6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

Commission File Number: 001-38091

NATIONAL ENERGY SERVICES REUNITED CORP.

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of registrant’s name into English)

777 Post Oak Blvd., Suite 730

Houston, Texas 77056

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F [X] Form 40-F [  ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): Yes [  ] No [X]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): Yes [  ] No [X]

INCORPORATION BY REFERENCE

The information contained in this report on Form 6-K shall be deemed incorporated by reference into the registration statements on Form F-3 (Registration Numbers 333-233422, 333-229801, and 333-226194) and Form S-8 (Registration Number 333-226813) of National Energy Services Reunited Corp. (including any prospectuses forming a part of such registration statements) and to be a part thereof from the date on which this report on Form 6-K is filed, to the extent not superseded by documents or reports subsequently filed or furnished.

TABLE OF CONTENTS

BASIS OF THIS PERIODIC REPORT ON FORM 6-K	3
FINANCIAL INFORMATION AND CURRENCY OF FINANCIAL STATEMENTS	3
PART I – FINANCIAL INFORMATION	4
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)	4
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS	4
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS	5
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME	6
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS SHAREHOLDERS’ EQUITY	7
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS	8
NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS	9
1. DESCRIPTION OF BUSINESS	9
2. BASIS OF PRESENTATION	9
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	11
4. BUSINESS COMBINATION	12
5. ACCOUNTS RECEIVABLE	14
6. SERVICE INVENTORIES	15
7. PROPERTY, PLANT, & EQUIPMENT	15
8. GOODWILL AND INTANGIBLE ASSETS	16
9. DEBT	17
10. FAIR VALUE ACCOUNTING	20
11. EMPLOYEE BENEFITS	20
12. SHARE-BASED COMPENSATION	20
13. COMMITMENTS AND CONTINGENCIES	21
14. EQUITY	22
15. EARNINGS PER SHARE	24
16. INCOME TAXES	27
17. RELATED PARTY TRANSACTIONS	27
18. REPORTABLE SEGMENTS	28
Cautionary Note Regarding Forward-Looking Statements	31
ITEM 2. OPERATING AND FINANCIAL REVIEW	32
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	42
ITEM 4. INTERNAL CONTROLS AND PROCEDURES	43
PART II - OTHER INFORMATION	44
Item 1. Legal Proceedings.	44
Item 1A. Risk Factors.	44

2

BASIS OF THIS PERIODIC REPORT ON FORM 6-K

On June 6, 2018, National Energy Services Reunited Corp. (“NESR,” the “Company,” “we,” “our,” “us” or similar terms) acquired all of the issued and outstanding equity interests of NPS Holdings Limited (“NPS”) and Gulf Energy S.A.O.C. (“GES” and, together with NPS, the “Subsidiaries”) (collectively, the “Business Combination”). As a result of the Business Combination, NESR is the accounting acquirer for accounting purposes, NPS and GES are acquirees and NPS is the accounting predecessor. The Business Combination was accounted for using the acquisition method of accounting, and the Successor (as defined below) financial statements reflect a new basis of accounting that is based on fair value of net assets acquired. See Note 4, Business Combination, to the unaudited condensed consolidated interim financial statements included in Part 1, Item 1, “Financial Statements (Unaudited)” of this Periodic Report on Form 6-K (the “Periodic Report”) for further discussion of the Business Combination.

The historical financial information contained in this Periodic Report includes periods that ended prior to the Business Combination. In this Periodic Report, unless we have indicated otherwise, or the context otherwise requires, references to the “Company” for time periods prior to June 6, 2018 refer to NPS, which is the “Predecessor” for accounting purposes, and for the time period from and after June 7, 2018 refer to NESR and its consolidated subsidiaries, which is the “Successor” for accounting purposes. The financial statements of our Predecessor may not be indicative of the financial results that will be reported by us for periods subsequent to the Business Combination.

FINANCIAL INFORMATION AND CURRENCY OF FINANCIAL STATEMENTS

The financial statements included in the unaudited condensed consolidated interim financial statements included in Part 1, Item 1, “Financial Statements (Unaudited)” of this Periodic Report have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). Unless otherwise indicated, all references in this Periodic Report to “dollars,” “$,” or “US$” are to U.S. dollars, which is the reporting currency of the unaudited condensed consolidated interim financial statements.

3

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

NATIONAL ENERGY SERVICES REUNITED CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In US$ thousands, except share data)

	September 30, 2019		December 31, 2018
Assets
Current assets
Cash and cash equivalents		43,082		24,892
Accounts receivable, net		107,370		62,636
Unbilled revenue		95,750		95,145
Service inventories, net		72,341		58,151
Prepaid assets		11,083		6,937
Retention withholdings		29,689		22,011
Other receivables		10,842		16,695
Other current assets		10,062		13,178
Total current assets		380,219		299,645
Non-current assets
Property, plant and equipment, net		383,485		328,727
Intangible assets, net		126,548		138,052
Goodwill		574,764		570,540
Other assets		2,801		6,345
Total assets	$	1,467,817	$	1,343,309
Liabilities and equity
Liabilities
Accounts payable		65,108		66,264
Accrued expenses		72,266		38,986
Current installments of long-term debt		7,500		45,093
Short-term borrowings		28,261		31,817
Income taxes payable		5,015		10,991
Other taxes payable		4,545		5,806
Other current liabilities		4,672		24,123
Total current liabilities		187,367		223,080
Long-term debt		337,885		225,172
Deferred tax liabilities		29,322		30,756
Pension benefit liabilities		14,682		13,828
Other liabilities		17,409		19,482
Total liabilities		586,665		512,318
Commitments and contingencies (Note 13)
Equity
Preferred shares, no par value; unlimited shares authorized; none issued and outstanding at September 30, 2019 and December 31, 2018, respectively		-		-
Common stock, no par value; unlimited shares authorized; 87,147,089 and 85,562,769 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		801,545		801,545
Additional paid in capital		15,641		1,034
Retained earnings		63,937		28,297
Accumulated other comprehensive income		29		48
Total shareholders’ equity		881,152		830,924
Non-controlling interests		-		67
Total equity		881,152		830,991
Total liabilities and equity	$	1,467,817	$	1,343,309

The accompanying notes are an integral part of the unaudited condensed consolidated interim financial statements.

4

NATIONAL ENERGY SERVICES REUNITED CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS

(In US$ thousands, except share data and per share amounts)

	Successor (NESR)												Predecessor (NPS)
	Period			Period			Period			Period			Period
Description	from January 1, 2019 to September 30, 2019			from July 1, 2019 to September 30, 2019			from June 7, 2018 to September 30, 2018			from July 1, 2018 to September 30, 2018			from January 1, 2018 to June 6, 2018
Revenues	$	473,209		$	161,606		$	190,566		$	145,580		$	137,027
Cost of services		(352,716	)		(121,326	)		(139,404	)		(102,349	)		(104,242	)
Gross profit		120,493			40,280			51,162			43,231			32,785
Selling, general and administrative expense		(46,592	)		(16,485	)		(22,779	)		(13,759	)		(19,969	)
Amortization		(12,036	)		(4,033	)		(5,116	)		(3,577	)		(10	)
Operating income		61,865			19,762			23,267			25,895			12,806
Interest expense, net		(14,691	)		(5,011	)		(8,099	)		(6,199	)		(4,090	)
Other income / (expense), net		(629	)		(130	)		(18	)		450			362
Income before income tax		46,545			14,621			15,150			20,146			9,078
Income tax expense		(10,905	)		(3,511	)		(2,960	)		(3,989	)		(2,342	)
Net income / (loss)		35,640			11,110			12,190			16,157			6,736
Net income / (loss) attributable to non-controlling interests		-			-			(172	)		47			(881	)
Net income attributable to shareholders	$	35,640		$	11,110		$	12,362		$	16,110		$	7,617
Weighted average shares outstanding:
Basic		86,938,883			87,024,655			85,562,769			85,562,769			348,524,566
Diluted		86,938,883			87,024,655			85,840,312			85,912,715			370,000,000
Net earnings per share (Note 15):
Basic	$	0.40		$	0.13		$	0.14		$	0.19		$	0.02
Diluted	$	0.40		$	0.13		$	0.14		$	0.19		$	0.02

The accompanying notes are an integral part of the unaudited condensed consolidated interim financial statements.

5

NATIONAL ENERGY SERVICES REUNITED CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME

(In US$ thousands)

	Successor (NESR)									Predecessor (NPS)
	Period			Period		Period		Period		Period
Description	from January 1, 2019 to September 30, 2019			from July 1, 2019 to September 30, 2019		from June 7, 2018 to September 30, 2018		from July 1, 2018 to September 30, 2018		from January 1, 2018 to June 6, 2018
Net income	$	35,640		$	11,110	$	12,190	$	16,157	$	6,736
Other comprehensive income, net of tax
Foreign currency translation adjustments		(19	)		-		-		-		(16	)
Total Comprehensive Income, net of tax		35,621			11,110		12,190		16,157		6,720
Comprehensive income attributable to non-controlling interest		-			-		-		-		-
Comprehensive income attributable to shareholder interest	$	35,621		$	11,110	$	12,190	$	16,157	$	6,720

The accompanying notes are an integral part of the unaudited condensed consolidated interim financial statements.

6

NATIONAL ENERGY SERVICES REUNITED CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS SHAREHOLDERS’ EQUITY

(In US$ thousands, except share data)

For the Predecessor (NPS) period from January 1, 2018 to June 6, 2018:

Predecessor (NPS)	Shares Outstanding		Common Stock		Redeemable Convertible Shares Outstanding			Redeemable Convertible Shares			Additional Paid in Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings (Accumulated Deficit)			Total Equity			Non- controlling Interests			Total Shareholders’ Equity
Balance at January 1, 2018		342,250,000		342,250		27,750,000			27,750			3,345		(436	)		18,480			391,389			(1,960	)		389,429
Net income (loss) from January 1 to June 6, 2018		-		-		-			-			-		-			7,617			7,617			(881	)		6,736
Foreign currency translation adjustments		-		-		-			-			-		(16	)		-			(16	)		-			(16	)
Conversion of redeemable shares		6,274,566		6,275		(6,274,566	)		(6,275	)		-		-			-			-			-			-
Dividends paid		-		-		-			-			-		-			(48,210	)		(48,210	)		-			(48,210	)
Amount of provision for Zakat		-		-		-			-			-		-			(766	)		(766	)		-			(766	)
Balance at June 6, 2018		348,524,566		348,525		21,475,434			21,475			3,345		(452	)		(22,879	)		350,014			(2,841	)		347,173

For the Successor (NESR) period from June 7, 2018 to September 30, 2018:

									Retained
							Additional		Earnings			Total			Non-
	Ordinary Shares						Paid in		(Accumulated			Shareholders’			controlling			Total
Successor (NESR)	Shares			Amount			Capital		Deficit)			Equity			Interests			Equity
Balance at June 7, 2018		11,730,425			56,602			-		(4,611	)		51,991			-			51,991
Reclassification of shares previously subject to redemption		16,921,700			165,188			-		-			165,188			-			165,188
Redeemed shares		(1,916,511	)		(19,379	)		-		-			(19,379	)		-			(19,379	)
Shares issued to acquire NPS		25,077,277			255,537			-		-			255,537			-			255,537
Shares issued to acquire GES		28,346,229			288,848			-		-			288,848			-			288,848
Shares issued to related party for loan fee and transaction costs		266,809			2,719			-		-			2,719			-			2,719
Shares issued to Backstop Investor		4,829,375			48,294			-		-			48,294			-			48,294
Shares issued for IPO underwriting fees		307,465			3,737			-		-			3,737			-			3,737
Shares issued through Restricted Stock Units		-			-			331		-			331			-			331
Business combination non-controlling interest		-			-			-		-			-			(951	)		(951	)
Non-controlling interest derecognized due to sale of subsidiary		-			-			-					-			3,042			3,042
Acquisition of non-controlling interest during the period		-			-			-		994			994			(994	)		-
Other		-			-			-		-			-
Net income (loss) from June 7, 2018 to September 30, 2018		-			-			-		12,362			12,362			(172	)		12,190
Balance at September 30, 2018		85,562,769			801,546			331		8,745			810,622			925			811,547

For the Successor (NESR) period from July 1, 2018 to September 30, 2018:

							Retained
					Additional		Earnings			Total			Non-
	Ordinary Shares				Paid in		(Accumulated			Shareholders’			controlling			Total
Successor (NESR)	Shares		Amount		Capital		Deficit)			Equity			Interests			Equity
Balance at July 1, 2018		85,562,769		801,546		-		(7,362	)		794,184			(2,165	)		792,019
Reclassification of shares previously subject to redemption		-		-		-		-			-			-			-
Redeemed shares		-		-		-		-			-			-			-
Shares issued to acquire NPS		-		-		-		-			-			-			-
Shares issued to acquire GES		-		-		-		-			-			-			-
Shares issued to related party for loan fee and transaction costs		-		-		-		-			-			-			-
Shares issued to Backstop Investor		-		-		-		-			-			-			-
Shares issued for IPO underwriting fees		-		-		-		-			-			-			-
Shares issued through Restricted Stock Units		-		-		331		-			331			-			331
Business combination non-controlling interest		-		-				-			-			-			-
Non-controlling interest		-		-		-					-			3,042			3,042
Acquisition of non-controlling interest during the period		-		-		-		-			-			-			-
Other		-		-		-		(3	)		(3	)		1			(2	)
Net income (loss) from July 1, 2018 to September 30, 2018		-		-		-		16,110			16,110			47			16,157
Balance at September 30, 2018		85,562,769		801,546		331		8,745			810,622			925			811,547

For the Successor (NESR) period from January 1, 2019 to September 30, 2019 and quarter from July 1, 2019 to September 30, 2019:

							Accumulated			Retained
					Additional		Other			Earnings		Total			Non-
Successor	Ordinary Shares				Paid In		Comprehensive			(Accumulated		Shareholders’			controlling			Total
(NESR)	Shares		Amount		Capital		Income (Loss)			Deficit)		Equity			Interests			Equity
Balance at January 1, 2019		85,562,769		801,545		1,034		48			28,297		830,924			67			830,991
Stock-based compensation expense		-		-		4,057		-			-		4,057			-			4,057
Vesting of restricted share units		250,310		-		-		-			-		-			-			-
Other		33,796		-		3		(19	)		-		(16	)		-			(16	)
Acquisition of non-controlling interest during the period		-		-		67		-			-		67			(67	)		-
NPS equity earn-out		1,300,214		-		10,480		-			-		10,480			-			10,480
Net income (loss) from January 1, 2019 to September 30, 2019		-		-		-		-			35,640		35,640			-			35,640
Balance at September 30, 2019		87,147,089		801,545		15,641		29			63,937		881,152			-			881,152

								Accumulated		Retained
					Additional			Other		Earnings		Total			Non-
Successor	Ordinary Shares				Paid In			Comprehensive		(Accumulated		Shareholders’			controlling		Total
(NESR)	Shares		Amount		Capital			Income (Loss)		Deficit)		Equity			Interests		Equity
Balance at July 1, 2019		86,896,779		801,545		13,698			29		52,827		868,099			-		868,099
Stock-based compensation expense		-		-		1,944			-		-		1,944			-		1,944
Vesting of restricted share units		250,310		-		-			-		-		-			-		-
Other		-		-		(1	)		-		-		(1	)		-		(1	)
Net income (loss) from July 1, 2019 to September 30, 2019		-		-		-			-		11,110		11,110			-		11,110
Balance at September 30, 2019		87,147,089		801,545		15,641			29		63,937		881,152			-		881,152

The accompanying notes are an integral part of the unaudited condensed consolidated interim financial statements.

7

NATIONAL ENERGY SERVICES REUNITED CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(In US$ thousands)

	Period from			Period from			Period from
	January 1 to			June 7 to			January 1 to
	September 30, 2019			September 30, 2018			June 6, 2018
Description	Successor (NESR)						Predecessor (NPS)
Cash flows from operating activities:
Net income/(loss)	$	35,640		$	12,190		$	6,736
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		59,728			24,155			17,284
Shares issued for transaction costs		-			2,175
Stock-based compensation		4,057			-			-
(Gain) on disposal of assets		(399	)		(684	)		-
Non-cash interest expense		1,361			8,001			3,350
Deferred tax expense (benefit)		(1,733	)		948			-
Allowance for doubtful receivables		920			629			2,402
Provision for obsolete service inventories		932			-			-
Other operating activities, net		(100	)		603			1,442
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		(46,523	)		10,178			(15	)
(Increase) in inventories		(15,123	)		(2,297	)		(2,080	)
(Increase) in prepaid expenses		(3,825	)		(2,943	)		(759	)
(Increase) in other current assets		(5,537	)		(21,866	)		(16,257	)
(Increase) decrease in other long-term assets and liabilities		5,403			312			(544	)
Increase (decrease) in accounts payable and accrued expenses		23,971			(14,629	)		7,335
Increase (decrease) in other current liabilities		(13,482	)		(2,341	)		1,932
Net cash provided by operating activities		45,290			14,431			20,826
Cash flows from investing activities:
Capital expenditures		(90,164	)		(16,169	)		(9,861	)
Proceeds from disposal of assets		1,125			4,432			-
Proceeds from the Company’s Trust account		-			231,782			-
Acquisition of business, net of cash acquired		-			(285,081	)		(1,098	)
Other investing activities		(932	)		330			3,043
Net cash used in investing activities		(89,971	)		(64,706	)		(7,916	)
Cash flows from financing activities:
Proceeds from long-term debt		365,000			100,000			47,063
Repayments of long-term debt		(285,048	)		-			-
Net change in overdraft facilities		(7,050	)		-			-
Proceeds from short-term borrowings		39,941			-			-
Repayments of short-term borrowings		(44,250	)		-			-
Proceeds from issuance of shares		-			48,294			-
Redemption of ordinary shares		-			(19,380	)		-
Payment of deferred underwriting fees		-			(5,333	)		(164	)
Dividend paid		-			-			(48,210	)
Other financing activities, net		(5,703	)		(5,792	)		(4,429	)
Net cash provided by (used in) financing activities		62,890			117,789			(5,740	)
Effect of exchange rate changes on cash		(19	)		-			(16	)
Net increase (decrease) in cash		18,190			67,514			7,154
Cash and cash equivalents, beginning of period		24,892			46			24,502
Cash and cash equivalents, end of period		43,082			67,560			31,656
Supplemental disclosure of cash flow information (also refer Note 3):
Interest paid		13,396			3,724			3,636
Income taxes paid		16,583			3,129			345

The accompanying notes are an integral part of the unaudited condensed consolidated interim financial statements.

8

NATIONAL ENERGY SERVICES REUNITED CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS

National Energy Services Reunited Corp. (“NESR,” the “Company,” “we,” “our,” “us” or similar terms) is a British Virgin Islands corporation headquartered in Houston, Texas. The Company, through its wholly-owned subsidiaries, NPS Holdings Limited (“NPS”) and Gulf Energy S.A.O.C. (“GES” and, together with NPS, the “Subsidiaries”) is a regional provider of services to the oil and gas industry in the Middle East and North Africa (“MENA”) and Asia Pacific regions.

NESR was incorporated in the British Virgin Islands as a special purpose acquisition company on January 23, 2017 for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation, or contractual control arrangement with, purchasing all or substantially all of the assets of, or engaging in any other similar business combination with one or more businesses or entities. On May 17, 2017, NESR sold 21,000,000 units, each consisting of one ordinary share and one warrant, in its initial public offering, generating gross proceeds of $210 million. Simultaneously with the closing of its initial public offering, NESR consummated the sale of 11,850,000 warrants (the “Private Warrants”) at a price of $0.50 per warrant in a private placement to its sponsor, NESR Holdings Ltd. (“NESR Holdings”), generating gross proceeds of $5.9 million. On May 30, 2017, in connection with the underwriters’ election to partially exercise their over-allotment option, NESR consummated the sale of an additional 1,921,700 units at $10.00 per unit and the sale of an additional 768,680 Private Warrants at $0.50 per warrant, generating total gross proceeds of $19.6 million.

An aggregate amount of $229.2 million from the net proceeds of the sale of the units in the initial public offering and the Private Warrants was placed in a trust account (“Trust Account”) until the earlier of: (i) the consummation of a business combination or (ii) the distribution of the trust account. On June 6, 2018 (the “Closing Date”), NESR acquired all of the issued and outstanding equity interests of NPS and GES (the “Business Combination”). Subsequently, the proceeds held in the Trust Account aggregating $231.8 million (including interest) were released.

Both NPS and GES are regional providers of services to the oil and gas industry in the MENA and Asia Pacific regions. Revenues are primarily derived from services provided during the drilling, completion and production phases of an oil or natural gas well. NPS operates in 12 countries with the majority of its revenues derived from operations in Saudi Arabia, Algeria, Qatar, UAE and Iraq. GES provides drilling equipment for rental and related services, well engineering services and directional drilling services imports, and sells oilfield equipment and renders specialized services to oil companies in Oman, Saudi Arabia, Algeria and Kuwait.

2. BASIS OF PRESENTATION

The accompanying condensed consolidated interim financial statements of the Company have been prepared in accordance with U.S. GAAP for interim financial reporting purposes. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated interim financial statements should be read in conjunction with the Company’s Annual Report on Form 20-F for the year ended December 31, 2018 and Reports on Form 6-K for the quarterly periods ended March 31, 2019 and June 30, 2019.

The Business Combination was accounted for under Accounting Standards Codification (“ASC”) Topic 805, Business Combination. Pursuant to ASC 805, NESR was determined to be the accounting acquirer based on evaluation of the facts and circumstances including:

● The transfer of cash by NESR;

● NESR’s executive management comprise the C-Suite of the combined company;

● NESR’s right to designate members of the board; and

● NESR initiated the Business Combination.

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As a result of the Business Combination, NPS and GES were acquirees and NPS was determined to be the accounting “Predecessor”. NPS was determined to be the accounting “Predecessor” as the Company expects to use the NPS platform to grow the business as it operates throughout the Middle East and Africa whereas GES is concentrated in Oman. Further, the market size of countries where NPS is operating is much larger than that of GES and the valuation and price paid for NPS was higher than that of GES. The Company’s financial statement presentation distinguishes a Predecessor for periods prior to the Closing Date. NESR is the “Successor” for periods after the Closing Date, which includes the consolidated financial results of both NPS and GES. The transactions were accounted for as a business combination using the acquisition method of accounting, and the Successor financial statements reflect a new basis of accounting for both NPS and GES that is based on the fair value of assets acquired and liabilities assumed. See Note 4, Business Combination, for further discussion on the Business Combination. As a result of the application of the acquisition method of accounting as of the Closing Date, the financial statements for the predecessor periods and for the successor period are presented on a different basis of accounting and are, therefore, not comparable. The historical information of NESR prior to the Business Combination has not been reflected in the Company’s financial statements prior to June 7, 2018, as it was not deemed the Predecessor. Statement of operations activity of NESR, being nominal in nature, prior to the closing of the Business Combination were recorded in the opening retained earnings as of June 7, 2018 and not presented separately.

In the accompanying condensed consolidated interim financial statements, the successor periods are from June 7, 2018 to September 30, 2018 (“2018 Successor Period”), July 1, 2018 to September 30, 2018 (“2018 Successor Quarter”), January 1, 2019 to September 30, 2019 (“2019 Successor Period”), and July 1, 2019 to September 30, 2019 (“2019 Successor Quarter”) and the predecessor period is from January 1, 2018 to June 6, 2018 (“2018 Predecessor Period”).

Emerging growth company

The Company is an “emerging growth company,” as defined in Section 2(a) of the U.S. Securities Act of 1933 as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make a comparison of the Company’s condensed consolidated interim financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Use of estimates

The preparation of condensed consolidated interim financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated interim financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s significant estimates include estimates made towards purchase price allocation for the acquisition of NPS and GES, allowance for doubtful accounts, impairment of property, plant and equipment, goodwill and intangible assets, estimated useful life of property plant and equipment and intangible assets, provision for inventories obsolescence, recoverability of unbilled revenue, provision for liabilities pertaining to unrecognized tax benefits, recoverability of deferred taxes and contingencies and actuarial assumptions in employee benefit plans.

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Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the condensed consolidated interim financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from the estimates.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Supplemental cash flow information

Non-cash transactions were as follows for the 2019 Period:

● Purchases of property, plant, and equipment in accounts payable and short-term borrowings at September 30, 2019 of $28.3 million and $22.6 million, respectively, are not included under “Capital expenditures” within the condensed consolidated statement of cash flows.

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Recently issued accounting standards not yet adopted

On August 28, 2018 the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update (“ASU”) No 2018-14, “Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to The Disclosure Requirements for Defined Benefit Plans.” ASU No. 2018-14 amends ASC 715 to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The update is effective for the Company for fiscal years ending after December 15, 2021. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

On August 28, 2018 the FASB issued ASU No 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” ASU No. 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820. The amendments in ASU No. 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In July 2018, the FASB issued ASU No. 2018-09, “Codification Improvements.” ASU 2018-09 makes changes to clarify the Accounting Standards Codification, corrects unintended application of guidance, and makes minor improvements to the Accounting Standards Codification that are not expected to have a significant effect on current accounting practice. The amendments are effective for the Company for fiscal years beginning after December 15, 2019 and for interim periods in fiscal years beginning after December 15, 2020. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” ASU 2018-07 expands the scope of Topic 718, Compensation—Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04 “Simplifying the Test for Goodwill.” The update amends Accounting Standard Codification No. 350 Intangibles - Goodwill and Other, provides guidance that simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in today’s two-step impairment test under accounting topic 350. The amendments in this update will be applied prospectively and is effective for annual and interim impairment tests performed in periods beginning after December 15, 2021. The Company does not expect the adoption of this standard to have an impact on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments”. The new standard amends the impairment model for trade receivables, net investments in leases, debt securities, loans and certain other instruments to utilize an expected loss methodology in place of the currently used incurred loss methodology. This pronouncement is effective for annual periods beginning after December 15, 2020, including interim periods within those annual periods. The Company is currently evaluating the provisions of the pronouncement and assessing the impact, if any, on its consolidated financial statements and related disclosures.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, “Leases,” a new standard on accounting for leases. This update increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. At its July 17, 2019, Board meeting, the FASB tentatively deferred the effective date for the Company’s consolidated financial statements by one year to as of and for the year ending December 31, 2021 and for interim periods beginning in 2022. The FASB plans to issue a proposed ASU to incorporate this decision. The Company is currently evaluating the provisions of the pronouncement and assessing the impact, if any, on its consolidated financial statements and related disclosures.

On August 6, 2018 the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements.” This ASU is intended to reduce costs and ease implementation of the lease standard for financial statement preparers. ASU 2018-11 provides a new transition method and a practical expedient for separating components of a contract. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. Additionally, the amendments in ASU 2018-11 provide lessors with a practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease component and, instead, to account for those components as a single component if the non-lease components otherwise would be accounted for under the new revenue guidance (Topic 606). At its July 17, 2019, Board meeting, the FASB tentatively deferred the effective date for the Company’s consolidated financial statements by one year to as of and for the year ended December 31, 2021 and for interim periods beginning in 2022. The FASB plans to issue a proposed ASU to incorporate this decision. The Company is currently evaluating the provisions of the pronouncement and assessing the impact, if any, on its consolidated financial statements and related disclosures.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” which outlines a single comprehensive model for entities to use in accounting for revenue. ASU 2014-09 supersedes the revenue recognition requirements in FASB ASC Topic 605, “Revenue Recognition,” and most industry-specific guidance. ASU 2014-09 sets forth a five-step model for determining when and how revenue is recognized. Under the model, an entity will be required to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers,” which deferred the effective date of ASU 2014-09 for all entities by one year and is effective for the Company’s consolidated financial statements as of and for the year ending December 31, 2019 and for interim periods beginning in 2020. The Company is currently analyzing the provisions of the pronouncement, assessing the impact of the new standard on revenue contracts, and evaluating prospective disclosures as compared to other industry participants. The Company expects to substantially complete its evaluation and document its conclusions during the fourth quarter of fiscal 2019. The Company anticipates utilizing the modified retrospective approach for adopting the new standard.

4. BUSINESS COMBINATION

On June 6, 2018, NESR consummated the Business Combination and related financing transactions, acquiring all of the issued and outstanding equity interests of NPS and GES.

Accounting treatment

The Business Combination is accounted for under ASC 805. Pursuant to ASC 805, NESR has been determined to be the accounting acquirer. Refer to Note 2, Basis of Presentation, for more information. NPS and GES both constitute businesses, with inputs, processes, and outputs. Accordingly, the acquisition of NPS and GES both constitute the acquisition of a business for purposes of ASC 805 and due to the change in control of each of NPS and GES was accounted for using the acquisition method. NESR recorded the fair value of assets acquired and liabilities assumed from NPS and GES.

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The following table summarizes the final allocation of the purchase price (in thousands):

Allocation of consideration

	NPS			GES
	(In thousands)
Cash and cash equivalents	$	31,656		$	5,206
Accounts receivable		55,392			18,013
Unbilled revenue		41,378			45,343
Inventories		33,652			31,092
Current assets		19,463			8,719
Property, plant and equipment		216,094			91,444
Intangible assets		94,000			53,000
Deferred tax assets		-			554
Other assets		7,457			1,254
Total identifiable assets acquired		499,092			254,625
Accounts payable		26,457			31,113
Accrued expenses		28,685			25,388
Current portion of loans and borrowings		-			16,368
Short-term borrowings		55,836			9,000
Current liabilities		3,665			15,449
Loans and borrowings		149,399			25,098
Deferred tax liabilities		24,098			8,053
Other liabilities		22,363			9,910
Non-controlling interest		(2,841	)		837
Net identifiable liabilities acquired		307,662			141,216
Total fair value of net assets acquired		191,430			113,409
Goodwill		399,325			175,439
Total gross consideration	$	590,755		$	288,848

During the quarter ended June 30, 2019, the Company finalized its valuation of certain identifiable assets and liabilities. These measurement period changes resulted in an increase of $3.2 million to goodwill in the 2019 Successor Period as compared to the amounts recorded as of December 31, 2018. For NPS, current liabilities increased by $3.2 million in the 2019 Successor Period due to income tax return-to-accrual adjustments that resulted from the filing of the 2018 income tax returns. For GES, other liabilities increased by $1.1 million due to an additional provision for uncertain tax positions.

The impact of these adjustments on the 2019 Successor Period was not material to the condensed consolidated interim financial statements.

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Intangible assets were identified that met either the separability criterion or the contractual-legal criterion described in ASC 805. The final allocation to intangible assets is as follows (in thousands):

Intangible assets

	Fair Value
	NPS		GES		Total		Useful Life
	(In thousands)
Customer contracts	$	77,000	$	44,500	$	121,500	10 years
Trademarks and trade names		17,000		8,500		25,500	8 years
Total intangible assets	$	94,000	$	53,000	$	147,000

Goodwill

$574.8 million has been allocated to goodwill as of September 30, 2019. Goodwill represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable definite-lived intangible assets acquired. The goodwill is not amortizable for tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from goodwill consist primarily of the strong market positions and the assembled workforces at the Subsidiaries.

In accordance with FASB ASC Topic 350, “Goodwill and Other Intangible Assets,” goodwill will not be amortized, but instead will be tested for impairment at least annually or more frequently if certain indicators are present. In the event management determines that the value of goodwill has become impaired, an accounting charge for the amount of impairment during the period in which the determination is made may be recognized.

Unaudited pro forma information

The following table summarizes the supplemental consolidated results of the Company on an unaudited pro forma basis, as if the Business Combination had been consummated on January 1, 2017 (in thousands):

	Period from January 1 to September 30, 2018
Revenues	$	394,495
Net income		8,971

These pro forma results were based on estimates and assumptions, which the Company believes are reasonable. They are not the results that would have been realized had the Company been a combined company during the periods presented and are not necessarily indicative of consolidated results of operations in future periods. The pro forma results include adjustments primarily related to purchase accounting adjustments. Acquisition costs and other non-recurring charges incurred in connection with the Business Combination are included in the earliest period presented.

5. ACCOUNTS RECEIVABLE

The following table summarizes the accounts receivable of the Company as of the period end dates set forth below (in thousands):

	September 30, 2019			December 31, 2018
Trade receivables	$	108,394		$	63,329
Less: allowance for doubtful accounts		(1,025	)		(693	)
Total	$	107,370		$	62,636

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Trade receivables relate to the sale of services, for which credit is extended based on our evaluation of the customer’s credit-worthiness. The gross contractual amounts of trade receivables at September 30, 2019 and December 31, 2018 were $113.2 million and $69.1 million, respectively. Movement in the allowance for doubtful accounts is as follows (in thousands):

	Period from January 1, 2019 to September 30, 2019			Period from June 7, 2018 to September 30, 2018		Period from January 1, 2018 to June 6, 2018
	Successor (NESR)					Predecessor (NPS)
Allowance for doubtful accounts at beginning of period	$	(693	)		-	$	(4,106	)
Add: additional allowance for the year		(1,051	)		-		(2,402	)
Less: write-off of doubtful accounts		719			-		-
Allowance for doubtful accounts at end of period	$	(1,025	)		-	$	(6,508	)

	Period from July 1, 2019 to September 30, 2019			Period from July 1, 2018 to September 30, 2018
	Successor (NESR)
Allowance for doubtful accounts at beginning of period	$	(450	)	$	-
Add: additional allowance for the year		(575	)		-
Less: write-off of doubtful accounts		-			-
Allowance for doubtful accounts at end of period	$	(1,025	)	$	-

6. SERVICE INVENTORIES

The following table summarizes the service inventories of the Company as of the period end dates set forth below (in thousands):

	September 30, 2019			December 31, 2018
Spare parts	$	36,118		$	29,928
Chemicals		16,420			14,803
Raw materials		3,452			200
Consumables		18,438			14,375
Total		74,428			59,306
Less: allowance for obsolete and slow-moving inventories		(2,087	)		(1,155	)
Total	$	72,341		$	58,151

7. PROPERTY, PLANT, & EQUIPMENT

Property, plant and equipment, net of accumulated depreciation, of the Company consists of the following as of the period end dates set forth below (in thousands):

	Estimated Useful Lives (in years)		September 30, 2019			December 31, 2018
Buildings and leasehold improvements		5 to 25	$	24,635		$	21,572
Drilling rigs, plant and equipment		3 to 15		370,227			278,249
Furniture and fixtures		5		1,194			1,348
Office equipment and tools		3 to 6		34,392			31,568
Vehicles and cranes		5 to 8		6,130			4,179
Less: Accumulated depreciation				(79,848	)		(32,522	)
Land				5,104			5,104
Capital work in progress				21,651			19,229
Total			$	383,485		$	328,727

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The Company recorded depreciation expense of $47.7 million, $17.2 million, $19.0 million, $14.2 million and $9.3 million, in the 2019 Successor Period, 2019 Successor Quarter, 2018 Successor Period, 2018 Successor Quarter, and 2018 Predecessor Period, respectively, in the Condensed Consolidated Statement of Operations.

8. GOODWILL AND INTANGIBLE ASSETS

Goodwill

Changes in the carrying amount of goodwill of the Company between December 31, 2018 and September 30, 2019 are as follows (in thousands):

	Production Services		Drilling and Evaluation Services		Goodwill
Balance as of December 31, 2018	$	416,494		154,046		570,540
Measurement period adjustments		3,152		1,072		4,224
Balance as of September 30, 2019	$	419,646		155,118		574,764

Intangible assets subject to amortization, net

The following is the weighted average amortization period for intangible assets of the Company subject to amortization (in years):

	Amortization
Customer contracts		10
Trademarks and trade names		8
Total intangible assets		9.6

The details of our intangible assets subject to amortization are set forth below (in thousands):

	September 30, 2019							December 31, 2018
	Gross carrying amount		Accumulated amortization			Net carrying amount		Gross carrying amount		Accumulated amortization			Net carrying amount
Customer contracts	$	121,500	$	(16,202	)	$	105,298	$	121,500	$	(7,088	)	$	114,412
Trademarks and trade names		25,500		(4,250	)		21,250		25,500		(1,860	)		23,640
Total intangible assets	$	147,000	$	(20,452	)	$	126,548	$	147,000	$	(8,948	)	$	138,052

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9. DEBT

Short-term debt

The Company’s short-term debt obligations consist of the following (in thousands):

	September 30, 2019		December 31, 2018
Modified Hana Loan	$	-	$	10,000
Other short-term borrowings		28,261		21,817
Short-term debt, excluding current installments of long-term debt	$	28,261	$	31,817

Short-term borrowings primarily consist of financing for capital equipment and inventory purchases.

Hana Loan and Modified Hana Loan agreements

In connection with the Business Combination, on June 5, 2018, NESR entered into a loan agreement with Hana Investments pursuant to which NESR borrowed $50.0 million on an unsecured basis (the “Hana Loan”). The Hana Loan had a scheduled maturity date of December 17, 2018 and was interest bearing, accruing interest at the greater of (i) an amount equal to $4.0 million or prorated if the loan was prepaid; and (ii) at a rate per annum equal to one-month Intercontinental Exchange LIBOR, adjusted monthly on the first day of each calendar month, plus a margin of 2.25% payable on maturity or prepaid. The interest was payable in NESR ordinary shares or cash at the election of the lender. The loan was subject to an origination fee of $0.6 million payable in NESR ordinary shares at $11.244 per share, which resulted in the issuance of 53,362 shares at closing of the Business Combination.

During 2018, the Company paid $44 million for both principal and interest in cash on the Hana Loan and entered into an extension (the “Modified Hana Loan”) for the balance of the loan which was fully repaid with cash during January 2019. The terms and conditions contained in the Hana Loan remained unchanged in the Modified Hana Loan.

Long-term debt

The Company’s long-term debt obligations consist of the following (in thousands):

	September 30, 2019			December 31, 2018
Secured Term Loan	$	300,000		$	-
Secured Revolving Credit Facility		50,000
Murabaha credit facility		-			150,000
APICORP bilateral term facility		-			46,875
SABB bilateral term facility		-			43,333
Term loan Ahli Bank		-			2,382
NBO loan $60,000		-			23,333
NBO loan $20,000		-			4,899
Less: unamortized debt issuance costs		(4,615	)		(557	)
Total loans and borrowings		345,385			270,265
Less: current portion of long-term debt		(7,500	)		(45,093	)
Long-term debt, net unamortized debt issuance costs and excluding current installments	$	337,885		$	225,172

Secured Facilities Agreement

On May 5, 2019, the Company entered into a $450.0 million term loan, revolving credit, and working capital facilities agreement (the “Secured Facilities Agreement”) with Arab Petroleum Investments Corporation (“APICORP”) – Bahrain Banking Branch, HSBC Bank Middle East Limited (“HSBC”), Mashreqbank PSC and Saudi British Bank acting as initial mandated lead arrangers and bookrunners, Mashreqbank PSC acting as global agent, APICORP and Mashreqbank PSC acting as security agents, NPS Bahrain for Oil & Gas Wells Services WLL and its Kuwait branch, Gulf Energy SAOC and National Petroleum Technology Company as borrowers, and HSBC, Mashreqbank PSC, APICORP and Saudi British Bank, as the “Lenders.” Upon consummation of this transaction, the Company settled its existing debt obligations with the exception of a $30.4 million working capital facility with HSBC, described below, used for the issuance of letters of guarantee and letters of credit.

On May 23, 2019 and June 20, 2019, the Company entered into $35.0 million and $40.0 million Incremental Facilities Agreements, respectively, increasing the size of the Secured Facilities Agreement to $485.0 million and $525.0 million, respectively.

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The $525.0 million Secured Facilities Agreement consists of a $300.0 million term loan due 2025 (the “Term Loan” or “Secured Term Loan”), a $65.0 million Revolving Credit Facility (“RCF” or “Secured Revolving Credit Facility”) due 2023, and a $160.0 million working capital facility. Borrowings under the Term Loan and RCF incur interest at the rate of three-month LIBOR plus 2.4% to 2.7% per annum, varying based on the Company’s Net Debt / EBITDA ratio. As of September 30, 2019, this results in an interest rate of 4.6%. The Company has drawn $300.0 million of the Term Loan and $50.0 million of the RCF as of September 30, 2019.

The RCF was obtained for general corporate and working capital purposes including capital expenditure related requirements and acquisitions (including transaction related expenses). The RCF requires the payment of a commitment fee each quarter. The commitment fee is computed at the rate of 0.60% per annum based on the average daily amount by which the borrowing base exceeds the outstanding borrowings during each quarter. Under the terms of the RCF, the final settlement is due by May 6, 2023. The Company is required to repay the amount of any principal balance outstanding together with any unpaid accumulated interest at three-month LIBOR plus 2.4% to 2.7% per annum, varying based on the Company’s Net Debt / EBITDA ratio. The Company is permitted to make any prepayment under this RCF in multiples of $5.0 million during this 4-year period up to May 6, 2023. Any unutilized balances from the RCF can be drawn down again during the 4-year tenure at the same terms. As of September 30, 2019, the Company has $15.0 million available to be drawn under the RCF.

The Secured Facilities Agreement also includes a working capital facility of $160.0 million for issuance of letters of guarantee and letters of credit and refinancing letters of credit over a period of one year, which carries an interest rate equal to three-month U.S. Dollar LIBOR for the applicable interest period, plus a margin of 1.00% to 1.25% per annum. As of September 30, 2019, the Company had utilized $130.7 million under this working capital facility and the balance of $29.3 million was available to the Company.

The Company has also retained legacy bilateral working capital facilities from HSBC totaling $30.4 million in Qatar ($16.4 million), in UAE ($13.9 million) and Kuwait ($0.1 million). As of September 30, 2019, the Company had utilized $27.5 million under this working capital facility and the balance of $2.9 million was available to the Company.

Utilization of the working capital facilities under both the legacy arrangement and Secured Facilities Agreement comprises both letters of credit issued to vendors and short-term borrowings used to settle letters of credit. Once a letter of credit is presented for payment by the vendor, the Company at its election can settle the letter of credit from available cash or leverage short-term borrowings that will be repaid quarterly over a one-year period.

The Secured Facilities Agreement includes covenants that specify maximum leverage (Net Debt / EBITDA) up to 3.50, minimum debt service coverage ratio (Cash Flow / Debt Service) of at least 1.25, and interest coverage (EBITDA / Interest) of at least 4.00. The Company is in compliance with all financial covenants as of September 30, 2019.

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Other debt information

Scheduled principal payments of long-term debt for periods subsequent to September 30, 2019 are as follows (in thousands):

2019	$	-
2020		15,000
2021		37,500
2022		45,000
2023		95,000
2024		45,000
Thereafter		112,500
Total	$	350,000

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10. FAIR VALUE ACCOUNTING

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, unbilled revenue, accounts payable, loans and borrowings and an embedded derivative. The fair value of the Company’s financial instruments approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature. The fair value of the Company’s long-term borrowings also approximates the carrying amounts as these loans are carrying interest at the market rate.

11. EMPLOYEE BENEFITS

Defined benefit plan

The Company provides defined benefit plan of severance pay to the eligible employees. The severance pay plan provides for a lump sum payment to employees on separation (retirement, resignation, death while in employment or on termination of employment) of an amount based upon the employees last drawn salary and length of service, subject to the completion of minimum service period (1-2 years) and taking into account the provisions of local applicable law or as per employee contract. The Company records annual amounts relating to these long-term employee benefits based on calculations that incorporate various actuarial and other assumptions, including discount rates, mortality, assumed rates of return, compensation increases and turnover rates. The Company reviews its assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends when it is appropriate to do so. The effect of modifications to those assumptions is recorded in the Condensed Consolidated Statement of Operations. The Company believes that the assumptions utilized in recording its obligations under its plans are reasonable based on its experience and market conditions. The net periodic costs are recognized as employees render the services necessary to earn these benefits.

The Components of net period benefit cost were as follows (in thousands):

	Period from January 1, 2019 to September 30, 2019		Period from June 7, 2018 to September 30, 2018		Period from January 1, 2018 to June 6, 2018
	Successor (NESR)				Predecessor (NPS)
Service Cost	$	2,255	$	1,153	$	866
Interest Cost		551		208		168
Other		77		70		375
Net Cost	$	2,883	$	1,431	$	1,409

	Period from July 1, 2019 to September 30, 2019		Period from July 1, 2018 to September 30, 2018
	Successor (NESR)
Service Cost	$	815	$	964
Interest Cost		375		178
Other		22		81
Net Cost	$	1,212	$	1,223

The Company made contributions to its defined benefit plan of $1.6 million, $0.5 million, $0.9 million, $0.7 million and $0.7 million, in the 2019 Successor Period, 2019 Successor Quarter, 2018 Successor Period, 2018 Successor Quarter, and 2018 Predecessor Period, respectively, in the Condensed Consolidated Statement of Operations. The plan of the Company is unfunded.

Defined contribution plan

The Company also provides a defined contribution retirement plan and occupational hazard insurance for Omani employees. Contributions to a defined contribution retirement plan and occupational hazard insurance for Omani employees in accordance with the Omani Social Insurances Law are recognized as an expense in the Condensed Consolidated Statement of Operations as incurred. Total contributions were $2.4 million, $0.8 million, $0.8 million and $0.5 million, for the 2019 Successor Period, 2019 Successor Quarter, 2018 Successor Period, and 2018 Successor Quarter, respectively, in the Condensed Consolidated Statement of Operations.

12. SHARE-BASED COMPENSATION

On May 18, 2018, the NESR shareholders approved the NESR 2018 Long Term Incentive Plan (the “LTIP”), effective upon the closing of the Business Combination. The board of directors previously approved the LTIP on February 9, 2018, including the performance criteria upon which performance goals may be based. A total of 5,000,000 ordinary shares are reserved for issuance under the LTIP. Grants to members of our Board of Directors are time-based and vest ratably over a 1-year period. Grants to our employees are time-based and vest ratably over a 3-year period.

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The purpose of the LTIP is to enhance NESR’s ability to attract, retain and motivate persons who make (or are expected to make) important contributions to NESR by providing these individuals with equity ownership opportunities. The Company intends to use time-based restricted stock unit awards to reward long-term performance of the executive officers. The Company believes that providing a meaningful portion of the total compensation package in the form of share-based awards will align the incentives of its executive officers with the interests of its shareholders and serve to motivate and retain the individual executive officers.

The following table sets forth the LTIP activity for the periods indicated:

	Number of Restricted Shares			Weighted Average Grant Date Fair Value per Share
Unvested at December 31, 2018 (NESR - Successor)		725,200		$	10.94
Granted		1,184,000		$	9.86
Vested and issued		(250,310	)	$	10.32
Forfeited		(106,000	)	$	10.87
Unvested at September 30, 2019 (NESR - Successor)		1,552,890		$	10.22

	Number of Restricted Shares			Weighted Average Grant Date Fair Value per Share
Unvested at June 30, 2019 (NESR - Successor)		1,600,200		$	10.59
Granted		214,000		$	7.60
Vested and issued		(250,310	)	$	10.32
Forfeited		(11,000	)	$	10.36
Unvested at September 30, 2019 (NESR - Successor)		1,552,890		$	10.22

At September 30, 2019, the Company had unrecognized compensation expense of $13.4 million related to unvested LTIP to be recognized on a straight-line basis over a weighted average remaining period of 2.26 years. Stock-based compensation has been recorded in the Condensed Consolidated Statement of Operations as follows for the periods presented:

	Cost of services		Selling, general and administrative expense		Total
2019 Successor Period	$	1,813,635	$	2,243,336	$	4,056,971
2019 Successor Quarter		757,779		1,187,479		1,945,258
2018 Successor Period		165,591		165,592		331,183
2018 Successor Quarter		165,591		165,592		331,183

There is no income tax impact of the stock-based compensation recorded by the Company.

13. COMMITMENTS AND CONTINGENCIES

Capital expenditure commitments

The Company was committed to incur capital expenditures of $15.7 million at September 30, 2019. These commitments are expected to be settled during 2019 and 2020.

Capital lease commitments

Future minimum lease commitments under non-cancellable capital leases with initial or remaining terms of one year or more at September 30, 2019, are payable as follows (in thousands):

2019	$	4,500
2020		18,000
2021		12,000
Thereafter		-
Total	$	34,500

Operating lease commitments

Future minimum lease commitments under non-cancellable operating leases with initial or remaining terms of one year or more at September 30, 2019, are payable as follows (in thousands):

2019	$	6,262
2020		24,814
2021		19,224
2022		3,508
2023		2,791
2024		2,792
Thereafter		4,425
Total	$	63,816

The Company recorded rental expense for cancellable and non-cancellable leases of $80.9 million, $24.5 million, $31.2 million, $25.2 million, and $19.5 million, in the 2019 Successor Period, 2019 Successor Quarter, 2018 Successor Period, 2018 Successor Quarter, and 2018 Predecessor Period, respectively, in the Condensed Consolidated Statement of Operations.

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Other commitments

The Company has outstanding letters of credit amounting to $28.2 million and $10.3 million as of September 30, 2019 and December 31, 2018, respectively.

In the normal course of business with customers, vendors and others, we have entered into off-balance sheet arrangements, such as surety bonds for performance, and other bank issued guarantees, including cash margin guarantees, which totaled $110.5 million and $41.4 million as of September 30, 2019 and December 31, 2018, respectively. A liability is accrued when a loss is both probable and can be reasonably estimated. None of the off-balance sheet arrangements either has, or is likely to have, a material effect on our condensed consolidated interim financial statements.

As of September 30, 2019, and December 31, 2018, the Company had a liability of $6.7 million and $6.7 million, respectively, on the consolidated balance sheet included in the line item “Other liabilities” reflecting various liabilities associated with the 2014 acquisition of NPS Bahrain.

Registration rights

The Company is a party to various registration rights agreements with holders of its securities. These registration rights agreements provide certain holders with demand and “piggyback” registration rights, and holders have other rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights are subject to various limitations. The Company generally bears the expenses incurred in connection with the filing of any such registration statements. On July 16, 2018, the Company filed a registration statement on Form F-3 pursuant to certain registration rights agreements, which was declared effective on August 22, 2018. On February 22, 2019, the Company filed another registration statement on Form F-3 pursuant to certain registration rights agreements, which was declared effective on March 4, 2019.

Legal proceedings

The Company is involved in certain legal proceedings which arise in the ordinary course of business and the outcomes of which are currently subject to uncertainties and therefore the probability of a loss, if any, being sustained and an estimate of the amount of any loss are difficult to ascertain. Consequently, it is not possible to make a reasonable estimate of the expected financial effect, if any, that will result from ultimate resolution of these disputes. The Company is contesting these claims/disputes and the Company’s management currently believes that provision against these potential claims is not required as the ultimate outcome of these disputes would not have a material impact on the Company’s business, financial condition or results of operations.

14. EQUITY

The Company is authorized to issue an unlimited number of ordinary shares, no par value, and preferred shares, no par value. The Company’s ordinary shares are entitled to one vote for each share. As of September 30, 2019, there were 87,147,089 ordinary shares outstanding, 22,921,700 public warrants and 12,618,680 private warrants. Each warrant entitles the registered holder to purchase one-half of one ordinary share at a price of $5.75 per half share at any time commencing on July 6, 2018 (30 days after the completion of the Business Combination). The warrants must be exercised for whole ordinary shares. The warrants expire on June 6, 2023 (five years after the completion of the Business Combination). The private warrants are identical to the public warrants except that such warrants are exercisable for cash (even if a registration statement covering the ordinary shares issuable upon exercise of such warrants is not effective) or on a cashless basis, at the holder’s option, and will not be redeemable so long as they are still held by the initial purchasers or their affiliates. No public warrants are exercisable for cash unless there is an effective and current registration statement covering the ordinary shares issuable upon exercise of the warrants and a current prospectus relating to such ordinary shares.

The Company is authorized to issue an unlimited number of preferred shares divided into five classes with designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. As of September 30, 2019, there were no preferred shares issued or outstanding.

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At the Closing Date, there were 11,730,425 ordinary shares outstanding that were not subject to possible redemption and 16,921,700 ordinary shares that were subject to possible redemption as a result of the Business Combination that were recorded outside of permanent equity as a liability on NESR’s consolidated balance sheet. On the Closing Date, the 16,921,700 ordinary shares were reclassed to permanent equity at the fair value of $165.2 million (redemption value of $10.11 per share less $0.35 underwriting fee per share or $9.76 per share). Of the ordinary shares reclassed, 1,916,511 ordinary shares were redeemed for $19.4 million ($10.11 per share). In connection with the completion of the Business Combination, $3.7 million in NESR ordinary shares (307,465) were issued for underwriting fees.

Pursuant to the NPS Stock Purchase Agreement dated November 12, 2017, Hana Investments exchanged its portion of the acquired NPS shares, totaling 83,660,878 shares, for 13,340,448 NESR ordinary shares, including accrued interest, at the time that NESR completed the Business Combination. At closing of the Business Combination, NESR purchased the remaining outstanding NPS shares with $292.8 million in cash and 11,318,828 NESR ordinary shares, subject to certain adjustments. Also, on the Closing Date, the Company paid interest totaling $4.7 million in stock (418,001 ordinary shares) to Hana Investments.

As discussed in Note 9, Debt, on June 5, 2018, in connection with the Business Combination, NESR entered into the Hana Loan with Hana Investments pursuant to which NESR borrowed $50.0 million on an unsecured basis. The loan was subject to an origination fee of $0.6 million payable in NESR ordinary shares at $11.244 per share, which resulted in the issuance of 53,362 shares at closing of the Business Combination.

In connection with the Business Combination, on June 5, 2018, the Company entered into a Relationship Agreement with Hana Investments (the “Olayan Relationship Agreement”), to set out certain rights to which Hana Investments will be entitled as a shareholder of the Company and certain obligations of the Company and NESR Holdings. The Company reimbursed Hana Investments for transaction fees and expenses in the amount of $2.1 million through the issuance of NESR ordinary shares at a conversion rate of $11.244 per share (213,447 ordinary shares) at closing of the Business Combination.

On June 6, 2018, NESR acquired 88% of the outstanding shares of GES from certain owners of GES in exchange for the issuance of 25,309,848 NESR ordinary shares, and NESR Holdings acquired the remaining 12% of the outstanding shares of GES for a total cash purchase price of $29.3 million as discussed in Note 4, Business Combination. NESR Holdings organized financing of the acquisition through certain loan contracts and assigned the GES shares which it acquired to NESR, and NESR assumed the obligation to satisfy the loan contracts. NESR elected to issue NESR ordinary shares to satisfy the loan contracts and issued a total of 3,036,381 NESR ordinary shares in settlement of the loan contracts and accrued interest.

In connection with the Business Combination, on April 27, 2018, the Company entered into the Forward Purchase Agreement with MEA Energy Investment Company 2 Ltd. (the “Backstop Investor”), pursuant to which the Company agreed to sell up to $150 million of the Company’s ordinary shares to the Backstop Investor or its designees and commonly controlled affiliates. On the Closing Date, the Company drew down $48,293,763 under the primary placement of the Forward Purchase Agreement and issued 4,829,375 ordinary shares to the Backstop Investor.

In February 2019, pursuant to the NPS Stock Purchase Agreement, the Company issued to the NPS selling shareholders 1,300,214 NESR ordinary shares to satisfy its obligation in connection with the NPS Equity Stock Earn-Out, a contingent consideration obligation arising from its acquisition of NPS in 2018 and based on the 2018 EBITDA (earnings before income taxes, depreciation and amortization) of NESR satisfying scheduled financial thresholds. As of year-end 2018, the Company presented its $10.5 million obligation under the terms of the NPS Equity Stock Earn-Out arrangement as part of Other current liabilities. It was reclassified to Additional paid in capital in the first quarter of 2019 when the shares were issued.

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15. EARNINGS PER SHARE

Basic earnings per common share was computed using the two-class method by dividing basic net income attributable to common shareholders by the weighted-average number of common shares outstanding. Diluted earnings per common share was computed using the two-class method by dividing diluted net income attributable to common shareholders by the weighted-average number of common shares outstanding plus dilutive common equivalent shares. Dilutive common equivalent shares include all in-the-money outstanding contracts to issue common shares as if they were exercised or converted.

2019 Successor Period and 2019 Successor Quarter

The following tables provide a reconciliation of the data used in the calculation of basic and diluted ordinary shares outstanding for the period (in thousands except shares and per share amounts).

Date	Transaction Detail	Change in Shares		Period from January 1, 2019 to September 30, 2019 Weighted Average Ordinary Shares Outstanding
December 31, 2018	Beginning Balance				85,562,769
January 9, 2019	Other		33,796		32,806
February 19, 2019	NPS equity stock earn-out		1,300,214		1,300,214
August 14, 2019	Restricted stock vesting		250,310		43,094
September 30, 2019	Ending Balance				86,938,883

Date	Transaction Detail	Change in Shares		Period from July 1, 2019 to September 30, 2019 Weighted Average Ordinary Shares Outstanding
June 30, 2019	Beginning Balance				86,896,779
August 14, 2019	Restricted stock vesting		250,310		127,876
September 30, 2019	Ending Balance				87,024,655

	Period from January 1, 2019 to		Period from July 1, 2019 to
	September 30, 2019		September 30, 2019
	Shares for Use in Allocation		Shares for Use in Allocation
	to Participating Earnings		to Participating Earnings
Weighted average ordinary shares outstanding	$	86,938,883	$	87,024,655
Non-vested, participating restricted shares		1,382,896		1,571,126
Shares for use in allocation of participating earnings	$	88,321,779	$	88,595,781

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Basic earnings per share (EPS):

	Period from January 1 to September 30, 2019		Period from July 1 to September 30, 2019
Net income	$	35,138	$	10,608
Less dividends to:		-		-
Ordinary Shares		-		-
Non-vested participating shares		-		-
Undistributed Successor Period Earnings	$	35,138	$	10,608
Allocation of earnings to Ordinary Shares	$	35,082	$	10,420
Allocation of earnings to Nonvested Shares		558		188

	Ordinary Shares		Ordinary Shares
Distributed Earnings	$	-	$	-
Undistributed Earnings		0.40		0.12
Total	$	0.40	$	0.12

Diluted earnings per share (EPS):

	Period from January 1 to September 30, 2019							Period from July 1 to September 30, 2019
Ordinary shares	Undistributed & distributed earnings to ordinary shareholders			Ordinary shares		EPS		Undistributed & distributed earnings to ordinary shareholders			Ordinary shares		EPS
As reported — basic	$	35,082			86,938,883	$	0.40	$	10,913			87,024,655	$	0.13
Add-back:
Undistributed earnings allocated to nonvested shareholders		558							197
12,618,680 Private Warrants @ $5.75 per half share (anti-dilutive)		-							-
22,921,700 Public Warrants @ $5.75 per half share (anti-dilutive)		-							-
Less:
Undistributed earnings reallocated to nonvested shareholders		(558	)						(197	)
Diluted EPS — Ordinary shares	$	35,082			86,938,883	$	0.40	$	10,913			87,024,655	$	0.13

Warrants that could be converted into as many as 17,770,190 ordinary shares are excluded from diluted EPS as they are anti-dilutive.

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2018 Successor Period and 2018 Successor Quarter

The following table provides a reconciliation of the data used in the calculation of basic and diluted common shares outstanding for the periods as tabulated below:

Basic EPS:

Date	Transaction Detail	Change in Shares		Total Shares Outstanding
12/31/2017	Beginning balance				11,730,425
6/6/2018	Shares issued to Backstop Investor		4,829,375		16,559,800
6/6/2018	Shares issued for IPO underwriting fees		307,465		16,867,265
6/6/2018	Shares issued to NPS/GES		53,690,315		70,557,580
6/6/2018	Reclassification of shares previously subject to redemption less redeemed shares		15,005,189		85,562,769
6/30/2018	Ending balance				85,562,769

Diluted EPS:

Weighted avg units outstanding	85,562,769
Dilutive common shares	277,543
Weighted avg dilutive units outstanding	85,840,312

The following table sets forth the calculation of basic and diluted earnings per common share for the periods presented:

	Period from		Period from
	July 1 to		June 6 to
	September 30, 2018		September 30, 2018
Weighted average basic common shares outstanding		85,562,769		85,562,769
Dilutive potential common shares from grant of restricted stock units		349,946		277,543
Weighted average dilutive common shares outstanding		85,912,715		85,840,312
Basic:
Net Income		16,110,000		12,362,000
Less: Earnings allocated to participating securities		-		-
Net income available to basic common shares		16,110,000		12,362,000
Basic earnings per common share		0.19		0.14
Diluted:
Net Income		16,110,000		12,362,000
Less: Earnings allocated to participating securities		-		-
Net income available to diluted common shares		16,110,000		12,362,000
Diluted earnings per common share		0.19		0.14

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2018 Predecessor Period

The following table sets forth the calculation of basic and diluted earnings per common share for the periods presented (in thousands except shares and per share amounts):

	2018
	Period from
	January 1 to
	June 6, 2018
Weighted average basic common shares outstanding		348,524,566
Dilutive potential common shares		21,475,434
Weighted average dilutive common shares outstanding		370,000,000
Basic:
Net Income		6,736
Less: Earnings allocated to participating securities		192
Net income available to basic common shares		6,928
Basic earnings per common share		0.02
Diluted:
Net Income		6,736
Less: Earnings allocated to participating securities		181
Net income available to diluted common shares		6,917
Diluted earnings per common share		0.02

16. INCOME TAXES

NESR is a holding company incorporated in the British Virgin Islands which exempts from corporate income tax income generated outside of the British Virgin Islands. The Subsidiaries operate in multiple tax jurisdictions throughout the MENA and Asia Pacific regions. NPS is based in the Emirate of Dubai in the UAE where no federal taxation exists and operates in 12 countries, where statutory tax rates generally vary from 0% to 35%. GES is based in the Sultanate of Oman, which has a 15% statutory corporate income tax rate, and also operates in Saudi Arabia, Algeria and Kuwait.

The Company’s effective tax rate was 23.4%, 24.0%, 19.5%, 19.8% and 25.7%, in the 2019 Successor Period, 2019 Successor Quarter, 2018 Successor Period, 2018 Successor Quarter, and 2018 Predecessor Period, respectively, in the Condensed Consolidated Statement of Operations. The tax rates for the successor periods have varied from 19.5% to 24.0%, with differences primarily attributable to revenue mix by country between periods and the prevalence of nondeductible costs such as share-based compensation.

17. RELATED PARTY TRANSACTIONS

Mubadarah Investment LLC (“Mubadarah”)

GES leases office space in a building it owns in Muscat, Oman to Mubadarah along with other Mubadarah group entities (collectively, the “Mubadarah group entities”). GES charges rental income to the Mubadarah group entities for the occupation of the office space, based on usage. Rental income charged by GES to the Mubadarah group entities amounted to $168,000, $49,000, $57,000 and $43,000 in the 2019 Successor Period, 2019 Successor Quarter, 2018 Successor Period, and 2018 Successor Quarter, respectively, in the Condensed Consolidated Statement of Operations. The outstanding balance of receivables from Mubadarah was $1.3 million at September 30, 2019. Mubadarah is owned by Hilal Al Busaidy and Yasser Al Barami, and, collectively with Mubadarah, they own 19.7% of the Company.

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Prime Business Solutions LLC (“PBS”)

PBS is 100% owned by Mubadarah Business Solutions LLC and is involved in the development and maintenance of Enterprise Resource Planning (“ERP”) systems.

PBS has developed and implemented the GEARS (ERP) system for GES and is currently engaged to maintain it. GES has paid maintenance fees to PBS totaling $209,000, $209,000, zero, and zero in the 2019 Successor Period, 2019 Successor Quarter, 2018 Successor Period, and 2018 Successor Quarter, respectively.

Key Management and Founders

Hilal Al Busaidy and Yasser Al Barami are both founding shareholders of GES. Certain shares owned by them were converted into NESR ordinary shares as part of the Business Combination.

18. REPORTABLE SEGMENTS

Operating segments are components of an enterprise where separate financial information is available that are evaluated regularly by the Company’s chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company reports segment information based on the “management” approach and its CODM is its Chief Executive Officer.

The Company’s services are similar to one another in that they consist of oilfield services and related offerings, whose customers are oil and gas companies. The results of operations of the service offerings are regularly reviewed by the CODM for the Company for the purposes of determining resource and asset allocation and assessing performance. The Company has determined that it has two reportable segments, Production Services and Drilling and Evaluation Services. Management evaluates the operating results of its reportable segments primarily based on revenue and segment EBITDA. The Company defines EBITDA as net income adjusted for interest expense, depreciation and amortization, and income tax benefit or expense. Total Segment EBITDA does not include general corporate expenses as these expenses are not allocated to the Company’s reportable segments and not reported to the Company’s CODM.

Total Segment EBITDA is not a measure of financial performance under U.S. GAAP and should not be considered an alternative to net income, the most directly comparable U.S. GAAP measure or any other measure of financial performance presented in accordance with U.S. GAAP. Our calculation of Total Segment EBITDA may not be comparable to that reported by other companies. The Company believes that the presentation of Total Segment EBITDA enables the Company and its shareholders to better assess each segment’s operating results relative to its operating results in prior periods and improves the comparability of the information presented. Investors should consider this non-U.S. GAAP measure in the context of the Company’s U.S. GAAP results.

Production Services that are offered depend on the well life cycle in which the services may fall. They include, but are not limited to, the following types of service offerings: coil tubing, stimulation and pumping, nitrogen services, completions, pipelines, cementing, laboratory services and filtration services.

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Drilling and Evaluation Services generates its revenue from the following service offerings: drilling and workover rigs, rig services, drilling services and rentals, fishing and remedials, directional drilling, turbines drilling, drilling fluids, wireline logging services, slickline services and well testing services.

The Company’s operations and activities are located within certain geographies, primarily the MENA region and the Asia Pacific region, which includes Malaysia, Indonesia and India.

In accordance with FASB ASC 280 - Segment Reporting, information on revenues and long-lived assets of the operations of the Company are disclosed below (in thousands):

Revenue from operations

	Successor (NESR)								Predecessor (NPS)
	Period from		Period from		Period from		Period from		Period from
	January 1, 2019 to September 30, 2019		July 1, 2019 to September 30, 2019		June 7, 2018 to September 30, 2018		July 1, 2018 to September 30, 2018		January 1, 2018 to June 6, 2018
Reportable Segment:
Production Services	$	284,631	$	97,160	$	117,268	$	88,666	$	112,295
Drilling and Evaluation Services		188,578		64,446		73,298		56,914		24,732
Total revenue	$	473,209	$	161,606	$	190,566	$	145,580	$	137,027

Long-lived assets

	September 30, 2019		December 31, 2018
Reportable Segment:
Production Services	$	262,736	$	219,278
Drilling and Evaluation Services		109,259		98,163
Unallocated		11,490		11,286
Total	$	383,485	$	328,727

Total Segment EBITDA

	Successor (NESR)												Predecessor (NPS)
	Period from			Period from			Period from			Period from			Period from
	January 1, 2019 to September 30, 2019			July 1, 2019 to September 30, 2019			June 7, 2018 to September 30, 2018			July 1, 2018 to September 30, 2018			January 1, 2018 to June 6, 2018
Reportable Segment:
Production Services		98,007			32,581			41,952			33,180			36,836
Drilling and Evaluation Services		40,869			15,239			18,905			17,630			3,267
Unallocated Costs		(13,855	)		(4,992	)		(13,453	)		(6,770	)		(9,651	)
Total Segment EBITDA	$	125,021		$	42,828		$	47,404		$	44,040		$	30,452

The following table presents a reconciliation of segment operating income, which is the most comparable financial measure under U.S. GAAP, to Total Segment EBITDA:

	Successor (NESR)												Predecessor (NPS)
	Period from January 1, 2019 to September 30, 2019			Period from July 1, 2019 to September 30, 2019			Period from June 7, 2018 to September 30, 2018			Period from July 1, 2018 to September 30, 2018			Period from January 1, 2018 to June 6, 2018
Production Services:
Segment EBITDA	$	98,007		$	32,581		$	41,952		$	33,180		$	36,836
Depreciation and amort.		(34,212	)		(12,322	)		(14,678	)		(9,615	)		(13,121	)
Other (income)/expense, net		1,166			188			(1,519	)		(1,681	)		236
Segment Operating Income		64,961			20,447			25,755			21,884			23,951
Drilling and Evaluation Services:
Segment EBITDA		40,869			15,239			18,905			17,630			3,267
Depreciation and amort.		(16,849	)		(5,980	)		(7,742	)		(5,791	)		(4,083	)
Other (income)/expense, net		55			(76	)		(992	)		(893	)		(92	)
Segment Operating Income		24,075			9,183			10,171			10,946			(908	)
Unallocated:
Segment EBITDA		(13,855	)		(4,992	)		(13,453	)		(6,770	)		(9,651	)
Share-based compensation		(4,057	)		(1,944	)		(331	)		(331	)		-
Depreciation and amort.		(8,667	)		(2,950	)		(1,404	)		(1,958	)		(80	)
Other (income)/expense, net		(592	)		18			2,529			2,124			(506	)
Segment Operating Income		(27,171	)		(9,868	)		(12,659	)		(6,935	)		(10,237	)
Total Operating Income	$	61,865		$	19,762		$	23,267		$	25,895		$	12,806

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Revenue by geographic area

	Successor (NESR)								Predecessor (NPS)
	Period from		Period from		Period from		Period from		Period from
	January 1, 2019 to September 30, 2019		July 1, 2019 to September 30, 2019		June 7, 2018 to September 30, 2018		July 1, 2018 to September 30, 2018		January 1, 2018 to June 6, 2018
MENA	$	465,856	$	158,229	$	188,488	$	143,914	$	134,479
Rest of world		7,353		3,377		2,078		1,666		2,548
Total revenue	$	473,209	$	161,606	$	190,566	$	145,580	$	137,027

Long-lived assets by geographic area

	September 30, 2019		December 31, 2018
Geographic Area:
MENA	$	374,911	$	319,552
Rest of world		8,574		9,175
Total	$	383,485	$	328,727

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Cautionary Note Regarding Forward-Looking Statements

This Periodic Report on Form 6-K (this “Periodic Report”) contains forward-looking statements (as such term is defined in 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”). Any and all statements contained in this Periodic Report that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future,” and terms of similar import (including the negative of any of these terms) may identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this Periodic Report may include, without limitation, statements regarding the benefits resulting from our recent business combination transaction, the plans and objectives of management for future operations, projections of income or loss, earnings or loss per share, capital expenditures, dividends, capital structure or other financial items, our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), expansion plans and opportunities, and the assumptions underlying or relating to any such statement.

The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the accuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation:

● The ability to recognize the anticipated benefits of our recent business combination transaction, which may be affected by, among other things, the price of oil, natural gas, natural gas liquids, competition, our ability to integrate the businesses acquired and the ability of the combined business to grow and manage growth profitably;

● Integration costs related to our recent business combination;

● Estimates of our future revenue, expenses, capital requirements and our need for financing;

● The risk of legal complaints and proceedings and government investigations;

● Our financial performance;

● Success in retaining or recruiting, or changes required in, our officers, key employees or directors;

● Current and future government regulations;

● Developments relating to our competitors;

● Changes in applicable laws or regulations;

● The possibility that we may be adversely affected by other economic and market conditions, political disturbances, war, terrorist acts, international currency fluctuations, business and/or competitive factors; and

● Other risks and uncertainties set forth under the caption “Risk Factors” in Part I, Item 3D of the Company’s Annual Report on Form 20-F for the year ended December 31, 2018 (the “Annual Report”).

Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to the risk factors. We disclaim any obligation to update the forward-looking statements contained in this Periodic Report to reflect any new information or future events or circumstances or otherwise, except as required by law. Readers should read this Periodic Report in conjunction with the discussion under Part II, Item 1A below, our unaudited condensed consolidated interim financial statements and the related notes thereto included in this Periodic Report, and other documents which we may furnish from time to time with the SEC.

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ITEM 2. OPERATING AND FINANCIAL REVIEW

The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated interim financial statements and related notes included in this Periodic Report. In addition, such analysis should be read in conjunction with the audited consolidated financial statements, the related notes, and the other information included in the Annual Report. The following discussion and analysis contain forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. Please read “Cautionary Note Regarding Forward-Looking Statements.”

Overview

We are a regional provider of services to the oil and gas industry in the MENA and Asia Pacific regions. We currently operate in 15 countries, with a strong presence in Saudi Arabia, Oman, Algeria, UAE, and Iraq. Our vision was founded on creating a regional provider for oilfield services that offered a full portfolio of solutions for our customers throughout the region with a strong focus on supporting the economies in which we operate. We believe strongly in employing locals and searching for opportunities to bring value into the region. With its vast reserves of oil and gas, the MENA region continues to dominate in its role as a vital source of global energy supply and stability. Our services include a broad suite of offerings that are essential in the drilling and completion of new oil and natural gas wells and in the remedial work on existing wells, both onshore and offshore, including completion services and equipment and drilling & evaluation services and equipment.

Factors Affecting our Results of Operations

Cyclical Nature of Sector

We provide oilfield services to exploration and production companies with operations in the onshore and offshore oil and gas sectors in the MENA, particularly the Middle East, and Asia Pacific regions. Demand for our services is mainly driven by our customers’ operations and is therefore linked to global commodity prices and expectations about future prices, rig activity and other factors.

The oilfield services sector is a highly cyclical industry. As a result, our operating results can fluctuate from quarter to quarter and period to period. However, due to the lower average cost per barrel in the Middle East and the need for infrastructure spending to sustain or increase current production levels of these oil rich countries, we believe that we are less affected by oil price volatility as compared to oilfield services companies that operate in other regions, as discussed below.

Global E&P Trends and Oil Prices

Since the most recent downturn in oil prices, which commenced in 2014, many projects have been deferred by exploration & production (“E&P”) companies, as they sought to reduce oilfield service costs in an attempt to lower their break-even points. Pricing concessions were granted by service providers in order to maintain their market share during these periods. After a double-digit decline in 2016, global E&P spending has posted successive years of increases, improving year-over-year by 4% in 2017 and 8% in 2018 and is expected to increase further in 2019. Despite these trends and estimates in global E&P spending, the pricing environment for oilfield services has been challenging due to the overhang of oilfield service capacity in certain regions globally.

Drilling Environments

Based on energy industry data, offshore oil production currently provides an estimated 30% of all global oil supply; however, the bulk of oil production comes from onshore activity. We provide services to E&P companies with both onshore and offshore drilling operations. Offshore drilling generally provides higher margins to service providers due to greater complexity, logistical challenges and the need for innovative solutions.

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Geographic Concentration; Middle Eastern Operations

Over 90% of our revenue has historically come from the MENA region, particularly the Middle East. The Middle East has almost half of the world’s proven oil reserves and accounts for almost a third of oil production, according to the BP Statistical Review of World Energy. The countries in the Arabian Gulf account for approximately one-quarter of global oil production and given the low break-even price, it is a key region for oilfield service companies. Most oil and gas fields in the Middle East are legacy fields on land or in shallow waters. These fields are largely engaged in development drilling activity, driven by the need for redevelopment, enhanced oil recovery via stimulation and the drilling of new production wells. Further, a number of gas fields scheduled to be developed in the near future will require oilfield services. Although the region still has low break-even levels, it is expected that more complex projects, with higher break-even prices, will be developed in the future and other new technologies will be required to meet customer expectations or drilling requirements. As a result, our capital expenditure and related financing needs may increase materially in the future.

In addition, regional drilling operations may be impacted by local political and economic trends. Due to the concentration of our operations in the MENA region, and particularly the Middle East, our financial condition and results of operations may be impacted by geopolitical, political or economic instability affecting the countries in which we operate, including armed conflict, imposition of economic sanctions, changes in governments and currency devaluations, among others.

Many MENA countries rely on the energy sector as the major source of national revenues. For example, according to energy industry data, during the recent industry downturn the MENA region saw less reduction in oil and gas activities than North America. Even at lower oil and gas prices, such oil and gas dependent economies have continued to maintain significant production and drilling activities. Further, given that Middle East markets have among the lowest break-even prices, they can continue to produce profitably at significantly lower commodity prices.

Key Components of Revenues and Expenses

Revenues

We earn revenue from our broad suite of oilfield services, including coiled tubing, cementing, stimulation and pumping, well testing services, drilling services and rental, fishing and remediation, drilling and workover rigs, nitrogen services, wireline logging services, turbines drilling, directional drilling, filtration services and slickline services, among others. We recognize revenues as services are rendered and collectability is reasonably assured. Our services are based on fixed or determinable price purchase orders or contracts with customers and do not include a right of return. Rates for services and equipment are typically priced on a per day, per man hour, per unit of measure or other similar basis.

Cost of services

Cost of services primarily includes staff costs for service personnel, purchase of non-capitalized material and equipment (such as tools and rental equipment), depreciation relating to capital assets used in our operations, vehicle and equipment rental and maintenance and repair.

Selling, general and administrative (“SG&A”)

SG&A expense primarily includes salary and employee benefits for non-production personnel (primarily management and administrative personnel), professional service fees (including expenses relating to the Business Combination), office rental and equipment, office supplies and non-capitalized office equipment and depreciation of office furniture and fixtures.

Amortization

Amortization expense primarily includes amortization of intangible assets associated with acquired customer contracts, trademarks and tradenames.

Interest expense, net

Interest expense primarily consists of interest on outstanding debt, net of interest income.

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Other income (expense), net

Other operating income (expenses) primarily consists of gain/loss on disposal of fixed assets, bank charges and foreign exchange transaction expenses.

Key Performance Indicators

We track two principal non-financial performance indicators that are important drivers of our results of operations: rig count and oil price. Oil price is important because the level of spending by E&P companies, our principal customers, is significantly influenced by anticipated future prices of oil, which is typically indicative of expected supply and demand. Changes in E&P spending, in turn, typically result in an increased or decreased demand for our services. Rig count, particularly in the regions in which we operate, is an indicator of the level of activity and spending by our E&P customers and has historically been an important indicator of our financial performance and activity levels.

The following table shows rig count (Source: Baker Hughes Published Rig Count Data) and average oil prices as of the dates indicated:

	As of September 30,
	2019		2018
Rig count:
MENA		486		457
Rest of World – outside of North America		645		547
Total		1,131		1,004
Brent Crude (per barrel)	$	60.78	$	81.34

Basis of Presentation of Financial Information

Business Combination Accounting and Presentation of Results of Operations

As a result of the Business Combination, NESR was determined to be the accounting acquirer and NPS was determined to be the predecessor for SEC reporting purposes. Pursuant to Accounting Standard Codification (“ASC”) 805, Business Combinations (“ASC 805”), the acquisition-date fair value of the purchase consideration paid by NESR to affect the Business Combination was allocated to the assets acquired and the liabilities assumed based on their estimated fair values. As a result of the application of the acquisition method of accounting resulting from the Business Combination, the financial statements and certain notes to the financial statements included Part 1, Item 1, “Financial Statements (Unaudited)” of this Periodic Report separate our presentations into two distinct sets of reporting periods, the period before the date of consummation of the Business Combination (“Predecessor Period”) and the period after that date (“Successor Period”), to indicate the application of the different basis of accounting between the periods presented. The predecessor period reflects the historical financial information of NPS prior to the Business Combination, while the successor period reflects our consolidated financial information, including the results of NPS and GES, after the Business Combination. The successor periods are from June 7, 2018 to September 30, 2018 (“2018 Successor Period”), July 1, 2018 to September 30, 2018 (“2018 Successor Quarter”), January 1, 2019 to September 30, 2019 (“2019 Successor Period”), and July 1, 2019 to September 30, 2019 (“2019 Successor Quarter”) and the predecessor period is from January 1, 2018 to June 6, 2018 (“2018 Predecessor Period”). References to the “2018 periods” below refers to the aggregation of results from the 2018 predecessor and successor periods to enhance comparability with 2019 amounts.

Our Condensed Consolidated Statement of Operations subsequent to the Business Combination includes depreciation and amortization expense on the NPS and GES property, plant, and equipment balances resulting from the fair value adjustments made under the new basis of accounting. Certain other items of income and expense, particularly depreciation and amortization were also impacted and NPS stand-alone results are presented as the Predecessor. Therefore, our financial information prior to the Business Combination is not comparable to our financial information subsequent to the Business Combination.

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Segments

We operate our business and report our results of operations through two operating and reporting segments, Production Services and Drilling and Evaluation Services, which aggregate services performed during distinct stages of a typical life cycle of an oil well.

Production Services. Our Production Services segment includes the results of operations from services that are generally offered and performed during the production stage of a well’s lifecycle. These services mainly include coiled tubing, cementing, stimulation and pumping, nitrogen services, filtration services, completions, pipelines, laboratory services and artificial lift services. Our Production Services accounted for 60%, 60%, 62%, 61% and 82%, in the 2019 Successor Period, 2019 Successor Quarter, 2018 Successor Period, 2018 Successor Quarter, and 2018 Predecessor Period, respectively.

Drilling and Evaluation Services. Our Drilling and Evaluation Services segment includes the results of operations from services that are generally offered and performed during pre-production stages of a well’s lifecycle and related mainly to the operation of oil rigs. The services mainly include well testing services, drilling services and rental, fishing and remediation, drilling and workover rigs, wireline logging services, turbines drilling, directional drilling, slickline services and drilling fluids, among others. Our Drilling and Evaluation Services accounted for 40%, 40%, 38%, 39% and 18%, in the 2019 Successor Period, 2019 Successor Quarter, 2018 Successor Period, 2018 Successor Quarter, and 2018 Predecessor Period, respectively.

See Item 4B, “Business Overview” in our Annual Report on Form 20-F for the year ended December 31, 2018, which is hereby incorporated by reference into this Periodic Report, for a description of our reportable segments.

Results of Operations

The discussions below relating to significant line items from our consolidated statements of operations are based on available information and represent our analysis of significant changes or events that impact the fluctuations in or comparability of reported amounts. Where appropriate, we have identified specific events and changes that affect comparability or trends. In addition, the discussions below for revenues are on an aggregate basis for each fiscal period, as the business drivers for all services are similar.

2019 compared to 2018

The following table presents our consolidated income statement data for the periods indicated:

	Successor (NESR)												Predecessor (NPS)
	Period from			Period from			Period from			Period from			Period from
Description	January 1, 2019 to September 30, 2019			July 1, 2019 to September 30, 2019			June 7, 2018 to September 30, 2018			July 1, 2018 to September 30, 2018			January 1, 2018 to June 6, 2018
Revenues	$	473,209		$	161,606		$	190,566		$	145,580		$	137,027
Cost of services		(352,716	)		(121,326	)		(139,404	)		(102,349	)		(104,242	)
Gross profit		120,493			40,280			51,162			43,231			32,785
Selling, general and administrative expense		(46,592	)		(16,485	)		(22,779	)		(13,759	)		(19,969	)
Amortization		(12,036	)		(4,033	)		(5,116	)		(3,577	)		(10	)
Operating income		61,865			19,762			23,267			25,895			12,806
Interest expense, net		(14,691	)		(5,011	)		(8,099	)		(6,199	)		(4,090	)
Other income (expense), net		(629	)		(130	)		(18	)		450			362
Income before income tax		46,545			14,621			15,150			20,146			9,078
Income tax (expense) benefit		(10,905	)		(3,511	)		(2,960	)		(3,989	)		(2,342	)
Net income (loss)		35,640			11,110			12,190			16,157			6,736

Revenue. Revenue was $473.2 million for the 2019 Successor Period compared to $137.0 million for the 2018 Predecessor Period and $190.6 for the 2018 Successor Period, or $327.6 million in total for the 2018 periods. Revenue was $161.6 million for the 2019 Successor Quarter compared to $145.6 million for the 2018 Successor Quarter.

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The table below presents our revenue by segment for the periods indicated:

	Successor (NESR)								Predecessor (NPS)
	Period from		Period from		Period from		Period from		Period from
	January 1, 2019 to September 30, 2019		July 1, 2019 to September 30, 2019		June 7, 2018 to September 30, 2018		July 1, 2018 to September 30, 2018		January 1, 2018 to June 6, 2018
Reportable Segment:
Production Services	$	284,631	$	97,160	$	117,268	$	88,666	$	112,295
Drilling and Evaluation Services		188,578		64,446		73,298		56,914		24,732
Total revenue	$	473,209	$	161,606	$	190,566	$	145,580	$	137,027

Production Services revenue was $284.6 million for the 2019 Successor Period compared to $112.3 million for the 2018 Predecessor Period and $117.3 for the 2018 Successor Period, or $229.6 million in total for the 2018 periods. Production Services revenue was $97.2 million for the 2019 Successor Quarter compared to $88.7 million for the 2018 Successor Quarter. The increase in revenue was primarily due to higher coil tubing and stimulation activities in Saudi Arabia, Iraq and the United Arab Emirates.

Drilling and Evaluation Services revenue was $188.6 million for the 2019 Successor Period compared to $24.7 million for the 2018 Predecessor Period and $73.3 for the 2018 Successor Period, or $98.0 million in total for the 2018 periods. Drilling and Evaluation Services revenue was $64.4 million for the 2019 Successor Quarter compared to $56.9 million for the 2018 Successor Quarter. The increase in revenue was primarily due to higher well testing, logging and drilling services activities in Saudi Arabia, Iraq and Algeria.

Cost of services. Cost of services was $352.7 million for the 2019 Successor Period compared to $104.2 million for the 2018 Predecessor Period and $139.4 million for the 2018 Successor Period, or $243.6 million in total for the 2018 periods. Cost of services was $121.3 million for the 2019 Successor Quarter compared to $102.3 million for the 2018 Successor Quarter. Cost of services as a percentage of total revenue was 75%, 75%, 73%, 76% and 70%, for the 2019 Successor Period, 2019 Successor Quarter, 2018 Successor Period, 2018 Successor Quarter, and 2018 Predecessor Period, respectively. The change in cost of services as percentage of total revenue is mainly due to a change in revenue mix between business lines with lower and higher margins. Cost of services included depreciation expense of $47.7 million, $17.2 million, $19.0 million, $14.2 million and $9.3 million, in the 2019 Successor Period, 2019 Successor Quarter, 2018 Successor Period, 2018 Successor Quarter, and 2018 Predecessor Period, respectively. Depreciation expense during the Successor periods and quarters has increased due to additional capital expenditures throughout the Successor periods and quarters, especially as compared to the Predecessor Period.

Gross profit. Gross profit as a percentage of total revenue was 25%, 25%, 27%, 24% and 30%, for the 2019 Successor Period, 2019 Successor Quarter, 2018 Successor Period, 2018 Successor Quarter, and 2018 Predecessor Period, respectively. The change in trend is described under “Revenue” and “Cost of services.”

Selling, general and administrative expense. SG&A expense, which represents costs associated with managing and supporting our operations, was $46.6 million for the 2019 Successor Period compared to $20.0 million for the 2018 Predecessor Period and $22.8 million for the 2018 Successor Period, or approximately $42.8 million in total for the 2018 periods. SG&A was $16.5 million for the 2019 Successor Quarter compared to $13.8 million for the 2018 Successor Quarter. SG&A as a percentage of total revenue was 10%, 10%, 12%, 15% and 9%, for the 2019 Successor Period, 2019 Successor Quarter, 2018 Successor Period, 2018 Successor Quarter, and 2018 Predecessor Period, respectively. The reduction of expenses as percentage of revenue for the 2019 Successor Period and Quarter is primarily due to integration cost savings realized following the Business Combination, along with revenue growth.

Amortization expense. Amortization expense was $12.0 million for the 2019 Successor Period compared to $10 thousand for the 2018 Predecessor Period and $5.1 million for the 2018 Successor Period, or $5.1 million in total for the 2018 periods. Amortization expense was $4.0 million for the 2019 Successor Quarter compared to $3.6 million for the 2018 Predecessor Quarter. The increase in the Successor Period and Quarter amortization was driven mainly by acquired intangible assets resulting from the Business Combination.

Interest expense, net. Interest expense, net, was $14.7 million for the 2019 Successor Period compared to $4.1 million for the 2018 Predecessor Period and $8.1 million for the 2018 Successor Period, or $12.2 million in total for the 2018 periods. Interest expense, net was $5.0 million for the 2019 Successor Quarter compared to $6.2 million for the 2018 Successor Quarter. The increase in interest expense during the 2019 Successor Period as compared to the 2018 periods is mainly attributable to the impact of the loan arrangement fees write-off of the prior credit facilities following the May 2019 refinancing as well as the incremental impact of including GES throughout the 2019 Successor Period, as compared to only post-acquisition in the 2018 periods. Comparing the 2019 Successor Quarter to the 2018 Successor Quarter, interest expense has decreased due to more favorable terms obtained as part of the May 2019 refinancing.

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Other (expense) income, net. Other (expense) income, net, was ($0.6) million for the 2019 Successor Period compared to $0.4 million for the 2018 Predecessor Period and ($18,000) for the 2018 Successor Period, or $0.4 million in total for the 2018 periods. Other (expense) income, net was ($0.1) million for the 2019 Successor Quarter compared to $0.5 million for the 2018 Successor Quarter. Differences between periods were mainly attributed to losses and gains on fixed assets.

Income tax expense (benefit). Income tax expense (benefit) was $10.9 million for the 2019 Successor Period compared to $2.3 million for the 2018 Predecessor Period and $3.0 million for the 2018 Successor Period, or $5.3 million in total for the 2018 periods. Income tax expense (benefit) was $3.5 million for the 2019 Successor Quarter compared to $4.0 million for the 2018 Successor Quarter. See Note 16, Income taxes, to our condensed consolidated interim financial statements included in Part 1, Item 1, “Financial Statements (Unaudited)” of this Periodic Report.

Net income. Net income (loss) was $35.6 million for the 2019 Successor Period compared to $6.7 million for the 2018 Predecessor Period and $12.2 million for the 2018 Successor Period, or $18.9 million in total for the 2018 periods. Net income was $11.1 million for the 2019 Successor Quarter compared to $16.2 million for the 2018 Predecessor Quarter.

Supplemental Segment EBITDA Discussion

	Successor (NESR)								Predecessor (NPS)
	Period from		Period from		Period from		Period from		Period from
	January 1, 2019 to September 30, 2019		July 1, 2019 to September 30, 2019		June 7, 2018 to September 30, 2018		July 1, 2018 to September 30, 2018		January 1, 2018 to June 6, 2018
Reportable Segment:
Production Services		98,007		32,581		41,952		33,180		36,836
Drilling and Evaluation Services		40,869		15,239		18,905		17,630		3,267

Production Services EBITDA was $98.0 million for the 2019 Successor Period compared to $36.8 million for the 2018 Predecessor Period and $41.9 for the 2018 Successor Period, or $78.8 million in total for the 2018 periods. Production Services EBITDA was $32.6 million for the 2019 Successor Quarter compared to $33.2 million for the 2018 Successor Quarter. The increase was in line with higher coil tubing and cementing activities as described above.

Drilling and Evaluation Services EBITDA was $40.9 million for the 2019 Successor Period compared to $3.3 million for the 2018 Predecessor Period and $18.9 million for the 2018 Successor Period, or $22.2 million in total for the 2018 periods. Drilling and Evaluation Services EBITDA was $15.2 million for the 2019 Successor Quarter compared to $17.6 million for the 2018 Successor Quarter. The decrease in EBITDA margins was largely attributable to pricing discounts for testing services combined with the delayed start-up of drilling rig operations from a legacy joint venture in Oman.

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Liquidity and Capital Resources

Our objective in financing our business is to maintain sufficient liquidity, adequate financial resources and financial flexibility to fund the requirements of our business. We had cash and cash equivalents of $43.1 million as of September 30, 2019 and $24.9 million as of December 31, 2018. Our outstanding long-term debt was $337.9 million as of September 30, 2019 and $225.2 million as of December 31, 2018. We believe that our cash on hand, cash flows generated from operations, and liquidity available through our credit facilities, including recently drawn facilities, will provide sufficient liquidity to manage our global cash needs. As of September 30, 2019, the Company has $15.0 million available to be drawn under the RCF as well as $32.2 million available to be drawn under its working capital facilities. See “Capital Resources” below.

Cash Flows

Cash flows provided by (used in) each type of activity were as follows for the periods presented:

(in thousands)

	Successor (NESR)						Predecessor (NPS)
	Period from January 1, 2019 to September 30, 2019			Period from June 7, 2018 to September 30, 2018			Period from January 1, 2018 to June 6, 2018
Cash Provided by (used in):
Operating Activities		45,290			14,431			20,826
Investing Activities		(89,971	)		(64,706	)		(7,916	)
Financing Activities		62,890			117,789			(5,740	)
Effect of exchange rate changes on cash		(19	)		-			(16	)
Net change in cash and cash equivalents		18,190			67,514			7,154

Operating Activities

Cash flows provided by operating activities were $45.3 million for the 2019 Successor Period compared to cash flows provided by operating activities of $20.8 million for the 2018 Predecessor Period and $14.4 for the 2018 Successor Period, or $35.3 million in total for the 2018 periods. Cash flows from operating activities increased by $10.1 million in the 2019 Period compared to the 2018 periods, primarily due to the impact of GES throughout the 2019 Successor Period as compared to the 2018 periods which only includes GES for part of the year.

Investing Activities

Cash flows used in investing activities were $90.0 million for the 2019 Successor Period compared to cash flows used in investing activities of $7.9 million for the 2018 Predecessor Period and $64.7 for the 2018 Successor Period, or $72.6 million in total for the 2018 periods. The difference between periods was primarily due to the change in timing of cash payments for capital expenditures. Our principal recurring investing activity is the funding of capital expenditures to ensure that we have the appropriate levels and types of machinery and equipment in place to generate revenue from operations.

Financing Activities

Cash flows provided by financing activities were $62.9 million for the 2019 Successor Period compared to cash flows used in financing activities of $5.8 million for the 2018 Predecessor Period and cash flows provided by financing activities of $117.8 million for the 2018 Successor Period, or cash flows provided by financing activities of $112.0 million in total for the 2018 periods. In the Successor Period as compared to the 2018 periods, the Company’s choice of financing shifted from a mixture of debt and equity to only debt. While equity was used in the 2018 Successor Period to finance the Business Combination, this transaction type has not reoccurred in the 2019 Successor Period. Additionally, a dividend to the former owners of NPS in the Predecessor Period did not reoccur in 2019.

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Credit Facilities

As of and after September 30, 2019, we had the following principal credit facilities and instruments outstanding or available:

Secured Facilities Agreement

On May 5, 2019, the Company entered into a $450.0 million term loan, revolving credit, and working capital facilities agreement (the “Secured Facilities Agreement”) with Arab Petroleum Investments Corporation (“APICORP”) – Bahrain Banking Branch, HSBC Bank Middle East Limited (“HSBC”), Mashreqbank PSC and Saudi British Bank acting as initial mandated lead arrangers and bookrunners, Mashreqbank PSC acting as global agent, APICORP and Mashreqbank PSC acting as security agents, NPS Bahrain for Oil & Gas Wells Services WLL and its Kuwait branch, Gulf Energy SAOC and National Petroleum Technology Company as borrowers, and HSBC, Mashreqbank PSC, APICORP and Saudi British Bank, as the “Lenders.” Upon consummation of this transaction, the Company settled its existing debt obligations with the exception of a $30.4 million working capital facility with HSBC, described below, used for the issuance of letters of guarantee and letters of credit.

On May 23, 2019 and June 20, 2019, the Company entered into $35.0 million and $40.0 million Incremental Facilities Agreements, respectively, increasing the size of the Secured Facilities Agreement to $485.0 million and $525.0 million, respectively.

The $525.0 million Secured Facilities Agreement consists of a $300.0 million term loan due 2025 (the “Term Loan” or “Secured Term Loan”), a $65.0 million Revolving Credit Facility (“RCF” or “Secured Revolving Credit Facility”) due 2023, and a $160.0 million working capital facility. Borrowings under the Term Loan and RCF incur interest at the rate of three-month LIBOR plus 2.4% to 2.7% per annum, varying based on the Company’s Net Debt / EBITDA ratio. As of September 30, 2019, this results in an interest rate of 4.6%. The Company has drawn $300.0 million of the Term Loan and $50.0 million of the RCF as of September 30, 2019.

The RCF was obtained for general corporate and working capital purposes including capital expenditure related requirements and acquisitions (including transaction related expenses). The RCF requires the payment of a commitment fee each quarter. The commitment fee is computed at the rate of 0.60% per annum based on the average daily amount by which the borrowing base exceeds the outstanding borrowings during each quarter. Under the terms of the RCF, the final settlement is due by May 6, 2023. The Company is required to repay the amount of any principal balance outstanding together with any unpaid accumulated interest at three-month LIBOR plus 2.4% to 2.7% per annum, varying based on the Company’s Net Debt / EBITDA ratio. The Company is permitted to make any prepayment under this RCF in multiples of $5.0 million during this 4-year period up to May 6, 2023. Any unutilized balances from the RCF can be drawn down again during the 4-year tenure at the same terms. As of September 30, 2019, the Company has $15.0 million available to be drawn under the RCF.

The Secured Facilities Agreement also includes a working capital facility of $160.0 million for issuance of letters of guarantee and letters of credit and refinancing letters of credit over a period of one year, which carries an interest rate equal to three-month U.S. Dollar LIBOR for the applicable interest period, plus a margin of 1.00% to 1.25% per annum. As of September 30, 2019, the Company had utilized $130.7 million under this working capital facility and the balance of $29.3 million was available to the Company.

The Company has also retained legacy bilateral working capital facilities from HSBC totaling $30.4 million in Qatar ($16.4 million), in UAE ($13.9 million) and Kuwait ($0.1 million). As of September 30, 2019, the Company had utilized $27.5 million under this working capital facility and the balance of $2.9 million was available to the Company.

Utilization of the working capital facilities under both the legacy arrangement and Secured Facilities Agreement comprises both letters of credit issued to vendors and short-term borrowings used to settle letters of credit. Once a letter of credit is presented for payment by the vendor, the Company at its election can settle the letter of credit from available cash or leverage short-term borrowings that will be repaid quarterly over a one-year period.

The Secured Facilities Agreement includes covenants that specify maximum leverage (Net Debt / EBITDA) up to 3.50, minimum debt service coverage ratio (Cash Flow / Debt Service) of at least 1.25, and interest coverage (EBITDA / Interest) of at least 4.00. The Company is in compliance with all financial covenants as of September 30, 2019.

39

Capital Resources

In the next twelve months, we believe cash on hand, cash flows from operating activities and available credit facilities, including those of our subsidiaries, will provide us with sufficient capital resources and liquidity to manage our working capital needs, meet contractual obligations, fund capital expenditures, and support the development of our short-term operating strategies. Although varying in approach by jurisdiction, the Company is able to make use of excess cash generated in a particular jurisdiction to fund cash needs of other jurisdictions.

We plan to pursue strategic acquisitions as an element of our business strategy. The timing, size or success of any acquisition and the associated potential capital commitments are unpredictable and uncertain. We may seek to fund all or part of any such acquisition with proceeds from debt or equity issuances, or may issue equity directly to the sellers, in any such acquisition, or any combination thereof. Our ability to obtain capital for strategic acquisitions will depend on our future operating performance, financial condition and, more broadly, on the availability of equity and debt financing. Capital availability will be affected by prevailing conditions in our industry, the global economy, the global financial markets and other factors, many of which are beyond our control. In addition, any additional debt service requirements we take on could be based on higher interest rates and shorter maturities and could impose a significant burden on our results of operations and financial condition, and the issuance of additional equity securities could result in significant dilution to our shareholders.

Other Factors Affecting Liquidity

Customer receivables. In line with industry practice, we bill our customers for our services in arrears and are, therefore, subject to our customers delaying or failing to pay our invoices. In weak economic environments, we may experience increased delays and failures to pay our invoices due to, among other reasons, a reduction in our customers’ cash flow from operations and their access to the credit markets as well as unsettled political conditions. If our customers delay paying or fail to pay us a significant amount of our outstanding receivables, it could have a material impact on our liquidity, consolidated results of operations and consolidated financial condition. Two of our largest customers, Saudi Aramco and Petroleum Development Oman, are owned by the governments of Saudi Arabia and Oman, respectively. It is customary for Saudi Aramco to delay payments of a portion (10%) of receivables until all taxes due within the country are fully paid and settled.

See “Off-Balance Sheet Arrangements” below for more information.

Shelf registration statement. On August 23, 2019, the Company filed a shelf registration statement on Form F-3 with the Securities and Exchange Commission (the “SEC”). On September 13, 2019, the SEC declared the shelf registration statement effective. The shelf registration statement gives the Company the ability to sell up to $300.0 million of the Company’s ordinary shares from time to time in one or more offerings. The specific terms, including the amount, of any ordinary shares to be sold in such an offering, if it does occur, would be described in supplemental filings with the SEC. The shelf registration statement currently provides the Company additional flexibility with regard to potential financings that it may undertake when market conditions permit. The shelf registration statement will expire in 2022.

Dividend Policy

We have not paid any cash dividends on our ordinary shares to date and do not intend to pay cash dividends in the foreseeable future. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition. The payment of any cash dividends will be within the discretion of our Board of Directors. In addition, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection with our indebtedness.

Off-Balance Sheet Arrangements

Letters of credit. The Company has outstanding letters of credit amounting to $25.6 million and $10.3 million as of September 30, 2019 and December 31, 2018, respectively.

40

Guarantee agreements. In the normal course of business with customers, vendors and others, we have entered into off-balance sheet arrangements, such as surety bonds for performance, and other bank issued guarantees, including cash margin guarantees, which totaled $110.5 million and $41.4 million as of September 30, 2019 and December 31, 2018, respectively. A liability is accrued when a loss is both probable and can be reasonably estimated. None of the off-balance sheet arrangements either has, or is likely to have, a material effect on our condensed consolidated interim financial statements. See “Off-Balance Sheet Arrangements” below for more information.

Contractual Obligations

The information in the Annual Report on Form 20-F for the year ended December 31, 2018 under the section entitled “Tabular Disclosure of Contractual Obligations” in Part I, Item 5F, is hereby incorporated by reference into this Periodic Report. As of September 30, 2019, there were no material changes to this disclosure regarding our contractual obligations except as it relates to our estimated long-term debt principal payments, estimated interest payments, and short-term borrowings.

As a result of our May 2019 debt refinancing described elsewhere in this periodic report, as of September 30, 2019, our future contractual obligations related to estimated long-term debt principal payments, estimated interest payments, and short-term borrowings are $350.0 million, $76.9 million, and $28.3 million, respectively. As of September 30, 2019, for estimated long-term debt principal payments, we anticipate paying $7.5 million in less than 1 year, $78.8 million from 1 to 3 years in the future, $140.0 million from 3-5 years into the future, and $123.7 million more than 5 years in the future. As of September 30, 2019, for estimated interest payments, we anticipate paying $16.8 million within 1 year, $33.6 million from 1 to 3 years in the future, $21.8 million from 3-5 years into the future, and $4.7 million more than 5 years in the future. For short-term borrowings payments, as of September 30, 2019, we anticipate paying $28.3 million within the next 12 months.

Critical Accounting Policies and Estimates

The information in the Annual Report on Form 20-F for the year ended December 31, 2018 under the section entitled “Critical Accounting Policies and Estimates” in Part I, Item 5A, is hereby incorporated by reference into this Periodic Report. As of September 30, 2019, there were no material changes to this disclosure regarding our Critical Accounting Policies and Estimates made in the Annual Report.

41

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risk

We are exposed to foreign currency risks that arise from normal business operations. These risks include transaction gains and losses associated with transactions denominated in currencies other than a location’s functional currency.

US dollar balances in the United Arab Emirates, Saudi Arabia, Oman and Qatari entities are not considered to represent significant currency risk as the respective currencies in these countries are pegged to the U.S. dollar. Our foreign currency risk arises from the settlement of transactions in currencies other than our functional currency, specifically in Algerian Dinar, Libyan Dinar, and Iraqi Dinar. However, customer contracts in these countries are largely denominated in U.S. dollars.

Credit Risk

Credit risk is the risk that one party to a financial instrument may fail to discharge an obligation and cause the other party to incur a financial loss. We are exposed to credit risk on our accounts receivable and other receivables and certain other assets (such as bank balances) as reflected in our consolidated balance sheet, with the maximum exposure equaling the carrying amount of these assets in the consolidated balance sheet. We seek to manage our credit risk with respect to banks by only dealing with reputable banks (our cash and cash equivalents are primarily held with banks and financial institution counterparties that are rated A1 to Baa3, based on Moody’s ratings) and with respect to customers by monitoring outstanding receivables and following up on outstanding balances. Management also considers the factors that may influence the credit risk of its customer base, including the default risk of the industry and the country in which our customers operate. We sell our products to a variety of customers, mainly to national oil companies in the MENA and Asia Pacific regions.

Liquidity Risk

Liquidity risk is the risk that we may not be able to meet our financial obligations as they fall due. Our approach to managing liquidity risk is to ensure, as far as possible, that we will always have sufficient liquidity to meet our liabilities when due, under both normal and stressed conditions, without incurring unacceptable costs or liabilities. We maintain cash flow forecasts to monitor our liquidity position.

Accounts payable are normally settled within the terms of purchase from the supplier. We believe cash on hand, cash flows from operating activities and the available credit facilities will provide us with sufficient capital resources and liquidity to manage our working capital needs, meet contractual obligations, fund capital expenditures, and support the development of our short-term and long-term operating strategies.

Market Risk

We are exposed to market risks primarily from changes in interest rates on our long-term borrowings as well as fluctuations in foreign currency exchange rates applicable to our foreign subsidiaries and where local exchange rates are not pegged to the U.S. dollar (Algeria, Libya and Iraq). However, the foreign exchange risk is largely mitigated by the fact that all customer contracts are denominated in U.S. dollars.

We do not use derivatives for trading purposes, to generate income or to engage in speculative activity.

42

ITEM 4. INTERNAL CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that material information required to be disclosed in our reports that we submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in rules 13(a)-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended), were not effective as of the end of the period covered by this Periodic Report due to the material weaknesses in our internal control over financial reporting described below.

Material Weaknesses identified as of December 31, 2018

In connection with the audit of the Company’s financial statements for the year ended December 31, 2018, management and the Company’s independent registered public accounting firm identified a material weakness in the Company’s internal control over financial reporting. It was concluded that the Company did not maintain an effective control environment over its financial reporting process by providing sufficient resources and technical expertise over accounting for income taxes and preparation of cash flows, in accordance with ASC 740 and ASC 230, respectively. The operators of review controls over accounting for income taxes and preparation of cash flows did not have sufficient information to perform an effective review to ensure compliance with U.S. GAAP. Specific observations contributing to this material weakness include: 1) during the course of the year-end financial close, our auditors identified adjustments related to certain income tax accounts and 2) the Company did not have timely management review controls over the statement of cash flows to verify the completeness and adequacy of information prior to presentation of the information to the independent auditors. Notwithstanding the identified material weakness, all required accounting entries have been reflected in our condensed consolidated interim financial statements. If left unremediated, the material weakness could result in future material misstatement of the condensed consolidated interim financial statements that would not be prevented or detected.

In connection with the preparation of our Subsidiaries’ consolidated financial statements as of and for the years ended December 31, 2015, 2016 and 2017, management of NPS and GES separately identified material weaknesses in internal controls over their financial reporting. Specifically, both had deficiencies in the financial statement close process with a cited lack of U.S. GAAP reporting expertise.

Management is evaluating changes designed to increase the effectiveness of its review controls over financial reporting processes and to ensure sufficient expertise and resources are allocated to verify compliance with U.S. GAAP. Changes since December 31, 2018 have included hiring additional personnel with U.S. GAAP reporting expertise, adjusting internal close and reporting timelines to allow more time for internal control to operate, and modifying financial reporting processes to add additional levels of review over the accuracy and completeness of information utilized in the preparation of the Company’s income tax provision and statement of cash flows. Management began testing the controls over the accuracy and completeness of information utilized in the preparation of the Company’s income tax provision and statement of cash flows during the third quarter of 2019. As the Company continues to evaluate and work to improve its internal control over financial reporting, management may execute additional measures to modify the remediation actions described above. Management will continue to review and make necessary changes to the overall design of the Company’s internal control.

43

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We are not and have not been involved in any material legal proceedings, other than legal proceedings in the ordinary course of business incidental to our business. Although no assurances can be given about the final outcome of pending legal proceedings, at the present time we are not a party to any legal proceeding or investigation that, in the opinion of management, is likely to have a material impact on our business, financial condition or results of operations.

There are no proceedings in which any of our directors, officers or any of their respective affiliates, or any beneficial shareholder of more than five percent of voting securities, is an adverse party or has a material interest adverse to the above-mentioned Company’s interest.

Item 1A. Risk Factors.

Risks Relating to Our Business and Operations

There are several factors that affect our business and operations, many of which are beyond our control. In addition to information set forth in this Periodic Report, careful consideration should be given to the risk factors discussed under the caption “Risk Factors” in Part I, Item 3D of the Annual Report on Form 20-F for the year ended December 31, 2018, which could have a material impact on our business, financial condition or results of operations and are hereby incorporated by reference into this Periodic Report. Such risks are not the only risks we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also have a material impact on our business, financial condition or results of operations.

44

SIGNATURES

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

	NATIONAL ENERGY SERVICES REUNITED CORP.
Date: November 7, 2019		/s/ Sherif Foda
	Name:	Sherif Foda
	Title:	Chief Executive Officer
		(Principal Executive Officer)
Date: November 7, 2019		/s/ Christopher L. Boone
	Name:	Christopher L. Boone
	Title:	Chief Financial Officer
		(Principal Financial and Accounting Officer)

45

XML

Summary of Significant Accounting Policies (Policies) - Successor [Member]

9 Months Ended

Sep. 30, 2019

Supplemental Cash Flow Information

Supplemental cash flow information

Non-cash transactions were as follows for the 2019 Period:

● Purchases of property, plant, and equipment in accounts payable at September 30, 2019 of $28.3 million, respectively, are not included under “Capital expenditures” within the condensed consolidated statement of cash flows.

Recently Issued Accounting Standards Not Yet Adopted

Recently issued accounting standards not yet adopted

On August 28, 2018 the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update (“ASU”) No 2018-14, “Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to The Disclosure Requirements for Defined Benefit Plans.” ASU No. 2018-14 amends ASC 715 to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The update is effective for the Company for fiscal years ending after December 15, 2021. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

On August 28, 2018 the FASB issued ASU No 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” ASU No. 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820. The amendments in ASU No. 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In July 2018, the FASB issued ASU No. 2018-09, “Codification Improvements.” ASU 2018-09 makes changes to clarify the Accounting Standards Codification, corrects unintended application of guidance, and makes minor improvements to the Accounting Standards Codification that are not expected to have a significant effect on current accounting practice. The amendments are effective for the Company for fiscal years beginning after December 15, 2019 and for interim periods in fiscal years beginning after December 15, 2020. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” ASU 2018-07 expands the scope of Topic 718, Compensation—Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04 “Simplifying the Test for Goodwill.” The update amends Accounting Standard Codification No. 350 Intangibles - Goodwill and Other, provides guidance that simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in today’s two-step impairment test under accounting topic 350. The amendments in this update will be applied prospectively and is effective for annual and interim impairment tests performed in periods beginning after December 15, 2021. The Company does not expect the adoption of this standard to have an impact on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments”. The new standard amends the impairment model for trade receivables, net investments in leases, debt securities, loans and certain other instruments to utilize an expected loss methodology in place of the currently used incurred loss methodology. This pronouncement is effective for annual periods beginning after December 15, 2020, including interim periods within those annual periods. The Company is currently evaluating the provisions of the pronouncement and assessing the impact, if any, on its consolidated financial statements and related disclosures.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, “Leases,” a new standard on accounting for leases. This update increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. At its July 17, 2019, Board meeting, the FASB tentatively deferred the effective date for the Company’s consolidated financial statements by one year to as of and for the year ending December 31, 2021 and for interim periods beginning in 2022. The FASB plans to issue a proposed ASU to incorporate this decision. The Company is currently evaluating the provisions of the pronouncement and assessing the impact, if any, on its consolidated financial statements and related disclosures.

On August 6, 2018 the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements.” This ASU is intended to reduce costs and ease implementation of the lease standard for financial statement preparers. ASU 2018-11 provides a new transition method and a practical expedient for separating components of a contract. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. Additionally, the amendments in ASU 2018-11 provide lessors with a practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease component and, instead, to account for those components as a single component if the non-lease components otherwise would be accounted for under the new revenue guidance (Topic 606). At its July 17, 2019, Board meeting, the FASB tentatively deferred the effective date for the Company’s consolidated financial statements by one year to as of and for the year ended December 31, 2021 and for interim periods beginning in 2022. The FASB plans to issue a proposed ASU to incorporate this decision. The Company is currently evaluating the provisions of the pronouncement and assessing the impact, if any, on its consolidated financial statements and related disclosures.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” which outlines a single comprehensive model for entities to use in accounting for revenue. ASU 2014-09 supersedes the revenue recognition requirements in FASB ASC Topic 605, “Revenue Recognition,” and most industry-specific guidance. ASU 2014-09 sets forth a five-step model for determining when and how revenue is recognized. Under the model, an entity will be required to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers,” which deferred the effective date of ASU 2014-09 for all entities by one year and is effective for the Company’s consolidated financial statements as of and for the year ending December 31, 2019 and for interim periods beginning in 2020. The Company is currently analyzing the provisions of the pronouncement, assessing the impact of the new standard on revenue contracts, and evaluating prospective disclosures as compared to other industry participants. The Company expects to substantially complete its evaluation and document its conclusions during the fourth quarter of fiscal 2019. The Company anticipates utilizing the modified retrospective approach for adopting the new standard.

XML

Income Taxes

9 Months Ended

Sep. 30, 2019

Successor [Member]

Income Taxes

16. INCOME TAXES

NESR is a holding company incorporated in the British Virgin Islands which imposes a zero percent statutory corporate income tax rate on income generated outside of the British Virgin Islands. The Subsidiaries operate in multiple tax jurisdictions throughout the MENA and Asia Pacific regions. NPS is based in the Emirate of Dubai in the UAE where no federal taxation exists and operates in 12 countries, where statutory tax rates generally vary from 0% to 35%. GES is based in the Sultanate of Oman, which has a 15% statutory corporate income tax rate, and also operates in Saudi Arabia, Algeria and Kuwait.

The Company’s effective tax rate was 24.5%, 27.4%, 19.5%, 19.8% and 25.7%, in the 2019 Successor Period, 2019 Successor Quarter, 2018 Successor Period, 2018 Successor Quarter, and 2018 Predecessor Period, respectively, in the Condensed Consolidated Statement of Operations. The tax rates for the successor periods have varied from 19.5% to 27.4%, with differences primarily attributable to revenue mix by country between periods and the impact of revisions to the forecasted estimated annual effective tax rate used to determine interim period income tax provisions.

XML

Equity (Details Narrative) - USD ($)						1 Months Ended	3 Months Ended	4 Months Ended
	Jun. 06, 2018	Jun. 06, 2018	Jun. 05, 2018	Apr. 27, 2018	Nov. 12, 2017	Feb. 28, 2019	Sep. 30, 2018	Sep. 30, 2018	Sep. 30, 2019	Dec. 31, 2018
Ordinary shares outstanding	11,730,425	11,730,425							87,147,089	85,562,769
Ordinary share price per shares	$ 9.76	$ 9.76
Preferred shares issued
Preferred shares outstanding
Shares previously subject to redemption, shares	16,921,700
Reclassification of shares previously subject to redemption	$ 165,200,000							$ 165,188,000
Redemption value price per shares	$ 10.11	10.11
Underwriting fee per share	$ 0.35	$ 0.35
Redeemed shares, shares	1,916,511
Redeemed shares value	$ 19,400,000							(19,379,000)
Ordinary shares issued for underwriting fees, value	$ 3,700,000							$ 3,737,000
Ordinary shares issued for underwriting fees, shares	307,465
Acquired percentage of shares outstanding	12.00%	12.00%
Obligation amount										$ 10,500,000
GES Transaction [Member]
Business acquisition exchange shares		25,309,848
Business acquisition payments		$ 29,300,000
Business combination, ordinary shares		3,036,381
Acquired percentage of shares outstanding	88.00%	88.00%
Stock Purchase Agreement [Member]
Business combination, ordinary shares					418,001
Business combination, consideration transferred					$ 4,700,000
Stock Purchase Agreement [Member] | NPS Holdings Limited [Member]
Number of ordinary shares issuance						1,300,214
Stock Purchase Agreement [Member] | NPS Holdings Limited [Member] | First Closing [Member]
Business acquisition exchange shares					83,660,878
Stock Purchase Agreement [Member] | NPS Holdings Limited [Member] | Second Closing [Member]
Business combination, ordinary shares					11,318,828
Stock Purchase Agreement [Member] | Hana Investments [Member]
Number of ordinary shares issuance					13,340,448
Business acquisition payments					$ 292,800,000
Hana Loan Agreement [Member]
Ordinary share price per shares			$ 11.244
Business combination, ordinary shares			53,362
Principal amount borrowed			$ 50,000,000
Origination fee			$ 600,000
Relationship Agreement [Member] | Hana Investments [Member]
Ordinary share price per shares			$ 11.244
Business combination, ordinary shares			213,447
Business combination, consideration transferred			$ 2,100,000
Forward Purchase Agreement [Member] | Backstop Investor [Member]
Business acquisition payments				$ 48,293,763
Business combination, ordinary shares				4,829,375
Number of ordinary shares of sale				$ 150,000,000
Public Warrants [Member]
Warrants									22,921,700
Ordinary share price per shares									$ 5.75
Warrants expire date									Jun. 06, 2023
Warrants term									5 years
Private Warrants [Member]
Warrants									12,618,680
Ordinary share price per shares									$ 5.75
Warrants expire date									Jun. 06, 2023
Warrants term									5 years

XML

Share-Based Compensation - Schedule of Unvested Restricted Stock (Details) - Successor [Member] - Restricted Stock Units (RSUs) [Member] - $ / shares	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019
Number of Restricted Shares, Unvested, Beginning Balance	1,600,200	725,200
Number of Restricted Shares, Granted	214,000	1,184,000
Number of Restricted Shares, Vested	(250,310)	(250,310)
Number of Restricted Shares, Forfeited	(11,000)	(106,000)
Number of Restricted Shares, Unvested, Ending Balance	1,552,890	1,552,890
Weighted Average Grant Date Fair Value per Share, Unvested, Beginning Balance	$ 10.59	$ 10.94
Weighted Average Grant Date Fair Value per Share, Granted	7.60	9.86
Weighted Average Grant Date Fair Value per Share, Vested	10.32	10.32
Weighted Average Grant Date Fair Value per Share, Forfeited	10.36	10.87
Weighted Average Grant Date Fair Value per Share, Unvested, Ending Balance	$ 10.22	$ 10.22

XML

Income Per Share - Schedule of Basic and Diluted Earnings Per Common Share (Details) (Parenthetical)	Sep. 30, 2019 $ / shares shares
Private Warrants [Member]
Number of warrants	12,618,680
Public Warrants [Member]
Number of warrants	22,921,700
Successor [Member] | Private Warrants [Member]
Number of warrants	12,618,680
Warrants, price per share | $ / shares	$ 5.75
Successor [Member] | Public Warrants [Member]
Number of warrants	22,921,700
Warrants, price per share | $ / shares	$ 5.75

XML

Business Combination - Schedule of Purchase Price Allocation (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Goodwill	$ 574,764	$ 570,540
NPS Holdings Limited [Member]
Cash and cash equivalents	31,656
Accounts receivable	55,392
Unbilled revenue	41,378
Inventories	33,652
Current assets	19,463
Property, plant and equipment	216,094
Intangible assets	94,000
Deferred tax assets
Other assets	7,457
Total identifiable assets acquired	499,092
Accounts payable	26,457
Accrued expenses	28,685
Current portion of loans and borrowings
Short-term borrowings	55,836
Current liabilities	3,665
Loans and borrowings	149,399
Deferred tax liabilities	24,098
Other liabilities	22,363
Non-controlling interest	(2,841)
Net identifiable liabilities acquired	307,662
Total fair value of net assets acquired	191,328
Goodwill	399,325
Total gross consideration	590,755
Gulf Energy S.A.O.C [Member]
Cash and cash equivalents	5,206
Accounts receivable	18,013
Unbilled revenue	45,343
Inventories	31,092
Current assets	8,719
Property, plant and equipment	91,444
Intangible assets	53,000
Deferred tax assets	554
Other assets	1,254
Total identifiable assets acquired	254,625
Accounts payable	31,113
Accrued expenses	25,388
Current portion of loans and borrowings	16,368
Short-term borrowings	9,000
Current liabilities	15,449
Loans and borrowings	25,098
Deferred tax liabilities	8,053
Other liabilities	9,910
Non-controlling interest	837
Net identifiable liabilities acquired	141,216
Total fair value of net assets acquired	113,409
Goodwill	175,439
Total gross consideration	$ 288,848

XML

Accounts Receivable - Schedule of Accounts Receivable (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Less: allowance for doubtful accounts	$ (1,025)	$ (693)
Total	107,370	62,636
Trade Receivables [Member]
Accounts receivables, gross	$ 108,394	$ 63,329

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Income Taxes (Details Narrative)	3 Months Ended		4 Months Ended	5 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2018	Jun. 06, 2018	Sep. 30, 2019
Successor [Member]
Income tax description					The Subsidiaries operate in multiple tax jurisdictions throughout the MENA and Asia Pacific regions. NPS is based in the Emirate of Dubai in the UAE where no federal taxation exists and operates in 12 countries, where statutory tax rates generally vary from 0% to 35%. GES is based in the Sultanate of Oman, which has a 15% statutory corporate income tax rate, and also operates in Saudi Arabia, Algeria and Kuwait.
Effective tax rate	27.40%	19.80%	19.50%		24.50%
Successor [Member] | Minimum [Member]
Effective tax rate					19.50%
Successor [Member] | Maximum [Member]
Effective tax rate					27.40%
Successor [Member] | Oman [Member]
Foreign tax rate					15.00%
Predecessor [Member]
Effective tax rate				25.70%

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Reportable Segments - Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas (Details) - USD ($) $ in Thousands	3 Months Ended		4 Months Ended	5 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2018	Jun. 06, 2018	Sep. 30, 2019	Dec. 31, 2018
Long-lived asset, Total	$ 383,485				$ 383,485	$ 328,727
MENA [Member]
Long-lived asset, Total	374,911				374,911	319,552
Rest of World [Member]
Long-lived asset, Total	8,574				8,574	$ 9,175
Successor [Member]
Revenue from operations, Total	161,606	$ 145,580	$ 190,566		473,209
Successor [Member] | MENA [Member]
Revenue from operations, Total	158,229	143,914	188,488		465,856
Successor [Member] | Rest of World [Member]
Revenue from operations, Total	$ 3,377	$ 1,666	$ 2,078		$ 7,353
Predecessor [Member] | NPS Holdings Limited [Member]
Revenue from operations, Total				$ 137,027
Predecessor [Member] | MENA [Member] | NPS Holdings Limited [Member]
Revenue from operations, Total				134,479
Predecessor [Member] | Rest of World [Member] | NPS Holdings Limited [Member]
Revenue from operations, Total				$ 2,548

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Debt - Scheduled Principal Payments of Long Term Debt (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Debt Disclosure [Abstract]
2019
2020	15,000
2021	37,500
2022	45,000
2023	95,000
2024	45,000
Thereafter	112,500
Total	$ 345,385	$ 270,265

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Debt (Details Narrative) - USD ($) $ in Thousands			9 Months Ended	12 Months Ended
	Jun. 20, 2019	Jun. 05, 2018	Sep. 30, 2019	Dec. 31, 2018	May 23, 2019	May 05, 2019
Line of credit			$ 300,000
Interest rate			4.60%
Withdrawn term loan			$ 50,000
LIBOR Plus [Member] | Minimum [Member]
Interest rate	2.40%
LIBOR Plus [Member] | Maximum [Member]
Interest rate	2.70%
Term Loan [Member]
Term of agreement	2025
Revolving Credit Facility [Member]
Debt maturity date	May 06, 2023
Term of agreement	2023
Line of credit	$ 65,000
Prepayment of borrowings	$ 5,000
Commitment fee percentage	0.60%
Prepayment under revolving credit facility, description	The Company is permitted to make any prepayment under this RCF in multiples of $5.0 million during this 4-year period up to May 6, 2023
Hana Loan Agreement [Member]
Principal amount borrowed		$ 50,000
Debt maturity date		Dec. 17, 2018
Debt description		The Hana Loan had a scheduled maturity date of December 17, 2018 and was interest bearing, accruing interest at the greater of (i) an amount equal to $4.0 million or prorated if the loan was prepaid; and (ii) at a rate per annum equal to one-month Intercontinental Exchange LIBOR, adjusted monthly on the first day of each calendar month, plus a margin of 2.25% payable on maturity or prepaid. The interest was payable in NESR ordinary shares or cash at the election of the lender.
Origination fee		$ 600
Ordinary shares		11.244
Number of shares issued in business combination		53,362
Modified Hana Loan [Member]
Debt periodic payment				$ 44,000
Secured Facilities Agreement [Member]
Term loan and revolving facilities	$ 525,000				$ 485,000	$ 450,000
Working capital facility	160,000					$ 30,400
Term loan amount	300,000
Service coverage ratio, description			The Secured Facilities Agreement includes covenants that specify maximum leverage (Net Debt / EBITDA) up to 3.50, minimum debt service coverage ratio (Cash Flow / Debt Service) of at least 1.25, and interest coverage (EBITDA / Interest) of at least 4.00. The Company is in compliance with all financial covenants as of September 30, 2019.
Secured Facilities Agreement [Member] | HSBC Bank Middle East Limited [Member]
Working capital facility	30,400		$ 27,500
Utilized working capital facility			2,900
Secured Facilities Agreement [Member] | HSBC Bank Middle East Limited [Member] | Qatar [Member]
Working capital facility	16,400
Secured Facilities Agreement [Member] | HSBC Bank Middle East Limited [Member] | UAE [Member]
Working capital facility	13,900
Secured Facilities Agreement [Member] | HSBC Bank Middle East Limited [Member] | Kuwait [Member]
Working capital facility	100
Secured Facilities Agreement [Member] | Lenders [Member]
Working capital facility			130,700
Utilized working capital facility			$ 29,300
Line of credit, description			Letters of guarantee and letters of credit and refinancing letters of credit over a period of one year, which carries an interest rate equal to three-month U.S. Dollar LIBOR for the applicable interest period, plus a margin of 1.00% to 1.25% per annum.
Incremental Facilities Agreement [Member]
Term loan and revolving facilities	$ 40,000				$ 35,000

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Goodwill and Intangible Assets (Tables) - Successor [Member]

9 Months Ended

Sep. 30, 2019

Schedule of Changes in Carrying Amount of Goodwill

Changes in the carrying amount of goodwill of the Company between December 31, 2018 and September 30, 2019 are as follows (in thousands):

	Production Services		Drilling and Evaluation Services		Goodwill
Balance as of December 31, 2018	$	416,494		154,046		570,540
Measurement period adjustments		3,152		1,072		4,224
Balance as of September 30, 2019	$	419,646		155,118		574,764

Schedule of Intangible Assets Subject to Amortization

The following is the weighted average amortization period for intangible assets of the Company subject to amortization (in years):

	Amortization
Customer contracts		10
Trademarks and trade names		8
Total intangible assets		9.6

The details of our intangible assets subject to amortization are set forth below (in thousands):

	September 30, 2019							December 31, 2018
	Gross carrying amount		Accumulated amortization			Net carrying amount		Gross carrying amount		Accumulated amortization			Net carrying amount
Customer contracts	$	121,500	$	(16,202	)	$	105,298	$	121,500	$	(7,088	)	$	114,412
Trademarks and trade names		25,500		(4,250	)		21,250		25,500		(1,860	)		23,640
Total intangible assets	$	147,000	$	(20,452	)	$	126,548	$	147,000	$	(8,948	)	$	138,052

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2019

Successor [Member]

Schedule of Future Minimum Lease Payments Under Non-cancelable Operating Leases

Future minimum lease commitments under non-cancellable operating leases with initial or remaining terms of one year or more at September 30, 2019, are payable as follows (in thousands):

2019	$	6,262
2020		24,814
2021		19,224
2022		3,508
2023		2,791
2024		2,792
Thereafter		4,425
Total	$	63,816

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Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2019

Successor [Member]

Goodwill and Intangible Assets

8. GOODWILL AND INTANGIBLE ASSETS

Goodwill

Changes in the carrying amount of goodwill of the Company between December 31, 2018 and September 30, 2019 are as follows (in thousands):

	Production Services		Drilling and Evaluation Services		Goodwill
Balance as of December 31, 2018	$	416,494		154,046		570,540
Measurement period adjustments		3,152		1,072		4,224
Balance as of September 30, 2019	$	419,646		155,118		574,764

Intangible assets subject to amortization, net

The following is the weighted average amortization period for intangible assets of the Company subject to amortization (in years):

	Amortization
Customer contracts		10
Trademarks and trade names		8
Total intangible assets		9.6

The details of our intangible assets subject to amortization are set forth below (in thousands):

	September 30, 2019							December 31, 2018
	Gross carrying amount		Accumulated amortization			Net carrying amount		Gross carrying amount		Accumulated amortization			Net carrying amount
Customer contracts	$	121,500	$	(16,202	)	$	105,298	$	121,500	$	(7,088	)	$	114,412
Trademarks and trade names		25,500		(4,250	)		21,250		25,500		(1,860	)		23,640
Total intangible assets	$	147,000	$	(20,452	)	$	126,548	$	147,000	$	(8,948	)	$	138,052

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Business Combination

9 Months Ended

Sep. 30, 2019

Successor [Member]

Business Combination

4. BUSINESS COMBINATION

On June 6, 2018, NESR consummated the Business Combination and related financing transactions, acquiring all of the issued and outstanding equity interests of NPS and GES.

Accounting treatment

The Business Combination is accounted for under ASC 805. Pursuant to ASC 805, NESR has been determined to be the accounting acquirer. Refer to Note 2, Basis of Presentation, for more information. NPS and GES both constitute businesses, with inputs, processes, and outputs. Accordingly, the acquisition of NPS and GES both constitute the acquisition of a business for purposes of ASC 805 and due to the change in control of each of NPS and GES was accounted for using the acquisition method. NESR recorded the fair value of assets acquired and liabilities assumed from NPS and GES.

The following table summarizes the final allocation of the purchase price (in thousands):

Allocation of consideration

	NPS			GES
	(In thousands)
Cash and cash equivalents	$	31,656		$	5,206
Accounts receivable		55,392			18,013
Unbilled revenue		41,378			45,343
Inventories		33,652			31,092
Current assets		19,463			8,719
Property, plant and equipment		216,094			91,444
Intangible assets		94,000			53,000
Deferred tax assets		-			554
Other assets		7,457			1,254
Total identifiable assets acquired		499,092			254,625
Accounts payable		26,457			31,113
Accrued expenses		28,685			25,388
Current portion of loans and borrowings		-			16,368
Short-term borrowings		55,836			9,000
Current liabilities		3,665			15,449
Loans and borrowings		149,399			25,098
Deferred tax liabilities		24,098			8,053
Other liabilities		22,363			9,910
Non-controlling interest		(2,841	)		837
Net identifiable liabilities acquired		307,662			141,216
Total fair value of net assets acquired		191,328			113,409
Goodwill		399,325			175,439
Total gross consideration	$	590,755		$	288,848

In the 2019 Successor Period, the Company updated its valuation of certain identifiable assets and liabilities. These measurement period changes resulted in an increase of $3.2 million to goodwill in the 2019 Successor Period as compared to the amounts recorded as of December 31, 2018. For NPS, current liabilities increased by $3.2 million in the 2019 Successor Period due to income tax return-to-accrual adjustments that resulted from the filing of the 2018 income tax returns. For GES, other liabilities increased by $1.1 million due to an additional provision for uncertain tax positions.

The impact of these adjustments on the 2019 Successor Period was not material to the condensed consolidated interim financial statements.

Intangible assets were identified that met either the separability criterion or the contractual-legal criterion described in ASC 805. The final allocation to intangible assets is as follows (in thousands):

Intangible assets

	Fair Value
	NPS		GES		Total		Useful Life
	(In thousands)
Customer contracts	$	77,000	$	44,500	$	121,500	10 years
Trademarks and trade names		17,000		8,500		25,500	8 years
Total intangible assets	$	94,000	$	53,000	$	147,000

Goodwill

$574.8 million has been allocated to goodwill as of September 30, 2019. Goodwill represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable definite-lived intangible assets acquired. The goodwill is not amortizable for tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from goodwill consist primarily of the strong market positions and the assembled workforces at the Subsidiaries.

In accordance with FASB ASC Topic 350, “Goodwill and Other Intangible Assets,” goodwill will not be amortized, but instead will be tested for impairment at least annually or more frequently if certain indicators are present. In the event management determines that the value of goodwill has become impaired, an accounting charge for the amount of impairment during the period in which the determination is made may be recognized.

Unaudited pro forma information

The following table summarizes the supplemental consolidated results of the Company on an unaudited pro forma basis, as if the Business Combination had been consummated on January 1, 2017 for the Predecessor Period ended June 6, 2018 (in thousands):

	Period from January 1 to September 30, 2018
Revenues	$	394,495
Net income		8,971

These pro forma results were based on estimates and assumptions, which the Company believes are reasonable. They are not the results that would have been realized had the Company been a combined company during the periods presented and are not necessarily indicative of consolidated results of operations in future periods. The pro forma results include adjustments primarily related to purchase accounting adjustments. Acquisition costs and other non-recurring charges incurred in connection with the Business Combination are included in the earliest period presented.

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Share-Based Compensation

9 Months Ended

Sep. 30, 2019

Successor [Member]

Share-Based Compensation

12. SHARE-BASED COMPENSATION

On May 18, 2018, the NESR shareholders approved the NESR 2018 Long Term Incentive Plan (the “LTIP”), effective upon the closing of the Business Combination. The board of directors previously approved the LTIP on February 9, 2018, including the performance criteria upon which performance goals may be based. A total of 5,000,000 ordinary shares are reserved for issuance under the LTIP. Grants to members of our Board of Directors are time-based and vest ratably over a 1-year period. Grants to our employees are time-based and vest ratably over a 3-year period.

The purpose of the LTIP is to enhance NESR’s ability to attract, retain and motivate persons who make (or are expected to make) important contributions to NESR by providing these individuals with equity ownership opportunities. The Company intends to use share-based awards to reward long-term performance of the executive officers. The Company believes that providing a meaningful portion of the total compensation package in the form of share-based awards will align the incentives of its executive officers with the interests of its shareholders and serve to motivate and retain the individual executive officers.

The following table sets forth the LTIP activity for the periods indicated:

	Number of Restricted Shares			Weighted Average Grant Date Fair Value per Share
Unvested at December 31, 2018 (NESR - Successor)		725,200		$	10.94
Granted		1,184,000		$	9.86
Vested		(250,310	)	$	10.32
Forfeited		(106,000	)	$	10.87
Unvested at September 30, 2019 (NESR - Successor)		1,552,890		$	10.22

	Number of Restricted Shares			Weighted Average Grant Date Fair Value per Share
Unvested at June 30, 2019 (NESR - Successor)		1,600,200		$	10.59
Granted		214,000		$	7.60
Vested		(250,310	)	$	10.32
Forfeited		(11,000	)	$	10.36
Unvested at September 30, 2019 (NESR - Successor)		1,552,890		$	10.22

At September 30, 2019, the Company had unrecognized compensation expense of $13.4 million related to unvested LTIP to be recognized on a straight-line basis over a weighted average remaining period of 2.26 years. Stock-based compensation has been recorded in the Condensed Consolidated Statement of Operations as follows for the periods presented:

	Cost of services		Selling, general and administrative expense		Total
2019 Successor Period	$	1,813,635	$	2,243,336	$	4,056,971
2019 Successor Quarter		757,779		1,187,479		1,945,258
2018 Successor Period		165,591		165,592		331,183
2018 Successor Quarter		165,591		165,592		331,183

There is no income tax impact of the stock-based compensation recorded by the Company.

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Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Current assets
Cash and cash equivalents	$ 43,082	$ 24,892
Accounts receivable, net	107,370	62,636
Unbilled revenue	95,750	95,145
Service inventories, net	72,341	58,151
Prepaid assets	11,083	6,937
Retention withholdings	29,689	22,011
Other receivables	10,842	16,695
Other current assets	10,062	13,178
Total current assets	380,219	299,645
Non-current assets
Property, plant and equipment, net	383,485	328,727
Intangible assets, net	126,548	138,052
Goodwill	574,764	570,540
Other assets	2,801	6,345
Total assets	1,467,817	1,343,309
Liabilities
Accounts payable	65,108	66,264
Accrued expenses	72,266	38,986
Current installments of long-term debt	7,500	45,093
Short-term borrowings	28,261	31,817
Income taxes payable	5,015	10,991
Other taxes payable	4,545	5,806
Other current liabilities	4,672	24,123
Total current liabilities	187,367	223,080
Long-term debt	337,885	225,172
Deferred tax liabilities	29,322	30,756
Pension benefit liabilities	14,682	13,828
Other liabilities	17,409	19,482
Total liabilities	586,665	512,318
Commitments and contingencies (Note 13)
Equity
Preferred shares, no par value; unlimited shares authorized; none issued and outstanding at September 30, 2019 and December 31, 2018, respectively
Common stock, no par value; unlimited shares authorized; 87,147,089 and 85,562,769 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively	801,545	801,545
Additional paid in capital	15,641	1,034
Retained earnings	63,937	28,297
Accumulated other comprehensive income	29	48
Total shareholders' equity	881,152	830,924
Non-controlling interests		67
Total equity	881,152	830,991
Total liabilities and equity	$ 1,467,817	$ 1,343,309

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Condensed Consolidated Interim Statements Shareholders' Equity (Unaudited) - USD ($) $ in Thousands	Common Stock [Member] Predecessor [Member] NPS Holdings Limited [Member]	Common Stock [Member] Successor [Member]	Redeemable Convertible Shares [Member] Predecessor [Member] NPS Holdings Limited [Member]	Additional Paid-In Capital [Member] Predecessor [Member] NPS Holdings Limited [Member]	Additional Paid-In Capital [Member] Successor [Member]	Accumulated Other Comprehensive Income (Loss) [Member] Predecessor [Member] NPS Holdings Limited [Member]	Accumulated Other Comprehensive Income (Loss) [Member] Successor [Member]	Retained Earnings (Accumulated Deficit) [Member] Predecessor [Member] NPS Holdings Limited [Member]	Retained Earnings (Accumulated Deficit) [Member] Successor [Member]	Total Shareholders' Equity [Member] Predecessor [Member]	Non-controlling Interests [Member] Predecessor [Member] NPS Holdings Limited [Member]	Non-controlling Interests [Member] Successor [Member]	Total Shareholders' Equity [Member] Predecessor [Member] NPS Holdings Limited [Member]	Total Shareholders' Equity [Member] Predecessor [Member]	Total Shareholders' Equity [Member] Successor [Member]	Predecessor [Member] NPS Holdings Limited [Member]	Successor [Member]	Total
Balance at beginning at Dec. 31, 2017	$ 342,250		$ 27,750	$ 3,345		$ (436)		$ 18,480			$ (1,960)		$ 391,389	$ 389,429
Balance at beginning, shares at Dec. 31, 2017	342,250,000		27,750,000
Foreign currency translation adjustments						(16)				$ (16)			(16)			$ (16)
Conversion of redeemable shares	$ 6,275		$ (6,275)
Conversion of redeemable shares, shares	6,274,566		(6,274,566)
Dividends paid								(48,210)		(48,210)			(48,210)
Amount of provision for Zakat								(766)		(766)			(766)
Net income (loss)								7,617		$ 6,736	(881)		7,617			$ 6,736
Balance at end at Jun. 06, 2018	$ 348,525	$ 56,602	$ 21,475	3,345		(452)		(22,879)	$ (4,611)		(2,841)		350,014	347,173	$ 51,991			$ 51,991
Balance at end, shares at Jun. 06, 2018	348,524,566	11,730,425	21,475,434
Shares issued to acquire NPS, shares																	70,557,580
Shares issued for IPO underwriting fees, shares																	16,867,265
Balance at end at Jun. 30, 2018	$ 348,525	$ 801,546	$ 21,475	3,345		(435)		(24,294)	(7,362)		(2,300)	(2,165)	348,616	346,316	794,184			792,019
Balance at end, shares at Jun. 30, 2018	348,524,566	85,562,769	21,475,434
Balance at beginning at Jun. 06, 2018	$ 348,525	$ 56,602	$ 21,475	3,345		(452)		(22,879)	(4,611)		(2,841)		350,014	347,173	51,991			51,991
Balance at beginning, shares at Jun. 06, 2018	348,524,566	11,730,425	21,475,434
Foreign currency translation adjustments
Reclassification of shares previously subject to redemption		$ 165,188													165,188			165,188
Reclassification of shares previously subject to redemption, shares		16,921,700
Redeemed shares		$ (19,379)													(19,379)			(19,379)
Redeemed shares, shares		(1,916,511)
Shares issued to acquire NPS		$ 255,537													255,537			255,537
Shares issued to acquire NPS, shares		25,077,277
Shares issued to acquire GES		$ 288,848													288,848			288,848
Shares issued to acquire GES, shares		28,346,229
Shares issued to related party for loan fee and transaction costs		$ 2,719													2,719			2,719
Shares issued to related party for loan fee and transaction costs, shares		266,809
Shares issued to Backstop Investor		$ 48,294													48,294			48,294
Shares issued to Backstop Investor, shares		4,829,375
Shares issued for IPO underwriting fees		$ 3,737													3,737			3,737
Shares issued for IPO underwriting fees, shares		307,465
Shares issued through Restricted Stock Units					331										331			331
Business combination non-controlling interest												(951)						(951)
Non-controlling interest												3,042						3,043
Acquisition of non-controlling interest during the period									994			(994)			994
Other
Net income (loss)									12,362			(172)			12,362		12,190	12,190
Balance at end at Sep. 30, 2018		$ 801,546			331				8,745			925			810,622			811,547
Balance at end, shares at Sep. 30, 2018		85,562,769
Balance at beginning at Jun. 30, 2018	$ 348,525	$ 801,546	$ 21,475	$ 3,345		$ (435)		$ (24,294)	(7,362)		$ (2,300)	(2,165)	$ 348,616	$ 346,316	794,184			792,019
Balance at beginning, shares at Jun. 30, 2018	348,524,566	85,562,769	21,475,434
Foreign currency translation adjustments
Reclassification of shares previously subject to redemption
Reclassification of shares previously subject to redemption, shares
Redeemed shares
Redeemed shares, shares
Shares issued to acquire NPS
Shares issued to acquire NPS, shares
Shares issued to acquire GES
Shares issued to acquire GES, shares
Shares issued to related party for loan fee and transaction costs
Shares issued to related party for loan fee and transaction costs, shares
Shares issued to Backstop Investor
Shares issued to Backstop Investor, shares
Shares issued for IPO underwriting fees
Shares issued for IPO underwriting fees, shares
Shares issued through Restricted Stock Units					331										331			331
Business combination non-controlling interest
Non-controlling interest												3,042						3,042
Acquisition of non-controlling interest during the period
Other									(3)			1			(3)			(2)
Other, shares
Net income (loss)									16,110			47			16,110		16,157	16,157
Balance at end at Sep. 30, 2018		$ 801,546			331				8,745			925			810,622			811,547
Balance at end, shares at Sep. 30, 2018		85,562,769
Balance at beginning at Dec. 31, 2018		$ 801,546			1,034		$ 48		28,297			67			830,924			830,991
Balance at beginning, shares at Dec. 31, 2018		85,562,769
Foreign currency translation adjustments																	(19)
Acquisition of non-controlling interest during the period					67							(67)			67
Stock-based Compensation					4,057										4,057			4,057
Vesting of restricted share units, shares		250,310
Other					3		(19)								(16)			(16)
Other, shares		33,796
NPS equity earn-out					10,480										10,480			10,480
NPS equity earn-out, shares		1,300,214
Net income (loss)									35,138						35,138		35,640	35,138
Balance at end at Sep. 30, 2019		$ 801,545			15,641		29		63,435						880,650			881,152
Balance at end, shares at Sep. 30, 2019		87,147,089
Balance at beginning at Jun. 30, 2019		$ 801,545			13,698		29		52,827						868,099			868,099
Balance at beginning, shares at Jun. 30, 2019		86,896,779
Foreign currency translation adjustments
Stock-based Compensation					1,944										1,944			1,944
Vesting of restricted share units, shares		250,310
Other					(1)										(1)			(1)
Other, shares
Net income (loss)									10,608						10,608		$ 11,110	10,608
Balance at end at Sep. 30, 2019		$ 801,545			$ 15,641		$ 29		$ 63,435						$ 880,650			$ 881,152
Balance at end, shares at Sep. 30, 2019		87,147,089

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Related Party Transactions (Details Narrative) - USD ($)	3 Months Ended		4 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2018	Sep. 30, 2019	Jun. 06, 2018
Percentage of ownership					12.00%
Successor [Member]
Rental income to be paid on leases	$ 24,500,000	$ 25,200,000	$ 31,200,000	$ 80,900,000
Successor [Member] | Prime Business Solutions LLC [Member]
Maintenance fees	209,000	0	0	209,000
Mubadarah Group Entities [Member] | Successor [Member]
Rental income to be paid on leases	49,000	$ 43,000	$ 57,000	168,000
Due from related party	$ 1,300,000			$ 1,300,000
Percentage of ownership	19.70%			19.70%
Business Solutions LLC [Member] | Successor [Member] | Prime Business Solutions LLC [Member]
Percentage of ownership	100.00%			100.00%

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Debt - Schedule of Long Term Debt Obligations (Details) (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Line of credit	$ 300,000
National Bank of Oman [Member]
Line of credit		$ 60
National Bank of Oman [Member]
Line of credit		$ 20

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Goodwill and Intangible Assets - Schedule of Intangible Assets Subject to Amortization (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Total intangible assets, term	9 years 7 months 6 days
Intangible assets, gross carrying amount	$ 147,000	$ 147,000
Intangible assets, accumulated amortization	(20,452)	(8,948)
Intangible assets, net carrying amount	$ 126,548	138,052
Customer Contracts [Member]
Total intangible assets, term	10 years
Intangible assets, gross carrying amount	$ 121,500	121,500
Intangible assets, accumulated amortization	(16,202)	(7,088)
Intangible assets, net carrying amount	$ 105,298	114,412
Trademarks and Trade Names [Member]
Total intangible assets, term	8 years
Intangible assets, gross carrying amount	$ 25,500	25,500
Intangible assets, accumulated amortization	(4,250)	(1,860)
Intangible assets, net carrying amount	$ 21,250	$ 23,640

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Debt (Tables) - Successor [Member]

9 Months Ended

Sep. 30, 2019

Schedule of Short Term Debt Obligations

The Company’s short-term debt obligations consist of the following (in thousands):

	September 30, 2019		December 31, 2018
Modified Hana Loan	$	-	$	10,000
Other short-term borrowings		28,261		21,817
Short-term debt, excluding current installments of long-term debt	$	28,261	$	31,817

Schedule of Long Term Debt Obligations

The Company’s long-term debt obligations consist of the following (in thousands):

	September 30, 2019			December 31, 2018
Secured Term Loan	$	300,000		$	-
Secured Revolving Credit Facility		50,000
Murabaha credit facility		-			150,000
APICORP bilateral term facility		-			46,875
SABB bilateral term facility		-			43,333
Term loan Ahli Bank		-			2,382
NBO loan $60,000		-			23,333
NBO loan $20,000		-			4,899
Less: unamortized debt issuance costs		(4,615	)		(557	)
Total loans and borrowings		345,385			270,265
Less: current portion of long-term debt		(7,500	)		(45,093	)
Long-term debt, net unamortized debt issuance costs and excluding current installments	$	337,885		$	225,172

Scheduled Principal Payments of Long Term Debt

Scheduled principal payments of long-term debt for periods subsequent to September 30, 2019 are as follows (in thousands):

2019	$	-
2020		15,000
2021		37,500
2022		45,000
2023		95,000
2024		45,000
Thereafter		112,500
Total	$	350,000

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Income Per Share (Tables) - Successor [Member]

9 Months Ended

Sep. 30, 2019

Schedule of a Reconciliation of Basic and Diluted Common Shares Outstanding

2019 Successor Period and 2019 Successor Quarter

The following tables provide a reconciliation of the data used in the calculation of basic and diluted ordinary shares outstanding for the period (in thousands except shares and per share amounts).

Date	Transaction Detail	Change in Shares		Period from January 1, 2019 to September 30, 2019 Weighted Average Ordinary Shares Outstanding
December 31, 2018	Beginning Balance				85,562,769
January 9, 2019	Other		33,796		32,806
February 19, 2019	NPS equity stock earn-out		1,300,214		1,300,214
August 14, 2019	Restricted stock vesting		250,310		43,094
September 30, 2019	Ending Balance				86,938,883

Date	Transaction Detail	Change in Shares		Period from July 1, 2019 to September 30, 2019 Weighted Average Ordinary Shares Outstanding
June 30, 2019	Beginning Balance				86,896,779
August 14, 2019	Restricted stock vesting		250,310		127,876
September 30, 2019	Ending Balance				87,024,655

	Period from January 1, 2019 to		Period from July 1, 2019 to
	September 30, 2019		September 30, 2019
	Shares for Use in Allocation		Shares for Use in Allocation
	to Participating Earnings		to Participating Earnings
Weighted average ordinary shares outstanding	$	86,938,883	$	87,024,655
Non-vested, participating restricted shares		1,382,896		1,571,126
Shares for use in allocation of participating earnings	$	88,321,779	$	88,595,781

2018 Successor Period and 2018 Successor Quarter

The following table provides a reconciliation of the data used in the calculation of basic and diluted common shares outstanding for the periods as tabulated below:

Basic EPS:

Date	Transaction Detail	Change in Shares		Total Shares Outstanding
12/31/2017	Beginning balance				11,730,425
6/6/2018	Shares issued to Backstop Investor		4,829,375		16,559,800
6/6/2018	Shares issued for IPO underwriting fees		307,465		16,867,265
6/6/2018	Shares issued to NPS/GES		53,690,315		70,557,580
6/6/2018	Reclassification of shares previously subject to redemption less redeemed shares		15,005,189		85,562,769
6/30/2018	Ending balance				85,562,769

Diluted EPS:

Weighted avg units outstanding	85,562,769
Dilutive common shares	277,543
Weighted avg dilutive units outstanding	85,840,312

Schedule of Basic and Diluted Earnings Per Common Share

Basic earnings per share (EPS):

	Period from January 1 to September 30, 2019		Period from July 1 to September 30, 2019
Net income	$	35,138	$	10,608
Less dividends to:		-		-
Ordinary Shares		-		-
Non-vested participating shares		-		-
Undistributed Successor Period Earnings	$	35,138	$	10,608
Allocation of earnings to Ordinary Shares	$	34,588	$	10,420
Allocation of earnings to Nonvested Shares		550		188

	Ordinary Shares		Ordinary Shares
Distributed Earnings	$	-	$	-
Undistributed Earnings		0.40		0.12
Total	$	0.40	$	0.12

Diluted earnings per share (EPS):

	Period from January 1 to September 30, 2019							Period from July 1 to September 30, 2019
Ordinary shares	Undistributed & distributed earnings to ordinary shareholders			Ordinary shares		EPS		Undistributed & distributed earnings to ordinary shareholders			Ordinary shares		EPS
As reported — basic	$	34,588			88,321,779	$	0.40	$	10,420			88,595,781	$	0.12
Add-back:
Undistributed earnings allocated to nonvested shareholders		550							188
12,618,680 Private Warrants @ $5.75 per half share (anti-dilutive)		-							-
22,921,700 Public Warrants @ $5.75 per half share (anti-dilutive)		-							-
Less:
Undistributed earnings reallocated to nonvested shareholders		(550	)						(188	)
Diluted EPS — Ordinary shares	$	34,588			88,321,779	$	0.40	$	10,420			88,595,781	$	0.12

The following table sets forth the calculation of basic and diluted earnings per common share for the periods presented:

	Period from		Period from
	July 1 to		June 6 to
	September 30, 2018		September 30, 2018
Weighted average basic common shares outstanding		85,562,769		85,562,769
Dilutive potential common shares from grant of restricted stock units		349,946		277,543
Weighted average dilutive common shares outstanding		85,912,715		85,840,312
Basic:
Net Income		16,110,000		12,362,000
Less: Earnings allocated to participating securities		-		-
Net income available to basic common shares		16,110,000		12,362,000
Basic earnings per common share		0.19		0.14
Diluted:
Net Income		16,110,000		12,362,000
Less: Earnings allocated to participating securities		-		-
Net income available to diluted common shares		16,110,000		12,362,000
Diluted earnings per common share		0.19		0.14

2018 Predecessor Period

The following table sets forth the calculation of basic and diluted earnings per common share for the periods presented (in thousands except shares and per share amounts):

	2018
	Period from
	January 1 to
	June 6, 2018
Weighted average basic common shares outstanding		348,524,566
Dilutive potential common shares		21,475,434
Weighted average dilutive common shares outstanding		370,000,000
Basic:
Net Income		6,736
Less: Earnings allocated to participating securities		192
Net income available to basic common shares		6,928
Basic earnings per common share		0.02
Diluted:
Net Income		6,736
Less: Earnings allocated to participating securities		181
Net income available to diluted common shares		6,917
Diluted earnings per common share		0.02

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Employee Benefits

9 Months Ended

Sep. 30, 2019

Successor [Member]

Employee Benefits

11. EMPLOYEE BENEFITS

Defined benefit plan

The Company provides defined benefit plan of severance pay to the eligible employees. The severance pay plan provides for a lump sum payment to employees on separation (retirement, resignation, death while in employment or on termination of employment) of an amount based upon the employees last drawn salary and length of service, subject to the completion of minimum service period (1-2 years) and taking into account the provisions of local applicable law or as per employee contract. The Company records annual amounts relating to these long-term employee benefits based on calculations that incorporate various actuarial and other assumptions, including discount rates, mortality, assumed rates of return, compensation increases and turnover rates. The Company reviews its assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends when it is appropriate to do so. The effect of modifications to those assumptions is recorded in the Condensed Consolidated Statement of Operations. The Company believes that the assumptions utilized in recording its obligations under its plans are reasonable based on its experience and market conditions. The net periodic costs are recognized as employees render the services necessary to earn these benefits.

The Components of net period benefit cost were as follows (in thousands):

	Period from January 1, 2019 to September 30, 2019		Period from June 7, 2018 to September 30, 2018		Period from January 1, 2018 to June 6, 2018
	Successor (NESR)				Predecessor (NPS)
Service Cost	$	2,255	$	1,153	$	866
Interest Cost		551		208		168
Other		77		70		375
Net Cost	$	2,883	$	1,431	$	1,409

	Period from July 1, 2019 to September 30, 2019		Period from July 1, 2018 to September 30, 2018
	Successor (NESR)
Service Cost	$	815	$	964
Interest Cost		375		178
Other		22		81
Net Cost	$	1,212	$	1,223

The Company made contributions to its defined benefit plan of $1.6 million, $0.5 million, $0.9 million, $0.7 million and $0.7 million, in the 2019 Successor Period, 2019 Successor Quarter, 2018 Successor Period, 2018 Successor Quarter, and 2018 Predecessor Period, respectively, in the Condensed Consolidated Statement of Operations. The scheme of the Company is unfunded.

Defined contribution plan

The Company also provides a defined contribution retirement plan and occupational hazard insurance for Omani employees. Contributions to a defined contribution retirement plan and occupational hazard insurance for Omani employees in accordance with the Omani Social Insurances Law are recognized as an expense in the Condensed Consolidated Statement of Operations as incurred. Total contributions were $2.4 million, $0.8 million, $0.8 million and $0.5 million, for the 2019 Successor Period, 2019 Successor Quarter, 2018 Successor Period, and 2018 Successor Quarter, respectively, in the Condensed Consolidated Statement of Operations.

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Preferred stock, no par value
Preferred stock, authorized unlimited	Unlimited	Unlimited
Preferred stock, issued
Preferred stock, outstanding
Common stock, no par value
Common stock, authorized unlimited	Unlimited	Unlimited
Common stock, issued	87,147,089	85,562,769
Common stock, outstanding	87,147,089	85,562,769

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Condensed Consolidated Interim Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	4 Months Ended	5 Months Ended	9 Months Ended
	Sep. 30, 2018	Jun. 06, 2018	Sep. 30, 2019
Cash flows from operating activities:
Net income / (loss)	$ 12,190		$ 35,138
Successor [Member]
Cash flows from operating activities:
Net income / (loss)	12,190		35,640
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	24,155		59,728
Shares issued for transaction costs	2,175
Stock-based compensation			4,057
(Gain) on disposal of assets	(684)		(399)
Non-cash interest expense	8,001		1,361
Deferred tax expense (benefit)	948		(1,733)
Allowance for doubtful receivables	629		920
Provision for obsolete service inventories			932
Other operating activities, net	603		(100)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable	10,178		(46,523)
(Increase) in inventories	(2,297)		(15,123)
(Increase) in prepaid expenses	(2,943)		(3,825)
(Increase) in other current assets	(21,866)		(5,537)
(Increase) decrease in other long-term assets and liabilities	312		5,403
Increase (decrease) in accounts payable and accrued expenses	(14,629)		23,971
Increase (decrease) in other current liabilities	(2,341)		(13,482)
Net cash provided by operating activities	14,431		45,290
Cash flows from investing activities:
Capital expenditures	(16,169)		(90,164)
Proceeds from disposal of assets	4,432		1,125
Proceeds from the Company's Trust account	231,782
Acquisition of business, net of cash acquired	(285,081)
Other investing activities	330		(932)
Net cash used in investing activities	(64,706)		(89,971)
Cash flows from financing activities:
Proceeds from long-term debt	100,000		365,000
Repayments of long-term debt			(285,048)
Net change in overdraft facilities			(7,050)
Proceeds from short-term borrowings			39,941
Proceeds from short-term borrowings			(44,250)
Proceeds from issuance of shares	48,294
Redemption of ordinary shares	(19,380)
Payment of deferred underwriting fees	(5,333)
Dividend paid
Other financing activities, net	(5,792)		(5,703)
Net cash provided by (used in) financing activities	117,789		62,890
Effect of exchange rate changes on cash			(19)
Net increase (decrease) in cash	67,514		18,190
Cash and cash equivalents, beginning of period	46		24,892
Cash and cash equivalents, end of period	67,560	$ 46	43,082
Supplemental disclosure of cash flow information (also refer Note 3):
Interest paid	3,724		13,396
Income taxes paid	3,129		$ 16,583
Predecessor [Member] | NPS Holdings Limited [Member]
Cash flows from operating activities:
Net income / (loss)		6,736
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		17,284
Stock-based compensation
(Gain) on disposal of assets
Non-cash interest expense		3,350
Deferred tax expense (benefit)
Allowance for doubtful receivables		2,402
Provision for obsolete service inventories
Other operating activities, net		1,442
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		(15)
(Increase) in inventories		(2,080)
(Increase) in prepaid expenses		(759)
(Increase) in other current assets		(16,257)
(Increase) decrease in other long-term assets and liabilities		(544)
Increase (decrease) in accounts payable and accrued expenses		7,335
Increase (decrease) in other current liabilities		1,932
Net cash provided by operating activities		20,826
Cash flows from investing activities:
Capital expenditures		(9,861)
Proceeds from disposal of assets
Proceeds from the Company's Trust account
Acquisition of business, net of cash acquired		(1,098)
Other investing activities		3,043
Net cash used in investing activities		(7,916)
Cash flows from financing activities:
Proceeds from long-term debt		47,063
Repayments of long-term debt
Net change in overdraft facilities
Proceeds from short-term borrowings
Proceeds from short-term borrowings
Proceeds from issuance of shares
Redemption of ordinary shares
Payment of deferred underwriting fees		(164)
Dividend paid		(48,210)
Other financing activities, net		(4,429)
Net cash provided by (used in) financing activities		(5,740)
Effect of exchange rate changes on cash		(16)
Net increase (decrease) in cash		7,154
Cash and cash equivalents, beginning of period	$ 31,656	24,502
Cash and cash equivalents, end of period		31,656
Supplemental disclosure of cash flow information (also refer Note 3):
Interest paid		3,636
Income taxes paid		$ 345

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Property, Plant and Equipment

9 Months Ended

Sep. 30, 2019

Successor [Member]

Property, Plant and Equipment

7. PROPERTY, PLANT, & EQUIPMENT

Property, plant and equipment, net of accumulated depreciation, of the Company consists of the following as of the period end dates set forth below (in thousands):

	Estimated Useful Lives (in years)		September 30, 2019			December 31, 2018
Buildings and leasehold improvements		5 to 25	$	24,635		$	21,572
Drilling rigs, plant and equipment		3 to 15		370,227			278,249
Furniture and fixtures		5		1,194			1,348
Office equipment and tools		3 to 6		34,392			31,568
Vehicles and cranes		5 to 8		6,130			4,179
Less: Accumulated depreciation				(79,848	)		(32,522	)
Land				5,104			5,104
Capital work in progress				21,651			19,229
Total			$	383,485		$	328,727

The Company recorded depreciation expense of $47.7 million, $17.2 million, $19.0 million, $14.2 million and $9.3 million, in the 2019 Successor Period, 2019 Successor Quarter, 2018 Successor Period, 2018 Successor Quarter, and 2018 Predecessor Period, respectively, in the Condensed Consolidated Statement of Operations.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Successor [Member]

Summary of Significant Accounting Policies

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Supplemental cash flow information

Non-cash transactions were as follows for the 2019 Period:

● Purchases of property, plant, and equipment in accounts payable at September 30, 2019 of $28.3 million, respectively, are not included under “Capital expenditures” within the condensed consolidated statement of cash flows.

Recently issued accounting standards not yet adopted

On August 28, 2018 the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update (“ASU”) No 2018-14, “Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to The Disclosure Requirements for Defined Benefit Plans.” ASU No. 2018-14 amends ASC 715 to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The update is effective for the Company for fiscal years ending after December 15, 2021. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

On August 28, 2018 the FASB issued ASU No 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” ASU No. 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820. The amendments in ASU No. 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In July 2018, the FASB issued ASU No. 2018-09, “Codification Improvements.” ASU 2018-09 makes changes to clarify the Accounting Standards Codification, corrects unintended application of guidance, and makes minor improvements to the Accounting Standards Codification that are not expected to have a significant effect on current accounting practice. The amendments are effective for the Company for fiscal years beginning after December 15, 2019 and for interim periods in fiscal years beginning after December 15, 2020. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” ASU 2018-07 expands the scope of Topic 718, Compensation—Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04 “Simplifying the Test for Goodwill.” The update amends Accounting Standard Codification No. 350 Intangibles - Goodwill and Other, provides guidance that simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in today’s two-step impairment test under accounting topic 350. The amendments in this update will be applied prospectively and is effective for annual and interim impairment tests performed in periods beginning after December 15, 2021. The Company does not expect the adoption of this standard to have an impact on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments”. The new standard amends the impairment model for trade receivables, net investments in leases, debt securities, loans and certain other instruments to utilize an expected loss methodology in place of the currently used incurred loss methodology. This pronouncement is effective for annual periods beginning after December 15, 2020, including interim periods within those annual periods. The Company is currently evaluating the provisions of the pronouncement and assessing the impact, if any, on its consolidated financial statements and related disclosures.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, “Leases,” a new standard on accounting for leases. This update increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. At its July 17, 2019, Board meeting, the FASB tentatively deferred the effective date for the Company’s consolidated financial statements by one year to as of and for the year ending December 31, 2021 and for interim periods beginning in 2022. The FASB plans to issue a proposed ASU to incorporate this decision. The Company is currently evaluating the provisions of the pronouncement and assessing the impact, if any, on its consolidated financial statements and related disclosures.

On August 6, 2018 the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements.” This ASU is intended to reduce costs and ease implementation of the lease standard for financial statement preparers. ASU 2018-11 provides a new transition method and a practical expedient for separating components of a contract. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. Additionally, the amendments in ASU 2018-11 provide lessors with a practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease component and, instead, to account for those components as a single component if the non-lease components otherwise would be accounted for under the new revenue guidance (Topic 606). At its July 17, 2019, Board meeting, the FASB tentatively deferred the effective date for the Company’s consolidated financial statements by one year to as of and for the year ended December 31, 2021 and for interim periods beginning in 2022. The FASB plans to issue a proposed ASU to incorporate this decision. The Company is currently evaluating the provisions of the pronouncement and assessing the impact, if any, on its consolidated financial statements and related disclosures.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” which outlines a single comprehensive model for entities to use in accounting for revenue. ASU 2014-09 supersedes the revenue recognition requirements in FASB ASC Topic 605, “Revenue Recognition,” and most industry-specific guidance. ASU 2014-09 sets forth a five-step model for determining when and how revenue is recognized. Under the model, an entity will be required to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers,” which deferred the effective date of ASU 2014-09 for all entities by one year and is effective for the Company’s consolidated financial statements as of and for the year ending December 31, 2019 and for interim periods beginning in 2020. The Company is currently analyzing the provisions of the pronouncement, assessing the impact of the new standard on revenue contracts, and evaluating prospective disclosures as compared to other industry participants. The Company expects to substantially complete its evaluation and document its conclusions during the fourth quarter of fiscal 2019. The Company anticipates utilizing the modified retrospective approach for adopting the new standard.

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Subsequent Events

9 Months Ended

Sep. 30, 2019

Successor [Member]

Subsequent Events

19. SUBSEQUENT EVENTS

The Company evaluated subsequent events and transactions that occur after the balance sheet date up to the date that the condensed consolidated interim financial statements are issued. Other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed consolidated interim financial statements. [UPDATE]

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Income Per Share

9 Months Ended

Sep. 30, 2019

Successor [Member]

Income Per Share

15. INCOME PER SHARE

Basic income per common share was computed using the two-class method by dividing basic net income attributable to common shareholders by the weighted-average number of common shares outstanding. Diluted income per common share was computed using the two-class method by dividing diluted net income attributable to common shareholders by the weighted-average number of common shares outstanding plus dilutive common equivalent shares. Dilutive common equivalent shares include all in-the-money outstanding contracts to issue common shares as if they were exercised or converted.

2019 Successor Period and 2019 Successor Quarter

The following tables provide a reconciliation of the data used in the calculation of basic and diluted ordinary shares outstanding for the period (in thousands except shares and per share amounts).

Date	Transaction Detail	Change in Shares		Period from January 1, 2019 to September 30, 2019 Weighted Average Ordinary Shares Outstanding
December 31, 2018	Beginning Balance				85,562,769
January 9, 2019	Other		33,796		32,806
February 19, 2019	NPS equity stock earn-out		1,300,214		1,300,214
August 14, 2019	Restricted stock vesting		250,310		43,094
September 30, 2019	Ending Balance				86,938,883

Date	Transaction Detail	Change in Shares		Period from July 1, 2019 to September 30, 2019 Weighted Average Ordinary Shares Outstanding
June 30, 2019	Beginning Balance				86,896,779
August 14, 2019	Restricted stock vesting		250,310		127,876
September 30, 2019	Ending Balance				87,024,655

	Period from January 1, 2019 to		Period from July 1, 2019 to
	September 30, 2019		September 30, 2019
	Shares for Use in Allocation		Shares for Use in Allocation
	to Participating Earnings		to Participating Earnings
Weighted average ordinary shares outstanding	$	86,938,883	$	87,024,655
Non-vested, participating restricted shares		1,382,896		1,571,126
Shares for use in allocation of participating earnings	$	88,321,779	$	88,595,781

Basic earnings per share (EPS):

	Period from January 1 to September 30, 2019		Period from July 1 to September 30, 2019
Net income	$	35,138	$	10,608
Less dividends to:		-		-
Ordinary Shares		-		-
Non-vested participating shares		-		-
Undistributed Successor Period Earnings	$	35,138	$	10,608
Allocation of earnings to Ordinary Shares	$	34,588	$	10,420
Allocation of earnings to Nonvested Shares		550		188

	Ordinary Shares		Ordinary Shares
Distributed Earnings	$	-	$	-
Undistributed Earnings		0.40		0.12
Total	$	0.40	$	0.12

Diluted earnings per share (EPS):

	Period from January 1 to September 30, 2019							Period from July 1 to September 30, 2019
Ordinary shares	Undistributed & distributed earnings to ordinary shareholders			Ordinary shares		EPS		Undistributed & distributed earnings to ordinary shareholders			Ordinary shares		EPS
As reported — basic	$	34,588			88,321,779	$	0.40	$	10,420			88,595,781	$	0.12
Add-back:
Undistributed earnings allocated to nonvested shareholders		550							188
12,618,680 Private Warrants @ $5.75 per half share (anti-dilutive)		-							-
22,921,700 Public Warrants @ $5.75 per half share (anti-dilutive)		-							-
Less:
Undistributed earnings reallocated to nonvested shareholders		(550	)						(188	)
Diluted EPS — Ordinary shares	$	34,588			88,321,779	$	0.40	$	10,420			88,595,781	$	0.12

Warrants that could be converted into as many as 17,770,190 ordinary shares are excluded from diluted EPS as they are anti-dilutive.

2018 Successor Period and 2018 Successor Quarter

The following table provides a reconciliation of the data used in the calculation of basic and diluted common shares outstanding for the periods as tabulated below:

Basic EPS:

Date	Transaction Detail	Change in Shares		Total Shares Outstanding
12/31/2017	Beginning balance				11,730,425
6/6/2018	Shares issued to Backstop Investor		4,829,375		16,559,800
6/6/2018	Shares issued for IPO underwriting fees		307,465		16,867,265
6/6/2018	Shares issued to NPS/GES		53,690,315		70,557,580
6/6/2018	Reclassification of shares previously subject to redemption less redeemed shares		15,005,189		85,562,769
6/30/2018	Ending balance				85,562,769

Diluted EPS:

Weighted avg units outstanding	85,562,769
Dilutive common shares	277,543
Weighted avg dilutive units outstanding	85,840,312

The following table sets forth the calculation of basic and diluted earnings per common share for the periods presented:

	Period from		Period from
	July 1 to		June 6 to
	September 30, 2018		September 30, 2018
Weighted average basic common shares outstanding		85,562,769		85,562,769
Dilutive potential common shares from grant of restricted stock units		349,946		277,543
Weighted average dilutive common shares outstanding		85,912,715		85,840,312
Basic:
Net Income		16,110,000		12,362,000
Less: Earnings allocated to participating securities		-		-
Net income available to basic common shares		16,110,000		12,362,000
Basic earnings per common share		0.19		0.14
Diluted:
Net Income		16,110,000		12,362,000
Less: Earnings allocated to participating securities		-		-
Net income available to diluted common shares		16,110,000		12,362,000
Diluted earnings per common share		0.19		0.14

2018 Predecessor Period

The following table sets forth the calculation of basic and diluted earnings per common share for the periods presented (in thousands except shares and per share amounts):

	2018
	Period from
	January 1 to
	June 6, 2018
Weighted average basic common shares outstanding		348,524,566
Dilutive potential common shares		21,475,434
Weighted average dilutive common shares outstanding		370,000,000
Basic:
Net Income		6,736
Less: Earnings allocated to participating securities		192
Net income available to basic common shares		6,928
Basic earnings per common share		0.02
Diluted:
Net Income		6,736
Less: Earnings allocated to participating securities		181
Net income available to diluted common shares		6,917
Diluted earnings per common share		0.02

XML

Income Per Share - Schedule of Basic and Diluted Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended		4 Months Ended	5 Months Ended	9 Months Ended
	Jun. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2018	Jun. 06, 2018	Sep. 30, 2019
Net income		$ 10,608	$ 16,157	$ 12,190		$ 35,138
Successor [Member]
Net income		11,110	$ 16,157	$ 12,190		35,640
Ordinary Shares
Non-vested participating shares
Undistributed Successor Period Earnings		10,608				35,138
Allocation of Undistributed Earnings to Ordinary Shares		10,420				34,588
Allocation of Undistributed Earnings to Nonvested Shares		$ 188				$ 550
Ordinary Shares, Distributed Earnings
Ordinary Shares, Undistributed Earnings		0.12				0.40
Ordinary Shares, Total		$ 0.13	$ 0.19	$ 0.14		$ 0.4
Undistributed & distributed earnings to ordinary shareholders, As reported - basic		$ 10,420				$ 34,588
Add-back : Undistributed & distributed earnings to ordinary shareholders, Undistributed earnings allocated to nonvested shareholders		188				550
Add-back : Undistributed & distributed earnings to ordinary shareholders, 12,618,680 Private Warrants @ $5.75 per half share (anti-dilutive)
Add-back : Undistributed & distributed earnings to ordinary shareholders, 22,921,700 Public Warrants @ $5.75 per half share (anti-dilutive)
Less : Undistributed & distributed earnings to ordinary shareholders, Undistributed earnings reallocated to nonvested shareholders		(188)				(550)
Diluted EPS - Ordinary shares		$ 10,420				$ 34,588
Add-back : Ordinary shares, As reported - basic	85,562,769	87,024,655	85,562,769	85,562,769		86,938,883
Add-back : Ordinary shares, Undistributed earnings allocated to nonvested shareholders
Add-back : Ordinary shares, 12,618,680 Private Warrants @ $5.75 per half share (anti-dilutive)
Add-back : Ordinary shares, 22,921,700 Public Warrants @ $5.75 per half share (anti-dilutive)
Diluted EPS - Ordinary shares	85,840,312	87,024,655	85,912,715	85,840,312		86,938,883
Diluted EPS- Ordinary shares		$ 0.13	$ 0.19	$ 0.14		$ 0.4
Weighted average ordinary shares outstanding	85,562,769	87,024,655	85,562,769	85,562,769		86,938,883
Dilutive potential common shares from grant of restricted stock units			349,946	277,543
Weighted average dilutive common shares outstanding	85,840,312	87,024,655	85,912,715	85,840,312		86,938,883
Basic: Less: Earnings allocated to participating securities
Basic: Net income available to basic common shares			$ 16,110	$ 12,362
Basic: Basic earnings per common share		$ 0.13	$ 0.19	$ 0.14		$ 0.4
Diluted : Less: Earnings allocated to participating securities
Diluted : Net income available to diluted common shares			$ 16,110	$ 12,362
Diluted : Diluted earnings per common share		$ 0.13	$ 0.19	$ 0.14		$ 0.4
Predecessor [Member] | NPS Holdings Limited [Member]
Net income					$ 6,736
Ordinary Shares, Total					$ 0.02
Add-back : Ordinary shares, As reported - basic					348,524,566
Diluted EPS - Ordinary shares					370,000,000
Diluted EPS- Ordinary shares					$ 0.02
Weighted average ordinary shares outstanding					348,524,566
Dilutive potential common shares from grant of restricted stock units					21,475,434
Weighted average dilutive common shares outstanding					370,000,000
Basic: Less: Earnings allocated to participating securities					$ 192
Basic: Net income available to basic common shares					$ 6,928
Basic: Basic earnings per common share					$ 0.02
Diluted : Less: Earnings allocated to participating securities					$ 181
Diluted : Net income available to diluted common shares					$ 6,917
Diluted : Diluted earnings per common share					$ 0.02

XML

Commitments and Contingencies - Schedule of Future Minimum Lease Payments Under Non-cancelable Operating Leases (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2019	$ 6,262
2020	24,814
2021	19,224
2022	3,508
2023	2,791
2024	2,792
Thereafter	4,425
Total	$ 63,816

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Share-Based Compensation (Details Narrative) - 2018 Long Term Incentive Plan [Member] - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	May 18, 2018
Ordinary shares reserved for issuance		5,000,000
Unrecognized compensation expense	$ 13,400
Weighted average remaining period	2 years 3 months 4 days

XML

Business Combination - Schedule of Preliminary Allocation to Intangible Assets (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Total intangible assets	$ 147,000	$ 147,000
Total intangible assets, term	9 years 7 months 6 days
NPS Holdings Limited [Member]
Total intangible assets	$ 94,000
Gulf Energy S.A.O.C [Member]
Total intangible assets	53,000
Customer Contracts [Member]
Total intangible assets	$ 121,500	121,500
Total intangible assets, term	10 years
Customer Contracts [Member] | NPS Holdings Limited [Member]
Total intangible assets	$ 77,000
Customer Contracts [Member] | Gulf Energy S.A.O.C [Member]
Total intangible assets	44,500
Trademarks and Trade Names [Member]
Total intangible assets	$ 25,500	$ 25,500
Total intangible assets, term	8 years
Trademarks and Trade Names [Member] | NPS Holdings Limited [Member]
Total intangible assets	$ 17,000
Trademarks and Trade Names [Member] | Gulf Energy S.A.O.C [Member]
Total intangible assets	$ 8,500

XML

Accounts Receivable - Schedule of Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands	3 Months Ended		4 Months Ended	5 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2018	Jun. 06, 2018	Sep. 30, 2019
Allowance for doubtful accounts at beginning of period					$ (693)
Allowance for doubtful accounts at end of period	$ (1,025)				(1,025)
Successor [Member]
Allowance for doubtful accounts at beginning of period	(450)				(693)
Add: additional allowance for the year	(444)				(920)
Less: write-off of doubtful accounts	(131)				588
Allowance for doubtful accounts at end of period	$ (1,025)				$ (1,025)
Predecessor [Member] | NPS Holdings Limited [Member]
Allowance for doubtful accounts at beginning of period			$ (6,508)	(4,106)
Add: additional allowance for the year				(2,402)
Less: write-off of doubtful accounts
Allowance for doubtful accounts at end of period				$ (6,508)

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Debt - Schedule of Short Term Debt Obligations (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Other short-term borrowings	$ 28,261	$ 21,817
Short-term debt, excluding current installments of long-term debt	28,261	31,817
Modified Hana Loan [Member]
Short term loan amount		$ 10,000

XML

Property, Plant and Equipment - Schedule of Property, Plant and Equipment (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Less: Accumulated depreciation	$ (79,848)	$ (32,522)
Land	5,104	5,104
Capital work in progress	21,651	19,229
Property, plant and equipment net	383,485	328,727
Buildings and Leasehold Improvements [Member]
Property, plant and equipment gross	$ 24,635	21,572
Buildings and Leasehold Improvements [Member] | Minimum [Member]
Property and equipment estimated useful lives	5 years
Buildings and Leasehold Improvements [Member] | Maximum [Member]
Property and equipment estimated useful lives	25 years
Drilling Rigs, Plant and Equipment [Member]
Property, plant and equipment gross	$ 370,227	278,249
Drilling Rigs, Plant and Equipment [Member] | Minimum [Member]
Property and equipment estimated useful lives	3 years
Drilling Rigs, Plant and Equipment [Member] | Maximum [Member]
Property and equipment estimated useful lives	15 years
Furniture and Fixtures [Member]
Property and equipment estimated useful lives	5 years
Property, plant and equipment gross	$ 1,194	1,348
Office Equipment and Tools [Member]
Property, plant and equipment gross	$ 34,392	31,568
Office Equipment and Tools [Member] | Minimum [Member]
Property and equipment estimated useful lives	3 years
Office Equipment and Tools [Member] | Maximum [Member]
Property and equipment estimated useful lives	6 years
Vehicles and Cranes [Member]
Property, plant and equipment gross	$ 6,130	$ 4,179
Vehicles and Cranes [Member] | Minimum [Member]
Property and equipment estimated useful lives	5 years
Vehicles and Cranes [Member] | Maximum [Member]
Property and equipment estimated useful lives	8 years

XML

Employee Benefits (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		5 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Jun. 06, 2018	Sep. 30, 2019	Sep. 30, 2018
Successor [Member]
Contributions to defined benefit plans	$ 500	$ 700		$ 1,600	$ 900
Total contributions	$ 800	$ 500		$ 2,400	$ 800
Predecessor [Member]
Contributions to defined benefit plans			$ 700

XML

Reportable Segments - Schedule of Segment Reporting, Information On Revenues and Long-lived Assets (Details) - USD ($) $ in Thousands	3 Months Ended		4 Months Ended	5 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2018	Jun. 06, 2018	Sep. 30, 2019	Dec. 31, 2018
Long-lived asset, Total	$ 383,485				$ 383,485	$ 328,727
Production Services [Member]
Long-lived asset, Total	268,244				268,244	219,278
Drilling and Evaluation Services [Member]
Long-lived asset, Total	126,105				126,105	98,163
Unallocated [Member]
Long-lived asset, Total	(10,864)				(10,864)	$ 11,286
Successor [Member]
Revenue from operations, Total	161,606	$ 145,580	$ 190,566		473,209
Segment EBITDA	42,828	44,040	47,404		125,021
Net Income	11,110	16,110	12,362		35,640
Income taxes	3,511	3,989	2,960		10,905
Interest expense, net	5,011	6,199	8,099		14,691
Depreciation and amortization	23,196	17,695	24,155		63,785
Successor [Member] | Production Services [Member]
Revenue from operations, Total	97,160	88,666	117,268		284,631
Segment EBITDA	32,581	33,180	41,952		98,007
Successor [Member] | Drilling and Evaluation Services [Member]
Revenue from operations, Total	64,446	56,914	73,298		188,578
Segment EBITDA	15,239	17,630	18,905		40,869
Successor [Member] | Unallocated Costs [Member]
Segment EBITDA	$ (4,992)	$ (6,770)	$ (13,453)		$ (13,855)
Predecessor [Member] | NPS Holdings Limited [Member]
Revenue from operations, Total				$ 137,027
Segment EBITDA				30,452
Net Income				7,617
Income taxes				2,342
Interest expense, net				4,090
Depreciation and amortization				17,284
Predecessor [Member] | Production Services [Member] | NPS Holdings Limited [Member]
Revenue from operations, Total				112,295
Segment EBITDA				36,836
Predecessor [Member] | Drilling and Evaluation Services [Member] | NPS Holdings Limited [Member]
Revenue from operations, Total				24,732
Segment EBITDA				3,267
Predecessor [Member] | Unallocated Costs [Member] | NPS Holdings Limited [Member]
Segment EBITDA				$ (9,651)

XML

Document and Entity Information	9 Months Ended
	Sep. 30, 2019
Document And Entity Information
Entity Registrant Name	National Energy Services Reunited Corp.
Entity Central Index Key	0001698514
Document Type	6-K
Document Period End Date	Sep. 30, 2019
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2019

XML

Condensed Consolidated Interim Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		4 Months Ended	5 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2018	Jun. 06, 2018	Sep. 30, 2019
Net income	$ 10,608	$ 16,157	$ 12,190		$ 35,138
Successor [Member]
Net income	11,110	16,157	12,190		35,640
Other comprehensive income, net of tax
Foreign currency translation adjustments					(19)
Total Comprehensive Income, net of tax	10,608	16,157	12,190		35,119
Comprehensive loss attributable to non-controlling interest
Comprehensive income attributable to shareholder interest	$ 10,608	$ 16,157	$ 12,190		$ 35,119
Predecessor [Member] | NPS Holdings Limited [Member]
Net income				$ 6,736
Other comprehensive income, net of tax
Foreign currency translation adjustments				(16)
Total Comprehensive Income, net of tax				6,720
Comprehensive loss attributable to non-controlling interest
Comprehensive income attributable to shareholder interest				$ 6,720

XML

Debt

9 Months Ended

Sep. 30, 2019

Successor [Member]

Debt

9. DEBT

Short-term debt

The Company’s short-term debt obligations consist of the following (in thousands):

	September 30, 2019		December 31, 2018
Modified Hana Loan	$	-	$	10,000
Other short-term borrowings		28,261		21,817
Short-term debt, excluding current installments of long-term debt	$	28,261	$	31,817

Short-term borrowings primarily consist of financings for capital equipment purchases.

Hana Loan and Modified Hana Loan agreements

In connection with the Business Combination, on June 5, 2018, NESR entered into a loan agreement with Hana Investments pursuant to which NESR borrowed $50.0 million on an unsecured basis (the “Hana Loan”). The Hana Loan had a scheduled maturity date of December 17, 2018 and was interest bearing, accruing interest at the greater of (i) an amount equal to $4.0 million or prorated if the loan was prepaid; and (ii) at a rate per annum equal to one-month Intercontinental Exchange LIBOR, adjusted monthly on the first day of each calendar month, plus a margin of 2.25% payable on maturity or prepaid. The interest was payable in NESR ordinary shares or cash at the election of the lender. The loan was subject to an origination fee of $0.6 million payable in NESR ordinary shares at $11.244 per share, which resulted in the issuance of 53,362 shares at closing of the Business Combination.

During 2018, the Company paid $44 million for both principal and interest in cash on the Hana Loan and entered into an extension (the “Modified Hana Loan”) for the balance of the loan which was fully repaid with cash during January 2019. The terms and conditions contained in the Hana Loan remained unchanged in the Modified Hana Loan.

Long-term debt

The Company’s long-term debt obligations consist of the following (in thousands):

	September 30, 2019			December 31, 2018
Secured Term Loan	$	300,000		$	-
Secured Revolving Credit Facility		50,000
Murabaha credit facility		-			150,000
APICORP bilateral term facility		-			46,875
SABB bilateral term facility		-			43,333
Term loan Ahli Bank		-			2,382
NBO loan $60,000		-			23,333
NBO loan $20,000		-			4,899
Less: unamortized debt issuance costs		(4,615	)		(557	)
Total loans and borrowings		345,385			270,265
Less: current portion of long-term debt		(7,500	)		(45,093	)
Long-term debt, net unamortized debt issuance costs and excluding current installments	$	337,885		$	225,172

Secured Facilities Agreement

On May 5, 2019, the Company entered into a $450.0 million term loan, revolving credit, and working capital facilities agreement (the “Secured Facilities Agreement”) with Arab Petroleum Investments Corporation (“APICORP”) – Bahrain Banking Branch, HSBC Bank Middle East Limited (“HSBC”), Mashreqbank PSC and Saudi British Bank acting as initial mandated lead arrangers and bookrunners, Mashreqbank PSC acting as global agent, APICORP and Mashreqbank PSC acting as security agents, NPS Bahrain for Oil & Gas Wells Services WLL, and its Kuwait branch, Gulf Energy SAOC and National Petroleum Technology Company as borrowers, and HSBC, Mashreqbank PSC, APICORP and Saudi British Bank, as the “Lenders.” Upon consummation of this transaction, the Company settled its existing debt obligations with the exception of a $30.4 million working capital facility with HSBC, described below, used for the issuance of letters of guarantee and letters of credit.

On May 23, 2019 and June 20, 2019, the Company entered into $35.0 million and $40.0 million Incremental Facilities Agreements, respectively, increasing the size of the Secured Facilities Agreement to $485.0 million and $525.0 million, respectively.

The $525.0 million Secured Facilities Agreement consists of a $300.0 million term loan due 2025 (the “Term Loan” or “Secured Term Loan”), a $65.0 million Revolving Credit Facility (“RCF” or “Secured Revolving Credit Facility”) due 2023, and a $160.0 million working capital facility. Borrowings under the Term Loan and RCF incur interest at the rate of three-month LIBOR plus 2.4% to 2.7% per annum, varying based on the Company’s Net Debt / EBITDA ratio. As of September 30, 2019, this results in an interest rate of 4.6%. The Company has drawn $300 million of the Term Loan and $50 million of the RCF as of September 30, 2019.

The RCF was obtained for general corporate and working capital purposes including capital expenditure related requirements and acquisitions (including transaction related expenses). The RCF requires the payment of a commitment fee each quarter. The commitment fee is computed at the rate of 0.60% per annum based on the average daily amount by which the borrowing base exceeds the outstanding borrowings during each quarter. Under the terms of the RCF, the final settlement is due by May 6, 2023. The Company is required to repay the amount of any principal balance outstanding together with any unpaid accumulated interest at three-month LIBOR plus 2.4% to 2.7% per annum, varying based on the Company’s Net Debt / EBITDA ratio. The Company is permitted to make any prepayment under this RCF in multiples of $5.0 million during this 4-year period up to May 6, 2023. Any unutilized balances from the RCF can be drawn down again during the 4-year tenure at the same terms.

The Secured Facilities Agreement also includes a working capital facility of $160.0 million for issuance of letters of guarantee and letters of credit and refinancing letters of credit over a period of one year, which carries an interest rate equal to three-month U.S. Dollar LIBOR for the applicable interest period, plus a margin of 1.00% to 1.25% per annum. As of September 30, 2019, the Company had utilized $130.7 million under this working capital facility and the balance of $29.3 million was available to the Company.

The Company has also retained legacy bilateral working capital facilities from HSBC totaling $30.4 million in Qatar ($16.4 million), in UAE ($13.9 million) and Kuwait ($0.1 million). As of September 30, 2019, the Company had utilized $27.5 million under this working capital facility and the balance of $2.9 million was available to the Company.

Amounts utilized entails that Company has utilized both the facilities by issuing letters of credit to its vendors under both working capital facilities but it still remains off balance sheet until drawn. Once the Company draws the letter of credit to settle any vendor dues, it is classified as short-term borrowings until repaid.

The Secured Facilities Agreement includes covenants that specify maximum leverage (Net Debt / EBITDA) up to 3.50, minimum debt service coverage ratio (Cash Flow / Debt Service) of at least 1.25, and interest coverage (EBITDA / Interest) of at least 4.00. The Company is in compliance with all financial covenants as of September 30, 2019.

Other debt information

Scheduled principal payments of long-term debt for periods subsequent to September 30, 2019 are as follows (in thousands):

2019	$	-
2020		15,000
2021		37,500
2022		45,000
2023		95,000
2024		45,000
Thereafter		112,500
Total	$	350,000

XML

Accounts Receivable

9 Months Ended

Sep. 30, 2019

Successor [Member]

Accounts Receivable

5. ACCOUNTS RECEIVABLE

The following table summarizes the accounts receivable of the Company as of the period end dates set forth below (in thousands):

	September 30, 2019			December 31, 2018
Trade receivables	$	108,394		$	63,329
Less: allowance for doubtful accounts		(1,025	)		(693	)
Total	$	107,370		$	62,636

Trade receivables relate to the sale of services, for which credit is extended based on our evaluation of the customer’s credit-worthiness. The gross contractual amounts of trade receivables at September 30, 2019 and December 31, 2018 were $113.2 million and $69.1 million, respectively. Movement in the allowance for doubtful accounts is as follows (in thousands):

	Period from January 1, 2019 to September 30, 2019			Period from June 7, 2018 to September 30, 2018		Period from January 1, 2018 to June 6, 2018
	Successor (NESR)					Predecessor (NPS)
Allowance for doubtful accounts at beginning of period	$	(693	)		-	$	(4,106	)
Add: additional allowance for the year		(920	)		-		(2,402	)
Less: write-off of doubtful accounts		588			-		-
Allowance for doubtful accounts at end of period	$	(1,025	)		-	$	(6,508	)

	Period from July 1, 2019 to September 30, 2019			Period from July 1, 2018 to September 30, 2018
	Successor (NESR)
Allowance for doubtful accounts at beginning of period	$	(450	)	$	-
Add: additional allowance for the year		(444	)		-
Less: write-off of doubtful accounts		(131	)		-
Allowance for doubtful accounts at end of period	$	(1,025	)	$	-

XML

Basis of Presentation

9 Months Ended

Sep. 30, 2019

Successor [Member]

Basis of Presentation

2. BASIS OF PRESENTATION

The accompanying condensed consolidated interim financial statements of the Company have been prepared in accordance with U.S. GAAP for interim financial reporting purposes. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated interim financial statements should be read in conjunction with the Company’s Annual Report on Form 20-F for the year ended December 31, 2018 and Reports on Form 6-K for the quarterly periods ended March 31, 2019 and June 30, 2019.

The Business Combination was accounted for under Accounting Standards Codification (“ASC”) Topic 805, Business Combination. Pursuant to ASC 805, NESR was determined to be the accounting acquirer based on evaluation of the facts and circumstances including:

● The transfer of cash by NESR;

● NESR’s executive management comprise the C-Suite of the combined company;

● NESR’s right to designate members of the board; and

● NESR initiated the Business Combination.

As a result of the Business Combination, NPS and GES were acquirees and NPS was determined to be the accounting “Predecessor”. NPS was determined to be the accounting “Predecessor” as the Company expects to use the NPS platform to grow the business as it operates throughout the Middle East and Africa whereas GES is concentrated in Oman. Further, the market size of countries where NPS is operating is much larger than that of GES and the valuation and price paid for NPS was higher than that of GES. The Company’s financial statement presentation distinguishes a Predecessor for periods prior to the Closing Date. NESR is the “Successor” for periods after the Closing Date, which includes the consolidated financial results of both NPS and GES. The transactions were accounted for as a business combination using the acquisition method of accounting, and the Successor financial statements reflect a new basis of accounting for both NPS and GES that is based on the fair value of assets acquired and liabilities assumed. See Note 4, Business Combination, for further discussion on the Business Combination. As a result of the application of the acquisition method of accounting as of the Closing Date, the financial statements for the predecessor periods and for the successor period are presented on a different basis of accounting and are, therefore, not comparable. The historical information of NESR prior to the Business Combination has not been reflected in the Company’s financial statements prior to June 7, 2018, as it was not deemed the Predecessor. Statement of operations activity of NESR, being nominal in nature, prior to the closing of the Business Combination were recorded in the opening retained earnings as of June 7, 2018 and not presented separately.

In the accompanying condensed consolidated interim financial statements, the successor periods are from June 7, 2018 to September 30, 2018 (“2018 Successor Period”), July 1, 2018 to September 30, 2018 (“2018 Successor Quarter”), January 1, 2019 to September 30, 2019 (“2019 Successor Period”), and July 1, 2019 to September 30, 2019 (“2019 Successor Quarter”) and the predecessor period is from January 1, 2018 to June 6, 2018 (“2018 Predecessor Period”).

Emerging growth company

The Company is an “emerging growth company,” as defined in Section 2(a) of the U.S. Securities Act of 1933 as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make a comparison of the Company’s condensed consolidated interim financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Use of estimates

The preparation of condensed consolidated interim financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated interim financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s significant estimates include estimates made towards purchase price allocation for the acquisition of NPS and GES, allowance for doubtful accounts, impairment of property, plant and equipment, goodwill and intangible assets, estimated useful life of property plant and equipment and intangible assets, provision for inventories obsolescence, recoverability of unbilled revenue, provision for liabilities pertaining to unrecognized tax benefits, recoverability of deferred taxes and contingencies and actuarial assumptions in employee benefit plans.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the condensed consolidated interim financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from our estimates.

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Description of Business (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands	Jun. 06, 2018	May 30, 2017	May 17, 2017
Total proceeds held in the trust account	$ 231,800
Initial Public Offering [Member]
Number of shares sold in transaction			21,000,000
Proceeds from issuance initial public offering			$ 210,000
Private Placement [Member] | Warrant [Member]
Number of warrant issued			11,850,000
Warrant price per share			$ 0.50
Proceeds from warrant issuance			$ 5,900
Over-Allotment Option [Member]
Total proceeds held in the trust account		$ 229,200
Over-Allotment Option [Member] | Warrant [Member]
Number of shares sold in transaction		1,921,700
Number of warrant issued		768,680
Warrant price per share		$ 0.50
Unit price		$ 10.00
Total proceeds from exercise of over-allotment option		$ 19,600

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Property, Plant and Equipment (Tables)

9 Months Ended

Sep. 30, 2019

Successor [Member]

Schedule of Property, Plant and Equipment

Property, plant and equipment, net of accumulated depreciation, of the Company consists of the following as of the period end dates set forth below (in thousands):

	Estimated Useful Lives (in years)		September 30, 2019			December 31, 2018
Buildings and leasehold improvements		5 to 25	$	24,635		$	21,572
Drilling rigs, plant and equipment		3 to 15		370,227			278,249
Furniture and fixtures		5		1,194			1,348
Office equipment and tools		3 to 6		34,392			31,568
Vehicles and cranes		5 to 8		6,130			4,179
Less: Accumulated depreciation				(79,848	)		(32,522	)
Land				5,104			5,104
Capital work in progress				21,651			19,229
Total			$	383,485		$	328,727

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Share-Based Compensation (Tables) - Successor [Member]

9 Months Ended

Sep. 30, 2019

Schedule of Unvested Restricted Stock

The following table sets forth the LTIP activity for the periods indicated:

	Number of Restricted Shares			Weighted Average Grant Date Fair Value per Share
Unvested at December 31, 2018 (NESR - Successor)		725,200		$	10.94
Granted		1,184,000		$	9.86
Vested		(250,310	)	$	10.32
Forfeited		(106,000	)	$	10.87
Unvested at September 30, 2019 (NESR - Successor)		1,552,890		$	10.22

	Number of Restricted Shares			Weighted Average Grant Date Fair Value per Share
Unvested at June 30, 2019 (NESR - Successor)		1,600,200		$	10.59
Granted		214,000		$	7.60
Vested		(250,310	)	$	10.32
Forfeited		(11,000	)	$	10.36
Unvested at September 30, 2019 (NESR - Successor)		1,552,890		$	10.22

Schedule of Stock-based Compensation

Stock-based compensation has been recorded in the Condensed Consolidated Statement of Operations as follows for the periods presented:

	Cost of services		Selling, general and administrative expense		Total
2019 Successor Period	$	1,813,635	$	2,243,336	$	4,056,971
2019 Successor Quarter		757,779		1,187,479		1,945,258
2018 Successor Period		165,591		165,592		331,183
2018 Successor Quarter		165,591		165,592		331,183

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Related Party Transactions

9 Months Ended

Sep. 30, 2019

Successor [Member]

Related Party Transactions

17. RELATED PARTY TRANSACTIONS

Mubadarah Investment LLC (“Mubadarah”)

GES leases office space in a building it owns in Muscat, Oman to Mubadarah along with other Mubadarah group entities (collectively, the “Mubadarah group entities”). GES charges rental income to the Mubadarah group entities for the occupation of the office space, based on usage. Rental income charged by GES to the Mubadarah group entities amounted to $168,000, $49,000, $57,000 and $43,000 in the 2019 Successor Period, 2019 Successor Quarter, 2018 Successor Period, and 2018 Successor Quarter, respectively, in the Condensed Consolidated Statement of Operations. The outstanding balance of receivables from Mubadarah was $1.3 million at September 30, 2019. Mubadarah is owned by Hilal Al Busaidy and Yasser Al Barami, and, collectively with Mubadarah, they own 19.7% of the Company.

Prime Business Solutions LLC (“PBS”)

PBS is 100% owned by Mubadarah Business Solutions LLC and is involved in the development and maintenance of Enterprise Resource Planning (“ERP”) systems.

PBS has developed and implemented the GEARS (ERP) system for GES and is currently engaged to maintain it. GES has paid any maintenance fees to PBS totaling $209,000, $209,000, $0, and $0 in the 2019 Successor Period, 2019 Successor Quarter, 2018 Successor Period, and 2018 Successor Quarter, respectively.

Key Management and Founders

Hilal Al Busaidy and Yasser Al Barami are both founding shareholders of GES. Certain shares owned by them were converted into NESR ordinary shares as part of the Business Combination.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2019

Successor [Member]

Commitments and Contingencies

13. COMMITMENTS AND CONTINGENCIES

Capital expenditure commitments

The Company was committed to incur capital expenditures of $15.7 million at September 30, 2019. These commitments are expected to be settled during 2019 and 2020.

Operating lease commitments

Future minimum lease commitments under non-cancellable operating leases with initial or remaining terms of one year or more at September 30, 2019, are payable as follows (in thousands):

2019	$	6,262
2020		24,814
2021		19,224
2022		3,508
2023		2,791
2024		2,792
Thereafter		4,425
Total	$	63,816

The Company recorded rental expense of $80.9 million, $24.5 million, $31.2 million, $25.2 million, and $19.5 million, in the 2019 Successor Period, 2019 Successor Quarter, 2018 Successor Period, 2018 Successor Quarter, and 2018 Predecessor Period, respectively, in the Condensed Consolidated Statement of Operations.

Other commitments

The Company has outstanding letters of credit amounting to $28.2 million and $10.3 million as of September 30, 2019 and December 31, 2018, respectively.

In the normal course of business with customers, vendors and others, we have entered into off-balance sheet arrangements, such as surety bonds for performance, and other bank issued guarantees, including cash margin guarantees, which totaled $110.5 million and $41.4 million as of September 30, 2019 and December 31, 2018, respectively. A liability is accrued when a loss is both probable and can be reasonably estimated. None of the off-balance sheet arrangements either has, or is likely to have, a material effect on our condensed consolidated interim financial statements.

As of September 30, 2019, and December 31, 2018, the Company had a liability of $6.7 million and $6.7 million, respectively, on the consolidated balance sheet included in the line item “Other liabilities” reflecting various liabilities associated with the 2014 acquisition of NPS Bahrain.

Registration rights

The Company is a party to various registration rights agreements with holders of its securities. These registration rights agreements provide certain holders with demand and “piggyback” registration rights, and holders have other rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights are subject to various limitations. The Company generally bears the expenses incurred in connection with the filing of any such registration statements. On July 16, 2018, the Company filed a registration statement on Form F-3 pursuant to certain registration rights agreements, which was declared effective on August 22, 2018. On February 22, 2019, the Company filed another registration statement on Form F-3 pursuant to certain registration rights agreements, which was declared effective on March 4, 2019.

Legal proceedings

The Company is involved in certain legal proceedings which arise in the ordinary course of business and the outcomes of which are currently subject to uncertainties and therefore the probability of a loss, if any, being sustained and an estimate of the amount of any loss are difficult to ascertain. Consequently, it is not possible to make a reasonable estimate of the expected financial effect, if any, that will result from ultimate resolution of these disputes. The Company is contesting these claims/disputes and the Company’s management currently believes that provision against these potential claims is not required as the ultimate outcome of these disputes would not have a material impact on the Company’s business, financial condition or results of operations.

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Business Combination (Tables) - Successor [Member]

9 Months Ended

Sep. 30, 2019

Schedule of Purchase Price Allocation

The following table summarizes the final allocation of the purchase price (in thousands):

Allocation of consideration

	NPS			GES
	(In thousands)
Cash and cash equivalents	$	31,656		$	5,206
Accounts receivable		55,392			18,013
Unbilled revenue		41,378			45,343
Inventories		33,652			31,092
Current assets		19,463			8,719
Property, plant and equipment		216,094			91,444
Intangible assets		94,000			53,000
Deferred tax assets		-			554
Other assets		7,457			1,254
Total identifiable assets acquired		499,092			254,625
Accounts payable		26,457			31,113
Accrued expenses		28,685			25,388
Current portion of loans and borrowings		-			16,368
Short-term borrowings		55,836			9,000
Current liabilities		3,665			15,449
Loans and borrowings		149,399			25,098
Deferred tax liabilities		24,098			8,053
Other liabilities		22,363			9,910
Non-controlling interest		(2,841	)		837
Net identifiable liabilities acquired		307,662			141,216
Total fair value of net assets acquired		191,328			113,409
Goodwill		399,325			175,439
Total gross consideration	$	590,755		$	288,848

Schedule of Preliminary Allocation to Intangible Assets

Intangible assets were identified that met either the separability criterion or the contractual-legal criterion described in ASC 805. The final allocation to intangible assets is as follows (in thousands):

Intangible assets

	Fair Value
	NPS		GES		Total		Useful Life
	(In thousands)
Customer contracts	$	77,000	$	44,500	$	121,500	10 years
Trademarks and trade names		17,000		8,500		25,500	8 years
Total intangible assets	$	94,000	$	53,000	$	147,000

Schedule of Proforma Information of Operations

The following table summarizes the supplemental consolidated results of the Company on an unaudited pro forma basis, as if the Business Combination had been consummated on January 1, 2017 for the Predecessor Period ended June 6, 2018 (in thousands):

	Period from January 1 to September 30, 2018
Revenues		394,495
Net income		8,971

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Property, Plant and Equipment (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		5 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Jun. 06, 2018	Sep. 30, 2019	Sep. 30, 2018
Successor [Member]
Depreciation expense	$ 17,200	$ 14,200		$ 47,700	$ 19,000
Predecessor [Member]
Depreciation expense			$ 9,300

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Business Combination (Details Narrative) - Successor [Member] $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Increase in goodwill	$ 3,200
Increase in current liabilities due to income tax return accrual	3,200
Other liabilities increased amount	1,100
Amount allocated to goodwill	$ 574,800

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Accounts Receivable (Details Narrative) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Receivables [Abstract]
Allowance for doubtful accounts receivable	$ 113,200	$ 69,100

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Income Per Share (Details Narrative)	9 Months Ended
	Sep. 30, 2019 shares
Successor [Member] | Private Warrants [Member]
Antidilutive securities excluded from computation of earnings per share amount	17,770,190

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Share-Based Compensation - Schedule of Stock-based Compensation (Details) - Successor [Member] - USD ($)	3 Months Ended		4 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2018	Sep. 30, 2019
Stock-based compensation	$ 1,945,258	$ 331,183	$ 331,183	$ 4,056,971
Cost of Services [Member]
Stock-based compensation	757,779	165,591	165,591	1,813,635
Selling, General and Administrative Services [Member]
Stock-based compensation	$ 1,187,479	$ 165,592	$ 165,592	$ 2,243,336

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Accounts Receivable (Tables) - Successor [Member]

9 Months Ended

Sep. 30, 2019

Schedule of Accounts Receivable

The following table summarizes the accounts receivable of the Company as of the period end dates set forth below (in thousands):

	September 30, 2019			December 31, 2018
Trade receivables	$	108,394		$	63,329
Less: allowance for doubtful accounts		(1,025	)		(693	)
Total	$	107,370		$	62,636

Schedule of Allowance for Doubtful Accounts

	Period from January 1, 2019 to September 30, 2019			Period from June 7, 2018 to September 30, 2018		Period from January 1, 2018 to June 6, 2018
	Successor (NESR)					Predecessor (NPS)
Allowance for doubtful accounts at beginning of period	$	(693	)		-	$	(4,106	)
Add: additional allowance for the year		(920	)		-		(2,402	)
Less: write-off of doubtful accounts		588			-		-
Allowance for doubtful accounts at end of period	$	(1,025	)		-	$	(6,508	)

	Period from July 1, 2019 to September 30, 2019			Period from July 1, 2018 to September 30, 2018
	Successor (NESR)
Allowance for doubtful accounts at beginning of period	$	(450	)	$	-
Add: additional allowance for the year		(444	)		-
Less: write-off of doubtful accounts		(131	)		-
Allowance for doubtful accounts at end of period	$	(1,025	)	$	-

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Reportable Segments

9 Months Ended

Sep. 30, 2019

Successor [Member]

Reportable Segments

18. REPORTABLE SEGMENTS

Operating segments are components of an enterprise where separate financial information is available that are evaluated regularly by the Company’s chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company reports segment information based on the “management” approach and its CODM is its Chief Executive Officer.

The Company’s services are similar to one another in that they consist of oilfield services and related offerings, whose customers are oil and gas companies. The results of operations of the service offerings are regularly reviewed by the CODM for the Company for the purposes of determining resource and asset allocation and assessing performance. The Company has determined that it has two reportable segments, Production Services and Drilling and Evaluation Services. Management evaluates the operating results of its reportable segments primarily based on revenue and segment EBITDA. The Company defines EBITDA as net income adjusted for interest expense, depreciation and amortization, and income tax benefit or expense. Segment EBITDA does not include general corporate expenses as these expenses are not allocated to the Company’s reportable segments and not reported to the Company’s CODM.

Segment EBITDA is not a measure of financial performance under U.S. GAAP and should not be considered an alternative to net income, the most directly comparable U.S. GAAP measure or any other measure of financial performance presented in accordance with U.S. GAAP. Our calculation of Segment EBITDA may not be comparable to that reported by other companies. The Company believes that the presentation of Segment EBITDA enables the Company and its shareholders to better assess each segment’s operating results relative to its operating results in prior periods and improves the comparability of the information presented. Investors should consider this non-U.S. GAAP measure in the context of the Company’s U.S. GAAP results.

Production Services that are offered depend on the well life cycle in which the services may fall. They include, but are not limited to, the following types of service offerings: coil tubing, stimulation and pumping, nitrogen services, completions, pipelines, cementing, laboratory services and filtration services.

Drilling and Evaluation Services generates its revenue from the following service offerings: drilling and workover rigs, rig services, drilling services and rentals, fishing and remedials, directional drilling, turbines drilling, drilling fluids, wireline logging services, slickline services and well testing services.

The Company’s operations and activities are located within certain geographies, primarily the MENA region and the Asia Pacific region, which includes Malaysia, Indonesia and India.

In accordance with FASB ASC 280 - Segment Reporting, information on revenues and long-lived assets of the operations of the Company are disclosed below (in thousands):

Revenue from operations

	Successor (NESR)								Predecessor (NPS)
	Period from		Period from		Period from		Period from		Period from
	January 1, 2019 to September 30, 2019		July 1, 2019 to September 30, 2019		June 7, 2018 to September 30, 2018		July 1, 2018 to September 30, 2018		January 1, 2018 to June 6, 2018
Reportable Segment:
Production Services	$	284,631	$	97,160	$	117,268	$	88,666	$	112,295
Drilling and Evaluation Services		188,578		64,446		73,298		56,914		24,732
Total revenue	$	473,209	$	161,606	$	190,566	$	145,580	$	137,027

Long-lived assets

	September 30, 2019			December 31, 2018
Reportable Segment:
Production Services	$	268,244		$	219,278
Drilling and Evaluation Services		126,105			98,163
Unallocated		(10,864	)		11,286
Total	$	383,485		$	328,727

Segment EBITDA

	Successor (NESR)												Predecessor (NPS)
	Period from			Period from			Period from			Period from			Period from
	January 1, 2019 to September 30, 2019			July 1, 2019 to September 30, 2019			June 7, 2018 to September 30, 2018			July 1, 2018 to September 30, 2018			January 1, 2018 to June 6, 2018
Reportable Segment:
Production Services		98,007			32,581			41,952			33,180			36,836
Drilling and Evaluation Services		40,869			15,239			18,905			17,630			3,267
Unallocated Costs		(13,855	)		(4,992	)		(13,453	)		(6,770	)		(9,651	)
Total Segment EBITDA	$	125,021		$	42,828		$	47,404		$	44,040		$	30,452

The following table presents a reconciliation of consolidated net income, which is the most comparable financial measure under U.S. GAAP, to Total Segment EBITDA:

	Successor (NESR)								Predecessor (NPS)
	Period from January 1, 2019 to September 30, 2019		Period from July 1, 2019 to September 30, 2019		Period from June 7, 2018 to September 30, 2018		Period from July 1, 2018 to September 30, 2018		Period from January 1, 2018 to June 6, 2018
Net Income	$	35,138	$	10,608	$	12,190	$	16,157	$	6,736
Add:
Income taxes		11,407		4,013		2,960		3,989		2,342
Interest expense, net		14,691		5,011		8,099		6,199		4,090
Depreciation and amortization		63,785		23,196		24,155		17,695		17,284
Total Segment EBITDA	$	125,021	$	42,828	$	47,404	$	44,040	$	30,452

Revenue by geographic area

	Successor (NESR)								Predecessor (NPS)
	Period from		Period from		Period from		Period from		Period from
	January 1, 2019 to September 30, 2019		July 1, 2019 to September 30, 2019		June 7, 2018 to September 30, 2018		July 1, 2018 to September 30, 2018		January 1, 2018 to June 6, 2018
MENA	$	465,856	$	158,229	$	188,488	$	143,914	$	134,479
Rest of world		7,353		3,377		2,078		1,666		2,548
Total revenue	$	473,209	$	161,606	$	190,566	$	145,580	$	137,027

Long-lived assets by geographic area

	September 30, 2019		December 31, 2018
Geographic Area:
MENA	$	374,911	$	319,552
Rest of world		8,574		9,175
Total	$	383,485	$	328,727

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Equity

9 Months Ended

Sep. 30, 2019

Successor [Member]

Equity

14. EQUITY

The Company is authorized to issue an unlimited number of ordinary shares, no par value, and preferred shares, no par value. The Company’s ordinary shares are entitled to one vote for each share. As of September 30, 2019, there were 87,147,089 ordinary shares outstanding, 22,921,700 public warrants and 12,618,680 private warrants. Each warrant entitles the registered holder to purchase one-half of one ordinary share at a price of $5.75 per half share at any time commencing on July 6, 2018 (30 days after the completion of the Business Combination). The warrants must be exercised for whole ordinary shares. The warrants expire on June 6, 2023 (five years after the completion of the Business Combination). The private warrants are identical to the public warrants except that such warrants are exercisable for cash (even if a registration statement covering the ordinary shares issuable upon exercise of such warrants is not effective) or on a cashless basis, at the holder’s option, and will not be redeemable so long as they are still held by the initial purchasers or their affiliates. No public warrants are exercisable for cash unless there is an effective and current registration statement covering the ordinary shares issuable upon exercise of the warrants and a current prospectus relating to such ordinary shares.

The Company is authorized to issue an unlimited number of preferred shares divided into five classes with designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. As of September 30, 2019, there were no preferred shares issued or outstanding.

At the Closing Date, there were 11,730,425 ordinary shares outstanding that were not subject to possible redemption and 16,921,700 ordinary shares that were subject to possible redemption as a result of the Business Combination that were recorded outside of permanent equity as a liability on NESR’s consolidated balance sheet. On the Closing Date, the 16,921,700 ordinary shares were reclassed to permanent equity at the fair value of $165.2 million (redemption value of $10.11 per share less $0.35 underwriting fee per share or $9.76 per share). Of the ordinary shares reclassed, 1,916,511 ordinary shares were redeemed for $19.4 million ($10.11 per share). In connection with the completion of the Business Combination, $3.7 million in NESR ordinary shares (307,465) was issued for underwriting fees.

Pursuant to the NPS Stock Purchase Agreement dated November 12, 2017, Hana Investments exchanged its portion of the acquired NPS shares, totaling 83,660,878 shares, for 13,340,448 NESR ordinary shares, including accrued interest, at the time that NESR completed the Business Combination. At closing of the Business Combination, NESR purchased the remaining outstanding NPS shares with $292.8 million in cash and 11,318,828 NESR ordinary shares, subject to certain adjustments. Also, on the Closing Date, the Company paid interest totaling $4.7 million in stock (418,001 ordinary shares) to Hana Investments.

As discussed in Note 9, Debt, on June 5, 2018, in connection with the Business Combination, NESR entered into the Hana Loan with Hana Investments pursuant to which NESR borrowed $50.0 million on an unsecured basis. The loan was subject to an origination fee of $0.6 million payable in NESR ordinary shares at $11.244 per share, which resulted in the issuance of 53,362 shares at closing of the Business Combination.

In connection with the Business Combination, on June 5, 2018, the Company entered into a Relationship Agreement with Hana Investments (the “Olayan Relationship Agreement”), to set out certain rights to which Hana Investments will be entitled as a shareholder of the Company and certain obligations of the Company and NESR Holdings. The Company reimbursed Hana Investments for transaction fees and expenses in the amount of $2.1 million through the issuance of NESR ordinary shares at a conversion rate of $11.244 per share (213,447 ordinary shares) at closing of the Business Combination.

On June 6, 2018, NESR acquired 88% of the outstanding shares of GES from certain owners of GES in exchange for the issuance of 25,309,848 NESR ordinary shares, and NESR Holdings acquired the remaining 12% of the outstanding shares of GES for a total cash purchase price of $29.3 million as discussed in Note 4, Business Combination. NESR Holdings organized financing of the acquisition through certain loan contracts and assigned the GES shares which it acquired to NESR, and NESR assumed the obligation to satisfy the loan contracts. NESR elected to issue NESR ordinary shares to satisfy the loan contracts and issued a total of 3,036,381 NESR ordinary shares in settlement of the loan contracts and accrued interest.

In connection with the Business Combination, on April 27, 2018, the Company entered into the Forward Purchase Agreement with MEA Energy Investment Company 2 Ltd. (the “Backstop Investor”), pursuant to which the Company agreed to sell up to $150 million of the Company’s ordinary shares to the Backstop Investor or its designees and commonly controlled affiliates. On the Closing Date, the Company drew down $48,293,763 under the primary placement of the Forward Purchase Agreement and issued 4,829,375 ordinary shares to the Backstop Investor.

In February 2019, pursuant to the NPS Stock Purchase Agreement, the Company issued to the NPS selling shareholders 1,300,214 NESR ordinary shares to satisfy its obligation in connection with the NPS Equity Stock Earn-Out, a contingent consideration obligation arising from its acquisition of NPS in 2018 and based on the 2018 EBITDA (earnings before income taxes, depreciation and amortization) of NESR satisfying scheduled financial thresholds. As of year-end 2018, the Company presented its $10.5 million obligation under the terms of the NPS Equity Stock Earn-Out arrangement as part of Other current liabilities. It was reclassified to Additional paid in capital in the first quarter of 2019 when the shares were issued.

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Summary of Significant Accounting Policies (Details Narrative) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Successor [Member] | Accounts Payable [Member]
Purchases of property, plant, and equipment	$ 28,300

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Business Combination - Schedule of Proforma Information of Operations (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2018 USD ($)
Business Combinations [Abstract]
Revenues	$ 394,495
Net income	$ 8,971

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Service Inventories - Schedule of Service Inventories (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Service inventories, gross	$ 74,428	$ 59,306
Less: allowance for obsolete and slow moving service inventories	(2,087)	(1,155)
Service inventories, net	72,341	58,151
Spare Parts [Member]
Service inventories, gross	36,118	29,928
Chemicals [Member]
Service inventories, gross	16,420	14,803
Raw Materials [Member]
Service inventories, gross	3,452	200
Consumables [Member]
Service inventories, gross	$ 18,438	$ 14,375

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Income Per Share - Schedule of a Reconciliation of Basic and Diluted Common Shares Outstanding (Details) - shares		1 Months Ended	3 Months Ended		4 Months Ended	9 Months Ended
	Jun. 06, 2018	Jun. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2018	Sep. 30, 2019
Total shares outstanding, shares issued for IPO underwriting fees	307,465
Successor [Member]
Change in shares, shares issued to backstop investor		4,829,375
Change in shares, shares issued for IPO underwriting fees		307,465
Change in shares, shares issued to NPS/GES		53,690,315
Reclassification of shares previously subject to redemption, net of shares redeemed		15,005,189
Total shares outstanding, beginning balance		11,730,425		85,562,769	11,730,425	85,562,769
Total shares outstanding, shares issued to backstop investor		16,559,800
Total shares outstanding, shares issued for IPO underwriting fees		16,867,265
Total shares outstanding, shares issued to NPS/GES		70,557,580
Total shares outstanding, reclassification of shares previously subject to redemption less redeemed shares		85,562,769
Total shares outstanding, Ending balance	11,730,425	85,562,769	86,938,883			86,938,883
Weighted average ordinary shares outstanding		85,562,769	87,024,655	85,562,769	85,562,769	86,938,883
Non-vested, participating restricted shares						1,382,896
Shares for use in allocation of participating earnings						88,321,779
Dilutive common shares		277,543
Weighted average dilutive common shares outstanding		85,840,312	87,024,655	85,912,715	85,840,312	86,938,883
Successor [Member] | January, 09, 2019 [Member]
Change in shares Other						33,796
Weighted average ordinary shares outstanding, Other						32,806
Successor [Member] | February 19, 2019 [Member]
Change in shares, NPS equity stock earn-out						1,300,214
Weighted average ordinary shares outstanding, NPS equity stock earn-out						1,300,214
Successor [Member] | August 14, 2019 [Member]
Change in shares, Restricted stock vesting						250,310
Weighted average ordinary shares outstanding, Restricted stock vesting						43,094
Successor [Member]
Total shares outstanding, beginning balance			86,896,779
Total shares outstanding, Ending balance			87,024,655			87,024,655
Weighted average ordinary shares outstanding			87,024,655
Non-vested, participating restricted shares			1,571,126
Shares for use in allocation of participating earnings			88,595,781
Successor [Member] | August 14, 2019 [Member]
Change in shares, Restricted stock vesting			250,310
Weighted average ordinary shares outstanding, Restricted stock vesting			127,876

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Commitments and Contingencies (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		4 Months Ended	5 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2018	Jun. 06, 2018	Sep. 30, 2019	Dec. 31, 2018
Capital expenditure commitments					$ 15,700
Letters of credit outstanding amount	$ 28,200				28,200	$ 10,300
Surety bonds and other bank issued guarantees	110,500				110,500	41,400
Liability	586,665				586,665	512,318
Other Liabilities [Member]
Liability	6,700				6,700	$ 6,700
Successor [Member]
Rental expense	$ 24,500	$ 25,200	$ 31,200		$ 80,900
Predecessor [Member] | NPS Holdings Limited [Member]
Rental expense				$ 19,500

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Employee Benefits - Schedule of Components of Net Periodic Benefit Cost (Details) - USD ($) $ in Thousands	3 Months Ended		4 Months Ended	5 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2018	Jun. 06, 2018	Sep. 30, 2019
Successor [Member]
Service Cost	$ 815	$ 964	$ 1,153		$ 2,255
Interest Cost	375	178	208		551
Other	22	81	70		77
Total net periodic benefit cost	$ 1,212	$ 1,223	$ 1,431		$ 2,883
Predecessor [Member] | NPS Holdings Limited [Member]
Service Cost				$ 866
Interest Cost				168
Other				375
Total net periodic benefit cost				$ 1,409

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Debt - Schedule of Long Term Debt Obligations (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Less: unamortized debt issuance costs	$ (4,615)	$ (557)
Total loans and borrowings	345,385	270,265
Less: current portion of long term debt	(7,500)	(45,093)
Long-term debt, net unamortized debt issuance costs and excluding current installments	337,885	225,172
Secured Term Loan [Member]
Total loans and borrowings	300,000
Secured Revolving Credit Facility [Member]
Total loans and borrowings	50,000
Murabaha Credit Facility [Member]
Total loans and borrowings		150,000
APICORP Bilateral Term Facility [Member]
Total loans and borrowings		46,875
SABB Bilateral Term Facility [Member]
Total loans and borrowings		43,333
Term Loan Ahli Bank [Member]
Total loans and borrowings		2,382
National Bank of Oman [Member]
Total loans and borrowings		23,333
National Bank of Oman [Member]
Total loans and borrowings		$ 4,899

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Goodwill and Intangible Assets - Schedule of Changes in Carrying Amount of Goodwill (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Balance as of December 31, 2018	$ 570,540
Measurement period adjustments	4,224
Balance as of September 30, 2019	574,764
Production Services [Member]
Balance as of December 31, 2018	416,494
Measurement period adjustments	3,152
Balance as of September 30, 2019	419,646
Drilling and Evaluation Services [Member]
Balance as of December 31, 2018	154,046
Measurement period adjustments	1,072
Balance as of September 30, 2019	$ 155,118

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Reportable Segments (Details Narrative)	9 Months Ended
	Sep. 30, 2019 Segment
Successor [Member]
Number of reportable segments	2

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Fair Value Accounting

9 Months Ended

Sep. 30, 2019

Successor [Member]

Fair Value Accounting

10. FAIR VALUE ACCOUNTING

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, unbilled revenue, accounts payable, loans and borrowings and an embedded derivative. The fair value of the Company’s financial instruments approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature. The fair value of the Company’s long-term borrowings also approximates the carrying amounts as these loans are carrying interest at the market rate.

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Service Inventories

9 Months Ended

Sep. 30, 2019

Successor [Member]

Service Inventories

6. SERVICE INVENTORIES

The following table summarizes the service inventories of the Company as of the period end dates set forth below (in thousands):

	September 30, 2019			December 31, 2018
Spare parts	$	36,118		$	29,928
Chemicals		16,420			14,803
Raw materials		3,452			200
Consumables		18,438			14,375
Total		74,428			59,306
Less: allowance for obsolete and slow-moving inventories		(2,087	)		(1,155	)
Total	$	72,341		$	58,151

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Description of Business

9 Months Ended

Sep. 30, 2019

Successor [Member]

Description of Business

1. DESCRIPTION OF BUSINESS

National Energy Services Reunited Corp. (“NESR,” the “Company,” “we,” “our,” “us” or similar terms) is a British Virgin Islands corporation headquartered in Houston, Texas. The Company, through its wholly-owned subsidiaries, NPS Holdings Limited (“NPS”) and Gulf Energy S.A.O.C. (“GES” and, together with NPS, the “Subsidiaries”) is a regional provider of services to the oil and gas industry in the Middle East and North Africa (“MENA”) and Asia Pacific regions.

NESR was incorporated in the British Virgin Islands as a special purpose acquisition company on January 23, 2017 for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation, or contractual control arrangement with, purchasing all or substantially all of the assets of, or engaging in any other similar business combination with one or more businesses or entities. On May 17, 2017, NESR sold 21,000,000 units, each consisting of one ordinary share and one warrant, in its initial public offering, generating gross proceeds of $210 million. Simultaneously with the closing of its initial public offering, NESR consummated the sale of 11,850,000 warrants (the “Private Warrants”) at a price of $0.50 per warrant in a private placement to its sponsor, NESR Holdings Ltd. (“NESR Holdings”), generating gross proceeds of $5.9 million. On May 30, 2017, in connection with the underwriters’ election to partially exercise their over-allotment option, NESR consummated the sale of an additional 1,921,700 units at $10.00 per unit and the sale of an additional 768,680 Private Warrants at $0.50 per warrant, generating total gross proceeds of $19.6 million.

An aggregate amount of $229.2 million from the net proceeds of the sale of the units in the initial public offering and the Private Warrants was placed in a trust account (“Trust Account”) until the earlier of: (i) the consummation of a business combination or (ii) the distribution of the trust account. On June 6, 2018 (the “Closing Date”), NESR acquired all of the issued and outstanding equity interests of NPS and GES (the “Business Combination”). Subsequently, the proceeds held in the Trust Account aggregating $231.8 million (including interest) were released.

Both NPS and GES are regional providers of services to the oil and gas industry in the MENA and Asia Pacific regions. Revenues are primarily derived from services provided during the drilling, completion and production phases of an oil or natural gas well. NPS operates in 12 countries with the majority of its revenues derived from operations in Saudi Arabia, Algeria, Qatar, UAE and Iraq. GES provides drilling equipment for rental and related services, well engineering services and directional drilling services imports, and sells oilfield equipment and renders specialized services to oil companies in Oman, Saudi Arabia, Algeria and Kuwait.

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Condensed Consolidated Interim Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		4 Months Ended	5 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2018	Jun. 06, 2018	Sep. 30, 2019
Net income / (loss)	$ 10,608	$ 16,157	$ 12,190		$ 35,138
Successor [Member]
Revenues	161,606	145,580	190,566		473,209
Cost of services	(121,326)	(102,349)	(139,404)		(352,716)
Gross profit	40,280	43,231	51,162		120,493
Selling, general and administrative expense	(16,485)	(13,759)	(22,779)		(46,592)
Amortization	(4,033)	(3,577)	(5,116)		(12,036)
Operating income	19,762	25,895	23,267		61,865
Interest expense, net	(5,011)	(6,199)	(8,099)		(14,691)
Other income / (expense), net	(130)	450	(18)		(629)
Income before income tax	14,621	20,146	15,150		46,545
Income tax expense	(3,511)	(3,989)	(2,960)		(10,905)
Net income / (loss)	11,110	16,157	12,190		35,640
Net income / (loss) attributable to non-controlling interests		47	(172)
Net income attributable to shareholders	$ 11,110	$ 16,110	$ 12,362		$ 35,640
Weighted average shares outstanding:
Basic	87,024,655	85,562,769	85,562,769		86,938,883
Diluted	87,024,655	85,912,715	85,840,312		86,938,883
Net earnings per share:
Basic	$ 0.13	$ 0.19	$ 0.14		$ 0.4
Diluted	$ 0.13	$ 0.19	$ 0.14		$ 0.4
Predecessor [Member] | NPS Holdings Limited [Member]
Revenues				$ 137,027
Cost of services				(104,242)
Gross profit				32,785
Selling, general and administrative expense				(19,969)
Amortization				(10)
Operating income				12,806
Interest expense, net				(4,090)
Other income / (expense), net				362
Income before income tax				9,078
Income tax expense				(2,342)
Net income / (loss)				6,736
Net income / (loss) attributable to non-controlling interests				(881)
Net income attributable to shareholders				$ 7,617
Weighted average shares outstanding:
Basic				348,524,566
Diluted				370,000,000
Net earnings per share:
Basic				$ 0.02
Diluted				$ 0.02

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Service Inventories (Tables)

9 Months Ended

Sep. 30, 2019

Successor [Member]

Schedule of Service Inventories

The following table summarizes the service inventories of the Company as of the period end dates set forth below (in thousands):

	September 30, 2019			December 31, 2018
Spare parts	$	36,118		$	29,928
Chemicals		16,420			14,803
Raw materials		3,452			200
Consumables		18,438			14,375
Total		74,428			59,306
Less: allowance for obsolete and slow-moving inventories		(2,087	)		(1,155	)
Total	$	72,341		$	58,151

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Employee Benefits (Tables)

9 Months Ended

Sep. 30, 2019

Successor [Member]

Schedule of Components of Net Periodic Benefit Cost

The Components of net period benefit cost were as follows (in thousands):

	Period from January 1, 2019 to September 30, 2019		Period from June 7, 2018 to September 30, 2018		Period from January 1, 2018 to June 6, 2018
	Successor (NESR)				Predecessor (NPS)
Service Cost	$	2,255	$	1,153	$	866
Interest Cost		551		208		168
Other		77		70		375
Net Cost	$	2,883	$	1,431	$	1,409

	Period from July 1, 2019 to September 30, 2019		Period from July 1, 2018 to September 30, 2018
	Successor (NESR)
Service Cost	$	815	$	964
Interest Cost		375		178
Other		22		81
Net Cost	$	1,212	$	1,223

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Reportable Segments (Tables) - Successor [Member]

9 Months Ended

Sep. 30, 2019

Schedule of Segment Reporting, Information On Revenues and Long-lived Assets

Revenue from operations

	Successor (NESR)								Predecessor (NPS)
	Period from		Period from		Period from		Period from		Period from
	January 1, 2019 to September 30, 2019		July 1, 2019 to September 30, 2019		June 7, 2018 to September 30, 2018		July 1, 2018 to September 30, 2018		January 1, 2018 to June 6, 2018
Reportable Segment:
Production Services	$	284,631	$	97,160	$	117,268	$	88,666	$	112,295
Drilling and Evaluation Services		188,578		64,446		73,298		56,914		24,732
Total revenue	$	473,209	$	161,606	$	190,566	$	145,580	$	137,027

Long-lived assets

	September 30, 2019			December 31, 2018
Reportable Segment:
Production Services	$	268,244		$	219,278
Drilling and Evaluation Services		126,105			98,163
Unallocated		(10,864	)		11,286
Total	$	383,485		$	328,727

Segment EBITDA

	Successor (NESR)												Predecessor (NPS)
	Period from			Period from			Period from			Period from			Period from
	January 1, 2019 to September 30, 2019			July 1, 2019 to September 30, 2019			June 7, 2018 to September 30, 2018			July 1, 2018 to September 30, 2018			January 1, 2018 to June 6, 2018
Reportable Segment:
Production Services		98,007			32,581			41,952			33,180			36,836
Drilling and Evaluation Services		40,869			15,239			18,905			17,630			3,267
Unallocated Costs		(13,855	)		(4,992	)		(13,453	)		(6,770	)		(9,651	)
Total Segment EBITDA	$	125,021		$	42,828		$	47,404		$	44,040		$	30,452

The following table presents a reconciliation of consolidated net income, which is the most comparable financial measure under U.S. GAAP, to Total Segment EBITDA:

	Successor (NESR)								Predecessor (NPS)
	Period from January 1, 2019 to September 30, 2019		Period from July 1, 2019 to September 30, 2019		Period from June 7, 2018 to September 30, 2018		Period from July 1, 2018 to September 30, 2018		Period from January 1, 2018 to June 6, 2018
Net Income	$	35,138	$	10,608	$	12,190	$	16,157	$	6,736
Add:
Income taxes		11,407		4,013		2,960		3,989		2,342
Interest expense, net		14,691		5,011		8,099		6,199		4,090
Depreciation and amortization		63,785		23,196		24,155		17,695		17,284
Total Segment EBITDA	$	125,021	$	42,828	$	47,404	$	44,040	$	30,452

Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas

Revenue by geographic area

	Successor (NESR)								Predecessor (NPS)
	Period from		Period from		Period from		Period from		Period from
	January 1, 2019 to September 30, 2019		July 1, 2019 to September 30, 2019		June 7, 2018 to September 30, 2018		July 1, 2018 to September 30, 2018		January 1, 2018 to June 6, 2018
MENA	$	465,856	$	158,229	$	188,488	$	143,914	$	134,479
Rest of world		7,353		3,377		2,078		1,666		2,548
Total revenue	$	473,209	$	161,606	$	190,566	$	145,580	$	137,027

Long-lived assets by geographic area

	September 30, 2019		December 31, 2018
Geographic Area:
MENA	$	374,911	$	319,552
Rest of world		8,574		9,175
Total	$	383,485	$	328,727