CJ 2017 Annual Report

upgrading and standardizing our equipment concurrent with our reactivation efforts, which among other benefits, is expected to increase the operating life of the equipment and lower the overall cost of ownership over time. During the fourth quarter of 2017, we deployed a refurbished horizontal frac fleet, totaling 40,000 HHP, to a dedicated customer in the Mid-Continent. In the first quarter of 2018, we plan to deploy another horizontal frac fleet consisting of 40,000 HHP of new-build pumps and refurbished ancillary equipment to a dedicated customer. Additionally, we plan to redeploy the remainder of our approximately 245,000 stacked HHP over the course of 2018 at an average estimated capital cost of approximately $24.0 million per horizontal equivalent frac fleet. Our remaining stacked HHP represents our oldest stacked equipment, and thus the most expensive to refurbish and redeploy. This estimated capital cost is inclusive of the pump refurbishment costs and all ancillary equipment necessary for future redeployment. Our typical horizontal fleet size consists of 20 pumps and our typical vertical fleet size consists of 10 pumps. The estimated capital cost to redeploy the remainder of our stacked HHP is inherently uncertain until the refurbishment process begins. Although we believe that approximately $24.0 million per horizontal equivalent frac fleet is a reasonable estimate, the actual capital cost to redeploy the remainder of our stacked HHP may exceed our current estimates. Additionally, we currently expect a portion of our capital expenditure program for 2018 to consist of the purchase of advanced auxiliary well-site equipment and additional units within our other core service lines. We expect to fund a portion of our 2018 capital expenditure program with borrowings under our Amended Credit Facility. The amount of indebtedness we have outstanding could limit our ability to finance future growth and could adversely affect our operations and financial condition. Our primary sources of liquidity have historically included cash flows from operations, proceeds from public offerings of common stock and borrowings under debt facilities. Future cash flows are subject to a number of variables, many of which are beyond our control, and are highly dependent on the drilling, completion and production activity by our customers, which in turn is highly dependent on oil and gas prices. See Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Industry Trends and Outlook” for additional discussion of the market challenges within our industry. Please also read “-Financial Condition and Cash Flows” below for information about net cash provided by or used in our operating, investing and financing activities. Based on our existing operating performance, we currently believe that our cash flows from operations, cash on hand and borrowings under our Amended Credit Facility will be sufficient to meet our operational and capital expenditure requirements over the next twelve months. 53 Financial Condition and Cash Flows The net cash provided by or used in our operating, investing and financing activities is summarized below (in thousands): Successor Predecessor Years Ended December 31, 2017 2016 2015 Cash flow provided by (used in): Operating activities $ 94 $ (107,372) $ 103,005 Investing activities (275,686) (26,927) (825,156) Financing activities 210,339 174,264 734,126 Effect of exchange rate on cash (2,102) (1,282) 3,908 Increase (decrease) in cash and cash equivalents $ (67,355) $ 38,683 $ 15,883 Cash Provided by (Used in) Operating Activities Net cash from operating activities was $0.1 million for the year ended December 31, 2017. The cash inflow was primarily related to net income of $22.5 million, adjustments for non-cash items of $106.5 million, cash provided from the collection of accounts receivable assumed in the O-Tex acquisition and positive changes in other operating assets and liabilities, excluding accounts receivable, inventory, accounts payable and accrued expenses. This cash inflow was offset by $149.3 million of (i) increased investment in working capital (accounts receivable, inventory, accounts payable and accrued expenses) as a result of the increase in the demand primarily for our completion service lines and the resulting increase in revenue and direct costs for the year ended December 31, 2017 and (ii) cash used to satisfy obligations related to accounts payable and accrued liabilities assumed in the O-Tex acquisition. Net cash used in operating activities was $107.4 million for the year ended December 31, 2016. The use of cash was primarily related to a net loss of $944.3 million and adjustments for non-cash items of $714.5 million, partially offset by