The following discussion of our financial condition, results of operations, liquidity, and capital resources should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in this report as well as our Annual Report on Form 10-K for the year ended December 31, 2022. Our first quarter represents the three-month period ended March 31. Unless otherwise noted, all currency amounts are stated in U.S. dollars. The reference to a "Note" herein refers to the accompanying Notes to Unaudited Condensed Consolidated Financial Statements contained in Item 1 "Financial Statements."

Business Overview

Newpark Resources, Inc. (the "Company," "we," "our," or "us") is a geographically diversified supplier providing environmentally-sensitive products, as well as rentals and services to customers across multiple industries. We currently operate our business through two reportable segments: Industrial Solutions and Fluids Systems, as described further below. In addition, we had a third reportable segment, Industrial Blending, which was exited in 2022.

While the Fluids Systems segment has historically been the primary driver of revenues, the Industrial Solutions segment has for several years been the primary driver of operating income, cash flows, and financial returns. Industrial Solutions also represents our primary focus for capital investments. The relative revenues, operating income, and capital expenditures for the Industrial Solutions and Fluids Systems segments for the first quarter of 2023 are as follows (amounts in millions):

[[Image Removed: 7696581431709]][[Image Removed: 7696581431710]][[Image Removed: 8246337259509]] * Fluids Systems segment operating income for the first quarter of 2023 includes $3.2 million in charges primarily related to facility exit and severance costs.

2023 Priorities

Following the completion of several divestiture transactions in the fourth quarter of 2022 (as described further below), the following priorities have been established for 2023:

•Accelerate Industrial Solutions Growth - We plan to continue to prioritize investment capital in the growth of our Industrial Solutions business, where, over the past three years, we have seen the strong market adoption of our specialty rental products and differentiated service offering. For the first quarter of 2023, Industrial Solutions revenues were $55.9 million, reflecting a 58% increase from the first quarter of 2022. Substantially all of the increase in revenues is attributable to our continued expansion in the power transmission sector.

•Drive Operational Efficiency - We plan to increase our focus on efficiency improvements and operating cost optimization across every aspect of our global footprint. With our simplified business model and enhanced focus on balance sheet optimization, we seek to improve returns and consistency in cash flow generation. During the first quarter of 2023, we generated $29.4 million of operating cash flow, which was partially driven by the effects of the 2022 divestitures in Fluids Systems as described further below. In the first quarter of 2023, we made the decision to exit our stimulation fluids product line and are in the process of winding down our Fluids operations in Chile. We also recently announced several organizational changes, which are expected to provide annualized recurring cost savings of approximately $6 million, with the benefits beginning to be realized over the next few quarters. We will continue to evaluate other under-performing areas within our business and anticipate additional actions may be necessary to optimize our operational footprint and invested capital within the Fluids Systems segment to transform this business for the evolving market conditions and outlook. As a result, we may incur future charges related to these efforts or potential asset impairments, which may negatively impact our future results.

•Prioritize Return of Capital - We are committed to maintaining a strong balance sheet, using excess cash generation to reduce our debt and return value to our shareholders. During the first quarter of 2023, we utilized $15 million of cash generation for debt repayments and another $15 million to repurchase 3.4 million (4%) of our outstanding shares under



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our repurchase program. In April 2023, we repurchased an additional 1.2 million shares of our common stock (1%) for a total cost of $5.0 million.

Segment Overview

Industrial Solutions - Our Industrial Solutions segment provides temporary worksite access solutions, including the rental of our manufactured recyclable composite matting systems, along with related site construction and services to customers in various markets including power transmission, E&P, pipeline, renewable energy, petrochemical, construction and other industries, primarily in the United States and Europe. We also sell our manufactured recyclable composite mats to customers around the world, with power transmission being the primary end-market.

Our Industrial Solutions segment has been the primary source of operating income and cash generation for us in recent years, as illustrated above, and has also been the primary focus for growth investments. The growth of the business in the power transmission and other industrial markets remains a strategic priority for us due to such markets' relative stability compared to E&P, as well as the magnitude of growth opportunity in these markets, including the potential positive impact from the energy transition and future legislation and regulations related to greenhouse gas emissions and climate change. We expect customer activity, particularly in the power transmission sector, will remain robust in the coming years, driven in part by the impacts of the energy transition and the increasing investment in grid reliance initiatives.

Fluids Systems - Our Fluids Systems segment provides drilling and completion fluids products and related technical services to customers for oil, natural gas, and geothermal projects primarily in North America and Europe, the Middle East and Africa ("EMEA"), as well as certain countries in Asia Pacific and Latin America. Over the past few years, our primary focus within Fluids Systems has been the transformation into a more agile and simplified business focused on key markets, while monetizing assets in underperforming or sub-scale markets and reducing our invested capital.

Our Fluids Systems operating results remain dependent on oil and natural gas drilling activity levels in the markets we serve and the nature of the drilling operations, which governs the revenue potential of each well. Drilling activity levels depend on a variety of factors, including oil and natural gas commodity pricing, inventory levels, product demand, and regulatory restrictions. Rig count data remains the most widely accepted indicator of drilling activity. Average North American rig count data for the first quarter of 2023 and 2022 is as follows:



                               First Quarter                2023 vs 2022
                            2023             2022         Count           %
U.S. Rig Count             760               633              127        20  %
Canada Rig Count           221               198               23        12  %
North America Rig Count    981               831              150        18  %

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Source: Baker Hughes Company

Oil and natural gas prices and activity are cyclical and volatile, and this market volatility has a significant impact on our operating results. We anticipate that market activity in the U.S. will remain fairly stable in the near-term, as many of our customers maintain strong capital discipline and prioritize cash flow generation over growth. The Canada rig count reflects normal seasonality for this market, with the highest rig count levels generally observed in the first quarter of each year, prior to Spring break-up. Outside of North America, drilling activity is generally more stable as this drilling activity is based on longer-term economic projections and multi-year drilling programs, which typically reduces the impact of short-term changes in commodity prices on overall drilling activity.

Further, the combination of geopolitical events and elevated oil prices are causing several markets to increase drilling activity levels, to help ensure reliable energy supply in the coming years, while reducing their dependency on Russia-sourced oil and natural gas. Consequently, the outlook for several markets within the EMEA region continues to strengthen, with growth in activity expected over the next few years.

Industrial Blending - Our Industrial Blending segment began operations in 2020 and supported industrial end-markets, including the production of disinfectants and industrial cleaning products. In the first quarter of 2022, we completed the wind down of the Industrial Blending business, and in November 2022 we completed the sale of the industrial blending assets.

2022 Strategic Actions

The following strategic actions were taken in 2022.

Exit of Industrial Blending Segment and Sale of Conroe, Texas Blending Facility

In the first quarter of 2022, we exited our Industrial Blending operations. In November 2022, we completed the sale of the industrial blending assets and received cash proceeds of approximately $14 million.



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Sale of Excalibar U.S. Mineral Grinding Business

In the second quarter of 2022, we initiated a formal sale process for our Excalibar U.S. mineral grinding business ("Excalibar"), which was reported within our Fluids Systems segment. In November 2022, we completed the sale of substantially all the long-lived assets, inventory, and operations of Excalibar to Cimbar Resources, INC. ("Cimbar"), and received cash proceeds (after purchase price adjustments) of approximately $51 million. The Company retained certain assets and liabilities, including accounts receivable and accounts payable, the wind down of which was substantially completed in the first quarter of 2023. Such working capital provided approximately $10 million of cash generation in the fourth quarter of 2022 and approximately $6 million of additional cash generation in the first quarter of 2023. In connection with the sale, the Company and Cimbar have entered into a long-term barite supply agreement for certain regions of our U.S. drilling fluids business, with an initial term of four years following the closing of the transaction.

Exit of Gulf of Mexico Operations

In the third quarter of 2022, our Board of Directors approved management's plan to exit our Fluids Systems Gulf of Mexico operations, including the potential sale of related assets. In December 2022, we completed the sale of substantially all assets associated with our Gulf of Mexico completion fluids operations. Separately, we entered into a seven-year arrangement to sublease our Fourchon, LA drilling fluids shorebase and blending facility to a leading global energy services provider. As part of this arrangement, substantially all of our Gulf of Mexico drilling fluids inventory will be sold as consumed by the lessee or no later than nine months from the closing of the transaction. These transactions provided cash generation of approximately $6 million in the fourth quarter of 2022, approximately $15 million in the first quarter of 2023, and is expected to provide additional cash generation of approximately $10 million, primarily in the second quarter of 2023. In addition, we expect to receive approximately $4 million in the second quarter of 2023 from the sale of certain long-lived assets previously used to support these operations. Fluids Systems segment operating income for the first quarter of 2023 includes $2.3 million in charges related to the exit of Gulf of Mexico operations, which is expected to be substantially completed during the second quarter of 2023.




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Summarized operating results of the business units exited in 2022 are shown in
the following table:

                                     First Quarter
(In thousands)                     2023          2022
Revenues
Industrial Blending             $      -      $      -
Excalibar                              -        14,346
Gulf of Mexico                         -         2,694
Total revenues                  $      -      $ 17,040

Operating income (loss)
Industrial Blending             $      -      $   (886)
Excalibar                            (77)          833
Gulf of Mexico                    (2,311)       (2,617)
Total operating income (loss)   $ (2,388)     $ (2,670)

Summarized net assets remaining from the business units exited in 2022 are shown in the following table:



(In thousands)         March 31, 2023       December 31, 2022
Receivables, net      $         9,391      $           27,798
Inventories                     1,409                   5,805
Accounts payable                 (575)                 (2,060)
Accrued liabilities                 -                    (311)
Total net assets      $        10,225      $           31,232

The net assets remaining as of March 31, 2023 primarily reflect remaining Gulf of Mexico working capital, the majority of which we expect to realize in the second quarter of 2023.

We also continue to evaluate strategic alternatives for our portfolio, which may result in additional divestitures. As a result, we may incur future charges related to these efforts or potential asset impairments, which may negatively impact our future results.






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