KLX Energy Services Holdings (KX4A) Risk Analysis

Sales of substantial amounts of our Common Stock in the public market, and the availability of shares of our Common Stock for future sale, including shares of our Common Stock to be issued in this Rights Offering, could cause the market price of our Common Stock to remain low for a substantial amount of time. We cannot foresee the impact of such potential sales on the market, but it is possible that if a significant percentage of such available shares of Common Stock were attempted to be sold within a short period of time, the market for shares of our Common Stock would be adversely affected. Even if a substantial number of sales do not occur within a short period of time, the mere existence of this "market overhang" could have a negative impact on the market for our Common Stock and our ability to raise additional capital. Any disposition by the Backstop Parties or any other substantial stockholders of our Common Stock in the public market, or the perception that such dispositions could occur, could adversely affect prevailing market prices of our Common Stock.

Under the Backstop Agreement, the Backstop Parties have committed, severally and not jointly, to purchase from the Company any shares of Common Stock not otherwise sold in the Rights Offering through an exchange of their 2030 Senior Notes for shares of Common Stock at the subscription price. Pursuant to the Backstop Agreement, the aggregate backstop commitment amount is $94.0 million, which may be increased to up to $125.0 million prior to August 21, 2026, and each individual Backstop Party is subject to an aggregate 30% ownership limitation. If stockholders do not fully subscribe in the Rights Offering, we will issue all of the unsubscribed shares of Common Stock offered in the Rights Offering to the Backstop Parties pursuant to the Backstop Exchange, and our stockholders could experience significant and immediate dilution. As a result of the Backstop Parties' potential substantial ownership of our capital stock following the Rights Offering, certain Backstop Parties may be able to significantly influence matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our Company or our assets. This concentration of ownership may limit the ability of other stockholders to influence corporate matters and may cause us to make strategic decisions that could involve risks to you or that may not be aligned with your interests. Additionally, pursuant to the Backstop Agreement, each Designating Holder (as defined above) shall have the right to designate one individual for appointment to our Board of Directors. This control may adversely affect the market price of our Common Stock.

Public and political debate regarding climate change, energy transition and the role of fossil fuels in the global energy mix remains active and, in recent years, has become increasingly polarized. While global demand for oil and natural gas continues, companies in the oil and gas industry remain subject to scrutiny from certain investors, advocacy groups and other stakeholders regarding environmental, sustainability and governance matters. Certain segments of the investment community-including some investment advisers, sovereign wealth funds, pension funds, endowments and other institutional investors-have adopted policies or expressed preferences that limit or discourage investments in fossil fuel-related businesses for social, environmental or reputational reasons. Although investor approaches to sustainability considerations have evolved and, in some cases, moderated, negative sentiment toward the oil and gas sector persists among portions of the capital markets. In addition, financial institutions, insurers and other counterparties may consider climate-related or sustainability factors in making financing, underwriting or business decisions. Companies perceived as not aligning with evolving investor expectations or broader societal views regarding sustainability and climate-related matters may experience reputational harm, reduced investor demand for their securities, increased shareholder engagement efforts or volatility in their stock price. Shifts in political leadership or public policy priorities may also influence investor perceptions of the long-term outlook for the oil and gas industry, which could affect our valuation, access to capital markets and overall business environment.

We may sell shares of Common Stock in the future. We may also issue additional shares of, and securities exercisable for, or convertible into, Common Stock, including as employee compensation or as consideration in one or more acquisitions or other business combination transactions. As of December 31, 2025, we had outstanding approximately 19.2 million shares of our Common Stock. We also have registered 2,477,051 shares of Common Stock reserved for issuance under our Long-Term Incentive Plan ("LTIP"). Of those shares initially registered and reserved for issuance, as of December 31, 2025, approximately 2,110,977 restricted shares of Common Stock were granted in connection with equity awards to management, directors and employees and approximately 366,074 shares remain available for future issuance. An amendment to the LTIP was approved by stockholders on May 10, 2023 to, among other things, increase the total number of shares of Common Stock for issuance by 1,200,000 shares, resulting in an increase of the total number of shares of our Common Stock reserved for issuance to 1,256,289, and extend the expiration date to March 8, 2033. In connection with the Refinancing, on March 12, 2025, we issued warrants to purchase, in aggregate, up to 2,373,187 shares of Common Stock at an exercise price of $0.01 per share, subject to adjustment (the "Warrants"), as described in greater detail in Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" below. In connection with our entry into the First Amendment to the Indenture, on March 6, 2026 and March 11, 2026, we issued additional Warrants to our noteholders, based on their pro rata ownership of principal amount of the 2030 Senior Notes, providing for the purchase of up to 803,712 shares of Common Stock at an exercise price of $0.01 per share, subject to adjustment, pursuant to Section 4(a)(2) of the Securities Act. The Warrants are exercisable immediately, and in lieu of exercising such Warrant, the holders thereof may convert their Warrants, in whole or in part, into the number of shares of Common Stock they would otherwise be entitled to purchase pursuant to the terms of the Warrants at any time prior to the expiration date. The warrant agreements governing the Warrants stipulate that the Company will file a registration statement with SEC with respect to the shares of Common Stock underlying the Warrants within 90 days of their issuance, providing for registered resale pursuant thereto. During the year ended December 31, 2024, we entered into a debt-for-equity exchange agreement (the "Exchange Agreement") with a noteholder of our 11.5% senior secured notes due 2025 (the "2025 Senior Notes"). Pursuant to the Exchange Agreement, the noteholder exchanged $1.0 in aggregate principal amount of the Company's outstanding 2025 Senior Notes for an aggregate of 190,476 shares of our Common Stock (the "Exchange"). During the year ended December 31, 2025, we did not have any Exchanges. Subject to the satisfaction of vesting conditions and the requirements of Rule 144, the registered restricted shares of our Common Stock will be available for resale immediately in the public market without restriction. With respect to shares of restricted stock granted to certain members of our management, we have filed a resale prospectus in order to allow such members of our management to freely resell their restricted stock once it has vested. In addition, (i) certain former members of our management are entitled to registration rights with respect to their shares of restricted stock, and (ii) certain former QES stockholders are entitled to registration rights with respect to the shares of Common Stock they received in the QES Merger. On March 8, 2023, we entered into a Registration Rights and Lock-Up Agreement with Greene's Holding Corporation in connection with the Greene's Acquisition. Following their receipt of Common Stock as consideration in the Greene's Acquisition, subject to release from the associated lock-up provisions and the filing of a resale registration statement or satisfaction of the requirements of Rule 144, the seller may seek to sell the Common Stock delivered to them. These sales (or the perception that these sales may occur), coupled with the increase in the outstanding number of shares of Common Stock, may affect the market for, and the market price of, our Common Stock in an adverse manner. On June 14, 2021, we entered into an Equity Distribution Agreement (as amended from time to time, the "Equity Distribution Agreement") with Piper Sandler & Co. as sales agent (the "Agent"). Pursuant to the terms of the Equity Distribution Agreement, we may sell from time to time through the Agent (the "ATM Offering") the Company's Common Stock, par value $0.01 per share, having an aggregate offering price of up to $50.0. On November 16, 2022, the Company entered into Amendment No. 1 to the Equity Distribution Agreement, which, among other things, allows for debt-for-equity exchanges in accordance with Section 3(a)(9) of the Securities Act of 1933, as amended (the "Securities Act"). On March 14, 2025, the Company entered into Amendment No. 2 to the Equity Distribution Agreement (the "EDA Amendment"), which, among other things, increased the aggregate offering price to up to approximately $57.8 (which amount includes all of the Common Stock previously sold pursuant to the Equity Distribution Agreement prior to the EDA Amendment) and provides for the Company's election not to deliver a placement notice. During the three and twelve months ended December 31, 2025, the Company sold - and 167,769 shares of Common Stock, respectively, in exchange for gross proceeds of $- and $0.6, respectively, and incurred legal and administrative fees of $- and $0.3, respectively. Any Common Stock offered and sold in the ATM Offering may be issued pursuant to the Company's shelf registration statement on Form S-3 (Registration No. 333-271182) filed with the SEC on April 7, 2023 and declared effective on April 19, 2023 (the "Registration Statement"), the prospectus supplement relating to the ATM Offering filed with the SEC on March 14, 2025 and any applicable additional prospectus supplements related to the ATM Offering that form a part of the Registration Statement. Sales of Common Stock under the Equity Distribution Agreement, as amended to date, may be made in any transactions that are deemed to be "at the market offerings" as defined in Rule 415 under the Securities Act. As of the filing of this Annual Report, the Company is subject to the General Instruction I.B.6 to Form S-3, known as the "baby shelf" rule, which limits the amount of securities we can sell under the Registration Statement in any 12-month period. We cannot predict the size of future issuances of our Common Stock or securities convertible into Common Stock or the effect, if any, that future issuances and sales of shares of our Common Stock will have on the market price of our Common Stock. Sales of substantial amounts of our Common Stock (including shares issued in connection with an acquisition or shares held by stockholders with registration rights), or the perception that such sales could occur, may adversely affect prevailing market prices of our Common Stock. Sales of or other transactions relating to shares of our Common Stock by our significant stockholders, directors, officers or employees could cause a perception in the marketplace that adverse events or trends have occurred or may be occurring at our company or that it is otherwise an advantageous time to sell shares of our Common Stock.

Our amended and restated certificate of incorporation and amended and restated bylaws contain, and Delaware law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids and to encourage prospective acquirers to negotiate with our Board rather than to attempt a hostile takeover. Some of these provisions include: - prohibiting cumulative voting by our stockholders on all matters;- establishing advance notice provisions for stockholder proposals and nominations for elections to the Board of Directors to be acted upon at meetings of stockholders;- a classified Board of Directors;- granting our Board the ability to authorize undesignated preferred stock; and- expressly authorizing our Board to adopt, alter or repeal our bylaws. In addition, because we have not chosen to be exempt from Section 203 of the Delaware General Corporation Law (the "DGCL"), this provision could also delay or effectively prevent a change of control that some stockholders may favor. In general, Section 203 provides that, subject to limited exceptions, persons that, together with their affiliates and associates, acquire ownership of 15% or more of the outstanding voting stock of a Delaware corporation shall not engage in any "business combination" with that corporation or its subsidiaries, including any merger or various other transactions, for a three-year period following the date on which that person became the owner of 15% or more of the corporation's outstanding voting stock. We believe these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our Board and by providing our Board with more time to assess any acquisition proposal. These provisions are not intended to make us immune from takeovers. However, these provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or effectively prevent an acquisition that our Board determines is not in the best interests of our company and our stockholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.

Our amended and restated bylaws provide that, unless we otherwise consent in writing to selection of an alternative forum, the Court of Chancery in the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of KLX Energy Services, any action asserting a claim of breach of a fiduciary duty owed by any director, officer, employee or agent of KLX Energy Services to KLX Energy Services or KLX Energy Services' stockholders, any action asserting a claim arising pursuant to any provision of the DGCL, KLX Energy Services' certificate of incorporation or the bylaws, or any action asserting a claim governed by the internal affairs doctrine. This provision may limit a stockholder's ability to bring a claim in a different judicial forum, including one that it may find favorable or convenient for intra-corporate disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits. Alternatively, if a court were to find this provision of our amended and restated bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions.