10-K: Cactus Inc. Navigates Market Headwinds, Expands Globally

Cactus Inc. reports a decline in 2025 net income and total revenues amidst lower oil prices and U.S. drilling activity, while strategically expanding internationally through a joint venture with Baker Hughes.

Summary

• Total revenues for 2025 decreased by 4.5% to $1,079.051 million, down from $1,129.814 million in 2024.
• Net income for 2025 was $201.642 million, a 13.4% decrease from $232.758 million in 2024.
• Operating income for 2025 declined by 13.5% to $250.501 million from $289.613 million in 2024.
• The Pressure Control segment's revenue decreased by 0.9% to $717.191 million, and its operating income fell by 9.9% to $189.861 million in 2025.
• The Spoolable Technologies segment's revenue decreased by 9.5% to $368.245 million, and its operating income decreased by 5.9% to $98.660 million in 2025.
• Average WTI oil prices decreased by 15% to $65.39 per barrel in 2025, while Henry Hub natural gas prices increased by 61% to $3.52 per MMBtu.
• U.S. land drilling rig count averaged 545 in 2025, a 6% decrease from 2024 levels.
• On January 1, 2026, Cactus Inc. acquired 65% of Baker Hughes Pressure Control LLC for a cash purchase price of $344.5 million, marking a significant international expansion.
• Cash and cash equivalents stood at $123.571 million as of December 31, 2025, with an additional $371.011 million held in escrow for the Baker Hughes transaction.
• The annual dividend rate for Class A common stock increased to $0.54 per share in 2025, up from $0.50 per share in 2024.
• Approximately $146.3 million remained authorized for future share repurchases under the program as of December 31, 2025.
• The Tax Receivable Agreement (TRA) liability was $262.9 million as of December 31, 2025, with an estimated early termination payment of $251.2 million.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a challenging year with declining revenues and net income driven by market headwinds in oil prices and drilling activity. While strategic international expansion and increased dividends are positive, the overall financial performance for 2025 indicates a contraction.

Positives

• Natural gas prices (Henry Hub) increased significantly by approximately 61% to $3.52 per MMBtu in 2025, strengthening the medium-to-long term outlook for natural gas demand.
• Completed the strategic acquisition of 65% of Baker Hughes Pressure Control LLC on January 1, 2026, for $344.5 million, expanding international operations, particularly in the Middle East.
• Increased the annual dividend rate for Class A common stock to $0.54 per share in 2025, up from $0.50 in 2024 and $0.46 in 2023.
• Maintained a strong liquidity position with $123.571 million in available cash and cash equivalents, plus $371.011 million in restricted cash for the Baker Hughes transaction as of December 31, 2025.
• Secured $222.9 million of available borrowing capacity under the Amended ABL Credit Facility and $100.0 million under the Term Loan Facility as of December 31, 2025.
• The Spoolable Technologies segment reported an improved Total Recordable Incident Rate (TRIR) of 0.79 in 2025, down from 1.26 in 2024, indicating enhanced safety performance.
• Management concluded that internal control over financial reporting was effective as of December 31, 2025.

Negatives

• Total revenues decreased by 4.5% to $1,079.051 million in 2025, primarily due to reduced drilling and completion activity.
• Net income decreased by 13.4% to $201.642 million in 2025, reflecting overall weaker financial performance.
• Operating income declined by 13.5% to $250.501 million in 2025, impacted by lower sales volumes and increased costs.
• The Pressure Control segment experienced a 0.9% revenue decrease and a 9.9% operating income decrease, attributed to lower customer activity and escalated tariff costs.
• The Spoolable Technologies segment saw a 9.5% revenue decrease and a 5.9% operating income decrease, mainly due to reduced domestic customer activity.
• Average WTI oil prices declined by 15% to $65.39 per barrel in 2025, contributing to lower U.S. drilling activity.
• The average number of U.S. land drilling rigs decreased by 6% to 545 in 2025, indicating a slowdown in domestic exploration and production.
• Corporate and other expenses increased by $12.1 million to $38.0 million, largely due to professional fees associated with the Baker Hughes transaction.
• The Pressure Control segment's TRIR increased to 1.49 in 2025 from 0.81 in 2024, suggesting a deterioration in safety performance for this segment.
• An initial $6.0 million investment in a Vietnam forging manufacturing facility was decided not to proceed with development, leading to asset liquidation.
• Incurred increased legal expenses and reserves related to litigation claims, impacting the Pressure Control segment's operating income.
• Other expense, net, was $0.8 million in 2025, a $4.0 million decrease compared to other income, net, in 2024, primarily due to the revaluation of the Tax Receivable Agreement liability.

Risks

• Demand for products and services is highly dependent on volatile oil and gas industry activity and customer expenditure levels.
• U.S. drilling and completion activity could be adversely affected by significant constraints in equipment, labor, or takeaway capacity.
• The company may be unable to employ a sufficient number of skilled and qualified workers to sustain or expand current operations.
• Business is dependent on the continuing services of certain key managers and employees, and their loss could adversely impact operations.
• Political, regulatory, economic, and social disruptions in countries of operation (e.g., China, Vietnam, Australia, Canada, Middle East) could adversely affect business.
• Dependence on a relatively small number of customers in a single industry, with the loss of an important customer potentially having a material adverse effect.
• Delays in obtaining, or inability to obtain or renew, permits or authorizations by customers for their operations could impair business.
• Competition within the oilfield services industry is high, potentially leading to active price competition and reduced utilization rates.
• New technology may cause the company to become less competitive, requiring substantial investment in development or acquisition.
• Increased costs, inflation, increased transit times, changes in global trade policies, increased tariffs, or lack of availability of raw materials and other components may result in increased operating expenses.
• The company may be subject to substantial liability, including claims for personal injury, property damage, and environmental contamination, if equipment fails to perform to specifications.
• Failure to obtain and maintain required licenses or approvals from industry groups like API and ISO could have a material adverse effect.
• Operations are subject to hazards inherent in the oil and natural gas industry, which could expose the company to substantial liability and loss of customers.
• Oilfield anti-indemnity provisions enacted by many states may restrict or prohibit a party's indemnification of the company.
• Operations require compliance with various domestic and international regulations, violations of which could have a material adverse effect.
• Compliance with environmental laws and regulations, including those related to hydraulic fracturing and greenhouse gases, may adversely affect business and results of operations.
• Increasing attention by the public and government agencies to climate change and environmental, social, and governance (ESG) matters could negatively impact demand for products and services and stock valuation.
• The global outbreak of COVID-19 had, and similar pandemics in the future may have, an adverse impact on business and operations.
• Ongoing conflicts in various parts of the world (e.g., Venezuela, Iran, Ukraine, Middle East) may affect business and results of operations.
• As a holding company, the company is dependent upon distributions from Cactus Companies to pay taxes, make payments under the Tax Receivable Agreement (TRA), and cover corporate expenses and dividends.
• Cactus WH Enterprises has the ability to direct the voting of a significant percentage of common stock (12.1% as of December 31, 2025), and its interests may conflict with those of other shareholders.
• Amended and restated certificate of incorporation and bylaws, as well as Delaware law, contain provisions that could discourage acquisition bids or merger proposals.
• Future sales of Class A common stock in the public market, or the perception that such sales may occur, could reduce the stock price.
• The company is required to make payments under the TRA for certain tax benefits, and the amounts of such payments could be significant and potentially exceed actual benefits.
• There is a risk that Cactus Companies could become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, leading to significant tax inefficiencies.
• A failure of information technology infrastructure and cyberattacks could adversely impact the company.
• Holders of Class A common stock may not receive dividends on their Class A common stock, as dividend payments are discretionary.
• Inability to fully protect intellectual property rights or trade secrets, or third-party attempts to enforce their intellectual property rights against the company, may result in loss of revenue or competitive advantage.
• The company may not realize the anticipated benefits from the Baker Hughes Transaction, and it could adversely impact business and operating results.
• Difficulties may be experienced in integrating the operations of the Joint Venture into the business.
• The company may be required to acquire Baker Hughes Company's remaining interests in the Joint Venture, potentially straining liquidity.
• The Joint Venture LLC Agreement restricts certain actions of the company or the Joint Venture, potentially limiting beneficial business decisions.
• The agreement with Baker Hughes Company significantly restricts the company's ability to transfer its interests in the Joint Venture and conduct surface pressure control business outside the Joint Venture in certain countries.
• The Joint Venture may have liabilities that are not known to the company, and indemnities negotiated in the Framework Agreement may not offer adequate protection.
• Expansion outside current geographic regions (e.g., Middle East) may encounter new obstacles due to less familiar geopolitical landscapes, new customers, local government pressures, and distinct regulatory environments.

Future Outlook

Expects a greater portion of operations and sales to be attributable to international markets, particularly the Middle East, following the Baker Hughes Transaction. Anticipates lower U.S. land drilling and completion activity levels in 2026 due to weaker oil demand and increased supply, which may reduce domestic demand for products and services. Estimates net capital expenditures for 2026 to range from $40 million to $50 million, including investments in international expansion, supply chain diversification, and plant enhancements. Intends to continue paying quarterly dividends at current levels, with potential for future increases if financial conditions permit, while retaining earnings for business growth or share repurchases. Does not anticipate that risks from cybersecurity threats are reasonably likely to materially affect the company's business strategy, results of operations, or financial condition.

Management Comments

• Our management is responsible for establishing and maintaining adequate internal control over financial reporting... Based on this assessment, management has concluded that, as of December 31, 2025, our internal control over financial reporting was effective.
• We currently intend to continue paying the quarterly dividend at the current levels while retaining the balance of future earnings, if any, to finance the growth of our business or repurchase shares of our Class A common stock. We may seek to increase the dividend in the future if our financial condition and results of operations permit.
• We currently estimate our net capital expenditures for the year ending December 31, 2026 will range from $40 million to $50 million, including investments in international expansion such as investments in the Joint Venture, further diversification of our low cost supply chain, enhancements for our Baytown, TX manufacturing plant and Hobbs, NM service center and additional deployment of equipment to facilitate installation of recent product introductions.
• The Company continues to evaluate the impacts of this legislation [OBBBA] but anticipates the impact to total income tax expense will be immaterial.
• The Company continues to evaluate the impact of both Pillar Two and the proposed side-by-side solution and estimates the impacts to income tax expense to be immaterial.

Industry Context

StockSavvy.ai notes that Cactus Inc.'s performance in 2025 reflects broader industry trends, with lower oil prices and reduced U.S. drilling activity impacting demand for oilfield services. The 15% decline in WTI oil prices and 6% drop in U.S. land drilling rigs align with the observed revenue decreases in both Pressure Control and Spoolable Technologies segments. The significant increase in natural gas prices (61%) and optimism for medium-to-long term natural gas demand, driven by AI infrastructure, presents a potential shift in focus for the industry, which Cactus Inc. may leverage with its Spoolable Technologies segment. The strategic acquisition of Baker Hughes' surface pressure control business and expansion into the Middle East positions Cactus Inc. for international growth, potentially offsetting domestic market softness, a common strategy among energy service providers facing mature domestic markets.

Comparison to Industry Standards

• The company competes with major players like Vault, SLB, and TechnipFMC in the Pressure Control segment, and Baker Hughes, Mattr, NOV, Tenaris, and Vallourec in the Spoolable Technologies segment.
• The company's Total Recordable Incident Rate (TRIR) statistics are reported to be 'in line with the industry average' based on data from the International Association of Drilling Contractors.
• The strategic joint venture with Baker Hughes, a significant industry participant, indicates a move to consolidate market share and expand internationally, a common strategy for energy service companies seeking growth beyond mature domestic markets. This move could enhance its competitive standing against global players like SLB and TechnipFMC in international pressure control markets.

Management Changes

Corporate Governance

Legal Proceedings

• Cactus, Inc. filed a complaint against Cameron International Corporation on August 20, 2021, seeking a declaratory judgment that its frac operations do not infringe certain Cameron patents and that such patents are invalid.
• Cameron International Corporation has asserted infringement of certain patents by Cactus SafeLink frac flow system and is seeking past royalties and other damages.
• The jury trial, originally scheduled for June 9, 2025, was delayed, and no new trial date has been set.
• Management cannot predict the outcome of these claims but states that an adverse outcome could have a material impact on the company's business, financial condition, and results of operations.

Related Party Transactions

• The company rents a plane under a dry lease from a company owned by a member of Cactus Companies, incurring an expense of $0.2 million in 2025.
• The Chief Executive Officer and President reimburse the company up to $2,350 per day for their personal use of company-employed pilots.
• The Tax Receivable Agreement (TRA) involves payments to certain direct and indirect holders of CC Units, including officers, directors, and employees, representing 85% of net cash tax savings.
• Amounts due from TRA Holders for professional fees and estimated state tax payments made on their behalf totaled $0.3 million as of December 31, 2025.
• Cactus Companies distributed $95.5 million to Cactus Inc. in 2025 to fund its dividend, TRA liability, and estimated tax payments.
• Cactus Companies made pro rata distributions totaling $15.6 million to other members in 2025.

Stakeholder Impact

• Shareholders (Class A): Benefit from an increased quarterly dividend to $0.14 per share and the ongoing share repurchase program, but face risks from declining revenues, market volatility, and potential dilution from future equity issuances.
• Shareholders (Class B/CC Unit Holders): Receive corresponding distributions for Class A dividends and have the right to redeem CC Units for Class A shares, subject to certain limitations.
• Employees: Benefit from comprehensive compensation and benefits, training and development programs, and a diverse workplace culture, but face potential impacts from industry downturns and the need for specialized skills.
• Customers: Affected by volatile oil and gas prices, drilling activity levels, and regulatory changes, which can influence demand for the company's products and services. They benefit from the company's focus on product performance, features, safety, and availability.
• Suppliers: May experience increased demand but also face potential challenges from increased costs, inflation, transit times, and tariffs on raw materials, though the company believes alternative arrangements are possible.
• Creditors: The company's compliance with debt covenants and available borrowing capacity under its credit facilities provide a stable financial position, but the TRA liability represents a significant future obligation.
• Regulatory Authorities: The company is subject to stringent environmental, health, safety, and other regulations, requiring ongoing compliance and resource investment, with potential for penalties for non-compliance.

Next Steps

• Integrate the operations of the Baker Hughes Pressure Control LLC joint venture, which closed on January 1, 2026.
• Evaluate the impact of new accounting standards, including ASU 2024-03 (effective for fiscal years beginning after December 15, 2026) and ASU 2025-06 (effective for annual reporting periods beginning after December 15, 2027).
• Continue to evaluate capital expenditures for 2026, estimated between $40 million and $50 million, based on market conditions and company initiatives.
• Monitor and manage cybersecurity risks and incidents, with ongoing reports to the Audit Committee.
• Potentially increase dividends in the future if financial conditions and results of operations permit.
• Continue the share repurchase program, with $146.3 million remaining authorized for future repurchases.
• Liquidate assets and return capital related to the Vietnam forging manufacturing facility, as development will not proceed.
• Await a new trial date for the patent infringement litigation against Cameron International Corporation.
• Prepare for the Baker Member's right to sell its remaining 35% interest in the Joint Venture (Put Right), which becomes exercisable starting January 1, 2028.

Key Dates

Recommendation

The company faces significant headwinds from declining oil prices and U.S. drilling activity, leading to reduced revenues and net income in 2025. While the strategic acquisition of a majority stake in Baker Hughes Pressure Control LLC and international expansion offer long-term growth potential, the immediate financial performance is weak. The increased dividend and share repurchase program provide some shareholder return, but the overall market conditions and operational challenges suggest a 'Hold' recommendation until the benefits of the international expansion materialize and domestic market conditions improve. The ongoing legal proceedings and risks associated with the TRA also add a layer of uncertainty.

Keywords

Oilfield Services, Pressure Control, Spoolable Pipe, Wellhead Equipment, Hydraulic Fracturing, Energy Sector, Oil & Gas, SEC Filing, 10-K, Financial Report, Baker Hughes Joint Venture, FlexSteel, Capital Expenditures, Dividends, Share Repurchase, Tax Receivable Agreement, ESG, Cybersecurity, International Operations, Vietnam Manufacturing