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Forbes Energy Services Ltd. – ‘POS AM’ on 10/11/11

On:  Tuesday, 10/11/11, at 5:13pm ET   ·   Accession #:  1193125-11-268492   ·   File #:  333-170741

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

10/11/11  Forbes Energy Services Ltd.       POS AM                 8:3.6M                                   RR Donnelley/FA

Document/Exhibit                   Description                      Pages   Size 

 1: POS AM      Post-Effective Amendment                            HTML   2.76M 
 2: EX-2.3      Plan of Conversion                                  HTML     10K 
 3: EX-2.4      Certificate of Conversion                           HTML     10K 
 4: EX-5.1      Opinion of Winstead Pc                              HTML     16K 
 5: EX-5.2      Opinion of Conyers Dill & Pearman Limited           HTML     24K 
 6: EX-8.1      Tax Opinion of Winstead Pc                          HTML     14K 
 7: EX-23.3     Consent of Bdo Usa, LLP                             HTML      7K 
 8: EX-23.4     Consent of Pricewaterhousecoopers LLP               HTML      6K 

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Index to Financial Statements

As filed with the Securities and Exchange Commission on October 11, 2011

Registration No. 333-170741

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Post-Effective Amendment No. 1

to

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Forbes Energy Services Ltd.

(Exact name of registrants as specified in their organizational documents)

3000 South Business Highway 281

Alice, Texas 78332

(361) 664-0549

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

John E. Crisp

Chairman, President and Chief Executive Officer

3000 South Business Highway 281

Alice, Texas 78332

(361) 664-0549

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

R. Clyde Parker, Jr., Esq.

Winstead PC

24 Waterway Avenue, Suite 500

The Woodlands, Texas 77380

(281) 681-5900

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

CALCULATION OF REGISTRATION FEE⁽¹⁾

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

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EXPLANATORY NOTE

This Post-Effective Amendment No. 1, or the Amendment, to Registration Statement on Form S-4/A, filed on August 10, 2011, Registration No. 333-170741, or the Registration Statement, is being filed pursuant to Rule 414(d) under the Securities Act of 1933, as amended, or the Securities Act, by Forbes Energy Services Ltd., in its capacity as a Texas corporation, or Forbes Texas, as a successor (for the purposes of Rule 414 of the Securities Act) of Forbes Energy Services Ltd., in its capacity as a Bermuda exempt company, or Forbes Bermuda. On August 12, 2011, Forbes Energy Services Ltd. changed its jurisdiction of incorporation from Bermuda to Texas by discontinuing its corporate existence in Bermuda and converting into a Texas corporation, or the Texas Conversion. Shortly before the Texas Conversion, Forbes Bermuda effected a four-to-one share consolidation, whereby each four common shares of par value $0.01 each were consolidated into a single common share of par value $0.04, or the Share Consolidation.

Forbes Texas expressly adopts the Registration Statement, as modified by this Amendment, as its own registration statement for all purposes of the Securities Act and the Securities Exchange Act of 1934, as amended.

The Texas Conversion was effected in the manner described in the section of the Registration Statement entitled “The Conversion”. The business, assets and liabilities, as well as our board of directors, executive officers, principal business locations and fiscal year, are the same after the Texas Conversion as they were prior to the Texas Conversion. The rights of holders of the Company’s common stock are now governed by its Texas certificate of formation and amended and restated bylaws, each of which is described in the Registration Statement.

The registration fees were paid at the time of filing of the Registration Statement. Because no additional securities are being registered, no further registration fee is required.

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PROSPECTUS

Forbes Energy Services Ltd.

Shares of Common Stock

REINCORPORATION INTO TEXAS

Forbes Energy Services Ltd. is a Texas corporation organized under the laws of Texas. We recently changed our jurisdiction of incorporation by converting into a corporation incorporated under the laws of the State of Texas and discontinuing from Bermuda, or the Conversion. To effect the Conversion, we filed a plan of conversion, certificate of formation and certificate of conversion in Texas, and a notice of discontinuance with the Bermuda Registrar of Companies, under which we were converted and continued as a Texas corporation under the same name (in order to distinguish between Forbes Energy Services Ltd. before and after the Conversion, we refer to the Bermuda entity prior to the Conversion as “Forbes Bermuda” and the Texas entity after the Conversion as “Forbes Texas”). On August 12, 2011, the effective date of the Conversion, each of our then issued and outstanding common and preference shares were automatically converted by operation of law, on a one-for-one basis, into shares of Texas common or preferred stock, as applicable. Under Bermuda law and our previous Bermuda bye-laws, we did not need shareholder approval of the Conversion, and our shareholders do not have statutory dissenters’ or appraisal rights as a result of the Conversion.

Prior to the Conversion, our common shares were listed on the Toronto Stock Exchange under the symbol “FRB.TO” and traded in the U.S. on the “pink sheets” under the symbol “FESLF.PK”. We continue to trade the common stock of Forbes Texas on the Toronto Stock Exchange under the same symbol after the Conversion. In connection with the Conversion, we listed the common stock of Forbes Texas on the NASDAQ Global Market, or NASDAQ, under the symbol “FES.” In order to meet the NASDAQ bid price requirements to be eligible to list on NASDAQ, we effected a four-to-one share consolidation, whereby each four common shares of par value $0.01 each were consolidated into a single common share of par value $0.04, or the Share Consolidation. We effected the Share Consolidation shortly before the Conversion. Similar to the Conversion, under Bermuda law and our previous Bermuda bye-laws, we did not need shareholder approval to effect the Share Consolidation and our shareholders do not have statutory dissenters’ or appraisal rights as a result of the Share Consolidation. The Toronto Stock Exchange approved the Share Consolidation. Our preference shares are not listed, and we do not intend to list the preferred stock of Forbes Texas, on any securities exchange. We urge you to review this prospectus, together with the incorporated information, carefully.

See the “Risk Factors” section beginning on page 10 for a discussion of factors you should consider.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is October [—], 2011.

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ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement we filed with the Securities and Exchange Commission, or the SEC. You should rely only on the information contained in this prospectus and in the accompanying letter of transmittal. We have not authorized any person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. You should assume the information appearing in this prospectus is accurate as of the date on the front cover of this prospectus only. Our business, financial condition, results of operations and prospects may have changed after that date.

References in this prospectus to “we,” “us,” “our,” the “Company” or the “Forbes Group” are to Forbes Energy Services Ltd. (as it currently exists under Texas law and existed under Bermuda law prior to the Conversion) and its subsidiaries on and after May 29, 2008; Forbes Energy Services LLC, or “FES LLC,” and its subsidiaries from January 1, 2008 to May 28, 2008; C.C. Forbes, LLC, TX Energy Services, LLC and Superior Tubing Testers, LLC from June 29, 2007 to December 31, 2007; and C.C. Forbes L.P., Texas Energy Services, L.P. and Superior Tubing Testers, L.P. prior to June 29, 2007. The terms “Forbes Bermuda” and “Forbes Texas” refer to Forbes Energy Services Ltd., or “FES Ltd,” prior to and after the Conversion, respectively.

All historical financial statements and other financial data contained in this prospectus as of and for the year ended December 31, 2007 and prior periods are of the Forbes Group on a combined basis, or Predecessor – Combined, and are identified as such. This financial information is presented on a combined basis because the operating subsidiaries were under common management prior to the reorganization under a common Delaware parent, Forbes Energy Services LLC. All financial statements and other financial data contained in this prospectus for all periods after January 1, 2008 are of the Forbes Group on a consolidated basis, or Successor – Consolidated, whether or not specifically identified as such.

The glossary contained in Annex A of this prospectus provides definitions of some oil and natural gas terms used in this prospectus.

WHERE YOU CAN FIND MORE INFORMATION

This prospectus includes important business and financial information about us that is not included in or delivered with this prospectus. If we have made references in this prospectus to any contracts, agreements or other documents and also filed any of those contracts, agreements or other documents as exhibits to the registration statement, you should read the relevant exhibit for a more complete understanding of the document or the matter involved.

We file annual, quarterly and current reports and other information with the SEC. You may read and copy any document we file with the SEC at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our filings with the SEC are also available to the public at the SEC’s website at http://www.sec.gov.

You may obtain copies of the information and documents incorporated by reference in this prospectus at no charge by writing or telephoning us at the following address or telephone number:

Forbes Energy Services Ltd.

3000 South Business Highway 281

Alice, TX 78332

Attention: Investor Relations

(361) 664-0549

We also maintain an Internet site at http://www.forbesenergyservices.com, where copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to those reports as applicable, are available free of charge. Our website and the information contained therein or connected thereto shall not be deemed to be incorporated into this prospectus or registration statement of which this prospectus forms a part, and you should not rely on any such information in connection with the Conversion and Share Consolidation.

i

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FORWARD-LOOKING STATEMENTS

This prospectus and any oral statements made in connection with it include certain forward-looking statements within the meaning of the federal securities laws. You can generally identify forward-looking statements by the appearance in such a statement of words like “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project” or “should” or other comparable words or the negative of these words. When you consider our forward-looking statements, you should keep in mind the risk factors we describe and other cautionary statements we make in this prospectus. Our forward-looking statements are only predictions based on expectations that we believe are reasonable. Our actual results could differ materially from those anticipated in, or implied by, these forward-looking statements as a result of known risks and uncertainties set forth below and elsewhere in this prospectus. These factors include or relate to the following:

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We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. To the extent these risks, uncertainties and assumptions give rise to events that vary from our expectations, the forward-looking events discussed in this prospectus may not occur. All forward-looking statements attributable to us are qualified in their entirety by this cautionary statement.

iii

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RISK FACTORS

The following information describes certain significant risks and uncertainties inherent in our business and the Conversion. You should take these risks into account in evaluating us. This section does not describe all risks applicable to us, our industry, our business or the Conversion, and it is intended only as a summary of known material risks that are specific to the Company or the Share Consolidation and the Conversion. You should carefully consider such risks and uncertainties together with the other information contained in this prospectus. If any of such risks or uncertainties actually occurs, our business, financial condition or operating results could be harmed substantially and could differ materially from the plans and other forward-looking statements included in the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on page 28 and “Business” on page 47 and elsewhere in this prospectus.

RISKS RELATING TO THE CHANGE IN OUR PLACE OF INCORPORATION

Prior to the conversion, your rights as a shareholder of Forbes Bermuda arose under Bermuda law as well as the Bermuda memorandum of association and bye-laws of Forbes Bermuda. After the Conversion, your rights as a shareholder of Forbes Texas arise under Texas law as well as the new Texas certificate of formation and bylaws of Forbes Texas.

Upon effectiveness of the Conversion, our shareholders became shareholders of Forbes Texas. As such their rights now arise under the new certificate of formation and bylaws of Forbes Texas as well as Texas law. There are differences between these new organizational documents and Texas law and our prior Bermuda organizational documents and Bermuda law which alter your rights as a shareholder of the Company. For example, under Bermuda law, in most circumstances, in the event that a company amends its memorandum of association at a general meeting of its shareholders, holders of not less than 20% in par value of the company’s issued share capital or any class thereof have the right to apply to the Supreme Court of Bermuda for an annulment of such amendment. No similar right is available under Texas law. Further, while class actions and derivative actions are generally not available to shareholders under Bermuda law, such actions are generally available to shareholders under Texas law. This change could increase the likelihood that the Company becomes involved in costly litigation, which could have a material adverse effect on the Company. Additionally, there are differences between the new certificate of formation and bylaws of Forbes Texas and the previous memorandum of association and bye-laws of Forbes Bermuda. For example, while the previous bye-laws of Forbes Bermuda required that notice of shareholder proposals be received not less than 20 days and no more than 60 days before the anniversary of the last annual meeting, the bylaws of Forbes Texas, consistent with United States securities laws, provide that notice of shareholder proposals must be received not less than 90 days and no more than 150 days before the one-year anniversary of the preceding year’s annual meeting. These differences, as wells a description of the rights of shareholders of Forbes Texas, are described in more detail below in “Description of Capital Stock—Differences between the Governing Corporate Law and Organizational Documents for Forbes Bermuda and Forbes Texas” beginning on page 83 of this prospectus. We also encourage you to read the new certificate of formation, including the certificates of designation attached thereto, and bylaws of Forbes Texas, which are incorporated by reference as exhibits to this prospectus.

RISKS RELATING TO THE SHARE CONSOLIDATION PRECEEDING THE CONVERSION

RISKS RELATED TO OUR COMMON STOCK

The dividend, liquidation and redemption rights of the holders of our Series B Preferred Stock may adversely affect our financial position and the rights of the holders of our common stock.

        Similar to Forbes Bermuda, Forbes Texas has shares of Series B Preferred Stock outstanding. Forbes Texas has the obligation to pay to the holders of its Series B Preferred Stock quarterly dividends of five percent per annum of the original issue price, payable quarterly in cash or in-kind. No dividends may be paid to holders of common stock while accumulated dividends remain unpaid on the Series B Preferred Stock. Until recently, dividends for the quarterly periods ended November 28, 2010, February 28, 2011 and May 28, 2011 had not been paid on the Series B Preferred Shares. The Company had not paid these dividends until recently due to certain restrictions on cash dividends in the indentures governing the Second Priority Notes and the First Priority Notes and certain restrictions on in-kind dividends imposed by the Toronto Stock Exchange, which had taken the position that, in light of the market price of the Company’s common shares, the issuance of additional Series B Preferred Shares as a dividend in-kind would violate Toronto Stock Exchange rules regarding the issuance of discounted shares, unless the Company received shareholder approval for such an issuance. The indenture restrictions on our ability to pay cash dividends on the Series B Preferred Shares were removed upon the discharge of the indentures governing the First Priority Notes and Second Priority Notes as discussed on pages 42 and 43. The Company received shareholder approval at its annual meeting on June 27, 2011 for a pool of Series B Preferred Shares to be issued as in-kind dividends for this particular quarterly period and for future quarterly periods.

Further, Forbes Texas is required, at the seventh anniversary of the issuance of the Series B Preferred Stock on May 28, 2017, to redeem any such outstanding shares at their original issue price, plus any accumulated and unpaid dividends, to be paid, at the election of Forbes Texas, in cash or shares of common stock. The payment of the redemption price in cash is expected to result in reduced capital resources available to the Company. The payment of the redemption price in shares of common stock would directly dilute the common shareholders. The payment of dividends in-kind would also have a dilutive effect on the common shareholders (as any Series B Preferred Stock issued as dividends will be themselves convertible into common stock). In the event that the Company is liquidated while Series B Preferred Stock is outstanding, holders of the Series B Preferred Stock will be entitled to receive a preferred liquidation distribution, plus any accumulated and unpaid dividends, before holders of common stock receive any distributions. See “Description of Capital Stock—Series B Senior Convertible Preferred Stock” on page 80 of this prospectus.

Holders of the Series B Preferred Stock have certain voting and other rights that may adversely affect holders of our common stock, and the holders of shares of our Series B Preferred Stock may have different interests from, and vote their shares in a manner deemed adverse to, holders of our common stock.

As of October 7, 2011, the Company has paid all required dividends on its Series B Preferred Stock for completed dividend periods. However, in the event that we fail to pay dividends, in cash or in-kind, on the Series B Preferred Stock for an aggregate of at least eight quarterly dividend periods (whether or not consecutive), the holders of the Series B Preferred Stock will be entitled to vote at any meeting of the shareholders with the holders of the common stock and to cast the number of votes equal to the number of whole shares of common stock into which the Series B Preferred Stock held by such holders are then convertible. If the holders of the current Series B Preferred Shares were able to vote pursuant to this provision at this time or converted the Series B Preferred Shares into common shares, we believe that those holders would be entitled to an aggregate of 3,793,599 votes resulting from their ownership of Series B Preferred Shares. This together with common shares already held by these shareholders (as reported to the Company by such shareholders), would entitle these shareholders to just under 20%, in the aggregate, of the voting power of the Company. Further, the holders of Series B Preferred Stock may have certain voting rights with respect to the approval of amendments to the certificate of formation of Forbes Texas or certain transactions between Forbes Texas and affiliate shareholders. See “Capital Stock—Anti-Takeover Provisions in Texas Law and the New Forbes Texas Certificate of Formation and Bylaws” on page 81 of this prospectus.

The holders of Series B Preferred Stock may have different interests from the holders of our common stock and could vote their shares in a manner deemed adverse to the holders of common stock.

RISKS RELATING TO OUR BUSINESS

The industry in which we operate is highly volatile, and there can be no assurance that demand for our services will continue to improve from previous depressed levels.

The demand, pricing and terms for oilfield services in our existing or future service areas largely depend upon the level of exploration and development activity for both crude oil and natural gas in the United States. Oil and natural gas industry conditions are influenced by numerous factors over which we have no control, including oil and natural gas prices, expectations about future oil and natural gas prices, levels of consumer demand, the cost of exploring for, producing and delivering oil and natural gas, the expected rates of current production, the discovery rates of new oil and natural gas reserves, available pipeline and other oil and natural gas transportation capacity, weather conditions, political, regulatory and economic conditions, and the ability of oil and natural gas companies to raise equity capital or debt financing.

In the fourth quarter of 2008 and during 2009, the level of activity in the oil and natural gas industry in the United States experienced a severe downturn. The industry decline resulted in the reduction of oil and natural gas prices. Although oil prices and utilization trends improved during 2010, there can be no assurance that depressed natural gas prices will improve or that the current improving trend in oil prices or our utilization will continue. We expect that a continuation of the recent severe reduction in natural gas prices or a reduction in oil prices would have a negative effect on oil and natural gas production levels and therefore affect the demand for drilling and well services by oil and natural gas companies. Any addition to, or elimination or curtailment of, government incentives for companies involved in the exploration for and production of oil and natural gas could have a significant effect on the oilfield services industry in the United States. Lower oil and natural gas prices could also cause our customers to seek to terminate, renegotiate or fail to honor our services contracts. It could affect the fair market value of our equipment fleet which, under specific circumstances, in turn could trigger a write down of our assets for accounting purposes. Lower oil and natural gas prices could also affect our ability to retain skilled oilfield services personnel and our ability to obtain access to capital to fund and grow our business. A reversal in the current trend of improving industry activity and pricing at current levels could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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We may be adversely affected by uncertainty in the global financial markets and the continuing worldwide economic downturn.

Our future results may be impacted by the continuing worldwide economic downturn, continued volatility or deterioration in the debt and equity capital markets, inflation, deflation, or other adverse economic conditions that may negatively affect us or parties with whom we do business resulting in their non-payment or inability to perform obligations owed to us such as the failure of customers to honor their commitments or the failure of major suppliers to complete orders. Additionally, credit market conditions may change slowing our collection efforts as customers may experience increased difficulty in obtaining requisite financing, potentially leading to lost revenue and higher than normal accounts receivable. This could result in greater expense associated with collection efforts and increased bad debt expense.

The current global economic environment may adversely impact our ability to issue additional debt. A continuation of the economic uncertainty may cause institutional investors to respond to their customers by increasing interest rates, enacting tighter lending standards or refusing to refinance existing debt upon maturity or on terms similar to expiring debt. Even with the net proceeds of the December 2009 common equity offering, our May 2010 preferred stock offering, the New Notes offering and availability under our new credit facility, we may require additional capital in the future. However, due to the above listed factors, we cannot be certain that additional funding will be available if needed and, to the extent required, on acceptable terms.

Our business depends on domestic spending by the oil and natural gas industry, and this spending and our business may be adversely affected by industry and financial market conditions that are beyond our control.

We depend on our customers’ willingness to make operating and capital expenditures to explore, develop and produce oil and natural gas in the United States. Current low natural gas prices, a decline in oil prices and global economic uncertainty may reduce the availability of capital for operating and capital expenditures and may curtail spending thereby reducing demand for our services and equipment.

Industry conditions are influenced by numerous factors over which we have no control, such as the supply of and demand for oil and natural gas, domestic and worldwide economic conditions, political instability in oil and natural gas producing countries and merger and divestiture activity among oil and natural gas producers. The volatility of the oil and natural gas industry and the consequent impact on exploration and production activity could adversely impact the level of drilling and workover activity by some of our customers. Any such reduction may cause a decline in the demand for our services or adversely affect the price of our services. In addition, reduced discovery rates of new oil and natural gas reserves in our market areas also may have a negative long-term impact on our business, even in an environment of stronger oil and natural gas prices, to the extent existing production is not replaced and the number of producing wells for us to service declines.

During 2009, adverse changes in capital markets caused a number of oil and natural gas producers to announce reductions in capital budgets for future periods. In the fourth quarter of 2009 and in 2010, several of these producers announced increased capital budgets relative to their lows in mid-2009. Even so, limitations on the availability of capital, or higher costs of capital, for financing expenditures may cause these and other oil and natural gas producers to limit capital budgets in the future even if commodity prices reach high levels.

These same economic factors impact our customers’ ability to pay amounts due to us on a timely basis. During 2009, this impacted a significant number of our customers resulting in several million dollars in uncollectable accounts receivable. While the severity of the negative financial impact of the industry downturn has subsided, there can be no assurances that another slowdown or downturn may not occur creating additional significant levels of uncollectable accounts receivable.

Our indebtedness could restrict our operations and make us more vulnerable to adverse economic conditions.

As of June 30, 2011, our long-term debt, including current portions, was 285.3 million. On September 9, 2011, we entered into a new credit facility which provides us initially with $75.0 million of available borrowing capacity. In the event the current industry upward trend reverses and we experience a decline in activity as we experienced in 2009, our level of indebtedness may adversely affect operations and limit our growth. Our level of indebtedness may affect our operations in several ways, including the following:

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These restrictions could have a material adverse effect on our business, financial position, results of operations and cash flows and the ability to satisfy the obligations under our New Indenture and the agreements governing our proposed new credit facility. Further, due to cross-default provisions in the New Indenture, a default and acceleration of outstanding debt under one debt agreement could result in the default and possible acceleration of outstanding debt under our other debt agreements. Accordingly, an event of default could result in all or a portion of our outstanding debt under our New Indenture and agreements governing any of our other indebtedness becoming immediately due and payable. If this occurred, we might not be able to obtain waivers or secure alternative financing to satisfy all of our obligations simultaneously, which might even force us to seek bankruptcy protection.

Impairment of our long-term assets may adversely impact our financial position and results of operations.

We evaluate our long-term assets including property, equipment, and identifiable intangible assets in accordance with generally accepted accounting principles in the U.S. We use estimated future cash flows in assessing recoverability of our long-lived assets. The cash flow projections are based on our current estimates and judgmental assessments. We perform this assessment whenever facts and circumstances indicate that the carrying value of the net assets may not be recoverable due to various external or internal factors, termed a “triggering event.” Based on our evaluation for the year ended December 31, 2010, no impairment was recorded.

We may be unable to maintain pricing on our core services.

As a result of pressures stemming from deteriorating market conditions and falling commodity prices, we entered 2009 with rapidly dropping pricing. Although pricing has increased in 2010 and the first six months of 2011, there can be no assurances that we can maintain these increases in the event of an industry decline such as the one experienced in 2009. We have and will likely continue to face pricing pressure from our customers and our competitors. The inability to maintain prices at the current levels would have a material negative impact on our financial position, operating results, and cash flows.

Industry capacity may adversely affect our business.

As a result of the worldwide economic downturn and decline in U.S. onshore exploration and production activities experienced in 2008 and 2009, and in spite of the improving conditions experienced in 2010 and so far in 2011, demand in the industry is much lower than in the past which also means that neither we nor our competitors are fully utilizing significant portions of our respective rig fleets and related equipment. Lower utilization of our fleet has led to reduced pricing for our services from historical levels. Capacity that exceeds current demand in the industry has further exacerbated the pricing pressure for our services. In light of such conditions, the excess capacity could cause us to experience continued pressure on the pricing for our services and our utilization. This could have a material negative impact on our financial position, operating results, and cash flows.

The industry in which we operate is highly competitive.

The oilfield services industry is highly competitive and we compete with a substantial number of companies, some of which have greater technical and financial resources than we have. Our four largest competitors are Basic Energy Services, Inc., Complete Production Services, Inc., Key Energy Services Inc. and Nabors Industries Ltd. Our ability to generate revenues and earnings depends primarily upon our ability to win bids in competitive bidding processes and to perform awarded projects within estimated times and costs. There can be no assurance that competitors will not substantially increase the resources devoted to the development and marketing of products and services that compete with ours, or that new or existing competitors will not enter the various markets in which we are active. In certain aspects of our business, we also compete with a number of small and medium-sized companies that, like us, have certain competitive advantages such as low overhead costs and specialized regional strengths. In addition, reduced levels of activity in the oil and natural gas industry could intensify competition and the pressure on competitive pricing and may result in lower revenues or margins to us.

The New Indenture imposes significant operating and financial restrictions on us that may prevent us from pursuing certain business opportunities and restrict or limit our ability to operate our business.

The New Indenture contains covenants that restrict or limit our ability to take various actions, such as

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The restrictions contained in the New Indenture could also limit our ability to plan for or react to market conditions, meet capital needs or otherwise restrict our activities or business plans and adversely affect our ability to fund our operations, enter into acquisitions or to engage in other business activities that would be in our interest.

We are subject to the risk of technological obsolescence.

We anticipate that our ability to maintain our current business and win new business will depend upon continuous improvements in operating equipment, among other things. There can be no assurance that we will be successful in our efforts in this regard or that we will have the resources available to continue to support this need to have our equipment remain technologically up to date and competitive. Our failure to do so could have a material adverse effect on us. No assurances can be given that competitors will not achieve technological advantages over us.

We are highly dependent on certain of our officers and key employees.

Our success is dependent upon our key management, technical and field personnel, especially John E. Crisp, our President and Chief Executive Officer, and Charles C. Forbes, our Executive Vice President and Chief Operating Officer. Any loss of the services of any one of such officers or a sufficient number of other employees could have a material adverse effect on our business and operations. Our ability to expand our services is dependent upon our ability to attract and retain additional qualified employees. The ability to secure the services of additional personnel may be constrained in times of strong industry activity.

Our customer base is concentrated within the oil and natural gas production industry and loss of a significant customer could cause our revenue to decline substantially.

We served in excess of 1,115 customers for the year ended December 31, 2010. For the years ended December 31, 2010 and 2009, our largest customer comprised approximately 13.7% and 11.7%, respectively, of our consolidated revenues, our five largest customers comprised approximately 35.9% and 37.7%, respectively, of our consolidated revenues, and our top ten customers comprised approximately 51.9% and 49.8%, respectively, of our consolidated revenues. These customers currently represent a large portion of our consolidated revenues. The loss of our top customer or of several of our top customers would adversely affect our revenues and results of operations. We may be able to replace customers lost with other customers, but there can be no assurance that lost revenues could be replaced in a timely manner, with the same margins or at all.

We expect that we will continue to incur significant costs as a result of being obligated to comply with Securities Exchange Act reporting requirements, the Sarbanes-Oxley Act, Canadian reporting requirements and indenture and new credit facility covenants and that our management will be required to devote substantial time to compliance matters.

Under the New Indenture, we are required to comply with several covenants, including requirements to deliver certain opinions and certificates and file reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, with the Securities and Exchange Commission, or the SEC. In connection with the Conversion, we registered the common stock of Forbes Texas under Section 12 of the Exchange Act. As a result of this we are now under increased reporting requirements under the Exchange Act. In addition, the Sarbanes-Oxley Act of 2002, and rules subsequently implemented by the SEC, have imposed various requirements on public companies, including the establishment and maintenance of effective disclosure controls and procedures, internal controls and corporate governance practices. We are also required to comply with the rules and regulations applicable to public companies in Canada and to file reports with the Canadian securities administrators. Accordingly, we expect to continue to incur significant legal, accounting and other expenses. We anticipate that our management and other personnel will continue to devote a substantial amount of time and resources to comply with these requirements.

The Sarbanes-Oxley Act of 2002 requires, among other things, that we maintain effective internal controls for financial reporting and disclosure. We have performed and will perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes Oxley Act of 2002. Our historical testing has, and our future testing may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses or significant deficiencies in addition to the one discussed below that was revealed in our most recent evaluation.

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We expect to continue to incur significant expense and devote substantial management effort toward ensuring compliance in particular with Section 404. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, if we identify or our independent registered public accounting firm identifies possible future deficiencies in our internal controls in addition to the one discussed below that are deemed to be material weaknesses or if we fail to adequately address existing and future deficiencies, we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would entail expenditure of additional financial and management resources.

We face several risks relating to a material weakness and significant deficiencies in our internal control over financial reporting.

In connection with the preparation of the Forbes Group’s consolidated financial statements for the year ended December 31, 2010, we identified control deficiencies that constitute a material weakness in the design and operation of our internal control over financial reporting. The following material weakness was present at December 31, 2010:

This control deficiency could result in a future material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. Accordingly, we have determined that the above control deficiency represents a material weakness. In addition, we have identified certain significant deficiencies that are not considered material weaknesses, including our method of evidencing certain support for related party transactions.

Internal control deficiencies could cause investors to lose confidence in our reported financial information. In addition, even if we are successful in strengthening our controls and procedures, our controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements. We can give no assurance that the measures we have taken to date, or any future measures we may take, will remediate the material weakness identified or that any additional material weaknesses and significant deficiencies or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Remediation” on page 31 of this prospectus for a description of certain measures we have undertaken to remediate our deficiencies.

We engage in transactions with related parties and such transactions present possible conflicts of interest that could have an adverse effect on the Company.

The Company has entered into a significant number of transactions with related parties. The details of certain of these transactions are set forth in the section “Transactions with Related Persons” on page 76. Related party transactions create the possibility of conflicts of interest with regard to the Company’s management. Such a conflict could cause an individual in the Company’s management to seek to advance his or her economic interests above those of the Company. Further, the appearance of conflicts of interest created by related party transactions could impair the confidence of our investors. The board of directors regularly reviews these transactions and, as previously required under the indentures governing the Second Priority Notes and the First Priority Notes and as currently required by the New Indenture, obtains the approval of the disinterested board members when such a transaction exceeds an aggregate consideration of $500,000 and an opinion regarding the fairness of such transaction from an outside firm when such a transaction exceeds an aggregate consideration of $2.5 million. Notwithstanding this, it is possible that a conflict of interest could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Activity in the oilfield services industry is seasonal and may affect our revenues during certain periods.

Our operations are impacted by seasonal factors. Historically, our business has been negatively impacted during the winter months due to inclement weather, fewer daylight hours and holidays. Our well servicing rigs are mobile, and we operate a significant number of oilfield vehicles. During periods of heavy snow, ice or rain, we may not be able to move our equipment between locations, thereby reducing our ability to generate rig or truck hours. In addition, the majority of our well servicing rigs work only during daylight hours. In the winter months when daylight time becomes shorter, this reduces the amount of time that the well servicing rigs can work and therefore has a negative impact on total hours worked. Finally, we historically have experienced significant slowdown during the Thanksgiving and Christmas holiday seasons.

We rely heavily on our suppliers and do not maintain written agreements with any such suppliers.

Our ability to compete and grow will be dependent on our access to equipment, including well servicing rigs, parts and components, among other things, at a reasonable cost and in a timely manner. We do not maintain written agreements with any of our suppliers (other than operating leases for certain equipment), and we are, therefore, dependent on the relationships we maintain with them. Failure of suppliers to deliver such equipment, parts and components at a reasonable cost and in a timely manner would be detrimental to our ability to maintain existing customers and obtain new customers. No assurance can be given that we will be successful in maintaining our required supply of such items.

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We rely heavily on two suppliers, Agri-Empresa, Inc. and Tetra Technologies, Inc., for potassium chloride, a principal raw material that is critical for our operations. While the materials are generally available, if we were to have a problem sourcing raw materials or transporting these materials from one of these two vendors, our ability to provide some of our services could be limited. Alternate suppliers exist for all other raw materials. The source and supply of materials has been consistent in the past, however, in periods of high industry activity, periodic shortages of certain materials have been experienced and costs have been affected. We do not have contracts with, but we do maintain relationships with, a number of suppliers in an attempt to mitigate this risk. However, if current or future suppliers are unable to provide the necessary raw materials, or otherwise fail to deliver products in the quantities required, any resulting delays in the provision of services to our customers could have a material adverse effect on our business, results of operations, financial condition and cash flows.

We do not maintain written agreements with respect to some of our salt water disposal wells.

Our ability to continue to provide well maintenance services depends on our continued access to salt water disposal wells. Several of our currently active salt water disposal wells are not subject to written operating agreements or are located on the premises of third parties who have not entered into a written lease with us. We do not maintain written surface leases or right of way agreements with these third parties and we are, therefore, dependent on the relationships we maintain with them. Failure to maintain relationships with these third parties could impair our ability to access and maintain the applicable salt water disposal wells and any well servicing equipment located on their property. If that occurred, we would increase the levels of fluid injection at our remaining salt water disposal wells. However, our permits to inject fluid into the salt water disposal wells is subject to maximum pressure limitations and if multiple salt water disposal wells became unavailable, this might adversely impact our operations.

We extend credit to our customers which presents a risk of non-payment.

A substantial portion of our accounts receivable are with customers involved in the oil and natural gas industry, whose revenues may be affected by fluctuations in oil and natural gas prices. Collection of these receivables could be influenced by economic factors affecting this industry. We do not have significant exposure to any individual customer other than our top customer, PEMEX, which accounted for approximately 13.7% and 11.7% (or $45.9 million and $25.1 million) of the revenues for the year ended December 31, 2010 and 2009, respectively. The remaining top five customers are all U.S. customers and amounted to 22.2% and 26.0% of our revenues for the year ended December 31, 2010 and 2009, respectively.

Due to the nature of our business, we may be subject to environmental liability.

Our business operations and ownership of real property are subject to numerous United States and Mexican federal, state and local environmental and health and safety laws and regulations, including those relating to emissions to air, discharges to water, treatment, storage and disposal of regulated materials, and remediation of soil and groundwater contamination. The nature of our business, including operations at our current and former facilities by prior owners, lessors or operators, exposes us to risks of liability under these laws and regulations due to the production, storage, use, transportation and disposal of materials that can cause contamination or personal injury if released into the environment. Environmental laws and regulations may have a significant effect on the costs of transportation and storage of raw materials as well as the costs of the transportation, treatment, storage and disposal of wastes. We believe we are in material compliance with applicable environmental and worker health and safety requirements. However, we may incur substantial costs, including fines, damages, criminal or civil sanctions, remediation costs, or experience interruptions in our operations for violations or liabilities arising under these laws and regulations. Although we may have the benefit of insurance maintained by our customers or by other third parties or by us, such insurances may not cover every expense. Further, we may become liable for damages against which we cannot adequately insure or against which we may elect not to insure because of high costs or other reasons.

Our customers are subject to similar environmental laws and regulations, as well as limits on emissions to the air and discharges into surface and sub-surface waters. Although regulatory developments that may occur in subsequent years could have the effect of reducing industry activity, we cannot predict the nature of any new restrictions or regulations that may be imposed. We may be required to increase operating expenses or capital expenditures in order to comply with any new restrictions or regulations.

Climate change legislation or regulations restricting emissions of “greenhouse gases” could result in increased operating costs and reduced demand for our services.

The U.S. Congress has been considering legislation to reduce the emissions of certain gases, commonly referred to as “greenhouse gases,” including carbon dioxide and methane, which, according to certain scientific studies, might contribute to the warming of the Earth’s atmosphere and other climatic changes. On June 26, 2009, the U.S. House of Representatives passed the American Clean Energy and Security Act of 2009, or ACESA, which would establish an economy-wide cap-and-trade program to reduce U.S. emissions of these greenhouse gases. ACESA would require a 17% reduction in greenhouse gas emissions from 2005 levels by 2020 and just over an 80% reduction of such emissions by 2050. Under this legislation, the Environmental Protection Agency, or the EPA, would issue a capped and steadily declining number of tradable emissions allowances to

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major sources of greenhouse gas emissions permitting such sources to continue to emit greenhouse gases into the atmosphere. The cost of these allowances would be expected to increase significantly over time. ACESA would impose increasing costs on the combustion of carbon-based fuels such as oil and natural gas. The U.S. Senate began work on its own legislation for restricting domestic greenhouse gas emissions and President Obama has indicated his support of legislation to reduce greenhouse gas emissions through an emission allowance system. Although it is not currently possible to predict when and if the Senate may act on climate change legislation or how any bill passed by the Senate would be reconciled with ACESA, any future federal laws or implementing regulations that may be adopted to address the emission of greenhouse gases could adversely affect demand for our services by reducing demand for the oil and natural gas produced by our customers. Such legislation could also increase our operating costs.

Additionally, on December 7, 2009, the EPA announced its finding that greenhouse gas emissions presented an endangerment to human health and the environment. These findings allow the EPA to proceed with the adoption and implementation of regulations that would restrict emissions of greenhouse gases under existing provisions of the federal Clean Air Act. In September 2009, the EPA proposed regulations in anticipation of finalizing its endangerment finding that would require a reduction in greenhouse gas emissions from motor vehicles and, could also trigger permit review for greenhouse gas emissions from certain stationary sources. On October 30, 2009, the EPA published a final rule requiring the reporting of greenhouse gas emissions from specified large greenhouse gas emission sources in the United States beginning in 2011 for emissions occurring in 2010. On November 30, 2010, the EPA issued regulations that expanded reporting requirements to include onshore and offshore petroleum and natural gas production; natural gas processing, distribution and storage; and facilities that inject and store carbon dioxide underground for the purposes of geologic sequestration or enhanced oil and gas recovery. Reporting requirements under these new regulations are mandatory beginning in 2012 for emissions occurring in 2011.

The adoption and implementation of any regulations imposing reporting obligations on, or limiting emissions of greenhouse gases from, our equipment and operations and the equipment and operations of our customers could require us to incur increased operating costs and could adversely affect demand for crude oil and natural gas produced by our customers, which would adversely affect demand for our services. The potential increase in the costs of our operations and the operations of our customers could include additional costs to operate and maintain equipment and facilities, install new emission controls on equipment and facilities, acquire allowances to authorize greenhouse gas emissions, pay any taxes related to greenhouse gas emissions and administer and manage a greenhouse gas emissions program. While we may be able to include some or all of such increased operating costs in the rates we charge for our services, any recovery of such costs is uncertain.

Even if such legislation is not adopted at the national level, a number of states, acting either individually or through multi-state regional initiatives, have already begun implementing legal measures to reduce emissions of greenhouse gases. While no such legislation is currently being considered in Texas, many of our customers operate nationally and would be adversely affected by the requirements of such legislation. Any one of these climate change regulatory and legislative initiatives could have a material adverse effect on our business, financial condition and results of operations.

Significant physical effects of climatic change, if they should occur, have the potential to damage oil and natural gas facilities, disrupt production activities and could cause us or our customers to incur significant costs in preparing for or responding to those effects.

In an interpretative guidance on climate change disclosures, the SEC indicates that climate change could have an effect on the severity of weather (including hurricanes and floods), sea levels, the arability of farmland, and water availability and quality. If any such effects were to occur, they could have an adverse effect on our assets and operations or the assets and operations of our customers. We may not be able to recover through insurance some or any of the damages, losses or costs that may result should the potential physical effects of climate change occur. Unrecovered damages and losses incurred by our customers could result in decreased demand for our services.

Increasing trucking regulations may increase our costs and negatively affect our results of operations.

In connection with the services we provide, we operate as a motor carrier and therefore are subject to regulation by the U.S. Department of Transportation, or U.S. DOT, and by various state agencies. These regulatory authorities exercise broad powers, governing activities such as the authorization to engage in motor carrier operations and regulatory safety. There are additional regulations specifically relating to the trucking industry, including testing and specification of equipment and product handling requirements. The trucking industry is subject to possible regulatory and legislative changes that may affect the economics of the industry by requiring changes in operating practices or by changing the demand for common or contract carrier services or the cost of providing truckload services. Some of these possible changes include increasingly stringent environmental regulations and changes in the regulations that govern the amount of time a driver may drive in any specific period, onboard black box recorder devices, or limits on vehicle weight and size.

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Interstate motor carrier operations are subject to safety requirements prescribed by the U.S. DOT. To a large degree, intrastate motor carrier operations are subject to state safety regulations that mirror federal regulations. Such matters as weight and dimension of equipment are also subject to federal and state regulations.

From time to time, various legislative proposals are introduced, including proposals to increase federal, state, or local taxes, including taxes on motor fuels, that may increase our costs or adversely affect the recruitment of drivers. Management cannot predict whether, or in what form, any increase in such taxes applicable to us will be enacted. We may be required to increase operating expenses or capital expenditures in order to comply with any new restrictions or regulations.

We are subject to extensive additional governmental regulation.

In addition to environmental and trucking regulations, our operations are subject to a variety of other United States and Mexico federal, state and local laws, regulations and guidelines, including laws and regulations relating to health and safety, the conduct of operations, and the manufacture, management, transportation, storage and disposal of certain materials used in our operations. Also, we may become subject to such regulation in any new jurisdiction in which we may operate. We believe that we are in compliance with such laws, regulations and guidelines. Although we continue to enhance our infrastructure, we have invested financial and managerial resources to comply with applicable laws, regulations and guidelines and expect to continue to do so in the future. Although regulatory expenditures have not, historically, been material to us, such laws, regulations and guidelines are subject to change. Accordingly, it is impossible for us to predict the cost or effect of such laws, regulations or guidelines on our future operations.

Our ability to use net operating loss carryforwards may be subject to limitations under Section 382 of the Internal Revenue Code.

As of December 31, 2010, we had U.S. federal tax net operating loss carryforwards of approximately $84.2 million. Generally, net operating loss, or NOL, carryforwards may be used to offset future taxable income and thereby reduce or eliminate U.S. federal income taxes. If we were to experience a change in ownership within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, however, our ability to utilize our NOLs might be significantly limited or possibly eliminated. A change of ownership under Section 382 is defined as a cumulative change of 50% or more in the ownership positions of certain of our stockholders over a three-year period.

Based on our review of the issue, we do not believe that we have experienced an ownership change under Section 382 of the Code. However, the issuance of additional equity in the future may result in an ownership change pursuant to Section 382 of the Code. In addition, an ownership change under Section 382 could be caused by circumstances beyond the Company’s control, such as market purchases of our stock. Thus, there can be no assurance that the Company will not experience an ownership change that would limit our application of our net operating loss carryforwards in calculating future federal tax liabilities.

Our operations are inherently risky, and insurance may not always be available in amounts sufficient to fully protect us.

We have an insurance and risk management program in place to protect our assets, operations and employees. We also have programs in place to address compliance with current safety and regulatory standards. However, our operations are subject to risks inherent in the oilfield services industry, such as equipment defects, malfunctions, failures, accidents and natural disasters. In addition, hazards such as unusual or unexpected geological formations, pressures, blow-outs, fires or other conditions may be encountered in drilling and servicing wells, as well as the transportation of fluids and company assets between locations. These risks and hazards could expose us to substantial liability for personal injury, loss of life, business interruption, property damage or destruction, pollution and other environmental damages.

Although we have obtained insurance against certain of these risks, such insurance is subject to coverage limits and exclusions and may not be available for the risks and hazards to which we are exposed. In addition, no assurance can be given that such insurance will be adequate to cover our liabilities or will be generally available in the future or, if available, that premiums will be commercially justifiable. If we were to incur substantial liability and such damages were not covered by insurance or were in excess of policy limits, or if we were to incur such liability at a time when we are not able to obtain liability insurance, our business, results of operations and financial condition could be materially adversely affected.

The market for oil and natural gas may be adversely affected by global demands to curtail use of such fuels.

Fuel conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to oil and natural gas and technological advances in fuel economy and energy generation devices could reduce the demand for oil and other liquid hydrocarbons. We cannot predict the effect of changing demand for oil and natural gas products, and any major changes may have a material adverse effect on our business, financial condition, results of operations and cash flows.

        Our international operations could be adversely affected by war, civil disturbance, or political or economic turmoil, fluctuation in currency exchange rates and local import and export controls.

In late 2008, we began operations in Mexico. We may continue to grow our business in Mexico or other foreign jurisdictions. Foreign operations are subject to various risks, including the risk of war, civil disturbances and governmental activities that may limit or disrupt markets, restrict the movement of funds or result in the deprivation of contract rights or the taking of property without fair compensation. In Mexico and other foreign jurisdictions, our operations may be subject to additional risks associated with such jurisdictions’ political relations with the United States, currency values and exchange controls, prevailing worker wages, the ability to identify, hire, train and retain qualified personnel and operating management in such jurisdictions, difficulty in enforcing agreements due to differences in the legal and regulatory regimes compared to those of the United States, communication and translation errors due to language barriers, our ability to maintain the legal authority of the Company to own and operate its business in Mexico or such other jurisdictions, and our compliance with foreign laws and regulations governing the operation and taxation of our business and the import and export of our equipment. These risks could adversely affect the results of our future operations.

Our operations in Mexico are subject to risks associated with contract bidding .

Our operations in Mexico are performed for PEMEX pursuant to a contract. The failure by us to renew this contract could have a material adverse effect on our financial condition,

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results of operations and cash flows. In December 2010 and March 2011, we completed amendments to the PEMEX contract which extended the term of the contract to December 31, 2011 and increased the dollar value available under the contract.

This contract is subject to competitive bid for renewal and there can be no assurances that we will be able to extend the contract beyond December 31, 2011, or increase the amounts available thereunder, or that we will be awarded other contracts by PEMEX. Failure to continue our relationship with PEMEX could negatively impact the Company as services performed for PEMEX have generated approximately USD $5.6 million in net income and USD $45.9 million in revenues for the year ended December 31, 2010.

We cannot predict how an exit by any of our principal equity investors could affect our operations or business.

As of October 7, 2011, John E. Crisp, Charles C. Forbes and Janet L. Forbes, or Founders, owned 5.5%, 12.2%, and 11.1%, respectively, of our common stock, on a beneficial ownership basis. Our principal equity investors may transfer their interests in us or engage in other business combination transactions with a third party that could result in a change in ownership or a change of control of us. Any transfer of an equity interest in us or a change of control could affect our governance. We cannot be certain that our equity investors will not sell, transfer or otherwise modify their ownership interest in us, whether in transactions involving third parties or other investors, nor can we predict how a change of equity investors or change of control would affect our operations or business.

Our principal equity investors control important decisions affecting our governance and our operations, and their interests may differ from those of the other shareholders and noteholders.

Circumstances may arise in which the interest of our principal equity investors could be in conflict with those of the other shareholders and noteholders. In particular, our principal equity investors may have an interest in pursuing certain strategies or transactions that, in their judgment, enhance the value of their investment in us even though these strategies or transactions may involve risks to other shareholders and noteholders. Further conflicts of interest may arise between noteholders and our principal equity investors when we are faced with decisions that could have different implications for noteholders and our principal equity investors, including financial budgets, potential competition, the issuance or disposition of securities, the payment of distributions by us, regulatory and legal positions and other matters. Because our principal equity investors control us, these conflicts may be resolved in a manner adverse to, or that imposes more risks on, the noteholders. Although the Texas corporate law which governs Forbes Texas provides certain procedural protections and requires that certain business combinations between us and certain interested or affiliated shareholders meet certain approval requirements, this does not address all conflicts of interest that may arise. For example, our principal equity investors and their affiliates are not prohibited from competing with us. Because our principal equity investors control us, conflicts of interest arising because of competition between us and a principal equity investor could be resolved in a manner adverse to us. It is possible that there will be situations where our principal equity investors’ interests are in conflict with our interests, and our principal equity investors acting through the board of directors or through our executive officers could resolve these conflicts in a manner adverse to us.

We have anti-takeover provisions in the organizational documents of Forbes Texas and elsewhere that may discourage a change of control.

The organizational documents of Forbes Texas contain provisions that could make it more difficult for a third party to acquire us without the consent of the board of directors. These provisions provide for the following:

We also have a shareholder rights plan which makes it very difficult for anyone to accumulate more than a certain percentage of our outstanding equity without approval of the board of directors. This plan remained in effect after the Conversion. These provisions could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many shareholders. As a result, shareholders may be limited in their ability to obtain a premium for their shares.

Future legal proceedings could adversely affect us and our operations.

Given the nature of our business, we are involved in litigation from time to time in the ordinary course of business. While we are not presently a party to any material legal proceedings, legal proceedings could be filed against us in the future. No assurance can be given as to the final outcome of any legal proceedings or that the ultimate resolution of any legal proceedings will not have a material adverse effect on us.

We may not be able to fully integrate future acquisitions.

We may undertake future acquisitions of businesses and assets in the ordinary course of business. Achieving the benefits of acquisitions depends in part on having the acquired assets perform as expected, successfully consolidating functions, retaining key employees and customer relationships, and integrating operations and procedures in a timely and efficient manner. Such integration may require substantial management effort, time and resources and may divert management’s focus from other strategic opportunities and operational matters, and ultimately we may fail to realize anticipated benefits of acquisitions.

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Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays for our customers.

Hydraulic fracturing is an important and common practice that is used to stimulate production of hydrocarbons, particularly natural gas, from tight formations. The process involves the injection of water, sand and chemicals under pressure into the formation to fracture the surrounding rock and stimulate production. The process is typically regulated by state oil and gas commissions but is not subject to regulation at the federal level. The U.S. Environmental Protection Agency, or the EPA, has commenced a study of the potential environmental impacts of hydraulic fracturing activities, and a committee of the U.S. House of Representatives is also conducting an investigation of hydraulic fracturing practices. Legislation has been introduced before Congress to provide for federal regulation of hydraulic fracturing and to require disclosure of the chemicals used in the fracturing process. In addition, some states are considering adopting regulations that could restrict hydraulic fracturing in certain circumstances. If new laws or regulations that significantly restrict hydraulic fracturing are adopted, such laws could make it more difficult or costly for producers, including our customers, to perform fracturing to stimulate production from tight formations. In addition, if hydraulic fracturing is regulated at the federal level, fracturing activities could become subject to additional permitting requirements, and also to attendant permitting delays and potential increases in costs. Such increases in cost could result in decreased demand for our services.

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MARKET VALUE OF COMMON STOCK

Our common shares began trading on the Toronto Stock Exchange, or TSX, under the symbol “FRB.TO” immediately after the completion of our initial public offering in Canada on May 29, 2008. On June 24, 2008, our common shares began to be quoted in the United States in U.S. dollars on the “Pink Sheets” over-the-counter market under the symbol “FESLF.PK.” On August 12, 2011, we completed the Share Consolidation and Conversion. To distinguish between the Company’s common stock before and after the Share Consolidation and Texas Conversion, a new common stock CUSIP number of 345143101 replaced the old CUSIP number of G38007103. Notwithstanding the effective date of the Share Consolidation and Texas Conversion, in accordance with standard procedures of the TSX, the Company’s common stock continued to trade on the TSX on a pre-consolidation, pre-conversion basis, under the old CUSIP, through Monday, August 15, 2011. At market open on Tuesday, August 16, 2011, trading began on the TSX on a post-consolidation post-conversion basis under the new CUSIP number listed above. Both before and after the Share Consolidation and Texas Conversion, the Company’s common stock traded on the TSX under the symbol FRB. Further, beginning on Tuesday, August 16, 2011, our common stock began trading on a post-consolidation, post-conversion basis on NASDAQ under the symbol FES. The following table sets forth, for the periods indicated, the high and low sales prices reported on the TSX (in Canadian dollars) and the Pink Sheets for our common shares for the years ended December 31, 2010 and 2009, respectively. All references in the table below to price per share prior to the Share Consolidation have been retroactively adjusted to give effect to the Share Consolidation. The prices reported on the Pink Sheets represent quotations between dealers without adjustment for retail mark-up, markdown or commission and may not represent actual transactions. In connection with the Conversion, the Company plans to apply to have the common stock of Forbes Texas listed on NASDAQ, nevertheless, there can be no assurance that our application will be successful.

As of October 7, 2011, the last reported sales price of our common shares on NASDAQ and on TSX was USD $5.35 and CDN $5.76 per share, respectively. As of September 30, 2011, we had 20,918,417 shares of common stock issued and outstanding, held by 35 shareholders of record. All common stock held in street name are recorded in the Company’s stock register as being held by one stockholder.

The Company has never declared a cash dividend on its common stock and has no plans of doing so now or in the foreseeable future after the Conversion. As described in more detail on page 40 of this Registration Statement, the loan agreement governing the new credit facility prohibits the payment of dividends on the Company’s common stock. It does, however, permit dividend payments on the Company’s Series B Preferred Stock. Further, as described in more detail on page 40 of this prospectus, the New Indenture restricts the Company’s ability to pay dividends on our equity interests, except dividends payable in equity interests and cash dividends on the Series B Preferred Shares up to $260,000 per quarter, unless, among other things, the Company is able to incur at least $1.00 of additional Indebtedness (as defined in the New Indenture) pursuant to the Fixed Charge Coverage Ratio set forth in such indenture.

The Series B Preferred Shares of Forbes Bermuda and the Series B Preferred Stock of Forbes Texas accrue dividends at a rate of $1.25 per share per year, which, at our discretion, is payable in-kind. Other than these dividends, the Board of Directors presently intends to retain all earnings for use in the Company’s business and, therefore, does not anticipate paying any other cash dividends in the foreseeable future. The declaration of dividends on common equity, if any, in the future would be subject to the discretion of the Board of Directors, which may consider factors such as the new credit facility and indenture restrictions discussed above, the Company’s results of operations, financial condition, capital needs and acquisition strategy, among others. Additionally, the Series B Preferred Stock prohibits the Company from paying a dividend on the common shares if dividends on the Series B Preferred Shares of Forbes Bermuda and the Series B Preferred Stock of Forbes Texas are not paid through the respective quarterly payment date. Further, if the aggregate cash payment of dividends on the common shares over a twelve month period exceeds five percent of the fair market value of the common shares, then we are required under the certificate of designation of the Series B Preferred Stock to pay the holders of such shares that amount that they would be entitled to receive had such holders converted their shares to common shares prior to the record date of such dividends.

In connection with the Bermuda Reorganization, the board of directors adopted and the Company’s sole shareholder at the time approved the 2008 Incentive Compensation Plan, or the Incentive Plan. The Incentive Plan continued in effect as the plan of Forbes Texas after the Conversion. The Incentive Plan is an unfunded plan that provides for the granting of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, and other stock-based incentive compensation, collectively referred to as the Awards, to employees, directors and consultants of the Company or an affiliate. The board of directors believes that the Incentive Plan strengthens the Company’s ability to attract, retain, and reward employees, directors, and consultants by enabling such persons to acquire or increase a proprietary interest in the Company,

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strengthening the mutuality of interests between such persons and the Company’s shareholders, and providing such persons with performance incentives to expend their maximum efforts in the creation of shareholder value. After the approval by the Company’s shareholders of an amendment to increase the maximum number of Common Shares that may be issued under the Incentive Plan by 1,672,500 at our annual meeting on June 27, 2011, the Incentive Plan provides for a reserve equal to 2,977,500 Common Shares after taking into account the effect of the share consolidation. In August 2010, the compensation committee granted options to purchase a total of 635,000 common shares to officers, directors and employees after taking into account the effect of the share consolidation.

In addition to the amendment referenced above to the Incentive Plan regarding the increase in Common Shares issuable pursuant to the plan, at the annual meeting on June 27, 2011, the shareholders also approved an amendment to the Incentive Plan that permitted a one-time employee stock option exchange program whereby option holders were given the opportunity to exchange stock options with an exercise price of $28.00 for a lesser number of new stock options that have approximately the same fair value as the options surrendered, or the Option Exhange. On July 14, 2011, the Company launched this Option Exchange. The Option Exchange only applied to options granted on May 29, 2008 and the Option Exchange expired on August 11, 2011. Those participating in the Option Exchange received new options for the old options they tendered at a ratio of .72 to 1. To minimize accounting expenses, this exchange ratio was calculated on an approximate “value-for-value” basis. However, due to changes in the market price of the Company’s common stock after the launch of the Option Exchange, compensation expense of approximately $0.3 million was recognized as a result of the Option Exchange. The new options have an exercise price of 9.32 per share. All eligible option holders participated in the Option Exchange. In connection with the Option Exchange, options to purchase 670,000 common shares were cancelled and new options to purchase 482,400 common shares were issued.

As of October 7, 2011, 592,975 shares remain available for issuance under the Incentive Compensation Plan.

The following table provides information as of December 31, 2010, regarding compensation plans (including individual compensation arrangements) under which equity securities are authorized for issuance:

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THE CONVERSION

General

Forbes Bermuda effected the Conversion by filing a plan of conversion, certificate of formation and certificate of conversion of Forbes Texas with the Texas Secretary of State and a notice of discontinuance for Forbes Bermuda with the Bermuda Registrar of Companies. The Conversion occurred, under Bermuda and Texas law, on August 12, 2011. Forbes Texas filed with the Bermuda Registrar of Companies certified copies of the certificate of formation issued in Texas. Upon making this filing in Bermuda, the Bermuda Registrar of Companies issued a certificate of discontinuance.

The Conversion caused our jurisdiction of incorporation to change from Bermuda to Texas. As a result of this change, we are governed by a new certificate of formation and bylaws, which are exhibits to this prospectus, and are subject to Texas law rather than Bermuda law. Neither our previous Bermuda organizational documents, Bermuda law or Texas law required shareholder consent to effect the Conversion.

Background and Reasons for the Conversion

We believe that the Conversion presented several advantages to the Company. We believe that domiciling FES Ltd in the United States resulted in an overall simplification of our corporate structure as all of the other major entities of the Forbes Group are domiciled in the United States. Further, we believe that Texas provides an excellent domicile for FES Ltd within the United States due to the fact that (i) reincorporating into Texas does not result in additional taxes as the Company is already subject to U.S. federal income taxes and Texas franchise taxes, (ii) the majority of the Company’s operations and management are located in Texas and (iii) we believe Texas has a body of corporate law more familiar to the officers, board of directors and many of the shareholders of FES Ltd. We believe that the reincorporation into Texas will result in legal and administrative efficiencies. For example, a corporation’s jurisdiction of incorporation may be a litigation forum, from time to time, and litigation at a distance from the Company’s principal office can result in inconvenience and added expense. By converting to a Texas corporation, we are able to conform our legal domicile with our principal place of business. Further, we believe that familiarity in the marketplace with Texas corporate law may lead to greater acceptance of us in the capital markets and enhance shareholder value over the long term.

In connection with the Conversion, we listed the common stock of Forbes Texas on the NASDAQ Stock Market, or NASDAQ. In order to be eligible for listing, shortly before the Conversion, we effected the Share Consolidation, whereby each four common shares outstanding were automatically converted into, and deemed for all purposes to be, one common share. Similar to the Conversion, under Bermuda law and our previous Bermuda bye-laws, we did not need shareholder approval to effect the Share Consolidation.

In November 2010, the board of directors of the Company gave preliminary approval of the Conversion and a ten-to-one share consolidation. On April 11, 2011, the board provided final approval and authorization of the filing of the documentation necessary to effect the Conversion. On June 16, 2011, the board of directors elected to change the consolidation ratio from ten-to-one to four-to-one. The Board provided final approval of the Share Consolidation on August 11, 2011.

Effects of the Conversion

Under the Companies Act 1981 of Bermuda, or the Companies Act, a Bermuda exempted company may be discontinued from Bermuda and continued in an appointed jurisdiction outside of Bermuda (which includes Texas) as if it had been incorporated under the laws of that other jurisdiction. Under the Companies Act and our previous Bermuda bye-laws, our board of directors had the authority to exercise all the powers of the Company to discontinue the Company to a jurisdiction outside of Bermuda. Additionally, under the Companies Act and our previous Bermuda bye-laws, the Company had the authority to increase, divide or consolidate the share capital by resolution of the board of directors. Neither the Companies Act nor our previous Bermuda bye-laws required shareholder consent to consummate these actions. For that reason, we did not ask for your vote or solicit proxies with respect to the Conversion and Share Consolidation.

Section 10.102 of the Business Organizations Code of the State of Texas, or the TBOC, provides that a “non-code organization,” which includes any business organization organized in a jurisdiction other than Texas, may convert into a Texas corporation by taking any action required for conversion under the laws and governing documents of the

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organization’s jurisdiction of formation and by filing in Texas a plan of conversion, certificate of formation and certificate of conversion. Section 10.102 of the TBOC does not provide any separate approval requirements for a conversion. The TBOC also does not provide shareholders with statutory rights of dissent and appraisal in connection with a conversion where the converting entity is not a Texas entity subject to dissenters rights.

Under the Companies Act, our discontinuance from Bermuda and continuance to a new jurisdiction (in this case Texas) is not deemed to create a new legal entity or prejudice or affect the continuity of our corporate existence. Similarly, Section 10.106 of the TBOC provides that, upon converting to Texas:

No Change in Management or our Board of Directors

Following the Conversion, the executive officers of Forbes Bermuda continued as the executive officers of Forbes Texas. As set forth below, our current executive officers are John E. Crisp (President and Chief Executive Officer), Charles C. Forbes, Jr. (Executive Vice President and Chief Operating Officer) and L. Melvin Cooper (Executive Vice President and Chief Financial Officer).

Similarly, the board of directors of Forbes Bermuda continued as the board of directors of Forbes Texas following the Conversion. As set forth below, our current board of directors is comprised of John E. Crisp, Charles C. Forbes, Jr., Janet Forbes, Travis H. Burris, William W. Sherrill and Dale W. Bossert.

In addition, the Conversion did not have any impact on the composition or chairpersons of our Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee. In connection with the NASDAQ listing we adopted new committee charters and corporate governance guidelines.

No Change in Business, Locations, Obligations or Incentive Plan

As discussed in this prospectus, the Conversion did result in a change to our jurisdiction of incorporation from Bermuda to Texas and the adoption of a new certificate of formation and bylaws. Nevertheless, the Conversion did not directly result in any change to our business, assets and liabilities, management, employees, principal business locations and fiscal year.

All of our obligations, including our new Notes, continued as outstanding and enforceable obligations of Forbes Texas after the completion of the Conversion. Additionally, the Incentive Plan and other employee agreements of Forbes Bermuda were continued by Forbes Texas.

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Share Consolidation

In the Share Consolidation each four common shares of par value $0.01 each of Forbes Bermuda outstanding immediately prior to the Share Consolidation were consolidated into one common share of par value $0.04. The Share Consolidation took place prior to the Conversion in accordance with the bye-laws of Forbes Bermuda and Bermuda corporate law. As a result of this, the consent of the shareholders was not required to effect the Share Consolidation. The Company conducted the Share Consolidation to cause the bid price per share of the common stock of Forbes Texas after the Conversion to be sufficient to qualify for listing on NASDAQ. NASDAQ requires a minimum bid price of $4.00 per share. On August 16, 2011, our common stock was successfully listed on NASDAQ.

Prior to the Share Consolidation, we had 83,673,700 common shares outstanding. Immediately after the Share Consolidation, we had 20,918,417 common shares outstanding after taking into account the elimination of fractional interests created as a result of the Share Consolidation. The Share Consolidation also reduced the total number of common shares that the Company is authorized to issue from 450,000,000 to 112,500,000. Because we were required by Bermuda law and our previous Bermuda bye-laws to maintain the share capital, which is defined as the number of authorized shares multiplied by the par value of such shares, at the same value after the Share Consolidation, the par value of each common share proportionately increased from $0.01 to $0.04.

The Share Consolidation resulted in holders of less than 400 common shares holding an “odd lot” or less than 100 common shares. A securities transaction of 100 or more shares is a “round lot” transaction of shares for securities trading purposes and a transaction of less than 100 shares is an “odd lot” transaction. Round lot transactions are the standard size requirements for securities transactions and odd lot transactions may result in higher transaction costs to the odd lot seller. The Share Consolidation also resulted in some shareholders mathematically holding fractions of shares of the Company’s common shares; however, the board of directors of the Company made a determination not to issue fractional shares. In lieu of issuing such fractional shares, the board decided to pay in cash the fair value of fractions of a share arising as a result of the Share Consolidation. Such cash amount is equal to the value of the fractional amount of the common share to which the shareholder would otherwise be entitled based on the per share closing price of a common share on the Toronto Stock Exchange on the day immediately prior to the effective time of the Share Consolidation (such price being converted from CDN$ to USD$ based on the exchange rate reported on such day in the Wall Street Journal). These payments have been and will be made through the Company’s exchange agent after consummation of the Share Consolidation and Conversion.

Share Conversion

At the effective time of the Conversion (which was promptly after the Share Consolidation), each outstanding common and preference shares of Forbes Bermuda automatically converted by operation of law, on a one-for-one basis, into shares of common or preferred stock of Forbes Texas, as applicable. Therefore, a shareholder of Forbes Bermuda was, after the Conversion, automatically deemed to be a shareholder of Forbes Texas, in each case holding the same class and series and proportional equity interest in Forbes Texas as such shareholder held in Forbes Bermuda. The number of outstanding shares of common and preferred stock of Forbes Texas was the same immediately after the Conversion as the number of outstanding common and preference shares of Forbes Bermuda immediately prior to the Conversion.

After the effective time of the Conversion, shareholders were notified that the Conversion had been effected. The Company’s American transfer agent, American Stock Transfer & Trust Company, LLC, is serving as the Company’s exchange agent, and its Canadian co-transfer agent, CIBC Mellon Trust Company, is serving as the Company’s forwarding agent, to facilitate the exchange of stock certificates. Registered shareholders who hold their shares in certificate form should have received a letter of transmittal containing instructions on how to surrender share certificates of Forbes Bermuda. When the Company receives completed copies of the letter of transmittal and shares certificate(s) from a registered shareholder, the Company will cause new certificates to be issued to such shareholder.

We advise non-registered shareholders who hold their common shares in “street-name” through a broker, custodian or other nominee, that such nominees may have different procedures for processing a reverse stock split transaction, such as the Share Consolidation, than those that we plan to use for our registered shareholders. If you hold your common shares through a nominee, you should contact your nominee with any questions on how the Share Consolidation will be processed.

Each certificate evidencing common or preference shares of Forbes Bermuda is deemed for all purposes to evidence the right to obtain identical number of shares of common or preferred stock, as applicable, of Forbes Texas, after giving effect to the Share Consolidation. Shareholders of Forbes Bermuda who held uncertificated shares immediately prior to the Conversion, continue to hold uncertificated shares of Forbes Texas immediately after the Conversion. Any registered shareholders entitled to a payment in lieu of any fractional share interest should have received or will receive such payment as discussed above in “The Conversion—Share Consolidation.”

The issuance of shares of preferred stock of Forbes Texas in exchange for preferences shares of Forbes Bermuda in connection with the Conversion was not registered. The Company relied on the exemptions from registration offered by Section 4(2) of the Securities Act of 1933, as amended, and Regulation S promulgated thereunder, with regard to the exchange of the preference shares of Forbes Bermuda for the preferred stock of Forbes Texas.

Comparison of Shareholder Rights

        There are differences between Texas and Bermuda corporate law. For example, under Bermuda law, in most circumstances, in the event that a company amends its memorandum of association at a general meeting of its shareholders, holders of not less than 20% in par value of the company’s issued share capital or any class thereof have the right to apply to the Supreme Court of Bermuda for an annulment of such amendment. No similar right is available under Texas law. Further, while class actions and derivative actions are generally not available to shareholders under Bermuda law, such actions are generally available to shareholders under Texas law. Additionally, there are differences between the new certificate of formation and bylaws of Forbes Texas and the previous memorandum of association and bye-laws of Forbes Bermuda. For example, while the previous bye-laws of Forbes Bermuda required that notice of shareholder proposals be received not less than 20 days and no more than 60 days before the anniversary of the last annual meeting, the bylaws of Forbes Texas, consistent with United States securities laws, provide that notice of shareholder proposals must be received not less than 90 days and no more than 150 days before the one-year anniversary of the preceding year’s annual meeting. For a description of your rights as a shareholder of Forbes Texas and how they differ from your rights as a shareholder of Forbes Bermuda, please see “Description of Capital Stock—Differences between the Governing Corporate Law and Organizational Documents for Forbes Bermuda and Forbes Texas” on page 83 of this prospectus.

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No Vote or Dissenters’ Rights of Appraisal in the Conversion or Share Consolidation

Under Bermuda law and the previous bye-laws of Forbes Bermuda, we were authorized to effect the Conversion and Share Consolidation, without requesting or receiving shareholder approval. Further, Bermuda law did not provide our shareholders with statutory dissenters’ rights of appraisal or any other appraisal rights as a result of the Share Consolidation and Conversion. Similarly, Texas law does not provide for any such rights in connection with these transactions. We did not ask for your vote or solicit that you send us a proxy in connection with these transactions.

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SELECTED HISTORICAL FINANCIAL AND OPERATING INFORMATION

The following statement of operations data for the years ended December 31, 2010, 2009 and 2008, and the balance sheet data as of December 31, 2010 and 2009, have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The statement of operations data for the years ended December 31, 2007 and 2006, and the balance sheet data as of December 31, 2008, 2007 and 2006 have been derived from our audited consolidated/combined financial statements not included in this prospectus. The statement of operations data for the six months ended June 30, 2011 and 2010, and the balance sheet data as of June 30, 2011 have been derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. All references in the table below to the number of shares, par value and per share amounts of the common stock of FES Ltd prior to the Share Consolidation have been retroactively adjusted to give effect to the Share Consolidation. Our historical results are not necessarily indicative of results to be expected for any future period. The data presented below have been derived from financial statements that have been prepared in accordance with accounting principles generally accepted in the United States and should be read with our financial statements, including notes, included elsewhere in this prospectus, and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 28 of this prospectus.