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ASSET DISPOSITIONS, ASSETS HELD FOR SALE AND ASSET IMPAIRMENTS | 6 Months Ended
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Jun. 30, 2020
Asset Impairment Charges [Abstract] |
ASSET DISPOSITIONS, ASSETS HELD FOR SALE AND ASSET IMPAIRMENTS | (15)ASSET DISPOSITIONS, ASSETS HELD FOR SALE AND ASSET IMPAIRMENTS In the fourth quarter of 2019, we evaluated our fleet for vessels to be considered for disposal and identified 46 vessels to be classified as held for sale. In the second quarter of 2020, we identified 22 additional vessels to be sold. The second quarter determination was largely a result of a worldwide downturn in the oil and gas industry precipitated by a global pandemic. In the first quarter of 2020, we sold 8 vessels that were held for sale and revalued the remaining 38 vessels to estimated net realizable value recording additional impairment expense of $10.2 million. In the second quarter of 2020, we sold 14 vessels that were held for sale and revalued the remaining 24 vessels to net realizable value recording additional impairment expense of $5.6 million. At June 30, 2020, when we identified the additional 22 vessels to be reclassified as assets held for sale, we recognized impairment expense of $49.9 million associated with those vessels. See the following table for activity in our assets held for sale account:
(in thousands, except for number of vessels data) | Number of Vessels |  | Three Months Ended March 31, 2020 |  |  | Number of Vessels |  | Three Months Ended June 30, 2020 |  |  | Number of Vessels |  | Six Months Ended June 30, 2020 |
Beginning balance |  | 46 |  | $ | 39,287 |  |  |  | 38 |  | $ | 26,142 |  |  |  | 46 |  | $ | 39,287 |
Additions |  | — |  |  |  |  |  |  | 22 |  |  | 15,930 |  |  |  | 22 |  |  | 15,930 |
Sales |  | (8 | ) |  | (2,938 | ) |  |  | (14 | ) |  | (7,407 | ) |  |  | (22 | ) |  | (10,345 | )
Additional impairment |  | — |  |  | (10,207 | ) |  |  | — |  |  | (5,601 | ) |  |  | — |  |  | (15,808 | )
Ending balance |  | 38 |  | $ | 26,142 |  |  |  | 46 |  | $ | 29,064 |  |  |  | 46 |  | $ | 29,064 |
We consider the valuation approach for our assets held for sale to be a Level 3 fair value measurement due to the level of estimation involved in valuing assets to be scrapped or sold. We determined the fair value of the vessels held for sale using three methodologies depending on the vessel and on our planned method of disposition. We designated certain vessels to be scrapped and valued those vessels using scrap yard pricing schedules based on dollars per ton. Other vessels were valued based on sales agreements or using comparative sales in the marketplace reduced by 10% to factor in the effects of completing a quick sale within the next twelve months. We do not separate our asset impairment expense by segment because of the significant movement of our assets between segments. In 2020, we have sold 25 vessels, 22 of which were classified as assets held for sale and three of which were sold from the active fleet. We recognized gains on the asset sales of $5.3 million in the first quarter, $1.7 million in the second quarter and $7.0 million combined for the six months ended June 30, 2020. In early 2020, it became evident that a novel coronavirus originating in Asia (COVID-19) could become a pandemic with worldwide reach. By mid-March, when the World Health Organization declared the outbreak to be a pandemic (the “COVID-19 pandemic”), much of the industrialized world had initiated severe measures to lessen its impact. The ongoing COVID-19 pandemic has created significant volatility, uncertainty, and economic disruption during the first quarter of 2020. With respect to our particular sector, the COVID-19 pandemic has resulted in a much lower demand for oil as national, regional, and local governments impose travel restrictions, border closings, restrictions on public gatherings, stay at home orders, and limitations on business operations in order to contain its spread. During this same time period, oil-producing countries have struggled to reach consensus on worldwide production levels, resulting in both a market oversupply of oil and a precipitous fall in oil prices. Combined, these conditions have adversely affected our operations and business beginning in the latter part of the first quarter of 2020 and continuing throughout the second quarter of 2020. We expect our operations and business in the remainder of 2020 to continue to be negatively impacted. The reduction in demand for hydrocarbons together with an unprecedented decline in the price of oil has resulted in our primary customers, the oil and gas companies, making material reductions to their planned spending on offshore projects, compounding the effect of the virus on offshore operations. Further, these conditions, separately or together, are expected to continue to impact the demand for our services, the utilization and/or rates we can achieve for our assets and services, and the outlook for our industry in general. We consider these events to be indicators that the value of our active offshore vessel fleet may be impaired. As a result, as of March 31, 2020 and June 30, 2020, we performed Step 1 evaluations of our active offshore fleet under FASB Accounting Standards Codification 360, which governs the methodology for identifying and recording impairment of long-lived assets to determine if any of our asset groups have net book value in excess of undiscounted future net cash flows. Our evaluations did not indicate impairment of any of our asset groups. We will continue to monitor the expected future cash flows and the fair market value of our asset groups for impairment.

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- Definition The entire disclosure for the details of the charge against earnings resulting from the aggregate write down of all assets from their carrying value to their fair value. Disclosure may also include a description of the impaired asset and facts and circumstances leading to the impairment, amount of the impairment loss and where the loss is located in the income statement, method(s) for determining fair value, and the segment in which the impaired asset is reported. + References No definition available. + Details
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