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Note 14 - Assets Held for Sale, Asset Sales and Asset Impairments

3 Months Ended

Mar. 31, 2022

(14)

ASSET DISPOSITIONS, ASSETS HELD FOR SALE AND ASSET IMPAIRMENTS

In 2019, we made a strategic decision to reduce the size of our fleet and to remove assets that were not considered to be part of our long-term plans. Beginning in the first quarter of 2020, the industry and world economies were affected by a global pandemic and a concurrent reduction in the demand for and the price of crude oil which caused us to expand our disposal program to include more vessels. Since December 2019, we have designated 85 vessels as assets held for sale, sold 67 and returned six to the active fleet. During the three months ending March 31, 2022, we added no vessels to assets held for sale, sold five of our vessels held for sale, and re-activated one vessel from assets held for sale back into the active fleet, leaving 12 vessels valued at $8.6 million remaining in the held for sale account as of March 31, 2022. In addition, we sold no vessels from our active fleet in the three month period ending March 31, 2022 and three vessels from our active fleet in the three month period ending March 31, 2021. The total vessel and other sales for the three month period ending March 31, 2022 contributed approximately $4.6 million in proceeds and we recognized a net $0.2 million gain on the dispositions. The vessel and other sales for the three month period ending March 31, 2021 contributed $11.0 million in proceeds and we recognized a $1.9 million net loss on the dispositions.

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 recycled or sold. We estimate the net realizable value of our assets held for sale using various methodologies including third party appraisals, sales comparisons, sales agreements and scrap yard tonnage prices. Estimates generally fall in ranges rather than exact numbers due to the nature of sales of offshore vessels and industry conditions. Our value ranges depend on our expectation of the ultimate disposition of the vessel. We will in all circumstances attempt to achieve maximum value for our vessels, but also recognize that certain vessels are more likely to be recycled, especially given the time and effort required to achieve a sale and the costs incurred to maintain a vessel while a searching for a buyer. We establish ranges that in many cases have scrap value as the low end of the range and an expected open market sale value at the top of the range. When there is no expectation within the range that is considered more likely than any other, we apply equal probability weighting to the low and high ends of the valuation range. In addition, in conjunction with the reactivation of a vessel from assets held for sale to the active fleet in the first quarter of 2022 and the concurrent valuation of such vessel at its fair value, we recaptured $0.5 million of impairment charged to expense in the fourth quarter of 2021. We do not separate our asset impairment expense by segment because of the significant movement of our assets between segments. During the three months ended March 31, 2022 and 2021, we recorded no impairment related to assets held for sale.

The following table presents the activity in our asset held for sale account for the periods indicated:

(In Thousands, except number of vessels)	Three Months Ended
	Number of Vessels			March 31, 2022			Number of Vessels			March 31, 2021
Beginning balance		18		$	14,421			23		$	34,396
Sales		(5	)		(4,330	)		(3	)		(3,182	)
Transfers		(1	)		(1,500	)		—			—
Ending balance		12		$	8,591			20		$	31,214