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Long-Lived Asset Impairment
12 Months Ended
Dec. 31, 2011
Long-Lived Asset Impairment [Abstract]  
Long-Lived Asset Impairment

13. Long-Lived Asset Impairment

During 2011, we reviewed the idle compression assets used in our contract operations segments for units that were not of the type, configuration, make or model that are cost efficient to maintain and operate. We performed a cash flow analysis of the expected proceeds from the salvage value of these units to determine the fair value of the assets. The net book value of these assets exceeded the fair value by $6.6 million for the year ended December 31, 2011, and was recorded as a long-lived asset impairment. In addition, in the fourth quarter of 2011, we recorded a $0.4 million impairment of non-fleet long-lived assets.

During December 2010, we completed an evaluation of our longer-term strategies and, as a result, determined to retire and sell approximately 1,800 idle compressor units, or approximately 600,000 horsepower, that were previously used to provide services in our North America and international contract operations businesses. As a result of our decision to sell these compressor units, we performed an impairment review and based on that review, recorded a $136.0 million asset impairment to reduce the book value of each unit to its estimated fair value. The fair value of each unit was estimated based on the expected net sale proceeds as compared to other fleet units we had recently sold, as well as our review of other units that were recently for sale by third parties.

This decision was part of our longer-term strategy to upgrade our fleet. As part of this strategy, we also currently plan to invest more than we have in the recent past to add newly built compressor units to our fleet. We expect to focus this investment on key growth areas, including providing compression and processing services to producers of natural gas from shale plays and natural gas liquids.

As a result of a decline in market conditions in North America during 2010 and 2009, we reviewed the idle compression assets used in our contract operations segments for units that are not of the type, configuration, make or model that are cost efficient to maintain and operate. We determined that 323 units representing 61,400 horsepower would be retired from the fleet in 2010 and 1,232 units representing 264,900 horsepower would be retired from the fleet in 2009. We performed a cash flow analysis of the expected proceeds from the salvage value of these units to determine the fair value of the assets. The net book value of these assets exceeded the fair value by $7.6 million and $91.0 million for the years ended December 31, 2010 and 2009, respectively, and was recorded as a long-lived asset impairment.

In addition, in the fourth quarter of 2010, 105 fleet units that were previously utilized in our international contract operations segment were damaged in a flood, resulting in a long-lived asset impairment of $3.3 million.

In the first quarter of 2009, our management approved a plan to close certain fabrication facilities and consolidate our compression fabrication activities. As a result, we reviewed the facilities to be closed for impairment and the net book value of these facilities exceeded the fair value by $6.0 million and was recorded as a long-lived asset impairment.

Prior to 2010, we were involved in a project in the Cawthorne Channel in Nigeria (the “Cawthorne Channel Project”), to process natural gas from certain Nigerian oil and natural gas fields. The Cawthorne Channel Project only operated for limited periods of time beginning in June 2006. In 2008 as a result of operational difficulties and taking into consideration the project’s historical performance and declines in commodity prices, we undertook an assessment of our estimated future cash flows from the Cawthorne Channel Project. Based on the analysis we completed, we determined that we would not recover all of our remaining investment in the Cawthorne Channel Project. Accordingly, we recorded an impairment charge of $21.6 million in our 2008 results to reduce the carrying amount of our assets associated with the Cawthorne Channel Project to their estimated fair value. In November 2009, we sold our investment in the subsidiary that owns the barge mounted processing plant and other related assets used on the Cawthorne Channel Project for $37.0 million. This sale resulted in a pre-tax gain of approximately $20.8 million which is reflected in Other (income) expense, net in our consolidated statements of operations. The assets associated with our investment in the Cawthorne Channel Project were part of our international contract operations segment.