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FAIR VALUE MEASUREMENTS | 9 Months Ended
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Sep. 30, 2022
FAIR VALUE MEASUREMENTS |
FAIR VALUE MEASUREMENTS | 16. FAIR VALUE MEASUREMENTS ​ Assets and Liabilities Measured at Fair Value on a Recurring Basis ​ Investment in ECOTEC ​ During the nine months ended September 30, 2022, we acquired a 19% equity interest in ECOTEC. We have elected the fair value option to account for this investment. The investment is valued at its transaction price, unless and until there is a significant change in the investment, such as an impairment or an additional investment. The investment’s fair value is reviewed periodically and is classified as a Level 3 measurement. As of September 30, 2022, the fair value of our investment in ECOTEC was as follows: ​
​ | ​ | ​ | ​
​ |  | September 30, 2022
Investment in ECOTEC | ​ | $ | 12,000
​ Interest Rate Swaps ​ Prior to their expiration in the first quarter of 2022, our interest rate swap derivative instruments were valued quarterly based on the income approach (discounted cash flows) using market observable inputs, including LIBOR forward curves. These fair value measurements were classified as Level 2. The following table presents our derivative position measured at fair value on a recurring basis, with pricing levels as of the date of valuation: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | September 30, 2022 | ​ | December 31, 2021
Derivative liabilities | ​ | $ | — | ​ | $ | 1,250
​ ​ Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis ​ During the three months and nine months ended September 30, 2022, we recorded nonrecurring fair value measurements of $4.1 million and $16.2 million, respectively, related to our idle compressors (see Note 12). Our estimate of the compressors’ fair value was primarily based on the expected net sale proceeds compared with other fleet units we recently sold and/or a review of other units recently offered for sale by third parties, or the estimated component value of the equipment we plan to use. We discounted the expected proceeds, net of selling and other carrying costs, using a weighted average disposal period of four years. The fair value of our compressors impaired in 2022 and 2021 was as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | September 30, 2022 |  | December 31, 2021
Impaired compressors | ​ | $ | 1,548 | ​ | $ | 4,380
​ ​ These fair value measurements are classified as Level 3. The significant unobservable inputs used to develop the above fair value measurements were weighted by the relative fair value of the compressors being measured. Additional quantitative information related to our significant unobservable inputs follows: ​
​ | ​ | ​ | ​ | ​
​ |  | Range |  | Weighted Average (1)
Estimated net sale proceeds: | ​ | ​ | ​ | ​
As of September 30, 2022 | ​ | $0 - $621 per horsepower | ​ | $44 per horsepower
As of December 31, 2021 | ​ | $0 - $621 per horsepower | ​ | $35 per horsepower
(1) | Calculated based on an estimated discount for market liquidity of 56% and 64% as of September 30, 2022 and December 31, 2021, respectively.
​ Other Financial Instruments ​ The carrying amounts of our cash, accounts receivable and accounts payable approximate fair value due to the short–term nature of these instruments. ​ The carrying amount of borrowings outstanding under our Credit Facility approximates fair value due to the variable interest rate. The measurement of the fair value of these outstanding borrowings is a Level 3 measurement. ​ The fair value of our fixed rate debt is estimated using yields observable in active markets, which are Level 2 inputs, and was as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | September 30, 2022 |  | December 31, 2021
Carrying amount of fixed rate debt (1) | ​ | $ | 1,296,895 | ​ | $ | 1,296,325
Fair value of fixed rate debt | ​ |  | 1,155,760 | ​ |  | 1,361,000
(1) | Carrying amounts are shown net of unamortized premium and deferred financing costs. See Note 7.
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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI https://asc.fasb.org/extlink&oid=126976982&loc=d3e19207-110258 + Details
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