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Fair Value Measurements
 9 Months Ended
Sep. 30, 2024
Fair Value Measurements  
Fair Value Measurements

15. Fair Value Measurements

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

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Investment in ECOTEC

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As of September 30, 2024, we owned a 25% equity interest in ECOTEC (see Note 6 (“Investments in Unconsolidated Affiliates”)). We have elected the fair value option to account for this investment. As of September 30, 2024, the fair value of our investment in ECOTEC was $16.2 million and is classified as Level 3.

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The fair value determination of this investment primarily consisted of unobservable inputs, which creates uncertainty in the measurement of fair value as of the reporting date. The significant unobservable inputs used in the fair value measurement, which was valued through an average of an income approach (discounted cash flow method) and a market approach (guideline public company method), are the WACC and the revenue multiples. Significant increases (decreases) in these inputs in isolation would result in a significantly higher (lower) fair value measurement.

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Additional quantitative information related to the significant unobservable inputs are as follows:

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Significant

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Three Months Ended

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Three Months Ended

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Unobservable

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September 30, 2024

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September 30, 2023

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Inputs

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Range

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Median

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Range

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Median

Valuation technique:

      

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Discounted cash flow

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WACC

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0.4% - 20.0%

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13.5%

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0.0% - 17.4%

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10.0%

Guideline public company

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Revenue multiple

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1.5x - 7.2x

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3.8x

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1.6x - 10.0x

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4.0x

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The reconciliation of changes in the fair value of our investment in ECOTEC is as follows:

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Three Months Ended

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Nine Months Ended

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September 30, 

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September 30, 

(in thousands)

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2024

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2023

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2024

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2023

Balance at beginning of period

      

$

14,905

      

$

12,807

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$

14,905

      

$

12,803

Purchases of equity interests

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1,250

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—

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1,250

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2,000

Unrealized loss (1)

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—

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—

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—

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(1,996)

Balance at end of period

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$

16,155

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$

12,807

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$

16,155

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$

12,807

(1)Included in other expense, net in our unaudited condensed consolidated statement of operations.

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Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

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Investment in Ionada

As of September 30, 2024, we had a fully diluted ownership equity interest in Ionada of 10% (see Note 6 (“Investments in Unconsolidated Affiliates”)). We have elected the fair value measurement alternative to account for this investment. As of September 30, 2024, the carrying value of our investment in Ionada was $4.3 million, which includes our initial investment of $3.8 million and cumulative transaction costs of $0.5 million. There had been no upward adjustments, impairments or downward adjustments to the carrying value of the investment as of September 30, 2024. Subject to certain contractual conditions additional investments may be made on the same terms and conditions as the initial investment, $1.2 million in November 2024, $1.3 million in November 2025 and $4.8 million prior to July 2026, for a fully diluted ownership interest of 12%, 15% and 24%, respectively.

Compressors

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During the nine months ended September 30, 2024, we recorded nonrecurring fair value measurements related to our idle compressors. 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. These fair value measurements are classified as Level 3. The fair value of our compressors impaired as of September 30, 2024 and December 31, 2023 was as follows:

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(in thousands)

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September 30, 2024

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December 31, 2023

Impaired compressors

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$

853

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$

1,423

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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:

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Range

       

   Weighted Average (1)

Estimated net sale proceeds:

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As of September 30, 2024

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$0 - $211 per horsepower

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$49 per horsepower

As of December 31, 2023

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$0 - $294 per horsepower

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$50 per horsepower

(1)Calculated based on an estimated discount for market liquidity of 25% and 33% as of September 30, 2024 and December 31, 2023, respectively.

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See Note 11 (“Long-Lived and Other Asset Impairments”) for further details.

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Other Financial Instruments

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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:

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(in thousands)

    

September 30, 2024

    

December 31, 2023

Carrying amount of fixed rate debt (1)

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$

1,789,956

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$

1,297,844

Fair value of fixed rate debt

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1,823,000

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1,289,000

(1) Carrying amounts are shown net of unamortized premium and deferred financing costs. See Note 7 (“Long-Term Debt”).