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Fair Value Measurements
 12 Months Ended
Dec. 31, 2024
Fair Value Measurements  
Fair Value Measurements

27. Fair Value Measurements

The accounting standard for fair value measurements and disclosures establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value into the following three categories:

●Level 1 – quoted unadjusted prices for identical markets in active markets to which we have access at the date of measurement.
●Level 2 – quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model–derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or prices vary substantially over time or among brokered markets makers.
●Level 3 – model–derived valuation in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those that reflect our own assumptions regarding how market participants would price the asset or liability based on the best available information.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Investment in ECOTEC

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As of December 31, 2024, we owned a 25% equity interest in ECOTEC (see Note 13 (“Investments in Unconsolidated Affiliates”)). We have elected the fair value option to account for this investment. As of December 31, 2024, the fair value of our investment in ECOTEC is $14.7 million.

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.

This fair value measurement is classified as Level 3. The significant unobservable inputs are as follows:

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Significant

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Year Ended

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Year Ended

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Unobservable

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December 31, 2024

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December 31, 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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0.0% - 17.0%

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12.9%

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0.4% - 20.0%

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13.5%

Guideline public company

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Revenue multiple

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1.6x - 7.3x

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4.3x

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1.5x - 7.2x

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3.8x

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

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Year Ended December 31, 

(in thousands)

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2024

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2023

Balance at beginning of period

      

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$

14,905

      

$

12,803

Purchases of equity interests

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1,250

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3,075

Unrealized loss (1)

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(1,484)

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(973)

Balance at end of period

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$

14,671

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$

14,905

(1)

Included in other expense, net in our consolidated statements of operations.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Investment in Ionada

As of December 31, 2024 and 2023, we had a fully diluted ownership equity interest in Ionada of 12% and 10%, respectively, (see Note 13 (“Investments in Unconsolidated Affiliates”)). We have elected the fair value measurement alternative to account for this investment. On November 19, 2024, subject to the same terms and conditions of our initial investment of $3.8 million, we invested an additional $1.2 million dollars and as a result, the carrying value of our investment in Ionada at December 31, 2024 was $5.5 million, which includes cumulative transaction costs of $0.5 million. There were no upward adjustments, impairments or downward adjustments to the carrying value of the investment as of December 31, 2024. Subject to certain contractual conditions, we may invest on the same terms and conditions as the initial and secondary investments, $1.3 million in November 2025 and $4.8 million prior to July 2026, for a fully diluted ownership interest of 15% and 24%, respectively.

Compression Fleet

During the years ended December 31, 2024 and 2023, 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 to other fleet units we recently sold, 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 impaired compression fleet impaired is as follows:

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(in thousands)

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2024

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2023

Impaired compression fleet

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$

1,048

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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 compression fleet 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 December 31, 2024

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$0 - $188 per horsepower

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$46 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 December 31, 2024 and 2023, respectively.

See Note 22 (“Long-Lived and Other Asset Impairment”) for further details.

Other Financial Instruments

The carrying amounts of our cash, receivables and payables approximate fair value due to the short–term nature of those instruments.

The carrying amount of borrowings outstanding under our Credit Facility approximates fair value due to its variable interest rate. 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)

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December 31, 

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2024

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2023

Carrying amount of fixed rate debt (1)

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$

1,790,051

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$

1,297,844

Fair value of fixed rate debt

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1,796,000

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1,289,000

(1)Carrying amounts are shown net of unamortized debt premium and deferred financing costs. See Note 16 (“Long-Term Debt”).