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Acquisitions | 9 Months Ended
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Sep. 30, 2017
Business Combinations [Abstract] |
Acquisitions | 2. Acquisitions Seventy Seven Energy Inc. (“SSE”) On April 20, 2017, pursuant to the merger agreement, a subsidiary of the Company was merged with and into SSE, with SSE continuing as the surviving entity and one of the Company’s wholly owned subsidiaries (the “SSE merger”). Pursuant to the terms of the merger agreement, the Company acquired all of the issued and outstanding shares of common stock of SSE, in exchange for approximately 46.3 million shares of common stock of the Company. Concurrent with the closing of the merger, the Company repaid all of the outstanding debt of SSE totaling $472 million. Based on the closing price of the Company’s common stock on April 20, 2017, the total fair value of the consideration transferred to effect the acquisition of SSE was approximately $1.5 billion. On April 20, 2017, following the SSE merger, SSE was merged with and into a newly-formed subsidiary of the Company named Seventy Seven Energy LLC (“SSE LLC”), with SSE LLC continuing as the surviving entity and one of the Company’s wholly owned subsidiaries. Through the SSE merger, the Company acquired a fleet of 91 drilling rigs, 36 of which the Company considers to be APEX® class rigs. Additionally, through the SSE merger, the Company acquired approximately 500,000 horsepower of modern, efficient fracturing equipment located in Oklahoma and Texas. The oilfield rentals business acquired through the SSE merger has a modern, well-maintained fleet of premium rental tools, and it provides specialized services for land-based oil and natural gas drilling, completion and workover activities. The merger has been accounted for as a business combination using the acquisition method. Under the acquisition method of accounting, the fair value of the consideration transferred is allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values as of the acquisition date, with the remaining unallocated amount recorded as goodwill. The total fair value of the consideration transferred was determined as follows (in thousands, except stock price):
Shares of Company common stock issued to SSE shareholders |  | 46,298 |
Company common stock price on April 20, 2017 | $ | 22.45 |
Fair value of common stock issued | $ | 1,039,396 |
Plus SSE long-term debt repaid by Company | $ | 472,000 |
Total fair value of consideration transferred | $ | 1,511,396 |
The final determination of the fair value of assets acquired and liabilities assumed at the merger date will be completed as soon as possible, but no later than one year from the merger date (the “measurement period”). The Company’s preliminary purchase price allocation is subject to revision as additional information about the fair value of assets and liabilities becomes available. Additional information that existed as of the merger date, but at the time was unknown to the Company, may become known to the Company during the remainder of the measurement period. The final determination of fair value may differ materially from these preliminary estimates. The following table represents the preliminary allocation of the total purchase price of SSE to the assets acquired and the liabilities assumed based on the fair value at the merger date, with the excess of the purchase price over the estimated fair value of the identifiable net assets acquired recorded as goodwill (in thousands):
Identifiable assets acquired |  |  |
Cash and cash equivalents | $ | 37,806 |
Accounts receivable |  | 149,598 |
Inventory |  | 8,036 |
Other current assets |  | 19,250 |
Property and equipment |  | 984,430 |
Other long-term assets |  | 14,546 |
Intangible assets |  | 22,500 |
Total identifiable assets acquired |  | 1,236,166 |
Liabilities assumed |  |  |
Accounts payable and accrued liabilities |  | 130,100 |
Deferred income taxes |  | 31,402 |
Other long-term liabilities |  | 1,734 |
Total liabilities assumed |  | 163,236 |
Net identifiable assets acquired |  | 1,072,930 |
Goodwill |  | 438,466 |
Total net assets acquired | $ | 1,511,396 |
The acquired goodwill is not deductible for tax purposes. Among the factors that contributed to a purchase price resulting in the recognition of goodwill was SSE’s reputation as an experienced provider of high-quality contract drilling and pressure pumping services in a safe and efficient manner. See Note 7 for a breakdown of goodwill acquired by operating segment. A portion of the fair value consideration transferred has been provisionally assigned to identifiable intangible assets as follows:
| Fair Value |  |  | Weighted Average Useful Life
| (in thousands) |  |  | (in years)
Assets |  |  |  |  |
Favorable drilling contracts | $ | 22,500 |  |  | 1
The results of SSE’s operations since the merger date are included in our consolidated statement of operations. The following pro forma condensed combined financial information was derived from the historical financial statements of the Company and SSE and gives effect to the merger as if it had occurred on January 1, 2016. The below information reflects pro forma adjustments based on available information and certain assumptions the Company believes are reasonable, including (i) adjustments related to the depreciation and amortization of the fair value of acquired intangibles and fixed assets, (ii) removal of the historical interest expense of SSE, (iii) tax benefit of the aforementioned pro forma adjustments, and (iv) adjustments related to the common shares outstanding to reflect the impact of the consideration exchanged in the merger. Additionally, the pro forma loss for the three months ended September 30, 2017 was adjusted to exclude the Company’s merger and integration-related costs of $9.4 million. The pro forma loss for the nine months ended September 30, 2017 was adjusted to exclude the Company’s merger and integration-related costs of $65.8 million and SSE’s merger-related costs of $36.7 million. The pro forma results of operations do not include any cost savings or other synergies that may result from the SSE merger or any estimated costs that have been or will be incurred by the Company to integrate the SSE operations. The pro forma condensed combined financial information has been included for comparative purposes and is not necessarily indicative of the results that might have actually occurred had the SSE merger taken place on January 1, 2016; furthermore, the financial information is not intended to be a projection of future results. The following table summarizes selected financial information of the Company on a pro forma basis (in thousands, except per share data):
| Three Months Ended |  |  | Nine Months Ended |
| September 30, |  |  | September 30, |
| 2017 |  |  | 2016 |  |  | 2017 |  |  | 2016 |
Revenues | $ | 684,989 |  |  | $ | 326,227 |  |  | $ | 1,811,903 |  |  | $ | 1,082,554 |
Net loss |  | (27,627 | ) |  |  | (117,185 | ) |  |  | (189,098 | ) |  |  | (346,481 | )
Loss per share |  | (0.13 | ) |  |  | (0.56 | ) |  |  | (0.89 | ) |  |  | (1.65 | )
Multi-Shot, LLC (“MS Directional”) On October 11, 2017, the Company acquired all of the issued and outstanding limited liability company interests of Multi-Shot, LLC (“MS Directional”). The aggregate consideration paid by the Company to the sellers consisted of $75 million in cash and 8,798,391 shares of the Company’s common stock. The purchase price is subject to customary post-closing adjustments relating to cash, net working capital and indebtedness of MS Directional as of the closing. Based on the closing price of the Company’s common stock on the closing date of the transaction, the total fair value of the consideration transferred to effect the acquisition of MS Directional was approximately $262 million. MS Directional is a leading directional drilling services company in the United States, with operations in most major producing onshore oil and gas basins. MS Directional provides a comprehensive suite of directional drilling services, including directional drilling, downhole performance motors, directional surveying, measurement while drilling, and wireline steering tools. The Company’s consolidated results of operations will include the results of the acquired MS Directional business beginning with the closing date of the acquisition of October 11, 2017. Due to the timing of the closing of the acquisition, the Company has not completed the detailed valuation work necessary to determine the required estimates of the fair value of the acquired assets and liabilities assumed and the related allocation of purchase price. MS Directional had total assets of approximately $104 million as of December 31, 2016, consisting of $21.4 million of accounts receivable, $23.9 million of inventory, $53.8 million of property and equipment and $4.9 million of other assets. The Company’s preliminary allocation of purchase price to the assets acquired will be included in future SEC filings of the Company. As this transaction closed subsequent to the end of the third quarter of 2017, the condensed consolidated financial statements and accompanying notes do not reflect any amounts relating to MS Directional.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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