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Goodwill and Intangible Assets | 12 Months Ended
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Dec. 31, 2019
Goodwill And Intangible Assets Disclosure [Abstract] |
Goodwill and Intangible Assets | 6. Goodwill and Intangible Assets Goodwill — Goodwill by operating segment as of December 31, 2019 and 2018 and changes for the years then ended are as follows (in thousands):
|  | Contract |  |  | Pressure |  |  | Directional |  |  | Other |  |  |  |  |
|  | Drilling |  |  | Pumping |  |  | Drilling |  |  | Operations |  |  | Total |
Balance, December 31, 2017 |  | $ | 395,060 |  |  | $ | 121,444 |  |  | $ | 88,685 |  |  | $ | 6,284 |  |  | $ | 611,473 |
Goodwill acquired |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 9,412 |  |  |  | 9,412 |
Measurement period adjustment |  |  | — |  |  |  | — |  |  |  | 1,000 |  |  |  | — |  |  |  | 1,000 |
Impairment |  |  | — |  |  |  | (121,444 | ) |  |  | (89,685 | ) |  |  | — |  |  |  | (211,129 | )
Balance, December 31, 2018 |  | $ | 395,060 |  |  | $ | — |  |  | $ | — |  |  | $ | 15,696 |  |  | $ | 410,756 |
Measurement period adjustment |  |  | — |  |  |  | — |  |  |  | — |  |  | $ | 2,104 |  |  |  | 2,104 |
Impairment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (17,800 | ) |  |  | (17,800 | )
Balance, December 31, 2019 |  | $ | 395,060 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 395,060 |
There were no accumulated impairment losses related to goodwill in the contract drilling segment as of December 31, 2019 or 2018. The change to goodwill in Other Operations in 2019 was primarily a result of a measurement period adjustment related to accrued liabilities, which resulted in a $2.1 million increase from the original purchase price allocation assessed with the Current Power acquisition. Goodwill is evaluated at least annually as of December 31, or when circumstances require, to determine if the fair value of recorded goodwill has decreased below its carrying value. For impairment testing purposes, goodwill is evaluated at the reporting unit level. The Company’s reporting units for impairment testing are its operating segments. The Company determines whether it is more likely than not that the fair value of a reporting unit is less than its carrying value after considering qualitative, market and other factors, and if this is the case, any necessary goodwill impairment is determined using a quantitative impairment test. From time to time, the Company may perform quantitative testing for goodwill impairment in lieu of performing the qualitative assessment. If the resulting fair value of goodwill is less than the carrying value of goodwill, an impairment loss would be recognized for the amount of the shortfall. Due to the decline in the market price of the Company’s common stock and recent commodity prices, the Company’s results of operations for the quarter ended September 3 0, 2019 and management’s expectations of operating results in future periods, the Company lowered its expectations with respect to future activity levels in certain of its operating segments. The Company performed a quantitative impairment assessment of its goodwill as of Sept ember 3 0, 2019. In completing the assessment, the fair value of each reporting unit was estimated using the income approach. The estimate of fair value for each reporting unit required the use of significant unobservable inputs, representative of a Level 3 fair value measurement. The assumptions included discount rates, revenue growth rates, operating expense growth rates, and terminal growth rates. Based on the results of the goodwill impairment test as of September 30, 2019, the fair value of the contract drilling reporting unit exceeded its carrying value by approximately 13% and management concluded that no impairment was indicated in its contract drilling reporting unit; however, impairment was indicated in its oilfield rentals and electrical controls and automation reporting units included in the other operations segment. The Company recognized an impairment charge of $17.8 million in 2019 associated with the impairment of all of the goodwill in its oilfield rentals and electrical controls and automation reporting units. The timeframe over which oil prices and activity levels may recover is highly uncertain. If the lower oil price environment experienced in 2019 were to last into late 2021 and beyond, the Company’s actual cash flows would likely be less than the expected cash flows used in these assessments and could result in additional goodwill impairment charges in the future and such impairment could be material. Due to the decline in the market price of the Company’s common stock and the deterioration of crude oil prices in the fourth quarter of 2018, the Company lowered its expectations with respect to future activity levels in certain of its operating segments. The Company performed a quantitative impairment assessment of its goodwill as of December 31, 2018. In completing the assessment, the fair value of each reporting unit was estimated using the income approach. The estimate of fair value for each reporting unit required the use of significant unobservable inputs, representative of a Level 3 fair value measurement. The assumptions included discount rates, revenue growth rates, operating expense growth rates, and terminal growth rates. Based on the results of the goodwill impairment test as of December 31, 2018, the fair value of the contract drilling and oilfield rentals reporting units exceeded their carrying values by approximately 16% and 14%, respectively, and the Company concluded that no impairment was indicated in its contract drilling and oilfield rentals reporting units; however, impairment was indicated in its pressure pumping and directional drilling reporting units. The Company recognized an impairment charge of $211 million associated with the impairment of all of the goodwill in its pressure pumping and directional drilling reporting units. In connection with the Company’s annual goodwill impairment assessment as of December 31, 2019 and 2017, the Company determined based on an assessment of qualitative factors that it was more likely than not that the fair values of its reporting units were greater than the respective carrying amount. In making this determination, the Company considered the current and expected levels of commodity prices for oil and natural gas, which influence the overall level of business activity in its reporting units, as well as its 2019 and 2017 operating results and forecasted operating results for the respective succeeding year. The Company also considered its overall market capitalization at December 31, 2019 and 2017. Intangible Assets — In 2018, intangible assets were recorded in the Company’s directional drilling operating segment with the acquisition of Superior QC and in other operations with the acquisition of Current Power. In 2017, intangible assets were recorded in the Company’s directional drilling operating segment with the acquisition of MS Directional and in the contract drilling operating segment with the SSE merger. See Note 2 for additional information. The Company’s intangible assets were recorded at fair value on the date of acquisition and are amortized on a straight line basis. The Company did not incur any costs to renew or extend the term of acquired intangible assets in 2019 or 2018. The following table identifies the segment and weighted average useful life of each of the Company’s intangible assets:
|  |  |  | Weighted Average
|  | Segment |  | Useful Life
|  |  |  | (in years)
Customer relationships |  | Directional drilling |  | 3.00
Customer relationships |  | Other operations |  | 7.00
Developed technology |  | Directional drilling |  | 5.22
Favorable drilling contracts |  | Contract drilling |  | 0.83
Internal use software |  | Directional drilling |  | 5.00
Due to the decline in the market price of the Company’s common stock and recent commodity prices, the Company’s results of operations for the quarter ended September 30, 2019 and management’s expectations of operating results in future periods, the Company lowered its expectations with respect to future activity levels in certain of its operating segments. The Company deemed it necessary to assess the recoverability of its contract drilling, pressure pumping, directional drilling and oilfield rentals asset groups as of September 30, 2019. The assessments of recoverability of the asset groups included the respective intangible assets, and no impairment was indicated. See Note 5 for additional information. Due to the decline in the market price of the Company’s common stock and the deterioration of crude oil prices in the fourth quarter of 2018, the Company lowered its expectations with respect to activity levels in certain of its operating segments. The Company deemed it necessary to assess the recoverability of its contract drilling, pressure pumping, directional drilling and oilfield rentals asset groups as of December 31, 2018. The assessments of recoverability of the asset groups included the respective intangible assets, and no impairment was indicated. See Note 5 for additional information. The Company concluded that no triggering events necessitating an impairment assessment of the intangible assets had occurred during the quarter ended December 31, 2019 or in 2017. The gross carrying amount and accumulated amortization of intangible assets as of December 31, 2019 and 2018 are as follows (in thousands):
|  | 2019 |  |  | 2018 |
|  | Gross Carrying |  |  | Accumulated |  |  | Net Carrying |  |  | Gross Carrying |  |  | Accumulated |  |  | Net Carrying |
|  | Amount |  |  | Amortization |  |  | Amount |  |  | Amount |  |  | Amortization |  |  | Amount |
Customer relationships |  | $ | 28,000 |  |  | $ | (19,710 | ) |  | $ | 8,290 |  |  | $ | 28,000 |  |  | $ | (10,719 | ) |  | $ | 17,281 |
Developed technology |  |  | 55,772 |  |  |  | (15,386 | ) |  |  | 40,386 |  |  |  | 55,772 |  |  |  | (6,533 | ) |  |  | 49,239 |
Favorable drilling contracts |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 22,500 |  |  |  | (22,500 | ) |  |  | — |
Internal use software |  |  | 482 |  |  |  | (214 | ) |  |  | 268 |  |  |  | 482 |  |  |  | (118 | ) |  |  | 364 |
|  | $ | 84,254 |  |  | $ | (35,310 | ) |  | $ | 48,944 |  |  | $ | 106,754 |  |  | $ | (39,870 | ) |  | $ | 66,884 |
Amortization expense on intangible assets of approximately $17.9 million, $18.3 million and $24.3 million was recorded for the years ended December 31, 2019, 2018 and 2017, respectively. The remaining amortization expense associated with finite-lived intangible assets is expected to be as follows (in thousands):
Year ending December 31, |  |  |  |
2020 |  | $ | 19,273 |
2021 |  |  | 12,483 |
2022 |  |  | 12,461 |
2023 |  |  | 1,034 |
2024 |  |  | 1,034 |
Thereafter |  |  | 2,659 |
Total |  | $ | 48,944 |

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- Definition The entire disclosure for goodwill and intangible assets. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -URI http://asc.fasb.org/topic&trid=2144416 + Details
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