Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill — Goodwill is evaluated at least annually on July 31, or more frequently when events and circumstances occur indicating recorded goodwill may be impaired. Goodwill is tested at the reporting unit level, which is at or one level below our operating segments. We determine 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. Any necessary goodwill impairment is determined using a quantitative impairment test. 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. The fair value of a reporting unit is determined using significant unobservable inputs, or level 3 in the fair value hierarchy. These inputs are based on internal management estimates, forecasts, and significant judgment.

We determined our drilling products operating segment consists of a single reporting unit and, accordingly, goodwill acquired from the Ulterra acquisition was allocated to that reporting unit. We determined our completion services operating segment consists of two reporting units; completion services, which is primarily comprised of our hydraulic fracturing operations and other integrated service offerings, and cementing services.

Goodwill Impairment Assessment

Negative market indicators such as lower industry-wide drilling rig and pressure pumping fleet count forecasts, increased volatility and pricing declines in the pressure pumping market, and continued efficiency gains and technology advancements reducing operating days have led to our reduced outlook for activity. During the third quarter of 2024, we viewed the reduction in activity forecasts combined with the decline in the market price of our common stock as a triggering event that warranted a quantitative assessment for goodwill impairment.

We estimated the fair value of the drilling products and the completion services reporting units using the income approach. Under this approach, we used a discounted cash flow model, which utilized present values of cash flows to estimate fair value. Forecasted cash flows reflected known market conditions in the third quarter of 2024 and management's anticipated business outlook for each reporting unit. Future cash flows were projected based on estimates of revenue growth rates, gross profit, selling, general and administrative expense, changes in working capital, and capital expenditures. The terminal period used within the discounted cash flow model for each reporting unit consisted of a 1% growth estimate. Future cash flows were then discounted using a market-participant, risk-adjusted weighted average cost of capital of 10.25% for the drilling products reporting unit and 10.75% for the completion services reporting unit. Financial and credit market volatility directly impacts our fair value measurement through the weighted average cost of capital used to determine a discount rate. During times of volatility, significant judgment must be applied to determine whether credit market changes are a short-term or long-term trend.

We estimated the fair value of the cementing services reporting unit in our completion services operating segment using a market approach. The market approach was based on trading multiples of earnings before interest, taxes, depreciation and amortization for companies comparable to the cementing services reporting unit.

The forecast for the completion services reporting unit assumed lower activity in 2025 compared to average activity levels for full year 2024 and increases in estimated activity of 2% to 8% beginning in 2026 through 2029. Those estimates were based on future drilling rig and pressure pumping fleet count forecasts during the third quarter of 2024 and estimated market share. Additionally, the forecast reflected the expectation that industry-wide pricing pressure will persist within the completions market and continue to compress adjusted gross profit. These factors negatively impacted the estimated value of the reporting unit.

Based on the results of the quantitative assessment, the fair value of the completion services reporting unit was less than its carrying value. Accordingly, we recorded an $885 million impairment charge to goodwill for the completion services reporting unit during the third quarter of 2024.

The forecast for the drilling products reporting unit assumed continued growth domestically as well as in international markets. Geopolitical instability in regions in which we expect to maintain and grow market share, a global decrease in the demand of drilling products, or other unforeseen macroeconomic considerations could negatively impact the key assumptions used in our goodwill assessment for our drilling products reporting unit.

Based on the results of the goodwill impairment tests performed during the third quarter of 2024, the fair values of the drilling products and cementing services reporting units exceeded their carrying values by approximately 13% and 73%, respectively. Accordingly, no impairment was recorded for the drilling products and cementing services reporting units.

Goodwill by operating segment as of December 31, 2023 and 2024 and changes for the years then ended are as follows (in thousands):


	Completion Services		Drilling Products		Total
Balance, December 31, 2023	$	922,125	$	457,616	$	1,379,741
Measurement period adjustment	—		(7,113)		(7,113)
Impairment	(885,240)		—		(885,240)
Balance, December 31, 2024	$	36,885	$	450,503	$	487,388

Intangible Assets — Our intangible assets were recorded at fair value on the date of acquisition and are amortized on a straight-line basis. The following table identifies the segment and weighted average useful life of each of our intangible assets:


	Segment	Weighted Average Useful Life
		(in years)
Customer relationships	Drilling Services, Completion Services and Drilling Products	11.5
Developed technology	Drilling Services, Completion Services and Drilling Products	5.2
Trade name	Completion Services and Drilling Products	10.2
Other	Drilling Services and Completion Services	3.1

The gross carrying amount and accumulated amortization of intangible assets as of December 31, 2024 and 2023 are as follows (in thousands):


	2024						2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	782,789	$	(95,785)	$	687,004	$	786,715	$	(25,563)	$	761,152
Developed technology	202,772		(56,562)		146,210		202,772		(16,435)		186,337
Trade name	101,000		(14,097)		86,903		101,000		(3,406)		97,594
Other	12,986		(3,493)		9,493		7,345		(731)		6,614
Intangible assets, net	$	1,099,547	$	(169,937)	$	929,610	$	1,097,832	$	(46,135)	$	1,051,697

Amortization expense on intangible assets of approximately $124 million, $41.5 million, and $1.3 million was recorded for the years ended December 31, 2024, 2023 and 2022, respectively.

The remaining amortization expense associated with finite-lived intangible assets, excluding in-process software, is expected to be as follows (in thousands):


Year ending December 31,
2025	$	123,645
2026	123,277
2027	121,250
2028	105,236
2029	80,068
Thereafter	373,535
Total	$	927,011