Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2025

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill — During the three months ended March 31, 2025, there were no additions or impairments to goodwill. As of March 31, 2025 and December 31, 2024, our goodwill balance was $487 million.

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 our acquisition of Ulterra Drilling Technologies, L.P. in 2023 was allocated to that reporting unit. We determined our completion services operating segment consisted of two reporting units; completion services, which was primarily comprised of our hydraulic fracturing operations and other integrated service offerings, and cementing services.

Goodwill Impairment Assessment

During 2024, 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 led to our reduced outlook for activity. During the third quarter of 2024, we determined that the reduction in activity forecasts combined with the decline in the market price of our common stock was a triggering event that warranted a quantitative assessment for goodwill impairment.

In connection with this 2024 assessment, 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.

In connection with this 2024 assessment, 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.

For purposes of our 2024 assessment, 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 would 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.

During the first quarter of 2025, the majority of our primary market indicators stabilized as did management’s outlook on future activity. As such, as of March 31, 2025, we determined there were no events that would indicate the carrying value of goodwill may not be recoverable or that potential impairment exists.

Subsequent to March 31, 2025, global economic conditions deteriorated, in part, because of recently enacted trade policies and tariffs implemented by the United States and other governments, as well as uncertainty regarding potential future changes to global trade policies and tariffs. Additionally, subsequent to March 31, 2025, several OPEC+ countries announced plans to phase out existing crude oil output cuts earlier than anticipated. These developments and geopolitical tensions have introduced increased uncertainty in global energy markets, which has contributed to a decline in our share price, lowered crude oil futures prices and increased uncertainty regarding the future economic environment in which we operate. The recent deterioration in macroeconomic conditions and the decline in our share price occurred after the balance sheet date and do not reflect conditions that existed as of March 31, 2025. Accordingly, these developments have not been reflected in the unaudited condensed consolidated financial statements for the three months ended March 31, 2025.

While the full effects are yet to be determined, prolonged trade tensions and sustained lower crude oil futures prices could adversely affect our future outlook on activity and profitability. If these conditions persist or deteriorate further, or if other unforeseen macroeconomic conditions emerge, they could negatively impact the key assumptions used in our goodwill assessment for our drilling products and cementing services reporting units. A decrease in fair value resulting from unfavorable changes to these assumptions, or others, could result in goodwill impairment in future periods that could be material to our results of operations and financial statements as a whole. We are unable to reasonably estimate the magnitude or timing of any such potential impacts.

We will continue to monitor these developments and evaluate the implications on the carrying value of goodwill in future interim periods.

Intangible Assets — The following table presents the gross carrying amount and accumulated amortization of our intangible assets as of March 31, 2025 and December 31, 2024 (in thousands):


	March 31, 2025						December 31, 2024
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	782,968	$	(113,384)	$	669,584	$	782,789	$	(95,785)	$	687,004
Developed technology	202,771		(66,867)		135,904		202,772		(56,562)		146,210
Trade name	101,000		(15,906)		85,094		101,000		(14,097)		86,903
Other	14,812		(4,435)		10,377		12,986		(3,493)		9,493
Intangible assets, net	$	1,101,551	$	(200,592)	$	900,959	$	1,099,547	$	(169,937)	$	929,610

Amortization expense on intangible assets of approximately $30.8 million and $30.5 million was recorded for the three months ended March 31, 2025 and 2024, respectively.