Impairments of Goodwill and Long-Lived Assets

9 Months Ended

Sep. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Impairments of Goodwill and Long-Lived Assets

During the third quarter of 2019, there was a significant decline in the quoted market prices of our common stock and a continued decline in U.S. onshore drilling and completions activity, which led us to evaluate all of our reporting units for a triggering event as of September 30, 2019. Upon evaluation, we considered these developments to be a triggering event that required us to update our goodwill impairment evaluation and review long-lived assets for all reporting units as of September 30, 2019.

As a result, and in connection with the preparation of our financial statements, we determined that certain long-lived assets were impaired as their carrying values exceeded their fair values. The amount of the impairment charges were measured as the difference between the carrying value and the estimated fair value of the assets. In addition, we determined that the remaining carrying value of our goodwill was fully impaired in the third quarter of 2019. The fair values used in each goodwill impairment analysis were determined using the net present value of the expected future cash flows for each reporting unit (classified within level 3 of the fair value hierarchy). We determined the fair value of each reporting unit using a combination of discounted cash flow and guideline public company methodologies, which required significant assumptions and estimates about the future operations of each reporting unit. The assumptions about future cash flows and growth rates were based on our strategic plans and management’s estimates for future activity levels. Forecasted cash flows in future periods were estimated using a terminal value calculation, which considered long-term earnings growth rates.

During the nine months ended September 30, 2020, the COVID-19 pandemic and associated preventative actions taken around the world to mitigate its spread caused oil demand to deteriorate and economic activity to decrease. As a result, oil prices declined significantly during the period and created an extremely challenging market for all sub-sectors of the oil and natural gas industry. In addition, responses to the spread of COVID-19, including significant government restrictions on movement, have driven sharp declines in global economic activity.

As a result, during the nine months ended September 30, 2020, we determined that certain long-lived assets were impaired as their carrying values exceeded their fair values. The amount of the impairment charges were measured as the difference between the carrying value and the estimated fair value of the assets. The fair value was determined either through analysis of discounted future cash flows or, for certain real estate, based on a third party's sales price estimate (classified within level 3 of the fair value hierarchy).

Following is a summary of impairment charges recognized (in thousands) in our Drilling & Downhole (“D&D”), Completions (“C”), Production (“P”), and Corporate (“Corp”) segments:


	Nine Months Ended September 30, 2020										Nine Months Ended September 30, 2019
Impairments of:	D&D		C		P		Corp		Total		D&D		C		P		Total
Goodwill (1)	$	—	$	—	$	—	$	—	$	—	$	191,485	$	260,238	$	19,287	$	471,010
Intangible assets (1)	5,257		—		—		—		5,257		—		48,241		5,230		53,471
Property and equipment (1)	1,069		9,608		4,460		—		15,137		5,200		2,655		—		7,855
Operating lease right of use assets (2)	4,544		6,140		1,914		1,498		14,096		1,450		582		155		2,187
Total impairments	$	10,870	$	15,748	$	6,374	$	1,498	$	34,490	$	198,135	$	311,716	$	24,672	$	534,523


	Three Months Ended September 30, 2020										Three Months Ended September 30, 2019
Impairments of:	D&D		C		P		Corp		Total		D&D		C		P		Total
Goodwill (1)	$	—	$	—	$	—	$	—	$	—	$	191,485	$	260,238	$	19,287	$	471,010
Intangible assets (1)	—		—		—		—		—		—		48,241		5,230		53,471
Property and equipment (1)	—		—		2,962		—		2,962		5,200		2,655		—		7,855
Operating lease right of use assets (2)	3,259		—		—		1,498		4,757		165		—		—		165
Total impairments	$	3,259	$	—	$	2,962	$	1,498	$	7,719	$	196,850	$	311,134	$	24,517	$	532,501

(1) These charges are included in Impairments of goodwill, intangible assets, property and equipment in the condensed consolidated statements of comprehensive loss.

(2) For the nine months ended September 30, 2020 and 2019, $10.4 million and $1.3 million, respectively, of these charges are included in Cost of sales, while $3.7 million and $0.9 million, respectively, are included in Selling, general and administrative expenses in the condensed consolidated statements of comprehensive loss. For the three months ended September 30, 2020 and 2019, $1.8 million and zero, respectively, of these charges are included in Cost of sales, while $2.9 million and $0.2 million, respectively, are included in Selling, general and administrative expenses in the condensed consolidated statements of comprehensive loss.