Impairments |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Impairments |
Impairments
Impairment of Goodwill
The Company performed its annual assessment of goodwill during the fourth quarter of 2019 and determined that the carrying value of goodwill for certain of its entities was greater than their fair values. As a result, the Company impaired goodwill associated with Stingray Pressure Pumping, SR Energy, Taylor Frac and Cobra Aviation, resulting in a $30.5 million impairment charge in 2019. To determine fair value at December 31, 2019, the Company used a combination of the income and market approaches. The income approach estimates the fair value based on anticipated cash flows that are discounted using a weighted average cost of capital. The market approach estimates the fair value using comparative multiples, which involves significant judgment in the selection of the appropriate peer group companies and valuation multiples. Additionally, during the third quarter of 2019, the Company temporarily shut down its cementing and acidizing operations. As a result, the Company recognized goodwill impairment expense of $3.2 million associated with Cementing and Stingray Cementing and Acidizing. The fair value was measured using an income approach.
During the year ended December 31, 2018, the Company moved Cementing's equipment from the Utica Shale to the Permian Basin. As a result, the Company recognized impairment on Cementing's goodwill totaling $3.2 million. The fair value was measured using an income approach.
Impairment of Other Long-Lived Assets
A summary of impairment of other long-lived assets is as follows (in thousands):
For the years ended December 31, 2019, 2018 and 2017, the Company recognized impairments of $3.0 million, $4.0 million and $3.8 million, respectively, related to drilling rig assets and $3.6 million, $0.3 million and $0.3 million, respectively, related to other property, plant and equipment. These assets were deemed impaired based on future expected cash flows of the equipment. The Company measured the fair values of its drilling rig assets at December 31, 2018 and 2017 and other property, plant and equipment at December 31, 2019, 2018 and 2017 using significant unobservable inputs (Level 3) based on an income approach. The Company measured the fair value of its drilling rig assets at December 31, 2019 using significant unobservable inputs (Level 3) based on a market approach.
The Company determined the fair value of WTL's non-contractual customer relationships was less than their carrying value, resulting in impairment expense of $0.8 million during the year ended December 31, 2019. Additionally, during the third quarter of 2019, the Company temporarily shut down its flowback operations, resulting in impairment of non-contractual customer relationships of $0.1 million.
During the year ended December 31, 2018, the Company moved Cementing's equipment from the Utica shale to the Permian basin. As a result, the Company recognized impairment on Cementing's intangible assets, including non-contractual customer relationships and trade name of $1.0 million and $0.2 million, respectively. Additionally, the Company recognized impairment of trade name totaling $0.2 million related to the name change of Stingray Logistics to Silverback Energy, which is included in the Company's Pressure Pumping segment.
The assumptions used in the impairment evaluation for long-lived assets are inherently uncertain and require management’s judgment. A continued period of low oil and natural gas prices or continued reductions in capital expenditures by our customers would likely have an adverse impact on our utilization and the prices that we receive for our services. This could result in the recognition of future material impairment charges on the same, or additional, property and equipment if future cash flow estimates, based upon information then available to management, indicate that their carrying values are not recoverable.
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