| Operating Segments |
Operating Segments
The Company is organized into five reportable segments based on the nature of services provided and the basis in which management makes business and operating decisions. The Company principally provides oilfield services in connection with on-shore drilling of oil and natural gas wells for small to large domestic independent oil and nature gas producers. The Company’s five segments consist of pressure pumping services ("Pressure Pumping"), well services ("Well Services"), natural sand proppant ("Sand"), contract land and directional drilling services ("Drilling") and other energy services ("Other Energy Services").
The Company's Chief Executive Officer and Chief Financial Officer comprise the Company's Chief Operating Decision Maker function ("CODM"). Segment information is prepared on the same basis that our CODM manages the segments, evaluates the segment financial statements, and makes key operating and resource utilization decisions. Segment evaluation is determined on a quantitative basis based on a function of revenue and earnings before interest, other expense (income), impairment, taxes and depreciation and amortization as well as a qualitative basis, such as nature of the product and service offerings, types of customers.
Based on the CODM's assessment, effective December 31, 2016, the Company reorganized the reportable segments to align with its new management reporting structure and business activities. Prior to this reorganization, the existing reportable segments were comprised of four segments for financial reporting purposes: land and directional drilling services, completion and production services, completion and production - natural sand proppant and remote accommodation services. As a result of this change, there are five reportable segments for financial reporting purposes as described above. Historical information in this Note to the financial statements has been revised to reflect the new reportable segment.
Additionally, given that the Company is a C Corporation that will file a consolidated income tax returns for periods following the contribution that occurred in October 2016 (See Note 1), the Company deems loss (income) before income taxes to be a more meaningful representation of operational performance. Historical information in this Note to the financial statements has been revised to reflect the presentation methodology.
The following table sets forth certain financial information with respect to the Company’s reportable segments:
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Completion and Production |
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Year Ended December 31, 2016 |
Pressure Pumping |
Well Services |
Sand |
Drilling |
Other Energy Services |
Total |
Revenue from external customers |
$ |
21,446,803 |
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$ |
9,157,042 |
|
$ |
5,433,141 |
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$ |
28,177,737 |
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$ |
30,861,317 |
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$ |
95,076,040 |
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Revenue from related parties |
$ |
102,861,423 |
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$ |
867,771 |
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$ |
28,323,303 |
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$ |
3,864,772 |
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$ |
5,412 |
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$ |
135,922,681 |
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Cost of revenue |
$ |
86,808,742 |
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$ |
13,540,309 |
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$ |
28,166,829 |
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$ |
31,847,969 |
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$ |
13,186,060 |
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$ |
173,549,909 |
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Selling, general and administrative expenses |
$ |
4,327,599 |
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$ |
2,336,002 |
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$ |
2,019,641 |
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$ |
5,624,705 |
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$ |
2,423,028 |
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$ |
16,730,975 |
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Earnings before interest, other expense (income), impairment, taxes and depreciation and amortization |
$ |
33,171,885 |
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$ |
(5,851,498 |
) |
$ |
3,569,974 |
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$ |
(5,430,165 |
) |
$ |
15,257,641 |
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$ |
40,717,837 |
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Other expense (income) |
$ |
26,743 |
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$ |
(565,966 |
) |
$ |
2,321 |
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$ |
247,620 |
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$ |
37,043 |
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$ |
(252,239 |
) |
Interest expense |
$ |
599,147 |
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$ |
134,007 |
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$ |
49,518 |
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$ |
2,828,753 |
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$ |
100,032 |
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$ |
3,711,457 |
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Depreciation and amortization |
$ |
37,012,902 |
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$ |
5,127,879 |
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$ |
4,078,844 |
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$ |
21,512,117 |
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$ |
2,179,116 |
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$ |
69,910,858 |
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Impairment of long-lived assets |
$ |
138,587 |
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$ |
1,384,751 |
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$ |
— |
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$ |
347,547 |
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$ |
— |
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$ |
1,870,885 |
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Loss (income) before income taxes |
$ |
(4,605,494 |
) |
$ |
(11,932,169 |
) |
$ |
(560,709 |
) |
$ |
(30,366,202 |
) |
$ |
12,941,450 |
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$ |
(34,523,124 |
) |
Provision (benefit) for income taxes |
$ |
— |
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$ |
50,265,203 |
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$ |
3,716 |
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$ |
— |
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$ |
3,615,952 |
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$ |
53,884,871 |
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Net income (loss) |
$ |
(4,605,494 |
) |
$ |
(62,197,372 |
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$ |
(564,425 |
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$ |
(30,366,202 |
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$ |
9,325,498 |
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$ |
(88,407,995 |
) |
Total expenditures for property, plant and equipment |
$ |
7,673,187 |
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$ |
404,612 |
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$ |
106,252 |
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$ |
2,709,478 |
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$ |
424,380 |
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$ |
11,317,909 |
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Goodwill |
$ |
86,043,148 |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
86,043,148 |
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Intangible assets, net |
$ |
21,435,058 |
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$ |
131,771 |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
21,566,829 |
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Total assets |
$ |
195,521,027 |
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$ |
66,043,726 |
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$ |
26,517,973 |
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$ |
99,867,691 |
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$ |
32,603,418 |
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$ |
420,553,835 |
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Completion and Production |
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Year Ended December 31, 2015 |
Pressure Pumping |
Well Services |
Sand |
Drilling |
Other Energy Services |
Total |
Revenue from external customers |
$ |
45,538,393 |
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$ |
26,134,568 |
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$ |
14,272,981 |
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$ |
68,457,719 |
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$ |
34,340,821 |
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$ |
188,744,482 |
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Revenue from related parties |
$ |
124,442,293 |
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$ |
2,716,773 |
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$ |
38,517,222 |
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$ |
4,574,370 |
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$ |
941,553 |
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$ |
171,192,211 |
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Cost of revenue |
$ |
131,717,344 |
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$ |
28,144,431 |
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$ |
43,890,437 |
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$ |
57,489,608 |
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$ |
15,105,497 |
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$ |
276,347,317 |
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Selling, general and administrative expenses |
$ |
4,901,459 |
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$ |
2,285,684 |
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$ |
2,405,350 |
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$ |
8,573,174 |
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$ |
2,375,881 |
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$ |
20,541,548 |
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Earnings before interest, other expense, impairment, taxes and depreciation and amortization |
$ |
33,361,883 |
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$ |
(1,578,774 |
) |
$ |
6,494,416 |
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$ |
6,969,307 |
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$ |
17,800,996 |
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$ |
63,047,828 |
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Other expense (income) |
$ |
66,889 |
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$ |
686,617 |
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$ |
(88,976 |
) |
$ |
1,121,093 |
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$ |
372,141 |
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$ |
2,157,764 |
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Interest expense |
$ |
1,859,195 |
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$ |
429,061 |
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$ |
51,476 |
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$ |
2,890,130 |
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$ |
60,959 |
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$ |
5,290,821 |
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Interest income |
$ |
— |
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$ |
— |
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$ |
98,056 |
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$ |
— |
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$ |
436 |
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$ |
98,492 |
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Depreciation and amortization |
$ |
35,728,715 |
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$ |
5,696,547 |
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$ |
4,200,809 |
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$ |
24,626,705 |
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$ |
2,141,106 |
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$ |
72,393,882 |
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Impairment of long-lived assets |
$ |
1,213,885 |
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$ |
88,247 |
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$ |
1,904,981 |
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$ |
8,917,240 |
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$ |
— |
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$ |
12,124,353 |
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Loss (income) before income taxes |
$ |
(5,506,801 |
) |
$ |
(8,479,246 |
) |
$ |
524,182 |
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$ |
(30,585,861 |
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$ |
15,227,226 |
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$ |
(28,820,500 |
) |
Provision (benefit) for income taxes |
$ |
72,435 |
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$ |
4,454 |
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$ |
— |
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$ |
(184,523 |
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$ |
(1,481,452 |
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$ |
(1,589,086 |
) |
Net income (loss) |
$ |
(5,579,236 |
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$ |
(8,483,700 |
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$ |
524,182 |
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$ |
(30,401,338 |
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$ |
16,708,678 |
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$ |
(27,231,414 |
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Total expenditures for property, plant and equipment |
$ |
4,169,678 |
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$ |
6,768,143 |
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$ |
171,202 |
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$ |
12,650,831 |
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$ |
2,491,821 |
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$ |
26,251,675 |
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Goodwill |
$ |
86,043,148 |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
86,043,148 |
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Intangible assets, net |
$ |
30,478,558 |
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$ |
159,271 |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
30,637,829 |
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Total assets |
$ |
226,690,841 |
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$ |
41,481,415 |
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$ |
32,726,899 |
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$ |
118,227,357 |
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$ |
31,859,058 |
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$ |
450,985,570 |
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Completion and Production |
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Year Ended December 31, 2014 |
Pressure Pumping |
Well Services |
Sand |
Drilling |
Other Energy Services |
Total |
Revenue from external customers |
$ |
12,144,538 |
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$ |
43,732,782 |
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$ |
36,859,731 |
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$ |
109,295,518 |
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$ |
17,168,471 |
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$ |
219,201,040 |
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Revenue from related parties |
$ |
12,635,148 |
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$ |
1,520,310 |
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$ |
9,490,543 |
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$ |
12,869,425 |
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$ |
3,809,538 |
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$ |
40,324,964 |
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Cost of revenue |
$ |
17,293,057 |
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$ |
31,715,681 |
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$ |
38,815,543 |
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$ |
93,571,050 |
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$ |
9,673,570 |
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$ |
191,068,901 |
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Selling, general and administrative expenses |
$ |
1,409,618 |
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$ |
2,339,024 |
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$ |
2,178,867 |
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$ |
9,763,922 |
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$ |
1,336,432 |
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$ |
17,027,863 |
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Earnings before interest, other expense, impairment, taxes and depreciation and amortization |
$ |
6,077,011 |
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$ |
11,198,387 |
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$ |
5,355,864 |
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$ |
18,829,971 |
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$ |
9,968,007 |
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$ |
51,429,240 |
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Other expense |
$ |
1,744,695 |
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$ |
777,382 |
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$ |
1,099,284 |
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$ |
1,539,279 |
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$ |
563,856 |
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$ |
5,724,496 |
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Interest expense |
$ |
386,618 |
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$ |
831,508 |
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$ |
127,988 |
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$ |
3,194,061 |
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$ |
63,420 |
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$ |
4,603,595 |
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Interest expense from related parties |
$ |
— |
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$ |
— |
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$ |
184,479 |
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$ |
— |
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$ |
— |
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$ |
184,479 |
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Interest income |
$ |
— |
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$ |
— |
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$ |
208,519 |
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$ |
— |
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$ |
5,622 |
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$ |
214,141 |
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Depreciation and amortization |
$ |
4,015,572 |
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$ |
4,768,024 |
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$ |
3,867,024 |
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$ |
21,319,617 |
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$ |
1,656,928 |
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$ |
35,627,165 |
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Loss (income) before income taxes |
$ |
(69,874 |
) |
$ |
4,821,473 |
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$ |
285,608 |
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$ |
(7,222,986 |
) |
$ |
7,689,425 |
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$ |
5,503,646 |
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Provision (benefit) for income taxes |
$ |
10,897 |
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$ |
18,226 |
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$ |
4,826 |
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$ |
77,576 |
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$ |
7,402,669 |
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$ |
7,514,194 |
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Net income (loss) |
$ |
(80,771 |
) |
$ |
4,803,247 |
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$ |
280,782 |
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$ |
(7,300,562 |
) |
$ |
286,756 |
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$ |
(2,010,548 |
) |
Total expenditures for property, plant and equipment |
$ |
180,466 |
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$ |
11,441,285 |
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$ |
4,587,464 |
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$ |
85,801,345 |
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$ |
9,679,496 |
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$ |
111,690,056 |
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Goodwill |
$ |
86,131,395 |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
86,131,395 |
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Intangible assets, net |
$ |
39,809,101 |
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$ |
186,770 |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
39,995,871 |
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Total assets |
$ |
275,859,470 |
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$ |
39,977,056 |
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$ |
40,734,019 |
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$ |
185,218,626 |
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$ |
38,925,705 |
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$ |
580,714,876 |
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The pressure pumping services segment provides hydraulic fracturing. The well services segment provides coil tubing, flowback and equipment rental services. The sand segment sells, distributes and is capable of producing sand for use in hydraulic fracturing. The contract land and directional drilling services segment provides vertical, horizontal and directional drilling services. The other energy services segment provides housing, kitchen and dining, and recreational service facilities for oilfield workers that are located in remote areas away from readily available lodging. The pressure pumping and well service segments primarily services in the Utica Shale of Eastern Ohio, Marcellus Shale in Pennsylvania, Eagle Ford and Permian basin in Texas and mid-continent region. The natural sand proppant segment primarily services the Utica Shale and Montney Shale in British Columbia and Alberta, Canada. The contract land and directional drilling services segment primarily services the Permian Basin in West Texas. The other energy services segment primarily services Canada.
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