Annual report pursuant to Section 13 and 15(d)

LEASES

v3.22.0.1
LEASES
12 Months Ended
Dec. 31, 2021
Leases [Abstract]  
LEASES LEASES           On January 1, 2019, we implemented ASC 842, using the modified retrospective transition method and elected not to restate prior years. Accordingly, the effects of adopting ASC 842 were adjusted in the beginning of 2019 while prior periods are accounted for under the legacy GAAP, ASC 840. There was no cumulative effect adjustment on beginning retained earnings. We also elected other practical expedients provided by the new lease standard, the short-term lease recognition practical expedient in which leases with a term of twelve months or less will not be recognized on the balance sheet and the practical expedient to not separate lease and non-lease components for real estate class of assets. Our discount rate was based on our estimated incremental borrowing rate on a collateralized basis with similar terms and economic considerations as our lease payments at the lease commencement. Below is a description of our operating and finance leases.
Operating Leases
Description of Lease
          In March 2013, we entered into a ten-year real estate lease contract (the “Real Estate Lease”) with a commencement date of April 1, 2013, as part of the expansion of our equipment yard. The lease is with an entity in which a former director of the Company has a noncontrolling equity ownership interest. For the years ended December 31, 2021, 2020 and 2019, the Company made lease payments of approximately $0.4 million, $0.4 million and $0.4 million, respectively. The assets and liabilities under this contract are equally allocated between our cementing and coiled tubing segments. In addition to the contractual lease period, the contract includes an optional renewal of up to ten years, and in management’s judgment the exercise of the renewal option is not reasonably assured. The contract does not include a residual value guarantee, covenants or financial restrictions. Further, the Real Estate Lease does not contain variability in payments resulting from either an index change or rate change. Effective January 1, 2019, the remaining lease term in our present value estimate of the minimum future lease payments was approximately four years.
          We accounted for our Real Estate Lease to be an operating lease. Our assumptions resulted from the existence of the right to control the use of the assets throughout the lease term. We did not account for the land separately from the building of the real estate lease because we concluded that the accounting effect was insignificant. As of December 31, 2021, the weighted average discount rate and remaining lease term was 6.7% and 1.3 years, respectively.
          As of December 31, 2021, our total operating lease right-of-use asset cost was $1.2 million, and accumulated amortization was $0.8 million. As of December 31, 2020, our total operating lease right-of-use asset cost was $1.2 million, and accumulated amortization was $0.5 million. For the years ended December 31, 2021, 2020 and 2019 we recorded operating lease cost of $0.3 million, $0.3 million and $0.4 million respectively, in our statement of operations.
Finance Leases
Description of Ground Lease
        In 2018, we entered into a ten-year land lease contract (the “Ground Lease”) with an exclusive option to purchase the land exercisable beginning one year from the commencement date of October 1, 2018 through the end of the contractual lease term. In March 2020, the Company exercised its option and purchased the land associated with the Ground Lease for approximately $2.5 million.
          The maturity analysis of liabilities and reconciliation to undiscounted and discounted remaining future lease payments for operating lease as of December 31, 2021 are as follows:
($ in thousands) Totals
2022 $ 389 
2023 98 
Total undiscounted future lease payments 487 
Amount representing interest (21)
Present value of future lease payments (lease obligation) $ 466 
          The total cash paid for amounts included in the measurement of our operating lease liability during the year ended December 31, 2021 was approximately $0.4 million. During the year ended December 31, 2020, the total cash paid for amounts included in the measurement of our operating and finance lease liabilities was approximately $0.4 million and $0.03 million, respectively. The non-cash lease obligation we recorded effective January 1, 2019, upon adopting the new lease standard, ASC 842, was $2.0 million and $3.1 million for operating and finance leases, respectively.
Short-Term Leases
          We elected the practical expedient, consistent with ASC 842, to exclude leases with an initial term of twelve months or less ("short-term lease") from our balance sheet and continue to record short-term leases as a period expense. For the years ended December 31, 2021 and 2020, our short-term asset lease expense was approximately $0.6 million and $1.0 million, respectively.
          In April 2021, we entered into a short-term lease arrangement to lease our turbine (the “Equipment Lease”) with a commencement date of June 1, 2021 through September 30, 2021. We classified the Equipment Lease as an operating lease, and during the year ended December 31, 2021, we recognized approximately $3.0 million in lease income recorded as part of our pressure pumping segment revenue on our statements of operations.
LEASES LEASES           On January 1, 2019, we implemented ASC 842, using the modified retrospective transition method and elected not to restate prior years. Accordingly, the effects of adopting ASC 842 were adjusted in the beginning of 2019 while prior periods are accounted for under the legacy GAAP, ASC 840. There was no cumulative effect adjustment on beginning retained earnings. We also elected other practical expedients provided by the new lease standard, the short-term lease recognition practical expedient in which leases with a term of twelve months or less will not be recognized on the balance sheet and the practical expedient to not separate lease and non-lease components for real estate class of assets. Our discount rate was based on our estimated incremental borrowing rate on a collateralized basis with similar terms and economic considerations as our lease payments at the lease commencement. Below is a description of our operating and finance leases.
Operating Leases
Description of Lease
          In March 2013, we entered into a ten-year real estate lease contract (the “Real Estate Lease”) with a commencement date of April 1, 2013, as part of the expansion of our equipment yard. The lease is with an entity in which a former director of the Company has a noncontrolling equity ownership interest. For the years ended December 31, 2021, 2020 and 2019, the Company made lease payments of approximately $0.4 million, $0.4 million and $0.4 million, respectively. The assets and liabilities under this contract are equally allocated between our cementing and coiled tubing segments. In addition to the contractual lease period, the contract includes an optional renewal of up to ten years, and in management’s judgment the exercise of the renewal option is not reasonably assured. The contract does not include a residual value guarantee, covenants or financial restrictions. Further, the Real Estate Lease does not contain variability in payments resulting from either an index change or rate change. Effective January 1, 2019, the remaining lease term in our present value estimate of the minimum future lease payments was approximately four years.
          We accounted for our Real Estate Lease to be an operating lease. Our assumptions resulted from the existence of the right to control the use of the assets throughout the lease term. We did not account for the land separately from the building of the real estate lease because we concluded that the accounting effect was insignificant. As of December 31, 2021, the weighted average discount rate and remaining lease term was 6.7% and 1.3 years, respectively.
          As of December 31, 2021, our total operating lease right-of-use asset cost was $1.2 million, and accumulated amortization was $0.8 million. As of December 31, 2020, our total operating lease right-of-use asset cost was $1.2 million, and accumulated amortization was $0.5 million. For the years ended December 31, 2021, 2020 and 2019 we recorded operating lease cost of $0.3 million, $0.3 million and $0.4 million respectively, in our statement of operations.
Finance Leases
Description of Ground Lease
        In 2018, we entered into a ten-year land lease contract (the “Ground Lease”) with an exclusive option to purchase the land exercisable beginning one year from the commencement date of October 1, 2018 through the end of the contractual lease term. In March 2020, the Company exercised its option and purchased the land associated with the Ground Lease for approximately $2.5 million.
          The maturity analysis of liabilities and reconciliation to undiscounted and discounted remaining future lease payments for operating lease as of December 31, 2021 are as follows:
($ in thousands) Totals
2022 $ 389 
2023 98 
Total undiscounted future lease payments 487 
Amount representing interest (21)
Present value of future lease payments (lease obligation) $ 466 
          The total cash paid for amounts included in the measurement of our operating lease liability during the year ended December 31, 2021 was approximately $0.4 million. During the year ended December 31, 2020, the total cash paid for amounts included in the measurement of our operating and finance lease liabilities was approximately $0.4 million and $0.03 million, respectively. The non-cash lease obligation we recorded effective January 1, 2019, upon adopting the new lease standard, ASC 842, was $2.0 million and $3.1 million for operating and finance leases, respectively.
Short-Term Leases
          We elected the practical expedient, consistent with ASC 842, to exclude leases with an initial term of twelve months or less ("short-term lease") from our balance sheet and continue to record short-term leases as a period expense. For the years ended December 31, 2021 and 2020, our short-term asset lease expense was approximately $0.6 million and $1.0 million, respectively.
          In April 2021, we entered into a short-term lease arrangement to lease our turbine (the “Equipment Lease”) with a commencement date of June 1, 2021 through September 30, 2021. We classified the Equipment Lease as an operating lease, and during the year ended December 31, 2021, we recognized approximately $3.0 million in lease income recorded as part of our pressure pumping segment revenue on our statements of operations.