|6 Months Ended|
Jun. 30, 2019
|Subsequent Events [Abstract]|
|Subsequent Events||Subsequent Events
Stockholder Rights Plan
On April 10, 2020, the board of directors of the Company adopted a short-term stockholder rights plan (the “Rights Plan”). The Rights Plan provides for the issuance of one right for each outstanding share of the Company’s common stock held by stockholders of record on April 24, 2020. In general, the rights will become exercisable only if a person or group acquires beneficial ownership of 10% (or 20% in the case of certain passive investors) or more of the Company’s outstanding common stock or announces a tender or exchange offer that would result in such ownership. If the rights become exercisable, all holders of rights (other than any triggering person) will be entitled to acquire shares of common stock at a 50% discount, or the Company may exchange each right held by such holders for one share of common stock.
The Rights Plan will expire on March 31, 2021. The Rights Plan may also be terminated, or the rights may be redeemed, prior to the scheduled expiration of the Rights Plan under certain other circumstances.
In the fourth quarter of 2019, management determined that the demand for vertical rigs and flowback services in the Permian Basin continued to be depressed. The Company's (i) vertical drilling rigs were not more likely than not to be utilized in the foreseeable future and (ii) flowback assets were having a deterioration in utilization. As such we expect to record impairment charges of approximately $3.4 million in the fourth quarter of 2019.
During the first quarter of 2020, management determined the reductions in commodity prices driven by the potential impact of the novel COVID-19 virus and global supply and demand dynamics coupled with the sustained decrease in the Company’s share price were triggering events for goodwill and asset impairment. As a result of the triggering events, we performed an interim goodwill impairment test on the hydraulic fracturing reporting unit and a recoverability tests on each of the assets groups. As a result, we expect to recognize impairments and charges in the first quarter of 2020 as follows:
•goodwill impairment of approximately $9.4 million;
•drilling asset group impairment of approximately $1.1 million as a result of our recoverability tests; and
If the depressed oil prices and the current economic conditions remain for a longer period of time, actual results may differ from estimates and future assumptions may change resulting in additional impairment charges in the future.
In the third quarter of 2019, we recorded severance expense of approximately $2.0 million relating to the resignation of two former executive officers.
The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef