Annual report pursuant to Section 13 and 15(d)

LEASES

v3.20.4
LEASES
12 Months Ended
Dec. 31, 2020
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, 2020, 2019 and 2018, the Company made lease payments of approximately $0.4 million, $0.4 million and $0.3 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 10 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 four years.
          Consistent with the requirements of the new lease standard, ASC 842, we have determined the 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, 2020, the weighted average discount rate and remaining lease term was 6.7% and 2.3 years, respectively.
          In January 2019, we entered into a four-year real estate lease contract with Pioneer, a related party, (the “Crew Camp Lease”) with a commencement date of January 1, 2019 for purposes of providing housing to Company personnel. The contract does not include a residual value guarantee, covenants or financial restrictions. Further, the Crew Camp Lease does not contain variability in payments resulting from either an index change or rate change. The lease term used in our estimate of the present value of the minimum future lease payments for the purpose of determining our right-of-use asset and lease obligation was four-years. We determined the Crew Camp Lease to be an operating lease. However, effective July 1, 2019, the Crew Camp Lease was terminated in connection with our disposal of our camp assets located at the leased real estate for $5.0 million. In connection with the Crew Camp Lease termination, we derecognized the right-of-use asset and lease liability of $0.5 million and $0.5 million, respectively. Prior to the termination, the total operating lease cost recorded during the year ended December 31, 2019, in connection with the Crew Camp Lease was $0.1 million. Effective July 1, 2019, we disposed of our camp assets and entered into a twelve month lodging arrangement, to rent a certain number of rooms daily, including related services, for a fixed rate and accordingly, we recorded a gain on sale in our statement of operations during the year ended December 31, 2019 of approximately $4.2 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. As of December 31, 2019, our total operating lease right-of-use asset cost was $1.2 million, and accumulated amortization was $0.3 million. For the years ended December 31, 2020 and 2019, we recorded operating lease cost of $0.3 million and $0.4 million, respectively, in our statement of operations. During the year ended December 31, 2018, our operating lease expense, under legacy GAAP, ASC 840, was $1.7 million.
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. The Ground Lease does not include any residual value guarantee, covenants or financial restrictions. Further, the Ground Lease does not contain variability in payments resulting from either an index change or rate change. In March 2020, the Company exercised its option and purchased the land associated with the Ground Lease for approximately $2.5 million. Prior to the exercise of our purchase option, the interest on our finance lease for the years ended December 31, 2020 and 2019 was approximately $0 and 0.1 million, respectively.
          The maturity analysis of liabilities and reconciliation to undiscounted and discounted remaining future lease payments for operating lease as of December 31, 2020 are as follows:
($ in thousands)
2021 $ 377 
2022 389 
2023 98 
2024 — 
2025 — 
Total undiscounted future lease payments 864 
Amount representing interest (65)
Present value of future lease payments (lease obligation) $ 799 
          The total cash paid in connection with our operating and finance lease liabilities during the year ended December 31, 2020 was $0.4 million and $0.03 million, respectively. During the year ended December 31, 2019, the total cash paid in connection with our operating and finance lease liabilities was $0.4 million and $0.4 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. The non-cash changes to our lease liabilities during the year ended December 31, 2019, relate to the derecognition of the lease liability of $0.5 million, in connection with the Crew Camp Lease termination on July 1, 2019.
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 leases”) from our balance sheet and continue to record short-term leases as a period expense. For the year ended December 31, 2020 and 2019, our short-term asset lease expense was approximately $1.0 million and $1.3 million, respectively. At December 31, 2020, the total remaining commitments and other obligations for all of our short-term lease and lodging arrangements was $6.0 million.
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, 2020, 2019 and 2018, the Company made lease payments of approximately $0.4 million, $0.4 million and $0.3 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 10 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 four years.
          Consistent with the requirements of the new lease standard, ASC 842, we have determined the 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, 2020, the weighted average discount rate and remaining lease term was 6.7% and 2.3 years, respectively.
          In January 2019, we entered into a four-year real estate lease contract with Pioneer, a related party, (the “Crew Camp Lease”) with a commencement date of January 1, 2019 for purposes of providing housing to Company personnel. The contract does not include a residual value guarantee, covenants or financial restrictions. Further, the Crew Camp Lease does not contain variability in payments resulting from either an index change or rate change. The lease term used in our estimate of the present value of the minimum future lease payments for the purpose of determining our right-of-use asset and lease obligation was four-years. We determined the Crew Camp Lease to be an operating lease. However, effective July 1, 2019, the Crew Camp Lease was terminated in connection with our disposal of our camp assets located at the leased real estate for $5.0 million. In connection with the Crew Camp Lease termination, we derecognized the right-of-use asset and lease liability of $0.5 million and $0.5 million, respectively. Prior to the termination, the total operating lease cost recorded during the year ended December 31, 2019, in connection with the Crew Camp Lease was $0.1 million. Effective July 1, 2019, we disposed of our camp assets and entered into a twelve month lodging arrangement, to rent a certain number of rooms daily, including related services, for a fixed rate and accordingly, we recorded a gain on sale in our statement of operations during the year ended December 31, 2019 of approximately $4.2 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. As of December 31, 2019, our total operating lease right-of-use asset cost was $1.2 million, and accumulated amortization was $0.3 million. For the years ended December 31, 2020 and 2019, we recorded operating lease cost of $0.3 million and $0.4 million, respectively, in our statement of operations. During the year ended December 31, 2018, our operating lease expense, under legacy GAAP, ASC 840, was $1.7 million.
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. The Ground Lease does not include any residual value guarantee, covenants or financial restrictions. Further, the Ground Lease does not contain variability in payments resulting from either an index change or rate change. In March 2020, the Company exercised its option and purchased the land associated with the Ground Lease for approximately $2.5 million. Prior to the exercise of our purchase option, the interest on our finance lease for the years ended December 31, 2020 and 2019 was approximately $0 and 0.1 million, respectively.
          The maturity analysis of liabilities and reconciliation to undiscounted and discounted remaining future lease payments for operating lease as of December 31, 2020 are as follows:
($ in thousands)
2021 $ 377 
2022 389 
2023 98 
2024 — 
2025 — 
Total undiscounted future lease payments 864 
Amount representing interest (65)
Present value of future lease payments (lease obligation) $ 799 
          The total cash paid in connection with our operating and finance lease liabilities during the year ended December 31, 2020 was $0.4 million and $0.03 million, respectively. During the year ended December 31, 2019, the total cash paid in connection with our operating and finance lease liabilities was $0.4 million and $0.4 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. The non-cash changes to our lease liabilities during the year ended December 31, 2019, relate to the derecognition of the lease liability of $0.5 million, in connection with the Crew Camp Lease termination on July 1, 2019.
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 leases”) from our balance sheet and continue to record short-term leases as a period expense. For the year ended December 31, 2020 and 2019, our short-term asset lease expense was approximately $1.0 million and $1.3 million, respectively. At December 31, 2020, the total remaining commitments and other obligations for all of our short-term lease and lodging arrangements was $6.0 million.