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Commitments and Contingencies
 12 Months Ended
Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Commitments and Contingencies
Environmental
Basic is subject to various federal, state and local environmental laws and regulations that establish standards and requirements for protection of the environment. Basic cannot predict the future impact of such standards and requirements which are subject to change and can have retroactive effectiveness. Basic continues to monitor the status of these laws and regulations.
Currently, Basic has not been fined, cited or notified of any environmental violations that would have a material adverse effect upon its financial position, liquidity or capital resources. However, management does recognize that by the very nature of its business, material costs could be incurred in the near term to maintain compliance. The amount of such future expenditures is not determinable due to several factors, including the unknown magnitude of possible regulation or liabilities, the unknown timing and extent of the corrective actions which may be required, the determination of Basic’s liability in proportion to other responsible parties and the extent to which such expenditures are recoverable from insurance or indemnification.
Litigation
From time to time, Basic is a party to litigation, or other legal proceedings that Basic considers to be a part of the ordinary course of business. Basic is not currently involved in any legal proceedings that it considers probable or reasonably possible, individually or in the aggregate, to result in a material adverse effect on its financial condition, results of operations or liquidity.
Sales and Use Tax Audit
In 2018, the Texas State Comptroller’s office issued a preliminary report on the sales and use tax audit for the period from 2010 through 2013. Basic appealed the preliminary report through the redetermination process. Based on our analysis, the potential liability associated with this audit ranges from $6.0 million to $24.0 million. This range could potentially change in future periods as the appeals and redetermination process progresses. Basic recorded an accrual of $6.0 million in the second quarter of 2018. After making monthly payments of $100,000, a net estimated liability of $4.2 million, and an additional amount of $1.9 million of related interest are included in accrued liabilities for the twelve months ended December 31, 2019.
On August 15, 2019, the Company was notified by the Oklahoma Tax Commission (the "OTC") that the tax court had issued findings, conclusions, and recommendations in an on-going tax case related to tax years 2006 through 2008. Based on the ruling and the advice of our Oklahoma tax counsel, the Company decided to negotiate a settlement with the OTC. The Company's analysis is that the potential liability associated with the settlement may range from $2.3 million to $3.5 million. The Company recorded $2.3 million of income tax and interest payable, which are included as accrued expenses on our consolidated balance sheets, and the related expense during the year ended December 31, 2019.
Employment Agreements
Pursuant to the Employment Agreement with Keith Schilling, the President and Chief Executive Officer of the Company, effective through December 31, 2021, and set to automatically renew for subsequent one-year periods unless notice of termination is properly given by the Company or Mr. Schilling, Mr. Schilling is entitled to a base salary of $650,000 per year. Mr. Schilling will also receive an annual performance bonus, with a target bonus equal to 90% of his base salary, if certain performance criteria are met. Under the Employment Agreement, Mr. Schilling is also eligible from time to time to receive awards of long-term equity incentive compensation under the Company’s equity compensation plans. In addition to his one-time signing bonus of $150,000, he will receive one-time payments to compensate him for the loss of equity issued from his previous employment in the following amounts: (i) $50,000 on May 15, 2020, (ii) $100,000 on May 15, 2021, and (iii) $100,000 on May 15, 2022, in each case conditioned on his continued employment through the applicable payment date.
If Mr. Schilling’s employment is terminated for certain reasons, he would also be entitled to a lump sum severance payment equal to 1.5 times the sum of his annual base salary plus his current annual incentive target bonus for the full year in which the termination of employment occurred. Additionally, if Mr. Schilling’s employment is terminated for certain reasons within the six months preceding or the twelve months following a change of control of the Company, he would be entitled to a lump sum severance payment equal to two times the sum of his annual base salary plus the higher of (i) his current annual incentive target bonus for the full year in which the termination of employment occurred or (ii) the highest annual incentive bonus received by him for any of the last three completed fiscal years. In the event that within the six months preceding or the twelve months following a change of control of the Company, Mr. Schilling’s Employment Agreement is not renewed by the Company and a new employment
agreement has not been entered into, Mr. Schilling will be entitled to the same severance benefits described above, subject to certain conditions.
Basic also has entered into employment agreements with various other executive officers. Under these agreements, if the officer’s employment is terminated for certain reasons, he would be entitled to a lump sum severance payment equal to either 0.75 times to 1.5 times the sum of his annual base salary plus his current annual incentive target bonus for the full year in which the termination occurred. If employment is terminated for certain reasons within the six months preceding or the twelve months following the change of control of the Company, he would be entitled to a lump sum severance payment equal to either 1.0 or 2.0 times the sum of his annual base salary plus the higher of (i) his current incentive target bonus for the full year in which the termination of employment occurred or (ii) the highest annual incentive bonus received by him for any of the last three fiscal years.
Self-Insured Risk Accruals
Basic is self-insured up to retention limits as it relates to workers’ compensation, general liability claims, and medical and dental coverage of its employees. Basic generally maintains no physical property damage coverage on its rig fleet, with the exception of certain of its 24-hour workover rigs, newly manufactured rigs and pumping services equipment. Basic has deductibles per occurrence for workers’ compensation, general liability claims, and medical and dental coverage of $2.0 million, $1.0 million and $0.4 million, respectively. Basic has a $1.0 million deductible per occurrence for automobile liability. Basic maintains accruals in the accompanying consolidated balance sheets related to self-insurance retentions by using third-party data and claims history.