Organization and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

The accompanying consolidated financial statements include the accounts of Pioneer Energy Services Corp. and our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

Use of Estimates

Use of Estimat

Subsequent Events

Subsequent Events — In preparing the accompanying consolidated financial statements, we have reviewed events that have occurred after December 31, 2018, through the filing of this Annual Report on Form 10-K, for inclusion as necessary.

Foreign Currencies

Foreign Currencies —

Change in Accounting Principle and Recently Issued Accounting Standards

Changes to accounting principles generally accepted in the United States of America (“U.S. GAAP”) are established by the Financial Accounting Standards Board (FASB) in the form of Accounting Standards Updates (ASUs) to the FASB Accounting Standards Codification (ASC). We consider the applicability and impact of all ASUs. Any ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on our consolidated financial position and results of operations.

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Revenue Recognition. In May 2014, the FASB issued ASU No. 2014-09, a comprehensive new revenue recognition standard that supersedes nearly all pre-existing revenue recognition guidance. The standard, and its related amendments, collectively referred to as ASC Topic 606, outlines a single comprehensive model for revenue recognition based on the core principle that a company will recognize revenue when promised goods or services are transferred to clients, in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services.

We adopted this standard effective January 1, 2018 using the modified retrospective method, in which the standard has been applied to all contracts existing as of the date of initial application, with the cumulative effect of applying the standard recognized in retained earnings. Accordingly, revenues for reporting periods ending after January 1, 2018 are presented under ASC Topic 606, while prior period amounts have not been adjusted and continue to be reported under the previous revenue recognition guidance. In accordance with ASC Topic 606, we also adopted ASC Subtopic 340-40, Other Assets and Deferred Costs, Contracts with Customers, effective January 1, 2018, which requires that the incremental costs of obtaining or fulfilling a contract with a customer be recognized as an asset if the costs are expected to be recovered.

The adoption of these standards resulted in a cumulative effect adjustment of $0.1 million after applicable income taxes, which consists of the impact of the timing difference related to recognition of mobilization revenues and costs. Mobilization costs incurred are deferred and amortized over the expected period of benefit under ASC Subtopic 340-40, but were amortized over the initial contract term under the previous accounting guidance. The recognition of both mobilization revenues and costs begins when mobilization activity is completed under ASC Topic 606, but were recognized during the period of initial mobilization under the previous accounting guidance. Additionally, the opening balances of deferred mobilization costs were reclassified in accordance with ASC Subtopic 340-40, which requires classification of the entire deferred balance according to the duration of the original contract to which it relates, rather than bifurcating the asset into current and noncurrent portions.

For more information about the accounting under ASC Topic 606, and disclosures under the new standard, see Note 2, Revenue from Contracts with Customers.


•	Leases. In February 2016, the FASB issued ASU No. 2016-02, Leases, which among other things, requires lessees to recognize substantially all leases on the balance sheet, with expense recognition that is similar to the current lease standard, and aligns the principles of lessor accounting with the principles of the FASB’s new revenue guidance (referenced above).

In July 2018, the FASB issued ASU No. 2018-11, Leases: Targeted Improvements, which provides an option to apply the guidance prospectively, and provides a practical expedient allowing lessors to combine the lease and non-lease components of revenues where the revenue recognition pattern is the same and where the lease component, when accounted for separately, would be considered an operating lease. The practical expedient also allows a lessor to account for the combined lease and non-lease components under ASC Topic 606, Revenue from Contracts with Customers, when the non-lease component is the predominant element of the combined component. As a lessor, we expect to apply the practical expedient which would allow us to continue to recognize our revenues (both lease and service components) under ASC Topic 606, and continue to present them as one revenue stream in our consolidated statements of operations.

As a lessee, this standard will primarily impact our accounting for long-term real estate and office equipment leases, for which we will recognize a right-of-use asset and a corresponding lease liability on our consolidated balance sheet. We will apply this guidance prospectively, beginning January 1, 2019 and currently estimate the impact on our balance sheet to be approximately $10 million. We are nearing completion of our process to implement a lease accounting system for our leases, including the conversion of our existing lease data to the new system and implementing relevant internal controls and procedures.

Cash and Cash Equivalents, Restricted Cash

Cash and Cash Equivalents — As of December 31, 2018, we had $13.0 million of cash and $40.6 million of cash equivalents, consisting of investments in highly-liquid money-market mutual funds. We had no cash equivalents at December 31, 2017.

Restricted Cash — Our restricted cash balance reflects the portion of net proceeds from the issuance of our senior secured term loan which are currently held in a restricted account until the completion of certain administrative tasks related to providing access rights to certain of our real property.

Revenue

Revenue — Production services jobs are varied in nature, but typically represent a single performance obligation, either for a particular job, a series of distinct jobs, or a period of time during which we stand ready to provide services as our client needs them. Revenue is recognized for these services over time, as the services are performed. Our drilling services business segments earn revenues by drilling oil and gas wells for our clients under daywork contracts. Daywork contracts are comprehensive agreements under which we provide a comprehensive service offering, including the drilling rig, crew, supplies and most of the ancillary equipment necessary to operate the rig. We account for our services provided under daywork contracts as a single performance obligation comprised of a series of distinct time increments which are satisfied over time. Accordingly, dayrate revenues are recognized in the period during which the services are performed. All of our revenues are recognized net of sales taxes, when applicable. For more information about the accounting under ASC Topic 606, see Note 2, Revenue from Contracts with Customers.

Trade Accounts Receivable

Trade and Unbilled Accounts Receivable — We record trade accounts receivable at the amount we invoice to our clients. These accounts do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our accounts receivable as of the balance sheet date. We determine the allowance based on the credit worthiness of our clients and general economic conditions. Consequently, an adverse change in those factors could affect our estimate of our allowance for doubtful accounts.

Unbilled Accounts Receivable

Our unbilled receivables represent revenues we have recognized in excess of amounts billed on drilling contracts and production services completed. For more information, see Note 2, Revenue from Contracts with Customers.

Inventories

Inventories — Inventories primarily consist of drilling rig replacement parts and supplies held for use by our drilling operations in Colombia, and supplies held for use by our wireline and coiled tubing operations. Inventories are valued at the lower of cost (first in, first out or actual) or net realizable value.

Prepaid Expenses and Other Current Assets

Prepaid Expenses and Other Current Assets — Prepaid expenses and other current assets include items such as insurance, rent deposits, software subscriptions and other fees. We routinely expense these items in the normal course of business over the periods these expenses benefit. Prepaid expenses and other current assets also include deferred mobilization costs for short-term drilling contracts.

Property and Equipment

Property and Equipment — Property and equipment are carried at cost less accumulated depreciation. Depreciation is provided for our assets over the estimated useful lives of the assets using the straight-line method. We record the same depreciation expense whether our equipment is idle or working. We charge our expenses for maintenance and repairs to operating costs. We capitalize expenditures for renewals and betterments to the appropriate property and equipment accounts. For more information, see Note 3, Property and Equipment.

Self Insurance Reserve [Policy Text Block]

Insurance Recoveries, Accrued Insurance Claims and Settlements, and Accrued Premiums and Deductibles — We use a combination of self-insurance and third-party insurance for various types of coverage. Our accrued premiums and deductibles include the premiums and estimated liability for the self-insured portion of costs associated with our health, workers’ compensation, general liability and auto liability insurance. Our insurance recoveries receivables and our accrued liability for insurance claims and settlements represent our estimate of claims in excess of our deductible, which are covered and managed by our third-party insurance providers, some of which may ultimately be settled by the insurance provider in the long-term. These are presented in our consolidated balance sheets as current due to the uncertainty in the timing of reporting and payment of claims. For more information, see Note 10, Employee Benefit Plans and Insurance.

Treasury Stock

Treasury Stock — Treasury stock purchases are accounted for under the cost method whereby the cost of the acquired common stock is recorded as treasury stock. Gains and losses on the subsequent reissuance of treasury stock shares are credited or charged to additional paid in capital using the average cost method.

Stock-based Compensation

Stock-based Compensation — We recognize compensation cost for our stock-based compensation awards based on the fair value estimated in accordance with ASC Topic 718, Compensation—Stock Compensation, and we recognize forfeitures when they occur. For our awards with graded vesting, we recognize compensation expense on a straight-line basis over the service period for each separately vesting portion of the award as if the award was, in substance, multiple awards. For more information, see Note 9, Equity Transactions and Stock-Based Compensation Plans.

Income Taxes

Income Taxes — We follow the asset and liability method of accounting for income taxes, under which we recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. We measure our deferred tax assets and liabilities by using the enacted tax rates we expect to apply to taxable income in the years in which we expect to recover or settle those temporary differences. The effect of a change in tax rates on deferred tax assets and liabilities is reflected in income in the period of enactment. For more information, see Note 6, Income Taxes.

Related Party Transactions

Related-Party Transactions — During each of the years ended December 31, 2018, 2017 and 2016, the Company paid approximately $0.2 million for trucking and equipment rental services received from Gulf Coast Lease Service, which represented arms-length transactions. Gulf Coast Lease Service is owned and operated by the two sons of our former Senior Vice President of Well Servicing, Mr. Freeman, who also served as the President of Gulf Coast Lease Service, primarily in an advisory role to his sons, and for which he did not receive compensation from Gulf Coast Lease Service. Mr. Freeman retired from his role as Senior Vice President of Well Servicing in January 2019.

Comprehensive Income

Comprehensive Income — We have not reported comprehensive income due to the absence of items of other comprehensive income in the periods presented.

Reclassifications

Reclassifications — Certain amounts in the consolidated financial statements for the prior year periods have been reclassified to conform to the current year’s presentation.