Fair Value of Financial Instruments and Concentrations of Credit Risk

12 Months Ended

Dec. 31, 2020

Fair Value of Financial Instruments and Concentrations of Credit Risk

Fair Value of Financial Instruments

Our financial instruments include cash and cash equivalents, receivables, payables, and debt. We believe the carrying values of these instruments, with the exception of our Convertible Notes, approximated their fair values at December 31, 2020 and 2019. The estimated fair value of our Convertible Notes was $61.1 million at December 31, 2020 and $101.4 million at December 31, 2019, based on quoted market prices at these respective dates.

Concentrations of Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk primarily consist of cash and trade accounts receivable. At December 31, 2020, substantially all of our cash deposits were held by our international subsidiaries in accounts at numerous financial institutions across the various regions in which we operate. A majority of the cash was held in accounts that maintain deposit ratings of P-1 by Moody’s, A-1 by Standard and Poor’s, and F1 by Fitch. As part of our investment strategy, we perform periodic evaluations of the relative credit standing of these financial institutions.

Customer Revenue Concentration

We derive a significant portion of our revenues from companies in the E&P industry, and our E&P customer base consists primarily of mid-sized and international oil companies as well as government-owned or government-controlled oil companies operating in the markets that we serve. For 2020, 2019 and 2018, revenues from our 20 largest customers represented approximately 49%, 42% and 44%, respectively, of our consolidated revenues. For 2020, 2019 and 2018, no single customer accounted for more than 10% of our consolidated revenues.

Receivables

Receivables consisted of the following at December 31:


(In thousands)	2020		2019
Trade receivables:
Gross trade receivables	$	133,717	$	207,554
Allowance for credit losses	(5,024)		(6,007)
Net trade receivables	128,693		201,547
Income tax receivables	6,545		7,393
Other receivables	5,807		7,774
Total receivables, net	$	141,045	$	216,714

Other receivables include $4.4 million and $6.2 million for value added, goods and service taxes related to foreign jurisdictions as of December 31, 2020 and 2019, respectively.

We adopted the new accounting guidance for credit losses as of January 1, 2020 (see Note 1 for additional information). To measure expected credit losses, we evaluate our receivables on a collective basis for assets that share similar risk characteristics. Our allowance for credit losses reflects losses that are expected over the contractual life of the asset, and takes into account historical loss experience, current and future economic conditions, and reasonable and supportable forecasts.

Changes in our allowance for credit losses were as follows:


(In thousands)	2020		2019		2018
Balance at beginning of year	$	6,007	$	10,034	$	9,457
Cumulative effect of accounting change	959		—		—
Credit loss expense	1,427		1,792		2,849
Write-offs, net of recoveries	(3,369)		(5,819)		(2,272)
Balance at end of year	$	5,024	$	6,007	$	10,034

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details