The oil and gas industry experienced an unprecedented disruption during the first quarter of 2020 due to the substantial decline in global demand for oil caused by the COVID-19 pandemic and subsequent mitigation efforts as well as macroeconomic events such as the geopolitical tensions between the Organization of Petroleum Exporting Countries (OPEC) and Russia, regarding limits on oil production. These factors resulted in a significant drop in oil prices and a substantial deterioration of the Company’s market capitalization. The combined impact of the OPEC disputes and the COVID-19 pandemic resulted in the Company’s customers canceling current and scheduled drilling and completion activities. By the end of the quarter, the domestic rig count began to decline precipitously, and oilfield operators announced significant capital expenditure reductions for the remainder of 2020. The Company determined these recent events constituted a triggering event that required a review of the recoverability of its long-lived assets and performance of an interim goodwill impairment assessment, both as of March 31, 2020.

The Company used both income based and market based approaches to determine the fair value of its long-lived asset groups and its reporting units for goodwill impairment assessment. Under the income approach, the fair value for each of our asset groups and reporting units was determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. The Company used internal forecasts, updated for recent events, to estimate future cash flows and terminal value calculations, which incorporated historical and forecasted trends, including an estimate of long-term future growth rates, based on its most recent views of the outlook for each asset group and reporting unit. For the market based valuation, the Company used comparable public company multiples. The selection of comparable businesses was based on the markets in which the asset groups and reporting units operate giving consideration to risk profiles, size, geography, and diversity of products and services.

Based on the concluded fair value of the asset groups, the Company measured and recorded an impairment loss that represents the amount by which the asset groups' carrying amounts exceeded their fair value. For purposes of the goodwill impairment assessment, the fair value of each reporting unit exceeded its net book value and therefore, goodwill was deemed to not be impaired. The Company recorded the following pre-tax charges during the three months ended March 31. 2020 which are reflected in “Impairment and other charges” in the consolidated statements of operations:

^(1).

Relates solely to the Technical Services segment and primarily includes pressure pumping and coiled tubing assets.

^(2).

Includes interest costs related to leased assets that were impaired in the third and fourth quarters of 2019 and additional costs related to abandoned assets.

See Note 7 for details of impairment and other charges by segment.

The full impact of the COVID-19 pandemic and OPEC disputes on the business, financial condition, results of operations or cash flows or the pace or extent of any subsequent recovery, cannot be reasonably predicted at this time. In response, the Company has reduced its workforce, instituted compensation adjustments, and lowered its expense structure and capital expenditures. The Company plans to continue to adjust its cost structure in accordance with its assessment of the operating environment. If market conditions continue to deteriorate, including crude oil prices further declining and remaining at low levels for a sustained period of time, the Company may record further asset impairments, or an impairment of the carrying value of goodwill.