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Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

 

The condensed consolidated balance sheet of ION Geophysical Corporation and its subsidiaries (collectively referred to as the “Company” or “ION,” unless the context otherwise requires) at December 31, 2020, has been derived from the Company’s audited consolidated financial statements at that date. The condensed consolidated balance sheet at March 31, 2021, and the condensed consolidated statements of operations, condensed consolidated statements of comprehensive loss, condensed consolidated statements of stockholders' deficit for the three months ended March 31, 2021 and 2020 and the condensed consolidated statements of cash flows for the three months ended March 31, 2021 and 2020, are unaudited. In the opinion of management, all adjustments of a normal recurring nature that are necessary for a fair presentation of the results of the interim period have been included. Interim results are not necessarily indicative of the operating results for a full year or of future operations. Intercompany transactions and balances have been eliminated.

 

The Company’s condensed consolidated financial statements reflect a non-redeemable noncontrolling interest in a majority-owned affiliate which is reported as a separate component of equity in “Noncontrolling interest” in the condensed consolidated balance sheets. Net (income) loss attributable to noncontrolling interest is stated separately in the condensed consolidated statements of operations. The activity for this noncontrolling interest relates to proprietary processing projects in Brazil.

 

Certain reclassifications were made to previously reported amounts in the condensed consolidated financial statements and notes thereto; particularly, the presentation of revenue by geographic area to make previously reported amounts consistent with current period presentation.

 

These condensed consolidated financial statements have been prepared using accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and applicable rules of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in annual financial statements presented in accordance with GAAP have been omitted. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

 

Going Concern [Policy Text Block]

Going Concern and Old Notes Restructuring

 

On April 20, 2021, the Company completed the Restructuring Transactions (as further discussed below) that extended the maturity of the notes by four years to December 2025 and provided additional liquidity to help meet its anticipated cash needs. As a result of the Restructuring Transactions, $113.5 million in aggregate principal amount outstanding of the Company's 9.125% Senior Secured Second Priority Notes due 2021 (the "Old Notes") has been reclassified from short-term debt to long-term debt in the Condensed Consolidated Balance Sheets. While the Company may continue to explore additional funding through private or public equity transactions, debt financing or other capital sources to meet its ongoing cash needs, management believes the completion of its Restructuring Transactions removes the substantial doubt raised in December 31, 2020 about the Company’s ability to continue as a going concern as of March 31, 2021.

 

On April 20, 2021, the Company successfully completed its previously announced offer to exchange (the “Exchange Offer”) the Old Notes for newly issued 8.00% Senior Secured Second Priority Notes due 2025 (the “New Notes”) and other consideration in the form of cash and ION common stock, as described in the Company's Prospectus dated March 10, 2021 and its previously announced rights offering (the "Rights Offering") to its holders of the Company's common stock, par value $0.01 per share (the "Common Stock") to purchase for (i) $2.78 principal amount of the New Notes per right, at a purchase price of 100% of the principal amount thereof or (ii) 1.08 shares of common stock per right, at a purchase price of $2.57 per whole share of common stock. The Exchange Offer and the Rights Offering are sometimes referred to herein as the Restructuring Transactions. 

 

In the Exchange Offer, approximately $113.5 million, or approximately 94.1%, of the $120.6 million outstanding Old Notes were accepted and exchanged for (1) $84.7 million aggregate principal amount of its New Notes, (ii) 6.1 million shares of Common Stock, including 1.5 million shares issued as the early participation payment and 4.6 million shares issued as stock consideration in lieu of the New Notes and (iii) $20.7 million paid in cash, including $3.6 million of accrued and unpaid interest that became due on the Old Notes as part of the exchange. The Company has accepted for exchange all such Old Notes validly tendered and not validly withdrawn in the Exchange Offer as of the expiration time on April 12, 2021.  Pursuant to the Exchange Offer, the Company will make an offer to participants to repurchase New Notes at par for up to 50% of the proceeds raised in excess of $35.0 million from the Rights Offering valued at $3.4 million.

 

In the concurrent Rights Offering, an aggregate amount of $41.8 million of rights (including over-subscription) was validly exercised by the holders of the Company's Common Stock, apportioned as $30.1 million in New Notes and $11.8 million in Common Stock allocated in 4.6 million shares. All over-subscription rights were exercised without proration as the $50.0 million limit on proceeds was not exceeded. Backstop parties were paid 5% backstop fees, in kind, resulting in the issuance of an additional $1.5 aggregate principal amount of New Notes and 0.2 million shares of Common Stock.

 

In total, $116.2 million in aggregate principal amount of New Notes and 10.9 million shares of Common Stock were issued. The Company received approximately $14 million in net proceeds from the transactions after deducting noteholder obligations, estimated transaction fees and accrued and unpaid interest paid on the Old Notes. After the Restructuring Transactions, $7.1 million of Old Notes remain outstanding and a total of 28.8 million shares of Common Stock are outstanding as of April 20, 2021.

 

The amendment to the Old Notes Indenture (as defined in Footnote 4, "Long-term Debt") is effective as of April 20, 2021. The Old Notes have been modified to, among other things, provide for the release of the second priority security interest in the collateral securing the Old Notes, and deletes in their entirety substantially all of the restrictive covenants and certain events of default pertaining to the Old Notes. For further details, refer to Footnote 4 "Long-term Debt - Old Notes."

 

COVID-19 Pandemic [Policy Text Block]

COVID-19 Business Impact and Response

 

The COVID- 19 pandemic caused the global economy to enter a recessionary period, which may be prolonged and severe. During 2020, the exploration and production (“E&P”) industry faced the dual impact of demand deterioration from COVID- 19 and market oversupply from increased production, which caused oil and natural gas prices to decline significantly for most of 2020. Brent crude prices, which are most relevant to ION’s internationally focused business, have rebounded to pre-pandemic levels, increasing to approximately $66 per barrel during April 2021. This reflects the continued expectation of rising oil demand as both the global economic activity and COVID- 19 vaccination rates increase, combined with ongoing crude oil production limits from members of  OPEC and partner countries.
 
The level and consistency of crude prices play an integral role in the trajectory of customers' offshore capital spending programs. While commodity prices can be volatile, the sharp decline throughout 2020 triggered E&P companies to reduce budgets by approximately 25%. Exploration offerings and data purchases are often discretionary and, therefore, receive disproportionately higher reductions than overall budget cuts. Consequently, there has been a material slowdown in offshore seismic spending since the second quarter of 2020.  

 

While management expects the E&P market to remain challenging in the near-term, there have been a number of positive developments that point to improving market conditions. Analyst projections and client activity continue to suggest increasing E&P spend and demand for seismic data in the second half of the year.  Spurred by increasing global demand and on-going production limits, Brent crude oil pricing, which is most relevant to ION’s internationally-focused business, has rebounded to pre-pandemic levels. In addition, there has been positive momentum across a number of leading indicators for ION's business, such as license rounds, tender activity, services engagements and backlog. Therefore, the Company remains cautiously optimistic market conditions will improve through the second half of 2021. The market backdrop serves as a catalyst to drive necessary cost restructuring and digital transformation of the E&P industry.

 
In January 2021, the Biden Administration ordered an indefinite moratorium on new U.S. oil and gas leasing and drilling permits on federal lands onshore and offshore waters. Management believes this will have a negligible impact on its business given the Company's diversified global footprint and international offshore focus. Should the moratorium result in longer-term change, this could drive large scale E&P company portfolio investment more towards international offshore, which would be well aligned with the Company's offerings.
 
The Company expects continued portfolio rationalization and high grading as E&P companies seek to find the best return on investment opportunities to meet oil and gas demand in the next decade. Near-term, due to the impact of the COVID- 19 pandemic, project high grading will likely be more acute due to budget reductions. Over the last several years, the Company had strategically shifted its portfolio closer to the reservoir, where revenue tends to be higher and more consistent. New Venture data acquisition offshore and Software and related personnel-based offshore services are expected to continue to be most impacted by COVID- 19 travel restrictions. While offshore operations have been temporarily impacted by travel restrictions, the Company believes the demand for digitalization technologies will remain strong. In some cases, ION technology is expected to be more relevant and valuable in the current environment, such as offerings that facilitate remote working.  
 
ION continues to work closely with its clients to understand their budgets and spending priorities and to scale its business appropriately. The Company partially mitigated the impact of the current macroeconomic environment by fully benefiting from the  structural changes and associated cost reductions totaling approximately $40 million through salary cuts, reduced capital expenditures, renegotiation of our current leases and application for various government assistance programs, among others. The management plan reflects the Company’s continued focus on preserving cash and managing liquidity in the current uncertain macroeconomic environment. In the event the Company’s customers experience more extensive capital constraint and budget reductions, further reducing demand for ION's services and products, resulting in deterioration of its revenues below its current forecasted levels, management may be required to update its plan by implementing further cost reductions and delaying capital investments. Refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2020 for further details.

 

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

 

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates are made at discrete points in time based on relevant market information. These estimates may be subjective in nature and involve uncertainties and matters of judgment and, therefore, cannot be determined with precision. Areas involving significant estimates include, but are not limited to, collectability of accounts and unbilled receivables, inventory valuation reserves, sales forecasts related to multi-client data library, impairment of property, plant and equipment and goodwill and deferred taxes. Actual results could materially differ from those estimates.