Discontinued Operations

9 Months Ended

Sep. 30, 2021

(20) Discontinued Operations

On December 10, 2019, Pumpco Energy Services, Inc (“Pumpco”) completed its existing hydraulic fracturing field operations and was determined to discontinue, wind down and exit its hydraulic fracturing operations. The financial results of Pumpco’s operations have historically been included in our North America segment. During the Successor Quarter and Successor Period, we have recognized gains of approximately $8.9 million and $13.9 million, respectively, related to the sale of these assets. We are currently, and will continue to, sell Pumpco’s fixed assets.

During the third quarter of 2021, we sold all of the issued and outstanding equity of Complete Energy Services, Inc. (“Complete”) to Select Energy Services, Inc. (“Select”), which also included SPN Well Services, Inc.’s (“SPW”) flowback and well testing businesses, including the associated assets, liabilities and working capital. On July 9, 2021, we entered into a Securities Purchase and Sale Agreement (the “Purchase Agreement”) with SES Holdings, LLC, Select and Complete. Pursuant to the Purchase Agreement, Select acquired 100% of the equity interests of Complete, for a purchase price of approximately $14.0 million in cash and the issuance of 3.6 million shares of Class A common stock, $0.01 par value, of Select, subject to customary post-closing adjustments. The Purchase Agreement contains customary representations, warranties and covenants. In connection with this disposition, during the second quarter of 2021, we recognized a reduction in value of assets related to Complete of approximately $12.4 million.

During the Successor Quarter, we completed an agreement with an unrelated third party to sell tranches of coil tubing assets held by SPW for $14.0 million. As of September 30, 2021, no tranches have been sold under this agreement, however we have received deposits from the buyer of approximately $7.3 million. These deposits are included in liabilities held for sale as of September 30, 2021 as deferred revenue. On November 1, 2021, we completed an agreement with an unrelated third party to sell the remaining assets of SPW for $8.5 million. In connection with this sale, we recognized a reduction in value of assets totaling $14.5 million during the Successor Quarter.

The financial results of the operations of Complete and SPW have historically been included in our Onshore Completion and Workover Services segment, and their discontinuance is aligned with our overall strategic objective to divest assets and service lines that do not compete for investment in the current market environment.

The following tables summarizes the components of our discontinued operations, net of tax (in thousands):


	Successor			Predecessor
	For the Three Months Ended September 30, 2021			For the Three Months Ended September 30, 2020
Revenues	$	16,985		$	30,996
Cost of services		6,883			29,216
Depreciation, depletion, amortization and accretion		146			7,055
General and administrative expenses		2,379			4,101
Reduction in value of assets		14,475			60,230
Loss from operations		(6,898	)		(69,606	)
Other income (expense)		238			6
Loss from discontinued operations before tax		(6,660	)		(69,600	)
Income tax benefit (expense)		1,499			(314	)
Loss from discontinued operations, net of income tax	$	(5,161	)	$	(69,914	)

Cost of services during the Successor Quarter includes gains on sales of assets of approximately $10.5 million.


	Successor			Predecessor
	For the Period February 3, 2021 through September 30, 2021			For the Period January 1, 2021 through February 2, 2021			For the Nine Months Ended September 30, 2020
Revenues	$	85,351		$	10,719		$	150,992
Cost of services		62,364			10,398			145,297
Depreciation, depletion, amortization and accretion		31,502			2,141			24,261
General and administrative expenses		8,597			1,119			21,576
Reduction in value of assets		26,905			-			109,591
Loss from operations		(44,017	)		(2,939	)		(149,733	)
Other income (expense)		188			2,485			21
Loss from discontinued operations before tax		(43,829	)		(454	)		(149,712	)
Income tax benefit (expense)		9,862			102			11,710
Loss from discontinued operations, net of income tax	$	(33,967	)	$	(352	)	$	(138,002	)

Cost of services during the Successor Period includes gains on sales of assets of approximately $15.5 million.

The following summarizes the assets and liabilities related to assets held for sale (in thousands):


	Successor		Predecessor
	September 30, 2021		December 31, 2020
Current assets:
Accounts receivable, net	$	11,033	$	25,448
Prepaid expenses		1,250		4,881
Other current assets		5,660		12,076
Total current assets		17,943		42,405

Property, plant and equipment, net		62,050		179,380
Operating lease ROU assets		6,938		16,958
Other assets		991		3,361
Total assets held for sale	$	87,922	$	242,104

Current liabilities:
Accounts payable	$	1,964	$	2,830
Accrued expenses		13,722		11,153
Total current liabilities		15,686		13,983

Operating lease liabilities		6,958		21,987
Decommissioning liabilities		-		8,311
Other liabilities		597		2,095
Total liabilities	$	23,241	$	46,376

Significant operating non-cash items relating to assets held for sale and cash flows from investing activities were as follows (in thousands):


	Successor			Predecessor
	For the Period February 3, 2021 through September 30, 2021			For the Period January 1, 2021 through February 2, 2021			For the Nine Months Ended September 30, 2020
Cash flows from discontinued operating activities:
Reduction in value of assets	$	26,905		$	-		$	109,591
Gain on sale of assets		(15,572	)		(43	)		-
Depreciation, depletion, amortization and accretion		31,502			2,142			24,261
Cash flows from discontinued investing activities:
Proceeds from sales of assets		53,225			486			14,369