Discontinued Operations

12 Months Ended

Dec. 31, 2021

(14) Discontinued Operations

In December 2019, Pumpco Energy Services, Inc (“Pumpco”) completed its hydraulic fracturing field operations and made the determination to discontinue, wind down and exit its hydraulic fracturing operations. We have, and will continue, to sell Pumpco’s fixed assets over time. During the Successor Period, we have recognized gains of approximately $10.5 million related to the sales of these 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, pursuant to 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 Successor Period, we recognized a reduction in value of assets related to Complete of approximately $12.4 million.

During the third quarter of 2021, we entered into an agreement with an unrelated third party to sell tranches of coil tubing assets held by SPW for $14.0 million. As of December 31, 2021, we have completed sales totaling $11.4 million under this contract. The gain/loss on these assets sales was not material.

In November 2021, we completed an agreement with an unrelated third party to sell the remaining assets of SPW for $8.5 million. In connection with the sale of the remaining assets of SPW, we recognized a reduction in value of assets totaling $14.5 million during the third quarter of 2021.

The disposal of Complete and SPW 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 table summarizes the components of loss from discontinued operations, net of tax (in thousands):


	Successor			Predecessor
							Year ended December 31,
	For the Period February 3, 2021 through December 31, 2021			For the Period January 1, 2021 through February 2, 2021			2020			2019
Revenues	$	90,682		$	10,719		$	184,580		$	734,768
Cost of services		85,191			10,398			180,408			639,065
Depreciation, depletion, amortization and accretion		31,502			2,141			31,022			124,746
General and administrative expenses		8,847			1,119			22,035			50,953
Other expenses		15,807			-			-			-
Reduction in value of assets		-			-			117,335			84,470
Loss from operations		(50,665	)		(2,939	)		(166,220	)		(164,466	)
Other income (expense)		188			2,485			(2,069	)		27
Loss from discontinued operations before tax		(50,477	)		(454	)		(168,289	)		(164,439	)
Income tax benefit (expense)		10,408			102			(398	)		(1,026	)
Loss from discontinued operations, net of income tax	$	(40,069	)	$	(352	)	$	(168,687	)	$	(165,465	)

The following summarizes the assets and liabilities related to the business reported as discontinued operations (in thousands):


	Successor		Predecessor
	December 31, 2021		December 31, 2020
Current assets:
Accounts receivable, net	$	7,469	$	25,448
Prepaid expenses		26		4,881
Other current assets		447		12,076
Total current assets		7,942		42,405

Property, plant and equipment, net		29,328		179,380
Operating lease ROU assets		127		16,958
Other assets		131		3,361
Total assets held for sale	$	37,528	$	242,104

Liabilities:
Accounts payable	$	652	$	2,830
Accrued expenses		4,268		11,153
Operating lease liabilities		72		21,987
Decommissioning liabilities		-		8,311
Other liabilities		615		2,095
Total liabilities	$	5,607	$	46,376

Significant operating non-cash items and cash flows from investing activities for our discontinued operations were as follows (in thousands):


	Successor		Predecessor
						Year ended December 31,
	For the Period February 3, 2021 through December 31, 2021		For the Period January 1, 2021 through February 2, 2021			2020		2019
Cash flows from discontinued operating activities:
Reduction in value of assets	$	-	$	-		$	117,335	$	84,470
(Gain)/loss on sale of assets		-		(43	)		286		12,727
Other expenses		15,807		-			-		-
Depreciation, depletion, amortization and accretion		31,502		2,141			31,022		124,746
Cash flows from discontinued investing activities:
Proceeds from sales of assets		88,332		486			22,224		23,140

Additionally, we have recast certain historical amounts in our consolidated balance sheet, statements of operations and in the following notes to these financial statements: Note 1 - Summary of Significant Account Policies, Note 3 - Fresh Start Accounting, Note 5 - Leases, Note 6 - Intangibles, Note 7 - Property, Plant and Equipment, Net, Note 10 - Income Taxes and Note 11 - Segment Information as it pertains to these discontinued operations.