Goodwill

12 Months Ended

Dec. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

As discussed in Note 3 Business Acquisition, during the second quarter of 2020, the Company acquired 100% ownership of JP3, as a new operating segment and reporting unit. The Company recorded goodwill of $17.5 million. During the third quarter of 2020, the Company made certain measurement period adjustments to inventory obtained in the JP3 acquisition, resulting in an increase of goodwill of $2.3 million.

On October 1 of each fiscal year, we perform our annual goodwill impairment test for the DA reporting unit. We also test goodwill for impairment whenever events or circumstances occur which, in our judgment, could more likely than not reduce the fair value of the DA reporting unit below its carrying amount. Potential impairment indicators include, but are not limited to, (i) the results of our most recent annual impairment testing, in particular the magnitude of the excess of fair value over carrying value observed, (ii) downward revisions to internal forecasts, and the magnitude thereof, if any, and (iii) declines in our market capitalization below our book value, and the magnitude and duration of those declines, if any.

In performing the annual quantitative impairment test and consistent with our prior practice, we determined the fair value of the DA reporting unit using an income approach. Under the income approach, the fair value of the reporting unit was determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. We used our internal forecasts, updated for recent events, to estimate future cash flows with cash flows beyond the specific operating plans estimated using a terminal value calculation, which incorporates historical and forecasted trends, including an estimate of long-term future growth rates, based on our most recent views of the long-term outlook for the DA reporting unit. Our internal forecasts include assumptions about future commodity pricing and expected demand for our goods and services. For the DA reporting unit, production growth is anticipated to be moderate in the near term as operators continue to show an abundance of fiscal discipline in development spending. Midstream thru-put volumes remain well below capacity levels. While we are expecting production growth to increase, it is likely to do so at a more conservative pace. These factors have precipitated our impairment decision for Data Analytics goodwill. Due to the inherent uncertainties involved in making estimates and assumptions, actual results may differ from those assumed in our forecasts. We derived our discount rate using a capital asset pricing model and analyzing published rates for industries relevant to the DA reporting unit to estimate the cost of equity financing. We used a discount rate that are commensurate with the risks and uncertainties inherent in the respective business and in our internally developed forecasts.

Based upon the results of our annual quantitative impairment test, we concluded that the carrying value of the DA reporting unit exceeded its estimated fair value as of the testing date, which resulted in goodwill impairment charges of $8.1 million. The goodwill impairment was calculated as the amount that the carrying value of the DA reporting unit, including any goodwill, exceeded its fair value. The carrying value of the DA reporting unit equals its fair value upon completion of the goodwill impairment test.

Changes in the carrying amount of goodwill are as follows (in thousands):


Balance at December 31, 2019	$	—
Acquisition goodwill recognized	17,522
Measurement period adjustment	2,276
Goodwill impairment recognized	(11,706)
Balance at December 31, 2020	$	8,092
Goodwill impairment recognized	(8,092)
Balance at December 31, 2021	$	—


	December 31, 2021		December 31, 2020
Goodwill	$	19,798	$	19,798
Accumulated impairment losses	(19,798)		(11,706)
Goodwill balance, net of impairment	$	—	$	8,092