Document and Entity Information
Document and Entity Information | 3 Months Ended |
Mar. 31, 2017 | |
Document And Entity Information | |
Entity Registrant Name | Select Energy Services, Inc. |
Entity Central Index Key | 1,693,256 |
Document Type | S-1/A |
Document Period End Date | Mar. 31, 2017 |
Amendment Flag | false |
Entity Filer Category | Non-accelerated Filer |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Mar. 31, 2017 | Mar. 10, 2017 | Dec. 31, 2016 | Dec. 20, 2016 | Dec. 19, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Current assets | ||||||||
Cash and cash equivalents | $ 8,048,000 | $ 40,041,000 | $ 13,897,000 | $ 16,305,000 | $ 10,282,000 | |||
Accounts receivable trade, net of allowance for doubtful accounts of $2,203 and $2,144, respectively | 103,180,000 | 75,892,000 | 79,479,000 | |||||
Accounts receivable, related parties | 279,000 | 135,000 | 224,000 | |||||
Inventories | 940,000 | 1,001,000 | 701,000 | |||||
Prepaid expenses and other current assets | 5,683,000 | 7,586,000 | 10,408,000 | |||||
Total current assets | 118,130,000 | 124,655,000 | 107,117,000 | |||||
Property and equipment | 756,124,000 | 739,386,000 | 736,418,000 | |||||
Accumulated depreciation | (500,541,000) | (490,519,000) | (367,726,000) | |||||
Property and equipment, net | 255,583,000 | 248,867,000 | 368,692,000 | |||||
Goodwill | 22,975,000 | $ 10,700,000 | 12,242,000 | 150,771,000 | 171,139,000 | |||
Other intangible assets, net | 36,017,000 | 11,586,000 | 19,840,000 | |||||
Other assets | 8,410,000 | 7,716,000 | 3,828,000 | |||||
Total assets | 441,115,000 | 405,066,000 | 650,248,000 | |||||
Current liabilities | ||||||||
Accounts payable | 13,012,000 | 10,796,000 | 9,745,000 | |||||
Accounts payable and accrued expenses, related parties | 666,000 | 648,000 | 112,000 | |||||
Accrued salaries and benefits | 6,431,000 | 2,511,000 | 2,658,000 | |||||
Accrued insurance | 9,351,000 | 10,338,000 | 16,437,000 | |||||
Accrued expenses and other current liabilities | 24,031,000 | 22,091,000 | 14,293,000 | |||||
Total current liabilities | 53,491,000 | 46,384,000 | 65,550,000 | |||||
Accrued lease obligations | 17,282,000 | 15,946,000 | ||||||
Other long term liabilities | 7,771,000 | 8,028,000 | 11,582,000 | |||||
Long-term debt, net of current maturities | 34,000,000 | 0 | 2,900,000 | |||||
Total liabilities | 112,544,000 | 70,358,000 | 322,473,000 | |||||
Commitments and contingencies (Note 8) | ||||||||
Preferred stock | ||||||||
Additional paid-in capital | 115,891,000 | 113,175,000 | ||||||
Accumulated deficit | (5,215,000) | (1,043,000) | ||||||
Total stockholders' equity | 111,263,000 | 112,716,000 | 317,154,000 | |||||
Noncontrolling interests | 217,308,000 | 221,992,000 | 10,621,000 | |||||
Total equity | 328,571,000 | 334,708,000 | $ 337,768,000 | $ 40,520,000 | 327,775,000 | $ 413,050,000 | ||
Total liabilities and equity | 441,115,000 | 405,066,000 | $ 650,248,000 | |||||
Class A-1 common stock | ||||||||
Current liabilities | ||||||||
Common stock | 161,000 | 161,000 | ||||||
Total equity | 161,000 | 161,000 | 161,000 | |||||
Class A common stock | ||||||||
Current liabilities | ||||||||
Common stock | 41,000 | 38,000 | ||||||
Total equity | 41,000 | 38,000 | 38,000 | |||||
Class B common stock | ||||||||
Current liabilities | ||||||||
Common stock | 385,000 | 385,000 | ||||||
Total equity | $ 385,000 | $ 385,000 | $ 385,000 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Allowance for doubtful accounts | $ 2,203 | $ 2,144 | $ 2,351 |
Preferred Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 | $ 0.01 |
Preferred Stock, Shares Authorized | 50,000,000 | 50,000,000 | 50,000,000 |
Preferred Stock, Shares Issued | 0 | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 | 0 |
Class A-1 common stock | |||
Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 | |
Common Stock, Shares Authorized | 40,000,000 | 40,000,000 | 0 |
Common Stock, Shares, Issued | 16,100,000 | 16,100,000 | 0 |
Common Stock, Shares, Outstanding | 16,100,000 | 16,100,000 | 0 |
Class A common stock | |||
Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 | |
Common Stock, Shares Authorized | 250,000,000 | 250,000,000 | 0 |
Common Stock, Shares, Issued | 4,077,970 | 3,802,792 | 0 |
Common Stock, Shares, Outstanding | 4,077,970 | 3,802,792 | 0 |
Class B common stock | |||
Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 | |
Common Stock, Shares Authorized | 150,000,000 | 150,000,000 | 0 |
Common Stock, Shares, Issued | 38,462,541 | 38,462,541 | 0 |
Common Stock, Shares, Outstanding | 38,462,541 | 38,462,541 | 0 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenue | ||
Water solutions | $ 78,377 | $ 62,289 |
Accommodations and rentals | 9,515 | 8,514 |
Wellsite completion and construction services | 12,033 | 8,036 |
Total revenue | 99,925 | 78,839 |
Costs of revenue | ||
Water solutions | 60,621 | 51,534 |
Accommodations and rentals | 7,923 | 6,238 |
Wellsite completion and construction services | 10,419 | 6,862 |
Depreciation and amortization | 21,204 | 26,142 |
Total costs of revenue | 100,167 | 90,776 |
Gross profit (loss) | (242) | (11,937) |
Operating expenses | ||
Selling, general and administrative | 9,957 | 8,980 |
Depreciation and amortization | 446 | 634 |
Lease abandonment costs | 1,863 | |
Total operating expenses | 12,266 | 9,614 |
Loss from operations | (12,508) | (21,551) |
Other income (expense) | ||
Interest expense, net | (730) | (3,367) |
Other income (expense), net | 1,064 | (566) |
Loss before tax expense | (12,174) | (25,484) |
Tax expense | (106) | (309) |
Net income (loss) | (12,280) | (25,793) |
Less: Net loss attributable to noncontrolling interests | 8,108 | 456 |
Net loss attributable to Select Energy Services, Inc. | (4,172) | (25,337) |
Predecessor | ||
Other income (expense) | ||
Less: Net loss attributable to noncontrolling interests | $ 25,337 | |
Class A-1 common stock | ||
Other income (expense) | ||
Net loss attributable to Select Energy Services, Inc. | $ (3,363) | |
EARNINGS PER SHARE | ||
Weighted average shares outstanding: | 16,100,000 | |
Net loss per share attributable to common stockholders: | $ (0.21) | |
Class A common stock | ||
Other income (expense) | ||
Net loss attributable to Select Energy Services, Inc. | $ (809) | |
EARNINGS PER SHARE | ||
Weighted average shares outstanding: | 3,870,194 | |
Net loss per share attributable to common stockholders: | $ (0.21) | |
Class B common stock | ||
EARNINGS PER SHARE | ||
Weighted average shares outstanding: | 38,462,541 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | Dec. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | Dec. 19, 2016 | Dec. 31, 2015 |
Net loss | $ (3,060) | $ (12,280) | $ (25,793) | $ (313,948) | $ (310,888) | $ (81,872) |
Interest rate derivatives designated as cash flow hedges | ||||||
Unrealized holding loss arising during period | (80) | 106 | 277 | |||
Net amount reclassified to earnings | 85 | 113 | 338 | |||
Net change in unrealized gain (loss) | 5 | (7) | (61) | |||
Comprehensive loss | (12,280) | (25,788) | (313,941) | (81,811) | ||
Less: Comprehensive loss attributable to noncontrolling interests | 8,108 | 456 | (6,424) | (981) | ||
Comprehensive loss attributable to Select Energy Services, Inc. | $ (4,172) | (1,043) | ||||
Predecessor | ||||||
Net loss | (306,481) | $ (306,481) | (80,891) | |||
Interest rate derivatives designated as cash flow hedges | ||||||
Comprehensive loss | $ 306,474 | $ 80,830 | ||||
Less: Comprehensive loss attributable to noncontrolling interests | $ (25,332) |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - USD ($) $ in Thousands | Class A-1 common stock | Class A common stock | Class B common stock | Total Stockholders' Equity | Additional Paid-In Capital | Accumulated Deficit | Noncontrolling Interests | Total |
Beginning balance at Dec. 31, 2014 | $ 11,510 | $ 413,050 | ||||||
Equity-based compensation | 692 | |||||||
Net income (loss) | (981) | (81,872) | ||||||
Ending balance at Dec. 31, 2015 | 10,621 | 327,775 | ||||||
Equity-based compensation | 317 | |||||||
Net income (loss) | $ (844) | $ (199) | (313,948) | |||||
Ending balance at Dec. 31, 2016 | $ 161 | $ 38 | $ 385 | $ 112,716 | $ 113,175 | $ (1,043) | 221,992 | 334,708 |
Ending balance (in shares) at Dec. 31, 2016 | 16,100,000 | 3,802,972 | 38,462,541 | |||||
Beginning balance at Dec. 31, 2015 | 10,621 | 327,775 | ||||||
Net income (loss) | (4,407) | (310,888) | ||||||
Ending balance at Dec. 19, 2016 | 5,297 | 40,520 | ||||||
Issuance of shares for acquisition | ||||||||
Ending balance at Dec. 20, 2016 | $ 161 | $ 38 | $ 385 | 113,759 | 113,175 | 224,009 | 337,768 | |
Ending balance (in shares) at Dec. 20, 2016 | 16,100,000 | 3,802,972 | 38,462,541 | |||||
Beginning balance at Dec. 19, 2016 | 5,297 | 40,520 | ||||||
Net income (loss) | (1,043) | (1,043) | (2,017) | (3,060) | ||||
Ending balance at Dec. 31, 2016 | $ 161 | $ 38 | $ 385 | 112,716 | 113,175 | (1,043) | 221,992 | 334,708 |
Ending balance (in shares) at Dec. 31, 2016 | 16,100,000 | 3,802,972 | 38,462,541 | |||||
Issuance of shares for acquisition | $ 3 | 2,498 | 2,495 | 3,002 | 5,500 | |||
Issuance of shares for acquisition (in shares) | 274,998 | |||||||
Equity-based compensation | 221 | 221 | 422 | 643 | ||||
Net income (loss) | (4,172) | (4,172) | (8,108) | (12,280) | ||||
Ending balance at Mar. 31, 2017 | $ 161 | $ 41 | $ 385 | $ 111,263 | $ 115,891 | $ (5,215) | $ 217,308 | $ 328,571 |
Ending balance (in shares) at Mar. 31, 2017 | 16,100,000 | 4,077,970 | 38,462,541 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cash flows from operating activities | ||
Net loss | $ (12,280) | $ (25,793) |
Adjustments to reconcile net loss to net cash provided by operating activities | ||
Depreciation and amortization | 21,650 | 26,776 |
(Gain) loss on disposal of property and equipment | (1,105) | 622 |
Bad debt expense | 334 | 158 |
Amortization of debt issuance costs | 309 | 651 |
Equity-based compensation | 643 | 308 |
Changes in operating assets and liabilities | ||
Accounts receivable | (21,157) | 18,994 |
Prepaid expenses and other assets | 1,337 | 2,006 |
Accounts payable and accrued liabilities | 2,333 | (7,302) |
Net cash (used in) provided by operating activities | (7,936) | 16,420 |
Cash flows from investing activities | ||
Acquisitions, net of cash received | (49,004) | |
Purchase of property, equipment, and intangible assets | (10,806) | (22,275) |
Proceeds received from sale of property and equipment | 1,753 | 2,736 |
Net cash used in investing activities | (58,057) | (19,539) |
Cash flows from financing activities | ||
Proceeds from revolving line of credit | 34,000 | 8,500 |
Payments on long-term debt | (7,625) | |
Payment of debt issuance costs | (376) | |
Member distributions | 212 | |
Net cash provided by financing activities | 34,000 | 711 |
Net decrease in cash and cash equivalents | (31,993) | (2,408) |
Cash and cash equivalents, beginning of period | 40,041 | 16,305 |
Cash and cash equivalents, end of period | 8,048 | 13,897 |
Supplemental cash flow disclosure: | ||
Cash paid for interest | 427 | 2,711 |
Cash paid for taxes | 12 | 208 |
Supplemental disclosure of noncash investing activities: | ||
Capital expenditures included in accounts payable and accrued liabilities | $ 4,766 | $ 28 |
BUSINESS AND BASIS OF PRESENTAT
BUSINESS AND BASIS OF PRESENTATION | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
BUSINESS AND BASIS OF PRESENTATION | ||
BUSINESS AND BASIS OF PRESENTATION | NOTE 1—BUSINESS AND BASIS OF PRESENTATION Description of the business : Select Energy Services, Inc. (“Select Energy Services” or “the Company”) was incorporated as a Delaware corporation on November 21, 2016. The Company is a holding company whose sole material asset consists of a membership interest in SES Holdings, LLC (“SES Holdings” or the “Predecessor”). SES Holdings was formed in July 2008 and in October 2008, members of Select Energy Services, LLC (“Select”), formerly known as Peak Oilfield Services, LLC (“Peak”), a Delaware limited liability company formed in December 2006, transferred all interests in Select to SES Holdings in exchange for membership interests in SES Holdings and Select became a wholly‑owned subsidiary of SES Holdings. Select Energy Services is an oilfield services company that provides water solutions to the U.S conventional oil and natural gas industry. The Company offers water‑related services that support oil and gas well completion and production activities including sourcing, transfer, containment, monitoring, treatment, flowback, hauling and disposal in the U.S. shale basins. These services establish and maintain the flow of oil and natural gas throughout the productive life of a horizontal well. The Company also operates a wellsite services group as a part of its total water solutions offering. These services include equipment rental, accommodations, crane and logistics services, wellsite and pipeline construction, and field services. The Company conducts its wellsite services activities on a third‑party contractual basis unrelated to its water‑related services. Reorganization : On December 20, 2016, Select Energy Services completed a private placement of 16,100,000 shares of Class A‑1 common stock (the “144A Offering”) at an offering price of $20.00 per share. In conjunction with the 144A Offering, SES Holdings’ then existing Class A and Class B units were converted into a single class of common units (the “SES Holdings LLC Units”) and SES Holdings effected a 10.3583 for 1 unit split. In exchange for the contribution of all net proceeds from the 144A Offering to SES Holdings, SES Holdings issued 16,100,000 SES Holdings LLC Units to Select Energy Services, and Select Energy Services became the sole managing member of SES Holdings. Select Energy Services issued 38,462,541 shares of Class B common stock to the other member of SES Holdings, SES Legacy Holdings, LLC (“Legacy Owner Holdco”), or one share for each SES Holdings LLC Unit held by Legacy Owner Holdco. The Company also acquired 3,802,972 SES Holdings LLC Units from certain legacy owners (the “Contributing Legacy Owners”) in exchange for the issuance of 3,802,972 shares of Class A common stock. Shareholders of Class A‑1, Class A, and Class B common stock vote together as a single class on all matters, subject to certain exceptions in our amended and restated certificate of incorporation. Shareholders of Class B common stock have voting rights only and are not entitled to an economic interest in Select Energy Services based on their ownership of Class B common stock. The reorganization transactions were treated as a combination of entities under common control with assets and liabilities transferred at their carrying amounts in a manner similar to a pooling of interests. Unless otherwise stated or the context otherwise indicates, all references to the “Company” or similar expressions for time periods prior to the reorganization and 144A Offering transactions refer to SES Holdings and its subsidiaries. For time periods subsequent to the reorganization and 144A Offering transactions, these terms refer to Select Energy Services, Inc. and its subsidiaries. Credit Facility : Concurrent with the closing of the 144A Offering, the Company repaid all of its outstanding indebtedness and amended its Credit Facility to reduce the total commitment of its revolving line of credit to $100.0 million. See Note 7—Debt for further discussion. Exchange rights : Under the Eighth Amended and Restated Limited Liability Company Agreement of SES Holdings (the “SES Holdings LLC Agreement”), Legacy Owner Holdco has the right (an “Exchange Right”) to cause SES Holdings to acquire all or a portion of its SES Holdings LLC Units for, at SES Holdings’ election, (i) shares of the Company’s Class A common stock at an exchange ratio of one share of Class A common stock for each SES Holdings LLC Unit exchanged, subject to conversion rate adjustments for stock splits, stock dividends, reclassification and other similar transactions or (ii) cash in an amount equal to the Cash Election Value (as defined within the SES Holdings LLC Agreement) of such Class A common stock. Alternatively, upon the exercise of any Exchange Right, the Company will have the right (the “Call Right”) to acquire the tendered SES Holdings LLC Units from the exchanging unitholder for, at its election, (i) the number of shares of Class A common stock the exchanging unitholder would have received under the exchange Right or (ii) cash in an amount equal to the Cash Election Value of such Class A common stock. In connection with any exchange of SES Holdings LLC Units pursuant to an Exchange Right or Call Right, the corresponding number of shares of the Company’s Class B common stock will be cancelled. Registration rights : In December 2016, in connection with the closing of the 144A Offering, Select Energy Services entered into a registration rights agreement with FBR Capital Markets & Co. for the benefit of the investors in the 144A Offering. Under this registration rights agreement, the Company agreed, at its expense, to file with the SEC, in no event later than April 30, 2017, a shelf registration statement registering for resale the 16,100,000 shares of the Company’s Class A common stock issuable upon conversion of the Class A‑1 common stock sold in the 144A Offering plus any additional shares of Class A‑1 common stock issued in respect thereof whether by stock dividend, stock distribution, stock split, or otherwise, and to use commercially reasonable efforts to cause such registration statement to be declared effective by the SEC as soon as practicable but in any event within 60 days after the closing of the Company’s IPO (as defined below). The Company filed this registration statement with the SEC on April 28, 2017. Each share of Class A‑1 common stock will be automatically converted into a share of Class A common stock on a one‑for‑one basis upon the effectiveness of such registration statement. Investors in the 144A Offering will be restricted from selling shares for a period of 60 days following the effective date of the registration statement related to the Company’s initial public offering of 8,700,000 shares of Class A common stock at a price of $14.00 per share (the “IPO”), or April 20, 2017. In addition, Legacy Owner Holdco has the right, under certain circumstances, to cause the Company to register the shares of Class A common stock obtained pursuant to the Exchange Right. Tax receivable agreement : Concurrent with the closing of the 144A Offering, the Company entered into two tax receivable agreements with Legacy Owner Holdco and certain legacy owners of SES Holdings. See Note 12—Related Party Transactions for further discussion. Basis of presentation : The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the SEC. These unaudited interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all disclosures required for financial statements prepared in conformity with GAAP. Accordingly, the accompanying unaudited interim consolidated financial statements and related notes should be read in conjunction with the Company’s consolidated financial statements for the years ended December 31, 2016 and 2015 included in the Final Prospectus. The consolidated financial statements include the accounts of Select Energy Services and all of its majority‑owned or controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, all adjustments which are of a normal recurring nature and considered necessary for a fair presentation of our interim financial statements have been included in these unaudited interim consolidated financial statements. Operating results for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2017. The Company’s historical financial statements prior to the 144A Offering and reorganization transactions are prepared using SES Holdings’ historical basis in the assets and liabilities, and include all revenues, costs, assets and liabilities attributed to SES Holdings. For investments in subsidiaries that are not wholly‑owned, but where the Company exercises control, the equity held by the minority owners and their portion of net income (loss) are reflected as noncontrolling interests. Investments in entities in which Select Energy Services exercises significant influence over operating and financial policies are accounted for using the equity method, and investments in entities for which the Company does not have significant control or influence are accounted for using the cost method. | NOTE 1—BUSINESS AND BASIS OF PRESENTATION Description of the business : Select Energy Services, Inc. (“Select Energy Services” or “the Company”) was incorporated as a Delaware corporation on November 21, 2016. The Company is a holding company whose sole material asset consists of a membership interest in SES Holdings, LLC (“SES Holdings” or the “Predecessor”). SES Holdings was formed in July 2008 and in October 2008, members of Select Energy Services, LLC (“Select”), formerly known as Peak Oilfield Services, LLC (“Peak”), a Delaware limited liability company, formed in December 2006, transferred all interests in Select to SES Holdings in exchange for membership interests in SES Holdings and Select became a wholly‑owned subsidiary of SES Holdings. Select Energy Services is an oilfield services company that provides water solutions to the U.S conventional oil and natural gas industry. The Company offers water‑related services that support oil and gas well completion and production activities including containment, monitoring, treatment, flowback, hauling and disposal in the U.S. shale basins. These services establish and maintain the flow of oil and natural gas throughout the productive life of a horizontal well. The Company also operates a wellsite services group as a part of its total water solutions offering. These services include equipment rental, accommodations, crane and logistics services, wellsite and pipeline construction, and field services. The Company conducts its wellsite services activities on a third‑party contractual basis unrelated to its water‑related services. Reorganization : On December 20, 2016, Select Energy Services completed a private placement of equity for 16,100,000 shares of Class A‑1 common stock (the “144A Offering”) at an offering price of $20.00 per share. In conjunction with the 144A Offering, SES Holdings’ then existing Class A and Class B units were converted into a single class of common units and SES Holdings effected a 10.3583 for 1 unit split. In exchange for the contribution of all net proceeds from the 144A Offering, SES Holdings issued 16,100,000 common units to Select Energy Services, and Select Energy Services became the sole managing member of SES Holdings. Select Energy Services issued 38,462,541 shares of Class B common stock, or one share for each common unit of SES Holdings held by SES Legacy Holdings, LLC (“Legacy Owner Holdco”). The Company also acquired 3,802,972 common units of SES Holdings from certain legacy owners (the “Contributing Legacy Owners”) in exchange for the issuance of 3,802,972 shares of Class A common stock. Shareholders of Class A‑1, Class A, and Class B common stock vote together as a single class on all matters. Shareholders of Class B common stock have voting rights only and are not entitled to an economic interest in Select Energy Services, Inc. based on their ownership of Class B common stock. The reorganization transactions were treated as a combination of entities under common control with assets and liabilities transferred at their carrying amounts in a manner similar to a pooling of interests. Unless otherwise stated or the context otherwise indicates, all references to the “Company” or similar expressions for time periods prior to the reorganization and 144A Offering transactions refer to SES Holdings, LLC and its subsidiaries. For time periods subsequent to the reorganization and 144A Offering transactions, these terms refer to Select Energy Services, Inc. and its subsidiaries. Credit facility : Concurrent with the closing of the 144A Offering, the Company repaid all debt outstanding and amended its senior secured credit facility to reduce the total commitment of its revolving line of credit to $100.0 million. See Note 7—Debt for further discussion. Exchange rights : Under the SES Holdings LLC Agreement, Legacy Owner Holdco has the right (an “Exchange Right”) to cause SES Holdings to acquire all or a portion of its common units of SES Holdings for, at SES Holdings’ election, (i) shares of the Company’s Class A common stock at an exchange ratio of one share of Class A common stock for each common unit of SES Holdings exchanged, subject to conversion rate adjustments for stock splits, stock dividends, reclassification and other similar transactions or (ii) cash in an amount equal to the Cash Election Value (as defined within the SES Holdings LLC Agreement) of such Class A common stock. Alternatively, upon the exercise of any Exchange Right, the Company will have the right (the “Call Right”) to acquire the tendered common units of SES Holdings from the exchanging unitholder for, at its election, (i) the number of shares of Class A common stock the exchanging unitholder would have received under the exchange Right or (ii) cash in an amount equal to the Cash Election Value of such Class A common stock. In connection with any exchange of common units of SES Holdings pursuant to an Exchange Right or Call Right, the corresponding number of shares of the Company’s Class B common stock will be cancelled. Registration rights : In December 2016, in connection with the closing of the 144A Offering, Select Energy Services entered into a registration rights agreement with FBR Capital Markets & Co. Under this registration rights agreement, the Company agreed, at its expense, to file with the SEC, in no event later than April 30, 2017, a shelf registration statement registering for resale the 16,100,000 shares of the Company’s Class A‑1 common stock sold in the 144A Offering plus any additional shares of Class A‑1 common stock issued in respect thereof whether by stock dividend, stock distribution, stock split, or otherwise, and to cause such registration statement to be declared effective by the SEC as soon as practicable but in any event within 180 days after the initial filing of such registration statement. Each share of Class A‑1 common stock will be automatically converted into a share of Class A common stock on a one‑for‑one basis (i) immediately prior to the closing of this offering or any closing of the underwriters’ option to purchase additional shares, as applicable, for any shares of Class A‑1 common stock that are convertible into shares of Class A common stock that will be sold in this offering by certain of the 144A Investors and (ii) upon the effectiveness of a registration statement filed to permit resales of shares purchased in the 144A Offering for any shares of Class A‑1 common stock outstanding after the closing of this offering. Investors in the 144A Offering will be entitled to make sales under such registration statement 60 days following the completion of this offering. In addition, Legacy Owner Holdco has the right, under certain circumstances, to cause the Company to register the shares of Class A common stock obtained pursuant to the Exchange Right. Tax receivable agreement : Concurrent with the closing of the 144A Offering, the Company entered into a Tax Receivable Agreement with certain legacy owners, and their affiliates, of SES Holdings. See Note 12—Related Party Transactions for further discussion. Basis of presentation : The consolidated financial statements include the accounts of Select Energy Services and all of its majority‑owned or controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company’s historical financial statements prior to the 144A Offering are prepared using SES Holdings’ historical basis in the assets and liabilities, and include all revenues, costs, assets and liabilities attributed to SES Holdings. For investments in subsidiaries that are not wholly‑owned, but where the Company exercises control, the equity held by the minority owners and their portion of net income (loss) are reflected as noncontrolling interests. Investments in entities in which Select Energy Services exercises significant influence over operating and financial policies are accounted for using the equity method, and investments in entities for which the Company does not have significant control or influence are accounted for using the cost method. Discontinued operations : The Company considers a component of its business to be one that comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of its business. The operating results of a component of its business that either has been disposed of or is classified as held for sale are presented as discontinued operations when the operations and cash flows of the component have been or will be eliminated from its ongoing operations as a result of the disposal transaction and the Company will not have any significant continuing involvement in the operations of the disposed component. Segment reporting : The Company operates in three operating and reportable segments. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assess performance. The Company’s chief operating decision maker assesses performance and allocates resources on the basis of the three reportable segments. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
SIGNIFICANT ACCOUNTING POLICIES | ||
SIGNIFICANT ACCOUNTING POLICIES | NOTE 2—SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies : Our significant accounting policies are disclosed in Note 2 of the consolidated financial statements for the years ended December 31, 2016 and 2015 included in the Final Prospectus. There have been no changes in such policies or the application of such policies during the quarter ended March 31, 2017. Use of estimates : The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates its estimates, including those related to recoverability of long‑lived assets and intangibles, useful lives used in depreciation and amortization, uncollectible accounts receivable, income taxes, self‑insurance liabilities, share‑based compensation and contingent liabilities. The Company bases its estimates on historical and other pertinent information that are believed to be reasonable under the circumstances. The accounting estimates used in the preparation of the consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. Emerging Growth Company status: Under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), we are an “emerging growth company,” which allows us to have an extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act. We intend to take advantage of all of the reduced reporting requirements and exemptions, including the longer phase‑in periods for the adoption of new or revised financial accounting standards under Section 107 of the JOBS Act until we are no longer an emerging growth company. Our election to use the phase‑in periods permitted by this election may make it difficult to compare our financial statements to those of non‑emerging growth companies and other emerging growth companies that have opted out of the longer phase‑in periods under Section 107 of the JOBS Act and who will comply with new or revised financial accounting standards. If we were to subsequently elect instead to comply immediately with these public company effective dates, such election would be irrevocable pursuant to Section 107 of the JOBS Act. Recent accounting pronouncements : In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) , outlining a comprehensive new revenue recognition standard that will supersede ASC 605, Revenue Recognition. The new accounting guidance creates a framework under which an entity will allocate the transaction price to separate performance obligations and recognize revenue when each performance obligation is satisfied. Under the new standard, entities will be required to use judgment and make estimates, including identifying performance obligations in a contract, estimating the amount of variable consideration to include in the transaction price, allocating the transaction price to each separate performance obligation, and determining when an entity satisfies its performance obligations. The standard allows for either “full retrospective” adoption, meaning that the standard is applied to all of the periods presented with a cumulative catch‑up as of the earliest period presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements with a cumulative catch‑up as of the current period. In August 2015, the FASB decided to defer the original effective date by one year to be effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019 for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures and has not yet determined the method by which it will adopt the standard. In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes , which amends existing guidance on income taxes to require the classification of all deferred tax assets and liabilities as noncurrent on the balance sheet. The pronouncement is effective for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018 for nonpublic entities, and may be applied either prospectively or retrospectively. The Company prospectively adopted this guidance during the three months ended March 31, 2017. Prior periods were not retrospectively adjusted. As the Company’s deferred tax assets and liabilities are all noncurrent, the adoption did not result in a change to the consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU 2016-02, Leases , which introduces a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in the current accounting guidance as well as the FASB’s new revenue recognition standard. However, the ASU eliminates the use of bright‑line tests in determining lease classification as required in the current guidance. The ASU also requires additional qualitative disclosures along with specific quantitative disclosures to better enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The pronouncement is effective for annual reporting periods beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, for nonpublic entities using a modified retrospective approach. Early adoption is permitted. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting , that provides a new requirement to record all of the tax effects related to share‑based payments at settlement (or expiration) through the income statement. This pronouncement is effective for annual reporting periods beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018, for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which addresses the classification and presentation of eight specific cash flow issues that currently result in diverse practices. The amendments provide guidance in the presentation and classification of certain cash receipts and cash payments in the statement of cash flows including debt prepayment or debt extinguishment costs, settlement of zero‑coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate‑owned life insurance policies, and distributions received from equity method investees. This pronouncement is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, for nonpublic entities. The amendments in this ASU should be applied using a retrospective approach. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-01 , Clarifying the Definition of a Business , with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This pronouncement is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment . This pronouncement removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This pronouncement is effective for annual reporting periods beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2019. The amendments in this ASU should be applied using a prospective approach. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. | NOTE 2—SIGNIFICANT ACCOUNTING POLICIES Use of estimates : The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates its estimates, including those related to recoverability of long‑lived assets and intangibles, useful lives used in depreciation and amortization, uncollectible accounts receivable, income taxes, self‑insurance liabilities, share‑based compensation and contingent liabilities. The Company bases its estimates on historical and other pertinent information that are believed to be reasonable under the circumstances. The accounting estimates used in the preparation of the consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. Cash and cash equivalents : The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Accounts receivable and allowance for doubtful accounts : Accounts receivable are stated at the invoiced amount, or the earned but not yet invoiced amount, net of an allowance for doubtful accounts. The Company establishes an allowance for doubtful accounts based on the review of several factors, including historical collection experience, current aging status of the customer accounts, and financial condition of its customers. Accounts receivable are written off when a settlement is reached for an amount less than the outstanding historical balance or when the Company determines that it is probable the balance will not be collected. The change in allowance for doubtful accounts is as follows: (in thousands) 2016 2015 Balance at beginning of year 2,351 3,169 Provisions for bad debts, included in SG&A expense 2,385 576 Uncollectible receivables written off (2,592) (1,394) Balance at end of year 2,144 2,351 Concentrations of credit and customer risk : Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. The amounts held in financial institutions periodically exceed the federal insured limit. Management believes that the financial institutions are financially sound and the risk of loss is minimal. The Company minimizes its exposure to counterparty credit risk by performing credit evaluations and ongoing monitoring of the financial stability of its customers. There were no customers that accounted for more than 10.0% of the Company’s consolidated revenues for the year ended December 31, 2016. During 2015, Anadarko Petroleum Corporation accounted for 10.6% of the Company’s consolidated revenues. Inventories : The Company values its inventories at lower of cost or market using the first‑in, first‑out (“FIFO”) method. Inventory costs primarily consist of water containment sections sold to customers in the ordinary course of business. Debt issuance costs : Debt issuance costs consist of costs directly associated with obtaining credit with financial institutions. These costs are recorded as a direct deduction from the carrying value of the associated debt liability and are generally amortized on a straight‑line basis over the life of the credit agreement, which approximates the effective‑interest method. Any unamortized debt issue costs are expensed in the year when the associated debt instrument is terminated. Amortization expense for debt issuance costs was $3.4 million and $3.2 million for the years ended December 31, 2016 and 2015, respectively, and is included in interest expense in the consolidated statements of operations. Property and equipment : Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on a straight line basis over the estimated useful life of each asset as noted below: Asset Classification Useful Life (years) Buildings and improvements 30 or lease term Vehicles and equipment 5 Machinery and equipment 2 - 15 Computer equipment and software 3 - 4 Office furniture and equipment 7 Disposal wells 7 - 10 Helicopters 7 Depreciation expense related to the Company’s property and equipment was $88.2 million and $98.3 million for the years ended December 31, 2016 and 2015, respectively. Expenditures for additions to property and equipment and major replacements are capitalized when they significantly increase the functionality or extend the useful life of the asset. Gains and losses on dispositions, maintenance, repairs and minor replacements are included in the consolidated statements of operations as incurred. See Note 5—Property and Equipment for further discussion. Goodwill and other intangible assets : Goodwill represents the excess of the purchase price of acquisitions over the fair value of the net assets acquired. Goodwill and other intangible assets not subject to amortization are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Intangible assets with finite useful lives are amortized either on a straight‑line basis over the asset’s estimated useful life or on a basis that reflects the pattern in which the economic benefits of the intangible assets are realized. Impairment of long‑lived and intangible assets : Long‑lived assets, such as property and equipment and finite‑lived intangible assets, are evaluated for impairment whenever events or changes in circumstances indicate that its carrying value may not be recoverable. Recoverability is measured by a comparison of its carrying amount to the estimated undiscounted cash flows to be generated by those assets. If the undiscounted cash flows are less than the carrying amount, the Company records impairment losses for the excess of its carrying value over the estimated fair value. The development of future cash flows and the estimate of fair value represent its best estimates based on industry trends and reference to market transactions and are subject to variability. The Company considers the factors within the fair value analysis to be Level 3 inputs within the fair value hierarchy. Due to certain economic factors related to oil prices and rig counts, during 2015, an impairment loss of $1.3 million related to other intangible assets was recognized within impairment of intangible assets in the consolidated statements of operations. The impairment related to certain intangible assets within the Company’s Water Solutions segment. The Company determined that triggering events existed during 2016 resulting in an evaluation of the recoverability of the carrying value of certain property and equipment. As a result of this evaluation, the Company recorded impairment of property and equipment of $60.0 million related to the Company’s Water Solutions segment. See Note 11—Fair Value Measurement for further discussion. The Company conducts its annual goodwill impairment test in the fourth quarter each year, or more frequently if indicators of impairment exist. The Company’s annual impairment tests utilize discounted cash flow projections using weighted average cost of capital calculations based on capital structures of publicly traded peer companies to determine the fair value of its reporting units. The Company’s reporting units are based on its organizational and reporting structure. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the implied fair value of the reporting unit’s goodwill is less than its carrying value. Application of the goodwill impairment test requires judgment, including the identification of reporting units, allocation of assets (including goodwill) and liabilities to reporting units and determining the fair value. The determination of reporting unit fair value relies upon certain estimates and assumptions. These estimates and assumptions are affected by numerous factors, including the general economic environment and levels of exploration and production activity of oil and natural gas companies. The Company considers these factors to be Level 3 inputs within the fair value hierarchy. While the Company believes that the estimates and assumptions used in its annual impairment tests are reasonable, changes in these estimates and assumptions could impact the determination of its reporting unit fair value. Due to certain economic factors related to oil prices and rig counts during 2015, an impairment loss of $20.1 million related to goodwill was recognized in the consolidated statements of operations for the year ended December 31, 2015. The Company determined that additional triggering events were present during 2016 resulting in a goodwill impairment assessment of $138.5 million, primarily related to the Company’s Water Solutions segment. See Note 6—Goodwill and Other Intangible Assets and Note 11—Fair Value Measurement for further discussion. Asset retirement obligations : The asset retirement obligation (“ARO”) liability reflects the present value of estimated costs of plugging, site reclamation, and similar activities associated with the Company’s salt water disposal wells. The Company utilizes current retirement costs to estimate the expected cash outflows for retirement obligations. The Company also estimates the productive life of the disposal wells, a credit‑adjusted risk‑free discount rate, and an inflation factor in order to determine the current present value of this obligation. The Company’s ARO liabilities are included in accrued expenses and other current liabilities and other long term liabilities during the years ended December 31, 2016 and 2015. The change in asset retirement obligations is as follows: (in thousands) 2016 2015 Balance at beginning of year 1,483 1,560 Accretion expense, included in Depreciation and Amortization expense 155 150 Change in estimate 30 (60) Settlements — (167) Balance at end of year 1,668 1,483 Self‑insurance : The Company self‑insures, through deductibles and retentions, up to certain levels for losses related to general liability, workers’ compensation and employer’s liability, and vehicle liability. The Company’s exposure (i.e. the retention or deductible) per occurrence is $1.0 million for general liability, $1.0 million for workers’ compensation and employer’s liability, and $1.0 million for vehicle liability. The Company also has an excess loss policy over these coverages with a limit of $50.0 million in the aggregate. Management regularly reviews its estimates of reported and unreported claims and provide for losses through reserves. Prior to June 1, 2016, the Company was self‑insured for group medical claims subject to a deductible of $250 thousand for large claims. As of June 1, 2016, the Company is fully‑insured for group medical. Employee benefit plans : The Company sponsors a defined contribution 401(k) Profit Sharing Plan (the “401(k) Plan”) for the benefit of substantially all employees of the Company. The 401(k) Plan allows eligible employees to make tax‑deferred contributions, not to exceed annual limits established by the Internal Revenue Service. Prior to December 4, 2015, the Company made matching contributions of 100% of employee contributions, up to 4% of compensation. These matching contributions were vested immediately. Effective December 4, 2015, the employer match was discontinued for all employees. The Company did not make any matching contributions for the year ended December 31, 2016. The Company’s contributions were $1.9 million for the year ended December 31, 2015. Revenue recognition : The Company recognizes revenue when it is realized or realizable and earned. Revenues are considered realized or realizable and earned when: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the seller’s price to the buyer is fixed or determinable, and (iv) collectability is reasonably assured. Services are typically priced on a throughput, day‑rate, hourly‑rate, or per‑job basis depending on the type of services provided. The Company’s services are generally governed by a service agreement or other persuasive evidence of an arrangement that include fixed or determinable fees and do not generally include right of return provisions or other significant post‑delivery obligations. Collectability is reasonably assured based on the establishment of appropriate credit qualification prior to services being rendered. Revenue generated by each of the Company’s segments are outlined as follows: Water Solutions —The Company’s Water Solutions segment provides water‑related services to customers, including the sourcing and transfer of water; the containment of fluids; measuring and monitoring of water; the filtering and treatment of fluids, well testing and handling, transportation, and recycling or disposal of fluids. Revenue from water solutions is primarily based on a per‑barrel price or other throughput metric as specified in the contract. We recognize revenue from water solutions when services are performed. The Company’s agreements with its customers are often referred to as “price sheets” and sometimes provide pricing for multiple services. However, these agreements generally do not authorize the performance of specific services or provide for guaranteed throughput amounts. As customers are free to choose which services, if any, to use based on the Company’s price sheet, the Company prices its separate services on the basis of their standalone selling prices. Customer agreements generally do not provide for performance‑, cancellation‑, termination‑, or refund‑type provisions. Services based on price sheets with customers are generally performed under separately‑issued “work orders” or “field tickets” as services are requested. Of the Company’s Water Solutions service lines, only sourcing and transfer of water are consistently provided as part of the same arrangement. In these instances, revenue for both sourcing and transfer are recognized concurrently when delivered. Accommodations and Rentals —The Company’s Accommodations and Rentals segment provides workforce accommodations and surface rental equipment. Accommodation services include trailer housing and mobile home units for field personnel. Equipment rentals are related to the accommodations and include generators, sewer and water tanks, and communication systems. Revenue from accommodations and equipment rental is typically recognized on a day‑rate basis. Wellsite Completion and Construction Services —The Company’s Wellsite Completion and Construction Services segment provides crane and logistics services, wellsite and pipeline construction, and field services. Revenue for heavy‑equipment rental is typically recognized on a day‑rate basis. Construction or field personnel revenue is based on hourly rates or on a per‑job basis as services are performed. Equity‑based compensation : The Company accounts for equity‑based awards by measuring the awards at the date of grant and recognizing the grant‑date fair value as an expense using either straight‑line or accelerated attribution, depending on the specific terms of the award agreements over the requisite service period, which is usually equivalent to the vesting period. The Company expenses awards with graded‑vesting service conditions on a straight‑line basis. The Company has liability awards that are expected to be settled in cash. Liability awards are recorded as accrued liabilities based on the estimated fair value of the awards expected to vest and are remeasured at each reporting date until settled. These awards are subject to revision based on the impact of certain performance conditions associated with the incentive plans. See Note 9—Equity‑based Compensation for further discussion. Foreign currency : For its subsidiaries in Canada, where the local currency is the functional currency, the Company historically translated assets and liabilities using the exchange rates in effect at the balance sheet dates, while income and expense items were translated using average exchange rates during the period. The resulting gains or losses arising from the translation of accounts from the functional currency to the U.S. Dollar were reported in the consolidated statements of comprehensive income (loss). See Note 3—Discontinued Operations for further discussion. Derivatives and hedging : The Company accounts for certain interest rate swaps as cash flow hedges. Management formally assesses both at the hedge’s inception and on an ongoing basis that the derivative will be highly effective in offsetting changes in cash flows of the related hedged items. The fair values of the derivatives are recognized as either assets or liabilities in the consolidated balance sheets. The effective portions of the changes in fair values of the derivative contracts are initially recorded in accumulated other comprehensive income and reclassified into the statement of operations in the period in which earnings are impacted by the hedged items or in the period that the transaction no longer qualifies as a cash flow hedge. The ineffective portion of the gains or losses on the derivative contracts, if any, is recognized in the consolidated statement of operations as it is incurred. See Note 10—Derivative Financial Instruments for further discussion. Fair value measurements : The Company measures certain assets and liabilities pursuant to accounting guidance which establishes a three‑tier fair value hierarchy and prioritizes the inputs used in measuring fair value. Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 inputs are quoted prices or other market data for similar assets and liabilities in active markets, or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the asset or liability. Level 3 inputs are unobservable inputs based upon its own judgment and assumptions used to measure assets and liabilities at fair value. See Note 11—Fair Value Measurement for further discussion. Income taxes : Select Energy Services is subject to U.S. federal and state income taxes as a corporation. SES Holdings and its subsidiaries, with the exception of certain corporate subsidiaries, are treated as flow‑through entities for U.S. federal income tax purposes, and as such, are generally not subject to U.S. federal income tax at the entity level. Rather, the tax liability with respect to their taxable income is passed through to their members or partners. Accordingly, the Company is subject to U.S. federal income taxation on its allocable share of SES Holdings’ net U.S. taxable income. The state of Texas includes in its tax system a franchise tax applicable to the Company and an accrual for franchise taxes is included in the financial statements when appropriate. The Company and its subsidiaries account for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled pursuant to the provisions of Accounting Standards Codification (“ASC”) 740, Income Taxes. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in earnings in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized. Due to significant operating losses during historical periods, the Company determined that any deferred tax assets that would result from giving pro forma effect to the reorganization and 144A Offering would be fully offset by a valuation allowance. As a result, the pro forma tax effect and impact on earnings per share data would be zero. The determination of the provision for income taxes requires significant judgment, use of estimates, and the interpretation and application of complex tax laws. Significant judgment is required in assessing the timing and amounts of deductible and taxable items and the probability of sustaining uncertain tax positions. The benefits of uncertain tax positions are recorded in the Company’s financial statements only after determining a more‑likely‑than‑not probability that the uncertain tax positions will withstand challenge, if any, from taxing authorities. When facts and circumstances change, the Company reassesses these probabilities and records any changes through the provision for income taxes. The Company recognizes interest and penalties relating to uncertain tax provisions as a component of tax expense. The Company identified no uncertain tax positions as of December 31, 2016 and 2015. See Note 13—Income Taxes for further discussion. Pro forma earnings per share (unaudited) : The calculation of unaudited pro forma earnings per share gives effect to the issuance of Class A common shares that would be required to be sold to extinguish “as adjusted” debt related to the Permian acquisition for the period subsequent to the reorganization and 144A Offering transactions. Recent accounting pronouncements : In May 2014, the Financial Accounting Standards Board (the “FASB”) issued an accounting standards update (“ASU”) on a comprehensive new revenue recognition standard that will supersede ASC 605, Revenue Recognition. The new accounting guidance creates a framework under which an entity will allocate the transaction price to separate performance obligations and recognize revenue when each performance obligation is satisfied. Under the new standard, entities will be required to use judgment and make estimates, including identifying performance obligations in a contract, estimating the amount of variable consideration to include in the transaction price, allocating the transaction price to each separate performance obligation, and determining when an entity satisfies its performance obligations. The standard allows for either “full retrospective” adoption, meaning that the standard is applied to all of the periods presented with a cumulative catch‑up as of the earliest period presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements with a cumulative catch‑up as of the current period. In August 2015, the FASB decided to defer the original effective date by one year to be effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019 for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures and has not yet determined the method by which it will adopt the standard. In August 2014, the FASB issued an ASU which requires management to assess a company’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. Before this new standard, there was minimal guidance in U.S. GAAP specific to going concern. Under the new standard, disclosures are required when conditions give rise to substantial doubt about a company’s ability to continue as a going concern within one year from the financial statement issuance date. The new standard applies to all entities and is effective for the annual period ending after December 15, 2016, and all annual and interim periods thereafter. The Company’s adoption of this new guidance during the year ended December 31, 2016 did not have a material impact on its consolidated financial statements and related disclosures. In April 2015, the FASB issued an accounting standards update that requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying value of that debt liability, consistent with debt discounts. The guidance is effective retrospectively for fiscal years, beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016, for nonpublic entities. Early adoption is permitted for financial statements that have not been previously issued. The Company adopted this guidance in 2016 and retrospectively reclassified $2.9 million of debt issuance costs that was previously presented as other long term assets to a direct deduction from the carrying value of short‑term and long‑term debt within the consolidated balance sheets as of December 31, 2015. In November 2015, the FASB issued an accounting standards update which amends existing guidance on income taxes to require the classification of all deferred tax assets and liabilities as noncurrent on the balance sheet. The pronouncement is effective for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018 for nonpublic entities, and may be applied either prospectively or retrospectively. The Company plans to adopt this guidance during the year ended December 31, 2017 and does not expect the adoption to have a material impact on its consolidated financial statements and related disclosures. In February 2016, the FASB issued an accounting standards update for leases. The ASU introduces a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in the current accounting guidance as well as the FASB’s new revenue recognition standard. However, the ASU eliminates the use of bright‑line tests in determining lease classification as required in the current guidance. The ASU also requires additional qualitative disclosures along with specific quantitative disclosures to better enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The pronouncement is effective for annual reporting periods beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, for nonpublic entities using a modified retrospective approach. Early adoption is permitted. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures and has not yet determined the method by which it will adopt the standard. In March 2016, the FASB issued an accounting standards update that provides a new requirement to record all of the tax effects related to share‑based payments at settlement (or expiration) through the income statement. This pronouncement is effective for annual reporting periods beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018, for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In August 2016, the FASB issued an accounting standards update addressing the classification and presentation of eight specific cash flow issues that currently result in diverse practices. The amendments provide guidance in the presentation and classification of certain cash receipts and cash payments in the statement of cash flows including debt prepayment or debt extinguishment costs, settlement of zero‑coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate‑owned life insurance policies, and distributions received from equity method investees. This pronouncement is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, for nonpublic entities. The amendments in this ASU should be applied using a retrospective approach. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In January 2017, the FASB issued an accounting standards update clarifying the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This pronouncement is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. |
ACQUISITION
ACQUISITION | 3 Months Ended |
Mar. 31, 2017 | |
ACQUISITION | |
ACQUISITION | NOTE 3— ACQUISITION On March 10, 2017, the Company completed its acquisition (the “Permian Acquisition”) of Gregory Rockhouse Ranch, Inc. and certain other affiliated entities and assets (collectively, the “GRR Entities”). The GRR Entities provide water and water‑related services to E&P companies in the Permian Basin and own and have rights to a vast array of fresh, brackish and effluent water sources with access to significant volumes of water annually and water transport infrastructure, including over 900 miles of temporary and permanent pipeline infrastructure and related storage facilities and pumps, all located in the northern Delaware Basin portion of the Permian Basin. The total consideration paid for this acquisition was $56.5 million, with $51.0 million paid in cash and $5.5 million paid in shares of Class A common stock valued at $20.00 per share, subject to customary post‑closing adjustments. The Company funded the cash portion of the consideration for the Permian Acquisition with $17.0 million of cash on hand and $34.0 million of borrowings under the Company’s Credit Facility. For the three months ended March 31, 2017, the Company expensed $0.7 million of transaction-related costs. The Permian Acquisition is being accounted for as a business combination under the acquisition method of accounting. The preliminary allocation of the consideration transferred is based on management’s estimates, judgments and assumptions. When determining the fair values of assets acquire and liabilities assumed, management made significant estimates, judgments, and assumptions. These estimates, judgments and assumptions are subject to change upon final valuation and should be treated as preliminary values. Management estimated that consideration paid exceeded the fair value of the net assets acquired. Therefore, goodwill of $10.7 million was recorded. The goodwill recognized is primarily attributable to synergies related to the Company’s comprehensive water solutions strategy that are expected to arise from the Permian Acquisition and is attributable to the Company’s Water Solutions segment. The assets acquired and liabilities assumed and the results of operations of the acquired business are included in the Company’s Water Solutions segment. The following table summarizes the consideration transferred and the estimated fair value of identified assets acquired and liabilities assumed at the date of acquisition: Preliminary purchase price allocation Amount Consideration transferred (in thousand) Cash paid $ 51,000 Class A common stock issued 5,500 Total consideration transferred 56,500 Less: identified assets Working capital 6,000 Fixed assets 13,225 Customer relationship intangible assets 21,392 Other intangible assets 5,150 Total identified assets 45,767 Goodwill $ 10,733 The Permian Acquisition contributed revenue and net income of $1.9 million and $0.3 million, respectively, to the Company for the period from March 10, 2017 to March 31, 2017. The following unaudited consolidated pro forma information is presented as if the Permian Acquisition had occurred on January 1, 2016: Pro Forma Three Months Ended March 31, 2017 2016 (unaudited) (in thousands) Revenue $ 105,531 $ 83,942 Net loss $ (12,055) $ (26,242) Less: net loss attributable to noncontrolling interests 1 7,932 17,369 Net loss attributable to Select Energy Services, Inc. 1 $ (4,123) $ (8,873) 1 The allocation of net loss attributable to noncontrolling interests and Select Energy Services gives effect to the corporate reorganization as though the 144A Offering occurred as of January 1, 2016. However, the calculation of pro forma net loss does not give effect to any pro forma adjustments for the 144A Offering. The unaudited pro forma amounts above have been calculated after applying the Company’s accounting policies and adjusting the Permian Acquisition results to reflect the increase to depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had been applied from January 1, 2016 and other related pro forma adjustments. The pro forma amounts do not include any potential synergies, cost savings or other expected benefits of the Permian Acquisition, and are presented for illustrative purposes only and are not necessarily indicative of results that would have been achieved if the Permian Acquisition had occurred as of January 1, 2016 or of future operating performance. |
EXIT AND DISPOSAL ACTIVITIES
EXIT AND DISPOSAL ACTIVITIES | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
EXIT AND DISPOSAL ACTIVITIES | ||
EXIT AND DISPOSAL ACTIVITIES | NOTE 4—EXIT AND DISPOSAL ACTIVITIES Due to a reduction in industry activity from 2014, the Company made the decision during the year ended December 31, 2016 to close 15 facilities and consolidate operations for the purpose of improving operating efficiencies. The Company recorded $1.9 million of charges related to exit and disposal activities and reclassified $0.2 million of deferred rent related to accrued lease obligations related to exited facilities during the three months ended March 31, 2017. The Company had a remaining balance of $20.4 million, inclusive of a short‑term balance of $3.1 million in accrued expenses and other current liabilities, as of March 31, 2017 related to accrued lease obligations and terminations at exited facilities within its Water Solutions segment. As of March 31, 2017, the Company has completed its exit from underperforming facilities but will continue to make non‑cancelable lease payments for related facilities through the year ended 2027. The Company’s abandonment of these facilities is not a part of a formalized exit plan. Provision during the Usage during the Balance as of three months ended three months ended Balance as of December 31, 2016 March 31, 2017 March 31, 2017 March 31, 2017 (in thousands) Lease obligations and terminations $ 18,000 $ 1,863 $ 712 $ 19,151 Reclassification of deferred rent 1,069 1,254 Total $ 19,069 $ 20,405 | NOTE 4—EXIT AND DISPOSAL ACTIVITIES Due to a reduction in industry activity from 2014, the Company made the decision to close 15 facilities and consolidate operations for the purpose of improving operating efficiencies. The Company recorded $19.4 million of charges related to exit and disposal activities and reclassified $1.1 million of deferred rent related to accrued lease obligations related to exited facilities. The Company had a remaining balance of $19.1 million, inclusive of a short‑term balance of $3.1 million in accrued expenses and other current liabilities, as of December 31, 2016 related to accrued lease obligations and terminations at exited facilities within its Water Solutions segment. As of December 31, 2016, the Company has completed its exit from underperforming facilities but will continue to make non‑cancelable lease payments for related facilities through the year ended 2027. The Company’s abandonment of these facilities is not a part of a formalized exit plan. Provision during the Payments during Balance as of year ended the year ended Balance as of December 31, 2015 December 31, 2016 December 31, 2016 December 31, 2016 (in thousands) Lease obligations and terminations $ — $ 19,423 $ 1,423 $ 18,000 Reclassification of deferred rent — 1,069 Total $ — $ 19,069 |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
PROPERTY AND EQUIPMENT. | ||
PROPERTY AND EQUIPMENT | NOTE 5—PROPERTY AND EQUIPMENT Property and equipment consists of the following as of March 31, 2017 and December 31, 2016: March 31, 2017 December 31, 2016 (in thousands) Land $ 8,540 $ 8,593 Buildings and leasehold improvements 83,061 83,352 Vehicles and equipment 27,711 24,114 Machinery and equipment 538,693 534,303 Computer equipment and software 11,221 11,102 Office furniture and equipment 4,277 4,275 Disposal wells 67,566 67,566 Helicopters 497 497 Construction in progress 14,558 5,584 756,124 739,386 Less accumulated depreciation and impairment (500,541) (490,519) Total property and equipment, net $ 255,583 $ 248,867 Long‑lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company had no capital lease obligations as of March 31, 2017 and December 31, 2016. | NOTE 5—PROPERTY AND EQUIPMENT Property and equipment consists of the following as of December 31, 2016 and 2015: December 31, 2016 2015 (in thousands) Land $ 8,593 $ 9,924 Buildings and leasehold improvements 83,352 82,834 Vehicles and equipment 24,114 8,993 Machinery and equipment 534,303 550,489 Computer equipment and software 11,102 10,256 Office furniture and equipment 4,275 4,329 Disposal wells 67,566 63,771 Helicopters 497 497 Construction in progress 5,584 5,325 739,386 736,418 Less accumulated depreciation and impairment (490,519) (367,726) Total property and equipment, net $ 248,867 $ 368,692 Long‑lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. As a result of declines in industry activity, the Company decided to shut‑in certain disposal wells and abandon certain machinery and equipment and facilities at underperforming yards. As a result of these decisions, the Company evaluated the recoverability of the carrying value of certain property and equipment. The Company utilized a variety of methods to determine if the impairment of the asset was necessary. These methods included the use of long‑term forecasts of the future revenues and costs related to the assets subject to review, estimated salvage value, and appraisals. For shut‑in disposal wells, long‑term forecasts of the future revenue and costs related to the assets were utilized to determine the impairment. The Company impaired machinery and equipment to its estimated salvage value, while owned buildings and land related to certain abandoned facilities at underperforming yards were impaired to appraisal values. Leasehold improvements related to leased abandoned facilities were fully impaired to the extent the Company determined there was no future value. As a result of these assessments, the Company recorded impairment of property and equipment of $60.0 million related to the Company’s Water Solutions segment. The Company had no capital lease obligations as of December 31, 2016 and 2015. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | ||
GOODWILL AND OTHER INTANGIBLE ASSETS | NOTE 6—GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill is evaluated for impairment on at least an annual basis, or more frequently if indicators of impairment exist. The annual impairment tests are based on Level 3 inputs. The changes in the carrying amounts of goodwill by reportable segment for the three months ended March 31, 2017 and the year ended December 31, 2016 are as follows: Wellsite Completion Water and Construction Accommodations Solutions Services and Rentals Total (in thousands) Balance as of December 31, 2015 $ 137,534 $ 12,242 $ 995 $ 150,771 Impairment (137,534) — (995) (138,529) Balance as of December 31, 2016 — 12,242 — 12,242 Additions 10,733 — — 10,733 Balance as of March 31, 2017 $ 10,733 $ 12,242 $ — $ 22,975 The components of other intangible assets are as follows: March 31, 2017 Gross Accumulated Net Value Amortization Value (in thousands) Customer relationships $ 78,218 $ 50,207 $ 28,011 Other 10,641 2,635 8,006 Total other intangible assets $ 88,859 $ 52,842 $ 36,017 December 31, 2016 Gross Accumulated Net Value Amortization Value (in thousands) Customer relationships $ 56,826 $ 48,236 $ 8,590 Other 5,491 2,495 2,996 Total other intangible assets $ 62,317 $ 50,731 $ 11,586 Intangibles obtained through acquisitions are initially recorded at estimated fair value based on preliminary information which is subject to change until final valuations are obtained. Customer relationships and non‑compete agreements are being amortized over estimated useful lives ranging from five to seven years and three to five years, respectively. Other intangible assets primarily relate to certain water rights that are amortized over estimated useful lives ranging from three to eight years. Intangible assets obtained in the Permian Acquisition consisted of customer relationships and non-compete agreements that will be amortized over estimated useful lives of thirteen and five years, respectively. As a result of the Permian Acquisition, the Company also obtained water rights that have an indefinite life and will be tested periodically for impairment. Amortization expense was $2.1 million and $2.2 million for the three months ended March 31, 2017 and 2016, respectively. | NOTE 6—GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill is evaluated for impairment on at least an annual basis, or more frequently if indicators of impairment exist. As a result of triggering events during 2015, the Company conducted its goodwill impairment test as of September 30, 2015 and recognized the impairment presented below. The Company determined that additional triggering events were present during the first half of 2016 resulting in an additional impairment assessment also as indicated below. The annual impairment tests are based on Level 3 inputs. The changes in the carrying amounts of goodwill by reportable segment for the years ended December 31, 2016 and 2015 are as follows: Wellsite Completion Water and Construction Accommodations Solutions Services and Rentals Total (in thousands) Balance as of December 31, 2014 $ 157,902 $ 12,242 $ 995 $ 171,139 Impairment (20,136) — — (20,136) Dispositions (232) — — (232) Balance as of December 31, 2015 137,534 12,242 995 150,771 Impairment (137,534) — (995) (138,529) Balance as of December 31, 2016 $ — $ 12,242 $ — $ 12,242 The components of other intangible assets are as follows: December 31, 2016 Gross Accumulated Net Value Amortization Value (in thousands) Customer relationships $ 56,826 $ 48,236 $ 8,590 Other 5,491 2,495 2,996 Total other intangible assets $ 62,317 $ 50,731 $ 11,586 December 31, 2015 Gross Accumulated Net Value Amortization Value (in thousands) Customer relationships $ 56,826 $ 40,163 $ 16,663 Other 4,924 1,747 3,177 Total other intangible assets $ 61,750 $ 41,910 $ 19,840 Intangibles obtained through acquisitions are initially recorded at estimated fair value based on preliminary information which is subject to change until final valuations are obtained. Customer relationships and non‑compete agreements are being amortized over estimated useful lives ranging from five to seven years and three to five years, respectively. Other intangible assets primarily relate to certain water rights that are amortized over estimated useful lives ranging from three to eight years. Amortization expense was $8.7 million and $9.3 million for the years ended December 31, 2016 and 2015, respectively. Future estimated amortization expense for other intangible assets as of December 31, 2016 for the next five succeeding years is expected to be as follows: Year Ending December 31, Amount (in thousands) 2017 $ 7,473 2018 1,607 2019 166 2020 166 2021 166 |
DEBT
DEBT | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
DEBT | ||
DEBT | NOTE 7—DEBT Credit Facility term loans and revolving line of credit Select Energy Services’ Credit Facility, originally executed in May 2011, has been amended over time. Effective December 20, 2016, the Company amended its Credit Facility to extend the maturity date from February 28, 2018 to February 28, 2020 and reduce the revolving line of credit to $100 million. The agreement also amended certain financial covenants and restrictions and outlined a new pricing grid that is effective after receipt of the third quarter 2017 compliance certificate. Accrued interest is payable at the end of each quarter. The Credit Facility has a variable interest rate that ranges from either (i) the London interbank rate (“LIBOR”) plus a margin for Eurodollar advances or (ii) the applicable base rate plus a margin for base rate advances based on the Company’s Leverage Ratio (as defined in the Credit Facility) as outlined below. In addition, a commitment fee related to the revolving line of credit is payable at the end of each calendar quarter based on a rate of 0.500% per annum on any unused portion of the commitment under the Credit Facility. Leverage Ratio Before Receipt of Third Quarter 2017 Eurodollar Base Rate Compliance Certificate Advances Advances < 4.00 4.00 % 3.00 % ≥ 4.00 4.50 % 3.50 % Leverage Ratio After Receipt of Third Quarter 2017 Eurodollar Base Rate Compliance Certificate Advances Advances < 2.00 3.00 % 2.00 % ≥ 2.00 < 2.50 3.25 % 2.25 % ≥ 2.50 < 3.00 3.50 % 2.50 % ≥ 3.00 < 3.50 3.75 % 2.75 % ≥ 3.50 < 4.00 4.00 % 3.00 % ≥ 4.00 4.50 % 3.50 % Select Energy Services had $34.0 million outstanding under the revolving line of credit as of March 31, 2017 and no debt outstanding under the revolving line of credit as of December 31, 2016. The weighted‑average interest rate of outstanding borrowings under the revolving line of credit was 5.50% as of March 31, 2017. The borrowing capacity under the revolving line of credit was reduced by outstanding letters of credit of $16.1 million as of March 31, 2017. The Company’s letters of credit have a variable interest rate between 3.00% and 4.50% based on the Company’s Leverage Ratio as outlined above. The unused portion of the available borrowings under the revolving line of credit was $49.9 million at March 31, 2017. Debt issuance costs are amortized to interest expense over the life of the debt to which they pertain. Total unamortized debt issuance costs as of March 31, 2017 were $3.6 million. As these debt issuance costs relate to a revolving line of credit, they are presented as a deferred charge within other assets on the consolidated balance sheet. The Company’s obligations under its Credit Facility are secured by substantially all of its assets. The Credit Facility contains customary events of default and covenants and limits its ability to incur additional indebtedness, pay dividends or make other distributions, create liens and sell assets. The Company was in compliance with all debt covenants as of March 31, 2017. | NOTE 7—DEBT The Company had no debt outstanding as of December 31, 2016. The Company’s long‑term debt, net of debt issuance costs of $2.9 million, consisted of the following as of December 31, 2015: As of December 31, 2015 (in thousands) Revolving line of credit $ 170,990 Credit facility term loan 96,656 Total debt 267,646 Less current maturities of long-term debt 22,305 Long-term debt $ 245,341 Credit facility term loans and revolving line of credit Select Energy Services has a senior secured credit facility originally executed in May of 2011 which has been amended over time. The credit facility was amended on October 30, 2015 to reduce the total credit facility to $355.0 million, comprising a $105.0 million term loan and a $250.0 million revolving line of credit. Effective September 22, 2016, the Company amended its credit facility to amend certain provisions related to leverage ratio covenants and reduced the revolving line of credit to $215.0 million. Effective December 20, 2016, the Company amended its senior secured credit facility to extend the maturity date from February 28, 2018 to February 28, 2020 and reduce the revolving line of credit to $100 million. The agreement also amended certain financial covenants and restrictions and outlined a new pricing grid that is effective after receipt of the third quarter 2017 compliance certificate. Accrued interest is payable at the end of each quarter. The credit facility has a variable interest rate that ranges from either (i) the London interbank rate (“LIBOR”) plus a margin for Eurodollar advances or (ii) the applicable base rate plus a margin for base rate advances based on the Company’s leverage ratio as outlined below. In addition, a commitment fee related to the revolving line of credit is payable at the end of each calendar quarter based on a rate of 0.500% per annum on any unused portion of the commitment under the credit agreement. Leverage Ratio Before Receipt of Third Quarter 2017 Eurodollar Base Rate Compliance Certificate Advances Advances < 4.00 4.00 % 3.00 % ≥ 4.00 4.50 % 3.50 % Leverage Ratio After Receipt of Third Quarter 2017 Eurodollar Base Rate Compliance Certificate Advances Advances < 2.00 3.00 % 2.00 % ≥ 2.00 < 2.50 3.25 % 2.25 % ≥ 2.50 < 3.00 3.50 % 2.50 % ≥ 3.00 < 3.50 3.75 % 2.75 % ≥ 3.50 < 4.00 4.00 % 3.00 % ≥ 4.00 4.50 % 3.50 % Select Energy Services had no debt outstanding under the revolving line of credit as of December 31, 2016 and $173.0 million outstanding as of December 31, 2015. The weighted‑average interest rate of outstanding borrowings under the revolving line of credit was 3.25% as of December 31, 2015. The borrowing capacity under the revolving line of credit was reduced by outstanding letters of credit of $16.3 million and $14.8 million as of December 31, 2016 and 2015, respectively. The Company’s letters of credit have a variable interest rate between 3.00% and 4.50% based on the Company’s leverage ratio as outlined above. The unused portion of the available borrowings under the revolving line of credit was $83.7 million and $62.2 million at December 31, 2016 and 2015, respectively. In connection with amending its credit facility, the Company incurred $4.5 million and $1.2 million of debt issuance costs during the years ended December 31, 2016 and 2015. Debt issuance costs are amortized to interest expense over the life of the debt to which they pertain. Total unamortized debt issuance costs as of December 31, 2016 and 2015 were $3.9 million and $2.9 million, respectively. As there are no drawn borrowings as of December 31, 2016, unamortized debt issuance costs are presented as a deferred asset. For December 31, 2015, unamortized debt issuance costs are presented as a direct deduction from the carrying value of the associated debt instruments. The Company’s obligations under its senior secured credit facility are secured by substantially all of its assets. The credit facility contains customary events of default and covenants and limits its ability to incur additional indebtedness, pay dividends or make other distributions, create liens and sell assets. The Company was in compliance with all debt covenants as of December 31, 2016. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
COMMITMENTS AND CONTINGENCIES. | ||
COMMITMENTS AND CONTINGENCIES | NOTE 8—COMMITMENTS AND CONTINGENCIES Litigation The Company is named from time to time in various legal proceedings in the ordinary course of business. The legal proceedings are at different stages; however, the Company does not believe the resolution of any of these proceedings would be material to its financial position or results of operations. General Business Risk As discussed in Note 1, the substantial majority of Company’s customers are in the oil and gas industry. The oil and gas industry is currently facing unique challenges due to the continued volatility and depressed state of oil and gas prices. | NOTE 8—COMMITMENTS AND CONTINGENCIES Operating leases Select Energy Services is party to non‑cancelable leases for operating locations, equipment and office space. Rent under the operating lease agreements is recognized ratably over the lease term. Total expenses incurred under these operating lease agreements for the years ended December 31, 2016 and 2015 was $21.6 million and $39.2 million, respectively. In January 2016 the Company bought out vehicle operating leases at a total purchase price of $16.2 million. The Company has the following operating lease commitments under non‑cancelable lease terms as of December 31, 2016: Year Ending December 31, Amount(1) (in thousands) 2017 $ 13,407 2018 11,976 2019 7,297 2020 7,269 2021 7,145 Thereafter 37,661 Total $ 84,755 (1) The Company’s operating lease commitments under non‑cancelable lease terms as of December 31, 2016 include $40.3 million of lease payments related to facilities that are included within the accrual for exit and disposal activities. Refer to Note 4—Exit and Disposal Activities for further discussion. Litigation The Company is named from time to time in various legal proceedings in the ordinary course of business. The legal proceedings are at different stages; however, the Company does not believe the resolution of any of these proceedings would be material to its financial position or results of operations. General Business Risk As discussed in Note 1, the substantial majority of Company’s customers are in the oil and gas industry. The oil and gas industry is currently facing unique challenges due to the continued volatility and depressed state of oil and gas prices. |
EQUITY_BASED COMPENSATION
EQUITY?BASED COMPENSATION | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
EQUITY BASED COMPENSATION | ||
EQUITY-BASED COMPENSATION | NOTE 9—EQUITY‑BASED COMPENSATION The SES Holdings 2011 Equity Incentive Plan, (“2011 Plan”) was approved by the Predecessor’s board of managers in April 2011. In conjunction with the 144A Offering, the Company adopted the Select Energy Services, Inc. 2016 Equity Incentive Plan (the “2016 Plan”) for employees, consultants and directors of the Company and its affiliates. Options that were outstanding under the 2011 Plan immediately prior to the 144A Offering were cancelled in exchange for new options granted under the 2016 Plan. The maximum number of shares that may be issued pursuant to the 2016 Plan shall not exceed 4,600,000 shares of Class A common stock plus 8% of any shares of Class A common stock sold in any underwritten public offering, subject to adjustment in the event of recapitalization or reorganization, or related to forfeitures or the expiration of awards. Stock options are granted with terms not to exceed ten years. Phantom unit awards granted under the 2011 Plan, upon vesting, entitled each participant with the right to receive an amount of cash based in part on the fair market value of a share of Class A common stock on the date of the Company’s initial public offering. Based on the fair market value of a share of the Company’s Class A common stock of $14.00 on the date of the Company’s initial public offering, each participant received a cash payment equal to $5.53 for each phantom unit on May 5, 2017. Refer to Note 17 – Subsequent Events for details related to the payments made in respect of outstanding phantom units in connection with the Company’s initial public offering. Stock option awards Stock options were granted with an exercise price equal to or greater than the fair market value of a share of the Company’s Class A common stock as of the date of grant. The Company historically valued its Class A common stock on a quarterly basis using a market approach that includes a comparison to publicly traded peer companies using earnings multiples based on their market values and a discount for lack of marketability. The fair value measurement relies on Level 3 inputs. The estimated fair value of its stock options is expensed over their vesting period, which is generally three years from the applicable date of grant. However, certain awards that were granted during 2016 in exchange for cancelled awards were immediately vested and fully exercisable on the date of grant because they were granted in exchange for the cancellation of outstanding options granted under the 2011 Plan that were fully vested and exercisable prior to such cancellation. The Company utilizes the Black‑Scholes model to determine fair value, which incorporates assumptions to value equity‑based awards. The risk‑free interest rate is based on the U.S. Treasury yield curve in effect for the expected term of the option at the time of grant. At the time of grant, there was no public market for the Company’s equity. Therefore, the Company considered the historic volatility of publicly traded peer companies when determining the volatility factor. The expected life of the options was based on a formula considering the vesting period and term of the options awarded, which is generally seven to ten years. A summary of the Company’s stock option activity and related information for the three months ended March 31, 2017 is as follows: For the three months ended March 31, 2017 Weighted-average Equity Options Exercise Price Beginning balance 620,721 $ 16.50 Granted 418,184 20.00 Ending balance 1,038,905 $ 17.91 The weighted‑average grant date fair value of stock options granted during the three months ended March 31, 2017 was $7.98. The relevant assumptions for stock options granted during the period are as follows: $20.00 Strike Underlying Equity $ 20.00 Strike Price $ 20.00 Dividend Yield (%) % Risk free rate (%) 1.64% - 1.99 % Volatility (%) 46.6% - 46.7 % Expected Term (Years) 4-6 There was no vested stock option activity, or exercise of vested stock options, during the three months ended March 31, 2017. A summary of the Company’s restricted stock unit activity and related information for the three months ended March 31, 2017 is as follows: For the three months ended March 31, 2017 Grant Date Fair Restricted Stock Value Beginning balance — $ — Granted 39,242 20.00 Ending balance 39,242 $ 20.00 The Company recognized approximately $0.6 million and $0.3 million of compensation expense related to stock options and restricted stock unit awards during the three months ended March 31, 2017 and 2016, respectively. Phantom unit awards The Company’s phantom unit awards are cash settled awards that were contingent upon meeting certain equity returns and a liquidation event. The settlement amount was based on the fair market value of a share of the Company’s Class A common stock on the date of completion of the Company’s initial public offering, which constituted a liquidation event with respect to such phantom unit awards. As a result of the cash‑settlement feature of these awards, the Company considers these awards to be liability awards, which are measured at fair value at each reporting date and the pro rata vested portion of the award is recognized as a liability to the extent that the performance condition is deemed probable. No compensation expense was recognized through March 31, 2017 due to the non‑occurrence of the performance condition, which was not considered probable as of March 31, 2017. There was no activity related to the Company’s phantom unit awards for the three months ended March 31, 2017. Refer to Note 17 – Subsequent Events for details related to the payments made in respect of outstanding phantom units in connection with the Company’s initial public offering. | NOTE 9—EQUITY‑BASED COMPENSATION The 2011 Equity Incentive Plan, (“2011 Plan”) was approved by the Predecessor’s board of managers in April 2011. In conjunction with the 144A Offering, the Company adopted a long‑term incentive plan (the “2016 Plan”) for employees, consultants and directors of the Company and its affiliates. Options that were outstanding under the 2011 Plan prior to the 144A Offering were cancelled and replaced with new options under the 2016 Plan. The maximum number of shares that may be issued pursuant to the 2016 Plan shall not exceed 4,600,000 shares of Class A common stock plus 8% of any shares of Class A common stock sold in any underwritten public offering, subject to adjustment in the event of recapitalization or reorganization, or related to forfeitures or the expiration of awards. Equity options are granted with terms not to exceed ten years. Phantom Awards granted under the Plan, upon vesting, entitle the Participant to receive an amount of cash based on the value of the underlying equity instrument. Equity option awards Equity options were granted with an exercise price equal to or greater than the fair market value of its underlying equity instrument as of the date of grant. The Company values its equity on a quarterly basis using a market approach that includes a comparison to publicly traded peer companies using earnings multiples based on their market values and a discount for lack of marketability. The fair value measurement relies on Level 3 inputs. The estimated fair value of its equity options is expensed over their vesting period, which is generally three years. However, certain awards that were granted during 2016 in replacement of cancelled awards were vested immediately. The Company utilizes the Black‑Scholes model to determine fair value, which incorporates assumptions to value equity‑based awards. The risk‑free interest rate is based on the U.S. Treasury yield curve in effect for the expected term of the option at the time of grant. At this time, there is no public market for the Company’s equity. Therefore, the Company considers the historic volatility of publicly traded peer companies when determining the volatility factor. The expected life of the options is based on a formula considering the vesting period and term of the options awarded, which is generally seven years. On December 20, 2016, outstanding equity options of SES Holdings were exchanged for equivalent equity options in Select Energy Services. There was no incremental compensation expense recorded as a result of the exchange. A summary of its equity option activity and related information is as follows: December 31, 2016 December 31, 2015 Weighted Weighted Unit Average Average Options Exercise Price Options Exercise Price Beginning balance 973,410 $ 16.16 1,262,220 $ 16.34 Granted 204,245 16.17 — — Cancelled (556,934) 15.79 (288,810) 16.93 Ending balance 620,721 $ 16.50 973,410 $ 16.16 The weighted‑average grant date fair value of equity options granted during the year ended December 31, 2016 was $1.84. The table below presents the assumptions used in determining the fair value of certain equity options previously cancelled that were regranted during the year ended December 31, 2016. $14.33 Strike $20.61 Strike Underlying Equity $ 6.08 $ 6.08 Strike Price $ 14.33 $ 20.61 Dividend Yield (%) — % — % Risk free rate (%) 0.86 % 0.86 % Volatility (%) 63.0 % 63.0 % Expected Term (Years) 5 5 The Company recognized approximately $0.3 million and $0.7 million of compensation expense related to equity options during the years ended December 31, 2016 and 2015, respectively. The Company’s fully vested equity option activity and related information is as follows: December 31, 2016 December 31, 2015 Weighted Weighted Vested Average Vested Average Units Exercise Price Units Exercise Price Beginning balance 905,698 $ 16.30 852,736 $ 17.19 Vested 229,747 15.96 257,973 14.69 Cancelled (514,724) 15.91 (205,011) 17.99 Ending balance 620,721 $ 16.50 905,698 $ 16.30 The weighted‑average remaining contractual term of outstanding vested equity at December 31, 2016 and 2015 was 2.50 and 3.50, respectively. All vested outstanding equity options are currently exercisable; however, the exercise price of 197,294 equity options, with a weighted‑average exercise price of $20.81, exceed the price of the underlying equity instruments. Phantom awards The Company’s Phantom Awards are cash settled awards contingent upon meeting certain equity returns and a liquidation event. The distribution amount is based on the fair value of the underlying equity at the time of the liquidation event with a maximum value of $7.53 per Phantom Award. As a result of the cash‑settlement feature of these awards, the Company considers these awards to be liability awards, which are measured at fair value at each reporting date and the pro rata vested portion of the award is recognized as a liability to the extent that the performance condition is deemed probable. No compensation expense has been recognized to date due to the non‑occurrence of the performance condition, which is not yet considered probable. Activity related to the Company’s Phantom Awards is as follows: For the year ended December 31, 2016 2015 Beginning balance 1,289,472 995,991 Granted 158,031 524,554 Cancelled (19,920) (231,073) Ending balance 1,427,583 1,289,472 |
DERIVATIVE FINANCIAL INSTRUMENT
DERIVATIVE FINANCIAL INSTRUMENTS | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
DERIVATIVE FINANCIAL INSTRUMENTS | ||
DERIVATIVE FINANCIAL INSTRUMENTS | NOTE 10—DERIVATIVE FINANCIAL INSTRUMENTS The Company had variable rate debt outstanding which was subject to interest rate risk based on volatility in underlying interest rates. In April 2013, the Company entered into a pay fixed, receive variable interest rate swap, with an aggregate notional amount of $125.0 million, which the Company designated as a cash flow hedge. The derivative contract matured in April 2016. The change in value and amounts reclassified to interest expense during the three months ended March 31, 2016 were nominal. There was no activity during the three months ended March 31, 2017. Changes in the fair values of the Company’s derivative instruments are presented on a net basis in the accompanying consolidated statements of operations. Changes in the fair value of the Company’s interest rate swap derivative instruments are as follows: Three Months Ended March 31, Derivatives designated as cash flow hedges 2016 (in thousands) Beginning fair value of interest rate swap derivative instruments $ (7) Amount of unrealized losses recognized in OCI (80) Amount of gains reclassified from AOCI to earnings (effective portion) 85 Net change in fair value of interest rate swap derivative instruments 5 Ending fair value of interest rate swap derivative instruments $ (2) | NOTE 10—DERIVATIVE FINANCIAL INSTRUMENTS The Company had variable rate debt outstanding which is subject to interest rate risk based on volatility in underlying interest rates. In April 2013, the Company entered into a pay fixed, receive variable interest rate swap, with an aggregate notional amount of $125.0 million, which the Company designated as a cash flow hedge. The derivative contract matured in April 2016. The change in value and amounts reclassified to interest expense during years ended December 31, 2015 and 2016, are nominal. The fair value measurement of the interest rate swap agreement was based on Level 2 inputs. See Note 11—Fair Value Measurement for further discussion. The table below summarizes the fair value and classification of the Company’s derivative instruments: As of December 31, Classification Balance Sheet Location 2016 2015 (in thousands) Liabilities: Current liability Accrued expenses and other current liabilities $ — $ 7 Long-term liability Other long-term liabilities — — Total liabilities $ — $ 7 Changes in the fair values of the Company’s derivative instruments are presented on a net basis in the accompanying consolidated statements of operations. Changes in the fair value of the Company’s interest rate swap derivative instruments are as follows: Year Ended December 31, Derivatives designated as cash flow hedges 2016 2015 (in thousands) Beginning fair value of interest rate swap derivative instruments $ (7) $ (68) Amount of unrealized losses recognized in OCI (106) (277) Amount of gains reclassified from AOCI to earnings (effective portion) 113 338 Net change in fair value of interest rate swap derivative instruments 7 61 Ending fair value of interest rate swap derivative instruments $ — $ (7) |
FAIR VALUE MEASUREMENT
FAIR VALUE MEASUREMENT | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
FAIR VALUE MEASUREMENT | ||
FAIR VALUE MEASUREMENT | NOTE 11—FAIR VALUE MEASUREMENT The Company utilizes fair value measurements to measure assets and liabilities in a business combination or assess impairment of property and equipment, intangible assets and goodwill. Fair value is defined as the amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in an orderly transaction between market participants at the measurement date. Further, ASC 820, Fair Value Measurements, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and includes certain disclosure requirements. Fair value estimates are based on either (i) actual market data or (ii) assumptions that other market participants would use in pricing an asset or liability, including estimates of risk. ASC 820 establishes a three‑level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows: Level 1 —Unadjusted quoted prices for identical assets or liabilities in active markets. Level 2 —Quoted prices for similar assets or liabilities in non‑active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 —Inputs that are unobservable and significant to the fair value measurement (including the Company’s own assumptions in determining fair value). A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. There were no transfers into, or out of, the three levels of the fair value hierarchy for the three months ended March 31, 2017 or the year ended December 31, 2016. Other fair value considerations The carrying values of the Company’s current financial instruments, which include cash and cash equivalents, accounts receivable trade and accounts payable, approximate their fair value at March 31, 2017 and December 31, 2016 due to the short‑term maturity of these instruments. The Company had no outstanding debt as of December 31, 2016. The carrying value of debt as of March 31, 2017 approximates fair value due to variable market rates of interest. These fair values, which are Level 3 measurements, were estimated based on the Company’s incremental borrowing rates for similar types of borrowing arrangements, when quoted market prices were not available. The estimated fair values of the Company’s financial instruments are not necessarily indicative of the amounts that would be realized in a current market exchange. The consideration transferred and the purchase price allocation of identified assets acquired and liabilities assumed related to the Permian Acquisition are based on the Company’s estimate of fair value utilizing Level 3 inputs at the date of acquisition. Refer to Note 3 – Acquisition for further discussion. | NOTE 11—FAIR VALUE MEASUREMENT The Company utilizes fair value measurements to measure assets and liabilities in a business combination or assess impairment of property and equipment, intangible assets and goodwill. Fair value is defined as the amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in an orderly transaction between market participants at the measurement date. Further, ASC 820, Fair Value Measurements, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and includes certain disclosure requirements. Fair value estimates are based on either (i) actual market data or (ii) assumptions that other market participants would use in pricing an asset or liability, including estimates of risk. ASC 820 establishes a three‑level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows: Level 1 —Unadjusted quoted prices for identical assets or liabilities in active markets. Level 2 —Quoted prices for similar assets or liabilities in non‑active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 —Inputs that are unobservable and significant to the fair value measurement (including the Company’s own assumptions in determining fair value). A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. There were no transfers into, or out of, the three levels of the fair value hierarchy for the years ended December 31, 2016 and 2015. Assets and liabilities measured at fair value on a recurring basis The Company estimated the fair value of derivative instruments using the market approach via a model that uses inputs that are observable in the market or can be derived from, or corroborated by, observable data. See Note 10—Derivatives Financial Instruments for further discussion. The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis: Fair Value Measurements Using Level 1 Level 2 Level 3 Total (In thousands) As of December 31, 2016 Financial liabilities Interest rate swap derivative instrument $ — $ — $ — $ — As of December 31, 2015 Financial liabilities Interest rate swap derivative instrument $ — $ (7) $ — $ (7) Assets and liabilities measured at fair value on a non‑recurring basis Nonfinancial assets and liabilities measured at fair value on a non‑recurring basis include certain nonfinancial assets and liabilities as may be acquired in a business combination and measurements of goodwill and intangible impairment. As there is no corroborating market activity to support the assumptions used, the Company has designated these measurements as Level 3. Long‑lived assets, such as property and equipment and finite‑lived intangible assets, are evaluated for impairment whenever events or changes in circumstances indicate that its carrying value may not be recoverable. The development of future cash flows and the estimate of fair value represent the Company’s best estimates based on industry trends and reference to market transactions and are subject to variability. The Company conducts its annual goodwill impairment test in the fourth quarter each year, or more frequently if indicators of impairment exist. As a result of triggering events during 2015, the Company conducted its goodwill impairment test as of September 30, 2015. The Company determined that additional triggering events were present during 2016 resulting in an additional impairment assessment. The Company’s annual impairment test utilizes discounted cash flow projections using weighted average cost of capital calculations based on capital structures of publicly traded peer companies to determine the fair value of its reporting units. The Company’s reporting units are based on its organizational and reporting structure. Application of the goodwill impairment test requires judgment, including the identification of reporting units, allocation of assets (including goodwill) and liabilities to reporting units and determining the fair value. The determination of reporting unit fair value relies upon certain estimates and assumptions. These estimates and assumptions are affected by numerous factors, including the general economic environment and levels of exploration and production activity of oil and natural gas companies. The Company’s estimates of fair value have been determined at discrete points in time based on relevant information. These estimates involve uncertainty and cannot be determined with precision. There were no significant changes in valuation techniques or related inputs for the years ended December 31, 2016 and 2015. The following table presents information about the Company’s assets measured at fair value on a non‑recurring basis for the years ended December 31, 2016 and 2015. Fair Value Measurements Using Carrying Level 1 Level 2 Level 3 Value(1) Impairment (In thousands) Year Ended December 31, 2016 Goodwill $ — $ — $ — $ 138,529 $ 138,529 Intangible Assets — — — 137 137 Fixed Assets — — 23,188 83,214 60,026 Year Ended December 31, 2015 Goodwill $ — $ — $ — $ 20,136 $ 20,136 Intangible Assets — — — 1,230 1,230 (1) Amount represents carrying value at the date of assessment. Other fair value considerations The carrying values of the Company’s current financial instruments, which include cash and cash equivalents, accounts receivable trade and accounts payable, approximate their fair value at December 31, 2016 and 2015 due to the short‑term maturity of these instruments. The Company had no outstanding debt as of December 31, 2016. The carrying value of debt as of December 31, 2015 approximates fair value due to variable market rates of interest. These fair values, which are Level 3 measurements, were estimated based on the Company’s incremental borrowing rates for similar types of borrowing arrangements, when quoted market prices were not available. The estimated fair values of the Company’s financial instruments are not necessarily indicative of the amounts that would be realized in a current market exchange. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
RELATED PARTY TRANSACTIONS | ||
RELATED PARTY TRANSACTIONS | NOTE 12—RELATED PARTY TRANSACTIONS The Company considers its related parties to be those stockholders who are beneficial owners of more than 5.0% of its common stock, executive officers, members of its board of directors or immediate family members of any of the foregoing persons. The Company has entered into a significant number of transactions with related parties. The Company’s board of directors regularly reviews these transactions; however, the Company’s results of operations may have been different if these transactions were conducted with non‑related parties. During the three months ended March 31, 2017, sales to related parties were $0.5 million and purchases from related party vendors were $1.2 million. These purchases comprised $0.2 million relating to purchases of property and equipment, less than $0.1 million relating to inventory and consumables, $0.4 million relating to rent of certain equipment or other services used in operations, and $0.5 million relating to management, consulting and other services. During the three months ended March 31, 2016, sales to related parties were $0.3 million and purchases from related party vendors were $1.0 million. These purchases comprised $0.1 million relating to purchases of property and equipment, less than $0.1 million relating to inventory and consumables, $0.3 million relating to rent of certain equipment or other services used in operations, and $0.6 million relating to management, consulting and other services. Tax receivable agreements In connection with the 144A Offering, the Company entered into two tax receivable agreements (the “Tax Receivable Agreements”) with Legacy Owner Holdco, Crestview GP, and certain affiliates of Predecessor unitholders (collectively, the “TRA Holders”). The first of the Tax Receivable Agreements, which the Company entered into with Legacy Owner Holdco and Crestview GP, generally provides for the payment by the Company to such TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income and franchise tax that the Company actually realizes (computed using simplifying assumptions to address the impact of state and local taxes) or is deemed to realize in certain circumstances in periods after the 144A Offering as a result of, as applicable to each such TRA Holder, (i) certain increases in tax basis that occur as a result of the Company’s acquisition (or deemed acquisition for U.S. federal income tax purposes) of all or a portion of such TRA Holder’s SES Holdings LLC Units in connection with the 144A Offering or pursuant to the exercise of the Exchange Right or the Company’s Call Right and (ii) imputed interest deemed to be paid by the Company as a result of, and additional tax basis arising from, any payments the Company makes under such Tax Receivable Agreement. The second of the Tax Receivable Agreements, which the Company entered into with an affiliate of the Contributing Legacy Owners, generally provides for the payment by the Company to such TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income and franchise tax that the Company actually realizes (computed using simplifying assumptions to address the impact of state and local taxes) or is deemed to realize in certain circumstances in periods after the 144A Offering as a result of, as applicable to each such TRA Holder, (i) any net operating losses available to the Company as a result of certain reorganization transactions entered into in connection with the 144A Offering and (ii) imputed interest deemed to be paid by the Company as a result of any payments the Company makes under such Tax Receivable Agreement. | NOTE 12—RELATED PARTY TRANSACTIONS The Company considers its related parties to be those members who are beneficial owners of more than 5.0% of its common stock, executive officers, members of its board of directors or immediate family members of any of the foregoing persons. The Company has entered into a significant number of transactions with related parties. The Company’s board of directors regularly reviews these transactions. Notwithstanding this, its results of operations may be different if these transactions were conducted with non‑related parties. During the year ended December 31, 2016, sales to related parties were $1.2 million. Purchases from related party vendors were $4.3 million during the year ended December 31, 2016. These purchases comprised $1.0 million relating to purchases of property and equipment, $0.2 million relating to inventory and consumables, $1.1 million relating to rent of certain equipment or other services used in operations, and $2.0 million relating to management, consulting and other services. During the year ended December 31, 2015, sales to related parties were $4.1 million. Purchases from related party vendors were $8.6 million during the year ended December 31, 2015. These purchases comprised $4.0 million relating to purchases of property and equipment, $0.9 million relating to inventory and consumables, $1.0 million relating to rent of certain equipment or other services used in operations, and $2.7 million relating to management, consulting and other services. Tax receivable agreements In connection with the 144A Offering, the Company entered into two tax receivable agreements (the “Tax Receivable Agreements”) with Legacy Owner Holdco, Crestview GP, and certain affiliates of Predecessor unitholders (collectively, the “TRA Holders”). The first of the Tax Receivable Agreements, which the Company entered into with Legacy Owner Holdco and Crestview GP, generally provides for the payment by the Company to such TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income and franchise tax that the Company actually realizes (computed using simplifying assumptions to address the impact of state and local taxes) or is deemed to realize in certain circumstances in periods after the 144A Offering as a result of, as applicable to each such TRA Holder, (i) certain increases in tax basis that occur as a result of the Company’s acquisition (or deemed acquisition for U.S. federal income tax purposes) of all or a portion of such TRA Holder’s SES Holdings, LLC common units in connection with the 144A Offering or pursuant to the exercise of the Exchange Right or the Company’s Call Right and (ii) imputed interest deemed to be paid by the Company as a result of, and additional tax basis arising from, any payments the Company makes under such Tax Receivable Agreement. The second of the Tax Receivable Agreements, which the Company entered into with an affiliate of the Contributing Legacy Owners, generally provides for the payment by the Company to such TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income and franchise tax that the Company actually realizes (computed using simplifying assumptions to address the impact of state and local taxes) or is deemed to realize in certain circumstances in periods after the 144A Offering as a result of, as applicable to each such TRA Holder, (i) any net operating losses available to the Company as a result of certain reorganization transactions entered into in connection with the 144A Offering and (ii) imputed interest deemed to be paid by the Company as a result of any payments the Company makes under such Tax Receivable Agreement. See Note 13—Income Taxes for further discussion of amounts recorded in connection with the 144A Offering. |
INCOME TAXES
INCOME TAXES | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
INCOME TAXES | ||
INCOME TAXES | NOTE 13—INCOME TAXES The Company is subject to U.S. federal and state income taxes as a corporation. SES Holdings and its subsidiaries, with the exception of certain corporate subsidiaries, are treated as flow‑through entities for U.S. federal income tax purposes, and as such, are generally not subject to U.S. federal income tax at the entity level. Rather, the tax liability with respect to their taxable income is passed through to their members or partners. Accordingly, prior to our reorganization in connection with the 144A Offering, the Predecessor only recorded a provision for Texas franchise tax and U.S. federal and state provisions for certain corporate subsidiaries as the Predecessor’s taxable income or loss was includable in the income tax returns of the individual partners and members. However, for periods following our reorganization in connection with the 144A Offering, Select Energy Services will recognize a tax liability on its allocable share of SES Holdings’ taxable income. The Company’s effective tax rate for the three months ended March 31, 2017 and 2016 was -0.9% and -1.2%, respectively. The effective tax rate for the three months ended March 31, 2017 differs from the statutory rate of 35% due to net income allocated to noncontrolling interests, state income taxes, other permanent differences between book and tax accounting, and valuation allowances. The Company recorded income tax expense of $0.1 million and $0.3 million for the three months ended March 31, 2017 and 2016, respectively. The tax benefits of deferred tax assets are recorded as an asset to the extent that management assesses the utilization of such assets to be more likely than not. When the future utilization of some portion of deferred tax assets is determined not to be more likely than not, a valuation allowance is provided to reduce the recorded tax benefits from such assets. As of March 31, 2017, management’s assessment as to the realizability of certain deferred tax assets has resulted in the recording of a valuation allowance to reduce deferred tax assets to the amounts that are considered more likely than not to be realized. Management believes there will be sufficient future taxable income based on the reversal of temporary differences to enable utilization or sustainability of those deferred tax assets that do not have a valuation allowance recorded against them. Separate federal and state income tax returns are filed for Select Energy Services, SES Holdings, and certain consolidated affiliates. The tax years 2012 through 2015 remain open to examination by the major taxing jurisdictions to which the Company is subject to income tax. Select Energy Services and SES Holdings are not currently under any income tax audits. Accounting for uncertainty in income taxes prescribes a recognition threshold and measurement methodology for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As of March 31, 2017 and December 31, 2016, there was no material liability or expense for the periods then ended recorded for payments of interest and penalties associated with uncertain tax positions or material unrecognized tax positions and the Company’s unrecognized tax benefits were not material. | NOTE 13—INCOME TAXES Following the 144A Offering, the Company is subject to U.S. federal and state income taxes as a corporation. Prior to the 144A Offering, the Predecessor only recorded a provision for Texas franchise tax and federal and state provisions for certain corporate subsidiaries as the Predecessor’s taxable income or loss was includable in the income tax returns of the individual partners and members. Specifically, SES Holdings and its subsidiaries, with the exception of certain corporate subsidiaries, are treated as flow‑through entities for U.S. federal income tax purposes, and as such, are generally not subject to U.S. federal income tax at the entity level. Rather, the tax liability with respect to its taxable income is passed through to its members or partners. Accordingly, the Select Energy Services will recognize a tax liability on its share of SES Holdings’ pre‑tax book income, exclusive of the noncontrolling interest for periods following the 144A Offering. The components of the federal and state income tax expense (benefit) are summarized as follows: Year Ended December 31, 2016 2015 (in thousands) Current tax expense Federal $ — $ 341 State 275 836 Total current expense 275 1,177 Deferred tax expense (benefit) Federal (841) (785) State 42 (68) Total deferred benefit (799) (853) Total income tax provision (benefit) $ (524) $ 324 Tax expense (benefit) attributable to controlling interests $ (179) $ 324 Tax benefit attributable to noncontrolling interests (345) — Total income tax expense (benefit) $ (524) $ 324 A reconciliation of the Company’s provision for income taxes as reported and the amount computed by multiplying income before taxes, less noncontrolling interest, by the U.S. federal statutory rate of 35%: Year Ended December 31, 2016 (in thousands) Provision calculated at federal statutory income tax rate: Net income before taxes $ (313,948) Statutory rate 35 % Income tax benefit computed at statutory rate (109,882) Less: Noncontrolling interests 109,230 Income tax benefit attributable to controlling interests (652) State and local income taxes, net of federal benefit 87 Change in valuation allowance 386 Tax benefit attributable to controlling interests (179) Tax benefit attributable to noncontrolling interests (345) Total income tax benefit $ (524) For the year ended December 31, 2015, the calculation is not applicable as the Company was not subject to federal income taxes prior to the 144A Offering, with the exception of certain corporate subsidiaries. Deferred taxes result from the temporary differences between financial reporting carrying amounts and the tax basis of existing assets and liabilities. As of December 31, 2016 and 2015, the Company had net deferred tax liabilities of $0.6 million and $1.4 million, respectively, which are recorded in other long‑term liabilities on the consolidated balance sheets. The principal components of the deferred tax assets (liabilities) are summarized as follows: Year Ended December 31, 2016 2015 (in thousands) Deferred tax assets Section 754 election tax basis adjustment $ 3,601 $ — Net operating loss 3,999 — Credits and other carryforwards 142 — Investment in consolidated subsidiary SES Holdings, LLC 297 — Property and equipment 220 — Total deferred tax assets 8,259 — Deferred tax liabilities Property and equipment — 68 Intangible assets 811 1,343 Noncurrent state deferred tax liability 113 — Total deferred tax liabilities 924 1,411 Net deferred tax assets (liabilities) 7,335 (1,411) Valuation allowance (7,932) — Net deferred tax assets (liabilities) $ (597) $ (1,411) On the date of the 144A Offering, the Company recorded a net deferred tax asset of $9.7 million related to the step up in tax basis resulting from the purchase by the Company of common units of SES Holdings. This deferred tax asset has a full valuation allowance. As a result, the Company has not recorded a liability for the effect of any associated Tax Receivable Agreement liabilities as the liability is based on the actual cash tax savings, which are not considered probable as of December 31, 2016. See Note 12—Related Party Transactions for further discussion of the Tax Receivable Agreements. The Company has a federal net operating loss carryforward of $10.9 million and a state net operating loss carryforward of $3.4 million, which begin to expire in 2031. The tax benefits of the net operating losses are recorded as an asset to the extent that management assesses the utilization of such carryforwards to be more likely than not. When the future utilization of some portion of the carryforwards or other deferred tax assets is determined not to be more likely than not, a valuation allowance is provided to reduce the recorded tax benefits from such assets. As of December 31, 2016, the Company has a valuation allowance of $7.9 million as a result of management’s assessment as to the realizability of certain deferred tax assets. Management believes there will be sufficient future taxable income based on the reversal of temporary differences to enable utilization of those deferred tax assets that do not have a valuation allowance recorded against them. Separate federal and state income tax returns are filed for Select Energy Services, SES Holdings, and certain consolidated affiliates. The tax years 2012 through 2015 remain open to examination by the major taxing jurisdictions to which the Company is subject to income tax. Select Energy Services and SES Holdings are not currently under any income tax audits. Accounting for uncertainty in income taxes prescribes a recognition threshold and measurement methodology for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As of December 31, 2016 and 2015 there was no material liability or expense for the periods then ended recorded for payments of interest and penalties associated with uncertain tax positions or material unrecognized tax positions and the Company’s unrecognized tax benefits were not material. |
NONCONTROLLING INTERESTS
NONCONTROLLING INTERESTS | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
NONCONTROLLING INTERESTS. | ||
NONCONTROLLING INTERESTS | NOTE 14—NONCONTROLLING INTERESTS The Company has ownership interests in multiple subsidiaries that are consolidated within the Company’s financial statements but are not wholly owned. During the three months ended March 31, 2017 and 2016, the Company and its Predecessor purchased additional interests from third parties in certain of these subsidiaries. As a result of the Company’s increased interest in these subsidiaries, the Company reduced its noncontrolling interests and recognized an increase in equity related to transactions with holders of noncontrolling interests. The following table summarizes the effects of changes in noncontrolling interests on equity for the three months ended March 31, 2017: For the three months ended March 31, 2017 2016 (in thousands) Net loss attributable to Select Energy Services, Inc. and its Predecessor $ (4,172) $ (25,337) Transfers from noncontrolling interests: Increase in equity due to transactions with holder of noncontrolling interests 2,495 — Change to equity from net loss attributable to Select Energy Services, Inc. and its Predecessor and transfers from noncontrolling interests $ (1,677) $ (25,337) | NOTE 15—NONCONTROLLING INTERESTS The Company has ownership interests in multiple subsidiaries that are consolidated within the Company’s financial statements but are not wholly owned. During the year ended December 31, 2016, the Company purchased additional interests from third‑parties in certain of these subsidiaries for a total of $0.3 million. As a result of the Company’s increased interest in these subsidiaries, the Company reduced its noncontrolling interests by $1.1 million and recognized an increase in Predecessor equity related to the purchase of noncontrolling interests of $0.7 million. The following table summarizes the effects of changes in noncontrolling interests on Predecessor equity for the year ended December 31, 2016: December 31, 2016 (in thousands) Net loss prior to 144A Offering $ (306,481) Transfers from noncontrolling interests: Increase in Predecessor equity due to purchase of noncontrolling interests 707 Change to Predecessor equity from net loss prior to 144A Offering and transfers from noncontrolling interests $ (305,774) |
EARNINGS PER SHARE
EARNINGS PER SHARE | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
EARNINGS PER SHARE | ||
EARNINGS PER SHARE | NOTE 15—EARNINGS PER SHARE Earnings per share are based on the amount of income allocated to the shareholders and the weighted‑average number of shares outstanding during the period for each class of common stock. The Company’s outstanding options are not included in the calculation of diluted weighted-average shares outstanding for the periods presented as the effect is antidilutive. Earnings related to periods prior to the reorganization and 144A Offering are attributable to the Predecessor. The following table presents the Company’s calculation of basic and diluted earnings per share for the three months ended March 31, 2017 and 2016 (dollars in thousands, except share and per share amounts): Three Months Ended March 31, 2017 2016 Net loss (12,280) (25,793) Less: Net loss attributable to Predecessor — 25,337 Less: Net loss attributable to noncontrolling interests 8,108 456 Net loss attributable to Select Energy Services, Inc. $ (4,172) $ — Allocation of net loss attributable to: Class A-1 stockholders $ (3,363) Class A stockholders (809) Class B stockholders — $ (4,172) Weighted average shares outstanding: Class A-1-Basic & Diluted 16,100,000 Class A-Basic & Diluted 3,870,194 Class B-Basic & Diluted 38,462,541 Net loss per share attributable to common stockholders: Class A-1-Basic & Diluted $ (0.21) Class A-Basic & Diluted $ (0.21) Class B-Basic & Diluted $ — | NOTE 16—EARNINGS PER SHARE Earnings per share are based on the amount of income allocated to the shareholders and the weighted‑average number of shares outstanding during the period for each class of common stock. The Company’s outstanding options are not included in the calculation of diluted weighted average shares outstanding for the periods presented as the effect is antidilutive. Earnings related to periods prior to the reorganization and 144A Offering are attributable to the Predecessor. The following table presents the Company’s calculation of basic and diluted earnings per share for the year ended December 31, 2016 (dollars in thousands, except share and per share amounts): Year Ended December 31, 2016 Net loss $ (313,948) Net loss attributable to Predecessor 306,481 Net loss attributable to noncontrolling interests 6,424 Net loss attributable to Select Energy Services, Inc. $ (1,043) Allocation of loss attributable to: Class A-1 stockholders $ (844) Class A stockholders (199) Class B stockholders — $ (1,043) Weighted average shares outstanding: Class A-1—Basic & Diluted 16,100,000 Class A—Basic & Diluted 3,802,972 Class B—Basic & Diluted 38,462,541 Net loss per share attributable to common stockholders: Class A-1—Basic & Diluted $ (0.05) Class A—Basic & Diluted $ (0.05) Class B—Basic & Diluted $ — |
SEGMENT INFORMATION
SEGMENT INFORMATION | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
SEGMENT INFORMATION | ||
SEGMENT INFORMATION | NOTE 16—SEGMENT INFORMATION Select Energy Services is an oilfield services company that provides solutions to the North American onshore oil and natural gas industry. The Company’s services are offered through three operating segments. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. The Company’s chief operating decision maker assesses performance and allocates resources on the basis of the three reportable segments. Corporate and other expenses that do not individually meet the criteria for segment reporting are reported separately as Corporate. Each operating segment reflects a reportable segment led by separate managers that report directly to the Company’s CODM. The Company’s CODM assesses performance and allocates resources on the basis of the following three reportable segments: Water Solutions —The Water Solutions segment provides water‑related services to customers that include major integrated oil companies and independent oil and natural gas producers. These services include: the sourcing of water; the transfer of the water to the wellsite through permanent pipeline infrastructure and temporary pipe; the containment of fluids off‑ and on‑location; measuring and monitoring of water; the filtering and treatment of fluids, well testing and handling of flowback and produced formation water; and the transportation and recycling or disposal of drilling, completion and production fluids. Accommodations and Rentals —The Accommodations and Rentals segment provides workforce accommodations and surface rental equipment supporting drilling, completion and production operations to the U.S. onshore oil and gas industry. Wellsite Completion and Construction Services —The Wellsite Completion and Construction Services segment provides oil and natural gas operators with a variety of services, including crane and logistics services, wellsite and pipeline construction and field services. These services are performed to establish, maintain and improve production throughout the productive life of an oil or gas well, or to otherwise facilitate other services performed on a well. Financial information as of March 31, 2017 and December 31, 2016 and for the three months ended March 31, 2017 and 2016, by segment, is as follows: Total Assets As of As of March 31, 2017 December 31, 2016 (in thousands) Water Solutions $ 357,168 $ 324,171 Accommodations and Rentals 39,247 38,874 Wellsite Completion and Construction Services 31,598 29,994 Corporate 13,102 12,027 $ 441,115 $ 405,066 For the three months ended March 31, 2017 Income (loss) before Depreciation and Capital Revenue taxes Amortization Expenditures (in thousands) Water Solutions $ 78,765 $ (7,672) $ 17,548 $ 11,955 Accommodations and Rentals 9,543 (2,403) 2,672 713 Wellsite Completion and Construction Services 12,267 (248) 984 1,342 Elimination (650) — — — Loss from operations (10,323) Corporate — (2,185) 446 — Interest expense, net — (730) — — Other income, net — 1,064 — — $ 99,925 $ (12,174) $ 21,650 $ 14,010 For the three months ended March 31, 2016 Income (loss) before Depreciation and Capital Revenue taxes Amortization Expenditures (in thousands) Water Solutions $ 62,309 $ (17,499) $ 21,922 $ 20,787 Accommodations and Rentals 8,596 (1,695) 2,829 500 Wellsite Completion and Construction Services 8,081 (1,192) 1,391 81 Elimination (147) — — — Loss from operations (20,386) Corporate — (1,165) 634 — Interest expense, net — (3,367) — — Other (expense), net — (566) — — $ 78,839 $ (25,484) $ 26,776 $ 21,368 | NOTE 17—SEGMENT INFORMATION Select Energy Services is an oilfield services company that provides solutions to the North American onshore oil and natural gas industry. The Company’s services are offered through three operating segments. Corporate and other expenses that do not individually meet the criteria for segment reporting are reported separately as Corporate. Each operating segment reflects a reportable segment led by separate segment management that reports directly or indirectly to the Company’s chief operating decision maker (“CODM”). The Company’s CODM assesses performance and allocates resources on the basis of the following three reportable segments: Water Solutions —The Water Solutions segment provides water‑related services to customers that include major integrated oil companies and independent oil and natural gas producers. These services include: the sourcing of water; the transfer of the water to the wellsite through permanent pipeline infrastructure and temporary pipe; the containment of fluids off‑ and on‑location; measuring and monitoring of water; the filtering and treatment of fluids, well testing and handling of flowback and produced formation water; and the transportation and recycling or disposal of drilling, completion and production fluids. Accommodations and Rentals —The Accommodations and Rentals segment provides workforce accommodations and surface rental equipment supporting drilling, completion and production operations to the U.S. onshore oil and gas industry. Wellsite Completion and Construction Services —The Wellsite Completion and Construction Services segment provides oil and natural gas operators with a variety of services, including crane and logistics services, wellsite and pipeline construction and field services. These services are performed to establish, maintain and improve production throughout the productive life of an oil or gas well, or to otherwise facilitate other services performed on a well. Financial information as of and for the years ended December 31, 2016 and 2015, by segment, is as follows: As of and for the year ended December 31, 2016 Income (loss) Depreciation and Capital Revenue before taxes Amortization Expenditures Total Assets (in thousands) Water Solutions $ 241,766 $ (282,019) $ 81,051 $ 34,458 $ 331,111 Accommodations and Rentals 27,367 (10,930) 10,841 1,580 38,874 Wellsite Completion and Construction Services 34,094 (4,108) 5,215 288 29,994 Elimination (828) — — — — Loss from operations (297,057) Corporate — (1,916) — — 5,087 Interest expense, net — (16,128) — — — Other income, net — 629 — — — $ 302,399 $ (314,472) $ 97,107 $ 36,326 $ 405,066 As of and for the year ended December 31, 2015 Income (loss) Depreciation and Capital Revenue before taxes Amortization Expenditures Total Assets (in thousands) Water Solutions $ 427,592 $ (52,757) $ 89,271 $ 34,724 $ 560,064 Accommodations and Rentals 53,677 (486) 11,475 10,555 52,890 Wellsite Completion and Construction Services 56,299 (3,003) 6,702 3,407 35,384 Elimination (1,991) — — — — Loss from operations (56,246) Corporate — (12,527) 264 — 1,910 Interest expense, net — (13,689) — — — Other income, net — 893 — — — $ 535,577 $ (81,569) $ 107,712 $ 48,686 $ 650,248 Revenue by groups of similar products and services are as follows: For the year ended December 31, 2016 2015 (in thousands) Water sourcing and transfer(1) $ 144,659 $ 230,354 Well testing and flowback 37,582 75,820 Fluid hauling and disposal 59,214 121,322 Accommodations and rentals 27,151 52,948 Wellsite completion and construction services 33,793 55,133 $ 302,399 $ 535,577 (1) Includes water sourcing, water transfer, containment, water monitoring, and water treatment and recycling services. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
SUBSEQUENT EVENTS | ||
SUBSEQUENT EVENTS | NOTE 17—SUBSEQUENT EVENTS On April 26, 2017, the Company completed its IPO of 8,700,000 shares of Class A common stock at a price of $14.00 per share. On May 10, 2017, the underwriters of the IPO exercised their over-allotment option to purchase an additional 1,305,000 shares of Class A common stock at the IPO price of $14.00 per share. After deducting underwriting discounts and commissions and estimated offering expenses payable by us, we received approximately $128.6 million of the aggregate net proceeds from the IPO (including the over-allotment option). We contributed all of the net proceeds received by us to SES Holdings in exchange for SES Holdings LLC Units. SES Holdings used the net proceeds in the following manner: (i) $34.0 was used to repay borrowings incurred under our Credit Facility to fund the cash portion of the purchase price of the Permian Acquisition, (ii) $7.8 million was used for the cash settlement of outstanding phantom unit awards and (iii) the remaining net proceeds are intended to be used for general corporate purposes, including funding our 2017 budgeted capital expenditures. On May 5, 2017, the Company settled its outstanding phantom unit awards for an aggregate amount equal to $7.8 million as a result of the completion of its IPO, which constituted a liquidity event with respect to such phantom unit awards. Based on the fair market value of a share of the Company’s Class A common stock on the date of the IPO of $14.00, the cash payment with respect to each phantom unit was approximately $5.53. | NOTE 18—SUBSEQUENT EVENTS On January 23, 2017, the Company issued 10,668 equity options to certain members of the Company’s board of directors related to the addition of independent directors and 324,111 equity options to certain employees of the Company with a strike price of $20.00 and terms ranging from seven to ten years. Additionally, the Company granted 2,500 restricted stock units to certain members of the Company’s board of directors related to the addition of independent directors and 34,867 restricted stock units to certain employees. On February 7, 2017, the Company issued 75,399 equity options to certain employees with a strike price of $20.00 and a term of seven years. On February 20, 2017, the Company issued 8,002 equity options to certain employees with a strike price of $20.00 and a term of seven years. Additionally, the Company granted 1,875 restricted stock units to certain employees. On February 24, 2017, the Company entered into a purchase and sale agreement to acquire a company in the Permian Basin with proprietary fresh water sources and water transport infrastructure for $56.5 million, with 90% to be paid in cash and 10% to be paid in equity, subject to certain closing adjustments. Closing is expected to be completed before the end of the first quarter of 2017. The Company has evaluated subsequent events through March 2, 2017, the date the financial statements are available to be issued. |
SIGNIFICANT ACCOUNTING POLICI25
SIGNIFICANT ACCOUNTING POLICIES (POLICIES) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
SIGNIFICANT ACCOUNTING POLICIES | ||
Use of estimates | Use of estimates : The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates its estimates, including those related to recoverability of long‑lived assets and intangibles, useful lives used in depreciation and amortization, uncollectible accounts receivable, income taxes, self‑insurance liabilities, share‑based compensation and contingent liabilities. The Company bases its estimates on historical and other pertinent information that are believed to be reasonable under the circumstances. The accounting estimates used in the preparation of the consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. | Use of estimates : The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates its estimates, including those related to recoverability of long‑lived assets and intangibles, useful lives used in depreciation and amortization, uncollectible accounts receivable, income taxes, self‑insurance liabilities, share‑based compensation and contingent liabilities. The Company bases its estimates on historical and other pertinent information that are believed to be reasonable under the circumstances. The accounting estimates used in the preparation of the consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. |
Emerging Growth Company Status | Emerging Growth Company status: Under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), we are an “emerging growth company,” which allows us to have an extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act. We intend to take advantage of all of the reduced reporting requirements and exemptions, including the longer phase‑in periods for the adoption of new or revised financial accounting standards under Section 107 of the JOBS Act until we are no longer an emerging growth company. Our election to use the phase‑in periods permitted by this election may make it difficult to compare our financial statements to those of non‑emerging growth companies and other emerging growth companies that have opted out of the longer phase‑in periods under Section 107 of the JOBS Act and who will comply with new or revised financial accounting standards. If we were to subsequently elect instead to comply immediately with these public company effective dates, such election would be irrevocable pursuant to Section 107 of the JOBS Act. | |
Recent accounting pronouncements: | Recent accounting pronouncements : In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) , outlining a comprehensive new revenue recognition standard that will supersede ASC 605, Revenue Recognition. The new accounting guidance creates a framework under which an entity will allocate the transaction price to separate performance obligations and recognize revenue when each performance obligation is satisfied. Under the new standard, entities will be required to use judgment and make estimates, including identifying performance obligations in a contract, estimating the amount of variable consideration to include in the transaction price, allocating the transaction price to each separate performance obligation, and determining when an entity satisfies its performance obligations. The standard allows for either “full retrospective” adoption, meaning that the standard is applied to all of the periods presented with a cumulative catch‑up as of the earliest period presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements with a cumulative catch‑up as of the current period. In August 2015, the FASB decided to defer the original effective date by one year to be effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019 for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures and has not yet determined the method by which it will adopt the standard. In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes , which amends existing guidance on income taxes to require the classification of all deferred tax assets and liabilities as noncurrent on the balance sheet. The pronouncement is effective for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018 for nonpublic entities, and may be applied either prospectively or retrospectively. The Company prospectively adopted this guidance during the three months ended March 31, 2017. Prior periods were not retrospectively adjusted. As the Company’s deferred tax assets and liabilities are all noncurrent, the adoption did not result in a change to the consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU 2016-02, Leases , which introduces a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in the current accounting guidance as well as the FASB’s new revenue recognition standard. However, the ASU eliminates the use of bright‑line tests in determining lease classification as required in the current guidance. The ASU also requires additional qualitative disclosures along with specific quantitative disclosures to better enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The pronouncement is effective for annual reporting periods beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, for nonpublic entities using a modified retrospective approach. Early adoption is permitted. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting , that provides a new requirement to record all of the tax effects related to share‑based payments at settlement (or expiration) through the income statement. This pronouncement is effective for annual reporting periods beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018, for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which addresses the classification and presentation of eight specific cash flow issues that currently result in diverse practices. The amendments provide guidance in the presentation and classification of certain cash receipts and cash payments in the statement of cash flows including debt prepayment or debt extinguishment costs, settlement of zero‑coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate‑owned life insurance policies, and distributions received from equity method investees. This pronouncement is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, for nonpublic entities. The amendments in this ASU should be applied using a retrospective approach. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-01 , Clarifying the Definition of a Business , with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This pronouncement is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment . This pronouncement removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This pronouncement is effective for annual reporting periods beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2019. The amendments in this ASU should be applied using a prospective approach. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures | Recent accounting pronouncements : In May 2014, the Financial Accounting Standards Board (the “FASB”) issued an accounting standards update (“ASU”) on a comprehensive new revenue recognition standard that will supersede ASC 605, Revenue Recognition. The new accounting guidance creates a framework under which an entity will allocate the transaction price to separate performance obligations and recognize revenue when each performance obligation is satisfied. Under the new standard, entities will be required to use judgment and make estimates, including identifying performance obligations in a contract, estimating the amount of variable consideration to include in the transaction price, allocating the transaction price to each separate performance obligation, and determining when an entity satisfies its performance obligations. The standard allows for either “full retrospective” adoption, meaning that the standard is applied to all of the periods presented with a cumulative catch‑up as of the earliest period presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements with a cumulative catch‑up as of the current period. In August 2015, the FASB decided to defer the original effective date by one year to be effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019 for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures and has not yet determined the method by which it will adopt the standard. In August 2014, the FASB issued an ASU which requires management to assess a company’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. Before this new standard, there was minimal guidance in U.S. GAAP specific to going concern. Under the new standard, disclosures are required when conditions give rise to substantial doubt about a company’s ability to continue as a going concern within one year from the financial statement issuance date. The new standard applies to all entities and is effective for the annual period ending after December 15, 2016, and all annual and interim periods thereafter. The Company’s adoption of this new guidance during the year ended December 31, 2016 did not have a material impact on its consolidated financial statements and related disclosures. In April 2015, the FASB issued an accounting standards update that requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying value of that debt liability, consistent with debt discounts. The guidance is effective retrospectively for fiscal years, beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016, for nonpublic entities. Early adoption is permitted for financial statements that have not been previously issued. The Company adopted this guidance in 2016 and retrospectively reclassified $2.9 million of debt issuance costs that was previously presented as other long term assets to a direct deduction from the carrying value of short‑term and long‑term debt within the consolidated balance sheets as of December 31, 2015. In November 2015, the FASB issued an accounting standards update which amends existing guidance on income taxes to require the classification of all deferred tax assets and liabilities as noncurrent on the balance sheet. The pronouncement is effective for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018 for nonpublic entities, and may be applied either prospectively or retrospectively. The Company plans to adopt this guidance during the year ended December 31, 2017 and does not expect the adoption to have a material impact on its consolidated financial statements and related disclosures. In February 2016, the FASB issued an accounting standards update for leases. The ASU introduces a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in the current accounting guidance as well as the FASB’s new revenue recognition standard. However, the ASU eliminates the use of bright‑line tests in determining lease classification as required in the current guidance. The ASU also requires additional qualitative disclosures along with specific quantitative disclosures to better enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The pronouncement is effective for annual reporting periods beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, for nonpublic entities using a modified retrospective approach. Early adoption is permitted. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures and has not yet determined the method by which it will adopt the standard. In March 2016, the FASB issued an accounting standards update that provides a new requirement to record all of the tax effects related to share‑based payments at settlement (or expiration) through the income statement. This pronouncement is effective for annual reporting periods beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018, for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In August 2016, the FASB issued an accounting standards update addressing the classification and presentation of eight specific cash flow issues that currently result in diverse practices. The amendments provide guidance in the presentation and classification of certain cash receipts and cash payments in the statement of cash flows including debt prepayment or debt extinguishment costs, settlement of zero‑coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate‑owned life insurance policies, and distributions received from equity method investees. This pronouncement is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, for nonpublic entities. The amendments in this ASU should be applied using a retrospective approach. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In January 2017, the FASB issued an accounting standards update clarifying the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This pronouncement is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. |
ACQUISITION (Tables)
ACQUISITION (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
ACQUISITION | |
Schedule Of consideration transferred and the estimated fair value of identified assets acquired and liabilities | Preliminary purchase price allocation Amount Consideration transferred (in thousand) Cash paid $ 51,000 Class A common stock issued 5,500 Total consideration transferred 56,500 Less: identified assets Working capital 6,000 Fixed assets 13,225 Customer relationship intangible assets 21,392 Other intangible assets 5,150 Total identified assets 45,767 Goodwill $ 10,733 |
Schedule of unaudited consolidated pro forma information | Pro Forma Three Months Ended March 31, 2017 2016 (unaudited) (in thousands) Revenue $ 105,531 $ 83,942 Net loss $ (12,055) $ (26,242) Less: net loss attributable to noncontrolling interests 1 7,932 17,369 Net loss attributable to Select Energy Services, Inc. 1 $ (4,123) $ (8,873) 1 The allocation of net loss attributable to noncontrolling interests and Select Energy Services gives effect to the corporate reorganization as though the 144A Offering occurred as of January 1, 2016. However, the calculation of pro forma net loss does not give effect to any pro forma adjustments for the 144A Offering. |
EXIT AND DISPOSAL ACTIVITIES (T
EXIT AND DISPOSAL ACTIVITIES (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
EXIT AND DISPOSAL ACTIVITIES | ||
Summary of exit and disposal activities | Provision during the Usage during the Balance as of three months ended three months ended Balance as of December 31, 2016 March 31, 2017 March 31, 2017 March 31, 2017 (in thousands) Lease obligations and terminations $ 18,000 $ 1,863 $ 712 $ 19,151 Reclassification of deferred rent 1,069 1,254 Total $ 19,069 $ 20,405 | Provision during the Payments during Balance as of year ended the year ended Balance as of December 31, 2015 December 31, 2016 December 31, 2016 December 31, 2016 (in thousands) Lease obligations and terminations $ — $ 19,423 $ 1,423 $ 18,000 Reclassification of deferred rent — 1,069 Total $ — $ 19,069 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
PROPERTY AND EQUIPMENT. | ||
Schedule of property and equipment | March 31, 2017 December 31, 2016 (in thousands) Land $ 8,540 $ 8,593 Buildings and leasehold improvements 83,061 83,352 Vehicles and equipment 27,711 24,114 Machinery and equipment 538,693 534,303 Computer equipment and software 11,221 11,102 Office furniture and equipment 4,277 4,275 Disposal wells 67,566 67,566 Helicopters 497 497 Construction in progress 14,558 5,584 756,124 739,386 Less accumulated depreciation and impairment (500,541) (490,519) Total property and equipment, net $ 255,583 $ 248,867 | December 31, 2016 2015 (in thousands) Land $ 8,593 $ 9,924 Buildings and leasehold improvements 83,352 82,834 Vehicles and equipment 24,114 8,993 Machinery and equipment 534,303 550,489 Computer equipment and software 11,102 10,256 Office furniture and equipment 4,275 4,329 Disposal wells 67,566 63,771 Helicopters 497 497 Construction in progress 5,584 5,325 739,386 736,418 Less accumulated depreciation and impairment (490,519) (367,726) Total property and equipment, net $ 248,867 $ 368,692 |
GOODWILL AND OTHER INTANGIBLE29
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | ||
Schedule of changes in the carrying amounts of goodwill by reportable segment | Wellsite Completion Water and Construction Accommodations Solutions Services and Rentals Total (in thousands) Balance as of December 31, 2015 $ 137,534 $ 12,242 $ 995 $ 150,771 Impairment (137,534) — (995) (138,529) Balance as of December 31, 2016 — 12,242 — 12,242 Additions 10,733 — — 10,733 Balance as of March 31, 2017 $ 10,733 $ 12,242 $ — $ 22,975 | Wellsite Completion Water and Construction Accommodations Solutions Services and Rentals Total (in thousands) Balance as of December 31, 2014 $ 157,902 $ 12,242 $ 995 $ 171,139 Impairment (20,136) — — (20,136) Dispositions (232) — — (232) Balance as of December 31, 2015 137,534 12,242 995 150,771 Impairment (137,534) — (995) (138,529) Balance as of December 31, 2016 $ — $ 12,242 $ — $ 12,242 |
Summary of components of other intangible assets | March 31, 2017 Gross Accumulated Net Value Amortization Value (in thousands) Customer relationships $ 78,218 $ 50,207 $ 28,011 Other 10,641 2,635 8,006 Total other intangible assets $ 88,859 $ 52,842 $ 36,017 December 31, 2016 Gross Accumulated Net Value Amortization Value (in thousands) Customer relationships $ 56,826 $ 48,236 $ 8,590 Other 5,491 2,495 2,996 Total other intangible assets $ 62,317 $ 50,731 $ 11,586 | December 31, 2016 Gross Accumulated Net Value Amortization Value (in thousands) Customer relationships $ 56,826 $ 48,236 $ 8,590 Other 5,491 2,495 2,996 Total other intangible assets $ 62,317 $ 50,731 $ 11,586 December 31, 2015 Gross Accumulated Net Value Amortization Value (in thousands) Customer relationships $ 56,826 $ 40,163 $ 16,663 Other 4,924 1,747 3,177 Total other intangible assets $ 61,750 $ 41,910 $ 19,840 |
DEBT (Tables)
DEBT (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
DEBT | ||
Summary of Company's leverage ratio | Leverage Ratio Before Receipt of Third Quarter 2017 Eurodollar Base Rate Compliance Certificate Advances Advances < 4.00 4.00 % 3.00 % ≥ 4.00 4.50 % 3.50 % Leverage Ratio After Receipt of Third Quarter 2017 Eurodollar Base Rate Compliance Certificate Advances Advances < 2.00 3.00 % 2.00 % ≥ 2.00 < 2.50 3.25 % 2.25 % ≥ 2.50 < 3.00 3.50 % 2.50 % ≥ 3.00 < 3.50 3.75 % 2.75 % ≥ 3.50 < 4.00 4.00 % 3.00 % ≥ 4.00 4.50 % 3.50 % | Leverage Ratio Before Receipt of Third Quarter 2017 Eurodollar Base Rate Compliance Certificate Advances Advances < 4.00 4.00 % 3.00 % ≥ 4.00 4.50 % 3.50 % Leverage Ratio After Receipt of Third Quarter 2017 Eurodollar Base Rate Compliance Certificate Advances Advances < 2.00 3.00 % 2.00 % ≥ 2.00 < 2.50 3.25 % 2.25 % ≥ 2.50 < 3.00 3.50 % 2.50 % ≥ 3.00 < 3.50 3.75 % 2.75 % ≥ 3.50 < 4.00 4.00 % 3.00 % ≥ 4.00 4.50 % 3.50 % |
EQUITY_BASED COMPENSATION (Tabl
EQUITY?BASED COMPENSATION (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
EQUITY BASED COMPENSATION | ||
Schedule of equity option activity and related information | For the three months ended March 31, 2017 Weighted-average Equity Options Exercise Price Beginning balance 620,721 $ 16.50 Granted 418,184 20.00 Ending balance 1,038,905 $ 17.91 | December 31, 2016 December 31, 2015 Weighted Weighted Unit Average Average Options Exercise Price Options Exercise Price Beginning balance 973,410 $ 16.16 1,262,220 $ 16.34 Granted 204,245 16.17 — — Cancelled (556,934) 15.79 (288,810) 16.93 Ending balance 620,721 $ 16.50 973,410 $ 16.16 |
Schedule of assumptions used in determining the fair value of certain equity options | $20.00 Strike Underlying Equity $ 20.00 Strike Price $ 20.00 Dividend Yield (%) % Risk free rate (%) 1.64% - 1.99 % Volatility (%) 46.6% - 46.7 % Expected Term (Years) 4-6 | $14.33 Strike $20.61 Strike Underlying Equity $ 6.08 $ 6.08 Strike Price $ 14.33 $ 20.61 Dividend Yield (%) — % — % Risk free rate (%) 0.86 % 0.86 % Volatility (%) 63.0 % 63.0 % Expected Term (Years) 5 5 |
Schedule of restricted stock activity | For the three months ended March 31, 2017 Grant Date Fair Restricted Stock Value Beginning balance — $ — Granted 39,242 20.00 Ending balance 39,242 $ 20.00 |
DERIVATIVE FINANCIAL INSTRUME32
DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
DERIVATIVE FINANCIAL INSTRUMENTS | ||
Summary of changes in the fair value of the interest rate swap derivative instruments | Three Months Ended March 31, Derivatives designated as cash flow hedges 2016 (in thousands) Beginning fair value of interest rate swap derivative instruments $ (7) Amount of unrealized losses recognized in OCI (80) Amount of gains reclassified from AOCI to earnings (effective portion) 85 Net change in fair value of interest rate swap derivative instruments 5 Ending fair value of interest rate swap derivative instruments $ (2) | Year Ended December 31, Derivatives designated as cash flow hedges 2016 2015 (in thousands) Beginning fair value of interest rate swap derivative instruments $ (7) $ (68) Amount of unrealized losses recognized in OCI (106) (277) Amount of gains reclassified from AOCI to earnings (effective portion) 113 338 Net change in fair value of interest rate swap derivative instruments 7 61 Ending fair value of interest rate swap derivative instruments $ — $ (7) |
NONCONTROLLING INTERESTS (Table
NONCONTROLLING INTERESTS (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
NONCONTROLLING INTERESTS. | ||
Summary of the effects of changes in noncontrolling interests | For the three months ended March 31, 2017 2016 (in thousands) Net loss attributable to Select Energy Services, Inc. and its Predecessor $ (4,172) $ (25,337) Transfers from noncontrolling interests: Increase in equity due to transactions with holder of noncontrolling interests 2,495 — Change to equity from net loss attributable to Select Energy Services, Inc. and its Predecessor and transfers from noncontrolling interests $ (1,677) $ (25,337) | December 31, 2016 (in thousands) Net loss prior to 144A Offering $ (306,481) Transfers from noncontrolling interests: Increase in Predecessor equity due to purchase of noncontrolling interests 707 Change to Predecessor equity from net loss prior to 144A Offering and transfers from noncontrolling interests $ (305,774) |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
EARNINGS PER SHARE | ||
Summary of calculation of basic and diluted earnings per share | The following table presents the Company’s calculation of basic and diluted earnings per share for the three months ended March 31, 2017 and 2016 (dollars in thousands, except share and per share amounts): Three Months Ended March 31, 2017 2016 Net loss (12,280) (25,793) Less: Net loss attributable to Predecessor — 25,337 Less: Net loss attributable to noncontrolling interests 8,108 456 Net loss attributable to Select Energy Services, Inc. $ (4,172) $ — Allocation of net loss attributable to: Class A-1 stockholders $ (3,363) Class A stockholders (809) Class B stockholders — $ (4,172) Weighted average shares outstanding: Class A-1-Basic & Diluted 16,100,000 Class A-Basic & Diluted 3,870,194 Class B-Basic & Diluted 38,462,541 Net loss per share attributable to common stockholders: Class A-1-Basic & Diluted $ (0.21) Class A-Basic & Diluted $ (0.21) Class B-Basic & Diluted $ — | The following table presents the Company’s calculation of basic and diluted earnings per share for the year ended December 31, 2016 (dollars in thousands, except share and per share amounts): Year Ended December 31, 2016 Net loss $ (313,948) Net loss attributable to Predecessor 306,481 Net loss attributable to noncontrolling interests 6,424 Net loss attributable to Select Energy Services, Inc. $ (1,043) Allocation of loss attributable to: Class A-1 stockholders $ (844) Class A stockholders (199) Class B stockholders — $ (1,043) Weighted average shares outstanding: Class A-1—Basic & Diluted 16,100,000 Class A—Basic & Diluted 3,802,972 Class B—Basic & Diluted 38,462,541 Net loss per share attributable to common stockholders: Class A-1—Basic & Diluted $ (0.05) Class A—Basic & Diluted $ (0.05) Class B—Basic & Diluted $ — |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
SEGMENT INFORMATION | ||
Summary of financial information by segment | Total Assets As of As of March 31, 2017 December 31, 2016 (in thousands) Water Solutions $ 357,168 $ 324,171 Accommodations and Rentals 39,247 38,874 Wellsite Completion and Construction Services 31,598 29,994 Corporate 13,102 12,027 $ 441,115 $ 405,066 For the three months ended March 31, 2017 Income (loss) before Depreciation and Capital Revenue taxes Amortization Expenditures (in thousands) Water Solutions $ 78,765 $ (7,672) $ 17,548 $ 11,955 Accommodations and Rentals 9,543 (2,403) 2,672 713 Wellsite Completion and Construction Services 12,267 (248) 984 1,342 Elimination (650) — — — Loss from operations (10,323) Corporate — (2,185) 446 — Interest expense, net — (730) — — Other income, net — 1,064 — — $ 99,925 $ (12,174) $ 21,650 $ 14,010 For the three months ended March 31, 2016 Income (loss) before Depreciation and Capital Revenue taxes Amortization Expenditures (in thousands) Water Solutions $ 62,309 $ (17,499) $ 21,922 $ 20,787 Accommodations and Rentals 8,596 (1,695) 2,829 500 Wellsite Completion and Construction Services 8,081 (1,192) 1,391 81 Elimination (147) — — — Loss from operations (20,386) Corporate — (1,165) 634 — Interest expense, net — (3,367) — — Other (expense), net — (566) — — $ 78,839 $ (25,484) $ 26,776 $ 21,368 | As of and for the year ended December 31, 2016 Income (loss) Depreciation and Capital Revenue before taxes Amortization Expenditures Total Assets (in thousands) Water Solutions $ 241,766 $ (282,019) $ 81,051 $ 34,458 $ 331,111 Accommodations and Rentals 27,367 (10,930) 10,841 1,580 38,874 Wellsite Completion and Construction Services 34,094 (4,108) 5,215 288 29,994 Elimination (828) — — — — Loss from operations (297,057) Corporate — (1,916) — — 5,087 Interest expense, net — (16,128) — — — Other income, net — 629 — — — $ 302,399 $ (314,472) $ 97,107 $ 36,326 $ 405,066 As of and for the year ended December 31, 2015 Income (loss) Depreciation and Capital Revenue before taxes Amortization Expenditures Total Assets (in thousands) Water Solutions $ 427,592 $ (52,757) $ 89,271 $ 34,724 $ 560,064 Accommodations and Rentals 53,677 (486) 11,475 10,555 52,890 Wellsite Completion and Construction Services 56,299 (3,003) 6,702 3,407 35,384 Elimination (1,991) — — — — Loss from operations (56,246) Corporate — (12,527) 264 — 1,910 Interest expense, net — (13,689) — — — Other income, net — 893 — — — $ 535,577 $ (81,569) $ 107,712 $ 48,686 $ 650,248 |
BUSINESS AND BASIS OF PRESENT36
BUSINESS AND BASIS OF PRESENTATION (Details) $ / shares in Units, $ in Millions | Apr. 26, 2017$ / sharesshares | Dec. 20, 2016USD ($)$ / sharesshares | May 05, 2017$ / shares | Mar. 31, 2017$ / sharesshares | Dec. 31, 2016shares | Sep. 22, 2016USD ($) | Dec. 31, 2015shares | Oct. 30, 2015USD ($) |
Share price | $ / shares | $ 20 | |||||||
Maximum borrowing capacity | $ | $ 100 | $ 215 | $ 355 | |||||
Revolving line of credit | ||||||||
Maximum borrowing capacity | $ | $ 100 | $ 250 | ||||||
Predecessor | ||||||||
Ratio | 10.3583 | |||||||
Common units issued | 16,100,000 | |||||||
Class A-1 common stock | ||||||||
Common stock issued | 16,100,000 | 16,100,000 | 0 | |||||
Class A-1 common stock | Private Placement | ||||||||
Shares issued | 16,100,000 | |||||||
Share price | $ / shares | $ 20 | |||||||
Class A common stock | ||||||||
Common stock issued | 4,077,970 | 3,802,792 | 0 | |||||
Class A common stock | IPO | ||||||||
Shares issued | 8,700,000 | |||||||
Share price | $ / shares | $ 14 | $ 14 | ||||||
Class B common stock | ||||||||
Common stock issued | 38,462,541 | 38,462,541 | 0 | |||||
Legacy Owner Holdco | Class B common stock | Private Placement | ||||||||
Common units issued | 38,462,541 | |||||||
Contributing Legacy Owners | Class A common stock | Predecessor | ||||||||
Common units issued | 3,802,972 | |||||||
Common stock issued | 3,802,972 |
ACQUISITION (Details)
ACQUISITION (Details) - USD ($) $ / shares in Units, $ in Thousands | Mar. 10, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
ACQUISITION | |||||
Proceeds from credit facility | $ 34,000 | ||||
Goodwill | 10,700 | $ 22,975 | $ 12,242 | $ 150,771 | $ 171,139 |
Class A common stock | |||||
ACQUISITION | |||||
Total consideration paid | 56,500 | ||||
Cash paid | 51,000 | ||||
Class A common stock issued | $ 5,500 | ||||
Class A Common stock issued, Share Price | $ 20 | ||||
Permian Acquisition | |||||
ACQUISITION | |||||
Total consideration paid | $ 56,500 | ||||
Cash paid | 51,000 | ||||
Class A common stock issued | 5,500 | ||||
Cash on hand | 17,000 | ||||
Goodwill | $ 10,733 |
ACQUISITION - Purchase price al
ACQUISITION - Purchase price allocation (Details2) - USD ($) $ in Thousands | Mar. 10, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Less: identified assets | |||||
Transaction cost | $ 700 | ||||
Goodwill | $ 10,700 | $ 22,975 | $ 12,242 | $ 150,771 | $ 171,139 |
Class A common stock | |||||
Consideration transferred | |||||
Cash paid | 51,000 | ||||
Class A common stock issued | 5,500 | ||||
Total consideration transferred | 56,500 | ||||
Permian Acquisition | |||||
Consideration transferred | |||||
Cash paid | 51,000 | ||||
Class A common stock issued | 5,500 | ||||
Total consideration transferred | 56,500 | ||||
Less: identified assets | |||||
Working capital | 6,000 | ||||
Fixed assets | 13,225 | ||||
Total identified assets | 45,767 | ||||
Goodwill | 10,733 | ||||
Permian Acquisition | Customer relationships | |||||
Less: identified assets | |||||
intangible assets | 21,392 | ||||
Permian Acquisition | Other | |||||
Less: identified assets | |||||
intangible assets | $ 5,150 |
ACQUISITION - Proforma (Details
ACQUISITION - Proforma (Details3) - USD ($) $ in Thousands | Mar. 10, 2017 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | Dec. 31, 2015 |
ACQUISITION | |||||
Revenue | $ 99,925 | $ 78,839 | $ 302,399 | $ 535,577 | |
Net income | (4,172) | (25,337) | $ (1,043) | ||
Permian Acquisition | |||||
ACQUISITION | |||||
Revenue | $ 1,900 | ||||
Net income | 300 | ||||
Pro forma information | |||||
Revenue | 105,531 | 83,942 | |||
Net loss | (12,055) | (26,242) | |||
Less: net loss attributable to noncontrolling interests | 7,932 | 17,369 | |||
Net loss attributable to Select Energy Services, Inc. | $ (4,123) | $ (8,873) |
EXIT AND DISPOSAL ACTIVITIES (D
EXIT AND DISPOSAL ACTIVITIES (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2017USD ($) | Dec. 31, 2016USD ($)item | Dec. 31, 2014facility | Dec. 31, 2015USD ($) | |
Exit and disposal activities | ||||
Number of facilities closed | 15 | 15 | ||
Charges related to exit and disposal activities | $ 1,900 | |||
Accrued Liabilities and Other Liabilities | 24,031 | $ 22,091 | $ 14,293 | |
Restructuring Reserve [Roll Forward] | ||||
Restructuring Reserve, Beginning Balance | 19,069 | |||
Restructuring Reserve, Ending Balance | 20,405 | 19,069 | ||
Accrued Liabilities [Member] | ||||
Exit and disposal activities | ||||
Accrued Liabilities and Other Liabilities | 3,100 | |||
Lease obligations and terminations | ||||
Exit and disposal activities | ||||
Accrued Liabilities and Other Liabilities | 3,100 | |||
Restructuring Reserve [Roll Forward] | ||||
Restructuring Reserve, Beginning Balance | 18,000 | |||
Provision for Restructuring | 1,863 | 19,423 | ||
Payments for Restructuring | 712 | 1,423 | ||
Restructuring Reserve, Ending Balance | 19,151 | 18,000 | ||
Reclassifications of deferred rent | ||||
Exit and disposal activities | ||||
Amount reclassed to accrued lease obligations | 200 | |||
Restructuring Reserve [Roll Forward] | ||||
Restructuring Reserve, Beginning Balance | 1,069 | |||
Restructuring Reserve, Ending Balance | $ 1,254 | $ 1,069 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2016 | Dec. 31, 2015 |
Property and equipment | ||||
Property and equipment, gross | $ 756,124 | $ 739,386 | $ 739,386 | $ 736,418 |
Less accumulated depreciation and impairment | (500,541) | (490,519) | (490,519) | (367,726) |
Total property and equipment, net | 255,583 | 248,867 | 248,867 | 368,692 |
Capital lease obligations | 0 | 0 | 0 | |
Land | ||||
Property and equipment | ||||
Property and equipment, gross | 8,540 | 8,593 | 8,593 | 9,924 |
Building and leasehold improvements | ||||
Property and equipment | ||||
Property and equipment, gross | 83,061 | 83,352 | 83,352 | 82,834 |
Vehicles and equipment | ||||
Property and equipment | ||||
Property and equipment, gross | 27,711 | 24,114 | 24,114 | 8,993 |
Machinery and equipment | ||||
Property and equipment | ||||
Property and equipment, gross | 538,693 | 534,303 | 534,303 | 550,489 |
Computer equipment and software | ||||
Property and equipment | ||||
Property and equipment, gross | 11,221 | 11,102 | 11,102 | 10,256 |
Office furniture and equipment | ||||
Property and equipment | ||||
Property and equipment, gross | 4,277 | 4,275 | 4,275 | 4,329 |
Disposal wells | ||||
Property and equipment | ||||
Property and equipment, gross | 67,566 | 67,566 | 67,566 | 63,771 |
Helicopters | ||||
Property and equipment | ||||
Property and equipment, gross | 497 | 497 | 497 | 497 |
Construction in progress | ||||
Property and equipment | ||||
Property and equipment, gross | $ 14,558 | $ 5,584 | $ 5,584 | $ 5,325 |
GOODWILL AND OTHER INTANGIBLE42
GOODWILL AND OTHER INTANGIBLE ASSETS - GOODWILL (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Goodwill | |||
Balance at the beginning of the period | $ 12,242 | $ 150,771 | $ 171,139 |
Impairment | (138,529) | (20,136) | |
Additions | 10,733 | ||
Balance at the end of the period | 22,975 | 12,242 | 150,771 |
Water Solutions | |||
Goodwill | |||
Balance at the beginning of the period | 137,534 | 157,902 | |
Impairment | (137,534) | (20,136) | |
Additions | 10,733 | ||
Balance at the end of the period | 10,733 | 137,534 | |
Wellsite Completion and Construction Services | |||
Goodwill | |||
Balance at the beginning of the period | 12,242 | 12,242 | 12,242 |
Balance at the end of the period | $ 12,242 | 12,242 | 12,242 |
Accommodations and Rentals | |||
Goodwill | |||
Balance at the beginning of the period | 995 | 995 | |
Impairment | $ (995) | ||
Balance at the end of the period | $ 995 |
GOODWILL AND OTHER INTANGIBLE43
GOODWILL AND OTHER INTANGIBLE ASSETS - OTHER INTANGIBLE ASSETS (Details2) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Other intangible assets | ||||
Gross Value | $ 88,859 | $ 62,317 | $ 61,750 | |
Accumulated Amortization | 52,842 | 50,731 | 41,910 | |
Net Value | 36,017 | 11,586 | 19,840 | |
Amortization expense | 2,100 | $ 2,200 | 8,700 | 9,300 |
Customer relationships | ||||
Other intangible assets | ||||
Gross Value | 78,218 | 56,826 | 56,826 | |
Accumulated Amortization | 50,207 | 48,236 | 40,163 | |
Net Value | $ 28,011 | $ 8,590 | 16,663 | |
Useful life of acquired intangible asset | 13 years | |||
Customer relationships | Minimum | ||||
Other intangible assets | ||||
Useful life of intangible asset | 5 years | 5 years | ||
Customer relationships | Maximum | ||||
Other intangible assets | ||||
Useful life of intangible asset | 7 years | 7 years | ||
Noncompete agreements | ||||
Other intangible assets | ||||
Useful life of acquired intangible asset | 5 years | |||
Noncompete agreements | Minimum | ||||
Other intangible assets | ||||
Useful life of intangible asset | 3 years | 3 years | ||
Noncompete agreements | Maximum | ||||
Other intangible assets | ||||
Useful life of intangible asset | 5 years | 5 years | ||
Other | ||||
Other intangible assets | ||||
Gross Value | $ 10,641 | $ 5,491 | 4,924 | |
Accumulated Amortization | 2,635 | 2,495 | 1,747 | |
Net Value | $ 8,006 | $ 2,996 | $ 3,177 | |
Other | Minimum | ||||
Other intangible assets | ||||
Useful life of intangible asset | 3 years | 3 years | ||
Other | Maximum | ||||
Other intangible assets | ||||
Useful life of intangible asset | 8 years | 8 years |
DEBT (Details)
DEBT (Details) - USD ($) | Dec. 31, 2016 | Dec. 20, 2016 | Mar. 31, 2017 | Sep. 22, 2016 | Dec. 31, 2015 | Oct. 30, 2015 |
DEBT | ||||||
Maximum borrowing capacity | $ 100,000,000 | $ 215,000,000 | $ 355,000,000 | |||
Commitment fee (as a percent) | 0.50% | |||||
Debt outstanding | $ 0 | $ 34,000,000 | $ 2,900,000 | |||
Weighted average interest rate (as a percent) | 3.25% | |||||
Outstanding letters of credit | 16,300,000 | $ 14,800,000 | ||||
Unamortized debt issuance cost | $ 3,900,000 | 2,900,000 | ||||
Before Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio less than 4.00 | Eurodollar Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 4.00% | |||||
Before Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio less than 4.00 | Base Rate Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 3.00% | |||||
Before Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 4.00 | Eurodollar Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 4.50% | |||||
Before Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 4.00 | Base Rate Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 3.50% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio less than 2.00 | Eurodollar Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 3.00% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio less than 2.00 | Base Rate Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 2.00% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 2.00 less than 2.50 | Eurodollar Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 3.25% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 2.00 less than 2.50 | Base Rate Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 2.25% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 2.50 less than 3.00 | Eurodollar Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 3.50% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 2.50 less than 3.00 | Base Rate Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 2.50% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 3.00 less than 3.50 | Eurodollar Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 3.75% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 3.00 less than 3.50 | Base Rate Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 2.75% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 3.50 less than 4.00 | Eurodollar Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 4.00% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 3.50 less than 4.00 | Base Rate Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 3.00% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 4.00 | Eurodollar Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 4.50% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 4.00 | Base Rate Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 3.50% | |||||
Revolving line of credit | ||||||
DEBT | ||||||
Maximum borrowing capacity | $ 100,000,000 | $ 250,000,000 | ||||
Commitment fee (as a percent) | 0.50% | |||||
Debt outstanding | $ 0 | $ 34,000,000 | ||||
Weighted average interest rate (as a percent) | 5.50% | |||||
Outstanding letters of credit | $ 16,100,000 | |||||
Unused portion of available borrowing | $ 83,700,000 | $ 62,200,000 | ||||
Unamortized debt issuance cost | $ 3,600,000 | |||||
Revolving line of credit | Before Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio less than 4.00 | Eurodollar Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 4.00% | |||||
Revolving line of credit | Before Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio less than 4.00 | Base Rate Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 3.00% | |||||
Revolving line of credit | Before Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 4.00 | Eurodollar Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 4.50% | |||||
Revolving line of credit | Before Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 4.00 | Base Rate Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 3.50% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio less than 2.00 | Eurodollar Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 3.00% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio less than 2.00 | Base Rate Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 2.00% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 2.00 less than 2.50 | Eurodollar Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 3.25% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 2.00 less than 2.50 | Base Rate Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 2.25% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 2.50 less than 3.00 | Eurodollar Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 3.50% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 2.50 less than 3.00 | Base Rate Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 2.50% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 3.00 less than 3.50 | Eurodollar Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 3.75% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 3.00 less than 3.50 | Base Rate Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 2.75% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 3.50 less than 4.00 | Eurodollar Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 4.00% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 3.50 less than 4.00 | Base Rate Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 3.00% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 4.00 | Eurodollar Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 4.50% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 4.00 | Base Rate Advances | ||||||
DEBT | ||||||
Margin (as a percent) | 3.50% | |||||
Letter of credit | ||||||
DEBT | ||||||
Unused portion of available borrowing | $ 49,900,000 | |||||
Letter of credit | Minimum | ||||||
DEBT | ||||||
Variable interest rate (as a percent) | 3.00% | 3.00% | ||||
Letter of credit | Maximum | ||||||
DEBT | ||||||
Variable interest rate (as a percent) | 4.50% | 4.50% |
EQUITY BASED COMPENSATION (Deta
EQUITY BASED COMPENSATION (Details) - $ / shares | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2017 | Dec. 31, 2016 | May 05, 2017 | Apr. 26, 2017 | |
EQUITY-BASED COMPENSATION | ||||
Equity options term | 7 years | |||
Vesting period | 3 years | 3 years | ||
Share Price | $ 20 | |||
Minimum | ||||
EQUITY-BASED COMPENSATION | ||||
Equity options term | 7 years | |||
Maximum | ||||
EQUITY-BASED COMPENSATION | ||||
Equity options term | 10 years | |||
Class A common stock | IPO | ||||
EQUITY-BASED COMPENSATION | ||||
Share Price | $ 14 | $ 14 | ||
2016 plan | Maximum | ||||
EQUITY-BASED COMPENSATION | ||||
Equity options term | 10 years | |||
2016 plan | Class A common stock | ||||
EQUITY-BASED COMPENSATION | ||||
Maximum number of shares | 4,600,000 | 4,600,000 | ||
Percentage of common stock sold in underwritten public offering | 8.00% | |||
2016 plan | Class A common stock | Over-allotment option | ||||
EQUITY-BASED COMPENSATION | ||||
Percentage of common stock sold in underwritten public offering | 8.00% | |||
Phantom Equity Awards | ||||
EQUITY-BASED COMPENSATION | ||||
Cash payment (per phantom unit) | $ 5.53 |
EQUITY BASED COMPENSATION - Equ
EQUITY BASED COMPENSATION - Equity Options (Details2) - $ / shares | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
Equity Options | ||
Beginning balance (in shares) | 620,721 | 973,410 |
Granted (in shares) | 418,184 | 204,245 |
Ending balance (in shares) | 1,038,905 | 620,721 |
Weighted-average Exercise Price | ||
Beginning balance (in dollars per share) | $ 16.50 | $ 16.16 |
Granted (in dollars per share) | 20 | 16.17 |
Ending balance (in dollars per share) | $ 17.91 | $ 16.50 |
EQUITY BASED COMPENSATION - Ass
EQUITY BASED COMPENSATION - Assumptions (Details3) - $ / shares | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
EQUITY-BASED COMPENSATION | |||
Weighted-average grant date fair value of equity options granted | $ 7.98 | $ 1.84 | |
Assumptions for equity options granted: | |||
Underlying Equity | 20 | ||
Strike Price | $ 20 | ||
Dividend Yield (%) | 0.00% | ||
Risk free rate(%), minimum | 1.64% | ||
Risk free rate(%), maximum | 1.99% | ||
Volatility (%), minimum | 46.60% | ||
Volatility (%), maximum | 46.70% | ||
Vested (in shares) | 0 | 229,747 | 257,973 |
Minimum | |||
Assumptions for equity options granted: | |||
Expected Term (Years) | 4 years | ||
Maximum | |||
Assumptions for equity options granted: | |||
Expected Term (Years) | 6 years |
EQUITY BASED COMPENSATION - Res
EQUITY BASED COMPENSATION - Restricted stock (Details4) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Grant Date Fair Value | ||||
Compensation expense | $ 0.3 | $ 0.7 | ||
Restricted Stock | ||||
Restricted stock | ||||
Granted (in shares) | 39,242 | |||
Ending balance (in shares) | 39,242 | |||
Grant Date Fair Value | ||||
Granted (in dollars per share) | $ 20 | |||
Ending balance (in dollars per share) | $ 20 | |||
Compensation expense | $ 0.6 | $ 0.3 |
EQUITY BASED COMPENSATION - Pha
EQUITY BASED COMPENSATION - Phantom Awards (Details5) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
EQUITY-BASED COMPENSATION | |||
Compensation expense | $ 300,000 | $ 700,000 | |
Phantom Awards | |||
EQUITY-BASED COMPENSATION | |||
Compensation expense | $ 0 | $ 0 |
DERIVATIVE FINANCIAL INSTRUME50
DERIVATIVE FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Apr. 30, 2013 | |
DERIVATIVE FINANCIAL INSTRUMENTS | ||||
Unrealized holding loss arising during period | $ (80) | $ 106 | $ 277 | |
Amount of gains reclassified from AOCI to earnings (effective portion) | 85 | 113 | 338 | |
Net change in unrealized gain (loss) | 5 | (7) | (61) | |
Interest Rate Swap | Cash Flow Hedging | ||||
DERIVATIVE FINANCIAL INSTRUMENTS | ||||
Aggregate notional amount | $ 125,000 | |||
Beginning fair value of interest rate swap derivative instruments | (7) | (7) | (68) | |
Unrealized holding loss arising during period | (80) | (106) | (277) | |
Amount of gains reclassified from AOCI to earnings (effective portion) | 85 | 113 | 338 | |
Net change in unrealized gain (loss) | 5 | $ 7 | 61 | |
Ending fair value of interest rate swap derivative instruments | $ (2) | $ (7) |
FAIR VALUE MEASUREMENT (Details
FAIR VALUE MEASUREMENT (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
FAIR VALUE MEASUREMENT | ||
Transfers into Level3 | $ 0 | $ 0 |
Transfers out of Level3 | $ 0 | 0 |
Debt outstanding | $ 0 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
RELATED PARTY TRANSACTIONS | ||||
Sales to related parties | $ 500,000 | $ 300,000 | $ 1,200,000 | $ 4,100,000 |
Purchases from related party vendors | $ 1,200,000 | 1,000,000 | $ 4,300,000 | $ 8,600,000 |
Minimum | ||||
RELATED PARTY TRANSACTIONS | ||||
Beneficial ownership (as a percent) | 5.00% | 5.00% | 5.00% | |
Tax Receivable Agreement | ||||
RELATED PARTY TRANSACTIONS | ||||
Number of tax receivable agreements | $ 2 | |||
Tax Receivable Agreement | Legacy Owner Holdco and Crestview GP | ||||
RELATED PARTY TRANSACTIONS | ||||
Percentage of net tax savings for payment to TRA Holders | 85 | |||
Tax Receivable Agreement | Contributing Legacy Owners | ||||
RELATED PARTY TRANSACTIONS | ||||
Percentage of net tax savings for payment to TRA Holders | 85 | |||
Property and equipment | ||||
RELATED PARTY TRANSACTIONS | ||||
Purchases from related party vendors | 200,000 | 100,000 | $ 1,000,000 | $ 4,000,000 |
Inventory and consumables | ||||
RELATED PARTY TRANSACTIONS | ||||
Purchases from related party vendors | 200,000 | 900,000 | ||
Inventory and consumables | Maximum | ||||
RELATED PARTY TRANSACTIONS | ||||
Purchases from related party vendors | 100,000 | 100,000 | ||
Rent of certain equipment or other services | ||||
RELATED PARTY TRANSACTIONS | ||||
Purchases from related party vendors | 400,000 | 300,000 | 1,100,000 | 1,000,000 |
Management, consulting and other services | ||||
RELATED PARTY TRANSACTIONS | ||||
Purchases from related party vendors | $ 500,000 | $ 600,000 | $ 2,000,000 | $ 2,700,000 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
INCOME TAXES | ||||
Effective Income tax (as percent) | (0.90%) | (1.20%) | 35.00% | |
Statutory tax rate (as a percent) | 35.00% | |||
Tax benefit (expense) | $ 106,000 | $ 309,000 | $ (524,000) | $ 324,000 |
Liability or expense | $ 0 | $ 0 | $ 0 |
NONCONTROLLING INTERESTS (Detai
NONCONTROLLING INTERESTS (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Effects of changes in noncontrolling interests on equity | |||
Net loss attributable to Select Energy Services, Inc. and its Predecessor | $ (4,172) | $ (25,337) | $ (1,043) |
Transfers from noncontrolling interests: | |||
Increase in equity due to transactions with holder of noncontrolling interests | 2,495 | ||
Change to equity from net loss attributable to Select Energy Services, Inc. and its Predecessor and transfers from noncontrollig interests | $ (1,677) | $ (25,337) |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands | Dec. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | Dec. 19, 2016 | Dec. 31, 2015 |
Calculation of basic and diluted earnings per share: | ||||||
Net loss | $ (3,060) | $ (12,280) | $ (25,793) | $ (313,948) | $ (310,888) | $ (81,872) |
Less: Net loss attributable to noncontrolling interests | 8,108 | 456 | 6,424 | 981 | ||
Net loss attributable to Select Energy Services, Inc. | (4,172) | (25,337) | (1,043) | |||
Predecessor | ||||||
Calculation of basic and diluted earnings per share: | ||||||
Net loss | (306,481) | $ (306,481) | $ (80,891) | |||
Less: Net loss attributable to noncontrolling interests | $ 25,337 | |||||
Class A-1 common stock | ||||||
Calculation of basic and diluted earnings per share: | ||||||
Net loss | (844) | |||||
Net loss attributable to Select Energy Services, Inc. | $ (3,363) | $ (844) | ||||
Weighted average shares outstanding: | 16,100,000 | 16,100,000 | ||||
Net loss per share attributable to common stockholders: | $ (0.21) | $ (0.05) | ||||
Class A common stock | ||||||
Calculation of basic and diluted earnings per share: | ||||||
Net loss | $ (199) | |||||
Net loss attributable to Select Energy Services, Inc. | $ (809) | $ (199) | ||||
Weighted average shares outstanding: | 3,870,194 | 3,802,972 | ||||
Net loss per share attributable to common stockholders: | $ (0.21) | $ (0.05) | ||||
Class B common stock | ||||||
Calculation of basic and diluted earnings per share: | ||||||
Weighted average shares outstanding: | 38,462,541 | 38,462,541 |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2017USD ($)segment | Mar. 31, 2016USD ($) | Dec. 31, 2016USD ($)segment | Dec. 31, 2015USD ($)segment | |
SEGMENT INFORMATION | ||||
Number of operating segments | segment | 3 | 3 | 3 | |
Number of reportable segments | segment | 3 | 3 | 3 | |
Assets | $ 441,115 | $ 405,066 | $ 650,248 | |
Segment information | ||||
Revenue | 99,925 | $ 78,839 | 302,399 | 535,577 |
Income (loss) before taxes | (12,174) | (25,484) | (314,472) | (81,569) |
Depreciation and amortization | 21,650 | 26,776 | 97,107 | 107,712 |
Capital Expenditures | 14,010 | 21,368 | 36,326 | 48,686 |
Loss from operations | (12,508) | (21,551) | (298,973) | (68,773) |
Other income (expense), net | 1,064 | (566) | 629 | 893 |
Water Solutions | ||||
SEGMENT INFORMATION | ||||
Assets | 357,168 | 324,171 | 560,064 | |
Segment information | ||||
Revenue | 78,765 | 62,309 | 241,766 | 427,592 |
Income (loss) before taxes | (7,672) | (17,499) | (282,019) | (52,757) |
Depreciation and amortization | 17,548 | 21,922 | 81,051 | 89,271 |
Capital Expenditures | 11,955 | 20,787 | 34,458 | 34,724 |
Accommodations and Rentals | ||||
SEGMENT INFORMATION | ||||
Assets | 39,247 | 38,874 | 52,890 | |
Segment information | ||||
Revenue | 9,543 | 8,596 | 27,367 | 53,677 |
Income (loss) before taxes | (2,403) | (1,695) | (10,930) | (486) |
Depreciation and amortization | 2,672 | 2,829 | 10,841 | 11,475 |
Capital Expenditures | 713 | 500 | 1,580 | 10,555 |
Wellsite Completion and Construction Services | ||||
SEGMENT INFORMATION | ||||
Assets | 31,598 | 29,994 | 35,384 | |
Segment information | ||||
Revenue | 12,267 | 8,081 | 34,094 | 56,299 |
Income (loss) before taxes | (248) | (1,192) | (4,108) | (3,003) |
Depreciation and amortization | 984 | 1,391 | 5,215 | 6,702 |
Capital Expenditures | 1,342 | 81 | 288 | 3,407 |
Elimination | ||||
Segment information | ||||
Revenue | (650) | (147) | (828) | (1,991) |
Corporate | ||||
SEGMENT INFORMATION | ||||
Assets | 13,102 | 12,027 | 1,910 | |
Segment information | ||||
Income (loss) before taxes | (2,185) | (1,165) | (1,916) | (12,527) |
Depreciation and amortization | 446 | 634 | 264 | |
Material reconciling items | ||||
Segment information | ||||
Loss from operations | (10,323) | (20,386) | (297,057) | (56,246) |
Interest expense, net | (730) | (3,367) | (16,128) | (13,689) |
Other income (expense), net | $ 1,064 | $ (566) | $ 629 | $ 893 |
SUBSEQUENT EVENTS - (Details)
SUBSEQUENT EVENTS - (Details) - USD ($) $ / shares in Units, $ in Thousands | May 10, 2017 | May 05, 2017 | Apr. 26, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Mar. 31, 2017 | Jan. 23, 2017 |
Subsequent Events | ||||||||
Share price | $ 20 | |||||||
Repayments of Debt | $ 7,625 | $ 298,000 | $ 107,000 | |||||
Phantom Equity Awards | ||||||||
Subsequent Events | ||||||||
Cash payment (per phantom unit) | $ 5.53 | |||||||
Class A common stock | IPO | ||||||||
Subsequent Events | ||||||||
Shares issued | 8,700,000 | |||||||
Share price | $ 14 | $ 14 | ||||||
Subsequent Event | ||||||||
Subsequent Events | ||||||||
Share price | $ 20 | |||||||
Subsequent Event | Phantom Equity Awards | ||||||||
Subsequent Events | ||||||||
Settlement of phantom equity awards | $ 7,800 | |||||||
Subsequent Event | Class A common stock | ||||||||
Subsequent Events | ||||||||
Net proceeds from the IPO | $ 128,600 | |||||||
Repayments of Debt | $ 34,000 | |||||||
Subsequent Event | Class A common stock | IPO | ||||||||
Subsequent Events | ||||||||
Shares issued | 8,700,000 | |||||||
Share price | $ 14 | $ 14 | ||||||
Cash payment (per phantom unit) | $ 5.53 | |||||||
Subsequent Event | Class A common stock | Over-allotment option | ||||||||
Subsequent Events | ||||||||
Shares issued | 1,305,000 | |||||||
Share price | $ 14 |
CONSOLIDATED BALANCE SHEETS58
CONSOLIDATED BALANCE SHEETS $ in Thousands | Dec. 31, 2015USD ($) |
Current assets | |
Cash and cash equivalents | $ 16,305 |
Accounts receivable trade, net of allowance for doubtful accounts of $2,144 and $2,351, respectively | 79,479 |
Accounts receivable, related parties | 224 |
Inventories | 701 |
Prepaid expenses and other current assets | 10,408 |
Total current assets | 107,117 |
Property and equipment | 736,418 |
Accumulated depreciation | (367,726) |
Property and equipment, net | 368,692 |
Goodwill | 150,771 |
Other intangible assets, net | 19,840 |
Other assets | 3,828 |
Total assets | 650,248 |
Current liabilities | |
Accounts payable | 9,745 |
Accounts payable and accrued expenses, related parties | 112 |
Accrued salaries and benefits | 2,658 |
Accrued insurance | 16,437 |
Accrued expenses and other current liabilities | 14,293 |
Current maturities of long-term debt | 22,305 |
Total current liabilities | 65,550 |
Other long term liabilities | 11,582 |
Long-term debt, net of current maturities | 245,341 |
Total liabilities | 322,473 |
Commitments and contingencies (Note 8) | |
Members' capital-no Predecessor units and 38,398,649 Predecessor units issued and outstanding as of December 31, 2016 and 2015, respectively | 317,154 |
Preferred stock | |
Total stockholders' equity | 317,154 |
Noncontrolling interests | 10,621 |
Total equity | 327,775 |
Total liabilities and equity | $ 650,248 |
CONSOLIDATED BALANCE SHEETS (59
CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Allowance for doubtful accounts | $ 2,203 | $ 2,144 | $ 2,351 |
Preferred Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 | $ 0.01 |
Preferred Stock, Shares Authorized | 50,000,000 | 50,000,000 | 50,000,000 |
Preferred Stock, Shares Issued | 0 | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 | 0 |
Class A-1 common stock | |||
Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 | |
Common Stock, Shares Authorized | 40,000,000 | 40,000,000 | 0 |
Common Stock, Shares, Issued | 16,100,000 | 16,100,000 | 0 |
Common Stock, Shares, Outstanding | 16,100,000 | 16,100,000 | 0 |
Class A common stock | |||
Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 | |
Common Stock, Shares Authorized | 250,000,000 | 250,000,000 | 0 |
Common Stock, Shares, Issued | 4,077,970 | 3,802,792 | 0 |
Common Stock, Shares, Outstanding | 4,077,970 | 3,802,792 | 0 |
Class B common stock | |||
Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 | |
Common Stock, Shares Authorized | 150,000,000 | 150,000,000 | 0 |
Common Stock, Shares, Issued | 38,462,541 | 38,462,541 | 0 |
Common Stock, Shares, Outstanding | 38,462,541 | 38,462,541 | 0 |
CONSOLIDATED STATEMENTS OF OP60
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Revenue | ||
Water solutions | $ 241,455 | $ 427,496 |
Accommodations and rentals | 27,151 | 52,948 |
Wellsite completion and construction services | 33,793 | 55,133 |
Total revenue | 302,399 | 535,577 |
Costs of revenue | ||
Water solutions | 200,399 | 332,411 |
Accommodations and rentals | 22,019 | 37,957 |
Wellsite completion and construction services | 29,089 | 48,356 |
Depreciation and amortization | 95,020 | 104,608 |
Total costs of revenue | 346,527 | 523,332 |
Gross profit (loss) | (44,128) | 12,245 |
Operating expenses | ||
Selling, general and administrative | 34,643 | 56,548 |
Depreciation and amortization | 2,087 | 3,104 |
Impairment of goodwill and other intangible assets | 138,666 | 21,366 |
Impairment of property and equipment | 60,026 | |
Lease abandonment costs | 19,423 | |
Total operating expenses | 254,845 | 81,018 |
Loss from operations | (298,973) | (68,773) |
Other income (expense) | ||
Interest expense, net | (16,128) | (13,689) |
Other income (expense), net | 629 | 893 |
Loss before tax expense | (314,472) | (81,569) |
Tax expense | 524 | (324) |
Net loss from continuing operations | (313,948) | (81,893) |
Net income from discontinued operations, net of tax | 21 | |
Net income (loss) | (313,948) | (81,872) |
Less: Net loss attributable to noncontrolling interests | 6,424 | 981 |
Net loss attributable to Select Energy Services, Inc. | (1,043) | |
Predecessor | ||
Other income (expense) | ||
Net income (loss) | (306,481) | $ (80,891) |
Class A-1 common stock | ||
Other income (expense) | ||
Net income (loss) | (844) | |
Net loss attributable to Select Energy Services, Inc. | $ (844) | |
EARNINGS PER SHARE | ||
Weighted average shares outstanding: | 16,100,000 | |
Net loss per share attributable to common stockholders (in dollars per share) | $ (0.05) | |
Pro forma net loss per share attributable to common stockholders (unaudited): | $ (4.62) | |
Class A common stock | ||
Other income (expense) | ||
Net income (loss) | $ (199) | |
Net loss attributable to Select Energy Services, Inc. | $ (199) | |
EARNINGS PER SHARE | ||
Weighted average shares outstanding: | 3,802,972 | |
Net loss per share attributable to common stockholders (in dollars per share) | $ (0.05) | |
Pro forma net loss per share attributable to common stockholders (unaudited): | $ (4.62) | |
Class B common stock | ||
EARNINGS PER SHARE | ||
Weighted average shares outstanding: | 38,462,541 |
CONSOLIDATED STATEMENTS OF CO61
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | Dec. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | Dec. 19, 2016 | Dec. 31, 2015 |
Net loss | $ (3,060) | $ (12,280) | $ (25,793) | $ (313,948) | $ (310,888) | $ (81,872) |
Other comprehensive income (loss) | ||||||
Unrealized holding loss arising during period | 80 | (106) | (277) | |||
Net amount reclassified to earnings | 85 | 113 | 338 | |||
Net change in unrealized gain (loss) | (5) | 7 | 61 | |||
Comprehensive loss | (12,280) | (25,788) | (313,941) | (81,811) | ||
Less: Comprehensive loss attributable to noncontrolling interests | (8,108) | (456) | 6,424 | 981 | ||
Comprehensive loss attributable to Select Energy Services, Inc. | $ (4,172) | (1,043) | ||||
Predecessor | ||||||
Net loss | (306,481) | $ (306,481) | (80,891) | |||
Other comprehensive income (loss) | ||||||
Comprehensive loss | $ 306,474 | $ 80,830 | ||||
Less: Comprehensive loss attributable to noncontrolling interests | $ 25,332 |
CONSOLIDATED STATEMENTS OF CH62
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - USD ($) $ in Thousands | Class A-1 common stock | Class A common stock | Class B common stock | Total Stockholders' Equity | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests | Total |
Beginning balance (Predecessor) at Dec. 31, 2014 | $ 401,608 | ||||||||
Beginning balance at Dec. 31, 2014 | $ (68) | $ 11,510 | $ 413,050 | ||||||
Beginning balance (in shares) (Predecessor) at Dec. 31, 2014 | 38,398,649 | ||||||||
Member distributions | Predecessor | $ (4,248) | ||||||||
Member distributions | (4,248) | ||||||||
Noncontrolling interest in subsidiary | 92 | 92 | |||||||
Equity-based compensation | Predecessor | 692 | ||||||||
Equity-based compensation | 692 | ||||||||
Net income (loss) | Predecessor | (80,891) | ||||||||
Net income (loss) | (981) | (81,872) | |||||||
Ending balance (Predecessor) at Dec. 31, 2015 | 317,161 | ||||||||
Ending balance at Dec. 31, 2015 | (7) | 10,621 | $ 327,775 | ||||||
Ending balance (in shares) (Predecessor) at Dec. 31, 2015 | 38,398,649 | ||||||||
Fair value of interest rate swap | 61 | $ 61 | |||||||
Member contributions | Predecessor | 23,519 | ||||||||
Member contributions | $ 23,519 | ||||||||
Member contributions (in shares) | Predecessor | 3,866,864 | ||||||||
Purchase of additional controlling interest | Predecessor | $ 707 | ||||||||
Purchase of additional controlling interest | (1,055) | (348) | |||||||
Noncontrolling interest in subsidiary | 138 | 138 | |||||||
Equity-based compensation | Predecessor | 317 | ||||||||
Equity-based compensation | 317 | ||||||||
Net income (loss) | Predecessor | (306,481) | ||||||||
Net income (loss) | $ (844) | $ (199) | (313,948) | ||||||
Ending balance at Dec. 31, 2016 | $ 161 | $ 38 | $ 385 | $ 112,716 | $ 113,175 | $ (1,043) | 221,992 | 334,708 | |
Ending balance (in shares) at Dec. 31, 2016 | 16,100,000 | 3,802,972 | 38,462,541 | ||||||
Beginning balance (Predecessor) at Dec. 31, 2015 | 317,161 | ||||||||
Beginning balance at Dec. 31, 2015 | (7) | 10,621 | $ 327,775 | ||||||
Beginning balance (in shares) (Predecessor) at Dec. 31, 2015 | 38,398,649 | ||||||||
Net income (loss) | Predecessor | $ (306,481) | ||||||||
Net income (loss) | (4,407) | (310,888) | |||||||
Ending balance (Predecessor) at Dec. 19, 2016 | 35,223 | ||||||||
Ending balance at Dec. 19, 2016 | 5,297 | $ 40,520 | |||||||
Ending balance (in shares) (Predecessor) at Dec. 19, 2016 | 42,265,513 | ||||||||
Noncontrolling interest in subsidiary | (218,712) | (218,712) | 218,712 | ||||||
Reorganization and 144A Offering | Predecessor | $ (35,223) | ||||||||
Reorganization and 144A Offering | $ 161 | $ 38 | $ 385 | 332,471 | 331,887 | $ 297,248 | |||
Reorganization and 144A Offering (in shares) | Predecessor | (42,265,513) | ||||||||
Reorganization and 144A Offering (in shares) | 16,100,000 | 3,802,972 | 38,462,541 | ||||||
Ending balance at Dec. 20, 2016 | $ 161 | $ 38 | $ 385 | 113,759 | 113,175 | 224,009 | $ 337,768 | ||
Ending balance (in shares) at Dec. 20, 2016 | 16,100,000 | 3,802,972 | 38,462,541 | ||||||
Beginning balance (Predecessor) at Dec. 19, 2016 | 35,223 | ||||||||
Beginning balance at Dec. 19, 2016 | 5,297 | $ 40,520 | |||||||
Beginning balance (in shares) (Predecessor) at Dec. 19, 2016 | 42,265,513 | ||||||||
Net income (loss) | (1,043) | (1,043) | (2,017) | $ (3,060) | |||||
Ending balance at Dec. 31, 2016 | $ 161 | $ 38 | $ 385 | 112,716 | 113,175 | (1,043) | 221,992 | 334,708 | |
Ending balance (in shares) at Dec. 31, 2016 | 16,100,000 | 3,802,972 | 38,462,541 | ||||||
Fair value of interest rate swap | $ 7 | 7 | |||||||
Equity-based compensation | 221 | 221 | 422 | 643 | |||||
Net income (loss) | (4,172) | (4,172) | (8,108) | (12,280) | |||||
Ending balance at Mar. 31, 2017 | $ 161 | $ 41 | $ 385 | $ 111,263 | $ 115,891 | $ (5,215) | $ 217,308 | $ 328,571 | |
Ending balance (in shares) at Mar. 31, 2017 | 16,100,000 | 4,077,970 | 38,462,541 |
CONSOLIDATED STATEMENTS OF CA63
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Cash flows from operating activities | ||
Net loss | $ (313,948) | $ (81,872) |
Adjustments to reconcile net loss to net cash provided by operating activities | ||
Depreciation and amortization | 97,107 | 107,712 |
(Gain) loss on disposal of property and equipment | (97) | (760) |
Bad debt expense | 2,385 | 3,179 |
Amortization of debt issuance costs | 3,435 | 576 |
Equity-based compensation | 317 | 692 |
Impairment of goodwill and other intangible assets | 138,666 | 21,366 |
Impairment of property and equipment | 60,026 | |
Loss on the sale of business unit | 972 | |
Other operating items, net | (1,619) | (2,340) |
Changes in operating assets and liabilities | ||
Accounts receivable | 1,290 | 140,426 |
Prepaid expenses and other assets | 1,224 | 3,112 |
Accounts payable and accrued liabilities | 16,345 | (41,064) |
Net cash (used in) provided by operating activities | 5,131 | 151,999 |
Cash flows from investing activities | ||
Proceeds received from investments | 830 | |
Purchase of property, equipment, and intangible assets | (36,290) | (54,076) |
Proceeds received from sale of business unit | 400 | |
Proceeds received from sale of property and equipment | 9,335 | 14,143 |
Net cash used in investing activities | (26,955) | (38,703) |
Cash flows from financing activities | ||
Proceeds from 144A Offering, net of underwriter fees and expenses | 297,248 | |
Member contributions | 23,519 | |
Proceeds from issuance of long-term debt | 27,500 | 5,000 |
Payments on long-term debt | (298,000) | (107,000) |
Payment of debt issuance costs | (4,497) | (1,192) |
Purchase of noncontrolling interests | (348) | |
Proceeds from noncontrolling interests | 138 | 92 |
Member distributions | 4,248 | |
Net cash provided by financing activities | 45,560 | (107,348) |
Effect of exchange rate changes on cash | 75 | |
Net decrease in cash and cash equivalents | 23,736 | 6,023 |
Cash and cash equivalents, beginning of period | 16,305 | 10,282 |
Cash and cash equivalents, end of period | 40,041 | 16,305 |
Supplemental cash flow disclosure: | ||
Cash paid for interest | 12,773 | 10,584 |
Cash paid for taxes | (192) | 2,262 |
Supplemental disclosure of noncash investing activities: | ||
Capital expenditures included in accounts payable and accrued liabilities | $ 1,563 | $ 936 |
BUSINESS AND BASIS OF PRESENT64
BUSINESS AND BASIS OF PRESENTATION | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
BUSINESS AND BASIS OF PRESENTATION | ||
BUSINESS AND BASIS OF PRESENTATION | NOTE 1—BUSINESS AND BASIS OF PRESENTATION Description of the business : Select Energy Services, Inc. (“Select Energy Services” or “the Company”) was incorporated as a Delaware corporation on November 21, 2016. The Company is a holding company whose sole material asset consists of a membership interest in SES Holdings, LLC (“SES Holdings” or the “Predecessor”). SES Holdings was formed in July 2008 and in October 2008, members of Select Energy Services, LLC (“Select”), formerly known as Peak Oilfield Services, LLC (“Peak”), a Delaware limited liability company formed in December 2006, transferred all interests in Select to SES Holdings in exchange for membership interests in SES Holdings and Select became a wholly‑owned subsidiary of SES Holdings. Select Energy Services is an oilfield services company that provides water solutions to the U.S conventional oil and natural gas industry. The Company offers water‑related services that support oil and gas well completion and production activities including sourcing, transfer, containment, monitoring, treatment, flowback, hauling and disposal in the U.S. shale basins. These services establish and maintain the flow of oil and natural gas throughout the productive life of a horizontal well. The Company also operates a wellsite services group as a part of its total water solutions offering. These services include equipment rental, accommodations, crane and logistics services, wellsite and pipeline construction, and field services. The Company conducts its wellsite services activities on a third‑party contractual basis unrelated to its water‑related services. Reorganization : On December 20, 2016, Select Energy Services completed a private placement of 16,100,000 shares of Class A‑1 common stock (the “144A Offering”) at an offering price of $20.00 per share. In conjunction with the 144A Offering, SES Holdings’ then existing Class A and Class B units were converted into a single class of common units (the “SES Holdings LLC Units”) and SES Holdings effected a 10.3583 for 1 unit split. In exchange for the contribution of all net proceeds from the 144A Offering to SES Holdings, SES Holdings issued 16,100,000 SES Holdings LLC Units to Select Energy Services, and Select Energy Services became the sole managing member of SES Holdings. Select Energy Services issued 38,462,541 shares of Class B common stock to the other member of SES Holdings, SES Legacy Holdings, LLC (“Legacy Owner Holdco”), or one share for each SES Holdings LLC Unit held by Legacy Owner Holdco. The Company also acquired 3,802,972 SES Holdings LLC Units from certain legacy owners (the “Contributing Legacy Owners”) in exchange for the issuance of 3,802,972 shares of Class A common stock. Shareholders of Class A‑1, Class A, and Class B common stock vote together as a single class on all matters, subject to certain exceptions in our amended and restated certificate of incorporation. Shareholders of Class B common stock have voting rights only and are not entitled to an economic interest in Select Energy Services based on their ownership of Class B common stock. The reorganization transactions were treated as a combination of entities under common control with assets and liabilities transferred at their carrying amounts in a manner similar to a pooling of interests. Unless otherwise stated or the context otherwise indicates, all references to the “Company” or similar expressions for time periods prior to the reorganization and 144A Offering transactions refer to SES Holdings and its subsidiaries. For time periods subsequent to the reorganization and 144A Offering transactions, these terms refer to Select Energy Services, Inc. and its subsidiaries. Credit Facility : Concurrent with the closing of the 144A Offering, the Company repaid all of its outstanding indebtedness and amended its Credit Facility to reduce the total commitment of its revolving line of credit to $100.0 million. See Note 7—Debt for further discussion. Exchange rights : Under the Eighth Amended and Restated Limited Liability Company Agreement of SES Holdings (the “SES Holdings LLC Agreement”), Legacy Owner Holdco has the right (an “Exchange Right”) to cause SES Holdings to acquire all or a portion of its SES Holdings LLC Units for, at SES Holdings’ election, (i) shares of the Company’s Class A common stock at an exchange ratio of one share of Class A common stock for each SES Holdings LLC Unit exchanged, subject to conversion rate adjustments for stock splits, stock dividends, reclassification and other similar transactions or (ii) cash in an amount equal to the Cash Election Value (as defined within the SES Holdings LLC Agreement) of such Class A common stock. Alternatively, upon the exercise of any Exchange Right, the Company will have the right (the “Call Right”) to acquire the tendered SES Holdings LLC Units from the exchanging unitholder for, at its election, (i) the number of shares of Class A common stock the exchanging unitholder would have received under the exchange Right or (ii) cash in an amount equal to the Cash Election Value of such Class A common stock. In connection with any exchange of SES Holdings LLC Units pursuant to an Exchange Right or Call Right, the corresponding number of shares of the Company’s Class B common stock will be cancelled. Registration rights : In December 2016, in connection with the closing of the 144A Offering, Select Energy Services entered into a registration rights agreement with FBR Capital Markets & Co. for the benefit of the investors in the 144A Offering. Under this registration rights agreement, the Company agreed, at its expense, to file with the SEC, in no event later than April 30, 2017, a shelf registration statement registering for resale the 16,100,000 shares of the Company’s Class A common stock issuable upon conversion of the Class A‑1 common stock sold in the 144A Offering plus any additional shares of Class A‑1 common stock issued in respect thereof whether by stock dividend, stock distribution, stock split, or otherwise, and to use commercially reasonable efforts to cause such registration statement to be declared effective by the SEC as soon as practicable but in any event within 60 days after the closing of the Company’s IPO (as defined below). The Company filed this registration statement with the SEC on April 28, 2017. Each share of Class A‑1 common stock will be automatically converted into a share of Class A common stock on a one‑for‑one basis upon the effectiveness of such registration statement. Investors in the 144A Offering will be restricted from selling shares for a period of 60 days following the effective date of the registration statement related to the Company’s initial public offering of 8,700,000 shares of Class A common stock at a price of $14.00 per share (the “IPO”), or April 20, 2017. In addition, Legacy Owner Holdco has the right, under certain circumstances, to cause the Company to register the shares of Class A common stock obtained pursuant to the Exchange Right. Tax receivable agreement : Concurrent with the closing of the 144A Offering, the Company entered into two tax receivable agreements with Legacy Owner Holdco and certain legacy owners of SES Holdings. See Note 12—Related Party Transactions for further discussion. Basis of presentation : The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the SEC. These unaudited interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all disclosures required for financial statements prepared in conformity with GAAP. Accordingly, the accompanying unaudited interim consolidated financial statements and related notes should be read in conjunction with the Company’s consolidated financial statements for the years ended December 31, 2016 and 2015 included in the Final Prospectus. The consolidated financial statements include the accounts of Select Energy Services and all of its majority‑owned or controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, all adjustments which are of a normal recurring nature and considered necessary for a fair presentation of our interim financial statements have been included in these unaudited interim consolidated financial statements. Operating results for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2017. The Company’s historical financial statements prior to the 144A Offering and reorganization transactions are prepared using SES Holdings’ historical basis in the assets and liabilities, and include all revenues, costs, assets and liabilities attributed to SES Holdings. For investments in subsidiaries that are not wholly‑owned, but where the Company exercises control, the equity held by the minority owners and their portion of net income (loss) are reflected as noncontrolling interests. Investments in entities in which Select Energy Services exercises significant influence over operating and financial policies are accounted for using the equity method, and investments in entities for which the Company does not have significant control or influence are accounted for using the cost method. | NOTE 1—BUSINESS AND BASIS OF PRESENTATION Description of the business : Select Energy Services, Inc. (“Select Energy Services” or “the Company”) was incorporated as a Delaware corporation on November 21, 2016. The Company is a holding company whose sole material asset consists of a membership interest in SES Holdings, LLC (“SES Holdings” or the “Predecessor”). SES Holdings was formed in July 2008 and in October 2008, members of Select Energy Services, LLC (“Select”), formerly known as Peak Oilfield Services, LLC (“Peak”), a Delaware limited liability company, formed in December 2006, transferred all interests in Select to SES Holdings in exchange for membership interests in SES Holdings and Select became a wholly‑owned subsidiary of SES Holdings. Select Energy Services is an oilfield services company that provides water solutions to the U.S conventional oil and natural gas industry. The Company offers water‑related services that support oil and gas well completion and production activities including containment, monitoring, treatment, flowback, hauling and disposal in the U.S. shale basins. These services establish and maintain the flow of oil and natural gas throughout the productive life of a horizontal well. The Company also operates a wellsite services group as a part of its total water solutions offering. These services include equipment rental, accommodations, crane and logistics services, wellsite and pipeline construction, and field services. The Company conducts its wellsite services activities on a third‑party contractual basis unrelated to its water‑related services. Reorganization : On December 20, 2016, Select Energy Services completed a private placement of equity for 16,100,000 shares of Class A‑1 common stock (the “144A Offering”) at an offering price of $20.00 per share. In conjunction with the 144A Offering, SES Holdings’ then existing Class A and Class B units were converted into a single class of common units and SES Holdings effected a 10.3583 for 1 unit split. In exchange for the contribution of all net proceeds from the 144A Offering, SES Holdings issued 16,100,000 common units to Select Energy Services, and Select Energy Services became the sole managing member of SES Holdings. Select Energy Services issued 38,462,541 shares of Class B common stock, or one share for each common unit of SES Holdings held by SES Legacy Holdings, LLC (“Legacy Owner Holdco”). The Company also acquired 3,802,972 common units of SES Holdings from certain legacy owners (the “Contributing Legacy Owners”) in exchange for the issuance of 3,802,972 shares of Class A common stock. Shareholders of Class A‑1, Class A, and Class B common stock vote together as a single class on all matters. Shareholders of Class B common stock have voting rights only and are not entitled to an economic interest in Select Energy Services, Inc. based on their ownership of Class B common stock. The reorganization transactions were treated as a combination of entities under common control with assets and liabilities transferred at their carrying amounts in a manner similar to a pooling of interests. Unless otherwise stated or the context otherwise indicates, all references to the “Company” or similar expressions for time periods prior to the reorganization and 144A Offering transactions refer to SES Holdings, LLC and its subsidiaries. For time periods subsequent to the reorganization and 144A Offering transactions, these terms refer to Select Energy Services, Inc. and its subsidiaries. Credit facility : Concurrent with the closing of the 144A Offering, the Company repaid all debt outstanding and amended its senior secured credit facility to reduce the total commitment of its revolving line of credit to $100.0 million. See Note 7—Debt for further discussion. Exchange rights : Under the SES Holdings LLC Agreement, Legacy Owner Holdco has the right (an “Exchange Right”) to cause SES Holdings to acquire all or a portion of its common units of SES Holdings for, at SES Holdings’ election, (i) shares of the Company’s Class A common stock at an exchange ratio of one share of Class A common stock for each common unit of SES Holdings exchanged, subject to conversion rate adjustments for stock splits, stock dividends, reclassification and other similar transactions or (ii) cash in an amount equal to the Cash Election Value (as defined within the SES Holdings LLC Agreement) of such Class A common stock. Alternatively, upon the exercise of any Exchange Right, the Company will have the right (the “Call Right”) to acquire the tendered common units of SES Holdings from the exchanging unitholder for, at its election, (i) the number of shares of Class A common stock the exchanging unitholder would have received under the exchange Right or (ii) cash in an amount equal to the Cash Election Value of such Class A common stock. In connection with any exchange of common units of SES Holdings pursuant to an Exchange Right or Call Right, the corresponding number of shares of the Company’s Class B common stock will be cancelled. Registration rights : In December 2016, in connection with the closing of the 144A Offering, Select Energy Services entered into a registration rights agreement with FBR Capital Markets & Co. Under this registration rights agreement, the Company agreed, at its expense, to file with the SEC, in no event later than April 30, 2017, a shelf registration statement registering for resale the 16,100,000 shares of the Company’s Class A‑1 common stock sold in the 144A Offering plus any additional shares of Class A‑1 common stock issued in respect thereof whether by stock dividend, stock distribution, stock split, or otherwise, and to cause such registration statement to be declared effective by the SEC as soon as practicable but in any event within 180 days after the initial filing of such registration statement. Each share of Class A‑1 common stock will be automatically converted into a share of Class A common stock on a one‑for‑one basis (i) immediately prior to the closing of this offering or any closing of the underwriters’ option to purchase additional shares, as applicable, for any shares of Class A‑1 common stock that are convertible into shares of Class A common stock that will be sold in this offering by certain of the 144A Investors and (ii) upon the effectiveness of a registration statement filed to permit resales of shares purchased in the 144A Offering for any shares of Class A‑1 common stock outstanding after the closing of this offering. Investors in the 144A Offering will be entitled to make sales under such registration statement 60 days following the completion of this offering. In addition, Legacy Owner Holdco has the right, under certain circumstances, to cause the Company to register the shares of Class A common stock obtained pursuant to the Exchange Right. Tax receivable agreement : Concurrent with the closing of the 144A Offering, the Company entered into a Tax Receivable Agreement with certain legacy owners, and their affiliates, of SES Holdings. See Note 12—Related Party Transactions for further discussion. Basis of presentation : The consolidated financial statements include the accounts of Select Energy Services and all of its majority‑owned or controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company’s historical financial statements prior to the 144A Offering are prepared using SES Holdings’ historical basis in the assets and liabilities, and include all revenues, costs, assets and liabilities attributed to SES Holdings. For investments in subsidiaries that are not wholly‑owned, but where the Company exercises control, the equity held by the minority owners and their portion of net income (loss) are reflected as noncontrolling interests. Investments in entities in which Select Energy Services exercises significant influence over operating and financial policies are accounted for using the equity method, and investments in entities for which the Company does not have significant control or influence are accounted for using the cost method. Discontinued operations : The Company considers a component of its business to be one that comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of its business. The operating results of a component of its business that either has been disposed of or is classified as held for sale are presented as discontinued operations when the operations and cash flows of the component have been or will be eliminated from its ongoing operations as a result of the disposal transaction and the Company will not have any significant continuing involvement in the operations of the disposed component. Segment reporting : The Company operates in three operating and reportable segments. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assess performance. The Company’s chief operating decision maker assesses performance and allocates resources on the basis of the three reportable segments. |
SIGNIFICANT ACCOUNTING POLICI65
SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
SIGNIFICANT ACCOUNTING POLICIES | ||
SIGNIFICANT ACCOUNTING POLICIES | NOTE 2—SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies : Our significant accounting policies are disclosed in Note 2 of the consolidated financial statements for the years ended December 31, 2016 and 2015 included in the Final Prospectus. There have been no changes in such policies or the application of such policies during the quarter ended March 31, 2017. Use of estimates : The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates its estimates, including those related to recoverability of long‑lived assets and intangibles, useful lives used in depreciation and amortization, uncollectible accounts receivable, income taxes, self‑insurance liabilities, share‑based compensation and contingent liabilities. The Company bases its estimates on historical and other pertinent information that are believed to be reasonable under the circumstances. The accounting estimates used in the preparation of the consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. Emerging Growth Company status: Under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), we are an “emerging growth company,” which allows us to have an extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act. We intend to take advantage of all of the reduced reporting requirements and exemptions, including the longer phase‑in periods for the adoption of new or revised financial accounting standards under Section 107 of the JOBS Act until we are no longer an emerging growth company. Our election to use the phase‑in periods permitted by this election may make it difficult to compare our financial statements to those of non‑emerging growth companies and other emerging growth companies that have opted out of the longer phase‑in periods under Section 107 of the JOBS Act and who will comply with new or revised financial accounting standards. If we were to subsequently elect instead to comply immediately with these public company effective dates, such election would be irrevocable pursuant to Section 107 of the JOBS Act. Recent accounting pronouncements : In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) , outlining a comprehensive new revenue recognition standard that will supersede ASC 605, Revenue Recognition. The new accounting guidance creates a framework under which an entity will allocate the transaction price to separate performance obligations and recognize revenue when each performance obligation is satisfied. Under the new standard, entities will be required to use judgment and make estimates, including identifying performance obligations in a contract, estimating the amount of variable consideration to include in the transaction price, allocating the transaction price to each separate performance obligation, and determining when an entity satisfies its performance obligations. The standard allows for either “full retrospective” adoption, meaning that the standard is applied to all of the periods presented with a cumulative catch‑up as of the earliest period presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements with a cumulative catch‑up as of the current period. In August 2015, the FASB decided to defer the original effective date by one year to be effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019 for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures and has not yet determined the method by which it will adopt the standard. In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes , which amends existing guidance on income taxes to require the classification of all deferred tax assets and liabilities as noncurrent on the balance sheet. The pronouncement is effective for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018 for nonpublic entities, and may be applied either prospectively or retrospectively. The Company prospectively adopted this guidance during the three months ended March 31, 2017. Prior periods were not retrospectively adjusted. As the Company’s deferred tax assets and liabilities are all noncurrent, the adoption did not result in a change to the consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU 2016-02, Leases , which introduces a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in the current accounting guidance as well as the FASB’s new revenue recognition standard. However, the ASU eliminates the use of bright‑line tests in determining lease classification as required in the current guidance. The ASU also requires additional qualitative disclosures along with specific quantitative disclosures to better enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The pronouncement is effective for annual reporting periods beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, for nonpublic entities using a modified retrospective approach. Early adoption is permitted. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting , that provides a new requirement to record all of the tax effects related to share‑based payments at settlement (or expiration) through the income statement. This pronouncement is effective for annual reporting periods beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018, for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which addresses the classification and presentation of eight specific cash flow issues that currently result in diverse practices. The amendments provide guidance in the presentation and classification of certain cash receipts and cash payments in the statement of cash flows including debt prepayment or debt extinguishment costs, settlement of zero‑coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate‑owned life insurance policies, and distributions received from equity method investees. This pronouncement is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, for nonpublic entities. The amendments in this ASU should be applied using a retrospective approach. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-01 , Clarifying the Definition of a Business , with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This pronouncement is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment . This pronouncement removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This pronouncement is effective for annual reporting periods beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2019. The amendments in this ASU should be applied using a prospective approach. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. | NOTE 2—SIGNIFICANT ACCOUNTING POLICIES Use of estimates : The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates its estimates, including those related to recoverability of long‑lived assets and intangibles, useful lives used in depreciation and amortization, uncollectible accounts receivable, income taxes, self‑insurance liabilities, share‑based compensation and contingent liabilities. The Company bases its estimates on historical and other pertinent information that are believed to be reasonable under the circumstances. The accounting estimates used in the preparation of the consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. Cash and cash equivalents : The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Accounts receivable and allowance for doubtful accounts : Accounts receivable are stated at the invoiced amount, or the earned but not yet invoiced amount, net of an allowance for doubtful accounts. The Company establishes an allowance for doubtful accounts based on the review of several factors, including historical collection experience, current aging status of the customer accounts, and financial condition of its customers. Accounts receivable are written off when a settlement is reached for an amount less than the outstanding historical balance or when the Company determines that it is probable the balance will not be collected. The change in allowance for doubtful accounts is as follows: (in thousands) 2016 2015 Balance at beginning of year 2,351 3,169 Provisions for bad debts, included in SG&A expense 2,385 576 Uncollectible receivables written off (2,592) (1,394) Balance at end of year 2,144 2,351 Concentrations of credit and customer risk : Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. The amounts held in financial institutions periodically exceed the federal insured limit. Management believes that the financial institutions are financially sound and the risk of loss is minimal. The Company minimizes its exposure to counterparty credit risk by performing credit evaluations and ongoing monitoring of the financial stability of its customers. There were no customers that accounted for more than 10.0% of the Company’s consolidated revenues for the year ended December 31, 2016. During 2015, Anadarko Petroleum Corporation accounted for 10.6% of the Company’s consolidated revenues. Inventories : The Company values its inventories at lower of cost or market using the first‑in, first‑out (“FIFO”) method. Inventory costs primarily consist of water containment sections sold to customers in the ordinary course of business. Debt issuance costs : Debt issuance costs consist of costs directly associated with obtaining credit with financial institutions. These costs are recorded as a direct deduction from the carrying value of the associated debt liability and are generally amortized on a straight‑line basis over the life of the credit agreement, which approximates the effective‑interest method. Any unamortized debt issue costs are expensed in the year when the associated debt instrument is terminated. Amortization expense for debt issuance costs was $3.4 million and $3.2 million for the years ended December 31, 2016 and 2015, respectively, and is included in interest expense in the consolidated statements of operations. Property and equipment : Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on a straight line basis over the estimated useful life of each asset as noted below: Asset Classification Useful Life (years) Buildings and improvements 30 or lease term Vehicles and equipment 5 Machinery and equipment 2 - 15 Computer equipment and software 3 - 4 Office furniture and equipment 7 Disposal wells 7 - 10 Helicopters 7 Depreciation expense related to the Company’s property and equipment was $88.2 million and $98.3 million for the years ended December 31, 2016 and 2015, respectively. Expenditures for additions to property and equipment and major replacements are capitalized when they significantly increase the functionality or extend the useful life of the asset. Gains and losses on dispositions, maintenance, repairs and minor replacements are included in the consolidated statements of operations as incurred. See Note 5—Property and Equipment for further discussion. Goodwill and other intangible assets : Goodwill represents the excess of the purchase price of acquisitions over the fair value of the net assets acquired. Goodwill and other intangible assets not subject to amortization are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Intangible assets with finite useful lives are amortized either on a straight‑line basis over the asset’s estimated useful life or on a basis that reflects the pattern in which the economic benefits of the intangible assets are realized. Impairment of long‑lived and intangible assets : Long‑lived assets, such as property and equipment and finite‑lived intangible assets, are evaluated for impairment whenever events or changes in circumstances indicate that its carrying value may not be recoverable. Recoverability is measured by a comparison of its carrying amount to the estimated undiscounted cash flows to be generated by those assets. If the undiscounted cash flows are less than the carrying amount, the Company records impairment losses for the excess of its carrying value over the estimated fair value. The development of future cash flows and the estimate of fair value represent its best estimates based on industry trends and reference to market transactions and are subject to variability. The Company considers the factors within the fair value analysis to be Level 3 inputs within the fair value hierarchy. Due to certain economic factors related to oil prices and rig counts, during 2015, an impairment loss of $1.3 million related to other intangible assets was recognized within impairment of intangible assets in the consolidated statements of operations. The impairment related to certain intangible assets within the Company’s Water Solutions segment. The Company determined that triggering events existed during 2016 resulting in an evaluation of the recoverability of the carrying value of certain property and equipment. As a result of this evaluation, the Company recorded impairment of property and equipment of $60.0 million related to the Company’s Water Solutions segment. See Note 11—Fair Value Measurement for further discussion. The Company conducts its annual goodwill impairment test in the fourth quarter each year, or more frequently if indicators of impairment exist. The Company’s annual impairment tests utilize discounted cash flow projections using weighted average cost of capital calculations based on capital structures of publicly traded peer companies to determine the fair value of its reporting units. The Company’s reporting units are based on its organizational and reporting structure. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the implied fair value of the reporting unit’s goodwill is less than its carrying value. Application of the goodwill impairment test requires judgment, including the identification of reporting units, allocation of assets (including goodwill) and liabilities to reporting units and determining the fair value. The determination of reporting unit fair value relies upon certain estimates and assumptions. These estimates and assumptions are affected by numerous factors, including the general economic environment and levels of exploration and production activity of oil and natural gas companies. The Company considers these factors to be Level 3 inputs within the fair value hierarchy. While the Company believes that the estimates and assumptions used in its annual impairment tests are reasonable, changes in these estimates and assumptions could impact the determination of its reporting unit fair value. Due to certain economic factors related to oil prices and rig counts during 2015, an impairment loss of $20.1 million related to goodwill was recognized in the consolidated statements of operations for the year ended December 31, 2015. The Company determined that additional triggering events were present during 2016 resulting in a goodwill impairment assessment of $138.5 million, primarily related to the Company’s Water Solutions segment. See Note 6—Goodwill and Other Intangible Assets and Note 11—Fair Value Measurement for further discussion. Asset retirement obligations : The asset retirement obligation (“ARO”) liability reflects the present value of estimated costs of plugging, site reclamation, and similar activities associated with the Company’s salt water disposal wells. The Company utilizes current retirement costs to estimate the expected cash outflows for retirement obligations. The Company also estimates the productive life of the disposal wells, a credit‑adjusted risk‑free discount rate, and an inflation factor in order to determine the current present value of this obligation. The Company’s ARO liabilities are included in accrued expenses and other current liabilities and other long term liabilities during the years ended December 31, 2016 and 2015. The change in asset retirement obligations is as follows: (in thousands) 2016 2015 Balance at beginning of year 1,483 1,560 Accretion expense, included in Depreciation and Amortization expense 155 150 Change in estimate 30 (60) Settlements — (167) Balance at end of year 1,668 1,483 Self‑insurance : The Company self‑insures, through deductibles and retentions, up to certain levels for losses related to general liability, workers’ compensation and employer’s liability, and vehicle liability. The Company’s exposure (i.e. the retention or deductible) per occurrence is $1.0 million for general liability, $1.0 million for workers’ compensation and employer’s liability, and $1.0 million for vehicle liability. The Company also has an excess loss policy over these coverages with a limit of $50.0 million in the aggregate. Management regularly reviews its estimates of reported and unreported claims and provide for losses through reserves. Prior to June 1, 2016, the Company was self‑insured for group medical claims subject to a deductible of $250 thousand for large claims. As of June 1, 2016, the Company is fully‑insured for group medical. Employee benefit plans : The Company sponsors a defined contribution 401(k) Profit Sharing Plan (the “401(k) Plan”) for the benefit of substantially all employees of the Company. The 401(k) Plan allows eligible employees to make tax‑deferred contributions, not to exceed annual limits established by the Internal Revenue Service. Prior to December 4, 2015, the Company made matching contributions of 100% of employee contributions, up to 4% of compensation. These matching contributions were vested immediately. Effective December 4, 2015, the employer match was discontinued for all employees. The Company did not make any matching contributions for the year ended December 31, 2016. The Company’s contributions were $1.9 million for the year ended December 31, 2015. Revenue recognition : The Company recognizes revenue when it is realized or realizable and earned. Revenues are considered realized or realizable and earned when: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the seller’s price to the buyer is fixed or determinable, and (iv) collectability is reasonably assured. Services are typically priced on a throughput, day‑rate, hourly‑rate, or per‑job basis depending on the type of services provided. The Company’s services are generally governed by a service agreement or other persuasive evidence of an arrangement that include fixed or determinable fees and do not generally include right of return provisions or other significant post‑delivery obligations. Collectability is reasonably assured based on the establishment of appropriate credit qualification prior to services being rendered. Revenue generated by each of the Company’s segments are outlined as follows: Water Solutions —The Company’s Water Solutions segment provides water‑related services to customers, including the sourcing and transfer of water; the containment of fluids; measuring and monitoring of water; the filtering and treatment of fluids, well testing and handling, transportation, and recycling or disposal of fluids. Revenue from water solutions is primarily based on a per‑barrel price or other throughput metric as specified in the contract. We recognize revenue from water solutions when services are performed. The Company’s agreements with its customers are often referred to as “price sheets” and sometimes provide pricing for multiple services. However, these agreements generally do not authorize the performance of specific services or provide for guaranteed throughput amounts. As customers are free to choose which services, if any, to use based on the Company’s price sheet, the Company prices its separate services on the basis of their standalone selling prices. Customer agreements generally do not provide for performance‑, cancellation‑, termination‑, or refund‑type provisions. Services based on price sheets with customers are generally performed under separately‑issued “work orders” or “field tickets” as services are requested. Of the Company’s Water Solutions service lines, only sourcing and transfer of water are consistently provided as part of the same arrangement. In these instances, revenue for both sourcing and transfer are recognized concurrently when delivered. Accommodations and Rentals —The Company’s Accommodations and Rentals segment provides workforce accommodations and surface rental equipment. Accommodation services include trailer housing and mobile home units for field personnel. Equipment rentals are related to the accommodations and include generators, sewer and water tanks, and communication systems. Revenue from accommodations and equipment rental is typically recognized on a day‑rate basis. Wellsite Completion and Construction Services —The Company’s Wellsite Completion and Construction Services segment provides crane and logistics services, wellsite and pipeline construction, and field services. Revenue for heavy‑equipment rental is typically recognized on a day‑rate basis. Construction or field personnel revenue is based on hourly rates or on a per‑job basis as services are performed. Equity‑based compensation : The Company accounts for equity‑based awards by measuring the awards at the date of grant and recognizing the grant‑date fair value as an expense using either straight‑line or accelerated attribution, depending on the specific terms of the award agreements over the requisite service period, which is usually equivalent to the vesting period. The Company expenses awards with graded‑vesting service conditions on a straight‑line basis. The Company has liability awards that are expected to be settled in cash. Liability awards are recorded as accrued liabilities based on the estimated fair value of the awards expected to vest and are remeasured at each reporting date until settled. These awards are subject to revision based on the impact of certain performance conditions associated with the incentive plans. See Note 9—Equity‑based Compensation for further discussion. Foreign currency : For its subsidiaries in Canada, where the local currency is the functional currency, the Company historically translated assets and liabilities using the exchange rates in effect at the balance sheet dates, while income and expense items were translated using average exchange rates during the period. The resulting gains or losses arising from the translation of accounts from the functional currency to the U.S. Dollar were reported in the consolidated statements of comprehensive income (loss). See Note 3—Discontinued Operations for further discussion. Derivatives and hedging : The Company accounts for certain interest rate swaps as cash flow hedges. Management formally assesses both at the hedge’s inception and on an ongoing basis that the derivative will be highly effective in offsetting changes in cash flows of the related hedged items. The fair values of the derivatives are recognized as either assets or liabilities in the consolidated balance sheets. The effective portions of the changes in fair values of the derivative contracts are initially recorded in accumulated other comprehensive income and reclassified into the statement of operations in the period in which earnings are impacted by the hedged items or in the period that the transaction no longer qualifies as a cash flow hedge. The ineffective portion of the gains or losses on the derivative contracts, if any, is recognized in the consolidated statement of operations as it is incurred. See Note 10—Derivative Financial Instruments for further discussion. Fair value measurements : The Company measures certain assets and liabilities pursuant to accounting guidance which establishes a three‑tier fair value hierarchy and prioritizes the inputs used in measuring fair value. Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 inputs are quoted prices or other market data for similar assets and liabilities in active markets, or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the asset or liability. Level 3 inputs are unobservable inputs based upon its own judgment and assumptions used to measure assets and liabilities at fair value. See Note 11—Fair Value Measurement for further discussion. Income taxes : Select Energy Services is subject to U.S. federal and state income taxes as a corporation. SES Holdings and its subsidiaries, with the exception of certain corporate subsidiaries, are treated as flow‑through entities for U.S. federal income tax purposes, and as such, are generally not subject to U.S. federal income tax at the entity level. Rather, the tax liability with respect to their taxable income is passed through to their members or partners. Accordingly, the Company is subject to U.S. federal income taxation on its allocable share of SES Holdings’ net U.S. taxable income. The state of Texas includes in its tax system a franchise tax applicable to the Company and an accrual for franchise taxes is included in the financial statements when appropriate. The Company and its subsidiaries account for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled pursuant to the provisions of Accounting Standards Codification (“ASC”) 740, Income Taxes. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in earnings in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized. Due to significant operating losses during historical periods, the Company determined that any deferred tax assets that would result from giving pro forma effect to the reorganization and 144A Offering would be fully offset by a valuation allowance. As a result, the pro forma tax effect and impact on earnings per share data would be zero. The determination of the provision for income taxes requires significant judgment, use of estimates, and the interpretation and application of complex tax laws. Significant judgment is required in assessing the timing and amounts of deductible and taxable items and the probability of sustaining uncertain tax positions. The benefits of uncertain tax positions are recorded in the Company’s financial statements only after determining a more‑likely‑than‑not probability that the uncertain tax positions will withstand challenge, if any, from taxing authorities. When facts and circumstances change, the Company reassesses these probabilities and records any changes through the provision for income taxes. The Company recognizes interest and penalties relating to uncertain tax provisions as a component of tax expense. The Company identified no uncertain tax positions as of December 31, 2016 and 2015. See Note 13—Income Taxes for further discussion. Pro forma earnings per share (unaudited) : The calculation of unaudited pro forma earnings per share gives effect to the issuance of Class A common shares that would be required to be sold to extinguish “as adjusted” debt related to the Permian acquisition for the period subsequent to the reorganization and 144A Offering transactions. Recent accounting pronouncements : In May 2014, the Financial Accounting Standards Board (the “FASB”) issued an accounting standards update (“ASU”) on a comprehensive new revenue recognition standard that will supersede ASC 605, Revenue Recognition. The new accounting guidance creates a framework under which an entity will allocate the transaction price to separate performance obligations and recognize revenue when each performance obligation is satisfied. Under the new standard, entities will be required to use judgment and make estimates, including identifying performance obligations in a contract, estimating the amount of variable consideration to include in the transaction price, allocating the transaction price to each separate performance obligation, and determining when an entity satisfies its performance obligations. The standard allows for either “full retrospective” adoption, meaning that the standard is applied to all of the periods presented with a cumulative catch‑up as of the earliest period presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements with a cumulative catch‑up as of the current period. In August 2015, the FASB decided to defer the original effective date by one year to be effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019 for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures and has not yet determined the method by which it will adopt the standard. In August 2014, the FASB issued an ASU which requires management to assess a company’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. Before this new standard, there was minimal guidance in U.S. GAAP specific to going concern. Under the new standard, disclosures are required when conditions give rise to substantial doubt about a company’s ability to continue as a going concern within one year from the financial statement issuance date. The new standard applies to all entities and is effective for the annual period ending after December 15, 2016, and all annual and interim periods thereafter. The Company’s adoption of this new guidance during the year ended December 31, 2016 did not have a material impact on its consolidated financial statements and related disclosures. In April 2015, the FASB issued an accounting standards update that requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying value of that debt liability, consistent with debt discounts. The guidance is effective retrospectively for fiscal years, beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016, for nonpublic entities. Early adoption is permitted for financial statements that have not been previously issued. The Company adopted this guidance in 2016 and retrospectively reclassified $2.9 million of debt issuance costs that was previously presented as other long term assets to a direct deduction from the carrying value of short‑term and long‑term debt within the consolidated balance sheets as of December 31, 2015. In November 2015, the FASB issued an accounting standards update which amends existing guidance on income taxes to require the classification of all deferred tax assets and liabilities as noncurrent on the balance sheet. The pronouncement is effective for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018 for nonpublic entities, and may be applied either prospectively or retrospectively. The Company plans to adopt this guidance during the year ended December 31, 2017 and does not expect the adoption to have a material impact on its consolidated financial statements and related disclosures. In February 2016, the FASB issued an accounting standards update for leases. The ASU introduces a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in the current accounting guidance as well as the FASB’s new revenue recognition standard. However, the ASU eliminates the use of bright‑line tests in determining lease classification as required in the current guidance. The ASU also requires additional qualitative disclosures along with specific quantitative disclosures to better enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The pronouncement is effective for annual reporting periods beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, for nonpublic entities using a modified retrospective approach. Early adoption is permitted. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures and has not yet determined the method by which it will adopt the standard. In March 2016, the FASB issued an accounting standards update that provides a new requirement to record all of the tax effects related to share‑based payments at settlement (or expiration) through the income statement. This pronouncement is effective for annual reporting periods beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018, for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In August 2016, the FASB issued an accounting standards update addressing the classification and presentation of eight specific cash flow issues that currently result in diverse practices. The amendments provide guidance in the presentation and classification of certain cash receipts and cash payments in the statement of cash flows including debt prepayment or debt extinguishment costs, settlement of zero‑coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate‑owned life insurance policies, and distributions received from equity method investees. This pronouncement is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, for nonpublic entities. The amendments in this ASU should be applied using a retrospective approach. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In January 2017, the FASB issued an accounting standards update clarifying the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This pronouncement is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. |
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS | 12 Months Ended |
Dec. 31, 2016 | |
Discontinued Operations and Disposal Groups [Abstract] | |
DISCONTINUED OPERATIONS | NOTE 3—DISCONTINUED OPERATIONS During the year ended December 31, 2016, there were no activities or cash flows related to discontinued operations. During the year ended December 31, 2015, the Company completed the liquidation of certain Canadian subsidiaries disposed of during 2014. The results of operations related to discontinued operations consisted of other (income) expense, net in the amount of $21 thousand within the consolidated statement of operations for the year ended December 31, 2015. The cash flows from discontinued operations were as follows: Year Ended December 31, 2015 (in thousands) Net cash provided by operating activities $ 400 Net cash provided by investing activities 679 Net cash used in financing activities (1,678) Effect of exchange rate changes on cash 75 Net increase in cash $ (524) |
EXIT AND DISPOSAL ACTIVITIES67
EXIT AND DISPOSAL ACTIVITIES | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
EXIT AND DISPOSAL ACTIVITIES | ||
EXIT AND DISPOSAL ACTIVITIES | NOTE 4—EXIT AND DISPOSAL ACTIVITIES Due to a reduction in industry activity from 2014, the Company made the decision during the year ended December 31, 2016 to close 15 facilities and consolidate operations for the purpose of improving operating efficiencies. The Company recorded $1.9 million of charges related to exit and disposal activities and reclassified $0.2 million of deferred rent related to accrued lease obligations related to exited facilities during the three months ended March 31, 2017. The Company had a remaining balance of $20.4 million, inclusive of a short‑term balance of $3.1 million in accrued expenses and other current liabilities, as of March 31, 2017 related to accrued lease obligations and terminations at exited facilities within its Water Solutions segment. As of March 31, 2017, the Company has completed its exit from underperforming facilities but will continue to make non‑cancelable lease payments for related facilities through the year ended 2027. The Company’s abandonment of these facilities is not a part of a formalized exit plan. Provision during the Usage during the Balance as of three months ended three months ended Balance as of December 31, 2016 March 31, 2017 March 31, 2017 March 31, 2017 (in thousands) Lease obligations and terminations $ 18,000 $ 1,863 $ 712 $ 19,151 Reclassification of deferred rent 1,069 1,254 Total $ 19,069 $ 20,405 | NOTE 4—EXIT AND DISPOSAL ACTIVITIES Due to a reduction in industry activity from 2014, the Company made the decision to close 15 facilities and consolidate operations for the purpose of improving operating efficiencies. The Company recorded $19.4 million of charges related to exit and disposal activities and reclassified $1.1 million of deferred rent related to accrued lease obligations related to exited facilities. The Company had a remaining balance of $19.1 million, inclusive of a short‑term balance of $3.1 million in accrued expenses and other current liabilities, as of December 31, 2016 related to accrued lease obligations and terminations at exited facilities within its Water Solutions segment. As of December 31, 2016, the Company has completed its exit from underperforming facilities but will continue to make non‑cancelable lease payments for related facilities through the year ended 2027. The Company’s abandonment of these facilities is not a part of a formalized exit plan. Provision during the Payments during Balance as of year ended the year ended Balance as of December 31, 2015 December 31, 2016 December 31, 2016 December 31, 2016 (in thousands) Lease obligations and terminations $ — $ 19,423 $ 1,423 $ 18,000 Reclassification of deferred rent — 1,069 Total $ — $ 19,069 |
PROPERTY AND EQUIPMENT68
PROPERTY AND EQUIPMENT | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
PROPERTY AND EQUIPMENT. | ||
PROPERTY AND EQUIPMENT | NOTE 5—PROPERTY AND EQUIPMENT Property and equipment consists of the following as of March 31, 2017 and December 31, 2016: March 31, 2017 December 31, 2016 (in thousands) Land $ 8,540 $ 8,593 Buildings and leasehold improvements 83,061 83,352 Vehicles and equipment 27,711 24,114 Machinery and equipment 538,693 534,303 Computer equipment and software 11,221 11,102 Office furniture and equipment 4,277 4,275 Disposal wells 67,566 67,566 Helicopters 497 497 Construction in progress 14,558 5,584 756,124 739,386 Less accumulated depreciation and impairment (500,541) (490,519) Total property and equipment, net $ 255,583 $ 248,867 Long‑lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company had no capital lease obligations as of March 31, 2017 and December 31, 2016. | NOTE 5—PROPERTY AND EQUIPMENT Property and equipment consists of the following as of December 31, 2016 and 2015: December 31, 2016 2015 (in thousands) Land $ 8,593 $ 9,924 Buildings and leasehold improvements 83,352 82,834 Vehicles and equipment 24,114 8,993 Machinery and equipment 534,303 550,489 Computer equipment and software 11,102 10,256 Office furniture and equipment 4,275 4,329 Disposal wells 67,566 63,771 Helicopters 497 497 Construction in progress 5,584 5,325 739,386 736,418 Less accumulated depreciation and impairment (490,519) (367,726) Total property and equipment, net $ 248,867 $ 368,692 Long‑lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. As a result of declines in industry activity, the Company decided to shut‑in certain disposal wells and abandon certain machinery and equipment and facilities at underperforming yards. As a result of these decisions, the Company evaluated the recoverability of the carrying value of certain property and equipment. The Company utilized a variety of methods to determine if the impairment of the asset was necessary. These methods included the use of long‑term forecasts of the future revenues and costs related to the assets subject to review, estimated salvage value, and appraisals. For shut‑in disposal wells, long‑term forecasts of the future revenue and costs related to the assets were utilized to determine the impairment. The Company impaired machinery and equipment to its estimated salvage value, while owned buildings and land related to certain abandoned facilities at underperforming yards were impaired to appraisal values. Leasehold improvements related to leased abandoned facilities were fully impaired to the extent the Company determined there was no future value. As a result of these assessments, the Company recorded impairment of property and equipment of $60.0 million related to the Company’s Water Solutions segment. The Company had no capital lease obligations as of December 31, 2016 and 2015. |
GOODWILL AND OTHER INTANGIBLE69
GOODWILL AND OTHER INTANGIBLE ASSETS | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | ||
GOODWILL AND OTHER INTANGIBLE ASSETS | NOTE 6—GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill is evaluated for impairment on at least an annual basis, or more frequently if indicators of impairment exist. The annual impairment tests are based on Level 3 inputs. The changes in the carrying amounts of goodwill by reportable segment for the three months ended March 31, 2017 and the year ended December 31, 2016 are as follows: Wellsite Completion Water and Construction Accommodations Solutions Services and Rentals Total (in thousands) Balance as of December 31, 2015 $ 137,534 $ 12,242 $ 995 $ 150,771 Impairment (137,534) — (995) (138,529) Balance as of December 31, 2016 — 12,242 — 12,242 Additions 10,733 — — 10,733 Balance as of March 31, 2017 $ 10,733 $ 12,242 $ — $ 22,975 The components of other intangible assets are as follows: March 31, 2017 Gross Accumulated Net Value Amortization Value (in thousands) Customer relationships $ 78,218 $ 50,207 $ 28,011 Other 10,641 2,635 8,006 Total other intangible assets $ 88,859 $ 52,842 $ 36,017 December 31, 2016 Gross Accumulated Net Value Amortization Value (in thousands) Customer relationships $ 56,826 $ 48,236 $ 8,590 Other 5,491 2,495 2,996 Total other intangible assets $ 62,317 $ 50,731 $ 11,586 Intangibles obtained through acquisitions are initially recorded at estimated fair value based on preliminary information which is subject to change until final valuations are obtained. Customer relationships and non‑compete agreements are being amortized over estimated useful lives ranging from five to seven years and three to five years, respectively. Other intangible assets primarily relate to certain water rights that are amortized over estimated useful lives ranging from three to eight years. Intangible assets obtained in the Permian Acquisition consisted of customer relationships and non-compete agreements that will be amortized over estimated useful lives of thirteen and five years, respectively. As a result of the Permian Acquisition, the Company also obtained water rights that have an indefinite life and will be tested periodically for impairment. Amortization expense was $2.1 million and $2.2 million for the three months ended March 31, 2017 and 2016, respectively. | NOTE 6—GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill is evaluated for impairment on at least an annual basis, or more frequently if indicators of impairment exist. As a result of triggering events during 2015, the Company conducted its goodwill impairment test as of September 30, 2015 and recognized the impairment presented below. The Company determined that additional triggering events were present during the first half of 2016 resulting in an additional impairment assessment also as indicated below. The annual impairment tests are based on Level 3 inputs. The changes in the carrying amounts of goodwill by reportable segment for the years ended December 31, 2016 and 2015 are as follows: Wellsite Completion Water and Construction Accommodations Solutions Services and Rentals Total (in thousands) Balance as of December 31, 2014 $ 157,902 $ 12,242 $ 995 $ 171,139 Impairment (20,136) — — (20,136) Dispositions (232) — — (232) Balance as of December 31, 2015 137,534 12,242 995 150,771 Impairment (137,534) — (995) (138,529) Balance as of December 31, 2016 $ — $ 12,242 $ — $ 12,242 The components of other intangible assets are as follows: December 31, 2016 Gross Accumulated Net Value Amortization Value (in thousands) Customer relationships $ 56,826 $ 48,236 $ 8,590 Other 5,491 2,495 2,996 Total other intangible assets $ 62,317 $ 50,731 $ 11,586 December 31, 2015 Gross Accumulated Net Value Amortization Value (in thousands) Customer relationships $ 56,826 $ 40,163 $ 16,663 Other 4,924 1,747 3,177 Total other intangible assets $ 61,750 $ 41,910 $ 19,840 Intangibles obtained through acquisitions are initially recorded at estimated fair value based on preliminary information which is subject to change until final valuations are obtained. Customer relationships and non‑compete agreements are being amortized over estimated useful lives ranging from five to seven years and three to five years, respectively. Other intangible assets primarily relate to certain water rights that are amortized over estimated useful lives ranging from three to eight years. Amortization expense was $8.7 million and $9.3 million for the years ended December 31, 2016 and 2015, respectively. Future estimated amortization expense for other intangible assets as of December 31, 2016 for the next five succeeding years is expected to be as follows: Year Ending December 31, Amount (in thousands) 2017 $ 7,473 2018 1,607 2019 166 2020 166 2021 166 |
DEBT70
DEBT | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
DEBT | ||
DEBT | NOTE 7—DEBT Credit Facility term loans and revolving line of credit Select Energy Services’ Credit Facility, originally executed in May 2011, has been amended over time. Effective December 20, 2016, the Company amended its Credit Facility to extend the maturity date from February 28, 2018 to February 28, 2020 and reduce the revolving line of credit to $100 million. The agreement also amended certain financial covenants and restrictions and outlined a new pricing grid that is effective after receipt of the third quarter 2017 compliance certificate. Accrued interest is payable at the end of each quarter. The Credit Facility has a variable interest rate that ranges from either (i) the London interbank rate (“LIBOR”) plus a margin for Eurodollar advances or (ii) the applicable base rate plus a margin for base rate advances based on the Company’s Leverage Ratio (as defined in the Credit Facility) as outlined below. In addition, a commitment fee related to the revolving line of credit is payable at the end of each calendar quarter based on a rate of 0.500% per annum on any unused portion of the commitment under the Credit Facility. Leverage Ratio Before Receipt of Third Quarter 2017 Eurodollar Base Rate Compliance Certificate Advances Advances < 4.00 4.00 % 3.00 % ≥ 4.00 4.50 % 3.50 % Leverage Ratio After Receipt of Third Quarter 2017 Eurodollar Base Rate Compliance Certificate Advances Advances < 2.00 3.00 % 2.00 % ≥ 2.00 < 2.50 3.25 % 2.25 % ≥ 2.50 < 3.00 3.50 % 2.50 % ≥ 3.00 < 3.50 3.75 % 2.75 % ≥ 3.50 < 4.00 4.00 % 3.00 % ≥ 4.00 4.50 % 3.50 % Select Energy Services had $34.0 million outstanding under the revolving line of credit as of March 31, 2017 and no debt outstanding under the revolving line of credit as of December 31, 2016. The weighted‑average interest rate of outstanding borrowings under the revolving line of credit was 5.50% as of March 31, 2017. The borrowing capacity under the revolving line of credit was reduced by outstanding letters of credit of $16.1 million as of March 31, 2017. The Company’s letters of credit have a variable interest rate between 3.00% and 4.50% based on the Company’s Leverage Ratio as outlined above. The unused portion of the available borrowings under the revolving line of credit was $49.9 million at March 31, 2017. Debt issuance costs are amortized to interest expense over the life of the debt to which they pertain. Total unamortized debt issuance costs as of March 31, 2017 were $3.6 million. As these debt issuance costs relate to a revolving line of credit, they are presented as a deferred charge within other assets on the consolidated balance sheet. The Company’s obligations under its Credit Facility are secured by substantially all of its assets. The Credit Facility contains customary events of default and covenants and limits its ability to incur additional indebtedness, pay dividends or make other distributions, create liens and sell assets. The Company was in compliance with all debt covenants as of March 31, 2017. | NOTE 7—DEBT The Company had no debt outstanding as of December 31, 2016. The Company’s long‑term debt, net of debt issuance costs of $2.9 million, consisted of the following as of December 31, 2015: As of December 31, 2015 (in thousands) Revolving line of credit $ 170,990 Credit facility term loan 96,656 Total debt 267,646 Less current maturities of long-term debt 22,305 Long-term debt $ 245,341 Credit facility term loans and revolving line of credit Select Energy Services has a senior secured credit facility originally executed in May of 2011 which has been amended over time. The credit facility was amended on October 30, 2015 to reduce the total credit facility to $355.0 million, comprising a $105.0 million term loan and a $250.0 million revolving line of credit. Effective September 22, 2016, the Company amended its credit facility to amend certain provisions related to leverage ratio covenants and reduced the revolving line of credit to $215.0 million. Effective December 20, 2016, the Company amended its senior secured credit facility to extend the maturity date from February 28, 2018 to February 28, 2020 and reduce the revolving line of credit to $100 million. The agreement also amended certain financial covenants and restrictions and outlined a new pricing grid that is effective after receipt of the third quarter 2017 compliance certificate. Accrued interest is payable at the end of each quarter. The credit facility has a variable interest rate that ranges from either (i) the London interbank rate (“LIBOR”) plus a margin for Eurodollar advances or (ii) the applicable base rate plus a margin for base rate advances based on the Company’s leverage ratio as outlined below. In addition, a commitment fee related to the revolving line of credit is payable at the end of each calendar quarter based on a rate of 0.500% per annum on any unused portion of the commitment under the credit agreement. Leverage Ratio Before Receipt of Third Quarter 2017 Eurodollar Base Rate Compliance Certificate Advances Advances < 4.00 4.00 % 3.00 % ≥ 4.00 4.50 % 3.50 % Leverage Ratio After Receipt of Third Quarter 2017 Eurodollar Base Rate Compliance Certificate Advances Advances < 2.00 3.00 % 2.00 % ≥ 2.00 < 2.50 3.25 % 2.25 % ≥ 2.50 < 3.00 3.50 % 2.50 % ≥ 3.00 < 3.50 3.75 % 2.75 % ≥ 3.50 < 4.00 4.00 % 3.00 % ≥ 4.00 4.50 % 3.50 % Select Energy Services had no debt outstanding under the revolving line of credit as of December 31, 2016 and $173.0 million outstanding as of December 31, 2015. The weighted‑average interest rate of outstanding borrowings under the revolving line of credit was 3.25% as of December 31, 2015. The borrowing capacity under the revolving line of credit was reduced by outstanding letters of credit of $16.3 million and $14.8 million as of December 31, 2016 and 2015, respectively. The Company’s letters of credit have a variable interest rate between 3.00% and 4.50% based on the Company’s leverage ratio as outlined above. The unused portion of the available borrowings under the revolving line of credit was $83.7 million and $62.2 million at December 31, 2016 and 2015, respectively. In connection with amending its credit facility, the Company incurred $4.5 million and $1.2 million of debt issuance costs during the years ended December 31, 2016 and 2015. Debt issuance costs are amortized to interest expense over the life of the debt to which they pertain. Total unamortized debt issuance costs as of December 31, 2016 and 2015 were $3.9 million and $2.9 million, respectively. As there are no drawn borrowings as of December 31, 2016, unamortized debt issuance costs are presented as a deferred asset. For December 31, 2015, unamortized debt issuance costs are presented as a direct deduction from the carrying value of the associated debt instruments. The Company’s obligations under its senior secured credit facility are secured by substantially all of its assets. The credit facility contains customary events of default and covenants and limits its ability to incur additional indebtedness, pay dividends or make other distributions, create liens and sell assets. The Company was in compliance with all debt covenants as of December 31, 2016. |
COMMITMENTS AND CONTINGENCIES71
COMMITMENTS AND CONTINGENCIES | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
COMMITMENTS AND CONTINGENCIES. | ||
COMMITMENTS AND CONTINGENCIES | NOTE 8—COMMITMENTS AND CONTINGENCIES Litigation The Company is named from time to time in various legal proceedings in the ordinary course of business. The legal proceedings are at different stages; however, the Company does not believe the resolution of any of these proceedings would be material to its financial position or results of operations. General Business Risk As discussed in Note 1, the substantial majority of Company’s customers are in the oil and gas industry. The oil and gas industry is currently facing unique challenges due to the continued volatility and depressed state of oil and gas prices. | NOTE 8—COMMITMENTS AND CONTINGENCIES Operating leases Select Energy Services is party to non‑cancelable leases for operating locations, equipment and office space. Rent under the operating lease agreements is recognized ratably over the lease term. Total expenses incurred under these operating lease agreements for the years ended December 31, 2016 and 2015 was $21.6 million and $39.2 million, respectively. In January 2016 the Company bought out vehicle operating leases at a total purchase price of $16.2 million. The Company has the following operating lease commitments under non‑cancelable lease terms as of December 31, 2016: Year Ending December 31, Amount(1) (in thousands) 2017 $ 13,407 2018 11,976 2019 7,297 2020 7,269 2021 7,145 Thereafter 37,661 Total $ 84,755 (1) The Company’s operating lease commitments under non‑cancelable lease terms as of December 31, 2016 include $40.3 million of lease payments related to facilities that are included within the accrual for exit and disposal activities. Refer to Note 4—Exit and Disposal Activities for further discussion. Litigation The Company is named from time to time in various legal proceedings in the ordinary course of business. The legal proceedings are at different stages; however, the Company does not believe the resolution of any of these proceedings would be material to its financial position or results of operations. General Business Risk As discussed in Note 1, the substantial majority of Company’s customers are in the oil and gas industry. The oil and gas industry is currently facing unique challenges due to the continued volatility and depressed state of oil and gas prices. |
EQUITYBASED COMPENSATION
EQUITYBASED COMPENSATION | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
EQUITY BASED COMPENSATION | ||
EQUITYBASED COMPENSATION | NOTE 9—EQUITY‑BASED COMPENSATION The SES Holdings 2011 Equity Incentive Plan, (“2011 Plan”) was approved by the Predecessor’s board of managers in April 2011. In conjunction with the 144A Offering, the Company adopted the Select Energy Services, Inc. 2016 Equity Incentive Plan (the “2016 Plan”) for employees, consultants and directors of the Company and its affiliates. Options that were outstanding under the 2011 Plan immediately prior to the 144A Offering were cancelled in exchange for new options granted under the 2016 Plan. The maximum number of shares that may be issued pursuant to the 2016 Plan shall not exceed 4,600,000 shares of Class A common stock plus 8% of any shares of Class A common stock sold in any underwritten public offering, subject to adjustment in the event of recapitalization or reorganization, or related to forfeitures or the expiration of awards. Stock options are granted with terms not to exceed ten years. Phantom unit awards granted under the 2011 Plan, upon vesting, entitled each participant with the right to receive an amount of cash based in part on the fair market value of a share of Class A common stock on the date of the Company’s initial public offering. Based on the fair market value of a share of the Company’s Class A common stock of $14.00 on the date of the Company’s initial public offering, each participant received a cash payment equal to $5.53 for each phantom unit on May 5, 2017. Refer to Note 17 – Subsequent Events for details related to the payments made in respect of outstanding phantom units in connection with the Company’s initial public offering. Stock option awards Stock options were granted with an exercise price equal to or greater than the fair market value of a share of the Company’s Class A common stock as of the date of grant. The Company historically valued its Class A common stock on a quarterly basis using a market approach that includes a comparison to publicly traded peer companies using earnings multiples based on their market values and a discount for lack of marketability. The fair value measurement relies on Level 3 inputs. The estimated fair value of its stock options is expensed over their vesting period, which is generally three years from the applicable date of grant. However, certain awards that were granted during 2016 in exchange for cancelled awards were immediately vested and fully exercisable on the date of grant because they were granted in exchange for the cancellation of outstanding options granted under the 2011 Plan that were fully vested and exercisable prior to such cancellation. The Company utilizes the Black‑Scholes model to determine fair value, which incorporates assumptions to value equity‑based awards. The risk‑free interest rate is based on the U.S. Treasury yield curve in effect for the expected term of the option at the time of grant. At the time of grant, there was no public market for the Company’s equity. Therefore, the Company considered the historic volatility of publicly traded peer companies when determining the volatility factor. The expected life of the options was based on a formula considering the vesting period and term of the options awarded, which is generally seven to ten years. A summary of the Company’s stock option activity and related information for the three months ended March 31, 2017 is as follows: For the three months ended March 31, 2017 Weighted-average Equity Options Exercise Price Beginning balance 620,721 $ 16.50 Granted 418,184 20.00 Ending balance 1,038,905 $ 17.91 The weighted‑average grant date fair value of stock options granted during the three months ended March 31, 2017 was $7.98. The relevant assumptions for stock options granted during the period are as follows: $20.00 Strike Underlying Equity $ 20.00 Strike Price $ 20.00 Dividend Yield (%) % Risk free rate (%) 1.64% - 1.99 % Volatility (%) 46.6% - 46.7 % Expected Term (Years) 4-6 There was no vested stock option activity, or exercise of vested stock options, during the three months ended March 31, 2017. A summary of the Company’s restricted stock unit activity and related information for the three months ended March 31, 2017 is as follows: For the three months ended March 31, 2017 Grant Date Fair Restricted Stock Value Beginning balance — $ — Granted 39,242 20.00 Ending balance 39,242 $ 20.00 The Company recognized approximately $0.6 million and $0.3 million of compensation expense related to stock options and restricted stock unit awards during the three months ended March 31, 2017 and 2016, respectively. Phantom unit awards The Company’s phantom unit awards are cash settled awards that were contingent upon meeting certain equity returns and a liquidation event. The settlement amount was based on the fair market value of a share of the Company’s Class A common stock on the date of completion of the Company’s initial public offering, which constituted a liquidation event with respect to such phantom unit awards. As a result of the cash‑settlement feature of these awards, the Company considers these awards to be liability awards, which are measured at fair value at each reporting date and the pro rata vested portion of the award is recognized as a liability to the extent that the performance condition is deemed probable. No compensation expense was recognized through March 31, 2017 due to the non‑occurrence of the performance condition, which was not considered probable as of March 31, 2017. There was no activity related to the Company’s phantom unit awards for the three months ended March 31, 2017. Refer to Note 17 – Subsequent Events for details related to the payments made in respect of outstanding phantom units in connection with the Company’s initial public offering. | NOTE 9—EQUITY‑BASED COMPENSATION The 2011 Equity Incentive Plan, (“2011 Plan”) was approved by the Predecessor’s board of managers in April 2011. In conjunction with the 144A Offering, the Company adopted a long‑term incentive plan (the “2016 Plan”) for employees, consultants and directors of the Company and its affiliates. Options that were outstanding under the 2011 Plan prior to the 144A Offering were cancelled and replaced with new options under the 2016 Plan. The maximum number of shares that may be issued pursuant to the 2016 Plan shall not exceed 4,600,000 shares of Class A common stock plus 8% of any shares of Class A common stock sold in any underwritten public offering, subject to adjustment in the event of recapitalization or reorganization, or related to forfeitures or the expiration of awards. Equity options are granted with terms not to exceed ten years. Phantom Awards granted under the Plan, upon vesting, entitle the Participant to receive an amount of cash based on the value of the underlying equity instrument. Equity option awards Equity options were granted with an exercise price equal to or greater than the fair market value of its underlying equity instrument as of the date of grant. The Company values its equity on a quarterly basis using a market approach that includes a comparison to publicly traded peer companies using earnings multiples based on their market values and a discount for lack of marketability. The fair value measurement relies on Level 3 inputs. The estimated fair value of its equity options is expensed over their vesting period, which is generally three years. However, certain awards that were granted during 2016 in replacement of cancelled awards were vested immediately. The Company utilizes the Black‑Scholes model to determine fair value, which incorporates assumptions to value equity‑based awards. The risk‑free interest rate is based on the U.S. Treasury yield curve in effect for the expected term of the option at the time of grant. At this time, there is no public market for the Company’s equity. Therefore, the Company considers the historic volatility of publicly traded peer companies when determining the volatility factor. The expected life of the options is based on a formula considering the vesting period and term of the options awarded, which is generally seven years. On December 20, 2016, outstanding equity options of SES Holdings were exchanged for equivalent equity options in Select Energy Services. There was no incremental compensation expense recorded as a result of the exchange. A summary of its equity option activity and related information is as follows: December 31, 2016 December 31, 2015 Weighted Weighted Unit Average Average Options Exercise Price Options Exercise Price Beginning balance 973,410 $ 16.16 1,262,220 $ 16.34 Granted 204,245 16.17 — — Cancelled (556,934) 15.79 (288,810) 16.93 Ending balance 620,721 $ 16.50 973,410 $ 16.16 The weighted‑average grant date fair value of equity options granted during the year ended December 31, 2016 was $1.84. The table below presents the assumptions used in determining the fair value of certain equity options previously cancelled that were regranted during the year ended December 31, 2016. $14.33 Strike $20.61 Strike Underlying Equity $ 6.08 $ 6.08 Strike Price $ 14.33 $ 20.61 Dividend Yield (%) — % — % Risk free rate (%) 0.86 % 0.86 % Volatility (%) 63.0 % 63.0 % Expected Term (Years) 5 5 The Company recognized approximately $0.3 million and $0.7 million of compensation expense related to equity options during the years ended December 31, 2016 and 2015, respectively. The Company’s fully vested equity option activity and related information is as follows: December 31, 2016 December 31, 2015 Weighted Weighted Vested Average Vested Average Units Exercise Price Units Exercise Price Beginning balance 905,698 $ 16.30 852,736 $ 17.19 Vested 229,747 15.96 257,973 14.69 Cancelled (514,724) 15.91 (205,011) 17.99 Ending balance 620,721 $ 16.50 905,698 $ 16.30 The weighted‑average remaining contractual term of outstanding vested equity at December 31, 2016 and 2015 was 2.50 and 3.50, respectively. All vested outstanding equity options are currently exercisable; however, the exercise price of 197,294 equity options, with a weighted‑average exercise price of $20.81, exceed the price of the underlying equity instruments. Phantom awards The Company’s Phantom Awards are cash settled awards contingent upon meeting certain equity returns and a liquidation event. The distribution amount is based on the fair value of the underlying equity at the time of the liquidation event with a maximum value of $7.53 per Phantom Award. As a result of the cash‑settlement feature of these awards, the Company considers these awards to be liability awards, which are measured at fair value at each reporting date and the pro rata vested portion of the award is recognized as a liability to the extent that the performance condition is deemed probable. No compensation expense has been recognized to date due to the non‑occurrence of the performance condition, which is not yet considered probable. Activity related to the Company’s Phantom Awards is as follows: For the year ended December 31, 2016 2015 Beginning balance 1,289,472 995,991 Granted 158,031 524,554 Cancelled (19,920) (231,073) Ending balance 1,427,583 1,289,472 |
DERIVATIVE FINANCIAL INSTRUME73
DERIVATIVE FINANCIAL INSTRUMENTS | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
DERIVATIVE FINANCIAL INSTRUMENTS | ||
DERIVATIVE FINANCIAL INSTRUMENTS | NOTE 10—DERIVATIVE FINANCIAL INSTRUMENTS The Company had variable rate debt outstanding which was subject to interest rate risk based on volatility in underlying interest rates. In April 2013, the Company entered into a pay fixed, receive variable interest rate swap, with an aggregate notional amount of $125.0 million, which the Company designated as a cash flow hedge. The derivative contract matured in April 2016. The change in value and amounts reclassified to interest expense during the three months ended March 31, 2016 were nominal. There was no activity during the three months ended March 31, 2017. Changes in the fair values of the Company’s derivative instruments are presented on a net basis in the accompanying consolidated statements of operations. Changes in the fair value of the Company’s interest rate swap derivative instruments are as follows: Three Months Ended March 31, Derivatives designated as cash flow hedges 2016 (in thousands) Beginning fair value of interest rate swap derivative instruments $ (7) Amount of unrealized losses recognized in OCI (80) Amount of gains reclassified from AOCI to earnings (effective portion) 85 Net change in fair value of interest rate swap derivative instruments 5 Ending fair value of interest rate swap derivative instruments $ (2) | NOTE 10—DERIVATIVE FINANCIAL INSTRUMENTS The Company had variable rate debt outstanding which is subject to interest rate risk based on volatility in underlying interest rates. In April 2013, the Company entered into a pay fixed, receive variable interest rate swap, with an aggregate notional amount of $125.0 million, which the Company designated as a cash flow hedge. The derivative contract matured in April 2016. The change in value and amounts reclassified to interest expense during years ended December 31, 2015 and 2016, are nominal. The fair value measurement of the interest rate swap agreement was based on Level 2 inputs. See Note 11—Fair Value Measurement for further discussion. The table below summarizes the fair value and classification of the Company’s derivative instruments: As of December 31, Classification Balance Sheet Location 2016 2015 (in thousands) Liabilities: Current liability Accrued expenses and other current liabilities $ — $ 7 Long-term liability Other long-term liabilities — — Total liabilities $ — $ 7 Changes in the fair values of the Company’s derivative instruments are presented on a net basis in the accompanying consolidated statements of operations. Changes in the fair value of the Company’s interest rate swap derivative instruments are as follows: Year Ended December 31, Derivatives designated as cash flow hedges 2016 2015 (in thousands) Beginning fair value of interest rate swap derivative instruments $ (7) $ (68) Amount of unrealized losses recognized in OCI (106) (277) Amount of gains reclassified from AOCI to earnings (effective portion) 113 338 Net change in fair value of interest rate swap derivative instruments 7 61 Ending fair value of interest rate swap derivative instruments $ — $ (7) |
FAIR VALUE MEASUREMENT74
FAIR VALUE MEASUREMENT | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
FAIR VALUE MEASUREMENT | ||
FAIR VALUE MEASUREMENT | NOTE 11—FAIR VALUE MEASUREMENT The Company utilizes fair value measurements to measure assets and liabilities in a business combination or assess impairment of property and equipment, intangible assets and goodwill. Fair value is defined as the amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in an orderly transaction between market participants at the measurement date. Further, ASC 820, Fair Value Measurements, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and includes certain disclosure requirements. Fair value estimates are based on either (i) actual market data or (ii) assumptions that other market participants would use in pricing an asset or liability, including estimates of risk. ASC 820 establishes a three‑level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows: Level 1 —Unadjusted quoted prices for identical assets or liabilities in active markets. Level 2 —Quoted prices for similar assets or liabilities in non‑active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 —Inputs that are unobservable and significant to the fair value measurement (including the Company’s own assumptions in determining fair value). A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. There were no transfers into, or out of, the three levels of the fair value hierarchy for the three months ended March 31, 2017 or the year ended December 31, 2016. Other fair value considerations The carrying values of the Company’s current financial instruments, which include cash and cash equivalents, accounts receivable trade and accounts payable, approximate their fair value at March 31, 2017 and December 31, 2016 due to the short‑term maturity of these instruments. The Company had no outstanding debt as of December 31, 2016. The carrying value of debt as of March 31, 2017 approximates fair value due to variable market rates of interest. These fair values, which are Level 3 measurements, were estimated based on the Company’s incremental borrowing rates for similar types of borrowing arrangements, when quoted market prices were not available. The estimated fair values of the Company’s financial instruments are not necessarily indicative of the amounts that would be realized in a current market exchange. The consideration transferred and the purchase price allocation of identified assets acquired and liabilities assumed related to the Permian Acquisition are based on the Company’s estimate of fair value utilizing Level 3 inputs at the date of acquisition. Refer to Note 3 – Acquisition for further discussion. | NOTE 11—FAIR VALUE MEASUREMENT The Company utilizes fair value measurements to measure assets and liabilities in a business combination or assess impairment of property and equipment, intangible assets and goodwill. Fair value is defined as the amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in an orderly transaction between market participants at the measurement date. Further, ASC 820, Fair Value Measurements, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and includes certain disclosure requirements. Fair value estimates are based on either (i) actual market data or (ii) assumptions that other market participants would use in pricing an asset or liability, including estimates of risk. ASC 820 establishes a three‑level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows: Level 1 —Unadjusted quoted prices for identical assets or liabilities in active markets. Level 2 —Quoted prices for similar assets or liabilities in non‑active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 —Inputs that are unobservable and significant to the fair value measurement (including the Company’s own assumptions in determining fair value). A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. There were no transfers into, or out of, the three levels of the fair value hierarchy for the years ended December 31, 2016 and 2015. Assets and liabilities measured at fair value on a recurring basis The Company estimated the fair value of derivative instruments using the market approach via a model that uses inputs that are observable in the market or can be derived from, or corroborated by, observable data. See Note 10—Derivatives Financial Instruments for further discussion. The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis: Fair Value Measurements Using Level 1 Level 2 Level 3 Total (In thousands) As of December 31, 2016 Financial liabilities Interest rate swap derivative instrument $ — $ — $ — $ — As of December 31, 2015 Financial liabilities Interest rate swap derivative instrument $ — $ (7) $ — $ (7) Assets and liabilities measured at fair value on a non‑recurring basis Nonfinancial assets and liabilities measured at fair value on a non‑recurring basis include certain nonfinancial assets and liabilities as may be acquired in a business combination and measurements of goodwill and intangible impairment. As there is no corroborating market activity to support the assumptions used, the Company has designated these measurements as Level 3. Long‑lived assets, such as property and equipment and finite‑lived intangible assets, are evaluated for impairment whenever events or changes in circumstances indicate that its carrying value may not be recoverable. The development of future cash flows and the estimate of fair value represent the Company’s best estimates based on industry trends and reference to market transactions and are subject to variability. The Company conducts its annual goodwill impairment test in the fourth quarter each year, or more frequently if indicators of impairment exist. As a result of triggering events during 2015, the Company conducted its goodwill impairment test as of September 30, 2015. The Company determined that additional triggering events were present during 2016 resulting in an additional impairment assessment. The Company’s annual impairment test utilizes discounted cash flow projections using weighted average cost of capital calculations based on capital structures of publicly traded peer companies to determine the fair value of its reporting units. The Company’s reporting units are based on its organizational and reporting structure. Application of the goodwill impairment test requires judgment, including the identification of reporting units, allocation of assets (including goodwill) and liabilities to reporting units and determining the fair value. The determination of reporting unit fair value relies upon certain estimates and assumptions. These estimates and assumptions are affected by numerous factors, including the general economic environment and levels of exploration and production activity of oil and natural gas companies. The Company’s estimates of fair value have been determined at discrete points in time based on relevant information. These estimates involve uncertainty and cannot be determined with precision. There were no significant changes in valuation techniques or related inputs for the years ended December 31, 2016 and 2015. The following table presents information about the Company’s assets measured at fair value on a non‑recurring basis for the years ended December 31, 2016 and 2015. Fair Value Measurements Using Carrying Level 1 Level 2 Level 3 Value(1) Impairment (In thousands) Year Ended December 31, 2016 Goodwill $ — $ — $ — $ 138,529 $ 138,529 Intangible Assets — — — 137 137 Fixed Assets — — 23,188 83,214 60,026 Year Ended December 31, 2015 Goodwill $ — $ — $ — $ 20,136 $ 20,136 Intangible Assets — — — 1,230 1,230 (1) Amount represents carrying value at the date of assessment. Other fair value considerations The carrying values of the Company’s current financial instruments, which include cash and cash equivalents, accounts receivable trade and accounts payable, approximate their fair value at December 31, 2016 and 2015 due to the short‑term maturity of these instruments. The Company had no outstanding debt as of December 31, 2016. The carrying value of debt as of December 31, 2015 approximates fair value due to variable market rates of interest. These fair values, which are Level 3 measurements, were estimated based on the Company’s incremental borrowing rates for similar types of borrowing arrangements, when quoted market prices were not available. The estimated fair values of the Company’s financial instruments are not necessarily indicative of the amounts that would be realized in a current market exchange. |
RELATED PARTY TRANSACTIONS75
RELATED PARTY TRANSACTIONS | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
RELATED PARTY TRANSACTIONS | ||
RELATED PARTY TRANSACTIONS | NOTE 12—RELATED PARTY TRANSACTIONS The Company considers its related parties to be those stockholders who are beneficial owners of more than 5.0% of its common stock, executive officers, members of its board of directors or immediate family members of any of the foregoing persons. The Company has entered into a significant number of transactions with related parties. The Company’s board of directors regularly reviews these transactions; however, the Company’s results of operations may have been different if these transactions were conducted with non‑related parties. During the three months ended March 31, 2017, sales to related parties were $0.5 million and purchases from related party vendors were $1.2 million. These purchases comprised $0.2 million relating to purchases of property and equipment, less than $0.1 million relating to inventory and consumables, $0.4 million relating to rent of certain equipment or other services used in operations, and $0.5 million relating to management, consulting and other services. During the three months ended March 31, 2016, sales to related parties were $0.3 million and purchases from related party vendors were $1.0 million. These purchases comprised $0.1 million relating to purchases of property and equipment, less than $0.1 million relating to inventory and consumables, $0.3 million relating to rent of certain equipment or other services used in operations, and $0.6 million relating to management, consulting and other services. Tax receivable agreements In connection with the 144A Offering, the Company entered into two tax receivable agreements (the “Tax Receivable Agreements”) with Legacy Owner Holdco, Crestview GP, and certain affiliates of Predecessor unitholders (collectively, the “TRA Holders”). The first of the Tax Receivable Agreements, which the Company entered into with Legacy Owner Holdco and Crestview GP, generally provides for the payment by the Company to such TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income and franchise tax that the Company actually realizes (computed using simplifying assumptions to address the impact of state and local taxes) or is deemed to realize in certain circumstances in periods after the 144A Offering as a result of, as applicable to each such TRA Holder, (i) certain increases in tax basis that occur as a result of the Company’s acquisition (or deemed acquisition for U.S. federal income tax purposes) of all or a portion of such TRA Holder’s SES Holdings LLC Units in connection with the 144A Offering or pursuant to the exercise of the Exchange Right or the Company’s Call Right and (ii) imputed interest deemed to be paid by the Company as a result of, and additional tax basis arising from, any payments the Company makes under such Tax Receivable Agreement. The second of the Tax Receivable Agreements, which the Company entered into with an affiliate of the Contributing Legacy Owners, generally provides for the payment by the Company to such TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income and franchise tax that the Company actually realizes (computed using simplifying assumptions to address the impact of state and local taxes) or is deemed to realize in certain circumstances in periods after the 144A Offering as a result of, as applicable to each such TRA Holder, (i) any net operating losses available to the Company as a result of certain reorganization transactions entered into in connection with the 144A Offering and (ii) imputed interest deemed to be paid by the Company as a result of any payments the Company makes under such Tax Receivable Agreement. | NOTE 12—RELATED PARTY TRANSACTIONS The Company considers its related parties to be those members who are beneficial owners of more than 5.0% of its common stock, executive officers, members of its board of directors or immediate family members of any of the foregoing persons. The Company has entered into a significant number of transactions with related parties. The Company’s board of directors regularly reviews these transactions. Notwithstanding this, its results of operations may be different if these transactions were conducted with non‑related parties. During the year ended December 31, 2016, sales to related parties were $1.2 million. Purchases from related party vendors were $4.3 million during the year ended December 31, 2016. These purchases comprised $1.0 million relating to purchases of property and equipment, $0.2 million relating to inventory and consumables, $1.1 million relating to rent of certain equipment or other services used in operations, and $2.0 million relating to management, consulting and other services. During the year ended December 31, 2015, sales to related parties were $4.1 million. Purchases from related party vendors were $8.6 million during the year ended December 31, 2015. These purchases comprised $4.0 million relating to purchases of property and equipment, $0.9 million relating to inventory and consumables, $1.0 million relating to rent of certain equipment or other services used in operations, and $2.7 million relating to management, consulting and other services. Tax receivable agreements In connection with the 144A Offering, the Company entered into two tax receivable agreements (the “Tax Receivable Agreements”) with Legacy Owner Holdco, Crestview GP, and certain affiliates of Predecessor unitholders (collectively, the “TRA Holders”). The first of the Tax Receivable Agreements, which the Company entered into with Legacy Owner Holdco and Crestview GP, generally provides for the payment by the Company to such TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income and franchise tax that the Company actually realizes (computed using simplifying assumptions to address the impact of state and local taxes) or is deemed to realize in certain circumstances in periods after the 144A Offering as a result of, as applicable to each such TRA Holder, (i) certain increases in tax basis that occur as a result of the Company’s acquisition (or deemed acquisition for U.S. federal income tax purposes) of all or a portion of such TRA Holder’s SES Holdings, LLC common units in connection with the 144A Offering or pursuant to the exercise of the Exchange Right or the Company’s Call Right and (ii) imputed interest deemed to be paid by the Company as a result of, and additional tax basis arising from, any payments the Company makes under such Tax Receivable Agreement. The second of the Tax Receivable Agreements, which the Company entered into with an affiliate of the Contributing Legacy Owners, generally provides for the payment by the Company to such TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income and franchise tax that the Company actually realizes (computed using simplifying assumptions to address the impact of state and local taxes) or is deemed to realize in certain circumstances in periods after the 144A Offering as a result of, as applicable to each such TRA Holder, (i) any net operating losses available to the Company as a result of certain reorganization transactions entered into in connection with the 144A Offering and (ii) imputed interest deemed to be paid by the Company as a result of any payments the Company makes under such Tax Receivable Agreement. See Note 13—Income Taxes for further discussion of amounts recorded in connection with the 144A Offering. |
INCOME TAXES76
INCOME TAXES | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
INCOME TAXES | ||
INCOME TAXES | NOTE 13—INCOME TAXES The Company is subject to U.S. federal and state income taxes as a corporation. SES Holdings and its subsidiaries, with the exception of certain corporate subsidiaries, are treated as flow‑through entities for U.S. federal income tax purposes, and as such, are generally not subject to U.S. federal income tax at the entity level. Rather, the tax liability with respect to their taxable income is passed through to their members or partners. Accordingly, prior to our reorganization in connection with the 144A Offering, the Predecessor only recorded a provision for Texas franchise tax and U.S. federal and state provisions for certain corporate subsidiaries as the Predecessor’s taxable income or loss was includable in the income tax returns of the individual partners and members. However, for periods following our reorganization in connection with the 144A Offering, Select Energy Services will recognize a tax liability on its allocable share of SES Holdings’ taxable income. The Company’s effective tax rate for the three months ended March 31, 2017 and 2016 was -0.9% and -1.2%, respectively. The effective tax rate for the three months ended March 31, 2017 differs from the statutory rate of 35% due to net income allocated to noncontrolling interests, state income taxes, other permanent differences between book and tax accounting, and valuation allowances. The Company recorded income tax expense of $0.1 million and $0.3 million for the three months ended March 31, 2017 and 2016, respectively. The tax benefits of deferred tax assets are recorded as an asset to the extent that management assesses the utilization of such assets to be more likely than not. When the future utilization of some portion of deferred tax assets is determined not to be more likely than not, a valuation allowance is provided to reduce the recorded tax benefits from such assets. As of March 31, 2017, management’s assessment as to the realizability of certain deferred tax assets has resulted in the recording of a valuation allowance to reduce deferred tax assets to the amounts that are considered more likely than not to be realized. Management believes there will be sufficient future taxable income based on the reversal of temporary differences to enable utilization or sustainability of those deferred tax assets that do not have a valuation allowance recorded against them. Separate federal and state income tax returns are filed for Select Energy Services, SES Holdings, and certain consolidated affiliates. The tax years 2012 through 2015 remain open to examination by the major taxing jurisdictions to which the Company is subject to income tax. Select Energy Services and SES Holdings are not currently under any income tax audits. Accounting for uncertainty in income taxes prescribes a recognition threshold and measurement methodology for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As of March 31, 2017 and December 31, 2016, there was no material liability or expense for the periods then ended recorded for payments of interest and penalties associated with uncertain tax positions or material unrecognized tax positions and the Company’s unrecognized tax benefits were not material. | NOTE 13—INCOME TAXES Following the 144A Offering, the Company is subject to U.S. federal and state income taxes as a corporation. Prior to the 144A Offering, the Predecessor only recorded a provision for Texas franchise tax and federal and state provisions for certain corporate subsidiaries as the Predecessor’s taxable income or loss was includable in the income tax returns of the individual partners and members. Specifically, SES Holdings and its subsidiaries, with the exception of certain corporate subsidiaries, are treated as flow‑through entities for U.S. federal income tax purposes, and as such, are generally not subject to U.S. federal income tax at the entity level. Rather, the tax liability with respect to its taxable income is passed through to its members or partners. Accordingly, the Select Energy Services will recognize a tax liability on its share of SES Holdings’ pre‑tax book income, exclusive of the noncontrolling interest for periods following the 144A Offering. The components of the federal and state income tax expense (benefit) are summarized as follows: Year Ended December 31, 2016 2015 (in thousands) Current tax expense Federal $ — $ 341 State 275 836 Total current expense 275 1,177 Deferred tax expense (benefit) Federal (841) (785) State 42 (68) Total deferred benefit (799) (853) Total income tax provision (benefit) $ (524) $ 324 Tax expense (benefit) attributable to controlling interests $ (179) $ 324 Tax benefit attributable to noncontrolling interests (345) — Total income tax expense (benefit) $ (524) $ 324 A reconciliation of the Company’s provision for income taxes as reported and the amount computed by multiplying income before taxes, less noncontrolling interest, by the U.S. federal statutory rate of 35%: Year Ended December 31, 2016 (in thousands) Provision calculated at federal statutory income tax rate: Net income before taxes $ (313,948) Statutory rate 35 % Income tax benefit computed at statutory rate (109,882) Less: Noncontrolling interests 109,230 Income tax benefit attributable to controlling interests (652) State and local income taxes, net of federal benefit 87 Change in valuation allowance 386 Tax benefit attributable to controlling interests (179) Tax benefit attributable to noncontrolling interests (345) Total income tax benefit $ (524) For the year ended December 31, 2015, the calculation is not applicable as the Company was not subject to federal income taxes prior to the 144A Offering, with the exception of certain corporate subsidiaries. Deferred taxes result from the temporary differences between financial reporting carrying amounts and the tax basis of existing assets and liabilities. As of December 31, 2016 and 2015, the Company had net deferred tax liabilities of $0.6 million and $1.4 million, respectively, which are recorded in other long‑term liabilities on the consolidated balance sheets. The principal components of the deferred tax assets (liabilities) are summarized as follows: Year Ended December 31, 2016 2015 (in thousands) Deferred tax assets Section 754 election tax basis adjustment $ 3,601 $ — Net operating loss 3,999 — Credits and other carryforwards 142 — Investment in consolidated subsidiary SES Holdings, LLC 297 — Property and equipment 220 — Total deferred tax assets 8,259 — Deferred tax liabilities Property and equipment — 68 Intangible assets 811 1,343 Noncurrent state deferred tax liability 113 — Total deferred tax liabilities 924 1,411 Net deferred tax assets (liabilities) 7,335 (1,411) Valuation allowance (7,932) — Net deferred tax assets (liabilities) $ (597) $ (1,411) On the date of the 144A Offering, the Company recorded a net deferred tax asset of $9.7 million related to the step up in tax basis resulting from the purchase by the Company of common units of SES Holdings. This deferred tax asset has a full valuation allowance. As a result, the Company has not recorded a liability for the effect of any associated Tax Receivable Agreement liabilities as the liability is based on the actual cash tax savings, which are not considered probable as of December 31, 2016. See Note 12—Related Party Transactions for further discussion of the Tax Receivable Agreements. The Company has a federal net operating loss carryforward of $10.9 million and a state net operating loss carryforward of $3.4 million, which begin to expire in 2031. The tax benefits of the net operating losses are recorded as an asset to the extent that management assesses the utilization of such carryforwards to be more likely than not. When the future utilization of some portion of the carryforwards or other deferred tax assets is determined not to be more likely than not, a valuation allowance is provided to reduce the recorded tax benefits from such assets. As of December 31, 2016, the Company has a valuation allowance of $7.9 million as a result of management’s assessment as to the realizability of certain deferred tax assets. Management believes there will be sufficient future taxable income based on the reversal of temporary differences to enable utilization of those deferred tax assets that do not have a valuation allowance recorded against them. Separate federal and state income tax returns are filed for Select Energy Services, SES Holdings, and certain consolidated affiliates. The tax years 2012 through 2015 remain open to examination by the major taxing jurisdictions to which the Company is subject to income tax. Select Energy Services and SES Holdings are not currently under any income tax audits. Accounting for uncertainty in income taxes prescribes a recognition threshold and measurement methodology for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As of December 31, 2016 and 2015 there was no material liability or expense for the periods then ended recorded for payments of interest and penalties associated with uncertain tax positions or material unrecognized tax positions and the Company’s unrecognized tax benefits were not material. |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 12 Months Ended |
Dec. 31, 2016 | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | NOTE 14—ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Accumulated other comprehensive income (loss) relates to the Company’s interest rate swap financial instrument and consists of the followings: Accumulated Other Comprehensive Income (Loss) (in thousands) Balance as of December 31, 2014 $ (68) Other comprehensive income (loss) before reclassification (277) Amounts reclassified from accumulated other comprehensive income (loss) 338 Balance as of December 31, 2015 $ (7) Other comprehensive income (loss) before reclassification (106) Amounts reclassified from accumulated other comprehensive income (loss) 113 Balance as of December 31, 2016 $ — Other comprehensive income (loss) was nominal for the years ended December 31, 2016 and 2015. |
NONCONTROLLING INTERESTS78
NONCONTROLLING INTERESTS | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
NONCONTROLLING INTERESTS. | ||
NONCONTROLLING INTERESTS | NOTE 14—NONCONTROLLING INTERESTS The Company has ownership interests in multiple subsidiaries that are consolidated within the Company’s financial statements but are not wholly owned. During the three months ended March 31, 2017 and 2016, the Company and its Predecessor purchased additional interests from third parties in certain of these subsidiaries. As a result of the Company’s increased interest in these subsidiaries, the Company reduced its noncontrolling interests and recognized an increase in equity related to transactions with holders of noncontrolling interests. The following table summarizes the effects of changes in noncontrolling interests on equity for the three months ended March 31, 2017: For the three months ended March 31, 2017 2016 (in thousands) Net loss attributable to Select Energy Services, Inc. and its Predecessor $ (4,172) $ (25,337) Transfers from noncontrolling interests: Increase in equity due to transactions with holder of noncontrolling interests 2,495 — Change to equity from net loss attributable to Select Energy Services, Inc. and its Predecessor and transfers from noncontrolling interests $ (1,677) $ (25,337) | NOTE 15—NONCONTROLLING INTERESTS The Company has ownership interests in multiple subsidiaries that are consolidated within the Company’s financial statements but are not wholly owned. During the year ended December 31, 2016, the Company purchased additional interests from third‑parties in certain of these subsidiaries for a total of $0.3 million. As a result of the Company’s increased interest in these subsidiaries, the Company reduced its noncontrolling interests by $1.1 million and recognized an increase in Predecessor equity related to the purchase of noncontrolling interests of $0.7 million. The following table summarizes the effects of changes in noncontrolling interests on Predecessor equity for the year ended December 31, 2016: December 31, 2016 (in thousands) Net loss prior to 144A Offering $ (306,481) Transfers from noncontrolling interests: Increase in Predecessor equity due to purchase of noncontrolling interests 707 Change to Predecessor equity from net loss prior to 144A Offering and transfers from noncontrolling interests $ (305,774) |
EARNINGS PER SHARE79
EARNINGS PER SHARE | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
EARNINGS PER SHARE | ||
EARNINGS PER SHARE | NOTE 15—EARNINGS PER SHARE Earnings per share are based on the amount of income allocated to the shareholders and the weighted‑average number of shares outstanding during the period for each class of common stock. The Company’s outstanding options are not included in the calculation of diluted weighted-average shares outstanding for the periods presented as the effect is antidilutive. Earnings related to periods prior to the reorganization and 144A Offering are attributable to the Predecessor. The following table presents the Company’s calculation of basic and diluted earnings per share for the three months ended March 31, 2017 and 2016 (dollars in thousands, except share and per share amounts): Three Months Ended March 31, 2017 2016 Net loss (12,280) (25,793) Less: Net loss attributable to Predecessor — 25,337 Less: Net loss attributable to noncontrolling interests 8,108 456 Net loss attributable to Select Energy Services, Inc. $ (4,172) $ — Allocation of net loss attributable to: Class A-1 stockholders $ (3,363) Class A stockholders (809) Class B stockholders — $ (4,172) Weighted average shares outstanding: Class A-1-Basic & Diluted 16,100,000 Class A-Basic & Diluted 3,870,194 Class B-Basic & Diluted 38,462,541 Net loss per share attributable to common stockholders: Class A-1-Basic & Diluted $ (0.21) Class A-Basic & Diluted $ (0.21) Class B-Basic & Diluted $ — | NOTE 16—EARNINGS PER SHARE Earnings per share are based on the amount of income allocated to the shareholders and the weighted‑average number of shares outstanding during the period for each class of common stock. The Company’s outstanding options are not included in the calculation of diluted weighted average shares outstanding for the periods presented as the effect is antidilutive. Earnings related to periods prior to the reorganization and 144A Offering are attributable to the Predecessor. The following table presents the Company’s calculation of basic and diluted earnings per share for the year ended December 31, 2016 (dollars in thousands, except share and per share amounts): Year Ended December 31, 2016 Net loss $ (313,948) Net loss attributable to Predecessor 306,481 Net loss attributable to noncontrolling interests 6,424 Net loss attributable to Select Energy Services, Inc. $ (1,043) Allocation of loss attributable to: Class A-1 stockholders $ (844) Class A stockholders (199) Class B stockholders — $ (1,043) Weighted average shares outstanding: Class A-1—Basic & Diluted 16,100,000 Class A—Basic & Diluted 3,802,972 Class B—Basic & Diluted 38,462,541 Net loss per share attributable to common stockholders: Class A-1—Basic & Diluted $ (0.05) Class A—Basic & Diluted $ (0.05) Class B—Basic & Diluted $ — |
SEGMENT INFORMATION80
SEGMENT INFORMATION | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
SEGMENT INFORMATION | ||
SEGMENT INFORMATION | NOTE 16—SEGMENT INFORMATION Select Energy Services is an oilfield services company that provides solutions to the North American onshore oil and natural gas industry. The Company’s services are offered through three operating segments. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. The Company’s chief operating decision maker assesses performance and allocates resources on the basis of the three reportable segments. Corporate and other expenses that do not individually meet the criteria for segment reporting are reported separately as Corporate. Each operating segment reflects a reportable segment led by separate managers that report directly to the Company’s CODM. The Company’s CODM assesses performance and allocates resources on the basis of the following three reportable segments: Water Solutions —The Water Solutions segment provides water‑related services to customers that include major integrated oil companies and independent oil and natural gas producers. These services include: the sourcing of water; the transfer of the water to the wellsite through permanent pipeline infrastructure and temporary pipe; the containment of fluids off‑ and on‑location; measuring and monitoring of water; the filtering and treatment of fluids, well testing and handling of flowback and produced formation water; and the transportation and recycling or disposal of drilling, completion and production fluids. Accommodations and Rentals —The Accommodations and Rentals segment provides workforce accommodations and surface rental equipment supporting drilling, completion and production operations to the U.S. onshore oil and gas industry. Wellsite Completion and Construction Services —The Wellsite Completion and Construction Services segment provides oil and natural gas operators with a variety of services, including crane and logistics services, wellsite and pipeline construction and field services. These services are performed to establish, maintain and improve production throughout the productive life of an oil or gas well, or to otherwise facilitate other services performed on a well. Financial information as of March 31, 2017 and December 31, 2016 and for the three months ended March 31, 2017 and 2016, by segment, is as follows: Total Assets As of As of March 31, 2017 December 31, 2016 (in thousands) Water Solutions $ 357,168 $ 324,171 Accommodations and Rentals 39,247 38,874 Wellsite Completion and Construction Services 31,598 29,994 Corporate 13,102 12,027 $ 441,115 $ 405,066 For the three months ended March 31, 2017 Income (loss) before Depreciation and Capital Revenue taxes Amortization Expenditures (in thousands) Water Solutions $ 78,765 $ (7,672) $ 17,548 $ 11,955 Accommodations and Rentals 9,543 (2,403) 2,672 713 Wellsite Completion and Construction Services 12,267 (248) 984 1,342 Elimination (650) — — — Loss from operations (10,323) Corporate — (2,185) 446 — Interest expense, net — (730) — — Other income, net — 1,064 — — $ 99,925 $ (12,174) $ 21,650 $ 14,010 For the three months ended March 31, 2016 Income (loss) before Depreciation and Capital Revenue taxes Amortization Expenditures (in thousands) Water Solutions $ 62,309 $ (17,499) $ 21,922 $ 20,787 Accommodations and Rentals 8,596 (1,695) 2,829 500 Wellsite Completion and Construction Services 8,081 (1,192) 1,391 81 Elimination (147) — — — Loss from operations (20,386) Corporate — (1,165) 634 — Interest expense, net — (3,367) — — Other (expense), net — (566) — — $ 78,839 $ (25,484) $ 26,776 $ 21,368 | NOTE 17—SEGMENT INFORMATION Select Energy Services is an oilfield services company that provides solutions to the North American onshore oil and natural gas industry. The Company’s services are offered through three operating segments. Corporate and other expenses that do not individually meet the criteria for segment reporting are reported separately as Corporate. Each operating segment reflects a reportable segment led by separate segment management that reports directly or indirectly to the Company’s chief operating decision maker (“CODM”). The Company’s CODM assesses performance and allocates resources on the basis of the following three reportable segments: Water Solutions —The Water Solutions segment provides water‑related services to customers that include major integrated oil companies and independent oil and natural gas producers. These services include: the sourcing of water; the transfer of the water to the wellsite through permanent pipeline infrastructure and temporary pipe; the containment of fluids off‑ and on‑location; measuring and monitoring of water; the filtering and treatment of fluids, well testing and handling of flowback and produced formation water; and the transportation and recycling or disposal of drilling, completion and production fluids. Accommodations and Rentals —The Accommodations and Rentals segment provides workforce accommodations and surface rental equipment supporting drilling, completion and production operations to the U.S. onshore oil and gas industry. Wellsite Completion and Construction Services —The Wellsite Completion and Construction Services segment provides oil and natural gas operators with a variety of services, including crane and logistics services, wellsite and pipeline construction and field services. These services are performed to establish, maintain and improve production throughout the productive life of an oil or gas well, or to otherwise facilitate other services performed on a well. Financial information as of and for the years ended December 31, 2016 and 2015, by segment, is as follows: As of and for the year ended December 31, 2016 Income (loss) Depreciation and Capital Revenue before taxes Amortization Expenditures Total Assets (in thousands) Water Solutions $ 241,766 $ (282,019) $ 81,051 $ 34,458 $ 331,111 Accommodations and Rentals 27,367 (10,930) 10,841 1,580 38,874 Wellsite Completion and Construction Services 34,094 (4,108) 5,215 288 29,994 Elimination (828) — — — — Loss from operations (297,057) Corporate — (1,916) — — 5,087 Interest expense, net — (16,128) — — — Other income, net — 629 — — — $ 302,399 $ (314,472) $ 97,107 $ 36,326 $ 405,066 As of and for the year ended December 31, 2015 Income (loss) Depreciation and Capital Revenue before taxes Amortization Expenditures Total Assets (in thousands) Water Solutions $ 427,592 $ (52,757) $ 89,271 $ 34,724 $ 560,064 Accommodations and Rentals 53,677 (486) 11,475 10,555 52,890 Wellsite Completion and Construction Services 56,299 (3,003) 6,702 3,407 35,384 Elimination (1,991) — — — — Loss from operations (56,246) Corporate — (12,527) 264 — 1,910 Interest expense, net — (13,689) — — — Other income, net — 893 — — — $ 535,577 $ (81,569) $ 107,712 $ 48,686 $ 650,248 Revenue by groups of similar products and services are as follows: For the year ended December 31, 2016 2015 (in thousands) Water sourcing and transfer(1) $ 144,659 $ 230,354 Well testing and flowback 37,582 75,820 Fluid hauling and disposal 59,214 121,322 Accommodations and rentals 27,151 52,948 Wellsite completion and construction services 33,793 55,133 $ 302,399 $ 535,577 (1) Includes water sourcing, water transfer, containment, water monitoring, and water treatment and recycling services. |
SUBSEQUENT EVENTS81
SUBSEQUENT EVENTS | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
SUBSEQUENT EVENTS | ||
SUBSEQUENT EVENTS | NOTE 17—SUBSEQUENT EVENTS On April 26, 2017, the Company completed its IPO of 8,700,000 shares of Class A common stock at a price of $14.00 per share. On May 10, 2017, the underwriters of the IPO exercised their over-allotment option to purchase an additional 1,305,000 shares of Class A common stock at the IPO price of $14.00 per share. After deducting underwriting discounts and commissions and estimated offering expenses payable by us, we received approximately $128.6 million of the aggregate net proceeds from the IPO (including the over-allotment option). We contributed all of the net proceeds received by us to SES Holdings in exchange for SES Holdings LLC Units. SES Holdings used the net proceeds in the following manner: (i) $34.0 was used to repay borrowings incurred under our Credit Facility to fund the cash portion of the purchase price of the Permian Acquisition, (ii) $7.8 million was used for the cash settlement of outstanding phantom unit awards and (iii) the remaining net proceeds are intended to be used for general corporate purposes, including funding our 2017 budgeted capital expenditures. On May 5, 2017, the Company settled its outstanding phantom unit awards for an aggregate amount equal to $7.8 million as a result of the completion of its IPO, which constituted a liquidity event with respect to such phantom unit awards. Based on the fair market value of a share of the Company’s Class A common stock on the date of the IPO of $14.00, the cash payment with respect to each phantom unit was approximately $5.53. | NOTE 18—SUBSEQUENT EVENTS On January 23, 2017, the Company issued 10,668 equity options to certain members of the Company’s board of directors related to the addition of independent directors and 324,111 equity options to certain employees of the Company with a strike price of $20.00 and terms ranging from seven to ten years. Additionally, the Company granted 2,500 restricted stock units to certain members of the Company’s board of directors related to the addition of independent directors and 34,867 restricted stock units to certain employees. On February 7, 2017, the Company issued 75,399 equity options to certain employees with a strike price of $20.00 and a term of seven years. On February 20, 2017, the Company issued 8,002 equity options to certain employees with a strike price of $20.00 and a term of seven years. Additionally, the Company granted 1,875 restricted stock units to certain employees. On February 24, 2017, the Company entered into a purchase and sale agreement to acquire a company in the Permian Basin with proprietary fresh water sources and water transport infrastructure for $56.5 million, with 90% to be paid in cash and 10% to be paid in equity, subject to certain closing adjustments. Closing is expected to be completed before the end of the first quarter of 2017. The Company has evaluated subsequent events through March 2, 2017, the date the financial statements are available to be issued. |
SIGNIFICANT ACCOUNTING POLICI82
SIGNIFICANT ACCOUNTING POLICIES (POLICIES) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
SIGNIFICANT ACCOUNTING POLICIES | ||
Use of estimates | Use of estimates : The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates its estimates, including those related to recoverability of long‑lived assets and intangibles, useful lives used in depreciation and amortization, uncollectible accounts receivable, income taxes, self‑insurance liabilities, share‑based compensation and contingent liabilities. The Company bases its estimates on historical and other pertinent information that are believed to be reasonable under the circumstances. The accounting estimates used in the preparation of the consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. | Use of estimates : The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates its estimates, including those related to recoverability of long‑lived assets and intangibles, useful lives used in depreciation and amortization, uncollectible accounts receivable, income taxes, self‑insurance liabilities, share‑based compensation and contingent liabilities. The Company bases its estimates on historical and other pertinent information that are believed to be reasonable under the circumstances. The accounting estimates used in the preparation of the consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. |
Cash and cash equivalents | Cash and cash equivalents : The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. | |
Accounts receivable and allowance for doubtful accounts | Accounts receivable and allowance for doubtful accounts : Accounts receivable are stated at the invoiced amount, or the earned but not yet invoiced amount, net of an allowance for doubtful accounts. The Company establishes an allowance for doubtful accounts based on the review of several factors, including historical collection experience, current aging status of the customer accounts, and financial condition of its customers. Accounts receivable are written off when a settlement is reached for an amount less than the outstanding historical balance or when the Company determines that it is probable the balance will not be collected. The change in allowance for doubtful accounts is as follows: (in thousands) 2016 2015 Balance at beginning of year 2,351 3,169 Provisions for bad debts, included in SG&A expense 2,385 576 Uncollectible receivables written off (2,592) (1,394) Balance at end of year 2,144 2,351 | |
Concentrations of credit and customer risk | Concentrations of credit and customer risk : Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. The amounts held in financial institutions periodically exceed the federal insured limit. Management believes that the financial institutions are financially sound and the risk of loss is minimal. The Company minimizes its exposure to counterparty credit risk by performing credit evaluations and ongoing monitoring of the financial stability of its customers. There were no customers that accounted for more than 10.0% of the Company’s consolidated revenues for the year ended December 31, 2016. During 2015, Anadarko Petroleum Corporation accounted for 10.6% of the Company’s consolidated revenues. | |
Inventories | Inventories : The Company values its inventories at lower of cost or market using the first‑in, first‑out (“FIFO”) method. Inventory costs primarily consist of water containment sections sold to customers in the ordinary course of business. | |
Property and equipment | Property and equipment : Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on a straight line basis over the estimated useful life of each asset as noted below: Asset Classification Useful Life (years) Buildings and improvements 30 or lease term Vehicles and equipment 5 Machinery and equipment 2 - 15 Computer equipment and software 3 - 4 Office furniture and equipment 7 Disposal wells 7 - 10 Helicopters 7 Depreciation expense related to the Company’s property and equipment was $88.2 million and $98.3 million for the years ended December 31, 2016 and 2015, respectively. Expenditures for additions to property and equipment and major replacements are capitalized when they significantly increase the functionality or extend the useful life of the asset. Gains and losses on dispositions, maintenance, repairs and minor replacements are included in the consolidated statements of operations as incurred. See Note 5—Property and Equipment for further discussion. | |
Goodwill and other intangible assets | Goodwill and other intangible assets : Goodwill represents the excess of the purchase price of acquisitions over the fair value of the net assets acquired. Goodwill and other intangible assets not subject to amortization are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Intangible assets with finite useful lives are amortized either on a straight‑line basis over the asset’s estimated useful life or on a basis that reflects the pattern in which the economic benefits of the intangible assets are realized. | |
Impairment of longlived and intangible assets | Impairment of long‑lived and intangible assets : Long‑lived assets, such as property and equipment and finite‑lived intangible assets, are evaluated for impairment whenever events or changes in circumstances indicate that its carrying value may not be recoverable. Recoverability is measured by a comparison of its carrying amount to the estimated undiscounted cash flows to be generated by those assets. If the undiscounted cash flows are less than the carrying amount, the Company records impairment losses for the excess of its carrying value over the estimated fair value. The development of future cash flows and the estimate of fair value represent its best estimates based on industry trends and reference to market transactions and are subject to variability. The Company considers the factors within the fair value analysis to be Level 3 inputs within the fair value hierarchy. Due to certain economic factors related to oil prices and rig counts, during 2015, an impairment loss of $1.3 million related to other intangible assets was recognized within impairment of intangible assets in the consolidated statements of operations. The impairment related to certain intangible assets within the Company’s Water Solutions segment. The Company determined that triggering events existed during 2016 resulting in an evaluation of the recoverability of the carrying value of certain property and equipment. As a result of this evaluation, the Company recorded impairment of property and equipment of $60.0 million related to the Company’s Water Solutions segment. See Note 11—Fair Value Measurement for further discussion. The Company conducts its annual goodwill impairment test in the fourth quarter each year, or more frequently if indicators of impairment exist. The Company’s annual impairment tests utilize discounted cash flow projections using weighted average cost of capital calculations based on capital structures of publicly traded peer companies to determine the fair value of its reporting units. The Company’s reporting units are based on its organizational and reporting structure. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the implied fair value of the reporting unit’s goodwill is less than its carrying value. Application of the goodwill impairment test requires judgment, including the identification of reporting units, allocation of assets (including goodwill) and liabilities to reporting units and determining the fair value. The determination of reporting unit fair value relies upon certain estimates and assumptions. These estimates and assumptions are affected by numerous factors, including the general economic environment and levels of exploration and production activity of oil and natural gas companies. The Company considers these factors to be Level 3 inputs within the fair value hierarchy. While the Company believes that the estimates and assumptions used in its annual impairment tests are reasonable, changes in these estimates and assumptions could impact the determination of its reporting unit fair value. Due to certain economic factors related to oil prices and rig counts during 2015, an impairment loss of $20.1 million related to goodwill was recognized in the consolidated statements of operations for the year ended December 31, 2015. The Company determined that additional triggering events were present during 2016 resulting in a goodwill impairment assessment of $138.5 million, primarily related to the Company’s Water Solutions segment. See Note 6—Goodwill and Other Intangible Assets and Note 11—Fair Value Measurement for further discussion. | |
Asset retirement obligations | Asset retirement obligations : The asset retirement obligation (“ARO”) liability reflects the present value of estimated costs of plugging, site reclamation, and similar activities associated with the Company’s salt water disposal wells. The Company utilizes current retirement costs to estimate the expected cash outflows for retirement obligations. The Company also estimates the productive life of the disposal wells, a credit‑adjusted risk‑free discount rate, and an inflation factor in order to determine the current present value of this obligation. The Company’s ARO liabilities are included in accrued expenses and other current liabilities and other long term liabilities during the years ended December 31, 2016 and 2015. The change in asset retirement obligations is as follows: (in thousands) 2016 2015 Balance at beginning of year 1,483 1,560 Accretion expense, included in Depreciation and Amortization expense 155 150 Change in estimate 30 (60) Settlements — (167) Balance at end of year 1,668 1,483 | |
Selfinsurance | Self‑insurance : The Company self‑insures, through deductibles and retentions, up to certain levels for losses related to general liability, workers’ compensation and employer’s liability, and vehicle liability. The Company’s exposure (i.e. the retention or deductible) per occurrence is $1.0 million for general liability, $1.0 million for workers’ compensation and employer’s liability, and $1.0 million for vehicle liability. The Company also has an excess loss policy over these coverages with a limit of $50.0 million in the aggregate. Management regularly reviews its estimates of reported and unreported claims and provide for losses through reserves. Prior to June 1, 2016, the Company was self‑insured for group medical claims subject to a deductible of $250 thousand for large claims. As of June 1, 2016, the Company is fully‑insured for group medical. | |
Employee benefit plans | Employee benefit plans : The Company sponsors a defined contribution 401(k) Profit Sharing Plan (the “401(k) Plan”) for the benefit of substantially all employees of the Company. The 401(k) Plan allows eligible employees to make tax‑deferred contributions, not to exceed annual limits established by the Internal Revenue Service. Prior to December 4, 2015, the Company made matching contributions of 100% of employee contributions, up to 4% of compensation. These matching contributions were vested immediately. Effective December 4, 2015, the employer match was discontinued for all employees. The Company did not make any matching contributions for the year ended December 31, 2016. The Company’s contributions were $1.9 million for the year ended December 31, 2015. | |
Revenue recognition | Revenue recognition : The Company recognizes revenue when it is realized or realizable and earned. Revenues are considered realized or realizable and earned when: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the seller’s price to the buyer is fixed or determinable, and (iv) collectability is reasonably assured. Services are typically priced on a throughput, day‑rate, hourly‑rate, or per‑job basis depending on the type of services provided. The Company’s services are generally governed by a service agreement or other persuasive evidence of an arrangement that include fixed or determinable fees and do not generally include right of return provisions or other significant post‑delivery obligations. Collectability is reasonably assured based on the establishment of appropriate credit qualification prior to services being rendered. Revenue generated by each of the Company’s segments are outlined as follows: Water Solutions —The Company’s Water Solutions segment provides water‑related services to customers, including the sourcing and transfer of water; the containment of fluids; measuring and monitoring of water; the filtering and treatment of fluids, well testing and handling, transportation, and recycling or disposal of fluids. Revenue from water solutions is primarily based on a per‑barrel price or other throughput metric as specified in the contract. We recognize revenue from water solutions when services are performed. The Company’s agreements with its customers are often referred to as “price sheets” and sometimes provide pricing for multiple services. However, these agreements generally do not authorize the performance of specific services or provide for guaranteed throughput amounts. As customers are free to choose which services, if any, to use based on the Company’s price sheet, the Company prices its separate services on the basis of their standalone selling prices. Customer agreements generally do not provide for performance‑, cancellation‑, termination‑, or refund‑type provisions. Services based on price sheets with customers are generally performed under separately‑issued “work orders” or “field tickets” as services are requested. Of the Company’s Water Solutions service lines, only sourcing and transfer of water are consistently provided as part of the same arrangement. In these instances, revenue for both sourcing and transfer are recognized concurrently when delivered. Accommodations and Rentals —The Company’s Accommodations and Rentals segment provides workforce accommodations and surface rental equipment. Accommodation services include trailer housing and mobile home units for field personnel. Equipment rentals are related to the accommodations and include generators, sewer and water tanks, and communication systems. Revenue from accommodations and equipment rental is typically recognized on a day‑rate basis. Wellsite Completion and Construction Services —The Company’s Wellsite Completion and Construction Services segment provides crane and logistics services, wellsite and pipeline construction, and field services. Revenue for heavy‑equipment rental is typically recognized on a day‑rate basis. Construction or field personnel revenue is based on hourly rates or on a per‑job basis as services are performed. | |
Equitybased compensation | Equity‑based compensation : The Company accounts for equity‑based awards by measuring the awards at the date of grant and recognizing the grant‑date fair value as an expense using either straight‑line or accelerated attribution, depending on the specific terms of the award agreements over the requisite service period, which is usually equivalent to the vesting period. The Company expenses awards with graded‑vesting service conditions on a straight‑line basis. The Company has liability awards that are expected to be settled in cash. Liability awards are recorded as accrued liabilities based on the estimated fair value of the awards expected to vest and are remeasured at each reporting date until settled. These awards are subject to revision based on the impact of certain performance conditions associated with the incentive plans. See Note 9—Equity‑based Compensation for further discussion. | |
Foreign currency | Foreign currency : For its subsidiaries in Canada, where the local currency is the functional currency, the Company historically translated assets and liabilities using the exchange rates in effect at the balance sheet dates, while income and expense items were translated using average exchange rates during the period. The resulting gains or losses arising from the translation of accounts from the functional currency to the U.S. Dollar were reported in the consolidated statements of comprehensive income (loss). See Note 3—Discontinued Operations for further discussion. | |
Derivatives and hedging | Derivatives and hedging : The Company accounts for certain interest rate swaps as cash flow hedges. Management formally assesses both at the hedge’s inception and on an ongoing basis that the derivative will be highly effective in offsetting changes in cash flows of the related hedged items. The fair values of the derivatives are recognized as either assets or liabilities in the consolidated balance sheets. The effective portions of the changes in fair values of the derivative contracts are initially recorded in accumulated other comprehensive income and reclassified into the statement of operations in the period in which earnings are impacted by the hedged items or in the period that the transaction no longer qualifies as a cash flow hedge. The ineffective portion of the gains or losses on the derivative contracts, if any, is recognized in the consolidated statement of operations as it is incurred. See Note 10—Derivative Financial Instruments for further discussion. | |
Fair value measurements | Fair value measurements : The Company measures certain assets and liabilities pursuant to accounting guidance which establishes a three‑tier fair value hierarchy and prioritizes the inputs used in measuring fair value. Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 inputs are quoted prices or other market data for similar assets and liabilities in active markets, or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the asset or liability. Level 3 inputs are unobservable inputs based upon its own judgment and assumptions used to measure assets and liabilities at fair value. See Note 11—Fair Value Measurement for further discussion. | |
Income taxes | Income taxes : Select Energy Services is subject to U.S. federal and state income taxes as a corporation. SES Holdings and its subsidiaries, with the exception of certain corporate subsidiaries, are treated as flow‑through entities for U.S. federal income tax purposes, and as such, are generally not subject to U.S. federal income tax at the entity level. Rather, the tax liability with respect to their taxable income is passed through to their members or partners. Accordingly, the Company is subject to U.S. federal income taxation on its allocable share of SES Holdings’ net U.S. taxable income. The state of Texas includes in its tax system a franchise tax applicable to the Company and an accrual for franchise taxes is included in the financial statements when appropriate. The Company and its subsidiaries account for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled pursuant to the provisions of Accounting Standards Codification (“ASC”) 740, Income Taxes. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in earnings in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized. Due to significant operating losses during historical periods, the Company determined that any deferred tax assets that would result from giving pro forma effect to the reorganization and 144A Offering would be fully offset by a valuation allowance. As a result, the pro forma tax effect and impact on earnings per share data would be zero. The determination of the provision for income taxes requires significant judgment, use of estimates, and the interpretation and application of complex tax laws. Significant judgment is required in assessing the timing and amounts of deductible and taxable items and the probability of sustaining uncertain tax positions. The benefits of uncertain tax positions are recorded in the Company’s financial statements only after determining a more‑likely‑than‑not probability that the uncertain tax positions will withstand challenge, if any, from taxing authorities. When facts and circumstances change, the Company reassesses these probabilities and records any changes through the provision for income taxes. The Company recognizes interest and penalties relating to uncertain tax provisions as a component of tax expense. The Company identified no uncertain tax positions as of December 31, 2016 and 2015. See Note 13—Income Taxes for further discussion. | |
Unaudited pro forma earnings per share | Pro forma earnings per share (unaudited) : The calculation of unaudited pro forma earnings per share gives effect to the issuance of Class A common shares that would be required to be sold to extinguish “as adjusted” debt related to the Permian acquisition for the period subsequent to the reorganization and 144A Offering transactions. | |
Recent accounting pronouncements: | Recent accounting pronouncements : In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) , outlining a comprehensive new revenue recognition standard that will supersede ASC 605, Revenue Recognition. The new accounting guidance creates a framework under which an entity will allocate the transaction price to separate performance obligations and recognize revenue when each performance obligation is satisfied. Under the new standard, entities will be required to use judgment and make estimates, including identifying performance obligations in a contract, estimating the amount of variable consideration to include in the transaction price, allocating the transaction price to each separate performance obligation, and determining when an entity satisfies its performance obligations. The standard allows for either “full retrospective” adoption, meaning that the standard is applied to all of the periods presented with a cumulative catch‑up as of the earliest period presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements with a cumulative catch‑up as of the current period. In August 2015, the FASB decided to defer the original effective date by one year to be effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019 for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures and has not yet determined the method by which it will adopt the standard. In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes , which amends existing guidance on income taxes to require the classification of all deferred tax assets and liabilities as noncurrent on the balance sheet. The pronouncement is effective for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018 for nonpublic entities, and may be applied either prospectively or retrospectively. The Company prospectively adopted this guidance during the three months ended March 31, 2017. Prior periods were not retrospectively adjusted. As the Company’s deferred tax assets and liabilities are all noncurrent, the adoption did not result in a change to the consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU 2016-02, Leases , which introduces a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in the current accounting guidance as well as the FASB’s new revenue recognition standard. However, the ASU eliminates the use of bright‑line tests in determining lease classification as required in the current guidance. The ASU also requires additional qualitative disclosures along with specific quantitative disclosures to better enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The pronouncement is effective for annual reporting periods beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, for nonpublic entities using a modified retrospective approach. Early adoption is permitted. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting , that provides a new requirement to record all of the tax effects related to share‑based payments at settlement (or expiration) through the income statement. This pronouncement is effective for annual reporting periods beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018, for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which addresses the classification and presentation of eight specific cash flow issues that currently result in diverse practices. The amendments provide guidance in the presentation and classification of certain cash receipts and cash payments in the statement of cash flows including debt prepayment or debt extinguishment costs, settlement of zero‑coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate‑owned life insurance policies, and distributions received from equity method investees. This pronouncement is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, for nonpublic entities. The amendments in this ASU should be applied using a retrospective approach. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-01 , Clarifying the Definition of a Business , with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This pronouncement is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment . This pronouncement removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This pronouncement is effective for annual reporting periods beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2019. The amendments in this ASU should be applied using a prospective approach. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures | Recent accounting pronouncements : In May 2014, the Financial Accounting Standards Board (the “FASB”) issued an accounting standards update (“ASU”) on a comprehensive new revenue recognition standard that will supersede ASC 605, Revenue Recognition. The new accounting guidance creates a framework under which an entity will allocate the transaction price to separate performance obligations and recognize revenue when each performance obligation is satisfied. Under the new standard, entities will be required to use judgment and make estimates, including identifying performance obligations in a contract, estimating the amount of variable consideration to include in the transaction price, allocating the transaction price to each separate performance obligation, and determining when an entity satisfies its performance obligations. The standard allows for either “full retrospective” adoption, meaning that the standard is applied to all of the periods presented with a cumulative catch‑up as of the earliest period presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements with a cumulative catch‑up as of the current period. In August 2015, the FASB decided to defer the original effective date by one year to be effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019 for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures and has not yet determined the method by which it will adopt the standard. In August 2014, the FASB issued an ASU which requires management to assess a company’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. Before this new standard, there was minimal guidance in U.S. GAAP specific to going concern. Under the new standard, disclosures are required when conditions give rise to substantial doubt about a company’s ability to continue as a going concern within one year from the financial statement issuance date. The new standard applies to all entities and is effective for the annual period ending after December 15, 2016, and all annual and interim periods thereafter. The Company’s adoption of this new guidance during the year ended December 31, 2016 did not have a material impact on its consolidated financial statements and related disclosures. In April 2015, the FASB issued an accounting standards update that requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying value of that debt liability, consistent with debt discounts. The guidance is effective retrospectively for fiscal years, beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016, for nonpublic entities. Early adoption is permitted for financial statements that have not been previously issued. The Company adopted this guidance in 2016 and retrospectively reclassified $2.9 million of debt issuance costs that was previously presented as other long term assets to a direct deduction from the carrying value of short‑term and long‑term debt within the consolidated balance sheets as of December 31, 2015. In November 2015, the FASB issued an accounting standards update which amends existing guidance on income taxes to require the classification of all deferred tax assets and liabilities as noncurrent on the balance sheet. The pronouncement is effective for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018 for nonpublic entities, and may be applied either prospectively or retrospectively. The Company plans to adopt this guidance during the year ended December 31, 2017 and does not expect the adoption to have a material impact on its consolidated financial statements and related disclosures. In February 2016, the FASB issued an accounting standards update for leases. The ASU introduces a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in the current accounting guidance as well as the FASB’s new revenue recognition standard. However, the ASU eliminates the use of bright‑line tests in determining lease classification as required in the current guidance. The ASU also requires additional qualitative disclosures along with specific quantitative disclosures to better enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The pronouncement is effective for annual reporting periods beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, for nonpublic entities using a modified retrospective approach. Early adoption is permitted. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures and has not yet determined the method by which it will adopt the standard. In March 2016, the FASB issued an accounting standards update that provides a new requirement to record all of the tax effects related to share‑based payments at settlement (or expiration) through the income statement. This pronouncement is effective for annual reporting periods beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018, for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In August 2016, the FASB issued an accounting standards update addressing the classification and presentation of eight specific cash flow issues that currently result in diverse practices. The amendments provide guidance in the presentation and classification of certain cash receipts and cash payments in the statement of cash flows including debt prepayment or debt extinguishment costs, settlement of zero‑coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate‑owned life insurance policies, and distributions received from equity method investees. This pronouncement is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, for nonpublic entities. The amendments in this ASU should be applied using a retrospective approach. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. In January 2017, the FASB issued an accounting standards update clarifying the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This pronouncement is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, for nonpublic entities. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures. |
SIGNIFICANT ACCOUNTING POLICI83
SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of change in allowance for doubtful accounts | The change in allowance for doubtful accounts is as follows: (in thousands) 2016 2015 Balance at beginning of year 2,351 3,169 Provisions for bad debts, included in SG&A expense 2,385 576 Uncollectible receivables written off (2,592) (1,394) Balance at end of year 2,144 2,351 |
Schedule of estimated useful life of property and equipment | Asset Classification Useful Life (years) Buildings and improvements 30 or lease term Vehicles and equipment 5 Machinery and equipment 2 - 15 Computer equipment and software 3 - 4 Office furniture and equipment 7 Disposal wells 7 - 10 Helicopters 7 |
Summary of change in asset retirement obligations | (in thousands) 2016 2015 Balance at beginning of year 1,483 1,560 Accretion expense, included in Depreciation and Amortization expense 155 150 Change in estimate 30 (60) Settlements — (167) Balance at end of year 1,668 1,483 |
DISCONTINUED OPERATIONS (Tables
DISCONTINUED OPERATIONS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Summary of cash flows from discontinued operations | Year Ended December 31, 2015 (in thousands) Net cash provided by operating activities $ 400 Net cash provided by investing activities 679 Net cash used in financing activities (1,678) Effect of exchange rate changes on cash 75 Net increase in cash $ (524) |
EXIT AND DISPOSAL ACTIVITIES 85
EXIT AND DISPOSAL ACTIVITIES (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
EXIT AND DISPOSAL ACTIVITIES | ||
Summary of exit and disposal activities | Provision during the Usage during the Balance as of three months ended three months ended Balance as of December 31, 2016 March 31, 2017 March 31, 2017 March 31, 2017 (in thousands) Lease obligations and terminations $ 18,000 $ 1,863 $ 712 $ 19,151 Reclassification of deferred rent 1,069 1,254 Total $ 19,069 $ 20,405 | Provision during the Payments during Balance as of year ended the year ended Balance as of December 31, 2015 December 31, 2016 December 31, 2016 December 31, 2016 (in thousands) Lease obligations and terminations $ — $ 19,423 $ 1,423 $ 18,000 Reclassification of deferred rent — 1,069 Total $ — $ 19,069 |
PROPERTY AND EQUIPMENT (Table86
PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
PROPERTY AND EQUIPMENT. | ||
Schedule of property and equipment | March 31, 2017 December 31, 2016 (in thousands) Land $ 8,540 $ 8,593 Buildings and leasehold improvements 83,061 83,352 Vehicles and equipment 27,711 24,114 Machinery and equipment 538,693 534,303 Computer equipment and software 11,221 11,102 Office furniture and equipment 4,277 4,275 Disposal wells 67,566 67,566 Helicopters 497 497 Construction in progress 14,558 5,584 756,124 739,386 Less accumulated depreciation and impairment (500,541) (490,519) Total property and equipment, net $ 255,583 $ 248,867 | December 31, 2016 2015 (in thousands) Land $ 8,593 $ 9,924 Buildings and leasehold improvements 83,352 82,834 Vehicles and equipment 24,114 8,993 Machinery and equipment 534,303 550,489 Computer equipment and software 11,102 10,256 Office furniture and equipment 4,275 4,329 Disposal wells 67,566 63,771 Helicopters 497 497 Construction in progress 5,584 5,325 739,386 736,418 Less accumulated depreciation and impairment (490,519) (367,726) Total property and equipment, net $ 248,867 $ 368,692 |
GOODWILL AND OTHER INTANGIBLE87
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | ||
Schedule of changes in the carrying amounts of goodwill by reportable segment | Wellsite Completion Water and Construction Accommodations Solutions Services and Rentals Total (in thousands) Balance as of December 31, 2015 $ 137,534 $ 12,242 $ 995 $ 150,771 Impairment (137,534) — (995) (138,529) Balance as of December 31, 2016 — 12,242 — 12,242 Additions 10,733 — — 10,733 Balance as of March 31, 2017 $ 10,733 $ 12,242 $ — $ 22,975 | Wellsite Completion Water and Construction Accommodations Solutions Services and Rentals Total (in thousands) Balance as of December 31, 2014 $ 157,902 $ 12,242 $ 995 $ 171,139 Impairment (20,136) — — (20,136) Dispositions (232) — — (232) Balance as of December 31, 2015 137,534 12,242 995 150,771 Impairment (137,534) — (995) (138,529) Balance as of December 31, 2016 $ — $ 12,242 $ — $ 12,242 |
Summary of components of other intangible assets | March 31, 2017 Gross Accumulated Net Value Amortization Value (in thousands) Customer relationships $ 78,218 $ 50,207 $ 28,011 Other 10,641 2,635 8,006 Total other intangible assets $ 88,859 $ 52,842 $ 36,017 December 31, 2016 Gross Accumulated Net Value Amortization Value (in thousands) Customer relationships $ 56,826 $ 48,236 $ 8,590 Other 5,491 2,495 2,996 Total other intangible assets $ 62,317 $ 50,731 $ 11,586 | December 31, 2016 Gross Accumulated Net Value Amortization Value (in thousands) Customer relationships $ 56,826 $ 48,236 $ 8,590 Other 5,491 2,495 2,996 Total other intangible assets $ 62,317 $ 50,731 $ 11,586 December 31, 2015 Gross Accumulated Net Value Amortization Value (in thousands) Customer relationships $ 56,826 $ 40,163 $ 16,663 Other 4,924 1,747 3,177 Total other intangible assets $ 61,750 $ 41,910 $ 19,840 |
Summary of future estimated amortization expense for other intangible assets | Year Ending December 31, Amount (in thousands) 2017 $ 7,473 2018 1,607 2019 166 2020 166 2021 166 |
DEBT (Tables)88
DEBT (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
DEBT | ||
Summary of long term debt | As of December 31, 2015 (in thousands) Revolving line of credit $ 170,990 Credit facility term loan 96,656 Total debt 267,646 Less current maturities of long-term debt 22,305 Long-term debt $ 245,341 | |
Summary of Company's leverage ratio | Leverage Ratio Before Receipt of Third Quarter 2017 Eurodollar Base Rate Compliance Certificate Advances Advances < 4.00 4.00 % 3.00 % ≥ 4.00 4.50 % 3.50 % Leverage Ratio After Receipt of Third Quarter 2017 Eurodollar Base Rate Compliance Certificate Advances Advances < 2.00 3.00 % 2.00 % ≥ 2.00 < 2.50 3.25 % 2.25 % ≥ 2.50 < 3.00 3.50 % 2.50 % ≥ 3.00 < 3.50 3.75 % 2.75 % ≥ 3.50 < 4.00 4.00 % 3.00 % ≥ 4.00 4.50 % 3.50 % | Leverage Ratio Before Receipt of Third Quarter 2017 Eurodollar Base Rate Compliance Certificate Advances Advances < 4.00 4.00 % 3.00 % ≥ 4.00 4.50 % 3.50 % Leverage Ratio After Receipt of Third Quarter 2017 Eurodollar Base Rate Compliance Certificate Advances Advances < 2.00 3.00 % 2.00 % ≥ 2.00 < 2.50 3.25 % 2.25 % ≥ 2.50 < 3.00 3.50 % 2.50 % ≥ 3.00 < 3.50 3.75 % 2.75 % ≥ 3.50 < 4.00 4.00 % 3.00 % ≥ 4.00 4.50 % 3.50 % |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
COMMITMENTS AND CONTINGENCIES. | |
Summary of operating lease commitments | Year Ending December 31, Amount(1) (in thousands) 2017 $ 13,407 2018 11,976 2019 7,297 2020 7,269 2021 7,145 Thereafter 37,661 Total $ 84,755 (1) The Company’s operating lease commitments under non‑cancelable lease terms as of December 31, 2016 include $40.3 million of lease payments related to facilities that are included within the accrual for exit and disposal activities. Refer to Note 4—Exit and Disposal Activities for further discussion. |
EQUITYBASED COMPENSATION (Table
EQUITYBASED COMPENSATION (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
EQUITY BASED COMPENSATION | ||
Schedule of equity option activity and related information | For the three months ended March 31, 2017 Weighted-average Equity Options Exercise Price Beginning balance 620,721 $ 16.50 Granted 418,184 20.00 Ending balance 1,038,905 $ 17.91 | December 31, 2016 December 31, 2015 Weighted Weighted Unit Average Average Options Exercise Price Options Exercise Price Beginning balance 973,410 $ 16.16 1,262,220 $ 16.34 Granted 204,245 16.17 — — Cancelled (556,934) 15.79 (288,810) 16.93 Ending balance 620,721 $ 16.50 973,410 $ 16.16 |
Schedule of assumptions used in determining the fair value of certain equity options | $20.00 Strike Underlying Equity $ 20.00 Strike Price $ 20.00 Dividend Yield (%) % Risk free rate (%) 1.64% - 1.99 % Volatility (%) 46.6% - 46.7 % Expected Term (Years) 4-6 | $14.33 Strike $20.61 Strike Underlying Equity $ 6.08 $ 6.08 Strike Price $ 14.33 $ 20.61 Dividend Yield (%) — % — % Risk free rate (%) 0.86 % 0.86 % Volatility (%) 63.0 % 63.0 % Expected Term (Years) 5 5 |
Schedule of fully vested equity options | December 31, 2016 December 31, 2015 Weighted Weighted Vested Average Vested Average Units Exercise Price Units Exercise Price Beginning balance 905,698 $ 16.30 852,736 $ 17.19 Vested 229,747 15.96 257,973 14.69 Cancelled (514,724) 15.91 (205,011) 17.99 Ending balance 620,721 $ 16.50 905,698 $ 16.30 | |
Summary of activity related to the Company's Phantom Awards | For the year ended December 31, 2016 2015 Beginning balance 1,289,472 995,991 Granted 158,031 524,554 Cancelled (19,920) (231,073) Ending balance 1,427,583 1,289,472 |
DERIVATIVE FINANCIAL INSTRUME91
DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
DERIVATIVE FINANCIAL INSTRUMENTS | ||
Summary of fair value and classification of derivative instruments | As of December 31, Classification Balance Sheet Location 2016 2015 (in thousands) Liabilities: Current liability Accrued expenses and other current liabilities $ — $ 7 Long-term liability Other long-term liabilities — — Total liabilities $ — $ 7 | |
Summary of changes in the fair value of the interest rate swap derivative instruments | Three Months Ended March 31, Derivatives designated as cash flow hedges 2016 (in thousands) Beginning fair value of interest rate swap derivative instruments $ (7) Amount of unrealized losses recognized in OCI (80) Amount of gains reclassified from AOCI to earnings (effective portion) 85 Net change in fair value of interest rate swap derivative instruments 5 Ending fair value of interest rate swap derivative instruments $ (2) | Year Ended December 31, Derivatives designated as cash flow hedges 2016 2015 (in thousands) Beginning fair value of interest rate swap derivative instruments $ (7) $ (68) Amount of unrealized losses recognized in OCI (106) (277) Amount of gains reclassified from AOCI to earnings (effective portion) 113 338 Net change in fair value of interest rate swap derivative instruments 7 61 Ending fair value of interest rate swap derivative instruments $ — $ (7) |
FAIR VALUE MEASUREMENT (Tables)
FAIR VALUE MEASUREMENT (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
FAIR VALUE MEASUREMENT | |
Summary of assets and liabilities measured at fair value on a recurring basis | Fair Value Measurements Using Level 1 Level 2 Level 3 Total (In thousands) As of December 31, 2016 Financial liabilities Interest rate swap derivative instrument $ — $ — $ — $ — As of December 31, 2015 Financial liabilities Interest rate swap derivative instrument $ — $ (7) $ — $ (7) |
Summary of assets and liabilities measured at fair value on a non recurring basis | Fair Value Measurements Using Carrying Level 1 Level 2 Level 3 Value(1) Impairment (In thousands) Year Ended December 31, 2016 Goodwill $ — $ — $ — $ 138,529 $ 138,529 Intangible Assets — — — 137 137 Fixed Assets — — 23,188 83,214 60,026 Year Ended December 31, 2015 Goodwill $ — $ — $ — $ 20,136 $ 20,136 Intangible Assets — — — 1,230 1,230 (1) Amount represents carrying value at the date of assessment. |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
INCOME TAXES | |
Summary of components of the federal and state income tax expense (benefit) | Year Ended December 31, 2016 2015 (in thousands) Current tax expense Federal $ — $ 341 State 275 836 Total current expense 275 1,177 Deferred tax expense (benefit) Federal (841) (785) State 42 (68) Total deferred benefit (799) (853) Total income tax provision (benefit) $ (524) $ 324 Tax expense (benefit) attributable to controlling interests $ (179) $ 324 Tax benefit attributable to noncontrolling interests (345) — Total income tax expense (benefit) $ (524) $ 324 |
Summary of reconciliation of the provision for income taxes | Year Ended December 31, 2016 (in thousands) Provision calculated at federal statutory income tax rate: Net income before taxes $ (313,948) Statutory rate 35 % Income tax benefit computed at statutory rate (109,882) Less: Noncontrolling interests 109,230 Income tax benefit attributable to controlling interests (652) State and local income taxes, net of federal benefit 87 Change in valuation allowance 386 Tax benefit attributable to controlling interests (179) Tax benefit attributable to noncontrolling interests (345) Total income tax benefit $ (524) |
Summary of principal components of the deferred tax assets (liabilities) | Year Ended December 31, 2016 2015 (in thousands) Deferred tax assets Section 754 election tax basis adjustment $ 3,601 $ — Net operating loss 3,999 — Credits and other carryforwards 142 — Investment in consolidated subsidiary SES Holdings, LLC 297 — Property and equipment 220 — Total deferred tax assets 8,259 — Deferred tax liabilities Property and equipment — 68 Intangible assets 811 1,343 Noncurrent state deferred tax liability 113 — Total deferred tax liabilities 924 1,411 Net deferred tax assets (liabilities) 7,335 (1,411) Valuation allowance (7,932) — Net deferred tax assets (liabilities) $ (597) $ (1,411) |
ACCUMULATED OTHER COMPREHENSI94
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | |
Summary of accumulated other comprehensive income (loss) relates to the Company's interest rate swap financial instrument | Accumulated Other Comprehensive Income (Loss) (in thousands) Balance as of December 31, 2014 $ (68) Other comprehensive income (loss) before reclassification (277) Amounts reclassified from accumulated other comprehensive income (loss) 338 Balance as of December 31, 2015 $ (7) Other comprehensive income (loss) before reclassification (106) Amounts reclassified from accumulated other comprehensive income (loss) 113 Balance as of December 31, 2016 $ — |
NONCONTROLLING INTERESTS (Tab95
NONCONTROLLING INTERESTS (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
NONCONTROLLING INTERESTS. | ||
Summary of the effects of changes in noncontrolling interests | For the three months ended March 31, 2017 2016 (in thousands) Net loss attributable to Select Energy Services, Inc. and its Predecessor $ (4,172) $ (25,337) Transfers from noncontrolling interests: Increase in equity due to transactions with holder of noncontrolling interests 2,495 — Change to equity from net loss attributable to Select Energy Services, Inc. and its Predecessor and transfers from noncontrolling interests $ (1,677) $ (25,337) | December 31, 2016 (in thousands) Net loss prior to 144A Offering $ (306,481) Transfers from noncontrolling interests: Increase in Predecessor equity due to purchase of noncontrolling interests 707 Change to Predecessor equity from net loss prior to 144A Offering and transfers from noncontrolling interests $ (305,774) |
EARNINGS PER SHARE (Tables)96
EARNINGS PER SHARE (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
EARNINGS PER SHARE | ||
Summary of calculation of basic and diluted earnings per share | The following table presents the Company’s calculation of basic and diluted earnings per share for the three months ended March 31, 2017 and 2016 (dollars in thousands, except share and per share amounts): Three Months Ended March 31, 2017 2016 Net loss (12,280) (25,793) Less: Net loss attributable to Predecessor — 25,337 Less: Net loss attributable to noncontrolling interests 8,108 456 Net loss attributable to Select Energy Services, Inc. $ (4,172) $ — Allocation of net loss attributable to: Class A-1 stockholders $ (3,363) Class A stockholders (809) Class B stockholders — $ (4,172) Weighted average shares outstanding: Class A-1-Basic & Diluted 16,100,000 Class A-Basic & Diluted 3,870,194 Class B-Basic & Diluted 38,462,541 Net loss per share attributable to common stockholders: Class A-1-Basic & Diluted $ (0.21) Class A-Basic & Diluted $ (0.21) Class B-Basic & Diluted $ — | The following table presents the Company’s calculation of basic and diluted earnings per share for the year ended December 31, 2016 (dollars in thousands, except share and per share amounts): Year Ended December 31, 2016 Net loss $ (313,948) Net loss attributable to Predecessor 306,481 Net loss attributable to noncontrolling interests 6,424 Net loss attributable to Select Energy Services, Inc. $ (1,043) Allocation of loss attributable to: Class A-1 stockholders $ (844) Class A stockholders (199) Class B stockholders — $ (1,043) Weighted average shares outstanding: Class A-1—Basic & Diluted 16,100,000 Class A—Basic & Diluted 3,802,972 Class B—Basic & Diluted 38,462,541 Net loss per share attributable to common stockholders: Class A-1—Basic & Diluted $ (0.05) Class A—Basic & Diluted $ (0.05) Class B—Basic & Diluted $ — |
SEGMENT INFORMATION (Tables)97
SEGMENT INFORMATION (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
SEGMENT INFORMATION | ||
Summary of financial information by segment | Total Assets As of As of March 31, 2017 December 31, 2016 (in thousands) Water Solutions $ 357,168 $ 324,171 Accommodations and Rentals 39,247 38,874 Wellsite Completion and Construction Services 31,598 29,994 Corporate 13,102 12,027 $ 441,115 $ 405,066 For the three months ended March 31, 2017 Income (loss) before Depreciation and Capital Revenue taxes Amortization Expenditures (in thousands) Water Solutions $ 78,765 $ (7,672) $ 17,548 $ 11,955 Accommodations and Rentals 9,543 (2,403) 2,672 713 Wellsite Completion and Construction Services 12,267 (248) 984 1,342 Elimination (650) — — — Loss from operations (10,323) Corporate — (2,185) 446 — Interest expense, net — (730) — — Other income, net — 1,064 — — $ 99,925 $ (12,174) $ 21,650 $ 14,010 For the three months ended March 31, 2016 Income (loss) before Depreciation and Capital Revenue taxes Amortization Expenditures (in thousands) Water Solutions $ 62,309 $ (17,499) $ 21,922 $ 20,787 Accommodations and Rentals 8,596 (1,695) 2,829 500 Wellsite Completion and Construction Services 8,081 (1,192) 1,391 81 Elimination (147) — — — Loss from operations (20,386) Corporate — (1,165) 634 — Interest expense, net — (3,367) — — Other (expense), net — (566) — — $ 78,839 $ (25,484) $ 26,776 $ 21,368 | As of and for the year ended December 31, 2016 Income (loss) Depreciation and Capital Revenue before taxes Amortization Expenditures Total Assets (in thousands) Water Solutions $ 241,766 $ (282,019) $ 81,051 $ 34,458 $ 331,111 Accommodations and Rentals 27,367 (10,930) 10,841 1,580 38,874 Wellsite Completion and Construction Services 34,094 (4,108) 5,215 288 29,994 Elimination (828) — — — — Loss from operations (297,057) Corporate — (1,916) — — 5,087 Interest expense, net — (16,128) — — — Other income, net — 629 — — — $ 302,399 $ (314,472) $ 97,107 $ 36,326 $ 405,066 As of and for the year ended December 31, 2015 Income (loss) Depreciation and Capital Revenue before taxes Amortization Expenditures Total Assets (in thousands) Water Solutions $ 427,592 $ (52,757) $ 89,271 $ 34,724 $ 560,064 Accommodations and Rentals 53,677 (486) 11,475 10,555 52,890 Wellsite Completion and Construction Services 56,299 (3,003) 6,702 3,407 35,384 Elimination (1,991) — — — — Loss from operations (56,246) Corporate — (12,527) 264 — 1,910 Interest expense, net — (13,689) — — — Other income, net — 893 — — — $ 535,577 $ (81,569) $ 107,712 $ 48,686 $ 650,248 |
Revenue from External Customers by Products and Services [Table Text Block] | For the year ended December 31, 2016 2015 (in thousands) Water sourcing and transfer(1) $ 144,659 $ 230,354 Well testing and flowback 37,582 75,820 Fluid hauling and disposal 59,214 121,322 Accommodations and rentals 27,151 52,948 Wellsite completion and construction services 33,793 55,133 $ 302,399 $ 535,577 Includes water sourcing, water transfer, containment, water monitoring, and water treatment and recycling services. |
BUSINESS AND BASIS OF PRESENT98
BUSINESS AND BASIS OF PRESENTATION (Details) - USD ($) $ / shares in Units, $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 | Dec. 20, 2016 | Sep. 22, 2016 | Dec. 31, 2015 | Oct. 30, 2015 |
Share price | $ 20 | |||||
Maximum borrowing capacity | $ 100 | $ 215 | $ 355 | |||
Revolving line of credit | ||||||
Maximum borrowing capacity | $ 100 | $ 250 | ||||
Class A-1 common stock | ||||||
Common stock issued | 16,100,000 | 16,100,000 | 0 | |||
Class A common stock | ||||||
Common stock issued | 4,077,970 | 3,802,792 | 0 | |||
Class B common stock | ||||||
Common stock issued | 38,462,541 | 38,462,541 | 0 |
SIGNIFICANT ACCOUNTING POLICI99
SIGNIFICANT ACCOUNTING POLICIES (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2017USD ($) | Mar. 31, 2016USD ($) | Dec. 31, 2016USD ($)customer | Dec. 31, 2015USD ($) | |
Allowance for Doubtful Accounts Receivable [Roll Forward] | ||||
Balance at beginning of year | $ 2,144 | $ 2,351 | $ 2,351 | $ 3,169 |
Provisions for bad debts, included in SG&A expense | 2,385 | 576 | ||
Uncollectible receivables written off | (2,592) | (1,394) | ||
Balance at end of year | $ 2,144 | 2,351 | ||
Concentrations of credit and customer risk | ||||
Number of customers accounting for more than 10% of consolidated revenues | customer | 0 | |||
Debt issuance costs | ||||
Amortization of Debt Issuance Costs | $ 309 | $ 651 | $ 3,435 | $ 576 |
Customer Concentration Risk [Member] | ||||
Concentrations of credit and customer risk | ||||
Concentration Risk, Percentage | 10.60% |
SIGNIFICANT ACCOUNTING POLIC100
SIGNIFICANT ACCOUNTING POLICIES - Property and Equipment (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
PROPERTY AND EQUIPMENT. | ||
Depreciation | $ 88,200,000 | $ 98,300,000 |
Goodwill and other intangible assets | ||
Goodwill and Intangible Asset Impairment | 138,666,000 | 21,366,000 |
Asset Retirement Obligation, Roll Forward Analysis [Roll Forward] | ||
Balance at beginning of year | 1,483,000,000 | 1,560,000,000 |
Accretion expense, included in Depreciation and Amortization expense | 155,000,000 | 150,000,000 |
Change in estimate | 30,000,000 | (60,000,000) |
Settlements | (167,000,000) | |
Balance at the end of year | $ 1,668,000,000 | 1,483,000,000 |
Building and leasehold improvements | ||
PROPERTY AND EQUIPMENT. | ||
Property, Plant and Equipment, Useful Life | 30 years | |
Vehicles and equipment | ||
PROPERTY AND EQUIPMENT. | ||
Property, Plant and Equipment, Useful Life | 5 years | |
Machinery and equipment | Minimum | ||
PROPERTY AND EQUIPMENT. | ||
Property, Plant and Equipment, Useful Life | 2 years | |
Machinery and equipment | Maximum | ||
PROPERTY AND EQUIPMENT. | ||
Property, Plant and Equipment, Useful Life | 15 years | |
Computer equipment and software | Minimum | ||
PROPERTY AND EQUIPMENT. | ||
Property, Plant and Equipment, Useful Life | 3 years | |
Computer equipment and software | Maximum | ||
PROPERTY AND EQUIPMENT. | ||
Property, Plant and Equipment, Useful Life | 4 years | |
Office furniture and equipment | ||
PROPERTY AND EQUIPMENT. | ||
Property, Plant and Equipment, Useful Life | 7 years | |
Disposal wells | Minimum | ||
PROPERTY AND EQUIPMENT. | ||
Property, Plant and Equipment, Useful Life | 7 years | |
Disposal wells | Maximum | ||
PROPERTY AND EQUIPMENT. | ||
Property, Plant and Equipment, Useful Life | 10 years | |
Helicopters | ||
PROPERTY AND EQUIPMENT. | ||
Property, Plant and Equipment, Useful Life | 7 years | |
Water Solutions | ||
Goodwill and other intangible assets | ||
Impairment of intangible assets | $ 60,000,000 | 1,300,000 |
Goodwill and Intangible Asset Impairment | $ 138,500,000 | $ 20,100,000 |
SIGNIFICANT ACCOUNTING POLIC101
SIGNIFICANT ACCOUNTING POLICIES - Self Insurance (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Self insurance | ||
Self insurance reserve towards deductible for general liability | $ 1,000 | |
Self insurance reserve towards deductible for workers compensation and employers liability | 1,000 | |
Self insurance reserve towards deductible for vehicle liability | 1,000 | |
Excess loss policy limit | 50,000 | |
Self insured group medical claim plan deductible | 250 | |
Employee benefit plans | ||
Company 401k contribution | $ 1,900 | |
Recent accounting pronouncements | ||
Debt issuance costs | $ 2,900 |
DISCONTINUED OPERATIONS (Detail
DISCONTINUED OPERATIONS (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2015USD ($) | |
Discontinued Operations and Disposal Groups [Abstract] | |
Other (income) expense, net | $ 21 |
Net Cash Provided by (Used in) Discontinued Operations [Abstract] | |
Net cash provided by operating activities | 400 |
Net cash provided by investing activities | 679 |
Net cash used in financing activities | (1,678) |
Effect of exchange rate changes on cash | 75 |
Net increase in cash | $ (524) |
EXIT AND DISPOSAL ACTIVITIES103
EXIT AND DISPOSAL ACTIVITIES (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2017USD ($) | Dec. 31, 2016USD ($)item | Dec. 31, 2014facility | Dec. 31, 2015USD ($) | |
Exit and disposal activities | ||||
Number of facilities closed | 15 | 15 | ||
Accrued Liabilities and Other Liabilities | $ 24,031 | $ 22,091 | $ 14,293 | |
Restructuring Reserve [Roll Forward] | ||||
Restructuring Reserve, Beginning Balance | 19,069 | |||
Restructuring Reserve, Ending Balance | 20,405 | 19,069 | ||
Lease obligations and terminations | ||||
Exit and disposal activities | ||||
Accrued Liabilities and Other Liabilities | 3,100 | |||
Restructuring Reserve [Roll Forward] | ||||
Restructuring Reserve, Beginning Balance | 18,000 | |||
Provision for Restructuring | 1,863 | 19,423 | ||
Payments for Restructuring | 712 | 1,423 | ||
Restructuring Reserve, Ending Balance | 19,151 | 18,000 | ||
Reclassifications of deferred rent | ||||
Restructuring Reserve [Roll Forward] | ||||
Restructuring Reserve, Beginning Balance | 1,069 | |||
Restructuring Reserve, Ending Balance | $ 1,254 | $ 1,069 |
PROPERTY AND EQUIPMENT (Deta104
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2015 | |
Property and equipment | ||||
Property and equipment, gross | $ 739,386 | $ 756,124 | $ 739,386 | $ 736,418 |
Less accumulated depreciation and impairment | (490,519) | (500,541) | (490,519) | (367,726) |
Total property and equipment, net | 248,867 | 255,583 | 248,867 | 368,692 |
Impairment of property and equipment | 60,000 | |||
Capital lease obligations | 0 | 0 | 0 | |
Land | ||||
Property and equipment | ||||
Property and equipment, gross | 8,593 | 8,540 | 8,593 | 9,924 |
Building and leasehold improvements | ||||
Property and equipment | ||||
Property and equipment, gross | 83,352 | 83,061 | 83,352 | 82,834 |
Vehicles and equipment | ||||
Property and equipment | ||||
Property and equipment, gross | 24,114 | 27,711 | 24,114 | 8,993 |
Machinery and equipment | ||||
Property and equipment | ||||
Property and equipment, gross | 534,303 | 538,693 | 534,303 | 550,489 |
Computer equipment and software | ||||
Property and equipment | ||||
Property and equipment, gross | 11,102 | 11,221 | 11,102 | 10,256 |
Office furniture and equipment | ||||
Property and equipment | ||||
Property and equipment, gross | 4,275 | 4,277 | 4,275 | 4,329 |
Disposal wells | ||||
Property and equipment | ||||
Property and equipment, gross | 67,566 | 67,566 | 67,566 | 63,771 |
Helicopters | ||||
Property and equipment | ||||
Property and equipment, gross | 497 | 497 | 497 | 497 |
Construction in progress | ||||
Property and equipment | ||||
Property and equipment, gross | $ 5,584 | $ 14,558 | $ 5,584 | $ 5,325 |
GOODWILL AND OTHER INTANGIBL105
GOODWILL AND OTHER INTANGIBLE ASSETS - GOODWILL (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Goodwill | ||
Balance at the beginning of the period | $ 150,771 | $ 171,139 |
Impairment | (138,529) | (20,136) |
Dispositions | (232) | |
Balance at the end of the period | 12,242 | 150,771 |
Water Solutions | ||
Goodwill | ||
Balance at the beginning of the period | 137,534 | 157,902 |
Impairment | (137,534) | (20,136) |
Dispositions | (232) | |
Balance at the end of the period | 137,534 | |
Wellsite Completion and Construction Services | ||
Goodwill | ||
Balance at the beginning of the period | 12,242 | 12,242 |
Balance at the end of the period | 12,242 | 12,242 |
Accommodations and Rentals | ||
Goodwill | ||
Balance at the beginning of the period | 995 | 995 |
Impairment | $ (995) | |
Balance at the end of the period | $ 995 |
GOODWILL AND OTHER INTANGIBL106
GOODWILL AND OTHER INTANGIBLE ASSETS - OTHER INTANGIBLE ASSETS (Details2) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Other intangible assets | ||||
Gross Value | $ 88,859 | $ 62,317 | $ 61,750 | |
Accumulated Amortization | 52,842 | 50,731 | 41,910 | |
Net Value | 36,017 | 11,586 | 19,840 | |
Amortization expense | 2,100 | $ 2,200 | 8,700 | 9,300 |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||||
2,017 | 7,473 | |||
2,018 | 1,607 | |||
2,019 | 166 | |||
2,020 | 166 | |||
2,021 | 166 | |||
Customer relationships | ||||
Other intangible assets | ||||
Gross Value | 78,218 | 56,826 | 56,826 | |
Accumulated Amortization | 50,207 | 48,236 | 40,163 | |
Net Value | $ 28,011 | $ 8,590 | 16,663 | |
Customer relationships | Minimum | ||||
Other intangible assets | ||||
Useful life of intangible asset | 5 years | 5 years | ||
Customer relationships | Maximum | ||||
Other intangible assets | ||||
Useful life of intangible asset | 7 years | 7 years | ||
Noncompete agreements | Minimum | ||||
Other intangible assets | ||||
Useful life of intangible asset | 3 years | 3 years | ||
Noncompete agreements | Maximum | ||||
Other intangible assets | ||||
Useful life of intangible asset | 5 years | 5 years | ||
Other | ||||
Other intangible assets | ||||
Gross Value | $ 10,641 | $ 5,491 | 4,924 | |
Accumulated Amortization | 2,635 | 2,495 | 1,747 | |
Net Value | $ 8,006 | $ 2,996 | $ 3,177 | |
Other | Minimum | ||||
Other intangible assets | ||||
Useful life of intangible asset | 3 years | 3 years | ||
Other | Maximum | ||||
Other intangible assets | ||||
Useful life of intangible asset | 8 years | 8 years |
DEBT (Details)107
DEBT (Details) - USD ($) | Dec. 31, 2016 | Dec. 20, 2016 | Mar. 31, 2017 | Sep. 22, 2016 | Dec. 31, 2015 | Oct. 30, 2015 |
DEBT | ||||||
Debt outstanding | $ 0 | $ 34,000,000 | $ 2,900,000 | |||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Long-term Debt | 267,646,000 | |||||
Current maturities of long-term debt | 22,305,000 | |||||
Long-term debt, net of current maturities | 245,341,000 | |||||
Maximum borrowing capacity | $ 100,000,000 | $ 215,000,000 | $ 355,000,000 | |||
Commitment fee (as a percent) | 0.50% | |||||
Outstanding | 0 | 173,000,000 | ||||
Debt outstanding | $ 267,646,000 | |||||
Weighted average interest rate (as a percent) | 3.25% | |||||
Outstanding letters of credit | 16,300,000 | $ 14,800,000 | ||||
Unamortized debt issuance cost | $ 3,900,000 | 2,900,000 | ||||
Before Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio less than 4.00 | Eurodollar Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 4.00% | |||||
Before Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio less than 4.00 | Base Rate Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 3.00% | |||||
Before Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 4.00 | Eurodollar Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 4.50% | |||||
Before Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 4.00 | Base Rate Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 3.50% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio less than 2.00 | Eurodollar Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 3.00% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio less than 2.00 | Base Rate Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 2.00% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 2.00 less than 2.50 | Eurodollar Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 3.25% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 2.00 less than 2.50 | Base Rate Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 2.25% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 2.50 less than 3.00 | Eurodollar Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 3.50% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 2.50 less than 3.00 | Base Rate Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 2.50% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 3.00 less than 3.50 | Eurodollar Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 3.75% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 3.00 less than 3.50 | Base Rate Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 2.75% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 3.50 less than 4.00 | Eurodollar Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 4.00% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 3.50 less than 4.00 | Base Rate Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 3.00% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 4.00 | Eurodollar Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 4.50% | |||||
After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 4.00 | Base Rate Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 3.50% | |||||
Revolving line of credit | ||||||
DEBT | ||||||
Debt outstanding | $ 0 | $ 34,000,000 | ||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Long-term Debt | 170,990,000 | |||||
Maximum borrowing capacity | $ 100,000,000 | 250,000,000 | ||||
Commitment fee (as a percent) | 0.50% | |||||
Debt outstanding | 170,990,000 | |||||
Weighted average interest rate (as a percent) | 5.50% | |||||
Outstanding letters of credit | $ 16,100,000 | |||||
Unused portion of available borrowing | $ 83,700,000 | 62,200,000 | ||||
Unamortized debt issuance cost | $ 3,600,000 | |||||
Revolving line of credit | Before Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio less than 4.00 | Eurodollar Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 4.00% | |||||
Revolving line of credit | Before Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio less than 4.00 | Base Rate Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 3.00% | |||||
Revolving line of credit | Before Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 4.00 | Eurodollar Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 4.50% | |||||
Revolving line of credit | Before Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 4.00 | Base Rate Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 3.50% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio less than 2.00 | Eurodollar Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 3.00% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio less than 2.00 | Base Rate Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 2.00% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 2.00 less than 2.50 | Eurodollar Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 3.25% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 2.00 less than 2.50 | Base Rate Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 2.25% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 2.50 less than 3.00 | Eurodollar Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 3.50% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 2.50 less than 3.00 | Base Rate Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 2.50% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 3.00 less than 3.50 | Eurodollar Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 3.75% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 3.00 less than 3.50 | Base Rate Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 2.75% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 3.50 less than 4.00 | Eurodollar Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 4.00% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 3.50 less than 4.00 | Base Rate Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 3.00% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 4.00 | Eurodollar Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 4.50% | |||||
Revolving line of credit | After Receipt Of Third Quarter 2017 Compliance Certificate | Leverage ratio greater than equal to 4.00 | Base Rate Advances | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Margin (as a percent) | 3.50% | |||||
Letter of credit | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Unused portion of available borrowing | $ 49,900,000 | |||||
Letter of credit | Minimum | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Variable interest rate (as a percent) | 3.00% | 3.00% | ||||
Letter of credit | Maximum | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Variable interest rate (as a percent) | 4.50% | 4.50% | ||||
Term loan | ||||||
Long-term Debt, Excluding Current Maturities [Abstract] | ||||||
Long-term Debt | 96,656,000 | |||||
Maximum borrowing capacity | $ 105,000,000 | |||||
Debt outstanding | $ 96,656,000 |
COMMITMENTS AND CONTINGENCIE108
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | |
Jan. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | |
Operating lease expenses | |||
Total lease expenses | $ 21,600 | $ 39,200 | |
Vehicle operating lease buyout | $ 16,200 | ||
Operating lease commitments under non-cancelable leases | |||
2,017 | 13,407 | ||
2,018 | 11,976 | ||
2,019 | 7,297 | ||
2,020 | 7,269 | ||
2,021 | 7,145 | ||
Thereafter | 37,661 | ||
Total | 84,755 | ||
Lease obligations and terminations | |||
Operating lease commitments under non-cancelable leases | |||
Total | $ 40,300 |
EQUITY BASED COMPENSATION (D109
EQUITY BASED COMPENSATION (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
EQUITY-BASED COMPENSATION | ||
Equity options term | 7 years | |
Vesting period | 3 years | 3 years |
Incremental compensation expense | $ 0 | |
Minimum | ||
EQUITY-BASED COMPENSATION | ||
Equity options term | 7 years | |
Maximum | ||
EQUITY-BASED COMPENSATION | ||
Equity options term | 10 years | |
2016 plan | Maximum | ||
EQUITY-BASED COMPENSATION | ||
Equity options term | 10 years | |
2016 plan | Class A common stock | ||
EQUITY-BASED COMPENSATION | ||
Maximum number of shares | 4,600,000 | 4,600,000 |
Percentage of common stock sold in underwritten public offering | 8.00% |
EQUITY BASED COMPENSATION - 110
EQUITY BASED COMPENSATION - Equity Options (Details2) - $ / shares | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Equity Options | |||
Beginning balance (in shares) | 620,721 | 973,410 | 1,262,220 |
Granted (in shares) | 418,184 | 204,245 | |
Cancelled (in shares) | (556,934) | (288,810) | |
Ending balance (in shares) | 1,038,905 | 620,721 | 973,410 |
Weighted-average Exercise Price | |||
Beginning balance (in dollars per share) | $ 16.50 | $ 16.16 | $ 16.34 |
Granted (in dollars per share) | 20 | 16.17 | |
Cancelled (in dollars per share) | 15.79 | 16.93 | |
Ending balance (in dollars per share) | $ 17.91 | $ 16.50 | $ 16.16 |
EQUITY BASED COMPENSATION - 111
EQUITY BASED COMPENSATION - Assumptions (Details3) - $ / shares | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
EQUITY-BASED COMPENSATION | ||
Weighted-average grant date fair value of equity options granted | $ 7.98 | $ 1.84 |
Assumptions for equity options granted: | ||
Underlying Equity | 20 | |
Strike Price | $ 20 | |
$14.33 Strike | ||
Assumptions for equity options granted: | ||
Underlying Equity | 6.08 | |
Strike Price | $ 14.33 | |
Risk free rate (%) | 0.86% | |
Volatility (%) | 63.00% | |
Expected Term (Years) | 5 years | |
$20.61 Strike | ||
Assumptions for equity options granted: | ||
Underlying Equity | $ 6.08 | |
Strike Price | $ 20.61 | |
Risk free rate (%) | 0.86% | |
Volatility (%) | 63.00% | |
Expected Term (Years) | 5 years |
EQUITY BASED COMPENSATION - 112
EQUITY BASED COMPENSATION - Restricted stock (Details4) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Vested Units | |||
Beginning balance (in units) | 620,721 | 905,698 | 852,736 |
Vested (in units) | 0 | 229,747 | 257,973 |
Cancelled (in units) | (514,724) | (205,011) | |
Ending balance (in units) | 620,721 | 905,698 | |
Weighted Average Exercise Price | |||
Beginning balance (in dollars per unit) | $ 16.50 | $ 16.30 | $ 17.19 |
Vested (in dollars per unit) | 15.96 | 14.69 | |
Cancelled (in dollars per unit) | 15.91 | 17.99 | |
Ending balance (in dollars per unit) | $ 16.50 | $ 16.30 | |
Compensation expense | $ 0.3 | $ 0.7 | |
Weighted average remaining contractual term | 2 years 6 months | 3 years 6 months | |
Number of equity options, exceed the price of underlying equity instrument | 197,294 | ||
Weighted average exercise price of equity options, exceed the price of underlying equity instrument | $ 20.81 |
EQUITY BASED COMPENSATION - 113
EQUITY BASED COMPENSATION - Phantom Awards (Details5) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
EQUITY-BASED COMPENSATION | |||
Compensation expense | $ 300,000 | $ 700,000 | |
Phantom Awards | |||
EQUITY-BASED COMPENSATION | |||
Distribution amount per award | $ 7.53 | ||
Compensation expense | $ 0 | $ 0 | |
Awards | |||
Beginning balance (in shares) | 1,427,583 | 1,289,472 | 995,991 |
Granted (in shares) | 158,031 | 524,554 | |
Cancelled (in shares) | (19,920) | (231,073) | |
Ending balance (in shares) | 1,427,583 | 1,289,472 |
DERIVATIVE FINANCIAL INSTRUM114
DERIVATIVE FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Apr. 30, 2013 | |
DERIVATIVE FINANCIAL INSTRUMENTS | ||||
Unrealized holding loss arising during period | $ (80) | $ 106 | $ 277 | |
Amount of gains reclassified from AOCI to earnings (effective portion) | 85 | 113 | 338 | |
Net change in unrealized gain (loss) | 5 | (7) | (61) | |
Current liability | ||||
DERIVATIVE FINANCIAL INSTRUMENTS | ||||
Beginning fair value of interest rate swap derivative instruments | 7 | 7 | ||
Ending fair value of interest rate swap derivative instruments | 7 | |||
Total liabilities | ||||
DERIVATIVE FINANCIAL INSTRUMENTS | ||||
Beginning fair value of interest rate swap derivative instruments | 7 | 7 | ||
Ending fair value of interest rate swap derivative instruments | 7 | |||
Interest rate swap derivative instrument | Cash Flow Hedging | ||||
DERIVATIVE FINANCIAL INSTRUMENTS | ||||
Aggregate notional amount | $ 125,000 | |||
Beginning fair value of interest rate swap derivative instruments | (7) | (7) | (68) | |
Unrealized holding loss arising during period | (80) | (106) | (277) | |
Amount of gains reclassified from AOCI to earnings (effective portion) | 85 | 113 | 338 | |
Net change in unrealized gain (loss) | 5 | $ 7 | 61 | |
Ending fair value of interest rate swap derivative instruments | $ (2) | $ (7) |
FAIR VALUE MEASUREMENT (Deta115
FAIR VALUE MEASUREMENT (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Goodwill | $ 138,529 | $ 20,136 |
Fixed Assets | 60,026 | |
Debt outstanding | 0 | |
Recurring | Level 2 | Interest rate swap derivative instrument | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Financial liabilities | (7) | |
Nonrecurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Goodwill | 138,529 | 20,136 |
Intangible Assets | 137 | 1,230 |
Fixed Assets | 60,026 | |
Nonrecurring | Carrying value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Goodwill | 20,136 | |
Intangible Assets | 137 | $ 1,230 |
Fixed Assets | 83,214 | |
Goodwill | 138,529 | |
Nonrecurring | Level 3 | Fair value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fixed Assets | $ 23,188 |
RELATED PARTY TRANSACTIONS (116
RELATED PARTY TRANSACTIONS (Details) $ in Millions | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2017USD ($) | Mar. 31, 2016USD ($) | Dec. 31, 2016USD ($)agreement | Dec. 31, 2015USD ($) | |
RELATED PARTY TRANSACTIONS | ||||
Sales to related parties | $ 0.5 | $ 0.3 | $ 1.2 | $ 4.1 |
Purchases from related party vendors | $ 1.2 | 1 | $ 4.3 | $ 8.6 |
Minimum | ||||
RELATED PARTY TRANSACTIONS | ||||
Beneficial ownership (as a percent) | 5.00% | 5.00% | 5.00% | |
Legacy Owner Holdco and Crestview GP | ||||
RELATED PARTY TRANSACTIONS | ||||
Percentage of net tax savings for payment to TRA Holders | 85.00% | |||
Contributing Legacy Owners | ||||
RELATED PARTY TRANSACTIONS | ||||
Percentage of net tax savings for payment to TRA Holders | 85.00% | |||
Tax Receivable Agreement | ||||
RELATED PARTY TRANSACTIONS | ||||
Number of tax receivable agreements | agreement | 2 | |||
Property and equipment | ||||
RELATED PARTY TRANSACTIONS | ||||
Purchases from related party vendors | $ 0.2 | 0.1 | $ 1 | $ 4 |
Inventory and consumables | ||||
RELATED PARTY TRANSACTIONS | ||||
Purchases from related party vendors | 0.2 | 0.9 | ||
Rent of certain equipment or other services | ||||
RELATED PARTY TRANSACTIONS | ||||
Purchases from related party vendors | 0.4 | 0.3 | 1.1 | 1 |
Management, consulting and other services | ||||
RELATED PARTY TRANSACTIONS | ||||
Purchases from related party vendors | $ 0.5 | $ 0.6 | $ 2 | $ 2.7 |
INCOME TAXES (Details)117
INCOME TAXES (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | Dec. 19, 2016 | Dec. 31, 2015 |
Effective Income tax (as percent) | (0.90%) | (1.20%) | 35.00% | |||
Tax benefit (expense) | $ 106 | $ 309 | $ (524) | $ 324 | ||
Current tax expense | ||||||
Federal | 341 | |||||
State | 275 | 836 | ||||
Total current expense | 275 | 1,177 | ||||
Deferred tax expense (benefit) | ||||||
Federal | (841) | (785) | ||||
State | 42 | (68) | ||||
Total deferred benefit | (799) | (853) | ||||
Income Tax Expense (Benefit), Total | 106 | 309 | (524) | 324 | ||
Tax expense (benefit) attributable to controlling interests | (179) | 324 | ||||
Tax benefit attributable to noncontrolling interests | (345) | |||||
Provision calculated at federal statutory income tax rate: | ||||||
Net income before taxes | $ (3,060) | $ (12,280) | $ (25,793) | $ (313,948) | $ (310,888) | (81,872) |
Statutory rate | (0.90%) | (1.20%) | 35.00% | |||
Income tax benefit computed at statutory rate | $ (109,882) | |||||
Less: Noncontrolling interests | 109,230 | |||||
Income tax benefit attributable to controlling interests | (652) | |||||
State and local income taxes, net of federal benefit | 87 | |||||
Change in valuation allowance | 386 | |||||
Tax expense (benefit) attributable to controlling interests | (179) | 324 | ||||
Tax benefit attributable to noncontrolling interests | (345) | |||||
Income Tax Expense (Benefit), Total | $ 106 | $ 309 | (524) | $ 324 | ||
Parent Company | ||||||
Provision calculated at federal statutory income tax rate: | ||||||
Net income before taxes | $ (1,043) |
INCOME TAXES - Deferred tax ass
INCOME TAXES - Deferred tax assets (Details2) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Deferred tax assets | |||
Section 754 election tax basis adjustment | $ 3,601,000 | ||
Net operating loss | 3,999,000 | ||
Credits and other carryforwards | 142,000 | ||
Investment in consolidated subsidiary SES Holdings, LLC | 297,000 | ||
Property and equipment | 220,000 | ||
Total deferred tax assets | 8,259,000 | ||
Deferred tax liabilities | |||
Property and equipment | $ 68,000 | ||
Intangible assets | 811,000 | 1,343,000 | |
Noncurrent state deferred tax liability | 113,000 | ||
Total deferred tax liabilities | 924,000 | 1,411,000 | |
Net deferred tax assets (liabilities) | 7,335,000 | (1,411,000) | |
Valuation allowance | (7,932,000) | ||
Net deferred tax assets (liabilities) | (597,000) | (1,411,000) | |
Net deferred tax related to the step up in tax basis | 9,700,000 | ||
Liability or expense | $ 0 | 0 | $ 0 |
Federal | |||
Deferred tax liabilities | |||
Net operating loss carryforward | 10,900,000 | ||
State | |||
Deferred tax liabilities | |||
Net operating loss carryforward | $ 3,400,000 |
ACCUMULATED OTHER COMPREHENS119
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Changes in accumulated other comprehensive income | ||
Balance at the beginning of the period | $ 317,154 | |
Balance at the end of the period | 112,716 | $ 317,154 |
Accumulated Other Comprehensive Income (Loss) | ||
Changes in accumulated other comprehensive income | ||
Balance at the beginning of the period | (7) | (68) |
Other comprehensive income (loss) before reclassifications | (106) | (277) |
Amounts reclassified from accumulated other comprehensive income | $ 113 | 338 |
Balance at the end of the period | $ (7) |
NONCONTROLLING INTERESTS (De120
NONCONTROLLING INTERESTS (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | Dec. 19, 2016 | Dec. 31, 2015 |
Effects of changes in noncontrolling interests on equity | ||||||
Net loss | $ (3,060) | $ (12,280) | $ (25,793) | $ (313,948) | $ (310,888) | $ (81,872) |
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Changes, Net [Abstract] | ||||||
Increase in equity due to transactions with holder of noncontrolling interests | 2,495 | |||||
Change to equity from net loss attributable to Select Energy Services, Inc. and its Predecessor and transfers from noncontrollig interests | $ (1,677) | $ (25,337) | ||||
Additional interests purchased | 300 | |||||
Noncontrolling Interest, Decrease from Redemptions or Purchase of Interests | (348) | |||||
Predecessor | ||||||
Effects of changes in noncontrolling interests on equity | ||||||
Net loss | (306,481) | $ (306,481) | $ (80,891) | |||
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Changes, Net [Abstract] | ||||||
Increase in equity due to transactions with holder of noncontrolling interests | 707 | |||||
Change to equity from net loss attributable to Select Energy Services, Inc. and its Predecessor and transfers from noncontrollig interests | (305,774) | |||||
Noncontrolling Interest, Decrease from Redemptions or Purchase of Interests | 707 | |||||
Parent Company | ||||||
Effects of changes in noncontrolling interests on equity | ||||||
Net loss | $ (1,043) |
EARNINGS PER SHARE (Details)121
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands | Dec. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | Dec. 19, 2016 | Dec. 31, 2015 |
Calculation of basic and diluted earnings per share: | ||||||
Net income before taxes | $ (3,060) | $ (12,280) | $ (25,793) | $ (313,948) | $ (310,888) | $ (81,872) |
Less: Net loss attributable to noncontrolling interests | 8,108 | 456 | 6,424 | 981 | ||
Net loss attributable to Select Energy Services, Inc. | (4,172) | (25,337) | (1,043) | |||
Predecessor | ||||||
Calculation of basic and diluted earnings per share: | ||||||
Net income before taxes | (306,481) | $ (306,481) | $ (80,891) | |||
Less: Net loss attributable to noncontrolling interests | $ 25,337 | |||||
Class A-1 common stock | ||||||
Calculation of basic and diluted earnings per share: | ||||||
Net income before taxes | (844) | |||||
Net loss attributable to Select Energy Services, Inc. | $ (3,363) | $ (844) | ||||
Weighted average shares outstanding: | 16,100,000 | 16,100,000 | ||||
Net loss per share attributable to common stockholders (in dollars per share) | $ (0.21) | $ (0.05) | ||||
Class A common stock | ||||||
Calculation of basic and diluted earnings per share: | ||||||
Net income before taxes | $ (199) | |||||
Net loss attributable to Select Energy Services, Inc. | $ (809) | $ (199) | ||||
Weighted average shares outstanding: | 3,870,194 | 3,802,972 | ||||
Net loss per share attributable to common stockholders (in dollars per share) | $ (0.21) | $ (0.05) | ||||
Class B common stock | ||||||
Calculation of basic and diluted earnings per share: | ||||||
Weighted average shares outstanding: | 38,462,541 | 38,462,541 | ||||
Parent Company | ||||||
Calculation of basic and diluted earnings per share: | ||||||
Net income before taxes | $ (1,043) | |||||
Net loss attributable to Select Energy Services, Inc. | $ (1,043) |
SEGMENT INFORMATION (Details122
SEGMENT INFORMATION (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2017USD ($)segment | Mar. 31, 2016USD ($) | Dec. 31, 2016USD ($)segment | Dec. 31, 2015USD ($)segment | |
SEGMENT INFORMATION | ||||
Number of operating segments | segment | 3 | 3 | 3 | |
Number of reportable segments | segment | 3 | 3 | 3 | |
Assets | $ 441,115 | $ 405,066 | $ 650,248 | |
Segment information | ||||
Revenue | 99,925 | $ 78,839 | 302,399 | 535,577 |
Income (loss) before taxes | (12,174) | (25,484) | (314,472) | (81,569) |
Depreciation and amortization | 21,650 | 26,776 | 97,107 | 107,712 |
Capital Expenditures | 14,010 | 21,368 | 36,326 | 48,686 |
Loss from operations | (12,508) | (21,551) | (298,973) | (68,773) |
Other income (expense), net | 1,064 | (566) | 629 | 893 |
Water Solutions | ||||
SEGMENT INFORMATION | ||||
Assets | 357,168 | 324,171 | 560,064 | |
Segment information | ||||
Revenue | 78,765 | 62,309 | 241,766 | 427,592 |
Income (loss) before taxes | (7,672) | (17,499) | (282,019) | (52,757) |
Depreciation and amortization | 17,548 | 21,922 | 81,051 | 89,271 |
Capital Expenditures | 11,955 | 20,787 | 34,458 | 34,724 |
Accommodations and Rentals | ||||
SEGMENT INFORMATION | ||||
Assets | 39,247 | 38,874 | 52,890 | |
Segment information | ||||
Revenue | 9,543 | 8,596 | 27,367 | 53,677 |
Income (loss) before taxes | (2,403) | (1,695) | (10,930) | (486) |
Depreciation and amortization | 2,672 | 2,829 | 10,841 | 11,475 |
Capital Expenditures | 713 | 500 | 1,580 | 10,555 |
Wellsite Completion and Construction Services | ||||
SEGMENT INFORMATION | ||||
Assets | 31,598 | 29,994 | 35,384 | |
Segment information | ||||
Revenue | 12,267 | 8,081 | 34,094 | 56,299 |
Income (loss) before taxes | (248) | (1,192) | (4,108) | (3,003) |
Depreciation and amortization | 984 | 1,391 | 5,215 | 6,702 |
Capital Expenditures | 1,342 | 81 | 288 | 3,407 |
Elimination | ||||
Segment information | ||||
Revenue | (650) | (147) | (828) | (1,991) |
Corporate | ||||
SEGMENT INFORMATION | ||||
Assets | 13,102 | 12,027 | 1,910 | |
Segment information | ||||
Income (loss) before taxes | (2,185) | (1,165) | (1,916) | (12,527) |
Depreciation and amortization | 446 | 634 | 264 | |
Material reconciling items | ||||
Segment information | ||||
Loss from operations | (10,323) | (20,386) | (297,057) | (56,246) |
Interest expense, net | (730) | (3,367) | (16,128) | (13,689) |
Other income (expense), net | $ 1,064 | $ (566) | $ 629 | $ 893 |
SEGMENT INFORMATION (Details 2)
SEGMENT INFORMATION (Details 2) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
SEGMENT INFORMATION | ||||
Water solutions | $ 78,377 | $ 62,289 | $ 241,455 | $ 427,496 |
Accommodations and rentals | 27,151 | 52,948 | ||
Wellsite completion and construction services | 33,793 | 55,133 | ||
Total revenue | 99,925 | 78,839 | 302,399 | 535,577 |
Water Solutions | ||||
SEGMENT INFORMATION | ||||
Total revenue | 78,765 | 62,309 | 241,766 | 427,592 |
Water sourcing and transfer | ||||
SEGMENT INFORMATION | ||||
Water solutions | 144,659 | 230,354 | ||
Well testing and flowback | ||||
SEGMENT INFORMATION | ||||
Water solutions | 37,582 | 75,820 | ||
Fluid hauling and disposal | ||||
SEGMENT INFORMATION | ||||
Water solutions | 59,214 | 121,322 | ||
Accommodations and Rentals | ||||
SEGMENT INFORMATION | ||||
Accommodations and rentals | 27,151 | 52,948 | ||
Total revenue | 9,543 | 8,596 | 27,367 | 53,677 |
Wellsite Completion and Construction Services | ||||
SEGMENT INFORMATION | ||||
Total revenue | 12,267 | 8,081 | 34,094 | 56,299 |
Elimination | ||||
SEGMENT INFORMATION | ||||
Total revenue | $ (650) | $ (147) | $ (828) | $ (1,991) |
SUBSEQUENT EVENTS - (Details124
SUBSEQUENT EVENTS - (Details) - USD ($) $ / shares in Units, $ in Thousands | Feb. 24, 2017 | Feb. 20, 2017 | Feb. 07, 2017 | Jan. 23, 2017 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | Dec. 31, 2015 |
Subsequent Events | ||||||||
Repayments of Debt | $ 7,625 | $ 298,000 | $ 107,000 | |||||
Issuance of equity options | 418,184 | 204,245 | ||||||
Share price | $ 20 | |||||||
Equity options term | 7 years | |||||||
Maximum | ||||||||
Subsequent Events | ||||||||
Equity options term | 10 years | |||||||
Minimum | ||||||||
Subsequent Events | ||||||||
Equity options term | 7 years | |||||||
Subsequent Event | ||||||||
Subsequent Events | ||||||||
Share price | $ 20 | |||||||
Business acquisition price | $ 56,500 | |||||||
Price paid in cash (in percentage) | 90.00% | |||||||
Price paid in equity (in percentage) | 10.00% | |||||||
Subsequent Event | Maximum | ||||||||
Subsequent Events | ||||||||
Equity options term | 10 years | |||||||
Subsequent Event | Minimum | ||||||||
Subsequent Events | ||||||||
Equity options term | 7 years | |||||||
Subsequent Event | Board of directors | ||||||||
Subsequent Events | ||||||||
Issuance of equity options | 10,668 | |||||||
Restricted stock granted | 2,500 | |||||||
Subsequent Event | Certain employees | ||||||||
Subsequent Events | ||||||||
Issuance of equity options | 8,002 | 75,399 | 324,111 | |||||
Share price | $ 20 | $ 20 | ||||||
Equity options term | 7 years | 7 years | ||||||
Restricted stock granted | 1,875 | 34,867 |