Investments in Unconsolidated Affiliates

6 Months Ended

Jun. 30, 2015

Investments in Unconsolidated Affiliates

Investments in Unconsolidated Affiliates

Note 3 Investments in Unconsolidated Affiliates

On March 24, 2015, we completed the previously announced Merger of our Completion & Production Services business line with C&J Energy. We received total consideration comprised of approximately $693.5 million in cash and approximately 62.5 million common shares in the combined company, CJES, representing approximately 53% of the outstanding and issued common shares of CJES. Because we have significant influence over CJES, but not a controlling financial interest, we account for our investment in CJES under the equity method of accounting.

Our consolidated statement of income (loss) for the six months ended June 30, 2015 consolidates the operating results of our Completion & Production Services business line through the closing date of the Merger. As a result of the Merger, we no longer consolidate the operating results of our Completion & Production Services business line and CJES became an unconsolidated affiliate. Therefore, subsequent to the closing date of the Merger, our share of the net income (loss) of our equity method investment is recorded as earnings (losses) from unconsolidated affiliates in our consolidated statements of income (loss). Our policy is to record our share of the net income (loss) of CJES on a one-quarter lag as we are not able to obtain the financial information of CJES on a timely basis. Accordingly, the equity in earnings from CJES, which is reflected in earnings (losses) from unconsolidated affiliates in our consolidated statement of income (loss) for the three months ended June 30, 2015 includes our share of the net income (loss) of CJES for the eight-day period from the closing date of the Merger until March 31, 2015.

We recorded our investment in the equity of CJES in the Investment in unconsolidated affiliates line in our consolidated balance sheet, with an initial valuation of approximately $676.2 million, based on the fair value of shares received on the closing date of the Merger. As of March 31, 2015, the fair market value of our investment in CJES was approximately $696.1 million, based on its available quoted market prices, which exceeds its carrying value of $675.3 million. Additionally, we recognized an estimated gross gain of $102.2 million in connection with the Merger based on the difference between the consideration received and the carrying value of the assets and liabilities of our Completion & Production Services business line. This gain was partially offset by $49.6 million in transaction costs related to the Merger. The Merger is subject to customary post-closing adjustments which may impact the ultimate amount of gain recognized on the transaction.