Goodwill

12 Months Ended

Mar. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Goodwill

The following table summarizes changes in goodwill by segment for the period indicated:

	Water Solutions		Crude Oil Logistics		Liquids Logistics		Total
	(in thousands)
Balances at March 31, 2020	$	294,658	$	579,846	$	119,083	$	993,587
Revisions to acquisition accounting	(11,348)		—		—		(11,348)
Impairment	—		(237,800)		—		(237,800)
Balances at March 31, 2021	$	283,310	$	342,046	$	119,083	$	744,439
Balances at March 31, 2022	$	283,310	$	342,046	$	119,083	$	744,439

Fiscal Year 2022 Goodwill Impairment Assessment

We performed a qualitative assessment as of January 1, 2022 to determine whether it was more likely than not that the fair value of each reporting unit was greater than the carrying value of the reporting unit. Based on these qualitative assessments, we determined that the fair value of each of our reporting units was more likely than not greater than the carrying value of the reporting units as of January 1, 2022, with the exception of our Crude Oil Logistics reporting unit. See below for a further discussion of the testing.

Due to lower than expected operating results, it was decided that the goodwill within the Crude Oil Logistics reporting unit should be tested for impairment as of January 1, 2022. We estimated the fair value of the Crude Oil Logistics reporting unit

based on the income approach, also known as the discounted cash flow method, which utilizes the present value of future expected cash flows to estimate the fair value. The future cash flows of the Crude Oil Logistics reporting unit were projected based upon estimates as of the test date of future revenues, operating expenses and cash outflows necessary to support these cash flows, including working capital and maintenance capital expenditures. We also considered expectations regarding: (i) the crude oil price environment as reflected in crude oil forward prices as of the test date, (ii) volumes based on historical information and estimates of future drilling and completion activity, as well as expectations for future demand recovery and (iii) estimated fixed and variable costs. The discounted cash flows for the Crude Oil Logistics reporting unit were based on five years of projected cash flows and we applied a discount rate and terminal multiple that we believe would be applied by a theoretical market participant in similar market transactions. Based on this test, we concluded that the fair value of the Crude Oil Logistics reporting unit exceeded its carrying value by approximately 12.0%.

Fiscal Year 2021 Goodwill Impairment Assessment

We performed a qualitative assessment as of January 1, 2021 to determine whether it was more likely than not that the fair value of each reporting unit was greater than the carrying value of the reporting unit. Based on these qualitative assessments, we determined that the fair value of each of our reporting units was more likely than not greater than the carrying value of the reporting units as of January 1, 2021, with the exception of our Water Solutions reporting unit, and our Crude Oil Logistics reporting unit, which was tested for impairment as of December 31, 2020. See below for a further discussion of the testing.

Due to lower than expected disposal volumes as a result of a slower than expected recovery in oil production in the various basins in which our Water Solutions reporting unit operates and the completion of our annual budget process, it was decided that the goodwill within the Water Solutions reporting unit should be tested for impairment as of January 1, 2021. We estimated the fair value of our Water Solutions reporting unit based on the income approach, also known as the discounted cash flow method, which utilizes the present value of future expected cash flows to estimate the fair value. The future cash flows of the Water Solutions reporting unit were projected based upon estimates as of the test date of future revenues, operating expenses and cash outflows necessary to support these cash flows, including working capital and maintenance capital expenditures. We also considered expectations regarding: (i) the crude oil price environment as reflected in crude oil forward prices as of the test date, (ii) disposal volumes based on historical information and estimates of future drilling and completion activity, as well as expectations for future demand recovery and (iii) estimated fixed and variable costs. The discounted cash flows for the Water Solutions reporting unit were based on five years of projected cash flows and we applied a discount rate and terminal multiple that we believe would be applied by a theoretical market participant in similar market transactions. Based on this test, we concluded that the fair value of the Water Solutions reporting unit exceeded its carrying value by approximately 3.0%.

As discussed in Note 17, in December 2020, we reached a settlement in the Extraction Oil & Gas, Inc.(“Extraction”) bankruptcy case, which is expected to result in decreases in future cash flows for certain of our assets. Based on this aforementioned event, we concluded that a triggering event occurred, which required us to perform a quantitative impairment test as of December 31, 2020 for our Crude Oil Logistics reporting unit. We estimated the fair value of the Crude Oil Logistics reporting unit based on the income approach, also known as the discounted cash flow method, which utilizes the present value of future expected cash flows to estimate the fair value. The future cash flows of the Crude Oil Logistics reporting unit were projected based upon estimates as of the test date of future revenues, operating expenses and cash outflows necessary to support these cash flows, including working capital and maintenance capital expenditures. We also considered expectations regarding: (i) the crude oil price environment as reflected in crude oil forward prices as of the test date, (ii) volumes based on historical information and estimates of future drilling and completion activity, as well as expectations for future demand recovery and (iii) estimated fixed and variable costs. The discounted cash flows for the Crude Oil Logistics reporting unit were based on five years of projected cash flows and we applied a discount rate and terminal multiple that we believe would be applied by a theoretical market participant in similar market transactions. Based on this test, we concluded that the fair value of the Crude Oil Logistics reporting unit was less than its carrying value by approximately 17.0%.

During the three months ended December 31, 2020, in our Crude Oil Logistics reporting unit, we recorded a goodwill impairment charge of $237.8 million within loss on disposal or impairment of assets, net in our consolidated statement of operations.

Fiscal Year 2020 Goodwill Impairment Assessment

We performed a qualitative assessment as of January 1, 2020 to determine whether it was more likely than not that the fair value of each reporting unit was greater than the carrying value of the reporting unit. Based on these qualitative assessments, we determined that the fair value of each of these reporting units was more likely than not greater than the carrying value of the reporting units as of January 1, 2020.

During the month of March 2020, our market capitalization declined significantly driven by current macroeconomic conditions including the collapse of oil prices driven by both the decrease in demand caused by the novel strain of coronavirus (COVID-19) pandemic and excess supply, as well as changing market conditions and expected lower crude oil production in certain regions, resulting in expected decreases in future cash flows for certain of our assets. In addition, the uncertainty related to oil demand continues to have a significant impact on the investment and operating plans of our primary customers. Based on these events, we concluded that a triggering event occurred which required us to perform a quantitative impairment test as of March 31, 2020 for our reporting units. We estimated the fair value of our reporting units based on the income approach, also known as the discounted cash flow method, which utilizes the present value of future expected cash flows to estimate the fair value. The future cash flows of our reporting units were projected based upon estimates as of the test date of future revenues, operating expenses and cash outflows necessary to support these cash flows, including working capital and maintenance capital expenditures. We also considered expectations regarding: (i) the crude oil price environment as reflected in crude oil forward prices as of the test date, (ii) volumes based on historical information and estimates of future drilling and completion activity, as well as expectations for future demand recovery and (iii) estimated fixed and variable costs. The discounted cash flows for each reporting unit were based on five years of projected cash flows and we applied discount rates and terminal multiples that we believe would be applied by a theoretical market participant in similar market transactions. Based on these tests, we concluded that the fair values of each of our reporting units exceeded their carrying values with the exception of our Water Solutions reporting unit, whose fair value was less than its carrying value by 7.3%.

During the three months ended March 31, 2020, in our Water Solutions reporting unit, we recorded a goodwill impairment charge of $250.0 million within loss on disposal or impairment of assets, net in our consolidated statement of operations.