CREDIT CONCENTRATION

9 Months Ended

Sep. 30, 2018

Accounts Notes And Loans Receivable Classified [Abstract]

CONCENTRATION OF CREDIT RISK

NOTE 3.  CONCENTRATION OF CREDIT RISK

Our revenues are derived principally from uncollateralized sales to numerous companies in the oil and natural gas industry; therefore, our customers may be similarly affected by changes in economic and other conditions within the industry.  

As of September 30, 2018, we have a $59.1 million receivable, net of an allowance for doubtful accounts of $19.0 million, from one customer, which represents 75.5% of our total accounts receivable.  This customer had historically relied on the monetization of exploration tax credits under a State of Alaska tax credit program (the “Tax Credits”).  In the past, the State of Alaska annually appropriated the amounts needed to pay all Tax Credit certificates for the prior fiscal year; however, appropriations in the last couple of years have been limited to the statutorily established minimum due to substantially reduced revenue from production taxes resulting in significant Alaskan budget deficits.  

In June 2018, Alaska passed legislation allowing Alaska to issue bonds to pay its estimated $1.0 billion liability for Tax Credit certificates.  Seismic companies will have two options from which to pick on a program–by–program basis.  One option allows for the purchase of the Tax Credit certificates at a 10% discount rate from the time Alaska would otherwise pay under the statutory minimum.  The second option allows for the purchase of the Tax Credit certificates at Alaska’s cost of capital (estimated to be approximately 5.1%) but only if the seismic data is made publicly available.

While we continue to pursue other options to monetize the Tax Credits, at this time we believe that the most likely path to monetize the Tax Credit certificates is if bonds are issued by Alaska.  While lawsuits have been filed asserting constitutional challenges to Alaska’s ability to issue the bonds, the Attorney General has issued an opinion that the issuance of the bonds is not prohibited by the Alaskan constitution.  The Revenue Department of the State of Alaska has indicated, however, that until the courts have resolved the legal issues, which it estimates may take six to 18 months, it will not go into the bond markets.

As of September 30, 2018, we do not believe that an additional allowance for doubtful accounts is necessary, as we have determined that it is still reasonable to estimate that we will receive approximately $56.4 million in proceeds from the issuance of the bonds and an additional $2.7 million from the sale of the Tax Credit certificates to an Alaskan oil and natural gas producer.