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Goodwill Impairment
9 Months Ended
Sep. 30, 2015
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill Impairment

14. Goodwill Impairment

Generally accepted accounting principles require the Company to test goodwill for impairment at least annually or more frequently whenever events or circumstances occur indicating that goodwill might be impaired. Events or circumstances which could indicate a probable impairment include, but are not limited to, a significant reduction in worldwide oil and gas prices or drilling; a significant reduction in profitability or cash flow of oil and gas companies or drilling contractors; a significant reduction in worldwide well remediation activity; a significant reduction in capital investment by other oilfield service companies; or a significant increase in worldwide inventories of oil or gas.

The Company considered the sustained decline in worldwide oil and gas prices and rig counts, which has impacted the Company’s current results and future outlook as well as the decline in the market value of the Company’s stock, as indicators that the fair value of the Company’s reporting units’ goodwill could have fallen below their carrying values. As a result, the Company performed an impairment analysis of its goodwill during the third quarter of 2015.

The inputs used in the interim impairment test in the second quarter of 2015 were updated for current market conditions and forecasts and the valuation techniques used in the analysis were consistent with those used during previous testing. The Company has not completed the Step 2 measurement of the Company’s reporting units’ goodwill impairment due to the complexities involved in determining the implied fair values of the Company’s reporting units’ goodwill and in light of finalizing purchase accounting related to recent acquisitions. Significant estimates that are subject to change in the Step 2 analysis include, but are not limited to, the valuation of amortizable customer relationships and trade names, preliminary purchase price accounting related to recent acquisitions, estimated fair values of inventory and property, plant and equipment, among others. Any adjustments to the estimated impairment charge in the fourth quarter may be material to our consolidated results. The Company expects to complete the measurement of its reporting units’ goodwill impairment in the three months ended December 31, 2015.  The third quarter 2015 goodwill impairment test indicated that two of the Company’s four reporting units’ goodwill were impaired (U.S. Energy and International). In the three and nine months ended September 30, 2015, the Company recognized an estimated impairment of $255 million ($202 million after tax) associated with the fair value of goodwill.

The impairment charges were primarily the result of the substantial and sustained decline in oil prices during 2015, actual and forecasted declines in rig activity and the effects of those events and forecasts on the Company’s results of operations. Further, continued adverse market conditions could result in the recognition of additional impairment if the Company determines that the fair values of its reporting units have again fallen below their carrying values.