Intangible Assets

9 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Note 6. Intangible Assets

Our intangible assets as of September 30, 2018 are comprised of customer contracts and relationships from the Black Diamond Acquisition and were recorded under the acquisition method of accounting at their estimated fair values at the date of acquisition. The customer contracts we acquired are long-term, fixed-fee contracts for the purchase and sale of crude oil. See Note 2. Basis of Presentation for further discussion of our crude oil purchase and sale revenue agreements. Fair value was calculated using the multi-period excess earnings method under the income approach for the existing customers. This valuation method is based on first forecasting gross profit for the existing customers and then applying expected attrition rates. The operating cash flows were calculated by determining the costs required to generate gross profit from the existing customers. The key assumptions include overall gross profit growth, attrition rate of existing customers over time and the discount rate.

We utilize the straight-line method of amortization for intangible assets with finite lives. The amortization period is reflective of the benefit pattern in which the estimated economic benefit is expected to be received over the estimated useful life of the

intangible asset. The estimated economic benefit was determined by assessing the life of the assets related to the contracts and relationships, likelihood of renewals, competitive factors, regulatory or legal provisions and maintenance costs.

Our intangible assets are as follows:



		September 30, 2018
	Useful Life	Intangible Assets, Gross (in thousands)		Accumulated Amortization (in thousands)		Intangible Assets, Net (in thousands)
Customer Contracts and Relationships	7-13 years ⁽¹⁾	$	339,760	$	21,416	$	318,344


⁽¹⁾	The weighted average useful life of our customer contracts and customer relationships is approximately 11 years.

Estimated future amortization expense related to the intangible assets at September 30, 2018 is as follows:



(in thousands)
Remainder of 2018	$	8,142
2019	32,301
2020	32,390
2021	32,301
2022	32,301
Thereafter	180,909
Total	$	318,344