Intangible Assets

12 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Note 7. Intangible Assets

Our intangible assets as of December 31, 2019 are comprised of customer contracts 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. Summary of Significant Accounting Policies and 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. As the fair value is based on inputs that are not observable in the market, these represent Level 3 inputs.

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:



	December 31, 2019						December 31, 2018
(in thousands)	Gross		Accumulated Amortization ⁽¹⁾		Net		Gross		Accumulated Amortization ⁽¹⁾		Net
Customer Contracts and Relationships	$	339,760	$	61,860	$	277,900	$	339,760	$	29,558	$	310,202


⁽¹⁾	For the years ended December 31, 2019 and 2018, amortization expense related to intangible assets totaled $32.3 million and $29.6 million, respectively.

Estimated future amortization expense related to the intangible assets at December 31, 2019 is as follows:



(in thousands)	December 31, 2019
2020	$	32,390
2021	32,301
2022	32,301
2023	32,301
2024	32,390
Thereafter	116,217
Total	$	277,900