Concentrations Risks and Uncertainties

6 Months Ended

Jun. 30, 2020

Risks and Uncertainties [Abstract]

Concentrations, Risks and Uncertainties

Concentrations, Risks and Uncertainties

Significant Customers

Our customers are engaged in the oil and natural gas exploration and production business primarily in the U.S. as well as Australia. Our receivables are spread over a number of customers, a majority of which are operators and suppliers to the oil and natural gas industry. For the six months ended June 30, 2020, no customer represented 10% or more of our consolidated revenues. For the six months ended June 30, 2019, one customer represented 10% of our consolidated revenue.

Significant Vendors

We have historically purchased a significant portion of supplies, equipment and machined components from a single vendor located in China. For the six months ended June 30, 2020 and 2019, purchases from this vendor totaled $4.7 million and $23.0 million, respectively. These figures represent approximately 7% and 19% for the respective periods of our total third-party vendor purchases of raw materials, finished products, equipment, machining and other services. Amounts due to the vendor included in accounts payable in the consolidated balance sheets as of June 30, 2020 and December 31, 2019 totaled $1.2 million and $4.3 million, respectively.

COVID-19

The significant decline in oil demand due to COVID-19 coupled with the instability of oil prices caused by geopolitical issues and production levels, as well as limited availability of storage capacity have resulted in our customers significantly reducing their capital expenditure budgets for 2020. As a result, demand for our products and services were severely impacted beginning in late March and our expectation is that this will continue for the second half of 2020 and potentially beyond. We are currently unable to estimate the full impact to our business, how long this significant drop in demand will last or the depth of the decline.

In an effort to offset the reduction in revenues resulting from the weakened macroeconomic environment, we implemented certain cost reduction measures beginning in March 2020. These initial measures included, but were not limited to, the following:

•50% reduction to our Chief Executive Officer’s base salary;

•Salary reductions ranging from 25% to 50% for our other named executive officers;

•Salary and wage reductions for the remaining U.S. workforce ranging from 2% to 15% depending on salary and position;

•Reduction in board member compensation by 25%; and

•Workforce reductions.

In May 2020, we implemented an additional 10% reduction in salary and wages for all U.S. employees in addition to further reductions to our Chief Executive Officer’s salary as well as suspension of our 401(k) match program. During the six months ended June 30, 2020, we reduced our worldwide workforce by approximately 50%. Additionally, we have reduced our planned capital expenditures for 2020.

Due to our reduced cash flow projections resulting from reduced sales, we assessed whether our long-lived assets and goodwill may have been impaired as of June 30, 2020. We previously performed quantitative impairment tests using management’s current projections of revenues, expenses and cash flows as of March 31, 2020. At that time, we calculated significant cushion in our quantitative tests. Actual results during the quarter ended June 30, 2020 were consistent with expectations and our forecasts have not materially changed; therefore, we concluded that our long-lived assets and goodwill were not impaired as of June 30, 2020.