Concentrations Risks and Uncertainties

9 Months Ended

Sep. 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 nine months ended September 30, 2020, no customer represented 10% or more of our consolidated revenues. For the nine months ended September 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 nine months ended September 30, 2020 and 2019, purchases from this vendor totaled $5.6 million and $30.3 million, respectively. These figures represent approximately 7% and 17% 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 September 30, 2020 and December 31, 2019 totaled $0.9 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 was severely impacted beginning in late March and continued through the third quarter of 2020. Our expectation is that this will continue through the end of 2020 and potentially beyond.

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

•More than 80% reduction to our Chief Executive Officer’s base salary;

•Salary reductions ranging from 32.5% to 55% 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 beginning in March 2020 with an additional 10% reduction in May 2020;

•Reduction in board member compensation by 25%;

•Suspension of our 401(k) match program;

•Headcount reductions during 2020 representing an almost 50% reduction in our worldwide workforce;

•Sales of fleet vehicles in line with the reduction in headcount; and

•Reduction in our 2020 planned capital expenditures.

Due to our reduced cash flows and projections resulting from reduced sales, we assessed whether our long-lived assets and goodwill may have been impaired as of September 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 second and third quarters of 2020 were broadly 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 September 30, 2020.