Annual report pursuant to Section 13 and 15(d)

Property Plant and Equipment

v3.19.1
Property Plant and Equipment
 12 Months Ended
Dec. 31, 2018
Property, Plant and Equipment [Abstract]  
Property, Plant and Equipment Note 3 - Property, Plant and Equipment
The components of our property, plant and equipment balance are as follows:
 
December 31,
Dollars in Thousands
2018
 
2017
Property, plant and equipment, at cost:
 
 
 
Drilling equipment
$
720,037

 
$
1,228,443

Rental tools
581,107

 
552,461

Building, land and improvements
58,193

 
60,309

Other
115,977

 
115,910

Construction in progress
10,855

 
11,753

Total property, plant and equipment, at cost
1,486,169

 
1,968,876

Less: Accumulated depreciation and amortization
951,798

 
1,343,105

Property, plant, and equipment, net
$
534,371

 
$
625,771


Depreciation expense was $105.2 million, $119.6 million and $136.3 million for the years ended December 31, 2018, 2017, and 2016, respectively.Loss on impairment
During the third quarter of 2018, we noted that historically, our barge rig utilization has trended closely with oil prices in periods of both decline and recovery. Management determined the divergence between oil prices and utilization for our Gulf of Mexico inland barge and International barge asset groups necessitated performance of a recoverability analysis for these two asset groups. Average quarterly oil prices have increased sequentially beginning in the third quarter of 2017, reaching an average quarterly 3-year high in the third quarter of 2018, while our utilization remained flat for the nine months ending September 30, 2018 as compared to the year ended December 31, 2018.
Based upon our recoverability analysis, where the carrying values exceeded both estimated future undiscounted cash flows and a subsequent aggregate fair value determination based upon a cost approach method, we determined the Gulf of Mexico inland barge and International barge asset groups were impaired. The significant unobservable inputs to the cost approach method included replacement costs and remaining economic life. See also Note 7 - Fair Value Measurements.
We estimated the fair values to be $19.7 million and $3.4 million for the Gulf of Mexico inland barge asset group and the International barge asset group, respectively. We recognized a pretax impairment loss of approximately $44.0 million in total, or $34.2 million and $9.8 million for the Gulf of Mexico inland barge asset group and the International barge asset group, respectively, for the year ended December 31, 2018. The Gulf of Mexico inland barge asset group is reported as part of the U.S. (Lower 48) Drilling segment and the International barge asset group is reported as part of the International & Alaska Drilling segment.
Provision for reduction in carrying value of certain assets
No provision for reduction in carrying value was identified during the year ended year ended December 31, 2018. We recorded a provision of $1.9 million for reduction in carrying value of assets for the year ended December 31, 2017. This provision was related to certain assets in the International & Alaska Drilling segment that were deemed to be excess and functionally obsolete unless significant costs were incurred to refurbish them.Gain (loss) on disposition of assetsDuring the normal course of operations, we periodically sell equipment deemed excess, obsolete, or not currently required for operations. Net losses recorded on asset disposition were $1.7 million and $2.9 million for the years ended December 31, 2018 and December 31, 2017, respectively. The net loss for 2018 was primarily related to equipment that was deemed obsolete in the International & Alaska Drilling segment and U.S. Rental Tools segment. The net loss for 2017 was primarily related to the sale of one rig located in Papua New Guinea. Activity in both periods included equipment retirements.