Property Plant and Equipment |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment |
Property, Plant and Equipment
The components of our property, plant and equipment balance are as follows:
Depreciation expense was $151.9 million, $142.5 million and $132.4 million for the years ended December 31, 2015, 2014, and 2013, respectively.
Provision for Reduction in Carrying Value of an Asset
Asset impairment evaluations are, by nature, highly subjective. They involve expectations about future cash flows generated by our assets and reflect management’s assumptions and judgments regarding future industry conditions and their effect on future utilization levels, dayrates and costs. The use of different estimates and assumptions could result in materially different carrying values of our assets.
We review the carrying amounts of long-lived assets for potential impairment when events occur or circumstances change that indicate the carrying values of such assets may not be recoverable. During the 2015 third quarter, as a result of the continued decline in oil prices and expected slower recovery, we performed a recoverability test for our respective asset groups. Based on the results of our recoverability test, the current carrying values of our asset groups are fully recoverable through our future estimated cash flows and thus were not subject to impairment at September 30, 2015. The determination of our forecasted cashflows for the respective asset groups included underlying assumptions and estimates with regard to dayrates, utilization, operating costs and capital expenditures associated with each rig based on its expected operating status (i.e. operating, stacked, etc.). During the 2015 fourth quarter, in response to the continuing deterioration of oil prices and market conditions, we updated our recoverability analysis to address significant changes in assumptions for our respective asset groups. Based on the results of our analysis, the respective asset groups were deemed recoverable and were not subject to impairment at December 31, 2015. Should current market conditions worsen or persist for an extended period of time, an impairment of the carrying value of our long-lived assets could occur.
Although no impairment of our asset groups was identified as a result of our 2015 third and fourth quarter analyses, during the year ended December 31, 2015, we recorded $12.5 million of provisions for reduction in carrying value of assets. During the 2015 fourth quarter management made a decision to exit the Drilling Services business in the Colombia market. As of December 31, 2015 there were three-rigs in the country. One of the rigs is being marketed for operations outside of Colombia, and for the remaining two rigs, components of the rigs that are useable elsewhere in our operations are being re-deployed and the carrying value of the remaining components has been written-off, resulting in a provision for reduction in carrying value of $4.8 million. In addition, during the 2015 fourth quarter, to adjust to the lower level of current and expected drilling activity, we performed a review of certain individual assets within our asset groups and recorded a $4.3 million provision for reduction in carrying value of assets primarily related to drilling equipment in our International & Alaska Drilling segment. During the 2015 second and third quarters, the Company wrote-off a combined $3.2 million related to certain international rental tools and drilling rigs that management concluded were no longer marketable and the carrying value of the rigs and equipment was no longer recoverable.
During the 2014 fourth quarter, we performed a recoverability test for our asset groups to determine if the carrying value of such assets was recoverable. Based on the results of our recoverability test, the current carrying values of our asset groups were fully recoverable through our future estimated cash flows. We therefore concluded that the asset groups were not subject to impairment at December 31, 2014.
Disposition of Assets
During the normal course of operations, we periodically sell equipment deemed to be excess, obsolete, or not currently required for operations.
Net gains recorded on asset disposition for the year ended December 31, 2015 were $1.6 million. The net gains for 2015 were primarily the result of a gain from an insurance settlement received during the first quarter of 2015 related to previously realized asset losses. This gain was partially offset by losses incurred during the 2015 fourth quarter related to equipment retirements.
Net gains recorded on assets dispositions for the year ended December 31, 2014 were $1.1 million. The net gains for 2014 were primarily the result of the sale of long lived assets, including the sale of two rigs located in Kazakhstan during the fourth quarter. The sale included the rigs, rig related inventory, property and leasehold improvements. The assets had a carrying value at the time of sale of $3.8 million and were sold for proceeds of $3.5 million, resulting in a net loss of approximately $0.3 million.
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