(2)	IMPAIRMENT CHARGES

Long-Lived Asset

Impairment

Our tangible long-lived assets consist primarily of vessels and construction-in-progress. We review l

ong-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. We assess potential impairment by comparing the carrying values of the long-lived assets to the undiscounted cash flows expected to be received from those assets. If impairment is indicated, we determine the amount of impairment expense by comparing the carrying value of the long-lived assets with their fair market value. We base our u

ndiscounted cash flow estimates on, among other things, historical results adjusted to reflect the best estimate of future operating performance. We obtain estimates of fair value of our vessels from independent appraisal firms. Management’s assumptions are an inherent part of our asset impairment evaluation, and the use of different assumptions could produce results that differ from those reported.

Beginning in late 2014, oil prices declined significantly and continued at low levels in 2015 and through the first quarter of 2016. Although we have seen some recent recovery, the lower price environment has impacted the operational plans for oil companies and consequently has affected the drilling and support service sector. The decrease in day rates and utilization has been significant since 2014 and although it appears that utilization has stabilized, our day rates continue to be under pressure from customers. In addition, the independent appraisal firms have lowered the fair value estimates related to our vessels in each quarter since the fourth quarter of 2014. As a result of these factors, and even though our policy generally requires an annual review for impairment, we have performed reviews for impairment in all but one quarter since the fourth quarter of 2014.

Based on the triggering events discussed above, we performed evaluations for impairment for the quarters ended March 31, 2016 and June 30, 2016 and determined that the carrying values of certain of our long-lived asset groups in the Americas and in Southeast Asia were greater than the related undiscounted expected future cash flows. We compared the carrying values of the long-lived asset groups to the fair value provided by the independent appraisal firms and

recorded $114.1 million of impairment charges in the first quarter of 2016 and $46.2 million in the second quarter of 2016. The first quarter impairment consisted of $94.5 million in connection with our long-lived assets in the U.S. Gulf of Mexico, which is part of our Americas segment and includes vessels under construction, and $19.6 million in connection with our Southeast Asia segment. The second quarter impairment consisted of $15.9 million in the Americas asset group that is outside the U.S. Gulf of Mexico and an additional $30.3 million in our Southeast Asia segment.

We will continue to monitor the industry for triggering events that could indicate additional impairment in 2016.

Vessel Component

Impairment

We have vessel components in our North Sea and Southeast Asia segments that we intend to sell. Based on third party valuations, we recorded impairment expense related to these assets totaling $2.6 million, consisting of $2.0 million in the North Sea and $0.6 million in Southeast Asia, in the first quarter of 2016.