(

) IMPAIRMENT CHARGES

Reduction in Value of Long-lived Assets and Goodwill

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 i

n late

2014,

the oil and gas industry experienced a significant decline in the price of oil causing an industry-wide downturn that continues into

2018.

Prices continued to decline throughout

2015

and into

2016,

reaching a low of less than

$30

per barrel in early

2016.

Prices began to recover over the remainder of

2016,

stabilizing at over

$40

per barrel for much of the

second

and

third

quarters of

2016

and further increasing to over

$50

per barrel by year end. Prices are subject to significant uncertainty and continue to be volatile, declining again in early

2017

before recovering to over

$60

per barrel in

January 2018.

The downturn of the last few years has significantly impacted the operational plans for oil companies, resulting in reduced expenditures for exploration and production activities, and consequently has adversely affected the drilling and support service sector. The decrease in day rates and utilization for offshore vessels has been significant. 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, we have performed a number of reviews for impairment since the

fourth

quarter of

2014.

See the discussions below detailing our impairment analyses and processes for each of goodwill, long-lived assets, intangible assets, vessel components and assets held for sale. The components of reduction in value of assets are as follows (in thousands):

	Successor		Predecessor
	November 15 Through December 31,		January 1 Through November 14,		Year Ended December 31,
	2017		2017		2016		2015
Goodwill impairment	$	-	$	-	$	-	$	22,554
Long-lived assets impairment		-		-		160,222		115,489
Intangible asset impairment		-		-		-		13,695
Vessel component impairment		-		-		2,586		365
Total reduction in value of assets	$	-	$	-	$	162,808	$	152,103

Goodwill

Impairment

We completed a qualitative analysis of goodwill of the Predecessor in

2015

and determined that further testing was necessary. Our goodwill impairment evaluation indicated that the carrying value of the North Sea segment exceeded its fair value so that goodwill was potentially impaired. We then performed the

second

step of the goodwill impairment test, which involved calculating the implied fair value of our goodwill by allocating the fair value of the North Sea segment to all of the assets and liabilities (other than goodwill) and comparing it to the carrying amount of goodwill. To estimate the fair value of the reporting unit we used a

50%

weighting of the discounted cash flow method and a

50%

weighting of the public company guideline method in determining fair value of the North Sea reporting unit.

We determined that the implied fair value of our goodwill for the North Sea segment was less than its carrying value and recorded a

$22.6

million impairment of the North Sea segment

’s goodwill. As a result of this impairment, we

longer have any goodwill.

Long-Lived Asset Impairment

In the Predecessor

2015

period, we recorded

$129.2

million of impairment expense related to our long-lived assets in the U.S. Gulf of Mexico, which is a part of our Americas segment. The impairment consisted of

$115.5

million related to our vessels and

$13.7

million related to our intangible asset. As a result of this impairment, we

longer have an intangible asset.

In the Predecessor

2016

period, we recorded an aggregate of

$160.2

million of impairment expense related to our long-lived assets. Impairment charges totaled

$94.5

million for the U.S. Gulf of Mexico and

$15.9

million for the non-U.S. Americas, both part of the Americas segment. We also recorded impairment in Southeast Asia totaling

$49.8

million.

Vessel Component Impairment

We have vessel components in our North Sea and Southeast Asia segments that we intend to sell. We recorded impairment based on

third

party appraisals of the North Sea components totaling

$0.4

million in the Predecessor

2015

period. 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 Predecessor

2016

period.