Note 3 Impairments and Other Charges

The components of impairments and other charges are provided below:


	Year Ended December 31,
	2018		2017		2016
	(In thousands)
Tangible Assets & Equipment:
Provision for retirement of assets	$	14,617	$	—	$	69,072
Impairment of long-lived assets		45,570		6,895		216,355
Subtotal		60,187		6,895		285,427

Other Charges:
Other-than-temporary impairment		—		—		219,737
Divestiture of International assets		64,668		—		—
Transaction related costs		14,323		21,628		—
Loss (gain) on early extinguishment of debt		5,268		16,013		(6,665)
Total	$	144,446	$	44,536	$	498,499

For the year ended December 31, 2018

Tangible Assets and Equipment

During 2018, as a result of the decline in oil and gas prices in the fourth quarter and the extended period of reduced demand for some of our legacy asset classes, we retired 13 of our remaining SCR rigs within the U.S. Drilling reportable segment resulting in a loss of $14.6 million. Additionally, we recorded impairments totaling $45.6 million primarily comprised of underutilized rigs in our International Drilling and U.S. Drilling reportable segments. These impairments were deemed necessary due to the lack of future contractual opportunities on specific rigs as result of a change in market conditions across certain geographic regions. The balance of the impairment charge primarily relates to obsolete inventory within our Rig Technologies reportable segment.

Transaction related costs

During 2018, we incurred $14.3 million in transaction related costs, including professional fees, severances, facility closure costs and other cost rationalization items, primarily in connection with the acquisition of Tesco.

Loss (gain) on early extinguishment of debt

During 2018, we repurchased $873.0 million aggregate principal amount of our senior notes. We paid the holders an aggregate of approximately $906.5 million in cash, reflecting principal and accrued and unpaid interest and prepayment premium and recognized a loss of $5.3 million as part of the debt extinguishment. See Note 11—Debt for additional discussion.

Divestiture of International assets

During 2018, we recognized a loss of $64.7 million on the sale of three offshore drilling rigs and eight workover rigs within our International Drilling reportable segment.

For the year ended December 31, 2017

Tangible Assets and Equipment

In 2017, we recorded impairments totaling $6.9 million primarily comprised of underutilized rigs in our International Drilling reportable segment. These impairments were deemed necessary due to the lack of future contractual opportunities because the rigs were smaller and lower horsepower than our newer rigs and also rigs competing in an overcrowded offshore market.

Transaction related costs

During 2017, we incurred $21.6 million in transaction related costs, including professional fees, severances, facility closure costs and other cost rationalization items, primarily in connection with the acquisition of Tesco.

Loss (gain) on early extinguishment of debt

During 2017, we repurchased $367.9 million aggregate principal amount of our senior notes. We paid the holders an aggregate of approximately $381.7 million in cash, reflecting principal and accrued and unpaid interest and prepayment premium and recognized a loss of $16.0 million as part of the debt extinguishment. See Note 11—Debt for additional discussion.

For the year ended December 31, 2016

Throughout the first half of 2016, we experienced decreased demand for our services as well as increased pricing pressure. Although there was a slight uptick in activity over the latter half of 2016, management evaluated our existing rig fleet and identified asset classes that may not fully participate in the next drilling cycle given the current requirements of many drilling programs and other factors. This resulted in both the provision for retirement of assets and tangible asset impairments. The majority of the remaining charges are attributable to our previous investment in CJES, which experienced severe financial and operational difficulties in their business, and ultimately commenced voluntarily cases under chapter 11 of the U.S. Bankruptcy code in July 2016. These charges are outlined below.

Tangible Assets and Equipment

The following table summarizes the 2016 retirement and impairment charges for tangible assets and equipment by reportable operating segment:


	Provision for		Tangible Asset
	Retirements		Impairments		Total
	(In thousands)
U.S. Drilling	$	25,365	$	163,182	$	188,547
Canada Drilling		19,573		1,125		20,698
International Drilling		23,275		12,721		35,996
Drilling Solutions		859		—		859
Rig Technologies		—		15,343		15,343
Other		—		23,984		23,984
Total	$	69,072	$	216,355	$	285,427

During 2016, we retired certain classes of rigs and rig components in our U.S. Drilling, Canada Drilling and International Drilling reportable segments and reduced their carrying value to their estimated salvage value. As a result of the sustained decline in oil and gas prices and the extended period of reduced demand for some of our legacy asset classes, we retired 24 of our remaining SCR rigs within the U.S. Drilling reportable segment. We utilized some of the parts on these retired rigs to enhance and upgrade other existing rigs in our fleet. Additionally, we retired 7 older rigs in our Canada Drilling reportable segment. Within our International Drilling reportable segment, we also retired various older, smaller and in some cases functionally obsolete rigs and yard assets.

In 2016, we also recorded impairments totaling $216.4 million primarily comprised of $163.2 million for underutilized rigs in our U.S. Drilling reportable segment as well as $12.7 million in our International Drilling reportable segment. These impairments were deemed necessary due to the lack of future contractual opportunities because the rigs were smaller and lower horsepower than our newer rigs, which limits the rigs functional capabilities of drilling many of the more complex wells in the current environment. Included in the other amount was an impairment of $22.4 million that we recognized related to our retained interest in the oil and gas properties located on the North Slope of Alaska to reduce the carrying value to fair value, as a result of the sustained decline in oil prices. The balance of the impairment charge primarily relates to obsolete inventory and various rig-related equipment within our Rig Technologies reportable segment.

Other-than-temporary impairment

During 2016, we recognized impairment charges associated with our CJES holdings in the amount of $216.2 million resulting from declines in the fair value of our investment including other than temporary impairment charges of $192.4 million. Additionally, we recorded a charge related to a reserve of certain other amounts associated with our CJES holdings, including affiliate receivables of $23.8 million.

The balance of the charge was related to an impairment of an equity security during the third quarter of 2016. As the trading price of the security remained below our cost basis for an extended period, we determined the investment was other than temporarily impaired and it was appropriate to write down the investment’s carrying value to its current estimated fair value. See Note 9—Investments in Unconsolidated Affiliates.

Loss (gain) on early extinguishment of debt

During 2016, we repurchased $152.7 million aggregate principal amount of our senior notes. We paid the holders an aggregate of approximately $157.5 million in cash, reflecting principal and accrued and unpaid interest and prepayment premium and recognized a gain as part of the debt extinguishment. See Note 11—Debt for additional discussion.