Goodwill and Other Intangibles

12 Months Ended

Dec. 31, 2019

Goodwill and Other Intangibles

Goodwill and intangible assets

Note 8—Goodwill and Other Intangibles

Goodwill—During the three months ended June 30, 2018, we classified as held for sale and impaired three ultra-deepwater floaters (see Note 7—Drilling Fleet).  We identified the impairment of these assets as an indicator that our goodwill may be impaired.  In the year ended December 31, 2018, as a result of our interim goodwill impairment test, we recognized a loss of $462 million ($0.99 per diluted share), which had no tax effect, associated with the impairment of the full balance of our goodwill.  We estimated the fair value of the contract drilling services reporting unit using the income approach.  Our estimate of fair value required us to use significant unobservable inputs, representative of a Level 3 fair value measurement, including assumptions related to the future performance of the reporting unit, such as future commodity prices, projected demand for our services, rig availability and dayrates.

Finite-lived intangible assets and liabilities—The gross carrying amount and accumulated amortization of our drilling contract intangible assets were as follows (in millions):

	Year ended December 31, 2019						Year ended December 31, 2018
	Gross				Net		Gross				Net
	carrying		Accumulated		carrying		carrying		Accumulated		carrying
	amount		amortization		amount		amount		amortization		amount
Drilling contract intangible assets
Balance, beginning of period	$	907	$	(112)	$	795	$	—	$	—	$	—
Acquisition		—		—		—		907		—		907
Amortization		—		(187)		(187)		—		(112)		(112)
Balance, end of period	$	907	$	(299)	$	608	$	907	$	(112)	$	795

We recognized drilling contract intangible amortization as a reduction of contract drilling revenues.  We expect to amortize the carrying amounts over the remaining contract periods, through March 2024.  As of December 31, 2019, the estimated future amortization of contract intangible assets was as follows (in millions):

	Total
Years ending December 31,
2020	$	190
2021		190
2022		171
2023		52
2024		5
Total carrying amount of contract intangible assets	$	608

In connection with our acquisition of Ocean Rig, we acquired contracts related to the construction of two ultra-deepwater drillships Ocean Rig Santorini and Ocean Rig Crete.  At December 31, 2018, the gross carrying amount of our construction contract liabilities was $132 million.  In October 2019, we agreed with Samsung Heavy Industries Co., Ltd. (“SHI”) to cancel the construction contracts for the

drillships in exchange for the parties terminating their respective obligations and liabilities under the construction contracts and our subsidiaries releasing to SHI their respective interests in the rigs.  As a result, in the three months ended December 31, 2019, we eliminated the construction contract intangible liabilities and recognized income of $132 million, recorded in other income, net.