Drilling Fleet

9 Months Ended

Sep. 30, 2020

Drilling Fleet

Drilling Fleet

Note 6—Drilling Fleet

Construction work in progress—The changes in our construction work in progress, including capital expenditures and other capital additions, were as follows (in millions):

	Nine months ended
	September 30,
	2020		2019
Construction work in progress, beginning of period	$	753	$	632
Capital expenditures
Newbuild construction program		114		90
Other equipment and construction projects		104		169
Total capital expenditures		218		259
Changes in accrued capital additions		(27)		32
Construction work in progress impaired		—		(5)
Property and equipment placed into service		(130)		(151)
Construction work in progress, end of period	$	814	$	767

Impairments of assets held and used—During the three months ended March 31, 2020, we identified indicators that the carrying amounts of our asset groups may not be recoverable.  Such indicators included recent significant declines in commodity prices and the market value of our stock, a reduction of expected demand for our drilling services as our customers announced reductions of capital investments in response to commodity prices and a reduction of projected dayrates.  As a result of our testing, we determined that the carrying amount of our midwater floater was impaired.  In the nine months ended September 30, 2020, we recognized a loss of $31 million ($0.05 per diluted share), which had no tax effect, associated with the impairment of our midwater floater.  We measured the fair value of the drilling unit in this asset group by applying the market approach, using estimates of the exchange price that would be received for the assets in the principal or most advantageous markets for the assets in an orderly transaction between participants as of the measurement date.  Our estimate of fair value required us to use significant other observable inputs, representative of Level 2 fair value measurements, including the marketability of the rig and prices of comparable rigs that may be sold for scrap value.

Impairments of assets held for sale—During the nine months ended September 30, 2020, we announced our intent to sell or retire, in an environmentally responsible way the ultra-deepwater floater GSF Development Driller II, the harsh environment floaters Polar Pioneer and Songa Dee and the midwater floaters Sedco 711, Sedco 714 and Transocean 712, along with related assets.  In the nine months ended September 30, 2020, we recognized an aggregate loss of $556 million ($0.90 per diluted share), which had no tax effect, associated with the impairment of these assets, which we determined were impaired at the time we classified the assets as held for sale.

During the nine months ended September 30, 2019, we announced our intent to retire in an environmentally responsible way the ultra-deepwater floaters Discoverer Deep Seas, Discoverer Enterprise and Discoverer Spirit, along with related assets.  In the three and nine months ended September 30, 2019, we recognized an aggregate loss of $578 million ($0.96 per diluted share), which had no tax effect, associated with the impairment of these assets and other equipment, which we determined were impaired at the time we classified the assets as held for sale.

We measured the impairment of the drilling units and related assets as the amount by which the carrying amount exceeded the estimated fair value less costs to sell.  We estimated the fair value of the assets using significant other observable inputs, representative of Level 2 fair value measurements, including indicative market values for the drilling units and related assets to be sold for scrap value or other purposes.

Dispositions—During the nine months ended September 30, 2020, in connection with our efforts to dispose of non-strategic assets, we completed the sale of the harsh environment floaters Polar Pioneer, Songa Dee and Transocean Arctic and the midwater floaters Sedco 711, Sedco 714 and Transocean 712, along with related assets.  In the nine months ended September 30, 2020, we received aggregate net cash proceeds of $11 million and recognized an aggregate net loss of $61 million, which had no tax effect, associated with the disposal of these assets.

During the nine months ended September 30, 2019, we completed the sale of the ultra-deepwater floaters Deepwater Frontier, Deepwater Millennium and Ocean Rig Paros, the harsh environment floater Eirik Raude, the deepwater floaters Jack Bates and Transocean 706 and the midwater floaters Actinia and Songa Delta, along with related assets.  In the nine months ended September 30, 2019, we received aggregate net cash proceeds of $47 million and recognized an aggregate net gain of $2 million, which had no tax effect, associated with the disposal of these assets.  In the nine months ended September 30, 2019, we received aggregate net cash proceeds of $5 million and recognized an aggregate net loss of $9 million associated with the disposal of assets unrelated to rig sales.

Assets held for sale—At September 30, 2020, the aggregate carrying amount of our assets held for sale, including the ultra-deepwater floater GSF Development Driller II, along with related assets, was $9 million, recorded in other current assets.  At December 31, 2019, we had no assets classified as held for sale.