Long-Lived Asset Impairments

9 Months Ended

Sep. 30, 2016

Property, Plant and Equipment [Abstract]

Long-Lived Asset Impairments and Other Asset Charges

Long-Lived Asset Impairments

During the third quarter of 2016, we recognized long-lived asset impairment charges of $436 million of which $388 million was related to our product line asset impairments and $48 million was related to the impairment of intangible assets. The product line impairment charges were related to our MENA Pressure Pumping and U.S. Well Construction, Drilling Services and Secure Drilling Service product lines. The intangible asset charge is related to the Well Construction and Completions businesses with $35 million attributable to the North America segment and $13 million related the Europe/SSA/Russia segment. These impairment charges were attributed to the following segments: $235 million in North America, $109 million in MENA/Asia Pacific, $12 million in Europe/SSA/Russia, $16 million in Latin America and $16 million in Land Drilling Rigs.

The impairments were due to the prolonged downturn in the oil and gas industry, whose recovery in the third quarter was not as strong as expected and whose recovery in the fourth quarter of 2016 and in 2017 is expected to be slower than had previously been anticipated. The change in the expectations of the market’s recovery, in addition to successive negative operating cash flows in certain asset groups represented an indicator that those assets will no longer be recoverable over their remaining useful lives.Based on the presence of these impairment indicators, we performed an analysis of those asset groups and recorded long-lived asset impairment charges to adjust the assets to fair value. See “Note 10 – Fair Value of Financial Instruments, Assets and Equity Investments” for additional information regarding the fair value determination.

In the second quarter of 2015, we recognized long-lived asset impairment charges of $124 million in our pressure pumping assets of our North America segment. We recognized total long-lived impairment charges due to the continued weakness in crude oil prices contributing to lower exploration and production spending and a decline in the utilization of our assets. The decline in oil prices and its impact on demand represented a significant adverse change in the business climate and an indication that these long-lived assets may not be recoverable. Based on the presence of impairment indicators, we performed an analysis of these asset groups and recorded long-lived asset impairment charges to adjust the assets to fair value. See “Note 10 – Fair Value of Financial Instruments, Assets and Equity Investments” for additional information regarding the fair value determination.

In the second quarter of 2015, we prepared analyses to determine the fair value of our equity investments in less than majority owned entities. Upon completion of these valuations, we determined that the fair value attributable to certain equity investments were significantly below its carrying value. We assessed this decline in value as other than temporary and recognized an impairment loss of $20 million. See “Note 10 – Fair Value of Financial Instruments, Assets and Equity Investments” for additional information regarding the fair value determination.