Leases (Notes)

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Leases

12. Leases

We lease certain facilities, land, vehicles, and equipment. Leases with an initial term of 12 months or less (“short-term leases”) are not recorded on the balance sheet (including short-term sale leaseback transactions); we recognize lease expense for these leases on a straight-line basis over the lease term.

For adoption of Topic 842 we used the December 31, 2018 incremental borrowing rate, for operating leases that commenced prior to December 31, 2018. We have data center lease agreements with lease and non-lease components which are accounted for separately, while for the remainder of our agreements we have elected the practical expedient to account for lease and non-lease components as a single lease component. For certain equipment leases, such as copiers and vehicles, we account for the leases under a portfolio method. Operating lease payments include related options to extend or terminate lease terms that are reasonably certain of being exercised.

The unmanned equipment that we lease to customers as operating leases consists primarily of drilling rental tools and artificial lift pumping equipment. These equipment rental revenues are generally provided based on call-out work orders that include fixed per unit prices and are derived from short-term contracts. See “Note 1 – Summary of Significant Accounting Policies” and “Note 23 – Revenues” for additional details on our equipment rental revenues.

		Successor
(Dollars in millions)	Classification	December 31, 2019
Balance Sheet Components:
Assets
Operating	Other Non-Current Assets	$	256
Finance	Property Plant and Equipment, Net	62
Total leased assets		$	318
Liabilities
Current
Operating	Other Current Liabilities	$	79
Finance	Short-term Borrowings and Current Portion of Long-term Debt	10
Non-Current
Operating	Other Non-Current Liabilities	213
Finance	Long-term Debt	54
Total lease liabilities		$	356

	Successor			Predecessor
	Period From			Period From
	12/14/19			1/1/2019
	through			through
(Dollars in millions)	12/31/2019			12/13/2019
Lease Expense Components:
Operating lease expense	$	5		$	109
Short-term and variable lease expense	5			91
Finance lease expense: Amortization of ROU assets and interest on lease liabilities	1			11
Sublease income	(1		)	(6		)
Total lease expense	$	10		$	205

In 2019 total expense incurred under operating leases was $10 million in the Successor Period and $200 million in the Predecessor Period, and $187 million and $217 million for the years ended December 31, 2018 and December 31, 2017, respectively.

We are committed under various operating lease agreements primarily related to office space and equipment. Generally, these leases include renewal provisions and rental payments, which may be adjusted for taxes, insurance and maintenance related to the property. Future minimum commitments under operating and finance leases are as follows:

	Successor
	Operating		Finance
(Dollars in millions)	Leases		Leases
Maturity of Lease Liabilities as of December 31, 2019:
2020	$	101	$	15
2021	80		12
2022	54		11
2023	30		11
2024	24		11
After 2024	149		25
Total Lease Payments	438		85
Less: Interest	146		21
Present Value of Lease Liabilities	$	292	$	64

	Successor			Predecessor
	Period From			Period From
	12/14/19			1/1/2019
	through			through
(Dollars in millions except years and percentages)	12/31/2019			12/13/2019
Other Supplemental Information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	5		$	131
Operating cash outflows from finance leases	$	—		$	4
Financing cash outflows from finance leases	$	1		$	8
ROU assets obtained in exchange of new operating lease liabilities	$	2		$	59
ROU assets obtained in exchange of new finance lease liabilities	$	—		$	6
Loss on sale leaseback transactions (short-term) (a)	$	—		$	34
	December 31, 2019
Weighted-average remaining lease term (years)
Operating leases	7.8
Finance leases	6.7
Weighted-average discount rate (percentages)
Operating leases	9.2		%
Finance leases	9.1		%

(a) Included in “Long-Lived Asset Impairments, Write-Downs and Other” in our Condensed Consolidated Statements of Operations and “Other, Net” in our Condensed Consolidated Statements of Cash Flows.

Leases

12. Leases

We lease certain facilities, land, vehicles, and equipment. Leases with an initial term of 12 months or less (“short-term leases”) are not recorded on the balance sheet (including short-term sale leaseback transactions); we recognize lease expense for these leases on a straight-line basis over the lease term.

For adoption of Topic 842 we used the December 31, 2018 incremental borrowing rate, for operating leases that commenced prior to December 31, 2018. We have data center lease agreements with lease and non-lease components which are accounted for separately, while for the remainder of our agreements we have elected the practical expedient to account for lease and non-lease components as a single lease component. For certain equipment leases, such as copiers and vehicles, we account for the leases under a portfolio method. Operating lease payments include related options to extend or terminate lease terms that are reasonably certain of being exercised.

The unmanned equipment that we lease to customers as operating leases consists primarily of drilling rental tools and artificial lift pumping equipment. These equipment rental revenues are generally provided based on call-out work orders that include fixed per unit prices and are derived from short-term contracts. See “Note 1 – Summary of Significant Accounting Policies” and “Note 23 – Revenues” for additional details on our equipment rental revenues.

		Successor
(Dollars in millions)	Classification	December 31, 2019
Balance Sheet Components:
Assets
Operating	Other Non-Current Assets	$	256
Finance	Property Plant and Equipment, Net	62
Total leased assets		$	318
Liabilities
Current
Operating	Other Current Liabilities	$	79
Finance	Short-term Borrowings and Current Portion of Long-term Debt	10
Non-Current
Operating	Other Non-Current Liabilities	213
Finance	Long-term Debt	54
Total lease liabilities		$	356

	Successor			Predecessor
	Period From			Period From
	12/14/19			1/1/2019
	through			through
(Dollars in millions)	12/31/2019			12/13/2019
Lease Expense Components:
Operating lease expense	$	5		$	109
Short-term and variable lease expense	5			91
Finance lease expense: Amortization of ROU assets and interest on lease liabilities	1			11
Sublease income	(1		)	(6		)
Total lease expense	$	10		$	205

In 2019 total expense incurred under operating leases was $10 million in the Successor Period and $200 million in the Predecessor Period, and $187 million and $217 million for the years ended December 31, 2018 and December 31, 2017, respectively.

We are committed under various operating lease agreements primarily related to office space and equipment. Generally, these leases include renewal provisions and rental payments, which may be adjusted for taxes, insurance and maintenance related to the property. Future minimum commitments under operating and finance leases are as follows:

	Successor
	Operating		Finance
(Dollars in millions)	Leases		Leases
Maturity of Lease Liabilities as of December 31, 2019:
2020	$	101	$	15
2021	80		12
2022	54		11
2023	30		11
2024	24		11
After 2024	149		25
Total Lease Payments	438		85
Less: Interest	146		21
Present Value of Lease Liabilities	$	292	$	64

	Successor			Predecessor
	Period From			Period From
	12/14/19			1/1/2019
	through			through
(Dollars in millions except years and percentages)	12/31/2019			12/13/2019
Other Supplemental Information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	5		$	131
Operating cash outflows from finance leases	$	—		$	4
Financing cash outflows from finance leases	$	1		$	8
ROU assets obtained in exchange of new operating lease liabilities	$	2		$	59
ROU assets obtained in exchange of new finance lease liabilities	$	—		$	6
Loss on sale leaseback transactions (short-term) (a)	$	—		$	34
	December 31, 2019
Weighted-average remaining lease term (years)
Operating leases	7.8
Finance leases	6.7
Weighted-average discount rate (percentages)
Operating leases	9.2		%
Finance leases	9.1		%

(a) Included in “Long-Lived Asset Impairments, Write-Downs and Other” in our Condensed Consolidated Statements of Operations and “Other, Net” in our Condensed Consolidated Statements of Cash Flows.