Leases

3 Months Ended

Mar. 31, 2020

We lease certain facilities, land, vehicles, and equipment. Leases with an initial term of 12 months or less 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. Operating right of use (“ROU”) assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date.

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 15 – Revenues” for additional details on our equipment rental revenues. Finance leases are recorded net of $3 million in accumulated amortization as of March 31, 2020.

As a result of the unprecedented industry conditions described in “Note 1 – General”, we impaired our right of use assets by $73 million to their respective fair values in the three months ended March 31, 2020, as also summarized at “Note 6 - Long-Lived Asset Impairments and Other”.



(Dollars in millions)	Classification	3/31/2020		12/31/2019
Balance Sheet Components:
Assets
Operating	Other Non-Current Assets	$	172	$	256
Finance	Property Plant and Equipment, Net	62		62
Total lease assets		$	234	$	318

Liabilities
Current
Operating	Other Current Liabilities	$	79	$	79
Finance	Short-term Borrowings and Current Portion of Long-term Debt	11		10

Non-Current
Operating	Other Non-Current Liabilities	196		213
Finance	Long-term Debt	52		54
Total lease liabilities		$	338	$	356



	Successor			Predecessor
	Three Months Ended			Three Months Ended
(Dollars in millions)	3/31/2020			3/31/2019
Lease Expense Components:
Operating lease expense	$	24		$	30
Short-term and variable lease expense	22			20
Finance lease expense: Amortization of ROU assets and interest on lease liabilities	4			3
Sublease income	(1		)	(2		)
Total lease expense	$	49		$	51



	Operating		Finance
(Dollars in millions)	Leases		Leases
Maturity of Lease Liabilities as of March 31, 2020:
Remainder of 2020	$	76	$	12
2021	83		13
2022	57		11
2023	31		11
2024	23		11
After 2024	138		25
Total Lease Payments	408		83
Less: Interest	133		20
Present Value of Lease Liabilities	$	275	$	63



	Successor			Predecessor
	Three Months Ended			Three Months Ended
(Dollars in millions except years and percentages)	3/31/2020			3/31/2019
Other Supplemental Information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	28		$	32
Operating cash outflows from finance leases	$	1		$	1
Financing cash outflows from finance leases	$	2		$	2

ROU assets obtained in exchange of new operating lease liabilities	$	19		$	19
ROU assets obtained in exchange of new finance lease liabilities	$	2		$	—
Loss on sale leaseback transactions (short-term)^(a)	$	—		$	36

Weighted-average remaining lease term (years)
Operating leases	7.7			6.7
Finance leases	6.4			7.9

Weighted-average discount rate (percentages)
Operating leases	9.2		%	13.1		%
Finance leases	9.1		%	5.6		%

(a) Included in “Restructuring, Asset Impairments and Other” of our Condensed Consolidated Statements of Operations and “Other Net Income Adjustments” of our Condensed Consolidated Statements of Cash Flows.

Leases



(Dollars in millions)	Classification	3/31/2020		12/31/2019
Balance Sheet Components:
Assets
Operating	Other Non-Current Assets	$	172	$	256
Finance	Property Plant and Equipment, Net	62		62
Total lease assets		$	234	$	318

Liabilities
Current
Operating	Other Current Liabilities	$	79	$	79
Finance	Short-term Borrowings and Current Portion of Long-term Debt	11		10

Non-Current
Operating	Other Non-Current Liabilities	196		213
Finance	Long-term Debt	52		54
Total lease liabilities		$	338	$	356



	Successor			Predecessor
	Three Months Ended			Three Months Ended
(Dollars in millions)	3/31/2020			3/31/2019
Lease Expense Components:
Operating lease expense	$	24		$	30
Short-term and variable lease expense	22			20
Finance lease expense: Amortization of ROU assets and interest on lease liabilities	4			3
Sublease income	(1		)	(2		)
Total lease expense	$	49		$	51



	Operating		Finance
(Dollars in millions)	Leases		Leases
Maturity of Lease Liabilities as of March 31, 2020:
Remainder of 2020	$	76	$	12
2021	83		13
2022	57		11
2023	31		11
2024	23		11
After 2024	138		25
Total Lease Payments	408		83
Less: Interest	133		20
Present Value of Lease Liabilities	$	275	$	63



	Successor			Predecessor
	Three Months Ended			Three Months Ended
(Dollars in millions except years and percentages)	3/31/2020			3/31/2019
Other Supplemental Information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	28		$	32
Operating cash outflows from finance leases	$	1		$	1
Financing cash outflows from finance leases	$	2		$	2

ROU assets obtained in exchange of new operating lease liabilities	$	19		$	19
ROU assets obtained in exchange of new finance lease liabilities	$	2		$	—
Loss on sale leaseback transactions (short-term)^(a)	$	—		$	36

Weighted-average remaining lease term (years)
Operating leases	7.7			6.7
Finance leases	6.4			7.9

Weighted-average discount rate (percentages)
Operating leases	9.2		%	13.1		%
Finance leases	9.1		%	5.6		%