Long-Lived Asset Impairments and Other Long-Lived Asset Impairments and Other

6 Months Ended

Jun. 30, 2020

Property, Plant and Equipment [Abstract]

Long-Lived Asset Impairments and Other

Long-lived Assets Impairment

As a result of the unprecedented global economic and industry conditions described in “Note 1 – General” to our Condensed Consolidated Financial Statements which we identified as impairment indicators, we completed impairment assessments of our property, plant and equipment, definite-lived intangible assets, goodwill and right of use assets with the assistance of third-party valuation advisors as of March 31, 2020 and again as of June 30, 2020. Based on our impairment test, we determined the carrying amount of certain long-lived assets exceeded their respective fair values. Therefore, during the three and six months ended June 30, 2020, we recognized long-lived asset impairments in “Long-lived Assets Impairments” on the accompanying Condensed Consolidated Statements of Operations of $178 million and $818 million, respectively. The fair values of our long-lived assets were determined using discounted cash flow or Level 3 fair value analyses. The unobservable inputs to the income approach included the assets’ estimated future cash flows, estimates of discount rates commensurate with the assets’ risks, revenue growth rates, profitability margins, and the remaining useful life of the primary asset. Given the dynamic nature of the COVID-19 pandemic and related market conditions, we cannot estimate the period of time that these events will persist or the full extent of the impact on our business. If, in addition to other factors, market conditions deteriorate further than we anticipate, we may record further impairments related to the carrying amount of our long-lived assets, definite-lived intangibles and right of use assets.

The table below details the Successor long-lived asset impairment by asset and segment:

	Three Months Ended June 30, 2020						Six Months Ended June 30, 2020
(Dollars in millions)	Western Hemisphere		Eastern Hemisphere		Total		Western Hemisphere		Eastern Hemisphere		Total
Property, Plant and Equipment	$	94	$	47	$	141	$	316	$	255	$	571
Intangible Assets	13		9		22		44		115		159
Right of Use Assets	7		8		15		56		32		88
Total Impairment Charges	$	114	$	64	$	178	$	416	$	402	$	818

During the second quarter of 2020, we recorded a $65 million charge to “Long-Lived Asset Impairments” in our Condensed Consolidated Statements of Operations to correct an immaterial error relating to our estimates of impairment of certain assets associated with our Drilling Services business in the Western Hemisphere that should have been recognized in the first quarter of 2020. This charge would have increased “Long-Lived Asset Impairments”, “Operating Loss”, “Loss Before Income Taxes” and “Net Loss” by $65 million in the three months ended March 31, 2020. The adjustment would not have affected our compliance with financial covenants under our ABL Credit Agreement and would not have had an impact to cash flow from operating activities or any other cash flow measures for that period or on our year-to-date results of operations.

We recognized Predecessor long-lived asset impairments of $13 million and $20 million, respectively, for the three and six months ended June 30, 2019. The long-lived asset impairments were primarily related to the Predecessor’s Western Hemisphere segment in the second quarter of 2019 and the Predecessor’s Eastern Hemisphere segment in the first quarter of 2019.