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Property and Equipment
12 Months Ended
Dec. 31, 2019
Property, Plant and Equipment [Abstract]  
Property, Plant and Equipment Disclosure [Text Block]
Property and Equipment
The following table presents the estimated useful lives and costs of our assets by class:
 
 
 
As of December 31,
 
 
 
2019
 
2018
 
Lives    
 
Cost (amounts in thousands)
Drilling rigs and equipment
3 - 25
 
$
613,061

 
$
590,148

Well servicing rigs and equipment
3 - 20
 
259,102

 
252,589

Wireline units and equipment
1 - 10
 
131,628

 
144,171

Coiled tubing units and equipment
1 - 7
 
30,816

 
25,689

Vehicles
3 - 10
 
50,308

 
50,317

Office equipment
3 - 10
 
12,353

 
11,606

Buildings and improvements
3 - 40
 
16,988

 
23,610

Property and equipment not yet placed in service
 
3,330

 
17,718

Land
 
1,960

 
2,367

 
 
 
$
1,119,546

 
$
1,118,215


Capital Expenditures — Our capital expenditure additions were $44.8 million and $72.9 million, including the impact of accruals for capital additions, during the years ended December 31, 2019 and 2018, respectively. Capital additions during 2019 primarily related to various upgrades and refurbishments of our drilling and production services fleets, vehicle and ancillary equipment purchases, and the completion of construction on our 17th AC drilling rig, which we deployed in March. Capital additions during 2018 primarily related to various routine expenditures to maintain our fleets and the purchase of new support equipment, expansion of our coiled tubing and wireline fleets, capital projects to upgrade and refurbish certain components of our international and domestic drilling rigs, the partial construction of the AC drilling rig deployed in March 2019, and vehicle fleet upgrades in all domestic business segments.
Gain/Loss on Disposition of Property — We recognized net gains of $4.5 million and $3.1 million during the years ended December 31, 2019 and 2018, respectively, on the disposition or sale of various property and equipment, primarily including drill pipe and collars, a domestic drilling yard, and certain older and/or underutilized equipment, most of which were previously held for sale.
Assets Held for Sale — We have various equipment designated as held for sale, with values of $3.4 million and $3.6 million in aggregate as of December 31, 2019 and 2018, respectively, primarily consisting of real estate property for two wireline locations closed during 2019, and the remaining equipment from two SCR drilling rigs which were held for sale at the end of 2018 and dismantled for spare parts in 2019.
During the years ended December 31, 2019 and 2018, we recognized impairment charges of $2.7 million and $4.4 million, respectively, to reduce the carrying values of assets which were classified as held for sale, to their estimated fair values, based on expected sales prices which are classified as Level 3 inputs as defined by ASC Topic 820, Fair Value Measurements and Disclosures.
Impairments In accordance with ASC Topic 360, Property, Plant and Equipment, we monitor all indicators of potential impairments. We evaluate for potential impairment of long-lived assets when indicators of impairment are present, which may include, among other things, significant adverse changes in industry trends (including revenue rates, utilization rates, oil and natural gas market prices, and industry rig counts). In performing an impairment evaluation, we estimate the future undiscounted net cash flows from the use and eventual disposition of the assets grouped at the lowest level that independent cash flows can be identified. We perform an impairment evaluation and estimate future undiscounted cash flows for each of our asset groups separately, which are our domestic drilling services, international drilling services, well servicing, wireline services and coiled tubing services segments. If the sum of the estimated future undiscounted net cash flows is less than the carrying amount of the asset group, then we determine the fair value of the asset group, and the amount of an impairment charge would be measured as the difference between the carrying amount and the fair value of the assets.
Due to adverse factors affecting our well servicing operations, including increased competition and labor shortages in certain well servicing markets, and lower than anticipated utilization, all of which contributed to a decline in our projected cash flows for the well servicing reporting unit, we performed an impairment analysis of this reporting unit at September 30, 2018. As a result of this analysis, we concluded that this reporting unit was not at risk of impairment because the sum of the estimated future undiscounted net cash flows for our well servicing reporting unit was significantly in excess of the carrying amount.
Due to lower-than-anticipated operating results and a decline in our projected cash flows for the coiled tubing reporting unit, we performed an impairment analysis of this reporting unit at September 30, 2019 and again at December 31, 2019. As a result of this analysis, we concluded that this reporting unit was not at risk of impairment because the estimated fair value of the reporting unit’s assets was in excess of the carrying value.
The most significant inputs used in our impairment analysis include the projected utilization and pricing of our services, as well as the estimated proceeds upon any future sale or disposal of the assets, all of which are classified as Level 3 inputs as defined by ASC Topic 820, Fair Value Measurements and Disclosures.
The assumptions we use in the evaluation for impairment are inherently uncertain and require management judgment. Although we believe the assumptions and estimates used in our impairment analysis are reasonable, different assumptions and estimates could materially impact the analysis and resulting conclusions. If commodity prices decrease or remain at current levels for an extended period of time, or if the demand for any of our services decreases below what we are currently projecting, our estimated cash flows may decrease and our estimates of the fair value of certain assets may decrease as well. If any of the foregoing were to occur, we could incur impairment charges on the related assets.