Impairment and Other Charges (Notes)

12 Months Ended

Dec. 31, 2019

Impairments and Other Charges [Abstract]

Market conditions negatively impacted our business during 2019, particularly in North America. We experienced continued pricing pressure and customer activity reductions for our products and services. The North America land rig count decreased 26% from its high point in early 2019 to its low point in December 2019, and we idled equipment throughout the year to adjust to changing activity levels. During the fourth quarter of 2019, the North America market continued to deteriorate with a 9% decrease in the average land rig count compared to the third quarter. Customer activity declined across all basins, affecting both our drilling and completions businesses, and pricing pressure persisted during the year-end tendering season.

As a result of these market conditions and our service delivery improvement strategy, we took actions during the fourth quarter of 2019 to proactively manage our equipment fleet, rationalize our portfolio of real estate facilities, and initiate reductions in our global workforce in an effort to mitigate the impact of market deterioration and better align our workforce with anticipated activity levels. As part of our real estate rationalization, we identified owned properties to sell and leased properties to abandon. We reviewed the recoverability of our long-lived assets and, based upon our impairment assessments, we determined the carrying amount of some of our long-lived assets exceeded their respective fair values.

We determined the fair value of our long-lived assets based on a discounted cash flow analysis, with the exception of real estate facilities classified as held for sale for which fair value was based on third party sales price estimates. These fair value assessments required the use of estimates which represent significant unobservable inputs. The discounted cash flow analysis utilized management’s short-term and long-term forecast of operating performance, including revenue growth rates and expected profitability margins, the remaining useful life and service potential of the asset, and a discount rate based on our weighted average cost of capital. As such, these analyses incorporate inherent uncertainties about commodity prices, supply and demand for our services, and future market conditions that are difficult to predict in volatile economic environments. If market conditions worsen, our fair value assumptions of estimated future cash flows could be materially altered and we may be required to record additional asset impairments. Such a potential impairment charge could have a material adverse impact on our operating results.

As a result of the events described above, we recorded impairments and other charges of approximately $2.5 billion during the year ended December 31, 2019. The following table presents various pre-tax charges we recorded during the years ended December 31, 2019, 2018 and 2017 which are reflected within "Impairments and other charges" on our consolidated statements of operations.



	Year Ended December 31
Millions of dollars	2019		2018		2017
Long-lived asset impairments	$	1,603	$	—	$	—
Inventory costs and write-downs	458		—		—
Severance	172		—		—
Joint ventures	154		—		—
Venezuela investment write-down	—		265		647
Other	119		—		—
Total impairments and other charges	$	2,506	$	265	$	647

Of the $2.5 billion of impairments and other charges recorded during the year ended December 31, 2019, approximately $1.6 billion was attributable to our Completion and Production segment and approximately $849 million was attributable to our Drilling and Evaluation segment. Long-lived asset impairments include impairments of property, plant and equipment, intangible assets, and real estate facilities. The $1.6 billion of long-lived asset impairments consists of the following: $759 million attributable to hydraulic fracturing equipment, the majority of which was located in North America; $243 million related to legacy drilling equipment; $215 million related to real estate properties owned and classified as held for sale; $139 million related to right-of-use assets associated with operating leases; $98 million related to intangible assets; and $148 million of other fixed asset impairments. Included within "Inventory costs and write-downs" in the table above are amounts associated with certain supply contracts, coupled with a write-down of some of our inventory which exceeded its market value. We also rationalized our portfolio of existing joint ventures and recorded resulting charges within "Joint ventures" in the table above.