Impairments

Impairment of Natural Gas and Oil Properties

On a quarterly basis, we analyze our unevaluated leasehold and transfer to evaluated properties leasehold that can be associated with reserves, leasehold that expired in the quarter, or leasehold that is not a part of our development strategy and will be abandoned. We also review, on a quarterly basis, the carrying value of our natural gas and oil properties under the full cost accounting rules of the SEC. This quarterly review is referred to as a ceiling test. Under the ceiling test, capitalized costs, less accumulated amortization and related deferred income taxes, may not exceed an amount equal to the sum of the present value of estimated future net revenues from proved reserves (adjusted for cash flow hedges) less estimated future expenditures to be incurred in developing and producing the proved reserves, less any related income tax effects. In the Prior Quarter, capitalized costs of natural gas and oil properties exceeded the ceiling, resulting in an impairment in the carrying value of natural gas and oil properties of $3.315 billion. For the ceiling test calculation, costs used are those as of the end of the appropriate quarterly period, and estimated future net revenues are calculated using the unweighted arithmetic average of natural gas and oil prices on the first day of each month within the 12-month period prior to the ending date of the quarterly period. Such prices are utilized except where different prices are fixed and determinable from applicable contracts for the remaining term of those contracts, including the effects of derivatives designated as cash flow hedges. Cash flow hedges as of September 30, 2012, which related to future periods, increased the ceiling test impairment by $279 million.

Impairments of Fixed Assets and Other

We test our long-lived assets, other than natural gas and oil properties, for recoverability whenever events or changes in circumstances indicate that carrying amounts may not be recoverable and recognize an impairment loss if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. A summary of our impairments of fixed assets by asset class and other charges for the Current Quarter, the Prior Quarter, the Current Period and the Prior Period is as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
	($ in millions)
Buildings and land	$	8	$	7	$	247	$	227
Drilling rigs and equipment	24		31		27		54
Gathering systems	21		—		22		—
Other	32		—		47		—
Total impairments of fixed assets and other	$	85	$	38	$	343	$	281

Buildings and Land. In June 2013, we determined we would sell certain of our buildings and land (other than our core campus) in the Oklahoma City area. These assets are being actively marketed and we believe it is probable that these assets will be sold over the next 12 months. As a result, these assets qualified as held for sale as of September 30, 2013. We recognized an impairment loss of $138 million during the Current Period on these assets for the difference between the carrying amount and fair value of the assets, less the anticipated costs to sell.

Given the impairment losses associated with these assets, we tested other noncore buildings and land that we own in the Oklahoma City area for recoverability in the Current Period. Our estimate of the future undiscounted cash flows for these assets was less than their carrying amounts, and we recognized an additional impairment loss of $44 million on these assets for the difference between the carrying amount and fair value of the assets. We measured the fair value of these assets based on prices from orderly sales transactions for comparable properties between market participants and, in certain cases, discounted cash flows. The buildings and land are included in our other segment. In addition, in the Current Period, we recognized an impairment loss of $28 million related to three office buildings in the Oklahoma City area. We received a purchase offer from a third party that we used to determine the fair value of the office buildings. As of September 30, 2013, the office buildings were classified as held for sale and included in our other segment. We anticipate selling the buildings in the 2013 fourth quarter.

Due to a decrease in the estimated market prices of certain surface land classified as held for sale in the Fort Worth area, in the Current Period we recognized an additional impairment loss of $31 million. See below for discussion of the impairment of Barnett surface land in the Prior Period. We measured the fair value of these assets based on recent prices from orderly sales transactions for comparable properties between market participants. The surface land is included in our other segment.

In the Prior Period, we recognized $227 million of impairment losses associated with an office building and surface land located in our Barnett Shale operating area. Due to depressed natural gas prices, we initiated a significant reduction in our Barnett Shale operations. The change in business climate in the Barnett Shale required us to test these long-lived assets for recoverability in the Prior Period. We received a purchase offer from a third party that we used to determine the fair value of the office building and measured the fair value of the surface land using prices from orderly sales transactions for comparable properties between market participants. The office building and surface land are included in our other segment.

Drilling Rigs and Equipment. In the Current Quarter, we recognized $24 million of impairment losses on eight owned drilling rigs (seven of which are classified as held for sale assets as of September 30, 2013). In the Prior Quarter, we negotiated the purchase of 22 rigs previously sold in our sale leaseback transactions described in Note 4 from various lessors for an aggregate purchase price of $53 million, of which $25 million was deemed to be early lease termination costs and was recognized as impairments of fixed assets and other in the condensed consolidated statement of operations. In addition, in the Prior Quarter and the Prior Period, we recognized $6 million and $20 million, respectively, of impairment losses on certain of our owned drilling rigs due to the expectation that these drilling rigs would have insufficient cash flow to recover carrying values because of a change in business climate resulting from depressed natural gas prices. We estimated the fair value of the drilling rigs using prices expected to be received to sell each rig in an orderly transaction between market participants. Also in the Prior Period, we recognized $9 million of impairment losses primarily related to drill pipe and other oilfield services equipment. The drilling rigs and equipment are included in our oilfield services operating segment.

Gathering Systems. In the Current Quarter, we recognized approximately $18 million of impairment losses on certain of our gathering systems classified as held for sale as of September 30, 2013 and December 31, 2012 based on decreases in the estimated fair value of these assets. We estimated the fair value of the gathering systems using prices expected to be received to sell each gathering system in an orderly transaction between market participants. These gathering systems are included in our marketing, gathering and compression operating segment.

Other. In the Current Quarter, we terminated a gas gathering agreement and recorded a charge of $26 million within impairments of fixed assets and other in the condensed consolidated statement of operations.