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PROPERTY, PLANT AND EQUIPMENT | 3 Months Ended
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Dec. 31, 2021
Property, Plant and Equipment [Abstract] |
PROPERTY, PLANT AND EQUIPMENT |
NOTE 4 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of December 31, 2021 and September 30, 2021 consisted of the following:
(in thousands) | Estimated Useful Lives |  | December 31, 2021 |  | September 30, 2021
Drilling services equipment | 4 - 15 years |  | $ | 6,256,764 |  |  | $ | 6,229,011 |
Tubulars | 4 years |  | 568,273 |  |  | 573,900 |
Real estate properties | 10 - 45 years |  | 43,303 |  |  | 43,302 |
Other | 2 - 23 years |  | 421,091 |  |  | 459,741 |
Construction in progress (1) |  |  | 53,481 |  |  | 47,587 |
|  |  | 7,342,912 |  |  | 7,353,541 |
Accumulated depreciation |  |  | (4,276,586) |  |  | (4,226,254) |
Property, plant and equipment, net |  |  | $ | 3,066,326 |  |  | $ | 3,127,287 |
Assets held-for-sale |  |  | $ | 62,821 |  |  | $ | 71,453 |
(1)Included in construction in progress are costs for projects in progress to upgrade or refurbish certain rigs in our existing fleet. Additionally, we include other capital maintenance purchase orders that are open/in process. As these various projects are completed, the costs are then classified to their appropriate useful life category. Depreciation Depreciation expense in the Unaudited Condensed Consolidated Statements of Operations was $98.6 million and $105.1 million, including $1.3 million and $0.3 million in abandonments, for the three months ended December 31, 2021 and 2020, respectively. Assets Held-for-Sale The following table summarizes the balance (in thousands) of our assets held-for-sale at the dates indicated below:
Balance at September 30, 2021 | $ | 71,453 |
Plus: |
Asset additions | 1,025 |
Less: |
Sale of assets held-for-sale | (9,657) |
Balance at December 31, 2021 | $ | 62,821 |
In March 2021, the Company's leadership continued the execution of the current strategy, which was initially introduced in 2019, focusing on operating various types of highly capable upgraded rigs and phasing out the older, less capable fleet. As a result, the Company has undertaken a plan to sell 71 Domestic non-super-spec rigs, all within our North America Solutions segment, the majority of which were previously decommissioned, written down and/or held as capital spares. The book values of those assets were written down to $13.5 million, which represents their fair value less estimated costs to sell, and were reclassified as held-for-sale in the second and third quarters of fiscal year 2021. During the three months ended December 31, 2021, we completed the sale of a portion of the assets with a net book value of $0.9 million that were classified as held-for-sale as September 30, 2021. During September 2021, the Company agreed to sell eight FlexRig® land rigs with an aggregate net book value of $55.6 million to ADNOC Drilling Company P.J.S.C. ("ADNOC Drilling") for $86.5 million. Two of the eight rigs were already located in the U.A.E where ADNOC Drilling is domiciled with the remaining six rigs to be shipped from the United States. We received the $86.5 million in cash consideration in advance of delivering the rigs. As part of the sales agreement, the rigs will be delivered and commissioned in stages over a twelve-month period subject to acceptance upon successful completion of final inspection on customary terms and conditions. No rigs have been delivered to ADNOC Drilling as of December 31, 2021 and, therefore, the total cash proceeds of $86.5 million are recorded in Accrued Liabilities within our Unaudited Condensed Consolidated Balance Sheets as of December 31, 2021. As a result, these rigs are classified as held-for-sale in the Unaudited Condensed Consolidated Balance Sheets until each rig is delivered, at which time any related gain/loss on the sale will be recognized in the Unaudited Condensed Consolidated Statement of Operations. The rigs' fair value less estimated cost to sell of $29.0 million, including approximately $24.0 million of cash costs to be incurred, approximated their net book values at December 31, 2021. Of the estimated $24.0 million of cash costs to be incurred, we paid approximately $3.9 million in cash charges during the three months ended December 31, 2021. During the fiscal year ended September 30, 2021, we formalized a plan to sell assets related to two of our lower margin service offerings, trucking and casing running assets, which contributed approximately 2.8 percent to our consolidated revenue during fiscal year 2021, all within our North America Solutions segment. The combined net book values of these assets of $23.2 million were written down to their combined fair value less estimated cost to sell of $8.8 million, and were reclassified as held-for-sale during the fourth quarter of fiscal year 2021. During the three months ended December 31, 2021, we closed on the sale of these assets in two separate transactions. The sale of our trucking assets was completed on November 3, 2021 while the sale of our casing running assets was completed on November 15, 2021 for total consideration less costs to sell of $6.0 million, in addition to the possibility of future earnout revenue, resulting in a loss of $3.4 million. Losses related to the sale of these assets are recorded in Other (Gain) Loss on Sale of Assets within our Unaudited Condensed Consolidated Statements of Operations. During the three months ended December 31, 2021, we identified two partial rig substructures and two international FlexRig® drilling rigs that met the asset held-for-sale criteria and were reclassified as assets held-for-sale on our Unaudited Condensed Consolidated Balance Sheets. The combined net book value of the rig substructures of $2.0 million were written down to their estimated scrap value of $0.1 million, resulting in a non-cash impairment charge of $1.9 million within our North America Solutions segment during the three months ended December 31, 2021 in the Unaudited Condensed Consolidated Statement of Operations. In conjunction with establishing a plan to sell the two international FlexRig® drilling rigs, we recognized a non-cash impairment charge of $2.5 million within our International Solutions segment during the three months ended December 31, 2021 in the Unaudited Condensed Consolidated Statement of Operations, as the rigs aggregate net book value of $3.4 million exceeded the fair value of the rigs less estimated cost to sell of $0.9 million. The significant assumptions utilized in the valuation were based on our intended method of disposal, historical sales of similar assets, and market quotes and are classified as Level 2 and Level 3 inputs by ASC Topic 820, Fair Value Measurement and Disclosures. Although we believe the assumptions used in our analysis are reasonable and appropriate, different assumptions and estimates could materially impact the analysis and our resulting conclusion. Gain/Loss on Sale of Assets During the three months ended December 31, 2021, we had a gain of $5.3 million related to customer reimbursement for the replacement value of lost or damaged drill pipe. Gains related to these asset sales are recorded in Gain on Reimbursement of Drilling Equipment within our Unaudited Condensed Consolidated Statements of Operations. During the same fiscal period, we also closed on the sale of our trucking and casing running assets as mentioned above. During the three months ended December 31, 2020, completed the sale of an offshore platform rig within our Offshore Gulf of Mexico operating segment for total consideration of $12.0 million with an aggregate net book value of $2.8 million, resulting in a gain of $9.2 million and recorded in Other (Gain) Loss on Sale of Assets within our Unaudited Condensed Consolidated Statements of Operations. We also had a gain of $2.2 million on asset sales related to customer reimbursement for the replacement value of drill pipe damaged or lost in drilling operations. Gains related to these asset sales are recorded in Gain on Reimbursement of Drilling Equipment within our Unaudited Condensed Consolidated Statements of Operations.

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