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PROPERTY, PLANT AND EQUIPMENT | 12 Months Ended
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Sep. 30, 2023
Property, Plant and Equipment [Abstract] |
PROPERTY, PLANT AND EQUIPMENT |
NOTE 3 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of September 30, 2023 and 2022 consisted of the following:
(in thousands) | Estimated Useful Lives |  | September 30, 2023 |  | September 30, 2022
Drilling services equipment | 4 - 15 years |  | $ | 6,396,612 |  |  | $ | 6,369,888 |
Tubulars | 4 years |  | 564,032 |  |  | 569,496 |
Real estate properties | 10 - 45 years |  | 47,313 |  |  | 45,557 |
Other | 2 - 23 years |  | 443,366 |  |  | 422,479 |
Construction in progress 1 |  |  | 97,374 |  |  | 70,119 |
|  |  | 7,548,697 |  |  | 7,477,539 |
Accumulated depreciation |  |  | (4,627,002) |  |  | (4,516,730) |
Property, plant and equipment, net |  |  | $ | 2,921,695 |  |  | $ | 2,960,809 |
Assets held-for-sale |  |  | $ | 645 |  |  | $ | 4,333 |
(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 advances for 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 in the Consolidated Statements of Operations of $375.7 million, $396.0 million and $412.5 million includes abandonments of $3.3 million, $6.6 million and $2.0 million for the fiscal years 2023, 2022 and 2021, respectively. I n November 2022, a fire at a wellsite caused substantial damage to one of our super spec-rigs within our North America Solutions segment. The major components were destroyed beyond repair and considered a total loss, and, as a result, these assets were written off and the rig was removed from our available rig count. At the time of the loss, the rig was fully insured under replacement cost insurance. The insurance recovery is expected to exceed the net book value of the components written off. The loss of $9.2 million and an offsetting insurance recovery for the same amount are recorded within Depreciation and amortization in our Consolidated Statement of Operations for the fiscal year ended September 30, 2023. During the fiscal year ended September 30, 2023, we collected $9.2 million of the total expected insurance proceeds. Future proceeds in excess of the recognized loss will be recognized once all contingencies related to the insurance claim have been resolved. Assets Held-for-Sale The following table is a summary of the changes in 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 | 2,580 |
Less: |
Sale of assets held-for-sale | (67,592) |
Reclassification to assets held and used | (2,108) |
Balance at September 30, 2022 | 4,333 |
Plus: |
Asset additions | 1,177 |
Less: |
Sale of assets held-for-sale | (2,132) |
Impairment Expense | (2,733) |
Balance at September 30, 2023 | $ | 645 |
Fiscal Year 2021 Activity In March 2021, the Company's leadership decided to continue the strategy, that began in 2019, which was to focus on operating various types of highly capable upgraded rigs and phasing out the older, less capable fleet. As a result, the Company developed 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 represented their fair value less estimated cost to sell as of the assessment date, and were reclassified as held-for-sale in the second and third quarters of fiscal year 2021. As a result, we recognized a non-cash impairment charge of $56.4 million during the fiscal year ended September 30, 2021 in the Consolidated Statement of Operations. 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. As part of the sales agreement, the rigs were delivered and commissioned in stages over a twelve-month period subject to acceptance upon successful completion of final inspection on customary terms and conditions. The net book value of these assets were reclassified as held-for-sale in the fourth quarter of fiscal year 2021. No rigs were delivered to ADNOC Drilling as of September 30, 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 services, 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. As a result, we recognized a non-cash impairment charge of $14.4 million in the Consolidated Statements of Operations during the year ended September 30, 2021. Fiscal Year 2022 Activity During the fiscal year ended September 30, 2022, we closed on the sale of our trucking and casing running assets for total consideration less costs to sell of $6.0 million, in addition to the possibility of future earnout proceeds, resulting in a loss of $3.4 million recorded in Other (gain) loss on sale of assets within our Consolidated Statements of Operations. We recognized earnout proceeds associated with the sale of our trucking and casing running assets of $1.6 million and $1.1 million during the fiscal years ended September 30, 2023 and 2022, respectively, in Other (gain) loss on sale of assets within our Consolidated Statements of Operations. During the first quarter of fiscal year 2022, we identified two partial rig substructures that met the asset held-for-sale criteria and were reclassified as Assets held-for-sale on our 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 and recorded in the Consolidated Statement of Operations for fiscal year ended September 30, 2022. During the second quarter of fiscal year 2022, we completed the sale of these assets, resulting in no gain or loss as a result of the sale. During the same period, we identified two international FlexRig® drilling rigs located in Colombia that met the asset held-for-sale criteria and were reclassified as Assets held-for-sale on our Consolidated Balance Sheets. 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 and recorded in the Consolidated Statement of Operations during the fiscal year ended September 30, 2022, 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. During the second quarter of fiscal year ended September 30, 2022, we completed the sale of the two international FlexRig® drilling rigs for total consideration of $0.9 million, resulting in no gain or loss as a result of the sale. During the fiscal year ended September 30, 2022, ADNOC Drilling accepted delivery of eight rigs with an aggregate net book value of $55.6 million. As a result, we recognized a gain of $3.1 million, after incurring $27.8 million of selling costs, during the fiscal year ended September 30, 2022 in Other (gain) loss on sale of assets within our Consolidated Statement of Operations. Upon final acceptance of delivery, these rigs were removed from assets classified as held-for-sale as of September 30, 2022. We paid approximately $21.6 million in cash charges attributable to selling costs for the eight rigs during fiscal year 2022. Fiscal Year 2023 Activity During the fiscal year ended September 30, 2023, the Company initiated a plan to decommission and scrap four international FlexRig® drilling rigs and four conventional drilling rigs located in Argentina that are not suitable for unconventional drilling. As a result, these rigs were reclassified to Assets held-for-sale on our Consolidated Balance Sheets. The rigs’ aggregate net book value of $8.8 million was written down to the estimated scrap value of $0.7 million, which resulted in a non-cash impairment charge of $8.1 million within our International Solutions segment and recorded in Asset impairment charges within our Consolidated Statement of Operations during the fiscal year ended September 30, 2023. During the fiscal year ended September 30, 2023, our North America Solutions assets that were previously classified as Assets held-for-sale at September 30, 2022 were either sold or written down to scrap value. The aggregate net book value of these remaining assets was $3.0 million, which exceeded the estimated scrap value of $0.3 million, resulting in a non-cash impairment charge of $2.7 million. During the same period, we also identified additional equipment that met the asset held-for-sale criteria and was reclassified to Assets held-for-sale on our Consolidated Balance Sheets. The aggregate net book value of the equipment of $1.4 million was written down to its estimated scrap value of $0.1 million, resulting in a non-cash impairment charge of $1.3 million during the fiscal year ended September 30, 2023. These impairment charges are recorded in Asset impairment charges within our North America Solutions segment in our Consolidated Statement of Operations. The significant assumptions utilized in the valuations of held-for-sale assets 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 Gain on Reimbursement of Drilling Equipment We recognized a gain of $48.2 million, $29.4 million, $12.3 million in fiscal years 2023, 2022 and 2021, respectively, related to customer reimbursement for the current replacement value of lost or damaged drill pipe. Gains related to these asset sales are recorded in Gains on reimbursement of drilling equipment within our Consolidated Statements of Operations. Other (Gain)/Loss on Sale of Assets We recognized a (gain)/loss of $8.0 million, $(5.4) million and $11.3 million in fiscal years 2023, 2022 and 2021, respectively, related to the sale of rig equipment and other capital assets. These amounts are recorded in Other (gain) loss on sale of assets within our Consolidated Statements of Operations. Fiscal Year 2023 During the fiscal year ended September 30, 2023, we recognized a loss of $17.1 million as a result of scrapping excess drilling equipment and spares. Additionally, during the same fiscal period, we recognized a gain of $2.6 million, $2.4 million, and $2.5 million from vehicle sales, other drilling equipment sales, and other miscellaneous asset sales, respectively. We also recognized a gain of $1.6 million in earnout proceeds associated with the sale of our trucking services assets during the fiscal year ended September 30, 2022. Fiscal Year 2022 During the first quarter of fiscal year 2022, we closed on the sale of our trucking and casing running assets resulting in a loss of $3.4 million, as mentioned above. We also recognized a gain of $1.1 million in earnout proceeds associated with the sale of our trucking services assets during the fiscal year ended September 30, 2022. During the same fiscal period, ADNOC Drilling accepted delivery of eight rigs resulting in an aggregate gain of $3.1 million, as mentioned above. We also recognized a gain of $4.2 million related to the sale of other held-for-sale assets (discussed above) during the fiscal year ended September 30, 2022. Fiscal Year 2021 During the fiscal year ended September 30, 2021, we closed on 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. Additionally, during the fiscal year ended September 30, 2021, we sold excess drilling equipment and spares, which resulted in a loss of $31.2 million and we also sold assets previously classified as held-for-sale, which resulted in a $3.1 million gain.

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