PROPERTY, PLANT AND EQUIPMENT

6 Months Ended

Mar. 31, 2024

Property, Plant and Equipment [Abstract]

NOTE 3 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment as of March 31, 2024 and September 30, 2023 consisted of the following:


(in thousands)	Estimated Useful Lives	March 31, 2024		September 30, 2023
Drilling services equipment	4 - 15 years	$	6,529,103	$	6,396,612
Tubulars	4 years	570,981		564,032
Real estate properties	10 - 45 years	48,463		47,313
Other	2 - 23 years	455,147		443,366
Construction in progress1		131,171		97,374
		7,734,865		7,548,697
Accumulated depreciation		(4,741,040)		(4,627,002)
Property, plant and equipment, net		$	2,993,825	$	2,921,695

Assets held-for-sale		$	—	$	645

(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 expense during the three months ended March 31, 2024 and 2023 was $102.9 million and $94.6 million, including abandonments of $2.6 million and $1.0 million, respectively. During the three months ended March 31, 2024, depreciation expense included $7.3 million of accelerated depreciation for components on rigs that are scheduled for conversion in fiscal year 2024 as compared to $0.8 million for three months ended March 31, 2023. Depreciation expense during the six months ended March 31, 2024 and 2023 was $195.3 million and $189.5 million, including abandonments of $3.1 million and $2.1 million, respectively. During the six months ended March 31, 2024, depreciation expense included $8.2 million of accelerated depreciation for components on rigs that are scheduled for conversion in fiscal year 2024 as compared to $1.7 million for six months ended March 31, 2023. These expenses are recorded within Depreciation and amortization on our Unaudited Condensed Consolidated Statements of Operations.

In 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 loss of $9.2 million was recorded as abandonment expense within Depreciation and amortization in our Unaudited Condensed Consolidated Statement of Operations for the six months ended March 31, 2023 and was offset by an insurance recovery that was also recognized within Depreciation and amortization for the same amount as the loss. During the fiscal year ended September 30, 2023, we collected $9.2 million of the total expected insurance proceeds. During the three months ended March 31, 2024, we recognized a gain on involuntary conversion of the rig of $5.5 million. We collected $5.0 million of insurance proceeds during the period, with an outstanding receivable of $0.5 million as of March 31, 2024. The total insurance proceeds received during the period exceeds the recognized loss and therefore was recognized as a gain within operating income during the three months ended March 31, 2024.

Impairment Charges

Fiscal Year 2024 Activity

We did not record any impairment charges during the three and six months ended March 31, 2024.

Fiscal Year 2023 Activity

During the six months ended March 31, 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 six months ended March 31, 2023. During the same period, we also identified additional equipment that met the asset held-for-sale criteria and was reclassified as Assets held-for-sale on our Unaudited Condensed 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 six months ended March 31, 2023. These impairment charges are recorded within our North America Solutions segment in our Unaudited Condensed Consolidated Statement of Operations.

During the six months ended March 31, 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 Unaudited Condensed Consolidated Balance Sheets as of March 31, 2023. 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 our Unaudited Condensed Consolidated Statement of Operations during the six months ended March 31, 2023.

Gain on Reimbursement of Drilling Equipment

We recognized gains of $7.5 million and $15.0 million during the three and six months ended March 31, 2024, respectively, and $11.6 million and $27.3 million during the three and six months ended March 31, 2023, 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 Unaudited Condensed Consolidated Statements of Operations.