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LEASES | 12 Months Ended
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Dec. 31, 2020
Leases [Abstract] |
LEASES | LEASESWe lease commercial office space, fleet vehicles, drilling rigs and facilities. We do not recognize acquired leases or leases with an initial term of 12 months or less on the balance sheet. Upon adoption of fresh start accounting, our right of use (ROU) assets and lease liabilities were recorded at the present value of the remaining fixed minimum lease payments as if the leases were new leases upon our emergence date. The effect of fresh start accounting on leases was not material. Refer to Note 3 Fresh Start Accounting for more details. Balance sheet information related to our operating and finance leases as of December 31, 2020 and December 31, 2019 were as follows:
|  |  | Successor |  |  | Predecessor
| Classification |  | 2020 |  |  | 2019
Assets |  |  | (in millions) |  |  | (in millions)
Operating | Other assets |  | $ | 38 |  |  |  | $ | 59 |
Finance | PP&E |  | 1 |  |  |  | 2 |
Total leased assets |  |  | $ | 39 |  |  |  | $ | 61 |
Liabilities |  |  |  |  |  |
Current |  |  |  |  |  |
Operating | Accrued liabilities |  | $ | 6 |  |  |  | $ | 27 |
Finance | Accrued liabilities |  | 1 |  |  |  | 1 |
Long-term |  |  |  |  |  |
Operating | Other long-term liabilities |  | 35 |  |  |  | 37 |
Finance | Other long-term liabilities |  | — |  |  |  | 1 |
Total lease liabilities |  |  | $ | 42 |  |  |  | $ | 66 |
In considering whether a contract contains a lease, we first considered whether there was an identifiable asset and then considered how and for what purpose the asset would be used over the contract term. Our lease liability was determined by measuring the present value of the remaining fixed minimum lease payments discounted using our incremental borrowing rate (IBR). In determining our IBR, we considered the average cost of borrowing for publicly traded corporate bond yields, which were adjusted to reflect our credit rating, the remaining lease term for each class of our leases and frequency of payments. We combine lease and nonlease components in determining fixed minimum lease payments for our drilling rigs and commercial office space. If applicable, fixed minimum lease payments are reduced by lease incentives for our commercial buildings and increased by mobilization and demobilization fees for our drilling rigs. Certain of our lease agreements include options to renew, which we exercise at our sole discretion, and we did not include these options in determining our fixed minimum lease payments over the lease term. Our lease liability does not include options to extend or terminate our leases. Our leases do not include options to purchase the leased property. Lease agreements for our fleet vehicles include residual value guarantees, none of which are recognized in our financial statements until the underlying contingency is resolved. Variable lease costs for our drilling rigs include costs to operate, move and repair the rigs. Variable lease costs for certain of our commercial office buildings included utilities and common area maintenance charges. Variable lease costs for our fleet vehicles included other-than-routine maintenance and other various amounts in excess of our fixed minimum rental fee. Our lease costs, including amounts capitalized to PP&E, were as follows:
| Successor |  |  | Predecessor
| November 1, 2020 - December 31, 2020 |  |  | January 1, 2020 - October 31, 2020 |  | January 1, 2019 - December 31, 2019
| (in millions) |  |  | (in millions)
Operating lease costs | $ | 2 |  |  |  | $ | 23 |  |  | $ | 52 |
Short-term lease costs(a) | 7 |  |  |  | 25 |  |  | 74 |
Variable lease costs(b) | — |  |  |  | 4 |  |  | 21 |
Total operating lease costs | 9 |  |  |  | 52 |  |  | 147 |
Finance lease costs | — |  |  |  | $ | 1 |  |  | $ | — |
Sublease income | $ | — |  |  |  | $ | (1) |  |  | $ | (1) |
Total lease costs | $ | 9 |  |  |  | $ | 52 |  |  | $ | 146 |
(a)Contracts with terms of less than one month or less are excluded from our disclosure of short-term lease costs. (b)No variable lease costs related to drilling rigs in the Successor period. The Predecessor period of January 1, 2020 through October 31, 2020 includes $3 million related to drilling rigs and 2019 includes $19 million, which were capitalized to PP&E. We have two contracts treated as finance leases, which were not material to our consolidated results of operations. We sublease certain commercial office space to third parties where we are the primary obligor under the head lease. The lease terms on those subleases never extend past the term of the head lease and the subleases contain no extension options or residual value guarantees. Sublease income is recognized based on the contract terms and included as a reduction of operating lease cost under our head lease. Sublease income was not material to our consolidated financial statements for all periods presented. Other supplemental information related to our operating and finance leases as of December 31, 2020 and December 31, 2019 is provided below:
| Successor |  |  | Predecessor
| November 1, 2020 - December 31, 2020 |  |  | January 1, 2020 - October 31, 2020 |  | January 1, 2019 - December 31, 2019
| (in millions) |  |  | (in millions)
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |  |  |
Operating cash outflows from operating leases | $ | 2 |  |  |  | $ | 9 |  |  | $ | 14 |
Investing cash outflows from operating leases | $ | — |  |  |  | $ | 14 |  |  | $ | 40 |
Financing cash outflows from finance leases | $ | — |  |  |  | $ | 1 |  |  | $ | — |
ROU assets obtained in exchange for new operating lease liabilities | $ | — |  |  |  | $ | — |  |  | $ | 122 |
ROU assets obtained in exchange for new finance lease liabilities | $ | — |  |  |  | $ | — |  |  | $ | 2 |
Impairment charges related to ROU assets | $ | — |  |  |  | $ | 2 |  |  | $ | 3 |
| Successor |  |  | Predecessor
| 2020 |  |  | 2019
Operating Leases |  |  |  |
Weighted-average remaining lease term (in years) | 6.81 |  |  | 4.75
Weighted-average discount rate | 4.5 | % |  |  | 12.2 | %
Finance Leases |  |  |  |
Weighted-average remaining lease term (in years) | 1.33 |  |  | 2.33
Weighted-average discount rate | 4.0 | % |  |  | 8.5 | %
The difference in the weighted-average discount rate between operating leases and finance leases primarily relates to lease term. As part of our company-wide consolidation of office space, we vacated certain office space in 2020 and 2019, some of which we subleased. When we enter into a sublease agreement, we evaluate the carrying value of our ROU asset (including the carrying value of related tenant improvements) for impairment based on future identifiable cash flows. We may terminate leases for vacated office space before the expiration of the lease term. In cases where we decided not to sublease vacated commercial office space, we shorten the useful life of the ROU assets and related tenant improvements to recover our remaining costs over our expected period of use. Maturities of our operating and finance lease liabilities at December 31, 2020 are as follows:
| Successor
| Operating |  | Finance
| Leases |  | Leases
| (in millions)
2021 | $ | 8 |  |  | $ | 1 |
2022 | 8 |  |  | — |
2023 | 7 |  |  | — |
2024 | 6 |  |  | — |
2025 | 5 |  |  | — |
Thereafter | 15 |  |  | — |
Less: Interest | (7) |  |  | — |
Present value of lease liabilities | $ | 42 |  |  | $ | 1 |
LEASES | LEASESWe lease commercial office space, fleet vehicles, drilling rigs and facilities. We do not recognize acquired leases or leases with an initial term of 12 months or less on the balance sheet. Upon adoption of fresh start accounting, our right of use (ROU) assets and lease liabilities were recorded at the present value of the remaining fixed minimum lease payments as if the leases were new leases upon our emergence date. The effect of fresh start accounting on leases was not material. Refer to Note 3 Fresh Start Accounting for more details. Balance sheet information related to our operating and finance leases as of December 31, 2020 and December 31, 2019 were as follows:
|  |  | Successor |  |  | Predecessor
| Classification |  | 2020 |  |  | 2019
Assets |  |  | (in millions) |  |  | (in millions)
Operating | Other assets |  | $ | 38 |  |  |  | $ | 59 |
Finance | PP&E |  | 1 |  |  |  | 2 |
Total leased assets |  |  | $ | 39 |  |  |  | $ | 61 |
Liabilities |  |  |  |  |  |
Current |  |  |  |  |  |
Operating | Accrued liabilities |  | $ | 6 |  |  |  | $ | 27 |
Finance | Accrued liabilities |  | 1 |  |  |  | 1 |
Long-term |  |  |  |  |  |
Operating | Other long-term liabilities |  | 35 |  |  |  | 37 |
Finance | Other long-term liabilities |  | — |  |  |  | 1 |
Total lease liabilities |  |  | $ | 42 |  |  |  | $ | 66 |
In considering whether a contract contains a lease, we first considered whether there was an identifiable asset and then considered how and for what purpose the asset would be used over the contract term. Our lease liability was determined by measuring the present value of the remaining fixed minimum lease payments discounted using our incremental borrowing rate (IBR). In determining our IBR, we considered the average cost of borrowing for publicly traded corporate bond yields, which were adjusted to reflect our credit rating, the remaining lease term for each class of our leases and frequency of payments. We combine lease and nonlease components in determining fixed minimum lease payments for our drilling rigs and commercial office space. If applicable, fixed minimum lease payments are reduced by lease incentives for our commercial buildings and increased by mobilization and demobilization fees for our drilling rigs. Certain of our lease agreements include options to renew, which we exercise at our sole discretion, and we did not include these options in determining our fixed minimum lease payments over the lease term. Our lease liability does not include options to extend or terminate our leases. Our leases do not include options to purchase the leased property. Lease agreements for our fleet vehicles include residual value guarantees, none of which are recognized in our financial statements until the underlying contingency is resolved. Variable lease costs for our drilling rigs include costs to operate, move and repair the rigs. Variable lease costs for certain of our commercial office buildings included utilities and common area maintenance charges. Variable lease costs for our fleet vehicles included other-than-routine maintenance and other various amounts in excess of our fixed minimum rental fee. Our lease costs, including amounts capitalized to PP&E, were as follows:
| Successor |  |  | Predecessor
| November 1, 2020 - December 31, 2020 |  |  | January 1, 2020 - October 31, 2020 |  | January 1, 2019 - December 31, 2019
| (in millions) |  |  | (in millions)
Operating lease costs | $ | 2 |  |  |  | $ | 23 |  |  | $ | 52 |
Short-term lease costs(a) | 7 |  |  |  | 25 |  |  | 74 |
Variable lease costs(b) | — |  |  |  | 4 |  |  | 21 |
Total operating lease costs | 9 |  |  |  | 52 |  |  | 147 |
Finance lease costs | — |  |  |  | $ | 1 |  |  | $ | — |
Sublease income | $ | — |  |  |  | $ | (1) |  |  | $ | (1) |
Total lease costs | $ | 9 |  |  |  | $ | 52 |  |  | $ | 146 |
(a)Contracts with terms of less than one month or less are excluded from our disclosure of short-term lease costs. (b)No variable lease costs related to drilling rigs in the Successor period. The Predecessor period of January 1, 2020 through October 31, 2020 includes $3 million related to drilling rigs and 2019 includes $19 million, which were capitalized to PP&E. We have two contracts treated as finance leases, which were not material to our consolidated results of operations. We sublease certain commercial office space to third parties where we are the primary obligor under the head lease. The lease terms on those subleases never extend past the term of the head lease and the subleases contain no extension options or residual value guarantees. Sublease income is recognized based on the contract terms and included as a reduction of operating lease cost under our head lease. Sublease income was not material to our consolidated financial statements for all periods presented. Other supplemental information related to our operating and finance leases as of December 31, 2020 and December 31, 2019 is provided below:
| Successor |  |  | Predecessor
| November 1, 2020 - December 31, 2020 |  |  | January 1, 2020 - October 31, 2020 |  | January 1, 2019 - December 31, 2019
| (in millions) |  |  | (in millions)
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |  |  |
Operating cash outflows from operating leases | $ | 2 |  |  |  | $ | 9 |  |  | $ | 14 |
Investing cash outflows from operating leases | $ | — |  |  |  | $ | 14 |  |  | $ | 40 |
Financing cash outflows from finance leases | $ | — |  |  |  | $ | 1 |  |  | $ | — |
ROU assets obtained in exchange for new operating lease liabilities | $ | — |  |  |  | $ | — |  |  | $ | 122 |
ROU assets obtained in exchange for new finance lease liabilities | $ | — |  |  |  | $ | — |  |  | $ | 2 |
Impairment charges related to ROU assets | $ | — |  |  |  | $ | 2 |  |  | $ | 3 |
| Successor |  |  | Predecessor
| 2020 |  |  | 2019
Operating Leases |  |  |  |
Weighted-average remaining lease term (in years) | 6.81 |  |  | 4.75
Weighted-average discount rate | 4.5 | % |  |  | 12.2 | %
Finance Leases |  |  |  |
Weighted-average remaining lease term (in years) | 1.33 |  |  | 2.33
Weighted-average discount rate | 4.0 | % |  |  | 8.5 | %
The difference in the weighted-average discount rate between operating leases and finance leases primarily relates to lease term. As part of our company-wide consolidation of office space, we vacated certain office space in 2020 and 2019, some of which we subleased. When we enter into a sublease agreement, we evaluate the carrying value of our ROU asset (including the carrying value of related tenant improvements) for impairment based on future identifiable cash flows. We may terminate leases for vacated office space before the expiration of the lease term. In cases where we decided not to sublease vacated commercial office space, we shorten the useful life of the ROU assets and related tenant improvements to recover our remaining costs over our expected period of use. Maturities of our operating and finance lease liabilities at December 31, 2020 are as follows:
| Successor
| Operating |  | Finance
| Leases |  | Leases
| (in millions)
2021 | $ | 8 |  |  | $ | 1 |
2022 | 8 |  |  | — |
2023 | 7 |  |  | — |
2024 | 6 |  |  | — |
2025 | 5 |  |  | — |
Thereafter | 15 |  |  | — |
Less: Interest | (7) |  |  | — |
Present value of lease liabilities | $ | 42 |  |  | $ | 1 |

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- Definition The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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