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Property And Equipment | 12 Months Ended
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Dec. 31, 2015
Property, Plant and Equipment [Abstract] |
Property And Equipment | PROPERTY AND EQUIPMENT Property and equipment as of December 31, 2015 and 2014 consisted of the following (in millions):
|  | 2015 |  | 2014
Drilling rigs and equipment |  | $ | 11,001.8 |  |  | $ | 13,253.2 |
Other |  | 180.0 |  |  | 135.0 |
Work in progress |  | 1,537.6 |  |  | 1,587.3 |
|  | $ | 12,719.4 |  |  | $ | 14,975.5 |
During 2015, drilling rigs and equipment declined $2.3 billion primarily due to a loss on impairment of $2.6 billion and depreciation expense of $572.5 million. These declines were partially offset by ENSCO DS-8 and ENSCO 110, which were placed into service during 2015, and capital upgrades to the existing rig fleet. Work in progress as of December 31, 2015 primarily consisted of $1.1 billion related to the construction of ultra deepwater drillships ENSCO DS-9 and ENSCO DS-10, $259.8 million related to the construction of ENSCO 140 and ENSCO 141 premium jackups rigs and $71.1 million related to the construction of ENSCO 123, an ultra-premium harsh environment jackup rig. ENSCO DS-9 has been delivered but has not been placed into service. Work in progress as of December 31, 2014 primarily consisted of $820.1 million related to the construction of ENSCO DS-8, ENSCO DS-9 and ENSCO DS-10 ultra-deepwater drillships, $233.1 million related to a capital enhancement project on ENSCO 5006, $179.3 million related to the construction of ENSCO 110, ENSCO 140 and ENSCO 141 premium jackup rigs, $59.2 million related to the construction of ENSCO 123 ultra-premium harsh environment jackup rig and costs associated with various modification and enhancement projects. Impairment of Long-Lived Assets Year Ended December 31, 2015 - During 2015, we recorded a pre-tax, non-cash loss on impairment of long-lived assets of $2,618.9 million, of which $2,470.3 million was included in (loss) income from continuing operations and $148.6 million was included in loss from discontinued operations, net in our consolidated statement of operations. Assets held-for-sale We continually assess our rig portfolio and actively work with our rig broker to market certain rigs that no longer meet our standards for economic returns or are not part of our long-term strategic plan. On a quarterly basis, we assess whether any rig meets the criteria established by Financial Accounting Standards Board 360-10-45 for held-for-sale classification on our balance sheet. All rigs classified as held-for-sale are recorded at fair value, less costs to sell. We measure the fair value of our assets held-for-sale by applying a market approach based on unobservable third-party estimated prices that would be received in exchange for the assets in an orderly transaction between market participants. We reassess the fair value of our held-for-sale assets on a quarterly basis and adjust the carrying value, as necessary. During 2015, we adopted the Financial Accounting Standards Board’s Accounting Standards Update 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity ("Update 2014-08"). Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. As a result, individual assets that were classified as held-for-sale during 2015 are not reported as discontinued operations. Rigs that were classified as held-for-sale prior to 2015 continue to be reported as discontinued operations. During the third quarter, we began marketing for sale ENSCO 91, an older, less capable jackup rig that we cold-stacked during the second quarter. We concluded that the rig met the held-for-sale criteria during the third quarter and its carrying value was reduced to fair value, less costs to sell, based on its estimated sales price. We recorded a pre-tax, non-cash loss on impairment totaling $10.0 million, which was included in loss on impairment within income from continuing operations in our consolidated statement of operations for the year ended December 31, 2015. Also during the third quarter, we concluded that impairments were required on certain held-for-sale rigs as a result of declines in fair value. We recorded a pre-tax, non-cash loss on impairment totaling $25.6 million, which was included in loss from discontinued operations, net, in our consolidated statement of operations for the year ended December 31, 2015. During the fourth quarter, we concluded that additional impairments were required due to our decision to sell our held-for-sale rigs for scrap value. As a result, we recognized a pre-tax, non-cash loss on impairment of $115.8 million, which was included in loss from discontinued operations, net, in our consolidated statement of operations for the year ended December 31, 2015. See “Note 10 - Discontinued Operations” for additional information on rigs classified as held-for-sale and presented in discontinued operations. Our six held-for-sale rigs have a remaining aggregate carrying value of $5.5 million and are included in other assets, net, on our consolidated balance sheet as of December 31, 2015. Assets held-for-use On a quarterly basis, we evaluate the carrying value of our property and equipment to identify events or changes in circumstances ("triggering events") that indicate the carrying value may not be recoverable. During the fourth quarter, commodity prices declined with Brent crude oil prices trading around $35 per barrel as of December 31, 2015. Commodity prices continued to decline further into 2016, and Brent crude oil prices reached a ten-year low of approximately $26 per barrel in January 2016. These prices resulted in significant capital spending reductions by our customers, causing a decline in day rates for the few contracts executed during the fourth quarter. Customers have delayed drilling programs and are exploring subletting opportunities for contracted rigs thereby exacerbating supply pressure. In addition, certain customers are requesting contract concessions or terminating drilling contracts. Customers are expected to continue to operate under reduced budgets until we see a meaningful recovery in commodity prices. The significant supply and demand imbalance will continue to be adversely impacted by future newbuild deliveries, program delays and lower capital spending by operators. These adverse changes resulted in further deterioration in our forecasted day rates and utilization during the fourth quarter. As a result, we concluded that a triggering event had occurred. Based on the asset impairment analysis performed as of December 31, 2015, we recorded a pre-tax, non-cash loss on impairment with respect to certain floaters and jackups totaling $2,460.3 million. The impairment charge was included in loss on impairment in our consolidated statement of operations for the year ended December 31, 2015. We measured the fair value of these rigs by applying either an income approach, using projected discounted cash flows, or a market approach. These valuations were based on unobservable inputs that require significant judgments for which there is limited information, including assumptions regarding future day rates, utilization, operating costs and capital requirements. In instances where we applied an income approach, forecasted day rates and utilization take into account current market conditions and our anticipated business outlook, both of which have been impacted by the adverse changes in the business environment observed during the fourth quarter. The day rates reflect contracted rates during the respective contracted periods and our estimate of market day rates in uncontracted periods. The forecasted market day rates were depressed in the near-term but were forecasted to grow in the longer-term and terminal period. Operating costs were forecasted using a combination of our historical average operating costs and expected future costs, adjusted for an estimated inflation factor. Capital requirements were based on our estimates of future capital costs, taking into consideration our historical trends. The estimated capital requirements included cash outflows to maintain the current operating condition of our rigs through their remaining useful lives. In instances where we applied a market approach, the fair value was based on unobservable third-party estimated prices that would be received in exchange for the assets in an orderly transaction between market participants. We validated all third-party estimated prices using our forecasts of economic returns for the respective rigs or other market data. If the global economy, our overall business outlook, and/or our expectations regarding the marketability of one or more of our drilling rigs deteriorate further, we may conclude that a triggering event has occurred and perform a recoverability test that could lead to a material impairment charge in future periods. Year Ended December 31, 2014 - During 2014, we recorded a pre-tax, non-cash loss on impairment of long-lived assets of $2,463.1 million, of which $1,220.8 million was included in (loss) income from continuing operations and $1,242.3 million was included in loss from discontinued operations, net, in our consolidated statement of operations. These losses were recorded during the second and fourth quarters of 2014. During the second quarter of 2014, demand for floaters deteriorated as a result of continued reductions in capital spending by operators in addition to delays in operators’ drilling programs. The reduction in demand, combined with the increasing supply from newbuild floater deliveries, led to a very competitive market. In general, contracting activity declined significantly, and day rates and utilization came under pressure, especially for older, less capable floaters. In response to the adverse change in the floaters business climate, we evaluated our older, less capable floaters and committed to a plan to sell five rigs. ENSCO 5000, ENSCO 5001, ENSCO 5002, ENSCO 6000 and ENSCO 7500 were removed from our portfolio of rigs marketed for contract drilling services and classified as held-for-sale. These rigs were written down to fair value, less costs to sell. We recorded a pre-tax, non-cash loss on impairment totaling $546.4 million during the second quarter associated with these rigs. The impairment charge was included in loss from discontinued operations, net, in our consolidated statement of operations for the year ended December 31, 2014. Also during the second quarter of 2014, as a result of the adverse change in the floater business climate, our decision to sell five floaters and the impairment charge incurred on the held-for-sale floaters, we concluded that a triggering event had occurred and performed an asset impairment analysis on our remaining older, less capable floaters. Based on the analysis performed as of May 31, 2014, we recorded an additional pre-tax, non-cash loss on impairment with respect to four other floaters totaling $991.5 million, of which $288.0 million related to ENSCO DS-2 that was removed from our portfolio of rigs marketed for contract drilling services during the fourth quarter of 2014. The ENSCO DS-2 impairment charge was reclassified to loss from discontinued operations, net, in our consolidated statement of operations for the year ended December 31, 2014. The remaining $703.5 million impairment charge was included in loss on impairment in our consolidated statement of operations for the year ended December 31, 2014. We measured the fair value of these rigs by applying an income approach, using projected discounted cash flows. These valuations were based on unobservable inputs that require significant judgments for which there is limited information, including assumptions regarding future day rates, utilization, operating costs and capital requirements. During the fourth quarter of 2014, Brent crude oil prices declined from approximately $95 per barrel to near $55 per barrel on December 31, 2014. These declines resulted in further reductions in capital spending by operators, including the cancellation or deferral of planned drilling programs. As a result, day rates and utilization came under further pressure, especially for older, less capable rigs. In response to the adverse change in business climate, we evaluated our aged rigs and committed to a plan to sell one additional floater and two jackups. ENSCO DS-2, ENSCO 58 and ENSCO 90 were removed from our portfolio of rigs marketed for contract drilling services. These rigs were written down to fair value, less costs to sell. In addition to the asset impairment recorded during the second quarter, we recorded an additional pre-tax, non-cash loss on impairment totaling $407.9 million during the fourth quarter on our held-for-sale rigs. The impairment charge was included in loss from discontinued operations, net, in our consolidated statement of operations for the year ended December 31, 2014. Also during the fourth quarter of 2014, as a result of the decline in commodity prices and adverse changes in the offshore drilling market, our decision to sell an additional floater and two jackups and the impairment charge incurred on the held-for-sale rigs, we concluded that a triggering event had occurred and performed an asset impairment analysis for all floaters and jackups. Based on the analysis performed as of December 31, 2014, we recorded an additional pre-tax, non-cash loss on impairment with respect to two older, less capable floaters and ten older, less capable jackups totaling $517.3 million. The impairment charge was included in loss on impairment in our consolidated statement of operations for the year ended December 31, 2014. We measured the fair value of these rigs by applying either an income approach, using projected discounted cash flows, or a market approach. These valuations were based on unobservable inputs that require significant judgments for which there is limited information, including assumptions regarding future day rates, utilization, operating costs and capital requirements. In instances where we applied a market approach, the fair value was based on unobservable third-party estimated prices that would be received in exchange for the assets in an orderly transaction between market participants. We validated all third-party estimated prices using our forecasts of economic returns for the respective rigs.

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- Definition The entire disclosure for long-lived, physical assets used in the normal conduct of business and not intended for resale. Includes, but is not limited to, accounting policies and methodology, roll forwards, depreciation, depletion and amortization expense, including composite depreciation, accumulated depreciation, depletion and amortization expense, useful lives and method used, income statement disclosures, assets held for sale and public utility disclosures. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.13-14) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=51717284&loc=d3e1361-107760 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=51719941&loc=d3e2921-110230 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6391035&loc=d3e2868-110229 + Details
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