DISCONTINUED OPERATIONS

Our business strategy has been to focus on ultra-deepwater floater and premium jackup operations and de-emphasize other assets and operations that are not part of our long-term strategic plan or that no longer meet our standards for economic returns. Consistent with this strategy, we sold nine jackup rigs, three dynamically positioned semisubmersible rigs, two moored semisubmersible rigs and two drillships during the three-year period ended December 31, 2017. We are marketing for sale ENSCO 7500, which was classified as held-for-sale in our consolidated financial statements as of December 31, 2017.

Following the Merger, we continue to focus on our fleet management strategy in light of the new composition of our rig fleet and are reviewing our fleet composition as we continue positioning Ensco for the future. As part of this strategy, we may act opportunistically from time to time to monetize assets to enhance shareholder value and improve our liquidity profile, in addition to selling or disposing of older, lower-specification or non-core rigs.

Prior to 2015, individual rig disposals were classified as discontinued operations once the rigs met the criteria to be classified as held-for-sale. The operating results of the rigs through the date the rig was sold as well as the gain or loss on sale were included in results from discontinued operations, net, in our consolidated statement of operations. Net proceeds from the sales of the rigs were included in investing activities of discontinued operations in our consolidated statement of cash flows in the period in which the proceeds were received.

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 are classified as held-for-sale beginning in 2015 are not reported as discontinued operations and their operating results and gain or loss on sale of these rigs are included in contract drilling expense in our consolidated statements of operations. Rigs that were classified as held-for-sale prior to 2015 continue to be reported as discontinued operations.

During 2014, we committed to a plan to sell various non-core floaters and jackups. The operating results for these rigs and any related gain or loss on sale were included in income (loss) from discontinued operations, net, in our consolidated statements of operations. ENSCO 7500 continues to be actively marketed for sale and was classified as held-for-sale on our December 31, 2017 consolidated balance sheet.

In September 2014, we sold ENSCO 93, a jackup contracted to Pemex. In connection with this sale, we executed a charter agreement with the purchaser to continue operating the rig for the remainder of the Pemex contract, which ended in July 2015, less than one year from the date of sale. Our management services following the sale did not constitute significant ongoing involvement and therefore, the rig's operating results through the term of the contract and loss on sale were included in results from discontinued operations, net, in our consolidated statements of operations.

The following rig sales were included in discontinued operations during the three-year period ended December 31, 2017 (in millions):



Rig	Date of Sale	Segment⁽¹⁾	Net Proceeds		Net Book Value⁽²⁾		Pre-tax Gain/(Loss)
ENSCO 90	June 2017	Jackups	$	.3	$	.3	$	—
ENSCO DS-2	May 2016	Floaters	5.0		4.0		1.0
ENSCO 58	April 2016	Jackups	.7		.3		.4
ENSCO 6000	April 2016	Floaters	.6		.8		(.2		)
ENSCO 5001	December 2015	Floaters	2.4		2.5		(.1		)
ENSCO 5002	June 2015	Floaters	1.6		—		1.6
			$	10.6	$	7.9	$	2.7

⁽¹⁾ The rigs' operating results were reclassified to discontinued operations in our consolidated statements of operations for each of the years in the three-year period ended December 31, 2017 and were previously included within the specified operating segment.

⁽²⁾ Includes the rig's net book value as well as inventory and other assets on the date of the sale.

The following table summarizes income (loss) from discontinued operations for each of the years in the three-year period ended December 31, 2017 (in millions):



	2017			2016			2015
Revenues	$	—		$	—		$	19.5
Operating expenses	1.5			3.1			39.5
Operating loss	(1.5		)	(3.1		)	(20.0		)
Income tax benefit	(2.1		)	(10.1		)	(7.7		)
Loss on impairment, net	—			—			(120.6		)
Gain on disposal of discontinued operations, net	.4			1.1			4.3
Income (loss) from discontinued operations	$	1.0		$	8.1		$	(128.6	)

On a quarterly basis, we reassess the fair values of our held-for-sale rigs to determine whether any adjustments to the carrying values are necessary. We recorded a non-cash loss on impairment totaling $120.6 million (net of tax benefits of $28.0 million), for the year ended December 31, 2015, as a result of declines in the estimated fair values of our held-for-sale rigs. The loss on impairment was included in loss from discontinued operations, net, in our consolidated statement of operations for the year ended December 31, 2015. We measured the fair value of held-for-sale rigs by applying a market approach, which was based on an unobservable third-party estimated price that would be received in exchange for the assets in an orderly transaction between market participants.

Income tax benefit from discontinued operations for the years ended December 31, 2017 and 2016 included $2.1 million and $10.2 million of discrete tax benefits, respectively.

Debt and interest expense are not allocated to our discontinued operations.