Property And Equipment

12 Months Ended

Dec. 31, 2019

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 2019 and 2018 consisted of the following (in millions):



	2019		2018
Drilling rigs and equipment	$	17,714.0	$	14,542.5
Work-in-progress	473.6		779.2
Other	206.2		195.3
	$	18,393.8	$	15,517.0

Drilling rigs and equipment as of December 31, 2019 increased by $3.2 billion, or 22%, as compared to prior period, primarily due to $3.0 billion of assets acquired from the Rowan Transaction, and $385.0 million due to VALARIS JU-123 which was placed into service in the current period.

Work-in-progress as of December 31, 2019 primarily consisted of $417.4 million related to the construction of ultra-deepwater drillships VALARIS DS-13 and VALARIS DS-14.

Work-in-progress as of December 31, 2018 primarily consisted of $416.8 million related to the construction of ultra-deepwater drillships VALARIS DS-13 and VALARIS DS-14 and $352.4 million related to the construction of VALARIS JU-123, an ultra-premium harsh environment jackup rig.

VALARIS JU-123 was placed into service and reclassified from work-in-progress to drilling rigs and equipment during the year ended December 31, 2019.

Impairment of Long-Lived Assets

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. Together with the Rowan Transaction, and as a result of the evaluation of the strategy of the combined fleet, we determined that a triggering event occurred resulting in the performance of a fleet-wide recoverability test. We determined that estimated undiscounted cash flows were sufficient to cover the rigs carrying values and concluded that no impairments were necessary.

During 2019, we recorded a pre-tax, non-cash loss on impairment of $98.4 million on two older, non-core assets in our fleet upon classification as held-for-sale. We determined that the fair value less cost to sell was lower than each rig's carrying value and concluded that the rigs were impaired.

During 2018, we recorded a pre-tax, non-cash loss on impairment of $40.3 million related to one older non-core jackup rig. We concluded that a triggering event occurred due to the expiration of a legacy higher day rate contract resulting in the performance of a recoverability test. We determined that the estimated undiscounted cash flows over

the remaining useful life of the rig were not sufficient to recover the rig’s carrying value and concluded the rig was impaired as of December 31, 2018.

During 2017, we recognized a pre-tax, non-cash loss on impairment of $182.9 million related to older, less capable, non-core assets in our fleet. We determined that the remaining useful life of certain non-core rigs would not extend substantially beyond their current contracts, resulting in triggering events and the performance of recoverability tests. Our estimates of undiscounted cash flows over the revised estimated remaining useful lives were not sufficient to recover each asset’s carrying value. Accordingly, we concluded that two semisubmersibles and one jackup were impaired as of December 31, 2017.

For rigs classified as held-for-sale, we recorded an impairment for the difference between their carrying value and the fair value less costs to sell. We estimated fair value using significant other observable inputs including indicative scrap values based on historical sale prices.

For rigs whose carrying values were determined not to be recoverable, we recorded an impairment for the difference between their fair values and carrying values. We estimated the fair values 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. Forecasted day rates and utilization took into account market conditions and our anticipated business outlook.

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.