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Property And Equipment | 12 Months Ended
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Dec. 31, 2021
Property, Plant and Equipment [Abstract] |
Property And Equipment | PROPERTY AND EQUIPMENT Property and equipment consisted of the following (in millions):
|  | Successor |  |  | Predecessor
|  | December 31, 2021 |  |  | December 31, 2020
Drilling rigs and equipment |  | $ | 886.9 |  |  |  | $ | 12,584.4 |
Work-in-progress |  | 35.6 |  |  |  | 446.1 |
Other |  | 34.5 |  |  |  | 178.8 |
|  | $ | 957.0 |  |  |  | $ | 13,209.3 |
Concurrent with our emergence from bankruptcy, we adopted fresh start accounting and adjusted the carrying value of our property and equipment to estimated fair value which included an adjustment to reconcile to our reorganization value. See "Note 3 - Fresh Start Accounting" for more information. Work-in-progress as of December 31, 2020 (Predecessor) primarily consisted of approximately $418 million related to the construction of ultra-deepwater drillships VALARIS DS-13 and VALARIS DS-14. Impairment of Long-Lived Assets Predecessor During the four months ended April 30, 2021, we recorded an aggregate pre-tax, non-cash impairment with respect to certain floaters of $756.5 million. During the year ended December 31, 2020 and the year ended December 31, 2019, we recorded an aggregate pre-tax, non-cash impairment with respect to certain floaters, jackups and spare equipment of $3.6 billion and $98.4 million, respectively. These pre-tax non-cash impairments are included in Loss on impairment in our Consolidated Statements of Operations. 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. For rigs whose carrying values are determined not to be recoverable, we record an impairment for the difference between their fair values and carrying values. Predecessor During the first quarter of 2021, as a result of challenging market conditions for certain of our floaters, we revised our near-term operating assumptions which resulted in a triggering event for purposes of evaluating impairment. We determined that the estimated undiscounted cash flows were not sufficient to recover the carrying values for certain rigs and concluded they were impaired as of March 31, 2021. Based on the asset impairment analysis performed as of March 31, 2021, we recorded a pre-tax, non-cash loss on impairment in the first quarter for certain floaters totaling $756.5 million. We measured the fair value of these assets to be $26.0 million at the time of impairment by applying either an income approach, using projected discounted cash flows or estimated sales price. These valuations were based on unobservable inputs that require significant judgments for which there is limited information, including, in the case of an income approach, assumptions regarding future day rates, utilization, operating costs and capital requirements. In instances where we applied an income approach, forecasted day rates and utilization took into account current market conditions and our anticipated business outlook. During the first quarter of 2020, the COVID-19 global pandemic and the response thereto negatively impacted the macro-economic environment and global economy. Global oil demand fell sharply at the same time global oil supply increased as a result of certain oil producers competing for market share which lead to a supply glut. As a consequence, Brent crude oil fell from around $60 per barrel at year-end 2019 to around $20 per barrel as of mid-April 2020. These adverse changes and impacts to our customer's capital expenditure plans in the first quarter resulted in further deterioration in our forecasted day rates and utilization for the remainder of 2020 and beyond. As a result, we concluded that a triggering event had occurred, and we performed a fleet-wide recoverability test. We determined that our estimated undiscounted cash flows were not sufficient to recover the carrying values of certain rigs and concluded they were impaired as of March 31, 2020. Based on the asset impairment analysis performed as of March 31, 2020, we recorded a pre-tax, non-cash loss on impairment in the first quarter with respect to certain floaters, jackups and spare equipment totaling $2.8 billion. We measured the fair value of these assets to be $72.3 million at the time of impairment by applying either an income approach, using projected discounted cash flows, or estimated sales price. These valuations were based on unobservable inputs that require significant judgments for which there is limited information, including, in the case of an income approach, assumptions regarding future day rates, utilization, operating costs and capital requirements. In instances where we applied an income approach, forecasted day rates and utilization took into account then current market conditions and our anticipated business outlook at that time, both of which had been impacted by the adverse changes in the business environment observed during the first quarter of 2020. During the second quarter of 2020, given the anticipated sustained market impacts arising from the decline in oil price and demand late in the first quarter, we revised our long-term operating assumptions which resulted in a triggering event for purposes of evaluating impairment and we performed a fleet-wide recoverability test. As a result, we recorded a pre-tax, non-cash impairment with respect to two floaters and spare equipment totaling $817.3 million. We measured the fair value of these assets to be $69.0 million at the time of impairment by applying an income approach or estimated scrap value. These valuations were based on unobservable inputs that require significant judgments for which there is limited information including, in the case of the income approach, assumptions regarding future day rates, utilization, operating costs and capital requirements. During 2019, 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. Assets held-for-sale and Assets sold 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. We continue to focus on our fleet management strategy in light of the composition of our rig fleet. While taking into account certain restrictions on the sales of assets under our Indenture dated April 30, 2021 (the “Indenture”), as part of our strategy, we may act opportunistically from time to time to monetize assets to enhance stakeholder value and improve our liquidity profile, in addition to reducing holding costs by selling or disposing of lower-specification or non-core rigs. To this end, we continually assess our rig portfolio and actively work with our rig broker to market certain rigs. See “Note 9 – Debt" for additional details on restrictions on the sales of assets. On a quarterly basis, we assess whether any rig meets the criteria established 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 or a negotiated sales price. We reassess the fair value of our held-for-sale assets on a quarterly basis and adjust the carrying value, as necessary. Successor In accordance with our business strategy described above, we sold VALARIS 22, VALARIS 37, VALARIS 100 and VALARIS 142, resulting in a pre-tax gain of $20.7 million during the eight months ending December 31, 2021 (Successor). Predecessor During the second quarter of 2020, we classified the following rigs as held-for-sale: VALARIS 8500, VALARIS 8501, VALARIS 8502, VALARIS DS-3, VALARIS DS-5, VALARIS DS-6 and VALARIS 105. The carrying value of these rigs was reduced to fair value, less costs to sell, based on their estimated sales price, and we recorded a pre-tax, non-cash loss on impairment totaling $15.0 million. These rigs were subsequently sold during the third quarter of 2020. During the third quarter of 2020, we classified VALARIS 8504, VALARIS 84 and VALARIS 88 as held-for-sale. The fair value, less costs to sell, based on each rig's estimated sales price, was in excess of the respective carrying value. As a result, we concluded that there was no impairment of these rigs. These rigs were sold during the fourth quarter of 2020. During the fourth quarter of 2020, we classified our Australia office building as held-for-sale. The fair value, less cost to sale, of this asset was determined to be in excess of the carrying value and we concluded that there was no impairment for the asset. Our Australia office building had a remaining aggregate carrying value of $2.3 million and is included in Other current assets, on our Consolidated Balance Sheet as of December 31, 2020. The office was subsequently sold in the first quarter of 2021 and we recognized an immaterial pre-tax gain during the four months ended April 30, 2021 (Predecessor). During the third quarter of 2019, we decided to retire VALARIS 5006 and classified the rig as held-for-sale. We recognized a pre-tax, non-cash loss on impairment of $88.2 million, which represented the difference between the carrying value of the rig and related assets and their estimated fair value, less costs to sell. We subsequently sold the rig during the fourth quarter of 2019. During the fourth quarter of 2019, we classified VALARIS 6002, VALARIS 68 and VALARIS 70 as held-for-sale. With the exception of VALARIS 70, we determined that the fair value, less costs to sell, based on each rig's estimated sales price, was in excess of the respective carrying value. Therefore, we concluded that there was no impairment for VALARIS 6002 and VALARIS 68. For VALARIS 70, we recognized a pre-tax impairment charge of $10.2 million. VALARIS 6002 and VALARIS 68 were subsequently sold in the first quarter of 2020 and VALARIS 70 was sold in the second quarter of 2020. VALARIS 101 was sold and resulted in a gain of $5.3 million during the four months ended April 30, 2021 (Predecessor).

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- Definition The entire disclosure for long-lived, physical asset used in normal conduct of business and not intended for resale. Includes, but is not limited to, work of art, historical treasure, and similar asset classified as collections. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 958 -SubTopic 360 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=120429125&loc=d3e99893-112916 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 958 -SubTopic 360 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=120429125&loc=SL120174063-112916 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 958 -SubTopic 360 -Section 50 -Paragraph 1 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=120429125&loc=d3e99779-112916 + Details
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