Note 5—Drilling Fleet

Construction work in progress—For the six months ended June 30, 2017 and 2016, the changes in our construction work in progress, including capital expenditures and other capital additions, were as follows (in millions):


	Six months ended
	June 30,
	2017		2016
Construction work in progress, at beginning of period	$	2,171	$	3,735

Capital expenditures
Newbuild construction program		200		740
Other equipment and construction projects		58		86
Total capital expenditures		258		826
Changes in accrued capital additions		(23)		(90)

Construction in progress sold		(289)		—
Property and equipment placed into service
Newbuild construction program		—		(1,672)
Other property and equipment		(47)		(165)
Construction work in progress, at end of period	$	2,070	$	2,634

Impairments of assets held and used—During the three months ended June 30, 2017, we identified indicators that the asset groups in our contract drilling services reporting unit may not be recoverable. Such indicators included recent significant declines in commodity prices and the market value of our stock, a reduction of projected dayrates and a further extension of currently low utilization rates. As a result of our testing, we determined that the carrying amount of the midwater floater asset group was impaired. In the three and six months ended June 30, 2017, we recognized a loss of $96 million ($0.25 per diluted share), which had no tax effect, associated with the impairment of the midwater floater asset group. We measured the fair value of this asset group by applying a combination of income and market approaches, using projected discounted cash flows and estimates of the exchange price that would be received for the assets in the principal or most advantageous markets for the assets in an orderly transaction between participants as of the measurement date. Our estimate of fair value required us to use significant unobservable inputs, representative of a Level 3 fair value measurement, including assumptions related to the future performance of our contract drilling services reporting unit, such as future commodity prices, projected demand for our services, rig availability and dayrates.

Impairments of assets held for sale—In the three and six months ended June 30, 2017, we recognized an aggregate loss of $17 million ($0.04 per diluted share), which had no tax effect, associated with the impairment of the midwater floaters Transocean Prospect and Transocean Searcher, along with related assets, which were classified as held for sale at the time of impairment. We measured the impairment of the drilling units and related equipment as the amount by which the carrying amount exceeded the estimated fair value less costs to sell. We estimated the fair value of the assets using significant other observable inputs, representative of a Level 2 fair value measurement, including indicative market values for the drilling units and related assets to be sold for scrap value.

In the three months ended June 30, 2016, we recognized an aggregate loss of $12 million ($0.03 per diluted share), which had no tax effect, associated with the impairment of the deepwater floater Sedco 702, along with related assets, which were classified as held for sale at the time of impairment. In the six months ended June 30, 2016, we recognized an aggregate loss of $15 million ($14 million, net of tax, or $0.04 per diluted share) associated with the impairment of the deepwater floater Sedco 702 and the midwater floater Transocean John Shaw, along with related assets, which were classified as held for sale at the time of impairment. We measured the impairment of the drilling units and related assets as the amount by which the carrying amount exceeded the estimated fair value less costs to sell. We estimated the fair value of the assets using significant other observable inputs, representative of Level 2 fair value measurements, including indicative market values for the drilling units and related assets to be sold for scrap value.

If we commit to plans to sell additional rigs for values below the respective carrying amounts or commit to plans to recycle additional rigs and sell them for scrap value, we may be required to recognize additional losses associated with the impairment of such assets. Such losses could be material.

Dispositions—On May 31, 2017, in connection with our efforts to dispose of non‑strategic assets, we completed the sale of 10 high‑specification jackups, including GSF Constellation I, GSF Constellation II, GSF Galaxy I, GSF Galaxy II, GSF Galaxy III, GSF Monarch, Transocean Andaman, Transocean Ao Thai, Transocean Honor and Transocean Siam Driller, along with related assets, and novated the contracts relating to the construction of five high‑specification jackups, together with related assets. In the three and six months ended June 30, 2017, we received aggregate net cash proceeds of $319 million and recognized an aggregate net loss of $1.6 billion ($4.08 per diluted share), which had no tax effect, associated with the disposal of these assets. Following the completion of the sale, we agreed to continue to operate three of these high‑specification jackups through completion or novation of the drilling contracts, one of which was completed as of June 30, 2017. In the three and six months ended June 30, 2017, excluding our loss on the disposal of these assets, our operating results included income of $9 million and $27 million, respectively, before taxes, associated with the high‑specification jackup asset group. In the three and six months ended June 30, 2016, our operating results included income of $8 million and $22 million, respectively, before taxes, associated with the high‑specification jackup asset group.

During the six months ended June 30, 2017, we also completed the sale of the midwater floater GSF Rig 140, along with related assets. In the six months ended June 30, 2017, we received aggregate net cash proceeds of $3 million and recognized an aggregate net gain of $2 million associated with the disposal of these assets. In the three and six months ended June 30, 2017, we received aggregate net cash proceeds of $6 million and $7 million, respectively, and recognized an aggregate net gain of $1 million associated with the disposal of assets unrelated to rig sales.

During the six months ended June 30, 2016, in connection with our efforts to dispose of non‑strategic assets, we completed the sale of the deepwater floater Deepwater Navigator and the midwater floaters Falcon 100, GSF Grand Banks, GSF Rig 135, Sedneth 701 and Transocean John Shaw, along with related assets. In the three and six months ended June 30, 2016, we received aggregate net cash proceeds of $8 million and $11 million, respectively, and recognized an aggregate net gain of $4 million and $5 million, respectively, associated with the disposal of these assets. In the three and six months ended June 30, 2016, we received aggregate net cash proceeds of $3 million and $4 million, respectively, and recognized an aggregate net loss of $6 million associated with the disposal of assets unrelated to rig sales.

Assets held for sale—At June 30, 2017, the aggregate carrying amount of our assets held for sale, including the midwater floaters Transocean Prospect and Transocean Searcher, along with related assets, was $5 million, recorded in other current assets. At December 31, 2016, the aggregate carrying amount of our assets held for sale, including the midwater floater GSF Rig 140, along with related assets and certain corporate assets, was $6 million, recorded in other current assets.