4.	Property and Equipment

Property and equipment consisted of the following at December 31, 2011 and 2010 (in thousands):


	2011			2010
Equipment	$	4,730,925		$	3,972,891
Oil and natural gas properties		131,812			110,749
Buildings		64,090			61,425
Land		11,467			11,074

		4,938,294			4,156,139
Less accumulated depreciation and depletion		(1,771,028	)		(1,535,239	)

Property and equipment, net	$	3,167,266		$	2,620,900

Depreciation, depletion, amortization and impairment — The following table summarizes depreciation, depletion, amortization and impairment expense related to property and equipment and intangible assets for 2011, 2010 and 2009 (in millions):


	2011		2010		2009
Depreciation and impairment expense	$	419.2	$	322.3	$	280.6
Amortization expense		4.1		1.0		—
Depletion expense		14.0		10.2		9.2

Total	$	437.3	$	333.5	$	289.8

The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable (a “triggering event”). In light of adverse market conditions affecting the Company beginning in the fourth quarter of 2008 and continuing into 2009, including a substantial decrease in the operating levels of its contract drilling business segment and a significant decline in oil and natural gas commodity prices, the Company determined that a triggering event had occurred and deemed it necessary to perform an assessment with respect to impairment of long-lived assets, including property and equipment, within its contract drilling segment in 2009. In light of favorable trends in rig utilization and revenue per operating day experienced by the Company and its peers in 2010 and 2011, management concluded that no triggering event had occurred in 2010 or 2011 with respect to its contract drilling segment as a whole (excluding the rigs which had been removed from the Company’s marketable fleet as discussed below). The Company concluded that no triggering event occurred with respect to its pressure pumping segment in 2011, 2010 or 2009. With respect to the long-lived assets in the Company’s oil and natural gas exploration and production segment, the Company assesses the recoverability of long-lived assets at the end of each quarter due to revisions in its oil and natural gas reserve estimates and expectations about future commodity prices.

Long-lived assets are evaluated for impairment at the lowest level for which identifiable cash flows can be separated from other long-lived assets. The Company performs the first step of its impairment assessments by comparing the undiscounted cash flows for each long-lived asset or asset group to its respective carrying value. Based on the results of these impairment tests, the carrying amounts of long-lived assets in the contract drilling and oil and natural gas segments were determined to be recoverable, except as described below.

The Company’s analysis indicated that the carrying amounts of certain oil and natural gas properties were not recoverable at various testing dates in 2011, 2010 and 2009. The Company’s estimates of expected future net cash flows from impaired properties are used in measuring the fair value of such properties. The Company recorded impairment charges of $3.0 million, $792,000 and $3.7 million in 2011, 2010 and 2009, respectively, related to its oil and natural gas properties. The Company determined the fair value of the impaired assets using internally developed unobservable inputs including future pricing and reserves (level 3 inputs in the fair value hierarchy of fair value accounting).

On a periodic basis, the Company evaluates its fleet of drilling rigs for marketability based on the condition of inactive rigs, expenditures that would be necessary to bring them to working condition and the expected demand for drilling services by rig type (such as drilling conventional vertical wells versus drilling longer horizontal wells using high capacity rigs). In connection with the Company’s ongoing planning process, it evaluated its then-current fleet of marketable drilling rigs in 2011, 2010 and 2009 and identified 53, four and 23 rigs, during each of those years respectively, that it determined were impaired and would no longer be marketed as rigs based on its assessment of estimated expenditures to bring these rigs into condition to operate in the current environment as well as its assessment of future demand and the suitability of the identified rigs in light of this expected demand. The components comprising these rigs were evaluated, and those components with continuing utility to the Company’s other marketed rigs were transferred to other rigs or to its yards to be used as spare equipment. The fair value of the remaining components of these rigs was estimated to be zero as there was no future cash flow expected and the associated net book value of $15.7 million in 2011, $4.2 million in 2010 and $10.5 million in 2009 was expensed in the Company’s consolidated statements of operations as an impairment charge.

During 2010, the Company sold certain rights to explore and develop zones deeper than depths that it generally targets for certain of the oil and natural gas properties in which it has working interests. The proceeds from this sale were approximately $22.3 million and the sale resulted in a gain on disposal of $20.1 million.