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Property and Equipment | 12 Months Ended
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Dec. 31, 2012
Property and Equipment |
4. | Property and Equipment
Property and equipment consisted of the following at December 31, 2012 and 2011 (in thousands):
|  | 2012 |  |  | 2011 |
Equipment |  | $ | 5,387,490 |  |  | $ | 4,730,925 |
Oil and natural gas properties |  |  | 156,834 |  |  |  | 131,812 |
Buildings |  |  | 66,490 |  |  |  | 64,090 |
Land |  |  | 10,413 |  |  |  | 11,467 |
|  |  | 5,621,227 |  |  |  | 4,938,294 |
Less accumulated depreciation and depletion |  |  | (2,005,844 | ) |  |  | (1,771,028 | )
Property and equipment, net |  | $ | 3,615,383 |  |  | $ | 3,167,266 |
Depreciation, depletion, amortization and impairment — The following table summarizes depreciation, depletion, amortization and impairment expense related to property and equipment and intangible assets for 2012, 2011 and 2010 (in thousands):
|  | 2012 |  |  | 2011 |  |  | 2010 |
Depreciation and impairment expense |  | $ | 502,953 |  |  | $ | 419,183 |  |  | $ | 322,308 |
Amortization expense |  |  | 4,110 |  |  |  | 4,110 |  |  |  | 1,027 |
Depletion expense |  |  | 19,551 |  |  |  | 13,986 |  |  |  | 10,158 |
Total |  | $ | 526,614 |  |  | $ | 437,279 |  |  | $ | 333,493 |
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 levels of activity and revenue per operating day experienced by the Company and its peers in 2010, 2011 and 2012, management concluded that no triggering event had occurred in 2010, 2011 or 2012 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 also concluded that no triggering event occurred with respect to its pressure pumping segment in 2010, 2011 or 2012 (excluding the equipment that was retired as discussed below). 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. The Company’s analysis indicated that the carrying amounts of certain oil and natural gas properties were not recoverable at various testing dates in 2012, 2011 and 2010. 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 $1.9 million, $3.0 million and $792,000 in 2012, 2011 and 2010, 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 2012, 2011 and 2010 and identified 36, 53 and four 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 were no future cash flows expected. The Company also evaluates its fleet of marketable pressure pumping equipment and in 2012 identified approximately 37,000 horsepower of pressure pumping equipment that would be retired. The identified pressure pumping equipment was impaired and estimated to have no fair value as there were no future cash flows expected. The net book value of the impaired assets of $12.5 million in 2012, $15.7 million in 2011 and $4.2 million in 2010 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. During 2012, the Company sold its flowback operations in a cash transaction. The sale price was $42.5 million and the Company recognized a gain on disposal of $22.6 million. Also during 2012, the Company sold at auction certain excess drilling assets. The total sale price was $10.6 million, and the Company recognized a gain on disposal of $4.5 million.

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- Definition The entire disclosure for long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software. This disclosure may include property plant and equipment accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives, income statement disclosures, assets held for sale and public utility disclosures. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6360339&loc=d3e1361-107760 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.13-14) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 12 -Paragraph 5 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6391035&loc=d3e2868-110229 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6391110&loc=d3e2921-110230 + Details
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