Property and Equipment

9 Months Ended

Sep. 30, 2016

Property Plant And Equipment [Abstract]

3. Property and Equipment

Property and equipment consisted of the following at September 30, 2016 and December 31, 2015 (in thousands):

	September 30,			December 31,
	2016			2015
Equipment	$	6,808,201		$	6,963,148
Oil and natural gas properties		201,450			200,923
Buildings		96,950			96,470
Land		22,370			22,370
		7,128,971			7,282,911
Less accumulated depreciation, depletion and impairment		(3,617,231	)		(3,362,203	)
Property and equipment, net	$	3,511,740		$	3,920,708

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”). Based on recent commodity prices, the Company’s results of operations for the three and nine month periods ended September 30, 2016 and management’s expectations of operating results in future periods, the Company concluded that no triggering event occurred during the nine months ended September 30, 2016 with respect to its contract drilling or pressure pumping segments. Management’s expectations of future operating results were based on the assumption that activity levels in both segments will begin to recover by early 2017 in response to improved future oil prices. Depreciation, amortization and impairment expense for the three and nine month periods ended September 30, 2015, included a charge of $131 million related to the write-down of drilling equipment, primarily related to mechanical drilling rigs and spare mechanical rig components, to their realizable values and $22.0 million related to the write-down of pressure pumping equipment and certain closed facilities to their realizable values.

The Company reviews its proved oil and natural gas properties for impairment whenever a triggering event occurs, such as downward revisions in reserve estimates or decreases in expected future oil and natural gas prices. Proved properties are grouped by field and undiscounted cash flow estimates are prepared based on the Company’s expectation of future pricing over the lives of the respective fields. These cash flow estimates are reviewed by an independent petroleum engineer. If the net book value of a field exceeds its undiscounted cash flow estimate, impairment expense is measured and recognized as the difference between net book value and fair value. The fair value estimates used in measuring impairment are based on internally developed unobservable inputs including reserve volumes and future production, pricing and operating costs (Level 3 inputs in the fair value hierarchy of fair value accounting). The expected future net cash flows are discounted using an annual rate of 10% to determine fair value. The Company reviews unproved oil and natural gas properties quarterly to assess potential impairment. The Company’s impairment assessment is made on a lease-by-lease basis and considers factors such as the Company’s intent to drill, lease terms and abandonment of an area. If an unproved property is determined to be impaired, the related property costs are expensed. Impairment expense related to proved and unproved oil and natural gas properties totaled $205,000 in the third quarter and approximately $2.4 million for the nine months ended September 30, 2016 and is included in depreciation, depletion, amortization and impairment in the condensed consolidated statements of operations.