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Impairments and Other Charges | 12 Months Ended
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Dec. 31, 2014
Impairments and Other Charges |
Impairments and Other Charges | Note 4 Impairments and Other Charge The components of impairments and other charges are provided below:
|  | Year Ended December 31, |
|  | 2014 |  | 2013 |  | 2012 |
|  | (In thousands) |
Tangible Assets & Equipment: |  |  |  |  |  |  |  |  |  |
Provision for retirement of assets |  | $ | 393,962 |  | $ | 14,044 |  | $ | 138,666 |
Impairment of long-lived assets |  |  | 217,627 |  |  | 20,000 |  |  | 50,355 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Subtotal |  |  | 611,589 |  |  | 34,044 |  |  | 189,021 |
Goodwill & Intangible Assets: |  |  |  |  |  |  |  |  |  |
Goodwill impairments |  |  | 356,605 |  |  | — |  |  | 26,279 |
Intangible asset impairment |  |  | 29,942 |  |  | — |  |  | 74,960 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Subtotal |  |  | 386,547 |  |  | — |  |  | 101,239 |
Other Charges: |  |  |  |  |  |  |  |  |  |
Transaction costs |  |  | 22,313 |  |  | — |  |  | — |
Other-than-temporary impairment on equity security |  |  | 6,974 |  |  | — |  |  | — |
Loss on tendered notes |  |  | — |  |  | 208,197 |  |  | — |
Termination of employment contract |  |  | — |  |  | 45,000 |  |  | — |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total |  | $ | 1,027,423 |  | $ | 287,241 |  | $ | 290,260 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
For the year ended December 31, 2014 During the latter part of 2014, oil prices fell sharply and have remained depressed into 2015. As a result of the reduced price of oil, we have experienced a decline in the demand for drilling and completion services as customers have begun reducing or curtailing their capital spending and drilling activities. The reduction in demand for drilling services, coupled with the increased supply of newly built high specification rigs in the drilling market, has led to a highly competitive market for all rigs, including high specification rigs. This has accelerated the under-utilization of our legacy rig fleet (non AC rigs). We have also experienced downward pricing pressure for our services. Due to the aforementioned factors, we recorded impairments and retirement provisions of approximately $1 billion during 2014, as detailed in the table above. The impairments and retirement provision were comprised of approximately $611.6 million in charges related to drilling rigs and rig equipment and $386.5 million in impairments to our goodwill and intangible assets. Tangible Assets and Equipment The following table summarizes the 2014 retirement and impairment charges for tangible assets and equipment by operating segment:
|  | Provision for Retirements |  | Tangible Asset Impairments |  | Total |
Drilling & Rig Services: |  |  |  |  |  |  |  |  |  |
U.S. |  | $ | 271,141 |  | $ | 137,000 |  | $ | 408,141 |
Canada |  |  | 24,211 |  |  | 10,176 |  |  | 34,387 |
International |  |  | 56,472 |  |  | 70,451 |  |  | 126,923 |
Rig Services |  |  | 42,138 |  |  | — |  |  | 42,138 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total |  | $ | 393,962 |  | $ | 217,627 |  | $ | 611,589 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
The majority of the 2014 charges from drilling rigs and rig equipment is due to the U.S. lower 48 legacy rig fleet. Given the recent sharp decline in crude oil prices and the resultant impact on our customers' spending programs that we have experienced or are expecting for 2015, and the disproportionate impact of the reduced activity that we believe our legacy rig fleet will absorb, we have retired approximately 25 mechanical rigs and impaired our fleet of SCR rigs, including retirements of rig related equipment associated with a reduced overall size of our working rig fleet. Also included in the 2014 charges for our U.S. drilling rigs and rig equipment is a retirement provision of approximately $54.4 million for our Gulf of Mexico jackup fleet. This market has been challenged for the past several years and we believe the drop in oil prices will exacerbate the lack of demand for these rigs. The majority of these rigs would require substantial amounts of capital in order for them to be operable again. The balance of the drilling rigs and rig equipment charges relate to our coil tubing drilling rig fleet in Canada and various under-utilized rigs or asset classes throughout our International and Canada drilling fleets. Goodwill and Intangible Assets During 2014, we recognized an impairment of goodwill totaling $356.6 million, the majority of which was for the remaining goodwill balance of $335.0 million in our Completion Services operating segment related to the acquisition of Superior in 2010. We expect to merge this operating segment with CJES, and the value attributable to the transaction has declined sharply beginning in the fourth quarter of 2014, with a drop in the market price of CJES's stock and the agreed upon reduction to the amount of cash we expect to receive from this transaction. The combination of these events and a sharp decline in the market price of our stock, led us to believe that a triggering event had occurred in the fourth quarter of 2014, and we performed an impairment test on our remaining goodwill balances. We determined that our Completion Services goodwill balances should be fully impaired. The balance of the impairment relates to $21.6 million in goodwill related to Ryan, our directional drilling operations included in our Rig Services operating segment. The recent decline in oil prices and the impact it is having on our businesses, along with the lack of certainty surrounding an eventual recovery, led us to impair these goodwill balances. A prolonged period of lower natural gas or oil prices could continue to adversely affect demand for our services and lead to further goodwill impairment charges for other operating units in the future. Additionally, during 2014, we recognized an impairment of $29.9 million primarily related to various customer relationships within our Completion & Production Services and Rig Services operating segments. Transaction costs During 2014, we incurred $22.3 million in transaction costs related to the Merger with CJES, including professional fees and other costs incurred to reorganize the business in contemplation of the Merger. Other-than-temporary impairment During 2014, we recorded an other-than-temporary impairment of $7.0 million related to an equity security. Because the trading price of this security remained below our cost basis for an extended period, we determined the investment was other than temporarily impaired and it was appropriate to write down the investment's carrying value to its current estimated fair value. For the years ended December 31, 2013 and 2012 Provision for retirement of long-lived assets During 2013, we recorded a provision for retirement of long-lived assets in multiple operating segments totaling $14.0 million, which reduced the carrying value of some assets to their salvage value. The retirements related to assets in Saudi Arabia and included obsolete top-drives, nonworking trucks, generators, engines and other miscellaneous equipment. The retirements in our Canada operations included functionally inoperable rigs and other drilling equipment. In our Completion & Production Services operations, the retirements related to rigs and vehicles that would require significant repair to return to work and other non-core assets. During 2012, we recorded a provision for retirement of long-lived assets in multiple operating segments, including $37.1 million in U.S., $33.7 million in Canada, $16.5 million in International and $2.0 million in Rig Services, all from our Drilling & Rig Services business line. The retirements in this business line included mechanical rigs, a jackup rig and other assets that have become inoperable or functionally obsolete and that we do not believe could be returned to service without significant costs to refurbish. Additionally in 2012, we recorded similar provisions for retirement of long-lived assets of $49.4 million in our Completion & Production Services business line. During 2012, we streamlined our operations and retired some non-core assets. Impairments of long-lived assets During 2013, we recognized an impairment of $20.0 million to our fleet of coil-tubing units in our Completion & Production Services business line. Intense competition and oversupply of equipment has led to lower utilization and margins for this product line. When these factors were considered as part of our annual impairment tests on long-lived assets, the sum of the estimated future cash flows, on an undiscounted basis, was less than the carrying amount of these assets. The estimated fair values of these assets were calculated using discounted cash flow models involving assumptions based on our utilization of the assets, revenues and direct costs, capital expenditures and working capital requirements. We believe the fair value estimated for purposes of these tests represents a Level 3 fair value measurement. In 2013, we suspended our coil-tubing operations in the United States. A prolonged period of slow economic recovery could continue to adversely affect the demand for and prices of our services, which could result in future impairment charges for other reporting units due to the potential impact on our estimate of our future operating results. During the fourth quarter of 2012, we determined that some of our coil-tubing rigs would not be fully utilized as forecasted, which resulted in a triggering event and required a year-end long-lived asset impairment test. Our year-end impairment test resulted in impairment charges of $17.4 million in our U.S. and $32.9 million in our Canada operations. Goodwill impairments During 2012, we recognized the impairment of goodwill associated with our operations in the U.S. and International drilling operations. The impairments were deemed necessary due to the prolonged uncertainty of utilization of some of our rigs as a result of changes in our customers' plans for future drilling operations in the Gulf of Mexico and our international markets. There were no goodwill impairments in 2013. Intangible asset impairment During 2012, we recorded an impairment of the Superior trade name totaling $75.0 million. The Superior trade name was initially classified as a ten-year intangible asset at the date of acquisition in September 2010. The impairment was a result of the decision to cease using the Superior trade name to reduce confusion in the marketplace and enhance the Nabors brand. There were no intangible asset impairments in 2013. Loss on tendered notes During 2013, we recognized a loss related to the extinguishment of debt in connection with the tender offer for our 9.25% senior notes. See Note 13—Debt for additional discussion. In 2013, we completed a cash tender offer for these notes and repurchased $785.4 million aggregate principal amount. We paid the holders an aggregate of approximately $1.0 billion in cash, reflecting principal and accrued and unpaid interest and prepayment premium and recognized a loss as part of the debt extinguishment. Provision for termination of employment contract During 2013, we recognized a one-time stock grant valued at $27.0 million, which vested immediately, and $18.0 million in cash awarded and paid to Mr. Petrello in connection with the termination of his prior employment agreement. See Note 19—Commitments and Contingencies for additional discussion.

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