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Property and Equipment
6 Months Ended
Jun. 30, 2016
Property, Plant and Equipment [Abstract]  
Property, Plant and Equipment Disclosure [Text Block]
Property and Equipment
During the six months ended June 30, 2016 and 2015, we had capital expenditures of $14.0 million and $95.2 million, respectively, which includes $0.2 million and $1.5 million, respectively, of capitalized interest costs incurred during the construction periods of new drilling rigs and other drilling equipment. Capital expenditures during 2015 primarily related to our five drilling rigs which began construction during 2014, as well as unit additions to our production services fleets. As of June 30, 2016 and December 31, 2015, capital expenditures incurred for property and equipment not yet placed in service was $9.9 million and $18.6 million, respectively, primarily related to new drilling equipment that was ordered in 2014, but which requires a long lead-time for delivery. This equipment will either be used to construct new drilling rigs or as spare equipment for our AC rig fleet.
During the six months ended June 30, 2016, we recorded net gains of $0.1 million on the disposition of property and equipment, primarily for the disposal of excess drill pipe for a gain, which was mostly offset by a loss on the disposition of damaged property. During the second quarter of 2016, one of our AC drilling rigs sustained damages, primarily to the mast and top drive, that resulted in a disposal of the damaged components with an aggregate net carrying value of $4.0 million, for which we are in the process of filing an insurance claim and expect the insurance proceeds will be approximately $3.4 million, resulting in an estimated net loss on disposal of $0.6 million recognized in the second quarter of 2016.
During the six months ended June 30, 2015, we recorded net gains of $3.2 million on the disposition of property and equipment, primarily for the sale of 27 of our mechanical and lower horsepower electric drilling rigs and other drilling equipment which we sold for aggregate proceeds of $33.4 million.
As of June 30, 2016, our condensed consolidated balance sheet reflects assets held for sale of $4.5 million, which primarily represents the fair value of four domestic mechanical and lower horsepower electric drilling rigs, as well as one real estate property and other equipment.
We evaluate for potential impairment of long-lived tangible and intangible assets subject to amortization when indicators of impairment are present. Circumstances that could indicate a potential impairment include significant adverse changes in industry trends, economic climate, legal factors, and an adverse action or assessment by a regulator. More specifically, significant adverse changes in industry trends include significant declines in revenue rates, utilization rates, oil and natural gas market prices and industry rig counts. Since late 2014, oil prices have declined significantly resulting in a downturn in our industry, affecting both drilling and production services. Despite the modest recovery in commodity prices in recent months, we continue to monitor all indicators of potential impairments in accordance with ASC Topic 360, Property, Plant and Equipment, and concluded there are no triggers present that require impairment testing as of June 30, 2016.
In performing an impairment evaluation, we estimate the future undiscounted net cash flows from the use and eventual disposition of long-lived tangible and intangible assets grouped at the lowest level that cash flows can be identified. For our Production Services Segment, we perform an impairment evaluation and estimate future undiscounted cash flows for the individual reporting units (well servicing, wireline and coiled tubing). For our Drilling Services Segment, we perform an impairment evaluation and estimate future undiscounted cash flows for individual domestic drilling rig assets and for our Colombian drilling rig assets as a group. If the sum of the estimated future undiscounted net cash flows is less than the carrying amount of the asset group, then we determine the fair value of the asset group. The amount of an impairment charge is measured as the difference between the carrying amount and the fair value of the assets. The assumptions used in the impairment evaluation for long-lived assets are inherently uncertain and require management judgment.
Based on our impairment analysis performed at June 30, 2015, we concluded that the carrying values of the non-AC drilling rigs in our domestic fleet which are not pad-capable, and our Colombian assets as a group, exceeded our estimated undiscounted cash flows for these assets. As a result, we recognized $69.8 million of impairment charges during the second quarter of 2015 to reduce the carrying values of these assets to their estimated fair values. Additionally, during the three and six months ended June 30, 2015, we recorded impairment charges of $1.5 million and $7.5 million, respectively, to reduce the carrying value of certain assets which were classified as held for sale, to their estimated fair values, based on expected sales prices.
Although we believe the assumptions and estimates used in our analysis are reasonable and appropriate, different assumptions and estimates could materially impact the analysis and resulting conclusions. If the demand for our drilling services remains at current levels or declines further and any of our rigs become or remain idle for an extended amount of time, then our estimated cash flows may further decrease, and the probability of a near term sale may increase. If any of the foregoing were to occur, we may incur additional impairment charges.