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LEASE OBLIGATIONS (Tables)

9 Months Ended

Sep. 30, 2019

Summary of Leased Assets and Lease Liability Obligations

The following tables summarize our leased assets and lease liability obligations:

		September 30, 2019		December 31, 2018
		(In millions)
Leases	Classification
Assets
Operating lease assets	Operating lease right-of-use assets	$	361	$	-
Finance lease assets ⁽¹⁾	Property, plant and equipment, net		67		70
	Total leased assets		428		70
Liabilities
Current
Operating	Current portion of long-term lease obligations		92		-
Finance ⁽²⁾	Finance lease obligation		69		8
			161		8
Noncurrent
Operating	Long-term lease obligations		301		-
Finance	Finance lease obligation		-		66
			301		66

	Total lease liabilities	$	462	$	74

⁽¹⁾

^{Our finance leases are represented by:}

(a) A jack-up barge utilized in our MENA region; and

(b) The Amazon, a pipelay and construction vessel, which was purchased by us in February 2017, sold to an unrelated third party (the “Amazon Owner”) and leased back under a long-term bareboat charter that gave us the right to use the vessel and was recorded as an operating lease. On July 27, 2018, we entered into agreements (the “Amazon Modification Agreements”) providing for certain modifications to the Amazon vessel and related financing and amended bareboat charter arrangements. The total cost of the modifications, including project management and other fees and expenses, is expected to be in the range of approximately $260 million to $290 million. The Amazon Owner is expected to fund the cost of the modifications primarily through an export credit-backed senior loan provided by a group of lenders, supplemented by expected direct capital expenditures by us of approximately $58 million over the course of the modifications. The amended bareboat charter arrangement is accounted for as a finance lease, recognizing Property, plant and equipment and Lease obligation for the present value of future minimum lease payments. The cost of modifications will be recorded in Property, plant and equipment with a corresponding liability for direct capital expenditures not incurred by us. The finance lease obligation will increase upon completion of the modifications and funding by the Amazon Owner. As of September 30, 2019, Property, plant and equipment, net included a $49 million asset (net of accumulated amortization of $6 million) and a finance lease liability of approximately $48 million. As of December 31, 2018, Property, plant and equipment, net included a $52 million asset (net of accumulated amortization of $3 million) and a finance lease liability of approximately $53 million.

⁽²⁾

^{As a result of the debt compliance matters and substantial doubt regarding our ability to continue as a going concern, as discussed in Note 2, Basis of Presentation and Significant Accounting Policies, we determined that the classification of all of our long-term debt obligations, including finance lease obligations, was current as of September 30, 2019. Accordingly, those obligations have been recorded within Current Liabilities on the Balance Sheet.}

Schedule of Lease Cost

Our lease cost was as follows:

		Three months ended		Nine months ended
		September 30, 2019
	Classification	(In millions)
Operating lease cost ⁽¹⁾	SG&A Expenses	$	25	$	67
Operating lease cost ⁽¹⁾	Cost of operations		21		51
Finance lease cost
Amortization of leased assets	Cost of operations		1		4
Interest on lease liabilities	Net Interest Expense		1		4
Net lease cost		$	48	$	126

⁽¹⁾	^{Includes short-term leases and immaterial variable lease costs.}

Schedule of Future Minimum Lease Payments for Operating and Finance Lease Obligations

Future minimum lease payments for our operating and finance lease obligations as of September 30, 2019 are as follows:

	Operating leases			Finance leases			Total
	(In millions)
2019	$	26		$	2		$	28
2020		93			12			105
2021		81			11			92
2022		69			11			80
2023		55			11			66
After 2023		335			46			381
Total lease payments		659			93			752
Less: Interest		(266	)		(24	)		(290	)
Present value of lease liabilities	$	393		$	69		$	462

Schedule of Lease Term and Discount Rates for Operating and Finance Lease Obligations

Lease term and discount rates for our operating and finance lease obligations are as follows:

Lease Term and Discount Rate	September 30, 2019
Weighted-average remaining lease term (years)
Operating leases		7.0
Finance leases		8.4
Weighted-average discount rate
Operating leases		9.2	%
Finance leases		8.9	%

Schedule of Supplemental Information for Operating and Finance Lease Obligations

Supplemental information for our operating and finance lease obligations are as follows:

Other information	September 30, 2019
	(In millions)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	(81	)
Financing cash flows from finance leases		(5	)
Leased assets obtained in exchange for new operating lease liabilities		361
Leased assets obtained in exchange for new finance lease liabilities		-