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PROPERTY AND EQUIPMENT
12 Months Ended
Sep. 30, 2015
Property, Plant and Equipment [Abstract]  
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT
A summary of property and equipment by classification is as follows:
 
September 30,
(In thousands)
2015
 
2014
Drilling vessels and equipment
$
4,003,483

 
$
4,181,774

Construction work in progress
720,852

 
319,548

Drill pipe
55,248

 
31,265

Office equipment and other
36,379

 
35,566

Total cost
4,815,962

 
4,568,153

Less: Accumulated depreciation
(643,830
)
 
(601,125
)
 Property and equipment, net
$
4,172,132

 
$
3,967,028



Impairment and Sale of Atwood Hunter

The Atwood Hunter completed the contract it was working under in December 2014. Based on the lack of contracting opportunities and the further deterioration of commodity prices, in January 2015, we determined that it was not likely that additional work would be obtained in the foreseeable future. Therefore, we made the decision to scrap the rig and the Atwood Hunter and its materials and supplies were written down to their salvage value. We recorded a non-cash impairment charge of approximately $60.8 million ($56.1 million, net of tax, or $0.86 per diluted share), which is included in Asset Impairment on the Consolidated Statement of Operations for fiscal 2015. This impairment charge includes write-downs of property and equipment of $48.0 million and write-downs of our inventory of materials and supplies that was specific to the Atwood Hunter of $8.4 million.

During August 2015, we completed the sale of our rig, the Atwood Hunter, for recycling. We received $2.9 million in proceeds and we recorded a loss of approximately $5.5 million ($5.5 million, net of tax, or $0.08 per diluted share), which is included in (Gain) Loss on Sale of Assets on the Consolidated Statement of Operations for fiscal year 2015. We incurred costs of $8.7 million related to the impairment and sale of the Atwood Hunter

Sale of Other Assets

During December 2014, we completed the sale of our rig, the Atwood Southern Cross, for recycling. We received $2.1 million in proceeds and incurred related costs of $2.0 million. We recorded a loss of approximately $8.0 million ($7.1 million, net of tax, or $0.11 per diluted share), which is included in (Gain) Loss on Sale of Assets on the Consolidated Statement of Operations for fiscal year 2015.
During January 2014, we sold our standard jackup drilling unit, the Vicksburg, for a sales price of $55.4 million. The carrying value of the rig and its related inventory was approximately $20.5 million.
During April 2014, we sold a wholly owned subsidiary which owned our semisubmersible tender assist drilling rig, the Seahawk, for a sales price of $4.0 million. The carrying value of the subsidiary after a $2.0 million impairment charge, approximated its sales price.

Construction Projects

As of September 30, 2015, we had expended approximately $675 million towards our two ultra-deepwater drillships under construction at the Daewoo Shipbuilding and Marine Engineering Co., Ltd. ("DSME") yard in South Korea. Remaining firm commitments for these two drillships under construction totaled approximately $575 million at September 30, 2015.

On October 31, 2014, we entered into Supplemental Agreements (collectively, "Supplemental Agreement No. 1") to the construction contracts for our two ultra-deepwater drillships which postponed their delivery by six months each. The Atwood Admiral was rescheduled for delivery on September 30, 2015 and the Atwood Archer was rescheduled for delivery on June 30, 2016. In consideration of the agreement by DSME to postpone deliveries, we agreed to accelerate the payment of a portion of the milestone payments on each rig as follows: $50 million on each rig was paid on November 30, 2014 and $25 million on each rig was paid on June 30, 2015. In addition, each rig’s final milestone payment amount will be increased by the aggregate financing cost on these payments using an interest rate of 3.5% per annum.

On February 6, 2015, we entered into additional Supplemental Agreements (collectively, “Supplemental Agreement No. 2”), which amended Supplemental Agreement No. 1 and gave us the option to postpone the delivery of each of these two drillships by two further periods of six months each (for a total potential extension of 12 months). In consideration, we agreed to accelerate the payment of a portion of the remaining milestone payments on both drillships whenever an option to further postpone delivery is exercised as follows: for the Atwood Admiral, $152 million (including the aggregate financing cost accrued to date from Supplemental Agreement No. 1) upon suspension of construction and testing and $146 million payable upon delivery of the drillship; for the Atwood Archer, $153 million (including the aggregate financing costs accrued to date from Supplemental Agreement No. 1) upon suspension of construction and testing and $205 million payable upon delivery of the drillship. On March 30, 2015, we exercised our first six-month option ("Option No. 1") to delay the delivery of the Atwood Admiral to March 31, 2016. If we elect to exercise the first six month option for the Atwood Archer, and/or the second six-month option on either of the two rigs (“Option No. 2”), milestone payments will also be further accelerated. Additionally, any of the extensions of the delivery dates will cause us to incur additional operating costs.

On May 18, 2015, we entered into additional Supplemental Agreements (collectively, "Supplemental Agreement No. 3"), under which the installment payments of $150 million for both rigs, which were initially due on September 30, 2015 for the Atwood Admiral per its Supplemental Agreement No. 2, and June 30, 2016 for the Atwood Archer could be accelerated in consideration for allowing us to keep the vessels dockside, which lowers our future operating costs. We exercised the first option under Supplemental Agreement No. 3 for the Atwood Admiral, and paid the $150 million installment on May 31, 2015. The second option for the Atwood Admiral will expire if not exercised by March 31, 2016. The first option for the Atwood Archer will expire if not exercised by December 31, 2015.

The expected delivery dates of the Atwood Admiral and Atwood Archer are as follows:

 
Atwood Admiral
 
Atwood Archer
 
Expected Delivery
 
Status
 
Expected Delivery
 
Status
Prior to supplemental agreements
3/31/2015
 
 
 
12/31/2015
 
 
Supplemental Agreement No. 1:
9/30/2015
 
Exercised
 
6/30/2016
 
Exercised
Supplemental Agreement No. 2:
 
 
 
 
 
 
 
Option No. 1
3/31/2016
 
Exercised
 
12/31/2016
 
Unexercised
Option No. 2
9/30/2016
 
Unexercised
 
6/30/2017
 
Unexercised


As of September 30, 2015, final expected payment for the Atwood Admiral is $147 million due March 31, 2016 and the final expected payment for the Atwood Archer is $358 million due June 30, 2016.