UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended: June 30, 20142015
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-36211
Noble Corporation plc
(Exact name of registrant as specified in its charter)
England and Wales (Registered Number | 98-0619597 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. employer identification number) |
Devonshire House, 1 Mayfair Place, London, England, W1J8AJ
(Address of principal executive offices) (Zip Code)
Registrant’s Telephone Number, Including Area Code: +44 20 3300 2300
Commission file number: 001-31306
Noble Corporation
(Exact name of registrant as specified in its charter)
Cayman Islands | 98-0366361 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. employer identification number) |
Suite 3D Landmark Square, 64 Earth Close, P.O. Box 31327 George Town, Grand Cayman, Cayman Islands, KY1-1206
(Address of principal executive offices) (Zip Code)
Registrant’s Telephone Number, Including Area Code: (345) 938-0293
Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether each registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Noble Corporation plc: | Large accelerated filerx | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company ¨ | ||||
Noble Corporation: | Large accelerated filer¨ | Accelerated filer¨ | Non-accelerated filerx | Smaller reporting company ¨ |
Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x
Number of shares outstanding and trading at July 31, 2014:24, 2015: Noble Corporation plc — 254,260,645241,969,586
Number of shares outstanding at July 31, 2014:24, 2015: Noble Corporation — 261,245,693
Noble Corporation, a Cayman Islands company and a wholly owned subsidiary of Noble Corporation plc, a public limited company registeredincorporated under the laws of England and Wales, meets the conditions set forth in General Instructions H(1) (a) and (b) to Form 10-Q and is therefore filing this Quarterly Report on Form 10-Q with the reduced disclosure format contemplated by paragraphs (b) and (c) of General Instruction H(2) of Form 10-Q.
This combined Quarterly Report on Form 10-Q is separately filed by Noble Corporation plc, a public limited company registeredincorporated under the laws of England and Wales (“Noble-UK”), and Noble Corporation, a Cayman Islands company (“Noble-Cayman”). Information in this filing relating to Noble-Cayman is filed by Noble-UK and separately by Noble-Cayman on its own behalf. Noble-Cayman makes no representation as to information relating to Noble-UK (except as it may relate to Noble-Cayman) or any other affiliate or subsidiary of Noble-UK. Since Noble-Cayman meets the conditions specified in General Instructions H(1)(a) and (b) to Form 10-Q, it is permitted to use the reduced disclosure format for wholly ownedwholly-owned subsidiaries of reporting companies as stated in General Instructions H(2). Accordingly, Noble-Cayman has omitted from this report the information called for by Item 3 (Quantitative and Qualitative Disclosures about Market Risk) of Part I of Form 10-Q and the following items of Part II of Form 10-Q: Item 2 (Unregistered Sales of Equity Securities and Use of Proceeds) and Item 3 (Defaults upon Senior Securities).
This report should be read in its entirety as it pertains to each Registrant. Except where indicated, the Consolidated Financial Statements and related Notes are combined. References in this Quarterly Report on Form 10-Q to “Noble,” the “Company,” “we,” “us,” “our” and words of similar meaning refer collectively to Noble-UK and its consolidated subsidiaries, including Noble-Cayman.
NOBLE CORPORATION PLC AND SUBSIDIARIES
(In thousands)
(Unaudited)
June 30, | December 31, | |||||||||||||||
2014 | 2013 | June 30, 2015 | December 31, 2014 | |||||||||||||
ASSETS | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | $ | 140,537 | $ | 114,458 | $ | 247,683 | $ | 68,510 | ||||||||
Accounts receivable | 889,942 | 949,069 | 540,423 | 569,096 | ||||||||||||
Taxes receivable | 148,345 | 140,269 | 60,564 | 107,490 | ||||||||||||
Prepaid expenses and other current assets | 233,252 | 187,139 | 161,634 | 183,466 | ||||||||||||
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Total current assets | 1,412,076 | 1,390,935 | 1,010,304 | 928,562 | ||||||||||||
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Property and equipment, at cost | 20,391,892 | 19,198,767 | 14,610,963 | 14,442,922 | ||||||||||||
Accumulated depreciation | (5,118,363 | ) | (4,640,677 | ) | (2,640,518 | ) | (2,330,413 | ) | ||||||||
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Property and equipment, net | 15,273,529 | 14,558,090 | 11,970,445 | 12,112,509 | ||||||||||||
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Other assets | 304,295 | 268,932 | 223,967 | 245,751 | ||||||||||||
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Total assets | $ | 16,989,900 | $ | 16,217,957 | $ | 13,204,716 | $ | 13,286,822 | ||||||||
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LIABILITIES AND EQUITY | ||||||||||||||||
Current liabilities | ||||||||||||||||
Current maturities of long-term debt | $ | 350,000 | $ | — | ||||||||||||
Accounts payable | $ | 365,961 | $ | 347,214 | 220,475 | 265,389 | ||||||||||
Accrued payroll and related costs | 148,447 | 151,161 | 81,804 | 102,520 | ||||||||||||
Taxes payable | 127,739 | 125,119 | 109,786 | 94,230 | ||||||||||||
Dividends payable | — | 128,249 | ||||||||||||||
Interest payable | 80,300 | 61,964 | ||||||||||||||
Other current liabilities | 258,667 | 300,172 | 111,529 | 144,571 | ||||||||||||
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Total current liabilities | 900,814 | 1,051,915 | 953,894 | 668,674 | ||||||||||||
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Long-term debt | 6,013,946 | 5,556,251 | 4,488,541 | 4,869,020 | ||||||||||||
Deferred income taxes | 233,419 | 225,455 | 104,402 | 120,589 | ||||||||||||
Other liabilities | 338,888 | 334,308 | 310,481 | 341,505 | ||||||||||||
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Total liabilities | 7,487,067 | 7,167,929 | 5,857,318 | 5,999,788 | ||||||||||||
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Commitments and contingencies | ||||||||||||||||
Shareholders’ equity | ||||||||||||||||
Shares; 254,258 and 253,448 shares outstanding | 2,543 | 2,534 | ||||||||||||||
Shares; 241,970 and 247,501 shares outstanding | 2,420 | 2,475 | ||||||||||||||
Additional paid-in capital | 828,879 | 810,286 | 609,667 | 695,638 | ||||||||||||
Retained earnings | 8,017,321 | 7,591,927 | 6,087,800 | 5,936,035 | ||||||||||||
Accumulated other comprehensive loss | (71,264 | ) | (82,164 | ) | (69,173 | ) | (69,418 | ) | ||||||||
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Total shareholders’ equity | 8,777,479 | 8,322,583 | 6,630,714 | 6,564,730 | ||||||||||||
Noncontrolling interests | 725,354 | 727,445 | 716,684 | 722,304 | ||||||||||||
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Total equity | 9,502,833 | 9,050,028 | 7,347,398 | 7,287,034 | ||||||||||||
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Total liabilities and equity | $ | 16,989,900 | $ | 16,217,957 | $ | 13,204,716 | $ | 13,286,822 | ||||||||
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See accompanying notes to the unaudited consolidated financial statements.
NOBLE CORPORATION PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
June 30, | June 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||||||
Operating revenues | ||||||||||||||||||||||||||||||||
Contract drilling services | $ | 1,200,406 | $ | 975,455 | $ | 2,406,710 | $ | 1,904,192 | $ | 771,307 | $ | 779,368 | $ | 1,550,668 | $ | 1,550,005 | ||||||||||||||||
Reimbursables | 31,811 | 28,260 | 68,464 | 49,434 | 22,248 | 24,413 | 47,229 | 48,963 | ||||||||||||||||||||||||
Labor contract drilling services | 8,146 | 13,603 | 16,358 | 34,657 | ||||||||||||||||||||||||||||
Other | — | 67 | 1 | 77 | ||||||||||||||||||||||||||||
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1,240,363 | 1,017,385 | 2,491,533 | 1,988,360 | 793,555 | 803,781 | 1,597,897 | 1,598,968 | |||||||||||||||||||||||||
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Operating costs and expenses | ||||||||||||||||||||||||||||||||
Contract drilling services | 577,134 | 487,971 | 1,138,265 | 968,097 | 319,207 | 370,902 | 640,957 | 723,782 | ||||||||||||||||||||||||
Reimbursables | 22,460 | 22,701 | 53,066 | 37,623 | 17,652 | 17,732 | 37,809 | 39,236 | ||||||||||||||||||||||||
Labor contract drilling services | 6,261 | 9,349 | 12,487 | 21,598 | ||||||||||||||||||||||||||||
Depreciation and amortization | 254,394 | 212,589 | 500,299 | 418,745 | 159,123 | 152,862 | 313,261 | 299,060 | ||||||||||||||||||||||||
General and administrative | 27,080 | 26,850 | 52,717 | 52,419 | 22,424 | 27,080 | 46,362 | 52,717 | ||||||||||||||||||||||||
Non-recurring spin-off related costs | 6,458 | 4,065 | 18,863 | 8,027 | ||||||||||||||||||||||||||||
Gain on contract extinguishment | — | — | — | (1,800 | ) | |||||||||||||||||||||||||||
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| 518,406 | 568,576 | 1,038,389 | 1,114,795 | |||||||||||||||||||||||||
893,787 | 763,525 | 1,775,697 | 1,504,709 |
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Operating income | 346,576 | 253,860 | 715,836 | 483,651 | 275,149 | 235,205 | 559,508 | 484,173 | ||||||||||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||||||||||
Interest expense, net of amount capitalized | (36,351 | ) | (24,665 | ) | �� | (76,743 | ) | (51,966 | ) | (57,465 | ) | (36,351 | ) | (106,509 | ) | (76,743 | ) | |||||||||||||||
Interest income and other, net | (328 | ) | 955 | (1,518 | ) | 530 | (431 | ) | (1,361 | ) | 6,151 | (2,629 | ) | |||||||||||||||||||
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Income before income taxes | 309,897 | 230,150 | 637,575 | 432,215 | ||||||||||||||||||||||||||||
Income from continuing operations before income taxes | 217,253 | 197,493 | 459,150 | 404,801 | ||||||||||||||||||||||||||||
Income tax provision | (52,435 | ) | (36,824 | ) | (106,871 | ) | (71,176 | ) | (39,405 | ) | (34,265 | ) | (82,852 | ) | (69,843 | ) | ||||||||||||||||
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Net income from continuing operations | 177,848 | 163,228 | 376,298 | 334,958 | ||||||||||||||||||||||||||||
Net income from discontinued operations, net of tax | — | 94,234 | — | 195,746 | ||||||||||||||||||||||||||||
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Net income | 257,462 | 193,326 | 530,704 | 361,039 | 177,848 | 257,462 | 376,298 | 530,704 | ||||||||||||||||||||||||
Net income attributable to noncontrolling interests | (22,903 | ) | (16,706 | ) | (39,819 | ) | (34,359 | ) | (18,817 | ) | (22,903 | ) | (38,864 | ) | (39,819 | ) | ||||||||||||||||
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Net income attributable to Noble Corporation | $ | 234,559 | $ | 176,620 | $ | 490,885 | $ | 326,680 | ||||||||||||||||||||||||
Net income attributable to Noble Corporation plc | $ | 159,031 | $ | 234,559 | $ | 337,434 | $ | 490,885 | ||||||||||||||||||||||||
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Net income per share | ||||||||||||||||||||||||||||||||
Basic | $ | 0.91 | $ | 0.69 | $ | 1.90 | $ | 1.28 | ||||||||||||||||||||||||
Diluted | $ | 0.91 | $ | 0.69 | $ | 1.90 | $ | 1.27 | ||||||||||||||||||||||||
Net income attributable to Noble Corporation plc | ||||||||||||||||||||||||||||||||
Income from continuing operations | $ | 159,031 | $ | 140,325 | $ | 337,434 | $ | 295,139 | ||||||||||||||||||||||||
Income from discontinued operations | — | 94,234 | — | 195,746 | ||||||||||||||||||||||||||||
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Net income attributable to Noble Corporation plc | $ | 159,031 | $ | 234,559 | $ | 337,434 | $ | 490,885 | ||||||||||||||||||||||||
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Per share data: | ||||||||||||||||||||||||||||||||
Basic: | ||||||||||||||||||||||||||||||||
Income from continuing operations | $ | 0.64 | $ | 0.54 | $ | 1.36 | $ | 1.14 | ||||||||||||||||||||||||
Income from discontinued operations | — | 0.37 | — | 0.76 | ||||||||||||||||||||||||||||
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Net income attributable to Noble Corporation plc | $ | 0.64 | $ | 0.91 | $ | 1.36 | $ | 1.90 | ||||||||||||||||||||||||
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Diluted: | ||||||||||||||||||||||||||||||||
Income from continuing operations | $ | 0.64 | $ | 0.54 | $ | 1.36 | $ | 1.14 | ||||||||||||||||||||||||
Income from discontinued operations | — | 0.37 | — | 0.76 | ||||||||||||||||||||||||||||
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Net income attributable to Noble Corporation plc | $ | 0.64 | $ | 0.91 | $ | 1.36 | $ | 1.90 | ||||||||||||||||||||||||
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See accompanying notes to the unaudited consolidated financial statements.
NOBLE CORPORATION PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
Three Months Ended | Six Months Ended | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
June 30, | June 30, | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||||
Net income | $ | 257,462 | $ | 193,326 | $ | 530,704 | $ | 361,039 | $ | 177,848 | $ | 257,462 | $ | 376,298 | $ | 530,704 | ||||||||||||||||
Other comprehensive income (loss), net of tax | ||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | 1,711 | (2,180 | ) | 2,720 | 477 | 1,425 | 1,711 | (1,874 | ) | 2,720 | ||||||||||||||||||||||
Foreign currency forward contracts | 706 | (3,529 | ) | 6,652 | (4,731 | ) | 3,054 | 706 | (91 | ) | 6,652 | |||||||||||||||||||||
Amortization of deferred pension plan amounts (net of tax provision of $253 and $730 for the three months ended June 30, 2014 and 2013, respectively, and $505 and $1,460 for the six months ended June 30, 2014 and 2013, respectively) | 765 | 1,632 | 1,528 | 3,274 | ||||||||||||||||||||||||||||
Amortization of deferred pension plan amounts (net of tax provision of $582 and $253 for the three months ended June 30, 2015 and 2014, respectively, and $1,148 and $505 for the six months ended June 30, 2015 and 2014, respectively) | 1,129 | 765 | 2,210 | 1,528 | ||||||||||||||||||||||||||||
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Other comprehensive income (loss), net | 3,182 | (4,077 | ) | 10,900 | (980 | ) | ||||||||||||||||||||||||||
Other comprehensive income, net | 5,608 | 3,182 | 245 | 10,900 | ||||||||||||||||||||||||||||
Net comprehensive income attributable to noncontrolling interests | (22,903 | ) | (16,706 | ) | (39,819 | ) | (34,359 | ) | (18,817 | ) | (22,903 | ) | (38,864 | ) | (39,819 | ) | ||||||||||||||||
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Comprehensive income attributable to Noble Corporation | $ | 237,741 | $ | 172,543 | $ | 501,785 | $ | 325,700 | ||||||||||||||||||||||||
Comprehensive income attributable to Noble Corporation plc | $ | 164,639 | $ | 237,741 | $ | 337,679 | $ | 501,785 | ||||||||||||||||||||||||
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See accompanying notes to the unaudited consolidated financial statements.
NOBLE CORPORATION PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended | ||||||||||||||||
June 30, | Six Months Ended June 30, | |||||||||||||||
2014 | 2013 | 2015 | 2014 | |||||||||||||
Cash flows from operating activities | ||||||||||||||||
Net income | $ | 530,704 | $ | 361,039 | $ | 376,298 | $ | 530,704 | ||||||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||||||||||
Depreciation and amortization | 500,299 | 418,745 | 313,261 | 500,299 | ||||||||||||
Deferred income taxes | 10,127 | (7,505 | ) | (17,312 | ) | 10,127 | ||||||||||
Amortization of share-based compensation | 26,517 | 20,335 | 21,147 | 26,517 | ||||||||||||
Net change in other assets and liabilities | (35,824 | ) | (146,549 | ) | 74,484 | (35,824 | ) | |||||||||
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Net cash from operating activities | 1,031,823 | 646,065 | 767,878 | 1,031,823 | ||||||||||||
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Cash flows from investing activities | ||||||||||||||||
Capital expenditures | (1,216,404 | ) | (1,244,311 | ) | (170,283 | ) | (1,216,404 | ) | ||||||||
Change in accrued capital expenditures | (11,813 | ) | (39,047 | ) | (38,408 | ) | (11,813 | ) | ||||||||
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Net cash from investing activities | (1,228,217 | ) | (1,283,358 | ) | (208,691 | ) | (1,228,217 | ) | ||||||||
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Cash flows from financing activities | ||||||||||||||||
Net change in borrowings outstanding on bank credit facilities | 707,472 | 941,653 | (1,123,495 | ) | 707,472 | |||||||||||
Repayment of long-term debt | (250,000 | ) | (300,000 | ) | — | (250,000 | ) | |||||||||
Issuance of senior notes | 1,092,728 | — | ||||||||||||||
Debt issuance costs on senior notes and credit facilities | (16,070 | ) | (386 | ) | ||||||||||||
Dividends paid to noncontrolling interests | (41,910 | ) | (46,649 | ) | (44,484 | ) | (41,910 | ) | ||||||||
Financing costs on credit facilities | (386 | ) | (1,912 | ) | ||||||||||||
Repurchases of shares | (100,630 | ) | — | |||||||||||||
Dividend payments | (193,740 | ) | (66,672 | ) | (185,669 | ) | (193,740 | ) | ||||||||
Employee stock transactions | 1,037 | 2,065 | (2,394 | ) | 1,037 | |||||||||||
Repurchases of employee shares surrendered for taxes | — | (7,077 | ) | |||||||||||||
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Net cash from financing activities | 222,473 | 521,408 | (380,014 | ) | 222,473 | |||||||||||
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Net change in cash and cash equivalents | 26,079 | (115,885 | ) | 179,173 | 26,079 | |||||||||||
Cash and cash equivalents, beginning of period | 114,458 | 282,092 | 68,510 | 114,458 | ||||||||||||
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Cash and cash equivalents, end of period | $ | 140,537 | $ | 166,207 | $ | 247,683 | $ | 140,537 | ||||||||
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See accompanying notes to the unaudited consolidated financial statements.
NOBLE CORPORATION PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
(Unaudited)
Accumulated | Shares | Additional Paid-in | Retained | Accumulated Other Comprehensive | Noncontrolling | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Additional | Other | Balance | Par Value | Capital | Earnings | Loss | Interests | Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Paid-in | Retained | Treasury | Comprehensive | Noncontrolling | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2013 | 253,448 | $ | 2,534 | $ | 810,286 | $ | 7,591,927 | $ | (82,164 | ) | $ | 727,445 | $ | 9,050,028 | ||||||||||||||||||||||||||||||||||||||||||||||
Balance | Par Value | Capital | Earnings | Shares | Loss | Interests | Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2012 | 253,348 | $ | 710,130 | $ | 83,531 | $ | 7,066,023 | $ | (21,069 | ) | $ | (115,449 | ) | $ | 765,124 | $ | 8,488,290 | |||||||||||||||||||||||||||||||||||||||||||
Employee related equity activity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of share-based compensation | — | — | 20,335 | — | — | — | — | 20,335 | — | — | 26,517 | — | — | — | 26,517 | |||||||||||||||||||||||||||||||||||||||||||||
Issuance of share-based compensation shares | 601 | 1,688 | (1,671 | ) | — | — | — | — | 17 | 683 | 6 | (8,952 | ) | — | — | — | (8,946 | ) | ||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 131 | 365 | 3,161 | — | — | — | — | 3,526 | 127 | 3 | 2,548 | — | — | — | 2,551 | |||||||||||||||||||||||||||||||||||||||||||||
Tax benefit of stock options exercised | — | — | (1,478 | ) | — | — | — | — | (1,478 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted shares forfeited or repurchased for taxes | — | — | — | — | (7,077 | ) | — | — | (7,077 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Tax benefit of equity transactions | — | — | (1,520 | ) | — | — | — | (1,520 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | 326,680 | — | — | 34,359 | 361,039 | — | — | — | 490,885 | — | 39,819 | 530,704 | |||||||||||||||||||||||||||||||||||||||||||||
Dividends paid to noncontrolling interests | — | — | — | — | — | (41,910 | ) | (41,910 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends | — | — | — | (256,723 | ) | — | — | — | (256,723 | ) | — | — | — | (65,491 | ) | — | — | (65,491 | ) | |||||||||||||||||||||||||||||||||||||||||
Dividends paid to noncontrolling interests | — | — | — | — | — | — | (46,649 | ) | (46,649 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss), net | — | — | — | — | — | (980 | ) | — | (980 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income, net | — | — | — | — | 10,900 | — | 10,900 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2013 | 254,080 | $ | 712,183 | $ | 103,878 | $ | 7,135,980 | $ | (28,146 | ) | $ | (116,429 | ) | $ | 752,834 | $ | 8,560,300 | |||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2014 | 254,258 | $ | 2,543 | $ | 828,879 | $ | 8,017,321 | $ | (71,264 | ) | $ | 725,354 | $ | 9,502,833 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2013 | 253,448 | $ | 2,534 | $ | 810,286 | $ | 7,591,927 | $ | — | $ | (82,164 | ) | $ | 727,445 | $ | 9,050,028 | ||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2014 | 247,501 | $ | 2,475 | $ | 695,638 | $ | 5,936,035 | $ | (69,418 | ) | $ | 722,304 | $ | 7,287,034 | ||||||||||||||||||||||||||||||||||||||||||||||
Employee related equity activity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of share-based compensation | — | — | 26,517 | — | — | — | — | 26,517 | — | — | 21,147 | — | — | — | 21,147 | |||||||||||||||||||||||||||||||||||||||||||||
Issuance of share-based compensation shares | 683 | 6 | (8,952 | ) | — | — | — | — | (8,946 | ) | 678 | 7 | (4,149 | ) | — | — | — | (4,142 | ) | |||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 127 | 3 | 2,548 | — | — | — | — | 2,551 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Tax benefit of stock options exercised | — | — | (1,520 | ) | — | — | — | — | (1,520 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Tax benefit of equity transactions | — | — | (2,401 | ) | — | — | — | (2,401 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchases of shares | (6,209 | ) | (62 | ) | (100,568 | ) | — | — | — | (100,630 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | 490,885 | — | — | 39,819 | 530,704 | — | — | — | 337,434 | — | 38,864 | 376,298 | |||||||||||||||||||||||||||||||||||||||||||||
Dividends paid to noncontrolling interests | — | — | — | — | — | (44,484 | ) | (44,484 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends | — | — | — | (65,491 | ) | — | — | — | (65,491 | ) | — | — | — | (185,669 | ) | — | — | (185,669 | ) | |||||||||||||||||||||||||||||||||||||||||
Dividends paid to noncontrolling interests | — | — | — | — | — | — | (41,910 | ) | (41,910 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss), net | — | — | — | — | — | 10,900 | — | 10,900 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income, net | — | — | — | — | 245 | — | 245 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2014 | 254,258 | $ | 2,543 | $ | 828,879 | $ | 8,017,321 | $ | — | $ | (71,264 | ) | $ | 725,354 | $ | 9,502,833 | ||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2015 | 241,970 | $ | 2,420 | $ | 609,667 | $ | 6,087,800 | $ | (69,173 | ) | $ | 716,684 | $ | 7,347,398 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited consolidated financial statements.
NOBLE CORPORATION AND SUBSIDIARIES
(In thousands)
(Unaudited)
June 30, | December 31, | |||||||||||||||
2014 | 2013 | June 30, 2015 | December 31, 2014 | |||||||||||||
ASSETS | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | $ | 137,710 | $ | 110,382 | $ | 245,120 | $ | 65,780 | ||||||||
Accounts receivable | 889,942 | 949,069 | 540,423 | 569,096 | ||||||||||||
Taxes receivable | 148,159 | 140,029 | 60,157 | 107,289 | ||||||||||||
Prepaid expenses and other current assets | 231,704 | 184,348 | 138,604 | 139,669 | ||||||||||||
|
|
|
| |||||||||||||
Total current assets | 1,407,515 | 1,383,828 | 984,304 | 881,834 | ||||||||||||
|
|
|
| |||||||||||||
Property and equipment, at cost | 20,353,341 | 19,160,350 | 14,572,411 | 14,404,371 | ||||||||||||
Accumulated depreciation | (5,108,147 | ) | (4,631,678 | ) | (2,627,726 | ) | (2,318,220 | ) | ||||||||
|
|
|
| |||||||||||||
Property and equipment, net | 15,245,194 | 14,528,672 | 11,944,685 | 12,086,151 | ||||||||||||
|
|
|
| |||||||||||||
Other assets | 304,366 | 269,014 | 220,764 | 222,254 | ||||||||||||
|
|
|
| |||||||||||||
Total assets | $ | 16,957,075 | $ | 16,181,514 | $ | 13,149,753 | $ | 13,190,239 | ||||||||
|
|
|
| |||||||||||||
LIABILITIES AND EQUITY | ||||||||||||||||
Current liabilities | ||||||||||||||||
Current maturities of long-term debt | $ | 350,000 | $ | — | ||||||||||||
Accounts payable | $ | 352,233 | $ | 345,910 | 218,066 | 261,012 | ||||||||||
Accrued payroll and related costs | 142,552 | 143,346 | 74,405 | 91,487 | ||||||||||||
Taxes payable | 124,631 | 120,588 | 107,716 | 91,471 | ||||||||||||
Interest payable | 80,300 | 61,964 | ||||||||||||||
Other current liabilities | 258,667 | 300,172 | 107,567 | 139,950 | ||||||||||||
|
|
|
| |||||||||||||
Total current liabilities | 878,083 | 910,016 | 938,054 | 645,884 | ||||||||||||
|
| |||||||||||||||
|
| |||||||||||||||
Long-term debt | 6,013,946 | 5,556,251 | 4,488,541 | 4,869,020 | ||||||||||||
Deferred income taxes | 233,419 | 225,455 | 104,402 | 120,589 | ||||||||||||
Other liabilities | 338,888 | 334,308 | 304,938 | 335,964 | ||||||||||||
|
|
|
| |||||||||||||
Total liabilities | 7,464,336 | 7,026,030 | 5,835,935 | 5,971,457 | ||||||||||||
|
|
|
| |||||||||||||
Commitments and contingencies | ||||||||||||||||
Shareholder equity | ||||||||||||||||
Ordinary shares; 261,246 shares outstanding | 26,125 | 26,125 | 26,125 | 26,125 | ||||||||||||
Capital in excess of par value | 516,108 | 497,316 | 545,352 | 530,657 | ||||||||||||
Retained earnings | 8,296,416 | 7,986,762 | 6,094,830 | 6,009,114 | ||||||||||||
Accumulated other comprehensive loss | (71,264 | ) | (82,164 | ) | (69,173 | ) | (69,418 | ) | ||||||||
|
|
|
| |||||||||||||
Total shareholder equity | 8,767,385 | 8,428,039 | 6,597,134 | 6,496,478 | ||||||||||||
Noncontrolling interests | 725,354 | 727,445 | 716,684 | 722,304 | ||||||||||||
|
|
|
| |||||||||||||
Total equity | 9,492,739 | 9,155,484 | 7,313,818 | 7,218,782 | ||||||||||||
|
|
|
| |||||||||||||
Total liabilities and equity | $ | 16,957,075 | $ | 16,181,514 | $ | 13,149,753 | $ | 13,190,239 | ||||||||
|
|
|
|
See accompanying notes to the unaudited consolidated financial statements.
NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands)
(Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
June 30, | June 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||||||
Operating revenues | ||||||||||||||||||||||||||||||||
Contract drilling services | $ | 1,200,406 | $ | 975,455 | $ | 2,406,710 | $ | 1,904,192 | $ | 771,307 | $ | 779,368 | $ | 1,550,668 | $ | 1,550,005 | ||||||||||||||||
Reimbursables | 31,811 | 28,260 | 68,464 | 49,434 | 22,248 | 24,413 | 47,229 | 48,963 | ||||||||||||||||||||||||
Labor contract drilling services | 8,146 | 13,603 | 16,358 | 34,657 | ||||||||||||||||||||||||||||
Other | — | 67 | 1 | 77 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
1,240,363 | 1,017,385 | 2,491,533 | 1,988,360 | 793,555 | 803,781 | 1,597,897 | 1,598,968 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Operating costs and expenses | ||||||||||||||||||||||||||||||||
Contract drilling services | 569,438 | 485,445 | 1,128,266 | 962,006 | 318,967 | 363,206 | 638,446 | 713,783 | ||||||||||||||||||||||||
Reimbursables | 22,460 | 22,701 | 53,066 | 37,623 | 17,652 | 17,732 | 37,809 | 39,236 | ||||||||||||||||||||||||
Labor contract drilling services | 6,261 | 9,402 | 12,487 | 21,651 | ||||||||||||||||||||||||||||
Depreciation and amortization | 253,774 | 212,232 | 499,084 | 417,983 | 158,797 | 152,242 | 312,663 | 297,845 | ||||||||||||||||||||||||
General and administrative | 11,489 | 15,588 | 23,421 | 30,431 | 13,509 | 11,489 | 25,717 | 23,421 | ||||||||||||||||||||||||
Gain on contract extinguishment | — | — | — | (1,800 | ) | |||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
|
|
|
| 508,925 | 544,669 | 1,014,635 | 1,074,285 | |||||||||||||||||||||||||
863,422 | 745,368 | 1,716,324 | 1,467,894 |
|
|
|
| |||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Operating income | 376,941 | 272,017 | 775,209 | 520,466 | 284,630 | 259,112 | 583,262 | 524,683 | ||||||||||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||||||||||
Interest expense, net of amount capitalized | (36,351 | ) | (24,665 | ) | (76,743 | ) | (51,966 | ) | (57,465 | ) | (36,351 | ) | (106,509 | ) | (76,743 | ) | ||||||||||||||||
Interest income and other, net | (215 | ) | 705 | (1,532 | ) | 768 | (1,901 | ) | (1,248 | ) | 4,547 | (2,643 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Income before income taxes | 340,375 | 248,057 | 696,934 | 469,268 | ||||||||||||||||||||||||||||
Income from continuing operations before income taxes | 225,264 | 221,513 | 481,300 | 445,297 | ||||||||||||||||||||||||||||
Income tax provision | (52,233 | ) | (35,730 | ) | (106,561 | ) | (69,744 | ) | (39,536 | ) | (34,063 | ) | (83,094 | ) | (69,533 | ) | ||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Net income from continuing operations | 185,728 | 187,450 | 398,206 | 375,764 | ||||||||||||||||||||||||||||
Net income from discontinued operations, net of tax | — | 100,692 | — | 214,609 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Net income | 288,142 | 212,327 | 590,373 | 399,524 | 185,728 | 288,142 | 398,206 | 590,373 | ||||||||||||||||||||||||
Net income attributable to noncontrolling interests | (22,903 | ) | (16,706 | ) | (39,819 | ) | (34,359 | ) | (18,817 | ) | (22,903 | ) | (38,864 | ) | (39,819 | ) | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Net income attributable to Noble Corporation | $ | 265,239 | $ | 195,621 | $ | 550,554 | $ | 365,165 | $ | 166,911 | $ | 265,239 | $ | 359,342 | $ | 550,554 | ||||||||||||||||
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited consolidated financial statements.
NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
Three Months Ended | Six Months Ended | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
June 30, | June 30, | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||||
Net income | $ | 288,142 | $ | 212,327 | $ | 590,373 | $ | 399,524 | $ | 185,728 | $ | 288,142 | $ | 398,206 | $ | 590,373 | ||||||||||||||||
Other comprehensive income (loss), net of tax | ||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | 1,711 | (2,180 | ) | 2,720 | 477 | 1,425 | 1,711 | (1,874 | ) | 2,720 | ||||||||||||||||||||||
Foreign currency forward contracts | 706 | (3,529 | ) | 6,652 | (4,731 | ) | 3,054 | 706 | (91 | ) | 6,652 | |||||||||||||||||||||
Amortization of deferred pension plan amounts (net of tax provision of $253 and $730 for the three months ended June 30, 2014 and 2013, respectively, and $505 and $1,460 for the six months ended June 30, 2014 and 2013, respectively) | 765 | 1,632 | 1,528 | 3,274 | ||||||||||||||||||||||||||||
Amortization of deferred pension plan amounts (net of tax provision of $582 and $253 for the three months ended June 30, 2015 and 2014, respectively, and $1,148 and $505 for the six months ended June 30, 2015 and 2014, respectively) | 1,129 | 765 | 2,210 | 1,528 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Other comprehensive income (loss), net | 3,182 | (4,077 | ) | 10,900 | (980 | ) | ||||||||||||||||||||||||||
Other comprehensive income, net | 5,608 | 3,182 | 245 | 10,900 | ||||||||||||||||||||||||||||
Net comprehensive income attributable to noncontrolling interests | (22,903 | ) | (16,706 | ) | (39,819 | ) | (34,359 | ) | (18,817 | ) | (22,903 | ) | (38,864 | ) | (39,819 | ) | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Comprehensive income attributable to Noble Corporation | $ | 268,421 | $ | 191,544 | $ | 561,454 | $ | 364,185 | $ | 172,519 | $ | 268,421 | $ | 359,587 | $ | 561,454 | ||||||||||||||||
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited consolidated financial statements.
NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended | ||||||||||||||||
June 30, | Six Months Ended June 30, | |||||||||||||||
2014 | 2013 | 2015 | 2014 | |||||||||||||
Cash flows from operating activities | ||||||||||||||||
Net income | $ | 590,373 | $ | 399,524 | $ | 398,206 | $ | 590,373 | ||||||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||||||||||
Depreciation and amortization | 499,084 | 417,983 | 312,663 | 499,084 | ||||||||||||
Deferred income taxes | 10,127 | (7,505 | ) | (17,312 | ) | 10,127 | ||||||||||
Capital contribution by parent—share-based compensation | 18,792 | 12,183 | ||||||||||||||
Capital contribution by parent - share-based compensation | 14,695 | 18,792 | ||||||||||||||
Net change in other assets and liabilities | (37,241 | ) | (146,377 | ) | 44,726 | (37,241 | ) | |||||||||
|
|
|
| |||||||||||||
Net cash from operating activities | 1,081,135 | 675,808 | 752,978 | 1,081,135 | ||||||||||||
|
| |||||||||||||||
|
| |||||||||||||||
Cash flows from investing activities | ||||||||||||||||
Capital expenditures | (1,216,270 | ) | (1,244,239 | ) | (170,283 | ) | (1,216,270 | ) | ||||||||
Change in accrued capital expenditures | (11,813 | ) | (39,047 | ) | (38,408 | ) | (11,813 | ) | ||||||||
|
|
|
| |||||||||||||
Net cash from investing activities | (1,228,083 | ) | (1,283,286 | ) | (208,691 | ) | (1,228,083 | ) | ||||||||
|
|
|
| |||||||||||||
Cash flows from financing activities | ||||||||||||||||
Net change in borrowings outstanding on bank credit facilities | 707,472 | 941,653 | (1,123,495 | ) | 707,472 | |||||||||||
Repayment of long-term debt | (250,000 | ) | (300,000 | ) | — | (250,000 | ) | |||||||||
Issuance of senior notes | 1,092,728 | — | ||||||||||||||
Debt issuance costs on senior notes and credit facilities | (16,070 | ) | (386 | ) | ||||||||||||
Dividends paid to noncontrolling interests | (41,910 | ) | (46,649 | ) | (44,484 | ) | (41,910 | ) | ||||||||
Financing costs on credit facilities | (386 | ) | (1,912 | ) | ||||||||||||
Distributions to parent company, net | (240,900 | ) | (100,960 | ) | (273,626 | ) | (240,900 | ) | ||||||||
|
|
|
| |||||||||||||
Net cash from financing activities | 174,276 | 492,132 | (364,947 | ) | 174,276 | |||||||||||
|
|
|
| |||||||||||||
Net change in cash and cash equivalents | 27,328 | (115,346 | ) | 179,340 | 27,328 | |||||||||||
Cash and cash equivalents, beginning of period | 110,382 | 277,375 | 65,780 | 110,382 | ||||||||||||
|
|
|
| |||||||||||||
Cash and cash equivalents, end of period | $ | 137,710 | $ | 162,029 | $ | 245,120 | $ | 137,710 | ||||||||
|
|
|
|
See accompanying notes to the unaudited consolidated financial statements.
NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
(Unaudited)
Accumulated | Shares | Capital in Excess of | Retained | Accumulated Other Comprehensive | Noncontrolling | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
Capital in | Other | Balance | Par Value | Par Value | Earnings | Loss | Interests | Equity | ||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Excess of | Retained | Comprehensive | Noncontrolling | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||
Balance | Par Value | Par Value | Earnings | Loss | Interests | Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2012 | 261,246 | $ | 26,125 | $ | 470,454 | $ | 7,384,828 | $ | (115,449 | ) | $ | 765,124 | $ | 8,531,082 | ||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2013 | 261,246 | $ | 26,125 | $ | 497,316 | $ | 7,986,762 | $ | (82,164 | ) | $ | 727,445 | $ | 9,155,484 | ||||||||||||||||||||||||||||||||||||||||||
Distributions to parent | — | — | — | (240,900 | ) | — | — | (240,900 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Capital contributions by parent - share-based compensation | — | — | 18,792 | — | — | — | 18,792 | |||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | 365,165 | — | 34,359 | 399,524 | — | — | — | 550,554 | — | 39,819 | 590,373 | ||||||||||||||||||||||||||||||||||||||||||
Capital contributions by parent — share-based compensation | — | — | 12,183 | — | — | — | 12,183 | |||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to parent | — | — | — | (100,960 | ) | — | — | (100,960 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid to noncontrolling interests | — | — | — | — | — | (46,649 | ) | (46,649 | ) | — | — | — | — | — | (41,910 | ) | (41,910 | ) | ||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss), net | — | — | — | — | (980 | ) | — | (980 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
|
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|
| ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2013 | 261,246 | $ | 26,125 | $ | 482,637 | $ | 7,649,033 | $ | (116,429 | ) | $ | 752,834 | $ | 8,794,200 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2013 | 261,246 | $ | 26,125 | $ | 497,316 | $ | 7,986,762 | $ | (82,164 | ) | $ | 727,445 | $ | 9,155,484 | ||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | 550,554 | — | 39,819 | 590,373 | |||||||||||||||||||||||||||||||||||||||||||||||||
Capital contributions by parent — share-based compensation | — | — | 18,792 | — | — | — | 18,792 | |||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to parent | — | — | — | (240,900 | ) | — | — | (240,900 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid to noncontrolling interests | — | — | — | — | — | (41,910 | ) | (41,910 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss), net | — | — | — | — | 10,900 | — | 10,900 | |||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income, net | — | — | — | — | 10,900 | — | 10,900 | |||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2014 | 261,246 | $ | 26,125 | $ | 516,108 | $ | 8,296,416 | $ | (71,264 | ) | $ | 725,354 | $ | 9,492,739 | 261,246 | $ | 26,125 | $ | 516,108 | $ | 8,296,416 | $ | (71,264 | ) | $ | 725,354 | $ | 9,492,739 | ||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2014 | 261,246 | $ | 26,125 | $ | 530,657 | $ | 6,009,114 | $ | (69,418 | ) | $ | 722,304 | $ | 7,218,782 | ||||||||||||||||||||||||||||||||||||||||||
Distributions to parent | — | — | — | (273,626 | ) | — | — | (273,626 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Capital contributions by parent - share-based compensation | — | — | 14,695 | — | — | — | 14,695 | |||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | 359,342 | — | 38,864 | 398,206 | |||||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid to noncontrolling interests | — | — | — | — | — | (44,484 | ) | (44,484 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income, net | — | — | — | — | 245 | — | 245 | |||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2015 | 261,246 | $ | 26,125 | $ | 545,352 | $ | 6,094,830 | $ | (69,173 | ) | $ | 716,684 | $ | 7,313,818 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
See accompanying notes to the unaudited consolidated financial statements.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Note 1 — Organization and Basis of Presentation
On November 20, 2013, pursuant to the Merger Agreement dated as of June 30, 2013 between Noble Corporation, a Swiss corporation (“Noble-Swiss”), and Noble Corporation plc, a public limited company registeredincorporated under the laws of England and Wales (“Noble-UK”), Noble-Swiss merged with and into Noble-UK, with Noble-UK as the surviving company (the “Transaction”). In the Transaction, all of the outstanding ordinary shares of Noble-Swiss were cancelled, and Noble-UK issued, through an exchange agent, one ordinary share of Noble-UK in exchange for each ordinary share of Noble-Swiss.
The Transaction effectively changed the place of incorporation of our publicly traded parent holding company from Switzerland to the United Kingdom. As a result of the Transaction, Noble-UK owns and conducts the same businesses through the Noble group as Noble-Swiss conducted prior to the Transaction, except that Noble-UK is the parent company of the Noble group of companies.
We are a leading offshore drilling contractor for the oil and gas industry. We perform contract drilling services with our global fleet of mobile offshore drilling units located worldwide, and at June 30, 2014 we were also responsible forunits. As of the operationsfiling date of this Quarterly Report on the Hibernia platform offshore Canada. At June 30, 2014,Form 10-Q, our fleet consisted of 1415 jackups, nine drillships and eight semisubmersibles, 14 drillships, 49 jackups andincluding one floating production storage and offloading unit (“FPSO”), including three units under construction as follows:
We report our contract drilling operations as a single reportable segment, Contract Drilling Services, which reflects how we manage our business, and
At the fact that all of our drilling fleet is dependent upon the worldwide oil and gas industry. The mobile offshore drilling units comprising our offshore rig fleet operate in a global market for contract drilling services and are often redeployed to different regions due to changing demands of our customers, which consist largely of major independent and government owned/controlled oil and gas companies throughout the world. As of June 30, 2014,2015, our fleet was locatedcontract drilling services segment conducts operations in the United States, Mexico, Brazil, Argentina, the North Sea, the Mediterranean West Africa,Sea, the Black Sea, the Middle East, India, Asia and Australia. Noble and its predecessors have been engaged in the contract drilling of oil and gas wells since 1921.
Noble Corporation, a Cayman Islands company (“Noble-Cayman”), is a direct,an indirect, wholly-owned subsidiary of Noble-UK, our publicly-traded parent company. Noble-UK’s principal asset is all of the shares of Noble-Cayman. Noble-Cayman has no public equity outstanding. The consolidated financial statements of Noble-UK include the accounts of Noble-Cayman, and Noble-UK conducts substantially all of its business through Noble-Cayman and its subsidiaries.
The accompanying unaudited consolidated financial statements of Noble-UK and Noble-Cayman have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) as they pertain to Quarterly Reports on Form 10-Q. Accordingly, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The unaudited financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the financial position and results of operations for the interim periods, on a basis consistent with the annual audited consolidated financial statements. All such adjustments are of a recurring nature. The December 31, 20132014 Consolidated Balance Sheets presented herein are derived from the December 31, 20132014 audited consolidated financial statements. These interim financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2013,2014, filed by both Noble-UK and Noble-Cayman. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.
Certain amounts in prior periods have been reclassified to conform to the current year presentation.
Note 2 – Spin-off of Paragon Offshore plc (“Paragon Offshore”)
On August 1, 2014, Noble-UK completed the separation and spin-off of a majority of its standard specification offshore drilling business (the “Spin-off”) through a pro rata distribution of all of the ordinary shares of its wholly-owned subsidiary, Paragon Offshore, to the holders of Noble’s ordinary shares. Our shareholders received one share of Paragon Offshore for every three shares of Noble owned as of July 23, 2014, the record date for the distribution. Through the Spin-off, we disposed of most of our standard specification drilling units and related assets, liabilities and business. Prior to the Spin-off, Paragon Offshore issued approximately $1.7 billion of long-term debt. We used the proceeds from this debt to repay certain amounts outstanding under our commercial paper program.
Prior to the completion of the Spin-off, Noble and Paragon Offshore entered into a series of agreements to effect the separation and Spin-off and govern the relationship between the parties after the Spin-off.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Master Separation Agreement (“MSA”)
The general terms and conditions relating to the separation and Spin-off are set forth in the MSA. The MSA identifies the assets transferred, liabilities assumed and contracts assigned either to Paragon Offshore plc Spin-off Transaction
On August 1, 2014, we completed the previously announced plan to reorganize our business by means of a spin-off of a wholly-owned subsidiary, Paragon Offshore plc (“Paragon Offshore”). The spin-off was accomplished through a pro rata distribution by us of all of the ordinary shares of Paragon Offshore to our shareholders. Our shareholders received one share of Paragon Offshore for every three shares of Noble owned as of July 23, 2014, the record date for the distribution. Paragon Offshore’s assets and liabilities consist of most of our standard specification drilling units and related assets, liabilities and business. Paragon Offshore’s fleet consists of five drillships, three semisubmersibles, 34 jackups and one FPSO. Paragon Offshore is also responsible for the Hibernia platform operations offshore Canada. In connection with the spin-off, we received approximately $1.7 billion in cash as settlement of intercompany notes issuedor by Paragon Offshore to us in the separation and describes when and how these transfers, assumptions and assignments would occur. The MSA provides for, among other things, Paragon Offshore’s responsibility for liabilities relating to its business and the responsibility of Noble as considerationfor liabilities related to our, and in certain limited cases, Paragon Offshore’s business, in each case irrespective of when the liability arose. The MSA also contains indemnification obligations and ongoing commitments by us and Paragon Offshore.
Employee Matters Agreement (“EMA”)
The EMA allocates liabilities and responsibilities between us and Paragon Offshore relating to employment, compensation and benefits and other employment related matters.
Tax Sharing Agreement (“TSA”)
The TSA provides for the business contributed to Paragon Offshore. Noble used these funds to repay outstanding third-party debtallocation of Noble-Caymantax liabilities and its subsidiaries.
Because the spin-off distribution was completed after June 30, 2014, the accounts ofbenefits between us and Paragon Offshore and its subsidiaries aregoverns the parties’ assistance with tax-related claims.
Transition Services Agreements
Under two transition services agreements, we agreed to continue, for a limited period of time, to provide various interim support services to Paragon Offshore, and Paragon Offshore agreed to provide various interim support services to us, including providing operational and administrative support for our remaining Brazilian operations.
Note 3 — Discontinued Operations
Paragon Offshore, which had been reflected as continuing operations in our consolidated financial statements prior to the Spin-Off, meets the criteria for being reported as discontinued operations and has been reclassified as such in this report. In subsequent reports, we expect to presentour results of operations. The results of discontinued operations for the accountsthree and six months ended June 30, 2014 include the historical results of Paragon Offshore, including $6 million and its subsidiaries as$19 million, respectively, of non-recurring costs incurred by Noble related to the Spin-Off.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
The following table provides the components of net income from discontinued operations.operations, net of tax for Noble-UK for the three and six months ended June 30, 2014:
Three months ended June 30, 2014 | Six months ended June 30, 2014 | |||||||
Operating revenues | ||||||||
Contract drilling services | $ | 421,038 | $ | 856,705 | ||||
Reimbursables | 7,398 | 19,501 | ||||||
Labor contract drilling services | 8,146 | 16,358 | ||||||
Other | — | 1 | ||||||
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|
|
| |||||
Operating revenues from discontinued operations | $ | 436,582 | $ | 892,565 | ||||
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| |||||
Income from discontinued operations | ||||||||
Income from discontinued operations before income taxes | $ | 112,404 | $ | 232,774 | ||||
Income tax provision | (18,170 | ) | (37,028 | ) | ||||
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| |||||
Net income from discontinued operations | $ | 94,234 | $ | 195,746 | ||||
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|
Note 24 — Consolidated Joint Ventures
We maintain a 50 percent interest in two joint ventures, each with a subsidiary of Royal Dutch Shell plc (“Shell”), that own and operate the twoBully-class drillships. We have determined that we are the primary beneficiary.beneficiary of the joint ventures. Accordingly, we consolidate the entities in our consolidated financial statements after eliminating intercompany transactions. Shell’s equity interests are presented as noncontrolling interests on our Consolidated Balance Sheets.
During the six months ended June 30, 2015 and 2014, the Bully joint ventures approved and paid dividends totaling $89 million and $84 million, of which $42 million was paid to our joint venture partner. During the six months ended June 30, 2013, the Bully joint ventures approved and paid dividends totaling $93 million, of which $47 million wasrespectively. Of these amounts, 50 percent were paid to our joint venture partner.
The combined carrying amount of theBully-class drillships at both June 30, 20142015 and December 31, 20132014 totaled $1.4 billion. These assets were primarily funded through partner equity contributions. Cash held by the Bully joint ventures totaledwas approximately $43$41 million at June 30, 20142015 as compared to approximately $50$47 million at December 31, 2013. Operational results for the three and six months ended June 30, 2014 and 2013 are as follows:
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Operating revenues | $ | 98,217 | $ | 87,478 | $ | 185,403 | $ | 177,773 | ||||||||
Net income | $ | 46,956 | $ | 35,914 | $ | 84,676 | $ | 73,413 |
Note 3 — Share Data
Share capital
As of June 30, 2014, Noble-UK had approximately 254.3 million shares outstanding and trading as compared to approximately 253.4 million shares outstanding and trading at December 31, 2013. Our Board of Directors may increase our share capital through the issuance of up to 53 million authorized shares (at current nominal value of $0.01 per share) without obtaining shareholder approval.
In April 2013, our shareholders approved the payment of a dividend aggregating $1.00 per share, which was declared by our Board of Directors and paid in four equal installments. The final payment of this obligation was made in May 2014, and included an additional dividend of $0.125 per share in accordance with our current dividend policy. The aggregate dividend paid in May 2014 was approximately $97 million, or $0.375 per share.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Earnings per share
The following table sets forth the computation of basic and diluted earnings per share for Noble-UK:
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Allocation of net income | ||||||||||||||||
Basic | ||||||||||||||||
Net income attributable to Noble Corporation | $ | 234,559 | $ | 176,620 | $ | 490,885 | $ | 326,680 | ||||||||
Earnings allocated to unvested share-based payment awards | (3,776 | ) | (2,169 | ) | (8,048 | ) | (3,822 | ) | ||||||||
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| |||||||||
Net income to common shareholders—basic | $ | 230,783 | $ | 174,451 | $ | 482,837 | $ | 322,858 | ||||||||
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| |||||||||
Diluted | ||||||||||||||||
Net income attributable to Noble Corporation | $ | 234,559 | $ | 176,620 | $ | 490,885 | $ | 326,680 | ||||||||
Earnings allocated to unvested share-based payment awards | (3,774 | ) | (2,167 | ) | (8,046 | ) | (3,819 | ) | ||||||||
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Net income to common shareholders—diluted | $ | 230,785 | $ | 174,453 | $ | 482,839 | $ | 322,861 | ||||||||
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| |||||||||
Weighted average shares outstanding—basic | 254,238 | 253,295 | 254,090 | 253,184 | ||||||||||||
Incremental shares issuable from assumed exercise of stock options | 97 | 261 | 116 | 265 | ||||||||||||
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| |||||||||
Weighted average shares outstanding—diluted | 254,335 | 253,556 | 254,206 | 253,449 | ||||||||||||
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Weighted average unvested share-based payment awards | 4,156 | 3,150 | 4,172 | 2,998 | ||||||||||||
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| |||||||||
Earnings per share | ||||||||||||||||
Basic | $ | 0.91 | $ | 0.69 | $ | 1.90 | $ | 1.28 | ||||||||
Diluted | $ | 0.91 | $ | 0.69 | $ | 1.90 | $ | 1.27 | ||||||||
Dividends per share | $ | 0.38 | $ | 0.13 | $ | 0.75 | $ | 0.26 |
Only those items having a dilutive impact on our basic earnings per share are included in diluted earnings per share. For the three months ended June 30, 2014 and 2013, approximately 1 million shares underlying stock options were excluded from the diluted earnings per share as such stock options were not dilutive.
Note 4 — Receivables from Customers
At June 30, 2014, we had a receivable of approximately $14 million related to theNoble Max Smith, which is being disputed by our customer, Petróleos Mexicanos (“Pemex”). This receivable has been classified as long-term and is included in “Other assets” on our Consolidated Balance Sheet. The disputed amount relates to lost revenues for downtime that occurred after our rig was damaged when one of Pemex’s supply boats collided with our rig in 2010. In January 2012, we filed a lawsuit against Pemex in Mexican court seeking recovery of this amount. This matter is currently proceeding through the Mexican judicial system. While we can make no assurances as to the outcome of this dispute, we believe we are entitled to the disputed amount.2014.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Note 5 — Share Data
Earnings per share
The following table sets forth the computation of basic and diluted earnings per share for Noble-UK:
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Numerator: | ||||||||||||||||
Basic | ||||||||||||||||
Income from continuing operations | $ | 159,031 | $ | 140,325 | $ | 337,434 | $ | 295,139 | ||||||||
Earnings allocated to unvested share-based payment awards | (3,555 | ) | (2,257 | ) | (7,489 | ) | (4,767 | ) | ||||||||
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| |||||||||
Income from continuing operations to common shareholders | 155,476 | 138,068 | 329,945 | 290,372 | ||||||||||||
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| |||||||||
Income from discontinued operations | — | 94,234 | — | 195,746 | ||||||||||||
Earnings allocated to unvested share-based payment awards | — | (1,519 | ) | — | (3,281 | ) | ||||||||||
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Income from discontinued operations, net of tax to common shareholders | — | 92,715 | — | 192,465 | ||||||||||||
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| |||||||||
Net income attributable to Noble-UK | 159,031 | 234,559 | 337,434 | 490,885 | ||||||||||||
Earnings allocated to unvested share-based payment awards | (3,555 | ) | (3,776 | ) | (7,489 | ) | (8,048 | ) | ||||||||
|
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| |||||||||
Net income to common shareholders - basic | $ | 155,476 | $ | 230,783 | $ | 329,945 | $ | 482,837 | ||||||||
|
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| |||||||||
Diluted | ||||||||||||||||
Income from continuing operations | $ | 159,031 | $ | 140,325 | $ | 337,434 | $ | 295,139 | ||||||||
Earnings allocated to unvested share-based payment awards | (3,555 | ) | (2,256 | ) | (7,489 | ) | (4,766 | ) | ||||||||
|
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| |||||||||
Income from continuing operations to common shareholders | 155,476 | 138,069 | 329,945 | 290,373 | ||||||||||||
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| |||||||||
Income from discontinued operations | — | 94,234 | — | 195,746 | ||||||||||||
Earnings allocated to unvested share-based payment awards | — | (1,518 | ) | — | (3,280 | ) | ||||||||||
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Income from discontinued operations, net of tax to common shareholders | — | 92,716 | — | 192,466 | ||||||||||||
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| |||||||||
Net income attributable to Noble-UK | 159,031 | 234,559 | 337,434 | 490,885 | ||||||||||||
Earnings allocated to unvested share-based payment awards | (3,555 | ) | (3,774 | ) | (7,489 | ) | (8,046 | ) | ||||||||
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| |||||||||
Net income to common shareholders - diluted | $ | 155,476 | $ | 230,785 | $ | 329,945 | $ | 482,839 | ||||||||
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Denominator: | ||||||||||||||||
Weighted average shares outstanding - basic | 241,966 | 254,238 | 242,324 | 254,090 | ||||||||||||
Incremental shares issuable from assumed exercise of stock options | — | 97 | — | 116 | ||||||||||||
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| |||||||||
Weighted average shares outstanding - diluted | 241,966 | 254,335 | 242,324 | 254,206 | ||||||||||||
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| |||||||||
Weighted average unvested share-based payment awards | 5,533 | 4,156 | 5,500 | 4,172 | ||||||||||||
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| |||||||||
Earnings per share | ||||||||||||||||
Basic | ||||||||||||||||
Continuing operations | $ | 0.64 | $ | 0.54 | $ | 1.36 | $ | 1.14 | ||||||||
Discontinued operations | — | 0.37 | — | 0.76 | ||||||||||||
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| |||||||||
Net income attributable to Noble-UK | $ | 0.64 | $ | 0.91 | $ | 1.36 | $ | 1.90 | ||||||||
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| |||||||||
Diluted | ||||||||||||||||
Continuing operations | $ | 0.64 | $ | 0.54 | $ | 1.36 | $ | 1.14 | ||||||||
Discontinued operations | — | 0.37 | — | 0.76 | ||||||||||||
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| |||||||||
Net income attributable to Noble-UK | $ | 0.64 | $ | 0.91 | $ | 1.36 | $ | 1.90 | ||||||||
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| |||||||||
Dividends per share | $ | 0.375 | $ | 0.375 | $ | 0.75 | $ | 0.75 |
Only those items having a dilutive impact on our basic earnings per share are included in diluted earnings per share. For the three months ended June 30, 2015 and 2014, approximately 2 million and 1 million shares underlying stock options, respectively, were excluded from the diluted earnings per share as such stock options were not dilutive.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Share capital
As of June 30, 2015, Noble-UK had approximately 242.0 million shares outstanding and trading as compared to approximately 247.5 million shares outstanding and trading at December 31, 2014. The decrease in shares outstanding is primarily related to the repurchase of 6.2 million shares pursuant to our approved share repurchase program, discussed below. Our Board of Directors may increase our share capital through the issuance of up to 53 million authorized shares (at current nominal value of $0.01 per share) without obtaining shareholder approval.
Our most recent quarterly dividend payment to shareholders, totaling approximately $93 million (or $0.375 per share), was declared on April 24, 2015 and paid on May 14, 2015 to holders of record on May 4, 2015.
Share repurchases
Under UK law, the company is only permitted to purchase its own shares by way of an “off-market purchase” in a plan approved by shareholders. In December 2014, we received shareholder approval to repurchase up to 37,000,000 ordinary shares, or approximately 15 percent of our outstanding ordinary shares at the time of the shareholder approval. Any repurchases are expected to be funded using cash on hand, cash from operations or short-term borrowings under our Credit Facilities. The authority to make such repurchases will expire on the later of April 2016 or the end of the Company’s 2016 annual general meeting of shareholders, at which time we could seek shareholder approval for further repurchases. During the six months ended June 30, 2015, we repurchased 6.2 million of our ordinary shares covered by this authorization for a total cost of approximately $101 million. During the three months ended June 30, 2015, we did not repurchase any of our shares.
Note 6 — Receivables from Customers
At June 30, 2015, we had receivables of approximately $14 million related to theNoble Max Smith that are being disputed by our former customer, Petróleos Mexicanos (“Pemex”). These receivables have been classified as long-term and are included in “Other assets” on our Consolidated Balance Sheet. The disputed amounts relate to lost revenues for downtime that occurred after our rig was damaged when one of Pemex’s supply boats collided with our rig in 2010. In January 2012, we filed a lawsuit against Pemex in a Mexican court seeking recovery of these amounts. While we can make no assurances as to the outcome of this dispute, we believe we are entitled to the disputed amounts.
Note 7 — Property and Equipment
Property and equipment, at cost, as of June 30, 20142015 and December 31, 20132014 for Noble-UK consisted of the following:
June 30, | December 31, | |||||||||||||||
2014 | 2013 | June 30, 2015 | December 31, 2014 | |||||||||||||
Drilling equipment and facilities | $ | 18,070,733 | $ | 17,130,986 | $ | 13,691,525 | $ | 13,254,240 | ||||||||
Construction in progress | 2,068,119 | 1,854,434 | 683,410 | 969,985 | ||||||||||||
Other | 253,040 | 213,347 | 236,028 | 218,697 | ||||||||||||
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| |||||||||||||
Property and equipment, at cost | $ | 20,391,892 | $ | 19,198,767 | $ | 14,610,963 | $ | 14,442,922 | ||||||||
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|
Capital expenditures, including capitalized interest, totaled $170 million and $1.2 billion for both the six months ended June 30, 2015 and 2014, and 2013.respectively. Capitalized interest was $6 million and $12 million for the three and six months ended June 30, 2015, respectively, as compared to $13 million and $27 million for the three and six months ended June 30, 2014.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Capital expenditures related to Paragon Offshore for the six months ended June 30, 2014 respectively,totaled $135 million. Depreciation expense for Paragon Offshore that was classified as compared to $32discontinued operations totaled $102 million and $62$201 million, respectively, for the three and six months ended June 30, 2013.2014.
Note 68 — Debt
Long-term debt consisted of the following at June 30, 20142015 and December 31, 2013:2014:
June 30, | December 31, | |||||||||||||||
2014 | 2013 | June 30, 2015 | December 31, 2014 | |||||||||||||
Senior unsecured notes: | ||||||||||||||||
7.375% Senior Notes due March 2014 | $ | — | $ | 249,964 | ||||||||||||
3.45% Senior Notes due August 2015 | 350,000 | 350,000 | $ | 350,000 | $ | 350,000 | ||||||||||
3.05% Senior Notes due March 2016 | 299,974 | 299,967 | 299,990 | 299,982 | ||||||||||||
2.50% Senior Notes due March 2017 | 299,903 | 299,886 | 299,938 | 299,920 | ||||||||||||
4.00% Senior Notes due March 2018 | 249,516 | — | ||||||||||||||
7.50% Senior Notes due March 2019 | 201,695 | 201,695 | 201,695 | 201,695 | ||||||||||||
4.90% Senior Notes due August 2020 | 499,086 | 499,022 | 499,218 | 499,151 | ||||||||||||
4.625% Senior Notes due March 2021 | 399,601 | 399,576 | 399,653 | 399,627 | ||||||||||||
3.95% Senior Notes due March 2022 | 399,221 | 399,178 | 399,309 | 399,264 | ||||||||||||
5.95% Senior Notes due April 2025 | 448,767 | — | ||||||||||||||
6.20% Senior Notes due August 2040 | 399,894 | 399,893 | 399,895 | 399,895 | ||||||||||||
6.05% Senior Notes due March 2041 | 397,663 | 397,646 | 397,700 | 397,681 | ||||||||||||
5.25% Senior Notes due March 2042 | 498,296 | 498,283 | 498,324 | 498,310 | ||||||||||||
6.95% Senior Notes due April 2045 | 394,536 | — | ||||||||||||||
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Total senior unsecured notes | 3,745,333 | 3,995,110 | 4,838,541 | 3,745,525 | ||||||||||||
Commercial paper program | 2,268,613 | 1,561,141 | ||||||||||||||
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Total long-term debt | $ | 6,013,946 | $ | 5,556,251 | ||||||||||||
Credit facilities & commercial paper program | — | 1,123,495 | ||||||||||||||
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Total debt | 4,838,541 | 4,869,020 | ||||||||||||||
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Less: Current maturities | (350,000 | ) | — | |||||||||||||
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| |||||||||||||||
Long-term debt | $ | 4,488,541 | $ | 4,869,020 | ||||||||||||
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Credit Facilities and Commercial Paper Program
We currently have three separatetwo credit facilities with an aggregate maximum available capacity of $2.9$2.7 billion, which are comprised of a five year $2.4 billion senior unsecured credit facility that matures in January 2020 and a $225 million 364-day senior unsecured credit facility that matures in January 2016 (together, referred to as the “Credit Facilities”).
We have established a commercial paper program whichthat allows us to issue up to $2.7$2.4 billion in unsecured commercial paper notes. Amounts issued under the commercial paper program are supported by the unused capacity under our Credit Facilities and, therefore, are classified as long-term on our Consolidated Balance Sheet. The outstanding amounts of commercial paper reduce availability under our Credit Facilities.
The Credit Facilities provide$2.4 billion facility provides us with the ability to issue up to $375$500 million in letters of credit in the aggregate.credit. The issuance of letters of credit under the Credit Facilitiesfacility reduces the amount available for borrowing. At June 30, 2014,2015, we had no letters of credit issued under the Credit Facilities.facility.
Senior Unsecured Notes
In March 2015, our indirect wholly-owned subsidiary, Noble Holding International Limited (“NHIL”), issued $1.1 billion aggregate principal amount of senior notes in three separate tranches, comprised of $250 million of 4.00% Senior Notes due 2018, $450 million of 5.95% Senior Notes due 2025, and $400 million of 6.95% Senior Notes due 2045. The weighted average coupon of all three tranches is 5.87%. The interest rate on these senior notes
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
may be increased if the credit rating applicable to the notes is downgraded below certain specified levels. The net proceeds of approximately $1.08 billion, after expenses, were used to repay indebtedness outstanding under our Credit Facilities and commercial paper program.
On August 1, 2015, our $350 million 3.45% Senior Unsecured Notes
In March 2014, matured, which we repaid using cash on hand. We have, therefore, classified these balances as “Current maturities of long-term debt” on our $250Consolidated Balance Sheet as of June 30, 2015.
Our $300 million 7.375%3.05% Senior Notes mature during the first quarter of 2016. We anticipate using issuancesavailability under our commercial paper program.Credit Facilities to repay the outstanding balances; therefore, we continue to report these balances as long-term as of June 30, 2015.
Covenants
The Credit Facilities are guaranteed by our indirect wholly-owned subsidiaries, Noble Holding International Limited (“NHIL”)NHIL and Noble Holding Corporation (“NHC”). The covenants and events of default under the two Credit Facilities are substantially similar, and each facility contains a covenant that limits our ratio of debt to total tangible capitalization, as defined in the Credit Facilities, to 0.60. At June 30, 2014,2015, our ratio of debt to total tangible capitalization was approximately 0.39.0.40. We were in compliance with all covenants under the Credit Facilities as of June 30, 2014.2015.
In addition to the covenants from the Credit Facilities noted above, the indentures governing our outstanding senior unsecured notes contain covenants that place restrictions on certain merger and consolidation transactions, unless we are the surviving entity or the other party assumes the obligations under the indenture, and on the ability to sell or transfer all or substantially all of our assets. In addition, there are restrictions on incurring or assuming certain liens and on entering into sale and lease-back transactions. At June 30, 2014,2015, we were in compliance with all of our debt covenants. We continually monitor compliance with the covenants under our notes and expect to remain in compliance during the remainder of 2014.2015.
Fair Value of Debt
Fair value represents the amount at which an instrument could be exchanged in a current transaction between willing parties. The estimated fair value of our senior notes was based on the quoted market prices for similar issues or on the current rates offered to us for debt of similar remaining maturities (Level 2 measurement).
The following table presents the estimated All remaining fair value of our long-term debt as of June 30, 2014 and December 31, 2013, respectively:disclosures are presented in Note 12.
June 30, 2014 | December 31, 2013 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Value | Fair Value | Value | Fair Value | |||||||||||||
Senior unsecured notes: | ||||||||||||||||
7.375% Senior Notes due March 2014 | $ | — | $ | — | $ | 249,964 | $ | 253,634 | ||||||||
3.45% Senior Notes due August 2015 | 350,000 | 359,532 | 350,000 | 363,019 | ||||||||||||
3.05% Senior Notes due March 2016 | 299,974 | 310,058 | 299,967 | 309,878 | ||||||||||||
2.50% Senior Notes due March 2017 | 299,903 | 307,420 | 299,886 | 302,891 | ||||||||||||
7.50% Senior Notes due March 2019 | 201,695 | 235,163 | 201,695 | 232,839 | ||||||||||||
4.90% Senior Notes due August 2020 | 499,086 | 548,520 | 499,022 | 528,597 | ||||||||||||
4.625% Senior Notes due March 2021 | 399,601 | 429,755 | 399,576 | 413,868 | ||||||||||||
3.95% Senior Notes due March 2022 | 399,221 | 408,265 | 399,178 | 390,520 | ||||||||||||
6.20% Senior Notes due August 2040 | 399,894 | 456,520 | 399,893 | 421,720 | ||||||||||||
6.05% Senior Notes due March 2041 | 397,663 | 452,273 | 397,646 | 417,312 | ||||||||||||
5.25% Senior Notes due March 2042 | 498,296 | 514,529 | 498,283 | 476,873 | ||||||||||||
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| |||||||||
Total senior unsecured notes | 3,745,333 | 4,022,035 | 3,995,110 | 4,111,151 | ||||||||||||
Commercial paper program | 2,268,613 | 2,268,613 | 1,561,141 | 1,561,141 | ||||||||||||
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|
| |||||||||
Total long-term debt | $ | 6,013,946 | $ | 6,290,648 | $ | 5,556,251 | $ | 5,672,292 | ||||||||
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NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
The following table presents the estimated fair value of our total debt as of June 30, 2015 and December 31, 2014, respectively:
June 30, 2015 | December 31, 2014 | |||||||||||||||
Carrying Value | Estimated Fair Value | Carrying Value | Estimated Fair Value | |||||||||||||
Senior unsecured notes: | ||||||||||||||||
3.45% Senior Notes due August 2015 | $ | 350,000 | $ | 350,341 | $ | 350,000 | $ | 354,992 | ||||||||
3.05% Senior Notes due March 2016 | 299,990 | 302,419 | 299,982 | 302,515 | ||||||||||||
2.50% Senior Notes due March 2017 | 299,938 | 299,126 | 299,920 | 287,014 | ||||||||||||
4.00% Senior Notes due March 2018 | 249,516 | 255,442 | — | — | ||||||||||||
7.50% Senior Notes due March 2019 | 201,695 | 223,947 | 201,695 | 212,068 | ||||||||||||
4.90% Senior Notes due August 2020 | 499,218 | 514,130 | 499,151 | 471,095 | ||||||||||||
4.625% Senior Notes due March 2021 | 399,653 | 396,118 | 399,627 | 363,837 | ||||||||||||
3.95% Senior Notes due March 2022 | 399,309 | 367,077 | 399,264 | 346,425 | ||||||||||||
5.95% Senior Notes due April 2025 | 448,767 | 442,302 | — | — | ||||||||||||
6.20% Senior Notes due August 2040 | 399,895 | 338,989 | 399,895 | 350,351 | ||||||||||||
6.05% Senior Notes due March 2041 | 397,700 | 329,678 | 397,681 | 343,653 | ||||||||||||
5.25% Senior Notes due March 2042 | 498,324 | 376,746 | 498,310 | 385,181 | ||||||||||||
6.95% Senior Notes due April 2045 | 394,536 | 367,827 | — | — | ||||||||||||
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|
|
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|
|
| |||||||||
Total senior unsecured notes | 4,838,541 | 4,564,142 | 3,745,525 | 3,417,131 | ||||||||||||
Credit facilities & commercial paper program | — | — | 1,123,495 | 1,123,495 | ||||||||||||
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|
| |||||||||
Total debt | $ | 4,838,541 | $ | 4,564,142 | $ | 4,869,020 | $ | 4,540,626 | ||||||||
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Note 79 — Income Taxes
At June 30, 2014,2015, the reserves for uncertain tax positions totaled $122$112 million (net of related tax benefits of $2$1 million). If the June 30, 20142015 reserves are not realized, the provision for income taxes would be reduced by $122$112 million. At December 31, 2013,2014, the reserves for uncertain tax positions totaled $127$116 million (net of related tax benefits of $2$1 million).
It is reasonably possible that our existing liabilities related to our reserve for uncertain tax positions may increase or decrease in the next 12 months primarily due to the completion of open audits or the expiration of statutes of limitation. However, we cannot reasonably estimate a range of changes in our existing liabilities due to various uncertainties, such as the unresolved nature of various audits.
Note 810 — Employee Benefit Plans
Pension costs include the following components:components for the three months ended June 30, 2015 and 2014:
Three Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||||||||||||||||||
2014 | 2013 | 2015 | 2014 | |||||||||||||||||||||||||||||
Non-U.S. | U.S. | Non-U.S. | U.S. | Non-U.S. | U.S. | Non-U.S. | U.S. | |||||||||||||||||||||||||
Service cost | $ | 1,433 | $ | 2,541 | $ | 1,349 | $ | 2,681 | $ | 846 | $ | 2,149 | $ | 1,433 | $ | 2,541 | ||||||||||||||||
Interest cost | 1,472 | 2,714 | 1,252 | 2,262 | 632 | 2,300 | 1,472 | 2,714 | ||||||||||||||||||||||||
Return on plan assets | (1,856 | ) | (3,846 | ) | (1,437 | ) | (3,276 | ) | (911 | ) | (3,286 | ) | (1,856 | ) | (3,846 | ) | ||||||||||||||||
Amortization of prior service cost | (5 | ) | 56 | — | 57 | 26 | 36 | (5 | ) | 56 | ||||||||||||||||||||||
Recognized net actuarial loss | 316 | 651 | 395 | 1,910 | 110 | 1,539 | 316 | 651 | ||||||||||||||||||||||||
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Net pension expense | $ | 1,360 | $ | 2,116 | $ | 1,559 | $ | 3,634 | $ | 703 | $ | 2,738 | $ | 1,360 | $ | 2,116 | ||||||||||||||||
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NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Six Months Ended June 30, | ||||||||||||||||
2014 | 2013 | |||||||||||||||
Non-U.S. | U.S. | Non-U.S. | U.S. | |||||||||||||
Service cost | $ | 2,853 | $ | 5,082 | $ | 2,728 | $ | 5,362 | ||||||||
Interest cost | 2,928 | 5,428 | 2,534 | 4,524 | ||||||||||||
Return on plan assets | (3,691 | ) | (7,692 | ) | (2,908 | ) | (6,552 | ) | ||||||||
Amortization of prior service cost | (10 | ) | 112 | — | 114 | |||||||||||
Recognized net actuarial loss | 629 | 1,302 | 800 | 3,820 | ||||||||||||
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Net pension expense | $ | 2,709 | $ | 4,232 | $ | 3,154 | $ | 7,268 | ||||||||
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Included in net pension expense for the three months ended June 30, 2014 for our non-U.S. and U.S. plans was approximately $0.8 million and $0.5 million, respectively, related to Paragon Offshore that was classified as discontinued operations.
Pension costs include the following components for the six months ended June 30, 2015 and 2014:
Six Months Ended June 30, | ||||||||||||||||
2015 | 2014 | |||||||||||||||
Non-U.S. | U.S. | Non-U.S. | U.S. | |||||||||||||
Service cost | $ | 1,720 | $ | 4,298 | $ | 2,853 | $ | 5,082 | ||||||||
Interest cost | 1,274 | 4,599 | 2,928 | 5,428 | ||||||||||||
Return on plan assets | (1,837 | ) | (6,573 | ) | (3,691 | ) | (7,692 | ) | ||||||||
Amortization of prior service cost | 53 | 71 | (10 | ) | 112 | |||||||||||
Recognized net actuarial loss | 155 | 3,079 | 629 | 1,302 | ||||||||||||
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Net pension expense | $ | 1,365 | $ | 5,474 | $ | 2,709 | $ | 4,232 | ||||||||
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Included in net pension expense for the six months ended June 30, 2014 for our non-U.S. and U.S. plans was approximately $2 million and $0.9 million, respectively, related to Paragon Offshore that was classified as discontinued operations.
During the three and six months ended June 30, 2014,2015, we made contributions to our pension plans totaling $6approximately $0.1 million and $7$0.3 million, respectively.
Note 911 — Derivative Instruments and Hedging Activities
We periodically enter into derivative instruments to manage our exposure to fluctuations in interest rates and foreign currency exchange rates. We have documented policies and procedures to monitor and control the use of derivative instruments. We do not engage in derivative transactions for speculative or trading purposes, nor are we a party to leveraged derivatives.
For foreign currency forward contracts, hedge effectiveness is evaluated at inception based on the matching of critical terms between derivative contracts and the hedged item. Any change in fair value resulting from ineffectiveness is recognized immediately in earnings.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Cash Flow HedgesTransition Services Agreements
Our North Sea, MexicoUnder two transition services agreements, we agreed to continue, for a limited period of time, to provide various interim support services to Paragon Offshore, and BrazilParagon Offshore agreed to provide various interim support services to us, including providing operational and administrative support for our remaining Brazilian operations.
Note 3 — Discontinued Operations
Paragon Offshore, which had been reflected as continuing operations have a significant amountin our consolidated financial statements prior to the Spin-Off, meets the criteria for being reported as discontinued operations and has been reclassified as such in our results of their cash operating expenses payable in local currencies. To limit the potential riskoperations. The results of currency fluctuations, we periodically enter into forward contracts, which settle monthly in the operations’ respective local currencies. All of these contracts have a maturity of less than 12 months. The forward contract settlements in the remainder of 2014 represent approximately 35 percent of these forecasted local currency requirements. The notional amount of the forward contracts outstanding, expressed in U.S. Dollars, was approximately $192 million at June 30, 2014. Total unrealized gains related to these forward contracts were approximately $7 million as of June 30, 2014 and were recorded as part of “Accumulated other comprehensive loss” (“AOCL”).
Financial Statement Presentation
The following table, together with Note 10, summarizes the financial statement presentation and fair value of our derivative positions as of June 30, 2014 and December 31, 2013:
Estimated fair value | ||||||||||
Balance sheet classification | June 30, 2014 | December 31, 2013 | ||||||||
Asset derivatives | ||||||||||
Cash flow hedges | ||||||||||
Short-term foreign currency forward contracts | Other current assets | $ | 6,652 | $ | — |
To supplement the fair value disclosures in Note 10, the following summarizes the recognized gains and losses of cash flow hedges and non-designated derivatives through AOCL or through “other income”discontinued operations for the three months ended June 30, 2014 and 2013:
Gain/(loss) recognized through AOCL | Gain/(loss) reclassified from AOCL to “other income” | Gain/(loss) recognized through “other income” | ||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||
Cash flow hedges | ||||||||||||||||||||||||
Foreign currency forward contracts | $ | 5,067 | $ | (4,431 | ) | $ | 1,585 | $ | (300 | ) | $ | — | $ | — |
To supplement the fair value disclosures in Note 10, the following summarizes the recognized gains and losses of cash flow hedges and non-designated derivatives through AOCL or through “other income” for the six months ended June 30, 2014 include the historical results of Paragon Offshore, including $6 million and 2013:$19 million, respectively, of non-recurring costs incurred by Noble related to the Spin-Off.
Gain/(loss) recognized through AOCL | Gain/(loss) reclassified from AOCL to “other income” | Gain/(loss) recognized through “other income” | ||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||
Cash flow hedges | ||||||||||||||||||||||||
Foreign currency forward contracts | $ | 3,873 | $ | (4,545 | ) | $ | 2,779 | $ | (186 | ) | $ | — | $ | — |
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Note 10 — Fair Value of Financial Instruments
The following table presentsprovides the components of net income from discontinued operations, net of tax for Noble-UK for the three and six months ended June 30, 2014:
Three months ended June 30, 2014 | Six months ended June 30, 2014 | |||||||
Operating revenues | ||||||||
Contract drilling services | $ | 421,038 | $ | 856,705 | ||||
Reimbursables | 7,398 | 19,501 | ||||||
Labor contract drilling services | 8,146 | 16,358 | ||||||
Other | — | 1 | ||||||
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Operating revenues from discontinued operations | $ | 436,582 | $ | 892,565 | ||||
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Income from discontinued operations | ||||||||
Income from discontinued operations before income taxes | $ | 112,404 | $ | 232,774 | ||||
Income tax provision | (18,170 | ) | (37,028 | ) | ||||
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Net income from discontinued operations | $ | 94,234 | $ | 195,746 | ||||
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Note 4 — Consolidated Joint Ventures
We maintain a 50 percent interest in two joint ventures, each with a subsidiary of Royal Dutch Shell plc (“Shell”), that own and operate the twoBully-class drillships. We have determined that we are the primary beneficiary of the joint ventures. Accordingly, we consolidate the entities in our consolidated financial statements after eliminating intercompany transactions. Shell’s equity interests are presented as noncontrolling interests on our Consolidated Balance Sheets.
During the six months ended June 30, 2015 and 2014, the Bully joint ventures approved and paid dividends totaling $89 million and $84 million, respectively. Of these amounts, 50 percent were paid to our joint venture partner.
The combined carrying amount of theBully-class drillships at both June 30, 2015 and estimated fair value of our financial instruments recognizedDecember 31, 2014 totaled $1.4 billion. These assets were primarily funded through partner equity contributions. Cash held by the Bully joint ventures was approximately $41 million at fair value on a recurring basis:
June 30, 2014 | ||||||||||||||||
Estimated Fair Value Measurements | ||||||||||||||||
Carrying Amount | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Assets - | ||||||||||||||||
Marketable securities | $ | 8,590 | $ | 8,590 | $ | — | $ | — | ||||||||
Foreign currency forward contracts | 6,652 | — | 6,652 | — |
December 31, 2013 | ||||||||||||||||
Estimated Fair Value Measurements | ||||||||||||||||
Carrying Amount | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Assets - | ||||||||||||||||
Marketable securities | $ | 7,230 | $ | 7,230 | $ | — | $ | — |
The foreign currency forward contracts have been valued using actively quoted prices and quotes obtained from the counterpartiesJune 30, 2015 as compared to the contracts. Our cash and cash equivalents, accounts receivable and accounts payable are by their nature short-term. As a result, the carrying values included in the accompanying Consolidated Balance Sheets approximate fair value.approximately $47 million at December 31, 2014.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Note 115 — Accumulated Other Comprehensive LossShare Data
Earnings per share
The following tables settable sets forth the changescomputation of basic and diluted earnings per share for Noble-UK:
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Numerator: | ||||||||||||||||
Basic | ||||||||||||||||
Income from continuing operations | $ | 159,031 | $ | 140,325 | $ | 337,434 | $ | 295,139 | ||||||||
Earnings allocated to unvested share-based payment awards | (3,555 | ) | (2,257 | ) | (7,489 | ) | (4,767 | ) | ||||||||
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Income from continuing operations to common shareholders | 155,476 | 138,068 | 329,945 | 290,372 | ||||||||||||
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Income from discontinued operations | — | 94,234 | — | 195,746 | ||||||||||||
Earnings allocated to unvested share-based payment awards | — | (1,519 | ) | — | (3,281 | ) | ||||||||||
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Income from discontinued operations, net of tax to common shareholders | — | 92,715 | — | 192,465 | ||||||||||||
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Net income attributable to Noble-UK | 159,031 | 234,559 | 337,434 | 490,885 | ||||||||||||
Earnings allocated to unvested share-based payment awards | (3,555 | ) | (3,776 | ) | (7,489 | ) | (8,048 | ) | ||||||||
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Net income to common shareholders - basic | $ | 155,476 | $ | 230,783 | $ | 329,945 | $ | 482,837 | ||||||||
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Diluted | ||||||||||||||||
Income from continuing operations | $ | 159,031 | $ | 140,325 | $ | 337,434 | $ | 295,139 | ||||||||
Earnings allocated to unvested share-based payment awards | (3,555 | ) | (2,256 | ) | (7,489 | ) | (4,766 | ) | ||||||||
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Income from continuing operations to common shareholders | 155,476 | 138,069 | 329,945 | 290,373 | ||||||||||||
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Income from discontinued operations | — | 94,234 | — | 195,746 | ||||||||||||
Earnings allocated to unvested share-based payment awards | — | (1,518 | ) | — | (3,280 | ) | ||||||||||
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Income from discontinued operations, net of tax to common shareholders | — | 92,716 | — | 192,466 | ||||||||||||
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Net income attributable to Noble-UK | 159,031 | 234,559 | 337,434 | 490,885 | ||||||||||||
Earnings allocated to unvested share-based payment awards | (3,555 | ) | (3,774 | ) | (7,489 | ) | (8,046 | ) | ||||||||
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Net income to common shareholders - diluted | $ | 155,476 | $ | 230,785 | $ | 329,945 | $ | 482,839 | ||||||||
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Denominator: | ||||||||||||||||
Weighted average shares outstanding - basic | 241,966 | 254,238 | 242,324 | 254,090 | ||||||||||||
Incremental shares issuable from assumed exercise of stock options | — | 97 | — | 116 | ||||||||||||
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Weighted average shares outstanding - diluted | 241,966 | 254,335 | 242,324 | 254,206 | ||||||||||||
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Weighted average unvested share-based payment awards | 5,533 | 4,156 | 5,500 | 4,172 | ||||||||||||
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Earnings per share | ||||||||||||||||
Basic | ||||||||||||||||
Continuing operations | $ | 0.64 | $ | 0.54 | $ | 1.36 | $ | 1.14 | ||||||||
Discontinued operations | — | 0.37 | — | 0.76 | ||||||||||||
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Net income attributable to Noble-UK | $ | 0.64 | $ | 0.91 | $ | 1.36 | $ | 1.90 | ||||||||
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Diluted | ||||||||||||||||
Continuing operations | $ | 0.64 | $ | 0.54 | $ | 1.36 | $ | 1.14 | ||||||||
Discontinued operations | — | 0.37 | — | 0.76 | ||||||||||||
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Net income attributable to Noble-UK | $ | 0.64 | $ | 0.91 | $ | 1.36 | $ | 1.90 | ||||||||
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Dividends per share | $ | 0.375 | $ | 0.375 | $ | 0.75 | $ | 0.75 |
Only those items having a dilutive impact on our basic earnings per share are included in diluted earnings per share. For the accumulated balances for each component of AOCL, net of tax, for the sixthree months ended June 30, 2015 and 2014, approximately 2 million and 2013.
Gains / (Losses) on Cash Flow Hedges(1) | Defined Benefit Pension Items(2) | Foreign Currency Items | Total | |||||||||||||
Balance at December 31, 2012 | $ | — | $ | (95,071 | ) | $ | (20,378 | ) | $ | (115,449 | ) | |||||
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Activity during period: | ||||||||||||||||
Other comprehensive income (loss) before reclassifications | (4,917 | ) | — | 477 | (4,440 | ) | ||||||||||
Amounts reclassified from AOCL | 186 | 3,274 | — | 3,460 | ||||||||||||
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Net other comprehensive income (loss) | (4,731 | ) | 3,274 | 477 | (980 | ) | ||||||||||
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Balance at June 30, 2013 | $ | (4,731 | ) | $ | (91,797 | ) | $ | (19,901 | ) | $ | (116,429 | ) | ||||
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Balance at December 31, 2013 | $ | — | $ | (58,598 | ) | $ | (23,566 | ) | $ | (82,164 | ) | |||||
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Activity during period: | ||||||||||||||||
Other comprehensive income before reclassifications | 9,431 | — | 2,720 | 12,151 | ||||||||||||
Amounts reclassified from AOCL | (2,779 | ) | 1,528 | — | (1,251 | ) | ||||||||||
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Net other comprehensive income | 6,652 | 1,528 | 2,720 | 10,900 | ||||||||||||
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Balance at June 30, 2014 | $ | 6,652 | $ | (57,070 | ) | $ | (20,846 | ) | $ | (71,264 | ) | |||||
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Note 12 — Commitments and Contingencies
TheNoble Homer Ferrington was under contract with a subsidiary of ExxonMobil Corporation (“ExxonMobil”), which entered into an assignment agreement with BP for a two-well farmout of the rig in Libya after successfully drilling two wells with the rig for ExxonMobil. In August 2010, BP attempted to terminate the assignment agreement claiming that the rig was not in the required condition, and ExxonMobil informed us that we must look to BP for payment of the dayrate during the assignment period. In August 2010, we initiated arbitration proceedings under the drilling contract against both BP and ExxonMobil. We do not believe BP had the right to terminate the assignment agreement and believe the rig was ready to operate under the drilling contract. The rig operated under farmout arrangements from March 2011 to the conclusion of the contract in the second quarter of 2012. We believe we are owed dayrate by either or both of these clients. The operating dayrate was approximately $538,000 per day for the work in Libya. The arbitration process is proceeding, and we intend to vigorously pursue these claims. As a result of the uncertainties noted above, we have not recognized any revenue during the assignment period and the matter could have a material positive effect on our results of operations or cash flows in the period the matter is resolved should the arbitration panel ultimately rule in our favor.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, exceptdiluted earnings per share data)
In November 2012, the U.S. Coast Guard in Alaska conducted an inspection of our drillship, theNoble Discoverer, and cited a number of deficiencies to be remediated, including issues relating to the main propulsion and safety management system. We initiated a comprehensive effort to address the deficiencies identified by the Coast Guard and worked with the agency to keep it apprised of our progress. We began an internal investigation in conjunction with the Coast Guard inspection, and the Coast Guard then began its own investigation. We reported certain potential violations of applicable law to the Coast Guard identified as a result of our internal investigation. These related to what we believesuch stock options were certain unauthorized disposals of collected deck and sea water from theNoble Discoverer, collected, treated deck water from theKulluk and potential record-keeping issues with the oil record books for theNoble DiscovererandKullukand other matters. The Coast Guard referred theNoble Discoverer andKulluk matters to the U.S. Department of Justice (“DOJ”) for further investigation. We are cooperating with the DOJ in connection with their investigation, which relates to the items described above, hazardous condition allegations with respect to theNoble Discoverer and other matters. We cannot predict when the DOJ will conclude the investigation and cannot provide any assurances with respect to the outcome. The DOJ is seeking criminal sanctions, including monetary penalties, against us, as well as some form of ongoing assurance of our operational compliance programs, and we are in settlement discussions with the DOJ. We believe it is probable that we will have to pay some amount in fines and penalties to resolve this matter and have reserved $12 million.
We previously reported on an action taken by the Nigerian Maritime Administration and Safety Agency, or NIMASA, against our previous Nigerian subsidiary (the “Paragon Nigeria Subsidiary”) in connection with Nigeria’s cabotage laws (the “Cabotage Action”) and a separate action taken by the Nigerian Industrial Training Fund against the Paragon Nigeria Subsidiary with respect to expatriate employee surcharges (the “ITF Action”). As a result of the spin-off of Paragon Offshore on August 1, 2014, the Cabotage Action and the ITF Action are, at the date of filing this report, the legal and contractual responsibility of Paragon Offshore and not of us.
We are from time to time a party to various lawsuits that are incidental to our operations in which the claimants seek an unspecified amount of monetary damages for personal injury, including injuries purportedly resulting from exposure to asbestos on drilling rigs and associated facilities. At June 30, 2014, there were 37 asbestos related lawsuits in which we are one of many defendants. These lawsuits have been filed in the United States in the states of Louisiana, Mississippi and Texas. We intend to vigorously defend against the litigation. We do not believe the ultimate resolution of these matters will have a material adverse effect on our financial position, results of operations or cash flows.
We are a defendant in certain claims and litigation arising out of operations in the ordinary course of business, the resolution of which, in the opinion of management, will not be material to our financial position, results of operations or cash flows. There is inherent risk in any litigation or dispute and no assurance can be given as to the outcome of these claims.
We operate in a number of countries throughout the world and our tax returns filed in those jurisdictions are subject to review and examination by tax authorities within those jurisdictions. During 2013, the IRS completed its examination of our tax reporting for the taxable year ended December 31, 2008 and concluded that we were entitled to a refund. The congressional Joint Committee on Taxation took no exception to the conclusions reached by the IRS, and the refund, plus interest, was received in March 2014. The IRS also completed its examination of our tax reporting for the taxable year ended December 31, 2009, and informed us that it made no changes to our reported tax. During the first quarter of 2014, the IRS began its examination of our tax reporting for the taxable years ended December 31, 2010 and 2011. We believe that we have accurately reported all amounts in our 2010 and 2011 tax returns. Furthermore, we are currently contesting several non-U.S. tax assessments and may contest future assessments. We believe the ultimate resolution of the outstanding assessments, for which we have not made any accrual, will not have a material adverse effect on our consolidated financial statements. We recognize uncertain tax positions that we believe have a greater than 50 percent likelihood of being sustained. We cannot predict or provide assurance as to the ultimate outcome of any existing or future assessments.
Audit claims of approximately $345 million attributable to income, customs and other business taxes have been assessed against us. We have contested, or intend to contest, these assessments, including through litigation if necessary, and we believe the ultimate resolution, for which we have not made any accrual, will not have a material adverse effect on our consolidated financial statements. Tax authorities may issue additional assessments or pursue legal actions as a result of tax audits and we cannot predict or provide assurance as to the ultimate outcome of such assessments and legal actions.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
We have been notified by Petróleo Brasileiro S.A. (“Petrobras”) that it is currently challenging assessments by Brazilian tax authorities of withholding taxes associated with the provision of drilling rigs for its operations in Brazil during 2008 and 2009. Petrobras has also notified us that if Petrobras must ultimately pay such withholding taxes, it will seek reimbursement from us for the portion allocable to our drilling rigs. The amount of withholding tax that Petrobras indicates may be allocable to Noble drilling rigs that remain in our fleet as a result of the Paragon Offshore spin-off is approximately $36 million. We dispute the validity of the assessment, and we have notified Petrobras of our position. We will, if necessary, vigorously defend our rights.
During June 2014 and July 2014, there were two inadvertent discharges of drilling fluid on theNoble Roger Eason, one of our rigs operating offshore Brazil. We are currently in discussions with the Brazilian government, and have not been assessed any fines. As a result of the spin-off of Paragon Offshore, theNoble Roger Eason is part of Paragon Offshore’s fleet, and this matter is the legal and contractual responsibility of Paragon Offshore.
We maintain certain insurance coverage against specified marine perils, which includes physical damage and loss of hire. Damage caused by hurricanes has negatively impacted the energy insurance market, resulting in more restrictive and expensive coverage for U.S. named windstorm perils. Accordingly, we have elected to significantly reduce the named windstorm insurance on our rigs operating in the U.S. Gulf of Mexico. Presently, we insure theNoble Jim Thompson,Noble Amos Runner andNoble Driller for “total loss only” when caused by a named windstorm. For theNoble Bully I, our customer assumes the risk of loss due to a named windstorm event, pursuant to the terms of the drilling contract, through the purchase of insurance coverage (provided that we are responsible for any deductible under such policy) or, at its option, the assumption of the risk of loss up to the insured value in lieu of the purchase of such insurance. The remaining rigs in the U.S. Gulf of Mexico are self-insured for named windstorm perils. Our rigs located in the Mexico portion of the Gulf of Mexico remain covered by commercial insurance for windstorm damage. In addition, we maintain a physical damage deductible on our rigs of $25 million per occurrence. The loss of hire coverage applies only to our rigs operating under contract with a dayrate equal to or greater than $200,000 a day and is subject to a 45-day waiting period for each unit and each occurrence.
Although we maintain insurance in the geographic areas in which we operate, pollution, reservoir damage and environmental risks generally are not fully insurable. Our insurance policies and contractual rights to indemnity may not adequately cover our losses or may have exclusions of coverage for some losses. We do not have insurance coverage or rights to indemnity for all risks, including loss of hire insurance on most of the rigs in our fleet. Uninsured exposures may include expatriate activities prohibited by U.S. laws and regulations, radiation hazards, certain loss or damage to property on board our rigs and losses relating to shore-based terrorist acts or strikes. If a significant accident or other event occurs and is not fully covered by insurance or contractual indemnity, it could materially adversely affect our financial position, results of operations or cash flows. Additionally, there can be no assurance that those parties with contractual obligations to indemnify us will necessarily be financially able to indemnify us against all these risks.
We carry protection and indemnity insurance covering marine third party liability exposures, which also includes coverage for employer’s liability resulting from personal injury to our offshore drilling crews. Our protection and indemnity policy currently has a standard deductible of $10 million per occurrence, with maximum liability coverage of $750 million.
In connection with our capital expenditure program, we had outstanding commitments, including shipyard and purchase commitments of approximately $1.3 billion at June 30, 2014.
We have entered into agreements with certain of our executive officers, as well as certain other employees. These agreements become effective upon a change of control of Noble-UK (within the meaning set forth in the agreements) or a termination of employment in connection with or in anticipation of a change of control, and remain effective for three years thereafter. These agreements provide for compensation and certain other benefits under such circumstances.dilutive.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Share capital
As of June 30, 2015, Noble-UK had approximately 242.0 million shares outstanding and trading as compared to approximately 247.5 million shares outstanding and trading at December 31, 2014. The decrease in shares outstanding is primarily related to the repurchase of 6.2 million shares pursuant to our approved share repurchase program, discussed below. Our Board of Directors may increase our share capital through the issuance of up to 53 million authorized shares (at current nominal value of $0.01 per share) without obtaining shareholder approval.
Our most recent quarterly dividend payment to shareholders, totaling approximately $93 million (or $0.375 per share), was declared on April 24, 2015 and paid on May 14, 2015 to holders of record on May 4, 2015.
Share repurchases
Under UK law, the company is only permitted to purchase its own shares by way of an “off-market purchase” in a plan approved by shareholders. In December 2014, we received shareholder approval to repurchase up to 37,000,000 ordinary shares, or approximately 15 percent of our outstanding ordinary shares at the time of the shareholder approval. Any repurchases are expected to be funded using cash on hand, cash from operations or short-term borrowings under our Credit Facilities. The authority to make such repurchases will expire on the later of April 2016 or the end of the Company’s 2016 annual general meeting of shareholders, at which time we could seek shareholder approval for further repurchases. During the six months ended June 30, 2015, we repurchased 6.2 million of our ordinary shares covered by this authorization for a total cost of approximately $101 million. During the three months ended June 30, 2015, we did not repurchase any of our shares.
Note 6 — Receivables from Customers
At June 30, 2015, we had receivables of approximately $14 million related to theNoble Max Smith that are being disputed by our former customer, Petróleos Mexicanos (“Pemex”). These receivables have been classified as long-term and are included in “Other assets” on our Consolidated Balance Sheet. The disputed amounts relate to lost revenues for downtime that occurred after our rig was damaged when one of Pemex’s supply boats collided with our rig in 2010. In January 2012, we filed a lawsuit against Pemex in a Mexican court seeking recovery of these amounts. While we can make no assurances as to the outcome of this dispute, we believe we are entitled to the disputed amounts.
Note 7 — Property and Equipment
Property and equipment, at cost, as of June 30, 2015 and December 31, 2014 for Noble-UK consisted of the following:
June 30, 2015 | December 31, 2014 | |||||||
Drilling equipment and facilities | $ | 13,691,525 | $ | 13,254,240 | ||||
Construction in progress | 683,410 | 969,985 | ||||||
Other | 236,028 | 218,697 | ||||||
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|
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| |||||
Property and equipment, at cost | $ | 14,610,963 | $ | 14,442,922 | ||||
|
|
|
|
Capital expenditures, including capitalized interest, totaled $170 million and $1.2 billion for the six months ended June 30, 2015 and 2014, respectively. Capitalized interest was $6 million and $12 million for the three and six months ended June 30, 2015, respectively, as compared to $13 million and $27 million for the three and six months ended June 30, 2014.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Capital expenditures related to Paragon Offshore plc Spin-off Transactionfor the six months ended June 30, 2014 totaled $135 million. Depreciation expense for Paragon Offshore that was classified as discontinued operations totaled $102 million and $201 million, respectively, for the three and six months ended June 30, 2014.
Note 8 — Debt
Long-term debt consisted of the following at June 30, 2015 and December 31, 2014:
June 30, 2015 | December 31, 2014 | |||||||
Senior unsecured notes: | ||||||||
3.45% Senior Notes due August 2015 | $ | 350,000 | $ | 350,000 | ||||
3.05% Senior Notes due March 2016 | 299,990 | 299,982 | ||||||
2.50% Senior Notes due March 2017 | 299,938 | 299,920 | ||||||
4.00% Senior Notes due March 2018 | 249,516 | — | ||||||
7.50% Senior Notes due March 2019 | 201,695 | 201,695 | ||||||
4.90% Senior Notes due August 2020 | 499,218 | 499,151 | ||||||
4.625% Senior Notes due March 2021 | 399,653 | 399,627 | ||||||
3.95% Senior Notes due March 2022 | 399,309 | 399,264 | ||||||
5.95% Senior Notes due April 2025 | 448,767 | — | ||||||
6.20% Senior Notes due August 2040 | 399,895 | 399,895 | ||||||
6.05% Senior Notes due March 2041 | 397,700 | 397,681 | ||||||
5.25% Senior Notes due March 2042 | 498,324 | 498,310 | ||||||
6.95% Senior Notes due April 2045 | 394,536 | — | ||||||
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|
| |||||
Total senior unsecured notes | 4,838,541 | 3,745,525 | ||||||
Credit facilities & commercial paper program | — | 1,123,495 | ||||||
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| |||||
Total debt | 4,838,541 | 4,869,020 | ||||||
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| |||||
Less: Current maturities | (350,000 | ) | — | |||||
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| |||||
Long-term debt | $ | 4,488,541 | $ | 4,869,020 | ||||
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|
|
Credit Facilities and Commercial Paper Program
PriorWe currently have two credit facilities with an aggregate maximum capacity of $2.7 billion, which are comprised of a five year $2.4 billion senior unsecured credit facility that matures in January 2020 and a $225 million 364-day senior unsecured credit facility that matures in January 2016 (together, the “Credit Facilities”).
We have a commercial paper program that allows us to issue up to $2.4 billion in unsecured commercial paper notes. Amounts issued under the commercial paper program are supported by the unused capacity under our Credit Facilities and, therefore, are classified as long-term on our Consolidated Balance Sheet. The outstanding amounts of commercial paper reduce availability under our Credit Facilities.
The $2.4 billion facility provides us with the ability to issue up to $500 million in letters of credit. The issuance of letters of credit under the facility reduces the amount available for borrowing. At June 30, 2015, we had no letters of credit issued under the facility.
Senior Unsecured Notes
In March 2015, our indirect wholly-owned subsidiary, Noble Holding International Limited (“NHIL”), issued $1.1 billion aggregate principal amount of senior notes in three separate tranches, comprised of $250 million of 4.00% Senior Notes due 2018, $450 million of 5.95% Senior Notes due 2025, and $400 million of 6.95% Senior Notes due 2045. The weighted average coupon of all three tranches is 5.87%. The interest rate on these senior notes
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
may be increased if the credit rating applicable to the notes is downgraded below certain specified levels. The net proceeds of approximately $1.08 billion, after expenses, were used to repay indebtedness outstanding under our Credit Facilities and commercial paper program.
On August 1, 2015, our $350 million 3.45% Senior Notes matured, which we repaid using cash on hand. We have, therefore, classified these balances as “Current maturities of long-term debt” on our Consolidated Balance Sheet as of June 30, 2015.
Our $300 million 3.05% Senior Notes mature during the first quarter of 2016. We anticipate using availability under our Credit Facilities to repay the outstanding balances; therefore, we continue to report these balances as long-term as of June 30, 2015.
Covenants
The Credit Facilities are guaranteed by NHIL and Noble Holding Corporation (“NHC”). The covenants and events of default under the two Credit Facilities are substantially similar, and each facility contains a covenant that limits our ratio of debt to total tangible capitalization, as defined in the Credit Facilities, to 0.60. At June 30, 2015, our ratio of debt to total tangible capitalization was approximately 0.40. We were in compliance with all covenants under the Credit Facilities as of June 30, 2015.
In addition to the covenants from the Credit Facilities noted above, the indentures governing our outstanding senior unsecured notes contain covenants that place restrictions on certain merger and consolidation transactions, unless we are the surviving entity or the other party assumes the obligations under the indenture, and on the ability to sell or transfer all or substantially all of our assets. In addition, there are restrictions on incurring or assuming certain liens and on entering into sale and lease-back transactions. At June 30, 2015, we were in compliance with all of our debt covenants. We continually monitor compliance with the covenants under our notes and expect to remain in compliance during the remainder of 2015.
Fair Value of Debt
Fair value represents the amount at which an instrument could be exchanged in a current transaction between willing parties. The estimated fair value of our senior notes was based on the quoted market prices for similar issues or on the current rates offered to us for debt of similar remaining maturities (Level 2 measurement). All remaining fair value disclosures are presented in Note 12.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
The following table presents the estimated fair value of our total debt as of June 30, 2015 and December 31, 2014, respectively:
June 30, 2015 | December 31, 2014 | |||||||||||||||
Carrying Value | Estimated Fair Value | Carrying Value | Estimated Fair Value | |||||||||||||
Senior unsecured notes: | ||||||||||||||||
3.45% Senior Notes due August 2015 | $ | 350,000 | $ | 350,341 | $ | 350,000 | $ | 354,992 | ||||||||
3.05% Senior Notes due March 2016 | 299,990 | 302,419 | 299,982 | 302,515 | ||||||||||||
2.50% Senior Notes due March 2017 | 299,938 | 299,126 | 299,920 | 287,014 | ||||||||||||
4.00% Senior Notes due March 2018 | 249,516 | 255,442 | — | — | ||||||||||||
7.50% Senior Notes due March 2019 | 201,695 | 223,947 | 201,695 | 212,068 | ||||||||||||
4.90% Senior Notes due August 2020 | 499,218 | 514,130 | 499,151 | 471,095 | ||||||||||||
4.625% Senior Notes due March 2021 | 399,653 | 396,118 | 399,627 | 363,837 | ||||||||||||
3.95% Senior Notes due March 2022 | 399,309 | 367,077 | 399,264 | 346,425 | ||||||||||||
5.95% Senior Notes due April 2025 | 448,767 | 442,302 | — | — | ||||||||||||
6.20% Senior Notes due August 2040 | 399,895 | 338,989 | 399,895 | 350,351 | ||||||||||||
6.05% Senior Notes due March 2041 | 397,700 | 329,678 | 397,681 | 343,653 | ||||||||||||
5.25% Senior Notes due March 2042 | 498,324 | 376,746 | 498,310 | 385,181 | ||||||||||||
6.95% Senior Notes due April 2045 | 394,536 | 367,827 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total senior unsecured notes | 4,838,541 | 4,564,142 | 3,745,525 | 3,417,131 | ||||||||||||
Credit facilities & commercial paper program | — | — | 1,123,495 | 1,123,495 | ||||||||||||
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|
|
|
|
|
|
| |||||||||
Total debt | $ | 4,838,541 | $ | 4,564,142 | $ | 4,869,020 | $ | 4,540,626 | ||||||||
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Note 9 — Income Taxes
At June 30, 2015, the reserves for uncertain tax positions totaled $112 million (net of related tax benefits of $1 million). If the June 30, 2015 reserves are not realized, the provision for income taxes would be reduced by $112 million. At December 31, 2014, the reserves for uncertain tax positions totaled $116 million (net of related tax benefits of $1 million).
It is reasonably possible that our existing liabilities related to our reserve for uncertain tax positions may increase or decrease in the next 12 months primarily due to the completion of open audits or the spin-offexpiration of Paragon Offshore, Noblestatutes of limitation. However, we cannot reasonably estimate a range of changes in our existing liabilities due to various uncertainties, such as the unresolved nature of various audits.
Note 10 — Employee Benefit Plans
Pension costs include the following components for the three months ended June 30, 2015 and Paragon Offshore entered into a Master Separation Agreement (“MSA”)2014:
Three Months Ended June 30, | ||||||||||||||||
2015 | 2014 | |||||||||||||||
Non-U.S. | U.S. | Non-U.S. | U.S. | |||||||||||||
Service cost | $ | 846 | $ | 2,149 | $ | 1,433 | $ | 2,541 | ||||||||
Interest cost | 632 | 2,300 | 1,472 | 2,714 | ||||||||||||
Return on plan assets | (911 | ) | (3,286 | ) | (1,856 | ) | (3,846 | ) | ||||||||
Amortization of prior service cost | 26 | 36 | (5 | ) | 56 | |||||||||||
Recognized net actuarial loss | 110 | 1,539 | 316 | 651 | ||||||||||||
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|
|
|
|
|
| |||||||||
Net pension expense | $ | 703 | $ | 2,738 | $ | 1,360 | $ | 2,116 | ||||||||
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|
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Included in net pension expense for the three months ended June 30, 2014 for our non-U.S. and other agreements to effect the separationU.S. plans was approximately $0.8 million and spin-off and govern the relationship between the parties after the spin-off.
MSA
The general terms and conditions relating to the separation and spin-off are set forth in the MSA. The MSA identifies the assets transferred, liabilities assumed and contracts assigned either$0.5 million, respectively, related to Paragon Offshore by us or bythat was classified as discontinued operations.
Pension costs include the following components for the six months ended June 30, 2015 and 2014:
Six Months Ended June 30, | ||||||||||||||||
2015 | 2014 | |||||||||||||||
Non-U.S. | U.S. | Non-U.S. | U.S. | |||||||||||||
Service cost | $ | 1,720 | $ | 4,298 | $ | 2,853 | $ | 5,082 | ||||||||
Interest cost | 1,274 | 4,599 | 2,928 | 5,428 | ||||||||||||
Return on plan assets | (1,837 | ) | (6,573 | ) | (3,691 | ) | (7,692 | ) | ||||||||
Amortization of prior service cost | 53 | 71 | (10 | ) | 112 | |||||||||||
Recognized net actuarial loss | 155 | 3,079 | 629 | 1,302 | ||||||||||||
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|
|
|
|
| |||||||||
Net pension expense | $ | 1,365 | $ | 5,474 | $ | 2,709 | $ | 4,232 | ||||||||
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|
Included in net pension expense for the six months ended June 30, 2014 for our non-U.S. and U.S. plans was approximately $2 million and $0.9 million, respectively, related to Paragon Offshore that was classified as discontinued operations.
During the three and six months ended June 30, 2015, we made contributions to usour pension plans totaling approximately $0.1 million and $0.3 million, respectively.
Note 11 — Derivative Instruments and Hedging Activities
We periodically enter into derivative instruments to manage our exposure to fluctuations in interest rates and foreign currency exchange rates. We have documented policies and procedures to monitor and control the separation and describes when and how these transfers, assumptions and assignments will occur. The MSA providesuse of derivative instruments. We do not engage in derivative transactions for among other things, Paragon Offshore’s responsibility for liabilities relatingspeculative or trading purposes, nor are we a party to their businessleveraged derivatives.
For foreign currency forward contracts, hedge effectiveness is evaluated at inception based on the matching of critical terms between derivative contracts and the responsibility of Noble for liabilities related to our, andhedged item. Any change in certain limited cases, Paragon Offshore’s business,fair value resulting from ineffectiveness is recognized immediately in each case irrespective of when the liability arose. The MSA also contains indemnification obligations and ongoing commitments by us and Paragon Offshore.earnings.
Employee Matters Agreement
The employee matters agreement allocates liabilities and responsibilities between us and Paragon Offshore relating to employment, compensation and benefits and other employment related matters.
Tax Sharing Agreement
The tax sharing agreement provides for the allocation of tax liabilities and benefits between us and Paragon Offshore and governs the parties’ assistance with tax-related claims.
Transition Services Agreements
Under two transition services agreements, we willagreed to continue, for a limited period of time, to provide various interim support services to Paragon Offshore, and Paragon Offshore willagreed to provide various interim support services to us, including providing operational and administrative support for our remaining Brazilian operations.
Note 133 — Segment and Related InformationDiscontinued Operations
We report our contract drilling operationsParagon Offshore, which had been reflected as a single reportable segment, Contract Drilling Services, which reflects how we manage our business, and the fact that all of our drilling fleet is dependent upon the worldwide oil industry. The mobile offshore drilling units comprising our offshore rig fleet operate in a single, global market for contract drilling services and are often redeployed globally due to changing demands of our customers, which consist largely of major non-U.S. and government owned/controlled oil and gas companies throughout the world. As of June 30, 2014, our contract drilling services segment conducts contract drillingcontinuing operations in our consolidated financial statements prior to the United States, Mexico, Brazil, Argentina,Spin-Off, meets the North Sea, the Mediterranean, West Africa, the Middle East, India, Asiacriteria for being reported as discontinued operations and Australia.
We evaluate the performancehas been reclassified as such in our results of our operating segment based on revenues from external customers and segment profit. Summarized financial informationoperations. The results of our reportable segmentdiscontinued operations for the three and six months ended June 30, 2014 and 2013 is shown ininclude the following tables. The “Other” column includeshistorical results of labor contract drilling services in CanadaParagon Offshore, including $6 million and Alaska, as well as corporate$19 million, respectively, of non-recurring costs incurred by Noble related items. The consolidated financial statements of Noble-UK includeto the accounts of Noble-Cayman, and Noble-UK conducts substantially all of its business through Noble-Cayman and its subsidiaries. As a result, the summarized financial information for Noble-Cayman is substantially the same as Noble-UK.Spin-Off.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Three Months Ended June 30, | ||||||||||||||||||||||||
2014 | 2013 | |||||||||||||||||||||||
Contract | Contract | |||||||||||||||||||||||
Drilling | Drilling | |||||||||||||||||||||||
Services | Other | Total | Services | Other | Total | |||||||||||||||||||
Revenues from external customers | $ | 1,229,697 | $ | 10,666 | $ | 1,240,363 | $ | 1,003,522 | $ | 13,863 | $ | 1,017,385 | ||||||||||||
Depreciation and amortization | 249,701 | 4,693 | 254,394 | 209,082 | 3,507 | 212,589 | ||||||||||||||||||
Segment operating income/ (loss) | 353,095 | (6,519 | ) | 346,576 | 257,622 | (3,762 | ) | 253,860 | ||||||||||||||||
Interest expense, net of amount capitalized | (84 | ) | (36,267 | ) | (36,351 | ) | (102 | ) | (24,563 | ) | (24,665 | ) | ||||||||||||
Income tax (provision)/ benefit | (60,031 | ) | 7,596 | (52,435 | ) | (41,240 | ) | 4,416 | (36,824 | ) | ||||||||||||||
Segment profit/ (loss) | 271,848 | (37,289 | ) | 234,559 | 199,811 | (23,191 | ) | 176,620 | ||||||||||||||||
Total assets (at end of period) | 16,132,649 | 857,251 | 16,989,900 | 14,777,991 | 688,095 | 15,466,086 |
The following table provides the components of net income from discontinued operations, net of tax for Noble-UK for the three and six months ended June 30, 2014:
Six Months Ended June 30, | ||||||||||||||||||||||||
2014 | 2013 | |||||||||||||||||||||||
Contract | Contract | |||||||||||||||||||||||
Drilling | Drilling | |||||||||||||||||||||||
Services | Other | Total | Services | Other | Total | |||||||||||||||||||
Revenues from external customers | $ | 2,472,135 | $ | 19,398 | $ | 2,491,533 | $ | 1,952,980 | $ | 35,380 | $ | 1,988,360 | ||||||||||||
Depreciation and amortization | 491,275 | 9,024 | 500,299 | 411,701 | 7,044 | 418,745 | ||||||||||||||||||
Segment operating income/ (loss) | 736,962 | (21,126 | ) | 715,836 | 486,609 | (2,958 | ) | 483,651 | ||||||||||||||||
Interest expense, net of amount capitalized | (157 | ) | (76,586 | ) | (76,743 | ) | (222 | ) | (51,744 | ) | (51,966 | ) | ||||||||||||
Income tax (provision)/ benefit | (123,687 | ) | 16,816 | (106,871 | ) | (80,137 | ) | 8,961 | (71,176 | ) | ||||||||||||||
Segment profit/ (loss) | 574,459 | (83,574 | ) | 490,885 | 372,059 | (45,379 | ) | 326,680 | ||||||||||||||||
Total assets (at end of period) | 16,132,649 | 857,251 | 16,989,900 | 14,777,991 | 688,095 | 15,466,086 |
Three months ended June 30, 2014 | Six months ended June 30, 2014 | |||||||
Operating revenues | ||||||||
Contract drilling services | $ | 421,038 | $ | 856,705 | ||||
Reimbursables | 7,398 | 19,501 | ||||||
Labor contract drilling services | 8,146 | 16,358 | ||||||
Other | — | 1 | ||||||
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| |||||
Operating revenues from discontinued operations | $ | 436,582 | $ | 892,565 | ||||
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| |||||
Income from discontinued operations | ||||||||
Income from discontinued operations before income taxes | $ | 112,404 | $ | 232,774 | ||||
Income tax provision | (18,170 | ) | (37,028 | ) | ||||
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| |||||
Net income from discontinued operations | $ | 94,234 | $ | 195,746 | ||||
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Note 4 — Consolidated Joint Ventures
We maintain a 50 percent interest in two joint ventures, each with a subsidiary of Royal Dutch Shell plc (“Shell”), that own and operate the twoBully-class drillships. We have determined that we are the primary beneficiary of the joint ventures. Accordingly, we consolidate the entities in our consolidated financial statements after eliminating intercompany transactions. Shell’s equity interests are presented as noncontrolling interests on our Consolidated Balance Sheets.
During the six months ended June 30, 2015 and 2014, the Bully joint ventures approved and paid dividends totaling $89 million and $84 million, respectively. Of these amounts, 50 percent were paid to our joint venture partner.
The combined carrying amount of theBully-class drillships at both June 30, 2015 and December 31, 2014 totaled $1.4 billion. These assets were primarily funded through partner equity contributions. Cash held by the Bully joint ventures was approximately $41 million at June 30, 2015 as compared to approximately $47 million at December 31, 2014.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Note 5 — Share Data
Earnings per share
The following table sets forth the computation of basic and diluted earnings per share for Noble-UK:
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Numerator: | ||||||||||||||||
Basic | ||||||||||||||||
Income from continuing operations | $ | 159,031 | $ | 140,325 | $ | 337,434 | $ | 295,139 | ||||||||
Earnings allocated to unvested share-based payment awards | (3,555 | ) | (2,257 | ) | (7,489 | ) | (4,767 | ) | ||||||||
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|
| |||||||||
Income from continuing operations to common shareholders | 155,476 | 138,068 | 329,945 | 290,372 | ||||||||||||
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|
|
| |||||||||
Income from discontinued operations | — | 94,234 | — | 195,746 | ||||||||||||
Earnings allocated to unvested share-based payment awards | — | (1,519 | ) | — | (3,281 | ) | ||||||||||
|
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Income from discontinued operations, net of tax to common shareholders | — | 92,715 | — | 192,465 | ||||||||||||
|
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| |||||||||
Net income attributable to Noble-UK | 159,031 | 234,559 | 337,434 | 490,885 | ||||||||||||
Earnings allocated to unvested share-based payment awards | (3,555 | ) | (3,776 | ) | (7,489 | ) | (8,048 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net income to common shareholders - basic | $ | 155,476 | $ | 230,783 | $ | 329,945 | $ | 482,837 | ||||||||
|
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|
| |||||||||
Diluted | ||||||||||||||||
Income from continuing operations | $ | 159,031 | $ | 140,325 | $ | 337,434 | $ | 295,139 | ||||||||
Earnings allocated to unvested share-based payment awards | (3,555 | ) | (2,256 | ) | (7,489 | ) | (4,766 | ) | ||||||||
|
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| |||||||||
Income from continuing operations to common shareholders | 155,476 | 138,069 | 329,945 | 290,373 | ||||||||||||
|
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| |||||||||
Income from discontinued operations | — | 94,234 | — | 195,746 | ||||||||||||
Earnings allocated to unvested share-based payment awards | — | (1,518 | ) | — | (3,280 | ) | ||||||||||
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Income from discontinued operations, net of tax to common shareholders | — | 92,716 | — | 192,466 | ||||||||||||
|
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|
| |||||||||
Net income attributable to Noble-UK | 159,031 | 234,559 | 337,434 | 490,885 | ||||||||||||
Earnings allocated to unvested share-based payment awards | (3,555 | ) | (3,774 | ) | (7,489 | ) | (8,046 | ) | ||||||||
|
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| |||||||||
Net income to common shareholders - diluted | $ | 155,476 | $ | 230,785 | $ | 329,945 | $ | 482,839 | ||||||||
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| |||||||||
Denominator: | ||||||||||||||||
Weighted average shares outstanding - basic | 241,966 | 254,238 | 242,324 | 254,090 | ||||||||||||
Incremental shares issuable from assumed exercise of stock options | — | 97 | — | 116 | ||||||||||||
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| |||||||||
Weighted average shares outstanding - diluted | 241,966 | 254,335 | 242,324 | 254,206 | ||||||||||||
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| |||||||||
Weighted average unvested share-based payment awards | 5,533 | 4,156 | 5,500 | 4,172 | ||||||||||||
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| |||||||||
Earnings per share | ||||||||||||||||
Basic | ||||||||||||||||
Continuing operations | $ | 0.64 | $ | 0.54 | $ | 1.36 | $ | 1.14 | ||||||||
Discontinued operations | — | 0.37 | — | 0.76 | ||||||||||||
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| |||||||||
Net income attributable to Noble-UK | $ | 0.64 | $ | 0.91 | $ | 1.36 | $ | 1.90 | ||||||||
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Diluted | ||||||||||||||||
Continuing operations | $ | 0.64 | $ | 0.54 | $ | 1.36 | $ | 1.14 | ||||||||
Discontinued operations | — | 0.37 | — | 0.76 | ||||||||||||
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| |||||||||
Net income attributable to Noble-UK | $ | 0.64 | $ | 0.91 | $ | 1.36 | $ | 1.90 | ||||||||
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Dividends per share | $ | 0.375 | $ | 0.375 | $ | 0.75 | $ | 0.75 |
Only those items having a dilutive impact on our basic earnings per share are included in diluted earnings per share. For the three months ended June 30, 2015 and 2014, approximately 2 million and 1 million shares underlying stock options, respectively, were excluded from the diluted earnings per share as such stock options were not dilutive.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Share capital
As of June 30, 2015, Noble-UK had approximately 242.0 million shares outstanding and trading as compared to approximately 247.5 million shares outstanding and trading at December 31, 2014. The decrease in shares outstanding is primarily related to the repurchase of 6.2 million shares pursuant to our approved share repurchase program, discussed below. Our Board of Directors may increase our share capital through the issuance of up to 53 million authorized shares (at current nominal value of $0.01 per share) without obtaining shareholder approval.
Our most recent quarterly dividend payment to shareholders, totaling approximately $93 million (or $0.375 per share), was declared on April 24, 2015 and paid on May 14, 2015 to holders of record on May 4, 2015.
Share repurchases
Under UK law, the company is only permitted to purchase its own shares by way of an “off-market purchase” in a plan approved by shareholders. In December 2014, we received shareholder approval to repurchase up to 37,000,000 ordinary shares, or approximately 15 percent of our outstanding ordinary shares at the time of the shareholder approval. Any repurchases are expected to be funded using cash on hand, cash from operations or short-term borrowings under our Credit Facilities. The authority to make such repurchases will expire on the later of April 2016 or the end of the Company’s 2016 annual general meeting of shareholders, at which time we could seek shareholder approval for further repurchases. During the six months ended June 30, 2015, we repurchased 6.2 million of our ordinary shares covered by this authorization for a total cost of approximately $101 million. During the three months ended June 30, 2015, we did not repurchase any of our shares.
Note 6 — Receivables from Customers
At June 30, 2015, we had receivables of approximately $14 million related to theNoble Max Smith that are being disputed by our former customer, Petróleos Mexicanos (“Pemex”). These receivables have been classified as long-term and are included in “Other assets” on our Consolidated Balance Sheet. The disputed amounts relate to lost revenues for downtime that occurred after our rig was damaged when one of Pemex’s supply boats collided with our rig in 2010. In January 2012, we filed a lawsuit against Pemex in a Mexican court seeking recovery of these amounts. While we can make no assurances as to the outcome of this dispute, we believe we are entitled to the disputed amounts.
Note 7 — Property and Equipment
Property and equipment, at cost, as of June 30, 2015 and December 31, 2014 for Noble-UK consisted of the following:
June 30, 2015 | December 31, 2014 | |||||||
Drilling equipment and facilities | $ | 13,691,525 | $ | 13,254,240 | ||||
Construction in progress | 683,410 | 969,985 | ||||||
Other | 236,028 | 218,697 | ||||||
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| |||||
Property and equipment, at cost | $ | 14,610,963 | $ | 14,442,922 | ||||
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|
|
Capital expenditures, including capitalized interest, totaled $170 million and $1.2 billion for the six months ended June 30, 2015 and 2014, respectively. Capitalized interest was $6 million and $12 million for the three and six months ended June 30, 2015, respectively, as compared to $13 million and $27 million for the three and six months ended June 30, 2014.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Capital expenditures related to Paragon Offshore for the six months ended June 30, 2014 totaled $135 million. Depreciation expense for Paragon Offshore that was classified as discontinued operations totaled $102 million and $201 million, respectively, for the three and six months ended June 30, 2014.
Note 8 — Debt
Long-term debt consisted of the following at June 30, 2015 and December 31, 2014:
June 30, 2015 | December 31, 2014 | |||||||
Senior unsecured notes: | ||||||||
3.45% Senior Notes due August 2015 | $ | 350,000 | $ | 350,000 | ||||
3.05% Senior Notes due March 2016 | 299,990 | 299,982 | ||||||
2.50% Senior Notes due March 2017 | 299,938 | 299,920 | ||||||
4.00% Senior Notes due March 2018 | 249,516 | — | ||||||
7.50% Senior Notes due March 2019 | 201,695 | 201,695 | ||||||
4.90% Senior Notes due August 2020 | 499,218 | 499,151 | ||||||
4.625% Senior Notes due March 2021 | 399,653 | 399,627 | ||||||
3.95% Senior Notes due March 2022 | 399,309 | 399,264 | ||||||
5.95% Senior Notes due April 2025 | 448,767 | — | ||||||
6.20% Senior Notes due August 2040 | 399,895 | 399,895 | ||||||
6.05% Senior Notes due March 2041 | 397,700 | 397,681 | ||||||
5.25% Senior Notes due March 2042 | 498,324 | 498,310 | ||||||
6.95% Senior Notes due April 2045 | 394,536 | — | ||||||
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| |||||
Total senior unsecured notes | 4,838,541 | 3,745,525 | ||||||
Credit facilities & commercial paper program | — | 1,123,495 | ||||||
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| |||||
Total debt | 4,838,541 | 4,869,020 | ||||||
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| |||||
Less: Current maturities | (350,000 | ) | — | |||||
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| |||||
Long-term debt | $ | 4,488,541 | $ | 4,869,020 | ||||
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|
Credit Facilities and Commercial Paper Program
We currently have two credit facilities with an aggregate maximum capacity of $2.7 billion, which are comprised of a five year $2.4 billion senior unsecured credit facility that matures in January 2020 and a $225 million 364-day senior unsecured credit facility that matures in January 2016 (together, the “Credit Facilities”).
We have a commercial paper program that allows us to issue up to $2.4 billion in unsecured commercial paper notes. Amounts issued under the commercial paper program are supported by the unused capacity under our Credit Facilities and, therefore, are classified as long-term on our Consolidated Balance Sheet. The outstanding amounts of commercial paper reduce availability under our Credit Facilities.
The $2.4 billion facility provides us with the ability to issue up to $500 million in letters of credit. The issuance of letters of credit under the facility reduces the amount available for borrowing. At June 30, 2015, we had no letters of credit issued under the facility.
Senior Unsecured Notes
In March 2015, our indirect wholly-owned subsidiary, Noble Holding International Limited (“NHIL”), issued $1.1 billion aggregate principal amount of senior notes in three separate tranches, comprised of $250 million of 4.00% Senior Notes due 2018, $450 million of 5.95% Senior Notes due 2025, and $400 million of 6.95% Senior Notes due 2045. The weighted average coupon of all three tranches is 5.87%. The interest rate on these senior notes
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
may be increased if the credit rating applicable to the notes is downgraded below certain specified levels. The net proceeds of approximately $1.08 billion, after expenses, were used to repay indebtedness outstanding under our Credit Facilities and commercial paper program.
On August 1, 2015, our $350 million 3.45% Senior Notes matured, which we repaid using cash on hand. We have, therefore, classified these balances as “Current maturities of long-term debt” on our Consolidated Balance Sheet as of June 30, 2015.
Our $300 million 3.05% Senior Notes mature during the first quarter of 2016. We anticipate using availability under our Credit Facilities to repay the outstanding balances; therefore, we continue to report these balances as long-term as of June 30, 2015.
Covenants
The Credit Facilities are guaranteed by NHIL and Noble Holding Corporation (“NHC”). The covenants and events of default under the two Credit Facilities are substantially similar, and each facility contains a covenant that limits our ratio of debt to total tangible capitalization, as defined in the Credit Facilities, to 0.60. At June 30, 2015, our ratio of debt to total tangible capitalization was approximately 0.40. We were in compliance with all covenants under the Credit Facilities as of June 30, 2015.
In addition to the covenants from the Credit Facilities noted above, the indentures governing our outstanding senior unsecured notes contain covenants that place restrictions on certain merger and consolidation transactions, unless we are the surviving entity or the other party assumes the obligations under the indenture, and on the ability to sell or transfer all or substantially all of our assets. In addition, there are restrictions on incurring or assuming certain liens and on entering into sale and lease-back transactions. At June 30, 2015, we were in compliance with all of our debt covenants. We continually monitor compliance with the covenants under our notes and expect to remain in compliance during the remainder of 2015.
Fair Value of Debt
Fair value represents the amount at which an instrument could be exchanged in a current transaction between willing parties. The estimated fair value of our senior notes was based on the quoted market prices for similar issues or on the current rates offered to us for debt of similar remaining maturities (Level 2 measurement). All remaining fair value disclosures are presented in Note 12.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
The following table presents the estimated fair value of our total debt as of June 30, 2015 and December 31, 2014, respectively:
June 30, 2015 | December 31, 2014 | |||||||||||||||
Carrying Value | Estimated Fair Value | Carrying Value | Estimated Fair Value | |||||||||||||
Senior unsecured notes: | ||||||||||||||||
3.45% Senior Notes due August 2015 | $ | 350,000 | $ | 350,341 | $ | 350,000 | $ | 354,992 | ||||||||
3.05% Senior Notes due March 2016 | 299,990 | 302,419 | 299,982 | 302,515 | ||||||||||||
2.50% Senior Notes due March 2017 | 299,938 | 299,126 | 299,920 | 287,014 | ||||||||||||
4.00% Senior Notes due March 2018 | 249,516 | 255,442 | — | — | ||||||||||||
7.50% Senior Notes due March 2019 | 201,695 | 223,947 | 201,695 | 212,068 | ||||||||||||
4.90% Senior Notes due August 2020 | 499,218 | 514,130 | 499,151 | 471,095 | ||||||||||||
4.625% Senior Notes due March 2021 | 399,653 | 396,118 | 399,627 | 363,837 | ||||||||||||
3.95% Senior Notes due March 2022 | 399,309 | 367,077 | 399,264 | 346,425 | ||||||||||||
5.95% Senior Notes due April 2025 | 448,767 | 442,302 | — | — | ||||||||||||
6.20% Senior Notes due August 2040 | 399,895 | 338,989 | 399,895 | 350,351 | ||||||||||||
6.05% Senior Notes due March 2041 | 397,700 | 329,678 | 397,681 | 343,653 | ||||||||||||
5.25% Senior Notes due March 2042 | 498,324 | 376,746 | 498,310 | 385,181 | ||||||||||||
6.95% Senior Notes due April 2045 | 394,536 | 367,827 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total senior unsecured notes | 4,838,541 | 4,564,142 | 3,745,525 | 3,417,131 | ||||||||||||
Credit facilities & commercial paper program | — | — | 1,123,495 | 1,123,495 | ||||||||||||
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| |||||||||
Total debt | $ | 4,838,541 | $ | 4,564,142 | $ | 4,869,020 | $ | 4,540,626 | ||||||||
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Note 9 — Income Taxes
At June 30, 2015, the reserves for uncertain tax positions totaled $112 million (net of related tax benefits of $1 million). If the June 30, 2015 reserves are not realized, the provision for income taxes would be reduced by $112 million. At December 31, 2014, the reserves for uncertain tax positions totaled $116 million (net of related tax benefits of $1 million).
It is reasonably possible that our existing liabilities related to our reserve for uncertain tax positions may increase or decrease in the next 12 months primarily due to the completion of open audits or the expiration of statutes of limitation. However, we cannot reasonably estimate a range of changes in our existing liabilities due to various uncertainties, such as the unresolved nature of various audits.
Note 10 — Employee Benefit Plans
Pension costs include the following components for the three months ended June 30, 2015 and 2014:
Three Months Ended June 30, | ||||||||||||||||
2015 | 2014 | |||||||||||||||
Non-U.S. | U.S. | Non-U.S. | U.S. | |||||||||||||
Service cost | $ | 846 | $ | 2,149 | $ | 1,433 | $ | 2,541 | ||||||||
Interest cost | 632 | 2,300 | 1,472 | 2,714 | ||||||||||||
Return on plan assets | (911 | ) | (3,286 | ) | (1,856 | ) | (3,846 | ) | ||||||||
Amortization of prior service cost | 26 | 36 | (5 | ) | 56 | |||||||||||
Recognized net actuarial loss | 110 | 1,539 | 316 | 651 | ||||||||||||
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|
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|
|
|
| |||||||||
Net pension expense | $ | 703 | $ | 2,738 | $ | 1,360 | $ | 2,116 | ||||||||
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|
|
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Included in net pension expense for the three months ended June 30, 2014 for our non-U.S. and U.S. plans was approximately $0.8 million and $0.5 million, respectively, related to Paragon Offshore that was classified as discontinued operations.
Pension costs include the following components for the six months ended June 30, 2015 and 2014:
Six Months Ended June 30, | ||||||||||||||||
2015 | 2014 | |||||||||||||||
Non-U.S. | U.S. | Non-U.S. | U.S. | |||||||||||||
Service cost | $ | 1,720 | $ | 4,298 | $ | 2,853 | $ | 5,082 | ||||||||
Interest cost | 1,274 | 4,599 | 2,928 | 5,428 | ||||||||||||
Return on plan assets | (1,837 | ) | (6,573 | ) | (3,691 | ) | (7,692 | ) | ||||||||
Amortization of prior service cost | 53 | 71 | (10 | ) | 112 | |||||||||||
Recognized net actuarial loss | 155 | 3,079 | 629 | 1,302 | ||||||||||||
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Net pension expense | $ | 1,365 | $ | 5,474 | $ | 2,709 | $ | 4,232 | ||||||||
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Included in net pension expense for the six months ended June 30, 2014 for our non-U.S. and U.S. plans was approximately $2 million and $0.9 million, respectively, related to Paragon Offshore that was classified as discontinued operations.
During the three and six months ended June 30, 2015, we made contributions to our pension plans totaling approximately $0.1 million and $0.3 million, respectively.
Note 11 — Derivative Instruments and Hedging Activities
We periodically enter into derivative instruments to manage our exposure to fluctuations in interest rates and foreign currency exchange rates. We have documented policies and procedures to monitor and control the use of derivative instruments. We do not engage in derivative transactions for speculative or trading purposes, nor are we a party to leveraged derivatives.
For foreign currency forward contracts, hedge effectiveness is evaluated at inception based on the matching of critical terms between derivative contracts and the hedged item. Any change in fair value resulting from ineffectiveness is recognized immediately in earnings.
Cash Flow Hedges
Several of our regional shorebases, including our North Sea, Australian and Brazilian operations, have a significant amount of their cash operating expenses payable in local currencies. To limit the potential risk of currency fluctuations, we periodically enter into forward contracts, which settle monthly in the operations’ respective local currencies. All of these contracts have a maturity of less than 12 months. The forward contract settlements in the remainder of 2015 represent approximately 60 percent of these forecasted local currency requirements. The notional amount of the forward contracts outstanding, expressed in U.S. Dollars, was approximately $47 million at June 30, 2015. Total unrealized losses related to these forward contracts were approximately $0.1 million as of June 30, 2015 and were recorded as part of “Accumulated other comprehensive loss” (“AOCL”).
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Financial Statement Presentation
The following table, together with Note 12, summarizes the financial statement presentation and fair value of our derivative positions as of June 30, 2015 and December 31, 2014:
Estimated fair value | ||||||||||
Balance sheet classification | June 30, 2015 | December 31, 2014 | ||||||||
Asset derivatives | ||||||||||
Cash flow hedges | ||||||||||
Short-term foreign currency forward contracts | Other current assets | $ | 1,103 | $ | — | |||||
Liability derivatives | ||||||||||
Cash flow hedges | ||||||||||
Short-term foreign currency forward contracts | Other current liabilities | $ | 1,194 | $ | — |
To supplement the fair value disclosures in Note 12, the following summarizes the recognized gains and losses of cash flow hedges and non-designated derivatives through AOCL or through “contract drilling services” expense for the three months ended June 30, 2015 and 2014:
Gain/(loss) recognized through AOCL | Gain/(loss) reclassified from AOCL to “contract drilling services” expense | Gain/(loss) recognized through “contract drilling services” expense | ||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||
Cash flow hedges | ||||||||||||||||||||||||
Foreign currency forward contracts | $ | 479 | $ | 5,067 | $ | (570 | ) | $ | 1,585 | $ | — | $ | — |
To supplement the fair value disclosures in Note 12, the following summarizes the recognized gains and losses of cash flow hedges and non-designated derivatives through AOCL or through “contract drilling services” expense for the six months ended June 30, 2015 and 2014:
Gain/(loss) recognized through AOCL | Gain/(loss) reclassified from AOCL to “contract drilling services” expense | Gain/(loss) recognized through “contract drilling services” expense | ||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||
Cash flow hedges | ||||||||||||||||||||||||
Foreign currency forward contracts | $ | 513 | $ | 3,873 | $ | (604 | ) | $ | 2,779 | $ | — | $ | — |
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Note 12 — Fair Value of Financial Instruments
The following tables present the carrying amount and estimated fair value of our financial instruments recognized at fair value on a recurring basis:
June 30, 2015 | ||||||||||||||||
Estimated Fair Value Measurements | ||||||||||||||||
Carrying Amount | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Assets - | ||||||||||||||||
Marketable securities | $ | 7,170 | $ | 7,170 | $ | — | $ | — | ||||||||
Foreign currency forward contracts | 1,103 | — | 1,103 | — | ||||||||||||
Liabilities - | ||||||||||||||||
Foreign currency forward contracts | $ | 1,194 | $ | — | $ | 1,194 | $ | — | ||||||||
December 31, 2014 | ||||||||||||||||
Estimated Fair Value Measurements | ||||||||||||||||
Carrying Amount | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Assets - | ||||||||||||||||
Marketable securities | $ | 6,175 | $ | 6,175 | $ | — | $ | — |
The foreign currency forward contracts have been valued using actively quoted prices and quotes obtained from the counterparties to the contracts. Our cash and cash equivalents, accounts receivable and accounts payable are by their nature short-term. As a result, the carrying values included in the accompanying Consolidated Balance Sheets approximate fair value.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Note 13 — Accumulated Other Comprehensive Loss
The following tables set forth the components of, and changes in the accumulated balances for each component of, AOCL for the six months ended June 30, 2015 and 2014. All amounts within the tables are shown net of tax.
Gains / (Losses) on Cash Flow Hedges(1) | Defined Benefit Pension Items(2) | Foreign Currency Items | Total | |||||||||||||
Balance at December 31, 2013 | $ | — | $ | (58,598 | ) | $ | (23,566 | ) | $ | (82,164 | ) | |||||
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Activity during period: | ||||||||||||||||
Other comprehensive income before reclassifications | 9,431 | — | 2,720 | 12,151 | ||||||||||||
Amounts reclassified from AOCL | (2,779 | ) | 1,528 | — | (1,251 | ) | ||||||||||
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Net other comprehensive income | 6,652 | 1,528 | 2,720 | 10,900 | ||||||||||||
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Balance at June 30, 2014 | $ | 6,652 | $ | (57,070 | ) | $ | (20,846 | ) | $ | (71,264 | ) | |||||
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Balance at December 31, 2014 | $ | — | $ | (58,440 | ) | $ | (10,978 | ) | $ | (69,418 | ) | |||||
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Activity during period: | ||||||||||||||||
Other comprehensive loss before reclassifications | (695 | ) | — | (1,874 | ) | (2,569 | ) | |||||||||
Amounts reclassified from AOCL | 604 | 2,210 | — | 2,814 | ||||||||||||
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Net other comprehensive income (loss) | (91 | ) | 2,210 | (1,874 | ) | 245 | ||||||||||
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Balance at June 30, 2015 | $ | (91 | ) | $ | (56,230 | ) | $ | (12,852 | ) | $ | (69,173 | ) | ||||
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(1) | Gains / (losses) on cash flow hedges are related to our foreign currency forward contracts. Reclassifications from AOCL are recognized through “contract drilling services” expense on our Consolidated Statements of Income. See Note 11 for additional information. |
(2) | Defined benefit pension items relate to actuarial changes, the amortization of prior service costs and curtailment and settlement expenses. Reclassifications from AOCL are recognized as expense on our Consolidated Statements of Income through either “contract drilling services” or “general and administrative”. See Note 10 for additional information. |
Note 14 — Commitments and Contingencies
TheNoble Homer Ferringtonwas under contract with a subsidiary of Exxon Mobil Corporation (“Exxon”), which entered into an assignment agreement with British Petroleum plc (“BP”) for a two-well farmout of the rig in Libya after successfully drilling two wells with the rig for Exxon. In August 2010, BP attempted to terminate the assignment agreement claiming that the rig was not in the required condition, and Exxon informed us that we must look to BP for payment of the dayrate during the assignment period. In August 2010, we initiated arbitration proceedings under the drilling contract against the Libyan operating subsidiaries of both BP and Exxon (the “Defendants”). The arbitration panel issued an award in our favor for the amount of $136 million plus interest and fees, and on July 10, 2015, the period under which the Defendants could seek clarification or correction of the award under the applicable arbitration rules expired. On July 31, 2015, BP paid us $149 million under the award, and we expect Exxon to promptly resolve their portion of the award. We anticipate recognizing award amounts received in our statement of operations during the third quarter.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
In December 2014, one of our subsidiaries reached a settlement with the U.S. Department of Justice (“DOJ”) regarding our drillship, theNoble Discoverer, and theKulluk in respect of violations of applicable law discovered in connection with a 2012 coast guard inspection in Alaska and our own subsequent internal investigation. Under the terms of the agreement, the subsidiary pled guilty to oil record book, ballast record and required hazardous condition reporting violations with respect to the Noble Discoverer and an oil record book violation with respect to theKulluk. The subsidiary paid $8.2 million in fines and $4 million in community service payments, and was placed on probation for four years, provided that we may petition the court for early dismissal of probation after three years. If during the term of probation, the subsidiary fails to adhere to the terms of the plea agreement, the DOJ may withdraw from the plea agreement and would be free to prosecute the subsidiary on all charges arising out of its investigation, including any charges dismissed pursuant to the terms of the plea agreement, as well as potentially other charges. We also implemented a comprehensive environmental compliance plan in connection with the settlement.
We have used a commercial agent in Brazil in connection with our Petróleo Brasileiro S.A. (“Petrobras”) drilling contracts. We understand that this agent has represented a number of different companies in Brazil over many years, including several offshore drilling contractors. Recent reports indicate that this agent has entered into a plea agreement in Brazil in connection with the award of a drilling contract to a competitor, and has implicated a Petrobras official as part of a wider investigation of Petrobras’ business practices. We are not aware of any improper activity by Noble in connection with contracts that Noble has entered into with Petrobras, and we have not been contacted by any authorities regarding such contracts or the investigation into Petrobras’ business practices.
We are from time to time a party to various lawsuits that are incidental to our operations in which the claimants seek an unspecified amount of monetary damages for personal injury, including injuries purportedly resulting from exposure to asbestos on drilling rigs and associated facilities. At June 30, 2015, there were 45 asbestos related lawsuits in which we are one of many defendants. These lawsuits have been filed in the United States in the states of Louisiana, Mississippi and Texas. We intend to vigorously defend against the litigation. We do not believe the ultimate resolution of these matters will have a material adverse effect on our financial position, results of operations or cash flows.
We are a defendant in certain claims and litigation arising out of operations in the ordinary course of business, the resolution of which, in the opinion of management, will not be material to our financial position, results of operations or cash flows. There is inherent risk in any litigation or dispute and no assurance can be given as to the outcome of these claims.
We operate in a number of countries throughout the world and our tax returns filed in those jurisdictions are subject to review and examination by tax authorities within those jurisdictions. During the first quarter of 2014, the IRS began its examination of our tax reporting in the U.S. for the taxable years ended December 31, 2010 and 2011. We believe that we have accurately reported all amounts in our 2010 and 2011 tax returns. We believe the ultimate resolution of the outstanding assessments in the U.S., for which we have not made any accrual, will not have a material adverse effect on our consolidated financial statements. We recognize uncertain tax positions that we believe have a greater than 50 percent likelihood of being sustained. We cannot predict or provide assurance as to the ultimate outcome of any existing or future assessments.
Audit claims of approximately $110 million attributable to income, customs and other business taxes have been assessed against us in Mexico and Brazil. Tax assessments of approximately $52 million have been made against Noble entities in Mexico, of which approximately $38 million relates to Paragon Offshore assets that operated through Noble-retained entities in Mexico prior to the Spin-off. Paragon Offshore has received tax assessments of approximately $220 million against Paragon Offshore entities in Mexico, of which approximately $50 million relates to Noble assets that operated through Paragon Offshore-retained entities in Mexico prior to the Spin-off. In Brazil, Paragon Offshore has received tax assessments of approximately $150 million, of which $46 million relates to Noble assets that operated through a Paragon Offshore-retained entity in Brazil prior to the Spin-off. Under the TSA, Paragon Offshore must indemnify us for all assessed amounts that are related to Paragon Offshore’s Mexico assets, approximately $38 million as noted above, and we must indemnify Paragon Offshore for all assessed amounts that are related to Noble’s Mexico and Brazil assets, approximately $50 million and $46 million, respectively, as noted above, if and when such payments become due.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
We have contested, or intend to contest or cooperate with Paragon Offshore where it is contesting, the assessments described above, including through litigation if necessary, and we believe the ultimate resolution, for which we have not made any accrual, will not have a material adverse effect on our consolidated financial statements. Tax authorities may issue additional assessments or pursue legal actions as a result of tax audits and we cannot predict or provide assurance as to the ultimate outcome of such assessments and legal actions or our ability to collect indemnities from Paragon Offshore under the TSA.
On January 23, 2015, Noble received an official notification of a ruling from the Second Chamber of the Supreme Court in Mexico. The ruling settled an ongoing dispute in Mexico relating to the classification of a Noble subsidiary’s business activity and the applicable rate of depreciation under the Mexican law applicable to the activities of that subsidiary. The ruling did not result in any additional tax liability to Noble. Additionally, the ruling is only applicable to the Noble subsidiary named in the ruling and, therefore, does not establish the depreciation rate applicable to the assets of other Noble subsidiaries. We will continue to contest future assessments received. Any claim by the tax authorities relating to this depreciation issue would be related to the businesses transferred to Paragon Offshore in the Spin-off and, therefore, would be subject to indemnification by Paragon Offshore under the TSA.
We have been notified by Petrobras that it is currently challenging assessments by Brazilian tax authorities of withholding taxes associated with the provision of drilling rigs for its operations in Brazil during 2008 and 2009. Petrobras has also notified us that if Petrobras must ultimately pay such withholding taxes, it will seek reimbursement from us for the portion allocable to our drilling rigs. The amount of withholding tax that Petrobras indicates may be allocable to Noble drilling rigs is R$79 million (approximately $25 million). We believe that our contract with Petrobras requires Petrobras to indemnify us for these withholding taxes. We will, if necessary, vigorously defend our rights.
We maintain certain insurance coverage against specified marine perils, which includes physical damage and loss of hire. The rigs in the U.S. Gulf of Mexico are self-insured for named windstorm perils. In addition, we maintain a physical damage deductible on our rigs of $25 million per occurrence. The loss of hire coverage applies only to our rigs operating under contract with a dayrate equal to or greater than $200,000 a day and is subject to a 45-day waiting period for each unit and each occurrence.
Although we maintain insurance in the geographic areas in which we operate, pollution, reservoir damage and environmental risks generally are not fully insurable. Our insurance policies and contractual rights to indemnity may not adequately cover our losses or may have exclusions of coverage for some losses. We do not have insurance coverage or rights to indemnity for all risks, including loss of hire insurance on most of the rigs in our fleet. Uninsured exposures may include expatriate activities prohibited by U.S. laws and regulations, radiation hazards, certain loss or damage to property on board our rigs and losses relating to shore-based terrorist acts, strikes or cyber risks. If a significant accident or other event occurs and is not fully covered by insurance or contractual indemnity, it could materially adversely affect our financial position, results of operations or cash flows. Additionally, there can be no assurance that those parties with contractual obligations to indemnify us will necessarily be financially able to indemnify us against all these risks.
We carry protection and indemnity insurance covering marine third party liability exposures, which also includes coverage for employer’s liability resulting from personal injury to our offshore drilling crews. Our protection and indemnity policy currently has a standard deductible of $10 million per occurrence, with maximum liability coverage of $750 million.
In connection with our capital expenditure program, we had outstanding commitments, including shipyard and purchase commitments of approximately $697 million at June 30, 2015.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
We have entered into agreements with certain of our executive officers, as well as certain other employees. These agreements become effective upon a change of control of Noble-UK (within the meaning set forth in the agreements) or a termination of employment in connection with or in anticipation of a change of control, and remain effective for three years thereafter. These agreements provide for compensation and certain other benefits under such circumstances.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Note 15 — Accounting Pronouncements
In April 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-08, which amends FASB Accounting Standards Codification (“ASC”) Topic 205, “Presentation of Financial Statements” and ASC Topic 360, “Property, Plant, and Equipment.” This ASU alters the definition of a discontinued operation to cover only asset disposals that are a strategic shift with a major effect on an entity’s operations and finances, and calls for more extensive disclosures about a discontinued operation’s assets, liabilities, income and expenses. The guidance is effective for all disposals, or classifications as held-for-sale, of components of an entity that occur within annual periods beginning on or after December 15, 2014. We are still evaluating what impact, if any,This standard was not early adopted in connection with the Spin-Off. The adoption of this guidance willdid not have a material impact on our financial condition, results of operations, cash flows or financial disclosures.
In May 2014, the FASB issued ASU No. 2014-09, which amends ASC Topic 606, “Revenue from Contracts with Customers.” The amendments in this ASU are intended to provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices and improve disclosure requirements. The amendments in this accounting standard update areUnder the deferred adoption date, the new guidance will be effective for interim and annual reporting periods beginning after December 15, 2016.2017. We are still evaluating what impact, if any, the adoption of this guidance will have on our financial condition, results of operations, cash flows or financial disclosures.
In June 2014, the FASB issued ASU No. 2014-12, which amends ASC Topic 718, “Compensation-Stock Compensation.” The guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition and should not be reflected in the estimate of the grant-date fair value of the award. The guidance is effective for annual periods beginning after December 15, 2015. The guidance can be applied prospectively for all awards granted or modified after the effective date or retrospectively to all awards with performance targets outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. We are stillevaluating what impact, if any, the adoption of this guidance will have on our financial condition, results of operations, cash flows or financial disclosures.
In August 2014, the FASB issued ASU No. 2014-15, which amends ASC Subtopic 205-40, “Disclosure of Uncertainties about an Entity’s Ability to continue as a Going Concern.” The amendments in this ASU provide guidance related to management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The amendments are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. We are evaluating what impact, if any, the adoption of this guidance will have on our financial condition, results of operations, cash flows or financial disclosures.
In January 2015, the FASB issued ASU No. 2015-01, which amends ASC Subtopic 225-20, “Income Statement – Extraordinary and Unusual Items.” The amendment in this ASU eliminates from GAAP the concept of extraordinary items. The amendments in this update are effective for interim and annual reporting periods beginning after December 15, 2015. We are evaluating what impact, if any, the adoption of this guidance will have on our financial condition, results of operations, cash flows or financial disclosures.
In February 2015, the FASB issued ASU No. 2015-02 which amends ASC Subtopic 810, “Consolidations.” This amendment affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. Specifically, the amendments modify the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities; eliminate the presumption that a general partner should consolidate a limited partnership; affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships. The standard is effective for interim and annual reporting periods beginning after December 15, 2015. The standard may be applied retrospectively or through a cumulative effect adjustment to retained earnings as of the beginning of the year of adoption. We are evaluating what impact, if any, the adoption of this guidance will have on our financial condition, results of operations, cash flows or financial disclosures.
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
In April 2015, the FASB issued ASU No. 2015-03 which amends ASC Subtopic 835-30, “Interest – Imputation of Interest.” The guidance requires debt issuance costs to be presented in the balance sheet as a direct reduction from the associated debt liability. The standard is effective for interim and annual reporting periods beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued. The new guidance will be applied on a retrospective basis. We are evaluating what impact the adoption of this guidance will have on our financial condition, results of operations, cash flows or financial disclosures.
In April 2015, the FASB issued ASU No. 2015-04 which amends ASC Topic 715, “Compensation – Retirement Benefits.” The guidance gives an employer whose fiscal year end does not coincide with a calendar month end the ability, as a practical expedient, to measure defined benefit retirement obligations and related plan assets as of the month end that is closest to its fiscal year end. The ASU also provides a similar practical expedient for interim remeasurements of significant events. The standard is effective for interim and annual reporting periods beginning after December 15, 2015. Early adoption is permitted. We are evaluating what impact, if any, the adoption of this guidance will have on our financial condition, results of operations, cash flows or financial disclosures.
Note 1516 — Net ChangeSupplemental Financial Information
Consolidated Balance Sheets Information
Deferred revenues from drilling contracts totaled $223 million and $263 million at June 30, 2015 and December 31, 2014, respectively. Such amounts are included in Other Assetseither “Other current liabilities” or “Other liabilities” in the accompanying Consolidated Balance Sheets, based upon our expected time of recognition. Related expenses deferred under drilling contracts totaled $90 million at June 30, 2015 as compared to $94 million at December 31, 2014, and Liabilitiesare included in either “Prepaid expenses and other current assets” or “Other assets” in the accompanying Consolidated Balance Sheets, based upon our expected time of recognition.
In April 2015, we agreed to contract dayrate reductions for five rigs working for Saudi Arabian Oil Company (“Aramco”), which are effective from January 1, 2015 through December 31, 2015. In accordance with accounting guidance, we are recognizing the reductions on a straight-line basis over the remaining life of the existing Aramco contracts. At June 30, 2015, revenues recorded in excess of billings as a result of this recognition totaled $37 million, and are included in “Other assets” in the accompanying Consolidated Balance Sheets.
Consolidated Statements of Cash Flows Information
The net effect of changes in other assets and liabilities on cash flows from operating activities is as follows:
Noble-UK | Noble-Cayman | |||||||||||||||
Six months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Accounts receivable | $ | 67,689 | $ | (90,903 | ) | $ | 67,689 | $ | (90,903 | ) | ||||||
Other current assets | (47,537 | ) | (68,614 | ) | (48,834 | ) | (70,214 | ) | ||||||||
Other assets | (39,612 | ) | 1,191 | (39,603 | ) | 1,145 | ||||||||||
Accounts payable | 17,497 | 32,125 | 5,073 | 32,222 | ||||||||||||
Other current liabilities | (46,749 | ) | (8,057 | ) | (34,454 | ) | (6,336 | ) | ||||||||
Other liabilities | 12,888 | (12,291 | ) | 12,888 | (12,291 | ) | ||||||||||
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$ | (35,824 | ) | $ | (146,549 | ) | $ | (37,241 | ) | $ | (146,377 | ) | |||||
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Note 16 — Subsequent Events
Paragon Offshore plc Spin-off Transaction
As discussed in Note 1, we completed our spin-off of Paragon Offshore on August 1, 2014. As part of this spin-off, we received approximately $1.7 billion in cash as settlement of intercompany notes issued by Paragon Offshore to Noble as consideration for the business contributed to Paragon Offshore. We used these funds to repay outstanding third-party debt of Noble-Cayman and its subsidiaries.
On July 18, 2014, Paragon Offshore incurred approximately $1.7 billion of debt consisting of:
Subsequent to the spin-off, we have no obligation for any of Paragon Offshore’s outstanding debt.
UK Bareboat Tax Law
In July 2014, the UK government passed a new law that restricts deductions on certain related party transactions, such as those relating to the bareboat charter agreements used in connection with our UK continental shelf operations. This legislation, which became effective retroactively from April 1, 2014, will result in an increase in the effective tax rate reducing our net income on our consolidated operations and will be shown in our statement of operations beginning in the third quarter of 2014. This new legislation would be applicable to our operations in the UK irrespective of the place of incorporation of Noble-UK.
Noble-UK | Noble-Cayman | |||||||||||||||
Six months ended June 30, | Six months ended June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Accounts receivable | $ | 28,673 | $ | 67,689 | $ | 28,673 | $ | 67,689 | ||||||||
Other current assets | 68,667 | (47,537 | ) | 48,106 | (48,834 | ) | ||||||||||
Other assets | 39,132 | (39,612 | ) | 18,838 | (39,603 | ) | ||||||||||
Accounts payable | (9,915 | ) | 17,497 | (7,947 | ) | 5,073 | ||||||||||
Other current liabilities | (19,481 | ) | (46,749 | ) | (10,350 | ) | (34,454 | ) | ||||||||
Other liabilities | (32,592 | ) | 12,888 | (32,594 | ) | 12,888 | ||||||||||
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$ | 74,484 | $ | (35,824 | ) | $ | 44,726 | $ | (37,241 | ) | |||||||
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NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Note 17 — Information about Noble-Cayman
Guarantees of Registered Securities
In May 2014, as part of the separation of Paragon Offshore, Noble Holding (U.S.) Corporation (“NHC”) assumed all of the obligations of Noble Drilling Corporation (“NDC”) under the Senior Notes due 2019, and NDC was released from all obligations under the Senior Notes due 2019. As such, we are removing NDC from the guarantor financial statements and NHC will no longer be combined with Noble Drilling Holding, LLC (“NDH”), as they are now issuers and guarantors on separate debt instruments. We have recast prior periods presented to conform to the guarantor structure as it exists at June 30, 2014.
Noble-Cayman, or one or more wholly-owned subsidiaries of Noble-Cayman, are a co-issuer or full and unconditional guarantor or otherwise obligated as of June 30, 2014 with respect to the following securities2015 as follows:
Notes | Issuer |
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$350 million 3.45% Senior Notes due 2015 | NHIL | Noble-Cayman | ||||
$300 million 3.05% Senior Notes due 2016 | NHIL | Noble-Cayman | ||||
$300 million 2.50% Senior Notes due 2017 | NHIL | Noble-Cayman | ||||
$250 million 4.00% Senior Notes due 2018 | NHIL | Noble-Cayman | ||||
$202 million 7.50% Senior Notes due 2019 | NHC | Noble-Cayman | ||||
Noble Drilling Services 6 LLC (“NDS6”) | ||||||
$500 million 4.90% Senior Notes due 2020 | NHIL | Noble-Cayman | ||||
$400 million 4.625% Senior Notes due 2021 | NHIL | Noble-Cayman | ||||
$400 million 3.95% Senior Notes due 2022 | NHIL | Noble-Cayman | ||||
$450 million 5.95% Senior Notes due 2025 | NHIL | Noble-Cayman | ||||
$400 million 6.20% Senior Notes due 2040 | NHIL | Noble-Cayman | ||||
$400 million 6.05% Senior Notes due 2041 | NHIL | Noble-Cayman | ||||
$500 million 5.25% Senior Notes due 2042 | NHIL | Noble-Cayman | ||||
$400 million 6.95% Senior Notes due 2045 | NHIL | Noble-Cayman |
The following condensed consolidating financial statements of Noble-Cayman, NHC, NDH, NHIL, NDS6 and all other subsidiaries present investments in both consolidated and unconsolidated affiliates using the equity method of accounting.
NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
June 30, 20142015
(in thousands)
Other | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-guarantor | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Noble- | Subsidiaries | Consolidating | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cayman | NHC | NDH | NHIL | NDS6 | of Noble | Adjustments | Total | Noble- Cayman | NHC | NDH | NHIL | NDS6 | Other Non-guarantor Subsidiaries of Noble | Consolidating Adjustments | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Current assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 5 | $ | — | $ | 1,330 | $ | — | $ | — | $ | 136,375 | $ | — | $ | 137,710 | $ | 29 | $ | — | $ | 126 | $ | — | $ | — | $ | 244,965 | $ | — | $ | 245,120 | ||||||||||||||||||||||||||||||||
Accounts receivable | — | — | 45,464 | — | — | 844,478 | — | 889,942 | — | — | 16,141 | — | — | 524,282 | — | 540,423 | ||||||||||||||||||||||||||||||||||||||||||||||||
Taxes receivable | — | 58,014 | 299 | — | — | 89,846 | — | 148,159 | — | 16,063 | 281 | — | — | 43,813 | — | 60,157 | ||||||||||||||||||||||||||||||||||||||||||||||||
Short-term notes receivable from affiliates | — | — | 1,077,965 | — | 19,500 | 560,925 | (1,658,390 | ) | — | 125,330 | — | 1,077,965 | — | 333,965 | 171,925 | (1,709,185 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||
Accounts receivable from affiliates | 1,164,153 | 368,701 | 161,002 | 252,598 | 34,071 | 4,375,746 | (6,356,271 | ) | — | 693,834 | 437,455 | 234,677 | 1,164,504 | 121,829 | 4,258,806 | (6,911,105 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||
Prepaid expenses and other current assets | — | — | 2,373 | 21 | — | 229,310 | — | 231,704 | 1,436 | — | 4,961 | — | — | 132,207 | — | 138,604 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total current assets | 1,164,158 | 426,715 | 1,288,433 | 252,619 | 53,571 | 6,236,680 | (8,014,661 | ) | 1,407,515 | 820,629 | 453,518 | 1,334,151 | 1,164,504 | 455,794 | 5,375,998 | (8,620,290 | ) | 984,304 | ||||||||||||||||||||||||||||||||||||||||||||||
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Property and equipment, at cost | — | — | 2,135,178 | — | — | 18,218,163 | — | 20,353,341 | — | — | 2,081,631 | — | — | 12,490,780 | — | 14,572,411 | ||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated depreciation | — | — | (246,406 | ) | — | — | (4,861,741 | ) | — | (5,108,147 | ) | — | — | (315,372 | ) | — | — | (2,312,354 | ) | — | (2,627,726 | ) | ||||||||||||||||||||||||||||||||||||||||||
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Property and equipment, net | — | — | 1,888,772 | — | — | 13,356,422 | — | 15,245,194 | — | — | 1,766,259 | — | — | 10,178,426 | — | 11,944,685 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Notes receivable from affiliates | 3,304,753 | — | 879,154 | 1,980,391 | 5,000 | 2,096,075 | (8,265,373 | ) | — | 3,304,653 | — | 236,920 | 1,980,391 | 5,000 | 1,583,587 | (7,110,551 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||
Investments in affiliates | 9,378,489 | 1,437,748 | 6,084,404 | 10,055,746 | 6,291,130 | — | (33,247,517 | ) | — | 4,971,977 | 1,316,576 | 2,913,930 | 8,777,006 | 6,634,018 | — | (24,613,507 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||
Other assets | 3,943 | — | 7,015 | 21,253 | 576 | 271,579 | — | 304,366 | 6,773 | — | 6,523 | 27,668 | 455 | 179,345 | — | 220,764 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total assets | $ | 13,851,343 | $ | 1,864,463 | $ | 10,147,778 | $ | 12,310,009 | $ | 6,350,277 | $ | 21,960,756 | $ | (49,527,551 | ) | $ | 16,957,075 | $ | 9,104,032 | $ | 1,770,094 | $ | 6,257,783 | $ | 11,949,569 | $ | 7,095,267 | $ | 17,317,356 | $ | (40,344,348 | ) | $ | 13,149,753 | ||||||||||||||||||||||||||||||
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LIABILITIES AND EQUITY | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Current liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short-term notes payables from affiliates | $ | — | $ | 171,925 | $ | — | $ | — | $ | 760,720 | $ | 725,745 | $ | (1,658,390 | ) | $ | — | $ | — | $ | 171,925 | $ | — | $ | — | $ | 371,720 | $ | 1,165,540 | $ | (1,709,185 | ) | $ | — | ||||||||||||||||||||||||||||||
Current maturities of long-term debt | — | — | — | 350,000 | — | — | — | 350,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts payable | — | — | 8,594 | — | — | 343,639 | — | 352,233 | — | — | 7,658 | — | — | 210,408 | — | 218,066 | ||||||||||||||||||||||||||||||||||||||||||||||||
Accrued payroll and related costs | — | — | 7,951 | — | — | 134,601 | — | 142,552 | — | — | 6,412 | — | — | 67,993 | — | 74,405 | ||||||||||||||||||||||||||||||||||||||||||||||||
Accounts payable to affiliates | 1,025,178 | 61,519 | 3,278,835 | 45,051 | 13,352 | 1,932,336 | (6,356,271 | ) | — | 717,632 | 65,849 | 3,460,644 | 78,638 | 23,959 | 2,564,383 | (6,911,105 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||
Taxes payable | — | — | — | — | — | 124,631 | — | 124,631 | — | — | — | — | — | 107,716 | — | 107,716 | ||||||||||||||||||||||||||||||||||||||||||||||||
Interest payable | — | — | — | 75,888 | 4,412 | — | — | 80,300 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other current liabilities | 1,173 | — | 32,505 | 57,053 | 4,412 | 163,524 | — | 258,667 | 273 | — | 7,097 | — | — | 100,197 | — | 107,567 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total current liabilities | 1,026,351 | 233,444 | 3,327,885 | 102,104 | 778,484 | 3,424,476 | (8,014,661 | ) | 878,083 | 717,905 | 237,774 | 3,481,811 | 504,526 | 400,091 | 4,216,237 | (8,620,290 | ) | 938,054 | ||||||||||||||||||||||||||||||||||||||||||||||
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Long-term debt | 2,268,613 | — | — | 3,543,638 | 201,695 | — | — | 6,013,946 | — | — | — | 4,286,846 | 201,695 | — | — | 4,488,541 | ||||||||||||||||||||||||||||||||||||||||||||||||
Notes payable to affiliates | 1,769,064 | — | 1,113,363 | 1,169,180 | 834,450 | 3,379,316 | (8,265,373 | ) | — | 1,769,064 | — | 600,874 | 1,169,181 | 192,215 | 3,379,217 | (7,110,551 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||
Deferred income taxes | — | — | — | — | — | 233,419 | — | 233,419 | — | — | — | — | — | 104,402 | — | 104,402 | ||||||||||||||||||||||||||||||||||||||||||||||||
Other liabilities | 19,930 | — | 30,999 | — | — | 287,959 | — | 338,888 | 19,929 | — | 27,703 | — | — | 257,306 | — | 304,938 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total liabilities | 5,083,958 | 233,444 | 4,472,247 | 4,814,922 | 1,814,629 | 7,325,170 | (16,280,034 | ) | 7,464,336 | 2,506,898 | 237,774 | 4,110,388 | 5,960,553 | 794,001 | 7,957,162 | (15,730,841 | ) | 5,835,935 | ||||||||||||||||||||||||||||||||||||||||||||||
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Commitments and contingencies | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total shareholder equity | 8,767,385 | 1,631,019 | 5,675,531 | 7,495,087 | 4,535,648 | 13,375,613 | (32,712,898 | ) | 8,767,385 | 6,597,134 | 1,532,320 | 2,147,395 | 5,989,016 | 6,301,266 | 8,221,330 | (24,191,327 | ) | 6,597,134 | ||||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling interests | — | — | — | — | — | 1,259,973 | (534,619 | ) | 725,354 | — | — | — | — | — | 1,138,864 | (422,180 | ) | 716,684 | ||||||||||||||||||||||||||||||||||||||||||||||
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Total equity | 8,767,385 | 1,631,019 | 5,675,531 | 7,495,087 | 4,535,648 | 14,635,586 | (33,247,517 | ) | 9,492,739 | 6,597,134 | 1,532,320 | 2,147,395 | 5,989,016 | 6,301,266 | 9,360,194 | (24,613,507 | ) | 7,313,818 | ||||||||||||||||||||||||||||||||||||||||||||||
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Total liabilities and equity | $ | 13,851,343 | $ | 1,864,463 | $ | 10,147,778 | $ | 12,310,009 | $ | 6,350,277 | $ | 21,960,756 | $ | (49,527,551 | ) | $ | 16,957,075 | $ | 9,104,032 | $ | 1,770,094 | $ | 6,257,783 | $ | 11,949,569 | $ | 7,095,267 | $ | 17,317,356 | $ | (40,344,348 | ) | $ | 13,149,753 | ||||||||||||||||||||||||||||||
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NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 20132014
(in thousands)
Other | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-guarantor | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Noble- | Subsidiaries | Consolidating | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cayman | NHC | NDH | NHIL | NDS6 | of Noble | Adjustments | Total | Noble- Cayman | NHC | NDH | NHIL | NDS6 | Other Non-guarantor Subsidiaries of Noble | Consolidating Adjustments | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Current assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 1 | $ | — | $ | 402 | $ | 4 | $ | — | $ | 109,975 | $ | — | $ | 110,382 | $ | 5 | $ | — | $ | 254 | $ | — | $ | — | $ | 65,521 | $ | — | $ | 65,780 | ||||||||||||||||||||||||||||||||
Accounts receivable | — | — | 34,038 | — | — | 915,031 | — | 949,069 | — | — | 37,655 | 2,336 | — | 529,105 | — | 569,096 | ||||||||||||||||||||||||||||||||||||||||||||||||
Taxes receivable | — | 52,307 | — | — | — | 87,722 | — | 140,029 | — | 63,373 | 752 | — | — | 43,164 | — | 107,289 | ||||||||||||||||||||||||||||||||||||||||||||||||
Short-term notes receivable from affiliates | — | — | 1,456,245 | 139,195 | 19,500 | 52,611 | (1,667,551 | ) | — | 123,449 | — | 1,077,965 | — | 333,966 | 171,925 | (1,707,305 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||
Accounts receivable from affiliates | 1,244,019 | — | 108,208 | 210,868 | 27,537 | 6,010,430 | (7,601,062 | ) | — | 2,019,319 | 374,012 | 192,771 | 157,164 | 125,834 | 4,191,406 | (7,060,506 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||
Prepaid expenses and other current assets | — | — | 6,336 | — | — | 178,012 | — | 184,348 | 14,274 | — | 1,764 | — | — | 123,631 | — | 139,669 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total current assets | 1,244,020 | 52,307 | 1,605,229 | 350,067 | 47,037 | 7,353,781 | (9,268,613 | ) | 1,383,828 | 2,157,047 | 437,385 | 1,311,161 | 159,500 | 459,800 | 5,124,752 | (8,767,811 | ) | 881,834 | ||||||||||||||||||||||||||||||||||||||||||||||
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Property and equipment, at cost | — | — | 2,340,216 | — | — | 16,820,134 | — | 19,160,350 | — | — | 2,040,168 | — | — | 12,364,203 | — | 14,404,371 | ||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated depreciation | — | — | (310,171 | ) | — | — | (4,321,507 | ) | — | (4,631,678 | ) | — | — | (278,147 | ) | — | — | (2,040,073 | ) | — | (2,318,220 | ) | ||||||||||||||||||||||||||||||||||||||||||
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Property and equipment, net | — | — | 2,030,045 | — | — | 12,498,627 | — | 14,528,672 | — | — | 1,762,021 | — | — | 10,324,130 | — | 12,086,151 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Notes receivable from affiliates | 3,304,753 | — | 124,216 | 2,367,555 | 5,000 | 1,390,500 | (7,192,024 | ) | — | 3,304,654 | — | 236,921 | 1,980,391 | 5,000 | 1,581,429 | (7,108,395 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||
Investments in affiliates | 8,601,712 | 2,907,379 | 6,595,591 | 9,456,735 | 5,440,004 | — | (33,001,421 | ) | — | 4,567,335 | 1,318,239 | 2,921,452 | 8,266,444 | 6,290,918 | — | (23,364,388 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||
Other assets | 6,256 | — | 6,332 | 22,681 | 639 | 233,106 | — | 269,014 | 2,908 | — | 6,212 | 19,826 | 517 | 192,791 | — | 222,254 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total assets | $ | 13,156,741 | $ | 2,959,686 | $ | 10,361,413 | $ | 12,197,038 | $ | 5,492,680 | $ | 21,476,014 | $ | (49,462,058 | ) | $ | 16,181,514 | $ | 10,031,944 | $ | 1,755,624 | $ | 6,237,767 | $ | 10,426,161 | $ | 6,756,235 | $ | 17,223,102 | $ | (39,240,594 | ) | $ | 13,190,239 | ||||||||||||||||||||||||||||||
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LIABILITIES AND EQUITY | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Current liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short-term notes payables from affiliates | $ | — | $ | 52,611 | $ | 139,195 | $ | — | $ | 750,000 | $ | 725,745 | $ | (1,667,551 | ) | $ | — | $ | — | $ | 171,925 | $ | — | $ | — | $ | 371,720 | $ | 1,163,660 | $ | (1,707,305 | ) | $ | — | ||||||||||||||||||||||||||||||
Accounts payable | — | — | 5,310 | — | — | 340,600 | — | 345,910 | 600 | — | 10,130 | — | — | 250,282 | — | 261,012 | ||||||||||||||||||||||||||||||||||||||||||||||||
Accrued payroll and related costs | — | — | 8,582 | — | — | 134,764 | — | 143,346 | — | — | 7,738 | — | — | 83,749 | — | 91,487 | ||||||||||||||||||||||||||||||||||||||||||||||||
Accounts payable to affiliates | 1,104,410 | 653,049 | 4,032,776 | 216,866 | 21,173 | 1,572,788 | (7,601,062 | ) | — | 606,224 | 63,602 | 3,513,705 | 61,982 | 16,869 | 2,798,124 | (7,060,506 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||
Taxes payable | — | — | 827 | — | — | 119,761 | — | 120,588 | — | — | — | — | — | 91,471 | — | 91,471 | ||||||||||||||||||||||||||||||||||||||||||||||||
Interest payable | 499 | — | — | 57,053 | 4,412 | — | — | 61,964 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other current liabilities | 412 | — | 22,106 | 62,431 | 4,412 | 210,811 | — | 300,172 | 15,651 | — | 13,409 | — | — | 110,890 | — | 139,950 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total current liabilities | 1,104,822 | 705,660 | 4,208,796 | 279,297 | 775,585 | 3,104,469 | (9,268,613 | ) | 910,016 | 622,974 | 235,527 | 3,544,982 | 119,035 | 393,001 | 4,498,176 | (8,767,811 | ) | 645,884 | ||||||||||||||||||||||||||||||||||||||||||||||
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Long-term debt | 1,561,141 | — | — | 3,793,414 | 201,696 | — | — | 5,556,251 | 1,123,495 | — | — | 3,543,830 | 201,695 | — | — | 4,869,020 | ||||||||||||||||||||||||||||||||||||||||||||||||
Notes payable to affiliates | 2,042,808 | — | 534,683 | 975,000 | 260,216 | 3,379,317 | (7,192,024 | ) | — | 1,769,068 | — | 598,715 | 1,169,180 | 192,216 | 3,379,216 | (7,108,395 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||
Deferred income taxes | — | — | — | — | — | 225,455 | — | 225,455 | — | — | — | — | — | 120,589 | — | 120,589 | ||||||||||||||||||||||||||||||||||||||||||||||||
Other liabilities | 19,931 | — | 24,502 | — | — | 289,875 | — | 334,308 | 19,929 | — | 29,093 | — | — | 286,942 | — | 335,964 | ||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Total liabilities | 4,728,702 | 705,660 | 4,767,981 | 5,047,711 | 1,237,497 | 6,999,116 | (16,460,637 | ) | 7,026,030 | 3,535,466 | 235,527 | 4,172,790 | 4,832,045 | 786,912 | 8,284,923 | (15,876,206 | ) | 5,971,457 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and contingencies | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total shareholder equity | 8,428,039 | 2,254,026 | 5,593,432 | 7,149,327 | 4,255,183 | 13,238,656 | (32,490,624 | ) | 8,428,039 | 6,496,478 | 1,520,097 | 2,064,977 | 5,594,116 | 5,969,323 | 7,812,656 | (22,961,169 | ) | 6,496,478 | ||||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling interests | — | — | — | — | — | 1,238,242 | (510,797 | ) | 727,445 | — | — | — | — | — | 1,125,523 | (403,219 | ) | 722,304 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Total equity | 8,428,039 | 2,254,026 | 5,593,432 | 7,149,327 | 4,255,183 | 14,476,898 | (33,001,421 | ) | 9,155,484 | 6,496,478 | 1,520,097 | 2,064,977 | 5,594,116 | 5,969,323 | 8,938,179 | (23,364,388 | ) | 7,218,782 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Total liabilities and equity | $ | 13,156,741 | $ | 2,959,686 | $ | 10,361,413 | $ | 12,197,038 | $ | 5,492,680 | $ | 21,476,014 | $ | (49,462,058 | ) | $ | 16,181,514 | $ | 10,031,944 | $ | 1,755,624 | $ | 6,237,767 | $ | 10,426,161 | $ | 6,756,235 | $ | 17,223,102 | $ | (39,240,594 | ) | $ | 13,190,239 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF INCOME
Three Months Ended June 30, 2015
(in thousands)
Noble- Cayman | NHC | NDH | NHIL | NDS6 | Other Non-guarantor Subsidiaries of Noble | Consolidating Adjustments | Total | |||||||||||||||||||||||||
Operating revenues | ||||||||||||||||||||||||||||||||
Contract drilling services | $ | — | $ | — | $ | 64,269 | $ | — | $ | — | $ | 755,585 | $ | (48,547 | ) | $ | 771,307 | |||||||||||||||
Reimbursables | — | — | 8,537 | — | — | 13,711 | — | 22,248 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total operating revenues | — | — | 72,806 | — | — | 769,296 | (48,547 | ) | 793,555 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Operating costs and expenses | ||||||||||||||||||||||||||||||||
Contract drilling services | 2,792 | 8,302 | 17,864 | 23,389 | — | 315,167 | (48,547 | ) | 318,967 | |||||||||||||||||||||||
Reimbursables | — | — | 3,299 | — | — | 14,353 | — | 17,652 | ||||||||||||||||||||||||
Depreciation and amortization | — | — | 20,683 | — | — | 138,114 | — | 158,797 | ||||||||||||||||||||||||
General and administrative | 482 | 3,672 | — | 9,045 | 1 | 309 | — | 13,509 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total operating costs and expenses | 3,274 | 11,974 | 41,846 | 32,434 | 1 | 467,943 | (48,547 | ) | 508,925 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Operating income (loss) | (3,274 | ) | (11,974 | ) | 30,960 | (32,434 | ) | (1 | ) | 301,353 | — | 284,630 | ||||||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||||||||||
Income (loss) of unconsolidated affiliates | 187,575 | 34,898 | 37,017 | 248,725 | 164,049 | — | (672,264 | ) | — | |||||||||||||||||||||||
Income (loss) of unconsolidated affiliates - discontinued operations, net of tax | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total income (loss) of unconsolidated affiliates | 187,575 | 34,898 | 37,017 | 248,725 | 164,049 | — | (672,264 | ) | — | |||||||||||||||||||||||
Interest expense, net of amounts capitalized | (21,133 | ) | (1,229 | ) | (3,310 | ) | (60,552 | ) | (7,753 | ) | (14,215 | ) | 50,727 | (57,465 | ) | |||||||||||||||||
Interest income and other, net | 3,743 | (1 | ) | 14,275 | 21,011 | 1,414 | 8,384 | (50,727 | ) | (1,901 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Income from continuing operations before income taxes | 166,911 | 21,694 | 78,942 | 176,750 | 157,709 | 295,522 | (672,264 | ) | 225,264 | |||||||||||||||||||||||
Income tax provision | — | (17,592 | ) | (1,397 | ) | — | — | (20,547 | ) | — | (39,536 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net income from continuing operations | 166,911 | 4,102 | 77,545 | 176,750 | 157,709 | 274,975 | (672,264 | ) | 185,728 | |||||||||||||||||||||||
Net income from discontinued operations, net of tax | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net Income | 166,911 | 4,102 | 77,545 | 176,750 | 157,709 | 274,975 | (672,264 | ) | 185,728 | |||||||||||||||||||||||
Net income attributable to noncontrolling interests | — | — | — | — | — | (27,360 | ) | 8,543 | (18,817 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net income attributable to Noble Corporation | 166,911 | 4,102 | 77,545 | 176,750 | 157,709 | 247,615 | (663,721 | ) | 166,911 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Other comprehensive income, net | 5,608 | — | — | — | — | 5,608 | (5,608 | ) | 5,608 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Comprehensive income attributable to Noble Corporation | $ | 172,519 | $ | 4,102 | $ | 77,545 | $ | 176,750 | $ | 157,709 | $ | 253,223 | $ | (669,329 | ) | $ | 172,519 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF INCOME
Six Months Ended June 30, 2015
(in thousands)
Noble- Cayman | NHC | NDH | NHIL | NDS6 | Other Non-guarantor Subsidiaries of Noble | Consolidating Adjustments | Total | |||||||||||||||||||||||||
Operating revenues | ||||||||||||||||||||||||||||||||
Contract drilling services | $ | — | $ | — | $ | 139,328 | $ | — | $ | — | $ | 1,493,392 | $ | (82,052 | ) | $ | 1,550,668 | |||||||||||||||
Reimbursables | — | — | 10,916 | — | — | 36,313 | — | 47,229 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total operating revenues | — | — | 150,244 | — | — | 1,529,705 | (82,052 | ) | 1,597,897 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Operating costs and expenses | ||||||||||||||||||||||||||||||||
Contract drilling services | 4,607 | 16,593 | 47,242 | 46,228 | — | 605,828 | (82,052 | ) | 638,446 | |||||||||||||||||||||||
Reimbursables | — | — | 4,781 | — | — | 33,028 | — | 37,809 | ||||||||||||||||||||||||
Depreciation and amortization | — | — | 38,051 | — | — | 274,612 | — | 312,663 | ||||||||||||||||||||||||
General and administrative | 939 | 7,060 | — | 17,394 | 1 | 323 | — | 25,717 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total operating costs and expenses | 5,546 | 23,653 | 90,074 | 63,622 | 1 | 913,791 | (82,052 | ) | 1,014,635 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Operating income (loss) | (5,546 | ) | (23,653 | ) | 60,170 | (63,622 | ) | (1 | ) | 615,914 | — | 583,262 | ||||||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||||||||||
Income (loss) of unconsolidated affiliates | 404,301 | 66,979 | 92,041 | 538,483 | 343,099 | — | (1,444,903 | ) | — | |||||||||||||||||||||||
Income (loss) of unconsolidated affiliates - discontinued operations, net of tax | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total income (loss) of unconsolidated affiliates | 404,301 | 66,979 | 92,041 | 538,483 | 343,099 | — | (1,444,903 | ) | — | |||||||||||||||||||||||
Interest expense, net of amounts capitalized | (45,886 | ) | (2,248 | ) | (6,565 | ) | (108,888 | ) | (13,969 | ) | (27,942 | ) | 98,989 | (106,509 | ) | |||||||||||||||||
Interest income and other, net | 6,473 | 4,831 | 26,987 | 41,790 | 2,813 | 20,642 | (98,989 | ) | 4,547 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Income from continuing operations before income taxes | 359,342 | 45,909 | 172,633 | 407,763 | 331,942 | 608,614 | (1,444,903 | ) | 481,300 | |||||||||||||||||||||||
Income tax provision | — | (33,685 | ) | (1,776 | ) | — | — | (47,633 | ) | — | (83,094 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net income from continuing operations | 359,342 | 12,224 | 170,857 | 407,763 | 331,942 | 560,981 | (1,444,903 | ) | 398,206 | |||||||||||||||||||||||
Net income from discontinued operations, net of tax | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net Income | 359,342 | 12,224 | 170,857 | 407,763 | 331,942 | 560,981 | (1,444,903 | ) | 398,206 | |||||||||||||||||||||||
Net income attributable to noncontrolling interests | — | — | — | — | — | (57,824 | ) | 18,960 | (38,864 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net income attributable to Noble Corporation | 359,342 | 12,224 | 170,857 | 407,763 | 331,942 | 503,157 | (1,425,943 | ) | 359,342 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Other comprehensive income, net | 245 | — | — | — | — | 245 | (245 | ) | 245 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Comprehensive income attributable to Noble Corporation | $ | 359,587 | $ | 12,224 | $ | 170,857 | $ | 407,763 | $ | 331,942 | $ | 503,402 | $ | (1,426,188 | ) | $ | 359,587 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF INCOME
Three Months Ended June 30, 2014
(in thousands)
Other | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-guarantor | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Noble- | Subsidiaries | Consolidating | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cayman | NHC | NDH | NHIL | NDS6 | of Noble | Adjustments | Total | Noble- Cayman | NHC | NDH | NHIL | NDS6 | Other Non-guarantor Subsidiaries of Noble | Consolidating Adjustments | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
Operating revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contract drilling services | $ | — | $ | — | $ | 85,664 | $ | — | $ | — | $ | 1,147,008 | $ | (32,266 | ) | $ | 1,200,406 | $ | — | $ | — | $ | 85,664 | $ | — | $ | — | $ | 725,970 | $ | (32,266 | ) | $ | 779,368 | ||||||||||||||||||||||||||||||
Reimbursables | — | — | 2,576 | — | — | 29,235 | — | 31,811 | — | — | 2,575 | — | — | 21,838 | — | 24,413 | ||||||||||||||||||||||||||||||||||||||||||||||||
Labor contract drilling services | — | — | — | — | — | 8,146 | — | 8,146 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Total operating revenues | — | — | 88,240 | — | — | 1,184,389 | (32,266 | ) | 1,240,363 | — | — | 88,239 | — | — | 747,808 | (32,266 | ) | 803,781 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Operating costs and expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contract drilling services | 2,615 | 13,267 | 26,516 | 35,214 | — | 524,092 | (32,266 | ) | 569,438 | 2,615 | 13,267 | 26,516 | 35,214 | — | 317,860 | (32,266 | ) | 363,206 | ||||||||||||||||||||||||||||||||||||||||||||||
Reimbursables | — | — | 1,662 | — | — | 20,798 | — | 22,460 | — | — | 1,662 | — | — | 16,070 | — | 17,732 | ||||||||||||||||||||||||||||||||||||||||||||||||
Labor contract drilling services | — | — | — | — | — | 6,261 | — | 6,261 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | — | — | 15,711 | — | — | 238,063 | — | 253,774 | — | — | 15,711 | — | — | 136,531 | — | 152,242 | ||||||||||||||||||||||||||||||||||||||||||||||||
General and administrative | 334 | 3,156 | — | 8,263 | 1 | (265 | ) | — | 11,489 | 334 | 3,156 | — | 8,263 | 1 | (265 | ) | — | 11,489 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Total operating costs and expenses | 2,949 | 16,423 | 43,889 | 43,477 | 1 | 788,949 | (32,266 | ) | 863,422 | 2,949 | 16,423 | 43,889 | 43,477 | 1 | 470,196 | (32,266 | ) | 544,669 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Operating income (loss) | (2,949 | ) | (16,423 | ) | 44,351 | (43,477 | ) | (1 | ) | 395,440 | — | 376,941 | (2,949 | ) | (16,423 | ) | 44,350 | (43,477 | ) | (1 | ) | 277,612 | — | 259,112 | ||||||||||||||||||||||||||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity earnings in affiliates, net of tax | 285,396 | 93,044 | 116,173 | 283,077 | 118,105 | — | (895,795 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income (loss) of unconsolidated affiliates | 184,704 | 64,955 | 22,653 | 164,952 | 114,022 | — | (551,286 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income (loss) of unconsolidated affiliates - discontinued operations, net of tax | 100,692 | 28,089 | 93,520 | 118,125 | 4,083 | — | (344,509 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total income (loss) of unconsolidated affiliates | 285,396 | 93,044 | 116,173 | 283,077 | 118,105 | — | (895,795 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest expense, net of amounts capitalized | (22,466 | ) | (736 | ) | (7,151 | ) | (39,998 | ) | (7,955 | ) | (12,452 | ) | 54,407 | (36,351 | ) | (22,466 | ) | (736 | ) | (7,151 | ) | (39,998 | ) | (7,955 | ) | (12,452 | ) | 54,407 | (36,351 | ) | ||||||||||||||||||||||||||||||||||
Interest income and other, net | 5,258 | — | 13,069 | 21,011 | 317 | 14,537 | (54,407 | ) | (215 | ) | 5,258 | — | 13,069 | 21,011 | 317 | 13,504 | (54,407 | ) | (1,248 | ) | ||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Income before income taxes | 265,239 | 75,885 | 166,442 | 220,613 | 110,466 | 397,525 | (895,795 | ) | 340,375 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income from continuing operations before income taxes | 265,239 | 75,885 | 166,441 | 220,613 | 110,466 | 278,664 | (895,795 | ) | 221,513 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income tax provision | — | (27,054 | ) | (1,578 | ) | — | (1,547 | ) | (22,054 | ) | — | (52,233 | ) | — | (17,194 | ) | (1,522 | ) | — | (1,547 | ) | (13,800 | ) | — | (34,063 | ) | ||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income from continuing operations | 265,239 | 58,691 | 164,919 | 220,613 | 108,919 | 264,864 | (895,795 | ) | 187,450 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income from discontinued operations, net of tax | — | (9,860 | ) | (55 | ) | — | — | 110,607 | — | 100,692 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Net Income | 265,239 | 48,831 | 164,864 | 220,613 | 108,919 | 375,471 | (895,795 | ) | 288,142 | 265,239 | 48,831 | 164,864 | 220,613 | 108,919 | 375,471 | (895,795 | ) | 288,142 | ||||||||||||||||||||||||||||||||||||||||||||||
Net income attributable to noncontrolling interests | — | — | — | — | — | (33,655 | ) | 10,752 | (22,903 | ) | — | — | — | — | — | (33,655 | ) | 10,752 | (22,903 | ) | ||||||||||||||||||||||||||||||||||||||||||||
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|
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|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Net income attributable to Noble Corporation | 265,239 | 48,831 | 164,864 | 220,613 | 108,919 | 341,816 | (885,043 | ) | 265,239 | 265,239 | 48,831 | 164,864 | 220,613 | 108,919 | 341,816 | (885,043 | ) | 265,239 | ||||||||||||||||||||||||||||||||||||||||||||||
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|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income, net | 3,182 | — | — | — | — | 3,182 | (3,182 | ) | 3,182 | 3,182 | — | — | — | — | 3,182 | (3,182 | ) | 3,182 | ||||||||||||||||||||||||||||||||||||||||||||||
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|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income attributable to Noble Corporation | $ | 268,421 | $ | 48,831 | $ | 164,864 | $ | 220,613 | $ | 108,919 | $ | 344,998 | $ | (888,225 | ) | $ | 268,421 | $ | 268,421 | $ | 48,831 | $ | 164,864 | $ | 220,613 | $ | 108,919 | $ | 344,998 | $ | (888,225 | ) | $ | 268,421 | ||||||||||||||||||||||||||||||
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|
|
|
NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF INCOME
Six Months Ended June 30, 2014
(in thousands)
Other | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-guarantor | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Noble- | Subsidiaries | Consolidating | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cayman | NHC | NDH | NHIL | NDS6 | of Noble | Adjustments | Total | Noble- Cayman | NHC | NDH | NHIL | NDS6 | Other Non-guarantor Subsidiaries of Noble | Consolidating Adjustments | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
Operating revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contract drilling services | $ | — | $ | — | $ | 171,246 | $ | — | $ | — | $ | 2,309,988 | $ | (74,524 | ) | $ | 2,406,710 | $ | — | $ | — | $ | 162,617 | $ | — | $ | — | $ | 1,461,912 | $ | (74,524 | ) | $ | 1,550,005 | ||||||||||||||||||||||||||||||
Reimbursables | — | — | 3,343 | — | — | 65,121 | — | 68,464 | — | — | 3,253 | — | — | 45,710 | — | 48,963 | ||||||||||||||||||||||||||||||||||||||||||||||||
Labor contract drilling services | — | — | — | — | — | 16,358 | — | 16,358 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | — | — | — | — | — | 1 | — | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Total operating revenues | — | — | 174,589 | — | — | 2,391,468 | (74,524 | ) | 2,491,533 | — | — | 165,870 | — | — | 1,507,622 | (74,524 | ) | 1,598,968 | ||||||||||||||||||||||||||||||||||||||||||||||
|
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|
|
|
|
|
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|
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|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Operating costs and expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contract drilling services | 12,686 | 20,486 | 61,400 | 61,330 | — | 1,046,888 | (74,524 | ) | 1,128,266 | 12,686 | 20,486 | 61,090 | 61,330 | — | 632,715 | (74,524 | ) | 713,783 | ||||||||||||||||||||||||||||||||||||||||||||||
Reimbursables | — | — | 2,571 | — | — | 50,495 | — | 53,066 | — | — | 2,493 | — | — | 36,743 | — | 39,236 | ||||||||||||||||||||||||||||||||||||||||||||||||
Labor contract drilling services | — | — | — | — | — | 12,487 | — | 12,487 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | — | — | 31,663 | — | — | 467,421 | — | 499,084 | — | — | 30,345 | — | — | 267,500 | — | 297,845 | ||||||||||||||||||||||||||||||||||||||||||||||||
General and administrative | 907 | 5,003 | — | 15,224 | 1 | 2,286 | — | 23,421 | 907 | 5,003 | — | 15,224 | 1 | 2,286 | — | 23,421 | ||||||||||||||||||||||||||||||||||||||||||||||||
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|
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|
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|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Total operating costs and expenses | 13,593 | 25,489 | 95,634 | 76,554 | 1 | 1,579,577 | (74,524 | ) | 1,716,324 | 13,593 | 25,489 | 93,928 | 76,554 | 1 | 939,244 | (74,524 | ) | 1,074,285 | ||||||||||||||||||||||||||||||||||||||||||||||
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|
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|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Operating income (loss) | (13,593 | ) | (25,489 | ) | 78,955 | (76,554 | ) | (1 | ) | 811,891 | — | 775,209 | (13,593 | ) | (25,489 | ) | 71,942 | (76,554 | ) | (1 | ) | 568,378 | — | 524,683 | ||||||||||||||||||||||||||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity earnings in affiliates, net of tax | 605,609 | 163,777 | 225,327 | 601,836 | 290,296 | — | (1,886,845 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income (loss) of unconsolidated affiliates | 391,000 | 110,710 | 120,767 | 420,510 | 284,171 | — | (1,327,158 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income (loss) of unconsolidated affiliates - discontinued operations, net of tax | 214,609 | 53,067 | 104,560 | 181,326 | 6,125 | — | (559,687 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total income (loss) of unconsolidated affiliates | 605,609 | 163,777 | 225,327 | 601,836 | 290,296 | — | (1,886,845 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest expense, net of amounts capitalized | (48,350 | ) | (963 | ) | (12,974 | ) | (86,491 | ) | (15,904 | ) | (24,746 | ) | 112,685 | (76,743 | ) | (48,350 | ) | (963 | ) | (12,974 | ) | (86,491 | ) | (15,904 | ) | (24,746 | ) | 112,685 | (76,743 | ) | ||||||||||||||||||||||||||||||||||
Interest income and other, net | 6,888 | — | 26,749 | 46,968 | 630 | 29,918 | (112,685 | ) | (1,532 | ) | 6,888 | — | 26,749 | 46,968 | 630 | 28,807 | (112,685 | ) | (2,643 | ) | ||||||||||||||||||||||||||||||||||||||||||||
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Income before income taxes | 550,554 | 137,325 | 318,057 | 485,759 | 275,021 | 817,063 | (1,886,845 | ) | 696,934 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income from continuing operations before income taxes | 550,554 | 137,325 | 311,044 | 485,759 | 275,021 | 572,439 | (1,886,845 | ) | 445,297 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income tax provision | — | (57,248 | ) | (2,585 | ) | — | (1,547 | ) | (45,181 | ) | — | (106,561 | ) | — | (38,593 | ) | (2,206 | ) | — | (1,547 | ) | (27,187 | ) | — | (69,533 | ) | ||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income from continuing operations | 550,554 | 98,732 | 308,838 | 485,759 | 273,474 | 545,252 | (1,886,845 | ) | 375,764 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income from discontinued operations, net of tax | — | (18,655 | ) | 6,634 | — | — | 226,630 | — | 214,609 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Net Income | 550,554 | 80,077 | 315,472 | 485,759 | 273,474 | 771,882 | (1,886,845 | ) | 590,373 | 550,554 | 80,077 | 315,472 | 485,759 | 273,474 | 771,882 | (1,886,845 | ) | 590,373 | ||||||||||||||||||||||||||||||||||||||||||||||
Net income attributable to noncontrolling interests | — | — | — | — | — | (63,641 | ) | 23,822 | (39,819 | ) | — | — | — | — | — | (63,641 | ) | 23,822 | (39,819 | ) | ||||||||||||||||||||||||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Net income attributable to Noble Corporation | 550,554 | 80,077 | 315,472 | 485,759 | 273,474 | 708,241 | (1,863,023 | ) | 550,554 | 550,554 | 80,077 | 315,472 | 485,759 | 273,474 | 708,241 | (1,863,023 | ) | 550,554 | ||||||||||||||||||||||||||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income, net | 10,900 | — | — | — | — | �� | 10,900 | (10,900 | ) | 10,900 | 10,900 | — | — | — | — | 10,900 | (10,900 | ) | 10,900 | |||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income attributable to Noble Corporation | $ | 561,454 | $ | 80,077 | $ | 315,472 | $ | 485,759 | $ | 273,474 | $ | 719,141 | $ | (1,873,923 | ) | $ | 561,454 | $ | 561,454 | $ | 80,077 | $ | 315,472 | $ | 485,759 | $ | 273,474 | $ | 719,141 | $ | (1,873,923 | ) | $ | 561,454 | ||||||||||||||||||||||||||||||
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|
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|
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|
|
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|
|
|
|
|
|
|
|
NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF INCOME
Three Months Ended June 30, 2013
(in thousands)
Other | ||||||||||||||||||||||||||||||||
Non-guarantor | ||||||||||||||||||||||||||||||||
Noble- | Subsidiaries | Consolidating | ||||||||||||||||||||||||||||||
Cayman | NHC | NDH | NHIL | NDS6 | of Noble | Adjustments | Total | |||||||||||||||||||||||||
Operating revenues | ||||||||||||||||||||||||||||||||
Contract drilling services | $ | — | $ | — | $ | 86,313 | $ | — | $ | — | $ | 912,063 | $ | (22,921 | ) | $ | 975,455 | |||||||||||||||
Reimbursables | — | — | 2,735 | — | — | 25,525 | — | 28,260 | ||||||||||||||||||||||||
Labor contract drilling services | — | — | — | — | — | 13,603 | — | 13,603 | ||||||||||||||||||||||||
Other | — | — | — | — | — | 67 | — | 67 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total operating revenues | — | — | 89,048 | — | — | 951,258 | (22,921 | ) | 1,017,385 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Operating costs and expenses | ||||||||||||||||||||||||||||||||
Contract drilling services | 1,016 | 5,816 | 14,062 | 25,636 | — | 461,836 | (22,921 | ) | 485,445 | |||||||||||||||||||||||
Reimbursables | — | — | 2,489 | — | — | 20,212 | — | 22,701 | ||||||||||||||||||||||||
Labor contract drilling services | — | — | — | — | — | 9,402 | — | 9,402 | ||||||||||||||||||||||||
Depreciation and amortization | — | — | 15,321 | — | — | 196,911 | — | 212,232 | ||||||||||||||||||||||||
General and administrative | 667 | 2,122 | — | 9,403 | 1 | 3,395 | — | 15,588 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total operating costs and expenses | 1,683 | 7,938 | 31,872 | 35,039 | 1 | 691,756 | (22,921 | ) | 745,368 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Operating income (loss) | (1,683 | ) | (7,938 | ) | 57,176 | (35,039 | ) | (1 | ) | 259,502 | — | 272,017 | ||||||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||||||||||
Equity earnings in affiliates, net of tax | 233,129 | 7,291 | 98,181 | 240,658 | 87,425 | — | (666,684 | ) | — | |||||||||||||||||||||||
Interest expense, net of amounts capitalized | (37,472 | ) | (233 | ) | (5,205 | ) | (32,705 | ) | (11,669 | ) | (24,093 | ) | 86,712 | (24,665 | ) | |||||||||||||||||
Interest income and other, net | 1,647 | — | 11,037 | 45,031 | 6,361 | 23,341 | (86,712 | ) | 705 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Income before income taxes | 195,621 | (880 | ) | 161,189 | 217,945 | 82,116 | 258,750 | (666,684 | ) | 248,057 | ||||||||||||||||||||||
Income tax provision | — | 15,766 | (1,467 | ) | — | — | (50,029 | ) | — | (35,730 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net Income | 195,621 | 14,886 | 159,722 | 217,945 | 82,116 | 208,721 | (666,684 | ) | 212,327 | |||||||||||||||||||||||
Net income attributable to noncontrolling interests | — | — | — | — | — | (27,183 | ) | 10,477 | (16,706 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net income attributable to Noble Corporation | 195,621 | 14,886 | 159,722 | 217,945 | 82,116 | 181,538 | (656,207 | ) | 195,621 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Other comprehensive loss, net | (4,077 | ) | — | — | — | — | (4,077 | ) | 4,077 | (4,077 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Comprehensive income attributable to Noble Corporation | $ | 191,544 | $ | 14,886 | $ | 159,722 | $ | 217,945 | $ | 82,116 | $ | 177,461 | $ | (652,130 | ) | $ | 191,544 | |||||||||||||||
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF INCOMECASH FLOWS
Six Months Ended June 30, 20132015
(in thousands)
Other | ||||||||||||||||||||||||||||||||
Non-guarantor | ||||||||||||||||||||||||||||||||
Noble- | Subsidiaries | Consolidating | ||||||||||||||||||||||||||||||
Cayman | NHC | NDH | NHIL | NDS6 | of Noble | Adjustments | Total | |||||||||||||||||||||||||
Operating revenues | ||||||||||||||||||||||||||||||||
Contract drilling services | $ | — | $ | — | $ | 133,270 | $ | — | $ | — | $ | 1,814,293 | $ | (43,371 | ) | $ | 1,904,192 | |||||||||||||||
Reimbursables | — | — | 3,321 | — | — | 46,113 | — | 49,434 | ||||||||||||||||||||||||
Labor contract drilling services | — | — | — | — | — | 34,657 | — | 34,657 | ||||||||||||||||||||||||
Other | — | — | — | — | — | 77 | — | 77 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total operating revenues | — | — | 136,591 | — | — | 1,895,140 | (43,371 | ) | 1,988,360 | |||||||||||||||||||||||
|
| �� |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Operating costs and expenses | ||||||||||||||||||||||||||||||||
Contract drilling services | 1,935 | 11,260 | 25,043 | 49,849 | — | 917,290 | (43,371 | ) | 962,006 | |||||||||||||||||||||||
Reimbursables | — | — | 2,823 | — | — | 34,800 | — | 37,623 | ||||||||||||||||||||||||
Labor contract drilling services | — | — | — | — | — | 21,651 | — | 21,651 | ||||||||||||||||||||||||
Depreciation and amortization | — | — | 30,183 | — | — | 387,800 | — | 417,983 | ||||||||||||||||||||||||
General and administrative | 1,292 | 4,014 | — | 18,116 | 1 | 7,008 | — | 30,431 | ||||||||||||||||||||||||
Gain on contract extinguishments | — | — | — | — | — | (1,800 | ) | — | (1,800 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total operating costs and expenses | 3,227 | 15,274 | 58,049 | 67,965 | 1 | 1,366,749 | (43,371 | ) | 1,467,894 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Operating income (loss) | (3,227 | ) | (15,274 | ) | 78,542 | (67,965 | ) | (1 | ) | 528,391 | — | 520,466 | ||||||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||||||||||
Equity earnings in affiliates, net of tax | 435,894 | 16,021 | 186,394 | 466,115 | 203,453 | — | (1,307,877 | ) | — | |||||||||||||||||||||||
Interest expense, net of amounts capitalized | (70,779 | ) | (617 | ) | (12,383 | ) | (67,265 | ) | (23,390 | ) | (47,427 | ) | 169,895 | (51,966 | ) | |||||||||||||||||
Interest income and other, net | 3,277 | — | 21,851 | 84,792 | 12,666 | 48,077 | (169,895 | ) | 768 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Income before income taxes | 365,165 | 130 | 274,404 | 415,677 | 192,728 | 529,041 | (1,307,877 | ) | 469,268 | |||||||||||||||||||||||
Income tax provision | — | 11,868 | (2,125 | ) | — | — | (79,487 | ) | — | (69,744 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net Income | 365,165 | 11,998 | 272,279 | 415,677 | 192,728 | 449,554 | (1,307,877 | ) | 399,524 | |||||||||||||||||||||||
Net income attributable to noncontrolling interests | — | — | — | — | — | (54,721 | ) | 20,362 | (34,359 | ) | ||||||||||||||||||||||
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Net income attributable to Noble Corporation | 365,165 | 11,998 | 272,279 | 415,677 | 192,728 | 394,833 | (1,287,515 | ) | 365,165 | |||||||||||||||||||||||
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Other comprehensive loss, net | (980 | ) | — | — | — | — | (980 | ) | 980 | (980 | ) | |||||||||||||||||||||
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Comprehensive income attributable to Noble Corporation | $ | 364,185 | $ | 11,998 | $ | 272,279 | $ | 415,677 | $ | 192,728 | $ | 393,853 | $ | (1,286,535 | ) | $ | 364,185 | |||||||||||||||
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Noble- Cayman | NHC | NDH | NHIL | NDS6 | Other Non-guarantor Subsidiaries of Noble | Consolidating Adjustments | Total | |||||||||||||||||||||||||
Cash flows from operating activities | ||||||||||||||||||||||||||||||||
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Net cash from operating activities | $ | (37,768 | ) | $ | (7,445 | ) | $ | 123,844 | $ | (117,391 | ) | $ | (11,095 | ) | $ | 802,833 | $ | — | $ | 752,978 | ||||||||||||
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Cash flows from investing activities | ||||||||||||||||||||||||||||||||
Capital expenditures | — | — | (48,227 | ) | — | — | (160,464 | ) | — | (208,691 | ) | |||||||||||||||||||||
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Net cash from investing activities | — | — | (48,227 | ) | — | — | (160,464 | ) | — | (208,691 | ) | |||||||||||||||||||||
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Cash flows from financing activities | ||||||||||||||||||||||||||||||||
Net change in borrowings outstanding on bank credit facilities | (1,123,495 | ) | — | — | — | — | — | — | (1,123,495 | ) | ||||||||||||||||||||||
Issuance of senior notes | — | — | — | 1,092,728 | — | — | — | 1,092,728 | ||||||||||||||||||||||||
Debt issuance costs on senior notes and credit facilities | (6,450 | ) | — | — | (9,620 | ) | — | — | — | (16,070 | ) | |||||||||||||||||||||
Dividends paid to noncontrolling interests | — | — | — | — | — | (44,484 | ) | — | (44,484 | ) | ||||||||||||||||||||||
Distributions to parent company, net | (273,626 | ) | — | — | — | — | — | — | (273,626 | ) | ||||||||||||||||||||||
Advances (to) from affiliates | 1,441,363 | 7,445 | (75,745 | ) | (965,717 | ) | 11,095 | (418,441 | ) | — | — | |||||||||||||||||||||
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Net cash from financing activities | 37,792 | 7,445 | (75,745 | ) | 117,391 | 11,095 | (462,925 | ) | — | (364,947 | ) | |||||||||||||||||||||
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Net change in cash and cash equivalents | 24 | — | (128 | ) | — | — | 179,444 | — | 179,340 | |||||||||||||||||||||||
Cash and cash equivalents, beginning of period | 5 | — | 254 | — | — | 65,521 | — | 65,780 | ||||||||||||||||||||||||
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Cash and cash equivalents, end of period | $ | 29 | $ | — | $ | 126 | $ | — | $ | — | $ | 244,965 | $ | — | $ | 245,120 | ||||||||||||||||
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NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Six Months Ended June 30, 2014
(in thousands)
Other | ||||||||||||||||||||||||||||||||
Non-guarantor | ||||||||||||||||||||||||||||||||
Noble- | Subsidiaries | Consolidating | ||||||||||||||||||||||||||||||
Cayman | NHC | NDH | NHIL | NDS6 | of Noble | Adjustments | Total | |||||||||||||||||||||||||
Cash flows from operating activities | ||||||||||||||||||||||||||||||||
Net cash from operating activities | $ | (33,190 | ) | $ | (89,407 | ) | $ | 132,085 | $ | (120,048 | ) | $ | (16,759 | ) | $ | 1,208,454 | $ | — | $ | 1,081,135 | ||||||||||||
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Cash flows from investing activities | ||||||||||||||||||||||||||||||||
New construction and capital expenditures | — | — | (860,876 | ) | — | — | (367,207 | ) | — | (1,228,083 | ) | |||||||||||||||||||||
Notes receivable from affiliates | — | — | — | 273,744 | — | — | (273,744 | ) | — | |||||||||||||||||||||||
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Net cash from investing activities | — | — | (860,876 | ) | 273,744 | — | (367,207 | ) | (273,744 | ) | (1,228,083 | ) | ||||||||||||||||||||
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Cash flows from financing activities | ||||||||||||||||||||||||||||||||
Net change in borrowings outstanding on bank credit facilities | 707,472 | — | — | — | — | — | — | 707,472 | ||||||||||||||||||||||||
Repayment of long-term debt | — | — | — | (250,000 | ) | — | — | — | (250,000 | ) | ||||||||||||||||||||||
Dividends paid to noncontrolling interests | — | — | — | — | — | (41,910 | ) | — | (41,910 | ) | ||||||||||||||||||||||
Financing costs on credit facilities | (386 | ) | — | — | — | — | — | — | (386 | ) | ||||||||||||||||||||||
Distributions to parent company, net | (240,900 | ) | — | — | — | — | — | — | (240,900 | ) | ||||||||||||||||||||||
Advances (to) from affiliates | (159,248 | ) | 89,407 | 729,719 | 96,300 | 16,759 | (772,937 | ) | — | — | ||||||||||||||||||||||
Notes payable to affiliates | (273,744 | ) | — | — | — | — | — | 273,744 | — | |||||||||||||||||||||||
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Net cash from financing activities | 33,194 | 89,407 | 729,719 | (153,700 | ) | 16,759 | (814,847 | ) | 273,744 | 174,276 | ||||||||||||||||||||||
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Net change in cash and cash equivalents | 4 | — | 928 | (4 | ) | — | 26,400 | — | 27,328 | |||||||||||||||||||||||
Cash and cash equivalents, beginning of period | 1 | — | 402 | 4 | — | 109,975 | — | 110,382 | ||||||||||||||||||||||||
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Cash and cash equivalents, end of period | $ | 5 | $ | — | $ | 1,330 | $ | — | $ | — | $ | 136,375 | $ | — | $ | 137,710 | ||||||||||||||||
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NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Six Months Ended June 30, 2013
(in thousands)
Other | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-guarantor | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Noble- | Subsidiaries | Consolidating | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cayman | NHC | NDH | NHIL | NDS6 | of Noble | Adjustments | Total | Noble- Cayman | NHC | NDH | NHIL | NDS6 | Other Non-guarantor Subsidiaries of Noble | Consolidating Adjustments | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
Cash flows from operating activities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Net cash from operating activities | $ | (60,083 | ) | $ | (47,456 | ) | $ | 71,577 | $ | (48,774 | ) | $ | (10,663 | ) | $ | 771,207 | $ | — | $ | 675,808 | $ | (33,190 | ) | $ | (89,407 | ) | $ | 132,085 | $ | (120,048 | ) | $ | (16,759 | ) | $ | 1,208,454 | $ | — | $ | 1,081,135 | ||||||||||||||||||||||||
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Cash flows from investing activities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
New construction and capital expenditures | — | — | (804,500 | ) | — | — | (478,786 | ) | — | (1,283,286 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital expenditures | — | — | (860,876 | ) | — | — | (367,207 | ) | — | (1,228,083 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes receivable from affiliates | — | — | — | 273,744 | — | — | (273,744 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Net cash from investing activities | — | — | (804,500 | ) | — | — | (478,786 | ) | — | (1,283,286 | ) | — | — | (860,876 | ) | 273,744 | — | (367,207 | ) | (273,744 | ) | (1,228,083 | ) | |||||||||||||||||||||||||||||||||||||||||
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Cash flows from financing activities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net change in borrowings outstanding on bank credit facilities | 941,653 | — | — | — | — | — | — | 941,653 | 707,472 | — | — | — | — | — | — | 707,472 | ||||||||||||||||||||||||||||||||||||||||||||||||
Repayment of long-term debt | (300,000 | ) | — | — | — | — | — | — | (300,000 | ) | — | — | — | (250,000 | ) | — | — | — | (250,000 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Dividends paid to noncontrolling interest | — | — | — | — | — | (46,649 | ) | — | (46,649 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financing costs on credit facilities | (1,912 | ) | — | — | — | — | — | — | (1,912 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt issuance costs on senior notes and credit facilities | (386 | ) | — | — | — | — | — | — | (386 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid to noncontrolling interests | — | — | — | — | — | (41,910 | ) | — | (41,910 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to parent company, net | (100,960 | ) | — | — | — | — | — | — | (100,960 | ) | (240,900 | ) | — | — | — | — | — | — | (240,900 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Advances (to) from affiliates | (479,696 | ) | 47,456 | 732,263 | 48,774 | 10,663 | (359,460 | ) | — | — | (159,248 | ) | 89,407 | 729,719 | 96,300 | 16,759 | (772,937 | ) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Notes payable to affiliates | (273,744 | ) | — | — | — | — | — | 273,744 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Net cash from financing activities | 59,085 | 47,456 | 732,263 | 48,774 | 10,663 | (406,109 | ) | — | 492,132 | 33,194 | 89,407 | 729,719 | (153,700 | ) | 16,759 | (814,847 | ) | 273,744 | 174,276 | |||||||||||||||||||||||||||||||||||||||||||||
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Net change in cash and cash equivalents | (998 | ) | — | (660 | ) | — | — | (113,688 | ) | — | (115,346 | ) | 4 | — | 928 | (4 | ) | — | 26,400 | — | 27,328 | |||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents, beginning of period | 1,003 | — | 904 | 2 | — | 275,466 | — | 277,375 | 1 | — | 402 | 4 | — | 109,975 | — | 110,382 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Cash and cash equivalents, end of period | $ | 5 | $ | — | $ | 244 | $ | 2 | $ | — | $ | 161,778 | $ | — | $ | 162,029 | $ | 5 | $ | — | $ | 1,330 | $ | — | $ | — | $ | 136,375 | $ | — | $ | 137,710 | ||||||||||||||||||||||||||||||||
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion is intended to assist you in understanding our financial position at June 30, 2014,2015, and our results of operations for the three and six months ended June 30, 20142015 and 2013.2014. The following discussion should be read in conjunction with the consolidated financial statements and related notes contained in this Quarterly Report on Form 10-Q and the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 20132014 filed by Noble Corporation plc, a public limited company registeredincorporated under the laws of England and Wales (“Noble-UK”), and Noble Corporation, a Cayman Islands company (“Noble-Cayman”).
As a result of the spin-off of Paragon Offshore plc, a public limited company incorporated under the laws of England and Wales (“Paragon Offshore”), on August 1, 2014, the results of operations for Paragon Offshore are reported as discontinued operations in this report. The terms “earnings” and “loss” as used in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” refer to income/(loss) from continuing operations. Income/(loss) from continuing operations is representative of the Company’s current business operations and focus.
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this report, including those regarding rig demand, the offshore drilling market, oil prices, contract backlog, fleet status, our financial position, business strategy, timing or resultsimpairments, level of acquisitions or dispositions,debt, repayment of debt, costs, expense management, timing or number of share repurchases, borrowings under our credit facilities or other instruments, sources of funds, completion, delivery dates and acceptance of our newbuild rigs, future capital expenditures, contract commitments, dayrates, contract amendments, commencements, extensionextensions, renewals, renegotiations or renewals,terminations, contract tenders, the outcome of any dispute, litigation, audit or investigation, plans and objectives of management for future operations, foreign currency requirements, results of joint ventures, indemnity and other contract claims, construction and upgrade of rigs, industry conditions, access to financing, impact of competition, governmental regulations and permitting, availability of labor, worldwide economic conditions, taxes and tax rates, indebtedness covenant compliance, dividends and distributable reserves, timing or results of acquisitions or dispositions, and timing for compliance with any new regulations are forward-looking statements. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “should” and similar expressions are intended to be among the statements that identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot assure you that such expectations will prove to be correct. These forward-looking statements speak only as of the date of this report on Form 10-Q and we undertake no obligation to revise or update any forward-looking statement for any reason, except as required by law. We have identified factors including but not limited to operating hazards and delays, risks associated with operations outside the U.S., actions by regulatory authorities, customers, joint venture partners, contractors, lenders and other third parties, market conditions, legislation and regulations affecting drilling operations, costs and difficulties relating to the integration of businesses, factors affecting the level of activity in the oil and gas industry, supply and demand of drilling rigs, factors affecting the duration of contracts, the actual amount of downtime, factors that reduce applicable dayrates, violations of anti-corruption laws, hurricanes and other weather conditions and the future price of oil and gas that could cause actual plans or results to differ materially from those included in any forward-looking statements. These factors include those referenced or described in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2013,2014, our Quarterly Reports on Form 10-Q and in our other filings with the U.S. Securities and Exchange Commission (“SEC”). We cannot control such risk factors and other uncertainties, and in many cases, we cannot predict the risks and uncertainties that could cause our actual results to differ materially from those indicated by the forward-looking statements. You should consider these risks and uncertainties when you are evaluating us.
Paragon Offshore plc Spin-off Transaction
On August 1, 2014, we completed the previously announced plan to reorganize our business by means of a spin-off of a wholly-owned subsidiary, Paragon Offshore plc (“Paragon Offshore”). The spin-off was accomplished through a pro rata distribution by us of all of the ordinary shares of Paragon Offshore to our shareholders. Our shareholders received one share of Paragon Offshore for every three shares of Noble owned as of July 23, 2014, the record date for the distribution. Paragon Offshore’s assets and liabilities consist of most of our standard specification drilling units and related assets, liabilities and business. Paragon Offshore’s fleet consists of five drillships, three semisubmersibles, 34 jackups and one floating production storage and offloading unit (“FPSO”). Paragon Offshore is also responsible for the Hibernia platform operations offshore Canada. In connection with the spin-off, we received approximately $1.7 billion in cash as settlement of intercompany notes issued by Paragon Offshore to Noble as consideration for the business contributed to Paragon Offshore. Noble used these funds to repay outstanding third-party debt of Noble-Cayman and its subsidiaries.
In connection with the separation and spin-off, we entered into a master separation agreement and other agreements described in Note 12 to our financial statements in this report.
Because the spin-off distribution was completed after June 30, 2014, the accounts of Paragon Offshore and its subsidiaries are reflected as continuing operations in our consolidated financial statements in this report and are part of our results of operations discussed throughout this report.
Executive Overview
We are a leading offshore drilling contractor for the oil and gas industry. We perform contract drilling services with our global fleet of mobile offshore drilling units located worldwide.units. As of August 1, 2014,the filing date of this Quarterly Report on Form 10-Q, our fleet consistsconsisted of 15 jackups, 11nine drillships and eight semisubmersibles, and 9 drillships, including three units under construction as follows:
We report our contract drilling operations as a single reportable segment, Contract Drilling Services, which reflects how we manage our business, and
Our the fact that all of our drilling fleet is locateddependent upon the worldwide oil and gas industry. The mobile offshore drilling units comprising our offshore rig fleet operate in a global market for contract drilling services and are often redeployed to different regions due to changing demands of our customers, which consist largely of major independent and government owned/controlled oil and gas companies throughout the world. As of June 30, 2015, our contract drilling services segment conducts operations in the United States, Brazil, Argentina, the North Sea, the Mediterranean West Africa,Sea, the Black Sea, the Middle East, Asia and Australia. Noble and its predecessors have been engaged in the contract drilling of oil and gas wells since 1921.
Outlook
The business environment for offshore drillers during the first six months of 20142015 remained challenging. The rig capacity imbalance, caused in part by the addition of newbuild units and rigs completing current contracts increased while customer demand for these rigs has been challenging. Whiledecreased. Beginning in June 2014, the price of Brent Crude,oil, a key factor in determining customer activity levels, remained strong throughoutbegan to decline rapidly, with the period, thereBrent crude price declining from approximately $112 per barrel on June 30, 2014 to approximately $63 per barrel on June 30, 2015. In this environment, operators have curtailed drilling programs, especially exploration activity, resulting in a dramatic reduction in dayrates for new contracts as well as lower rig utilization. The industry has beenresponded by accelerating the pace of rig retirements and reducing the supply of marketed rigs across the worldwide fleet.
We expect that the business environment for the remainder of 2015 and 2016 will remain challenging and could potentially deteriorate further. The present level of global economic activity, high levels of US onshore oil production, the potential increase of oil supply from Iran and a decreaselack of production cuts within OPEC are contributing to an uncertain oil price environment, leading to a persistent disruption in contracting activity particularly for ultra-deepwaterour customers’ exploration and deepwater rigs with delays in projects, as operators evaluate development costs. In addition, supplyproduction spending plans. Current and expected demand from customers over the remainder of 2015 and 2016 is not expected to increase duesupport the current supply of offshore drilling rigs resulting from capital expenditures that the offshore drilling industry has undertaken in recent years or the continuation of capital expenditures at similar levels. We cannot give any assurances as to a significant number of newbuild units that are forecast to enter the market over the next 12 months and the number of drilling contracts that will roll over during such period, particularlywhen these conditions in the deepwater and ultra-deepwater segments.offshore drilling market will improve, or when there will be higher demand for contract drilling services or a decline in the supply of available drilling rigs. While current market conditions persist, we believe the short-term outlook has downside risks, wewill continue to have confidencefocus on operating efficiency, cost control and operating margin preservation, which could include stacking or scrapping additional drilling rigs.
We believe in the long-term fundamentals for the industry. These fundamental factors include stable crude oil prices, favorable explorationindustry, especially for those contractors with a modern fleet of high-specification rigs like ours. Also, we believe the ultimate recovery will benefit from any sustained under-investment by clients during this current market phase.
Consistent with our policy, we evaluate property and equipment for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Further declines in the offshore drilling market, or lack of recovery in market conditions, to the extent actual results geographic expansion of deepwater drilling activities, a growing backlog of multi-year field development programs and greater access bydo not meet our customers to promising offshore regions, as evidenced by the Australian government releasing 30 oil and gas blocks for bidding and the energy reform legislation in Mexico that could potentiallyestimated assumptions, may lead to an increasepotential impairments in drilling activity in Mexican waters.the future.
Results and Strategy
Our goal is to be the preferred offshore drilling contractor for the oil and gas industry based upon the following core principles:
Our business strategy has also focusedfocuses on the active expansion of our worldwide deepwater drilling and high specification jackup capabilities through construction, modificationshigh-specification jackups and acquisitions, the deployment of our drilling assetsrigs in important oil and gas producing areas throughoutbasins around the world and the divestiture of our standard specification drilling units.world.
We have actively expanded our offshore deepwater drilling and high specificationhigh-specification jackup capabilities in recent years through the construction and acquisition of rigs. As part of this technicalCurrently, we have one newbuild project remaining, the heavy-duty, harsh environment jackup,Noble Lloyd Noble, which is scheduled to commence operations under a four-year
contract in the North Sea in mid-2016. Although we plan to focus on capital preservation and operational expansion,liquidity based on current market conditions, we also plan to continue to evaluate opportunities to enhance our fleet to achieve greater technological capability, which we believe will lead to increased drilling efficiencies and thean enhanced ability to completeexecute the increasingly more complex drilling programs required by our customers. During the first six months of 2014, we continued to execute our newbuild program, completing the following milestones:
While we cannot predict the future level of demand or dayrates for our drilling services or future conditions in the offshore contract drilling industry, we continue to believe we are strategically well positioned withinpositioned.
Spin-off of Paragon Offshore plc
On August 1, 2014, Noble-UK completed the industryseparation and thatspin-off of a majority of its standard specification offshore drilling business (the “Spin-Off”) through a pro rata distribution of all of the ordinary shares of its wholly-owned subsidiary, Paragon Offshore, to the holders of Noble’s ordinary shares. Our shareholders received one share of Paragon Offshore for every three shares of Noble owned as of July 23, 2014, the record date for the distribution. Through the Spin-Off, we disposed of most of our newbuild activity will further strengthenstandard specification drilling units and related assets, liabilities and business. Prior to the Spin-off, Paragon Offshore issued approximately $1.7 billion of long-term debt. We used the proceeds from this debt to repay certain amounts outstanding under our position.commercial paper program. The results of operations for Paragon Offshore prior to the Spin-off date and incremental Spin-off related costs have been classified as discontinued operations for all periods presented in this Quarterly Report on Form 10-Q. For additional information regarding the Spin-off, see Note 2 to the consolidated financial statements included in this report.
Contract Drilling Services Backlog
We maintain a backlog (as defined below) of commitments for contract drilling services. The following table sets forth, as of June 30, 2014,2015, the amount of our contract drilling services backlog and the percent of available operating days committed for the periods indicated and, because the Paragon Offshore spin-off occurred after such date, includes backlog of $2.3 billion associated with the Paragon Offshore fleet:indicated:
Year Ending December 31, | Year Ending December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
Total | 2014(1) | 2015 | 2016 | 2017 | 2018-2023 | Total | 2015(1) | 2016 | 2017 | 2018 | 2019-2023 | |||||||||||||||||||||||||||||||||||||
(In millions) | (In millions) | |||||||||||||||||||||||||||||||||||||||||||||||
Contract Drilling Services Backlog | ||||||||||||||||||||||||||||||||||||||||||||||||
Semisubmersibles/Drillships(2) (6) | $ | 10,067 | $ | 1,459 | $ | 2,659 | $ | 1,956 | $ | 1,253 | $ | 2,740 | ||||||||||||||||||||||||||||||||||||
Jackups(3) | 3,286 | 919 | 1,204 | 496 | 230 | 437 | ||||||||||||||||||||||||||||||||||||||||||
Semisubmersibles/Drillships (2) (5) | $ | 6,788 | $ | 1,180 | $ | 1,811 | $ | 1,100 | $ | 701 | $ | 1,996 | ||||||||||||||||||||||||||||||||||||
Jackups | 1,901 | 299 | 665 | 424 | 252 | 261 | ||||||||||||||||||||||||||||||||||||||||||
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Total | $ | 13,353 | $ | 2,378 | $ | 3,863 | $ | 2,452 | $ | 1,483 | $ | 3,177 | $ | 8,689 | $ | 1,479 | $ | 2,476 | $ | 1,524 | $ | 953 | $ | 2,257 | ||||||||||||||||||||||||
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Percent of Available Days Committed(5) | ||||||||||||||||||||||||||||||||||||||||||||||||
Percent of Available Days Committed(4) | ||||||||||||||||||||||||||||||||||||||||||||||||
Semisubmersibles/Drillships | 72 | % | 59 | % | 40 | % | 24 | % | 9 | % | 78 | % | 58 | % | 35 | % | 24 | % | 14 | % | ||||||||||||||||||||||||||||
Jackups | 76 | % | 46 | % | 13 | % | 4 | % | 1 | % | 80 | % | 68 | % | 41 | % | 19 | % | 2 | % | ||||||||||||||||||||||||||||
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Total | 74 | % | 50 | % | 23 | % | 11 | % | 9 | % | 79 | % | 63 | % | 38 | % | 21 | % | 8 | % | ||||||||||||||||||||||||||||
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(1) | Represents a six-month period beginning July 1, |
(2) |
The drilling contracts with Royal Dutch Shell, PLCRoyal Dutch Shell, plc (“Shell”) for theNoble Globetrotter I,Noble Globetrotter II,Noble Jim Thompson,Noble Clyde Boudreaux,Noble Max Smith, Noble Don Taylorand the Noble Jim Day provide opportunities for us to earn performance bonuses based on key performance indicators as defined by the contract.contracts. Our backlog includes an amount equal to 25 percent of potential performance bonuses for these rigs, or $162 million.
Our contract drilling services backlog reflects estimated future revenues attributable to both signed
(3) | Some of our drilling contracts provide the customer with certain termination rights and, |
(4) | Percent of available days committed is calculated by dividing the total number of days our rigs are operating under contract for such period, or committed days, by the product of the total number of our rigs, including cold stacked rigs, and the number of calendar days in such period. Committed days do not include the days that |
days that a rig is expected to |
(5) | Noble and a subsidiary of Shell are involved in joint ventures that own and operate both theNoble Bully I and theNoble Bully II. Under the terms of the joint venture agreements, each party has an equal 50 percent share in both rigs. As of June 30, 2015, the combined amount of backlog for these rigs totals approximately $1.4 billion, all of which is included in our backlog. Noble’s proportional interest in the backlog for these rigs totals $720 million. |
Our contract drilling services backlog reflects estimated future revenues attributable to both signed drilling contracts and letters of intent that we expect to result in binding drilling contracts. A letter of intent is generally subject to customary conditions, including the execution of a definitive drilling contract. It is possible that some customers that have entered into letters of intent will not enter into signed drilling contracts. As of June 30, 2015, our contract drilling services backlog did not include any letters of intent.
We calculate backlog for any given unit and period by multiplying the full contractual operating dayrate for such unit by the number of days remaining in the period. The reported contract drilling services backlog does not include amounts representing revenues for mobilization, demobilization and contract preparation, which are not expected to be significant to our contract drilling services revenues, amounts constituting reimbursables from customers or amounts attributable to uncommitted option periods under drilling contracts or letters of intent.
The amount of actual revenues earned and the actual periods during which revenues are earned may be materially different than the backlog amounts and backlog periods set forth in the table above due to various factors, including, but not limited to, shipyard and maintenance projects, unplanned downtime, achievement of bonuses, weather conditions and other factors that result in applicable dayrates lower than the full contractual operating dayrate. In addition, amounts included in the backlog may change because drilling contracts may be varied or modified by mutual consent or customers may exercise termination rights contained in some of our drilling contracts or decline to enter into a drilling contract after executing a letter of intent. As a result, our backlog as of any particular date may not be indicative of our actual operating results for the periods for which the backlog is calculated. See Part I, Item 1A, “Risk Factors – We can provide no assurance that our current backlog of contract drilling revenue will be ultimately realized” in our Annual Report on Form 10-K for the year ended December 31, 2014.
As of June 30, 2015, Shell and Freeport-McMoRan Inc. represented approximately 61 percent and 12 percent of our backlog, respectively.
Results of Operations
For the Three Months Ended June 30, 2015 and 2014
Net income from continuing operations attributable to Noble-UK for the three months ended June 30, 2015 (the “Current Quarter”) was $159 million, or $0.64 per diluted share, on operating revenues of $794 million, compared to net income from continuing operations for the three months ended June 30, 2014 (the “Comparable Quarter”) of $140 million, or $0.54 per diluted share, on operating revenues of $804 million.
As a result of Noble-UK conducting all of its business through Noble-Cayman and its subsidiaries, the financial position and results of operations for Noble-Cayman, and the reasons for material changes in the amount of revenue and expense items between the Current Quarter and the Comparable Quarter, would be the same as the information presented below regarding Noble-UK in all material respects, except operating income for Noble-Cayman for the three months ended June 30, 2015 and 2014 was $9 million and $24 million higher, respectively, than operating income for Noble-UK for the same periods. The operating income difference is primarily a result of executive costs directly attributable to Noble-UK for operations support and stewardship related services. In addition, we had non-recurring costs of $6 million during the Comparable Quarter related to the Spin-off, which we recognized as part of discontinued operations at the Noble-UK level.
Rig Utilization, Operating Days and Average Dayrates
Operating results from continuing operations for our contract drilling services segment are dependent on three primary metrics: rig utilization, operating days and dayrates. The following table sets forth the average rig utilization, operating days and average dayrates for our rig fleet for the three months ended June 30, 2015 and 2014:
Average Rig Utilization (1) | Operating Days (2) | Average Dayrates | ||||||||||||||||||||||||||||||
Three Months Ended June 30, | Three Months Ended June 30, | Three Months Ended June 30, | ||||||||||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | % Change | 2015 | 2014 | % Change | |||||||||||||||||||||||||
Jackups | 84 | % | 87 | % | 993 | 870 | 14 | % | $ | 171,482 | $ | 178,259 | -4 | % | ||||||||||||||||||
Semisubmersibles | 63 | % | 74 | % | 455 | 742 | -39 | % | 403,319 | 424,199 | -5 | % | ||||||||||||||||||||
Drillships | 100 | % | 100 | % | 819 | 637 | 29 | % | 509,783 | 485,686 | 5 | % | ||||||||||||||||||||
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Total | 83 | % | 85 | % | 2,267 | 2,249 | 1 | % | $ | 340,217 | $ | 346,494 | -2 | % | ||||||||||||||||||
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(1) | We define utilization for a specific period as the total number of days our rigs are operating under contract, divided by the product of the total number of our rigs, including cold stacked rigs, and the number of calendar days in such period. Information reflects our policy of reporting on the basis of the number of available rigs in our fleet, excluding newbuild rigs under construction. |
(2) | Information reflects the number of days
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Contract Drilling Services
The following table sets forth the operating results from continuing operations for our contract drilling services segment for the three months ended June 30, 2015 and its subsidiaries, the financial position and results of operations for Noble-Cayman, and the reasons for material changes in the amount of revenue and expense items between 2014 and 2013, would be the same as the information presented below regarding Noble-UK in all material respects, except operating income for Noble-Cayman for the three months ended June 30, 2014 and 2013 was $30 million and $18 million higher than operating income for Noble-UK for the same period. The operating income difference is primarily a result of executive costs directly attributable to Noble-UK for operations support and stewardship related services.
Rig Utilization, Operating Days and Average Dayrates
Operating results for our contract drilling services segment are dependent on three primary metrics: rig utilization, operating days and dayrates. The following table sets forth the average rig utilization, operating days and average dayrates for our rig fleet for the three months ended June 30, 2014 and 2013 (dollars in thousands):
Average Rig | Operating | Average | ||||||||||||||||||||||||||||||
Utilization (1) | Days (2) | Dayrates | ||||||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | Three Months Ended | ||||||||||||||||||||||||||||||
June 30, | June 30, | June 30, | ||||||||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | % Change | 2014 | 2013 | % Change | |||||||||||||||||||||||||
Jackups | 80 | % | 92 | % | 3,272 | 3,594 | -9 | % | $ | 130,851 | $ | 116,266 | 13 | % | ||||||||||||||||||
Semisubmersibles | 73 | % | 76 | % | 924 | 970 | -5 | % | 394,605 | 370,117 | 7 | % | ||||||||||||||||||||
Drillships | 92 | % | 78 | % | 1,001 | 637 | 57 | % | 407,259 | 311,490 | 31 | % | ||||||||||||||||||||
Other | 0 | % | 0 | % | — | — | 0 | % | — | — | 0 | % | ||||||||||||||||||||
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Total | 79 | % | 83 | % | 5,197 | 5,201 | 0 | % | $ | 231,003 | $ | 187,537 | 23 | % | ||||||||||||||||||
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Contract Drilling Services
The following table sets forth the operating results for our contract drilling services segment for the three months ended June 30, 2014 and 2013 (dollars in thousands):
Three Months Ended | ||||||||||||||||||||||||||||||||
June 30, | Change | Three Months Ended June 30 | Change | |||||||||||||||||||||||||||||
2014 | 2013 | $ | % | 2015 | 2014 | $ | % | |||||||||||||||||||||||||
Operating revenues: | ||||||||||||||||||||||||||||||||
Contract drilling services | $ | 1,200,406 | $ | 975,455 | $ | 224,951 | 23 | % | $ | 771,307 | $ | 779,368 | $ | (8,061 | ) | -1 | % | |||||||||||||||
Reimbursables (1) | 29,291 | 28,000 | 1,291 | 5 | % | 22,248 | 22,243 | 5 | 0 | % | ||||||||||||||||||||||
Other | — | 67 | (67 | ) | ** | |||||||||||||||||||||||||||
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$ | 1,229,697 | $ | 1,003,522 | $ | 226,175 | 23 | % | $ | 793,555 | $ | 801,611 | $ | (8,056 | ) | -1 | % | ||||||||||||||||
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Operating costs and expenses: | ||||||||||||||||||||||||||||||||
Contract drilling services | $ | 577,134 | $ | 487,971 | $ | 89,163 | 18 | % | $ | 319,207 | $ | 370,902 | $ | (51,695 | ) | -14 | % | |||||||||||||||
Reimbursables (1) | 21,481 | 22,469 | (988 | ) | -4 | % | 17,652 | 17,097 | 555 | 3 | % | |||||||||||||||||||||
Depreciation and amortization | 249,701 | 209,082 | 40,619 | 19 | % | 153,579 | 148,324 | 5,255 | 4 | % | ||||||||||||||||||||||
General and administrative | 26,845 | 26,378 | 467 | 2 | % | 22,424 | 26,845 | (4,421 | ) | -16 | % | |||||||||||||||||||||
Non-recurring spin-off related costs | 1,441 | — | 1,441 | ** | ||||||||||||||||||||||||||||
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876,602 | 745,900 | 130,702 | 18 | % | 512,862 | 563,168 | (50,306 | ) | -9 | % | ||||||||||||||||||||||
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Operating income | $ | 353,095 | $ | 257,622 | $ | 95,473 | 37 | % | $ | 280,693 | $ | 238,443 | $ | 42,250 | 18 | % | ||||||||||||||||
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(1) | We record reimbursements from customers for out-of-pocket expenses as operating revenues and the related direct costs as operating expenses. Changes in the amount of these reimbursables generally do not have a material effect on our financial position, results of operations or cash flows. |
Operating Revenues. Changes in contract drilling services revenues for the Current Quarter as compared to the Comparable Quarter was driven by an increase in average dayrates, partially offset by a slight decrease in operating days. The 23 percent increase in average dayrates increased revenue by approximately $226 million, but the slight decrease in operating days decreased revenues by $1 million.
The increase in contract drilling services revenues relates to our drillships, jackups and semisubmersibles, which generated approximately $209 million, $10 million and $6 million more revenue, respectively, in the Current Quarter.
The increase in drillship revenues was driven by a 57 percent increase in operating days and a 31 percent increase in average dayrates, resulting in a $113 million and a $96 million increase in revenues, respectively, from the Comparable Quarter. The increase in both average dayrates and operating days was the result of theNoble Don Taylor, Noble Globetrotter IIandNoble Bob Douglas
Operating Revenues. Changes in contract drilling services revenues for the Current Quarter as compared to the Comparable Quarter were driven by a decrease in average dayrates, partially offset by an increase in operating days. The 2 percent decrease in average dayrates decreased revenues by $14 million, which was partially offset by the 1 percent increase in operating days which increased revenues by $6 million.
The decrease in contract drilling services revenues was related to our semisubmersibles, which generated $131 million less revenue than in the Comparable Quarter. This was partially offset by increased revenues related to our drillships and jackups, which generated $108 million and $15 million more revenue, respectively, in the Current Quarter.
The decrease in semisubmersible revenues was driven by a 39 percent decrease in operating days and a 5 percent decrease in average dayrates, resulting in a $122 million and a $9 million decrease in revenues, respectively, from the Comparable Quarter. The decrease in both operating days and average dayrates was primarily attributable to the retirement of theNoble Jim Thompson, theNoble Driller and theNoble Paul Wolff as a result of our decision to discontinue marketing these rigs based on current market conditions. Additionally, theNoble Max Smith and theNoble Paul Romano were operational during the Comparable Quarter but were off contract during the Current Quarter.
The increase in drillship revenues was driven by a 29 percent increase in operating days and a 5 percent increase in average dayrates, resulting in an $88 million and a $20 million increase in revenues, respectively, from the Comparable Quarter. The increase in both average dayrates and operating days was the result of the newbuilds Noble Sam Croftand theNoble Tom Madden, which commenced their contracts in July 2014 and November 2014, respectively.
The 14 percent increase in operating days on our jackups resulted in a $22 million increase in revenues from the Comparable Quarter. The increase in operating days was the result of the commencement of theNoble Sam Turner in August 2013, September 2013 and December 2013, respectively. Additionally, theNoble Roger Eason was fully operational during the Current Quarter, after receiving a reduced rate while in the shipyard to undergo its reliability upgrade project during the Comparable Quarter.
The 13 percent increase in jackup average dayrates resulted in a $48 million increase in revenues from the Comparable Quarter. The increase in average dayrates resulted from favorable dayrate changes on new contracts across the jackup fleet, as well as the newbuild jackups operating at favorable dayrates. The 9 percent decline in operating days resulted in a $38 million decline in revenues driven by theNoble Gus Androes, Noble David Tinsley, Noble Gene Rosserand Noble Charlie Yester, which were off contract in the Current Quarter but experienced full utilization during the Comparable Quarter, coupled with increased downtime on theNoble Percy Johns andNoble Scott Marks during the Current Quarter. These decreases were partially offset by the contract commencements of the following newbuilds:Noble Mick O’Brien, Noble Regina AllenandNoble Houston Colbert in November 2013, January 2014 and March 2014, respectively, and theNoble Lewis Dugger, which was sold in July 2013, was fully utilized during the Comparable Quarter.
The 7 percent increase in average dayrates on our semisubmersibles resulted in a $23 million increase in revenues from the Comparable Quarter. The increase in average dayrates is due to favorable dayrate changes on new contracts across the semisubmersible fleet, as well as the return to work of theNoble Paul Romano during the Current Quarter. The 5 percent decline in operating days resulted in a $17 million decline in revenues driven by theNoble Paul Wolff, which completed its contract during the Current Quarter but experienced full utilization during the Comparable Quarter.
Operating Costs and Expenses. Contract drilling services operating costs and expenses increased $89 million for the Current Quarter as compared to the Comparable Quarter. A significant portion of the increase is due to the crew-up and operating expenses for our newbuild rigs as they commenced operating under contracts, which added approximately $70 million in expense in the Current Quarter. The remaining change was primarily driven by a $12 million increase in labor costs and a $9 million increase in mobilization due to the amortization of certain rig moves and the demobilization of rigs. These increases were partially offset by a $2 million decrease in maintenance and other rig-related expenses.
The increase in depreciation and amortization in the Current Quarter from the Comparable Quarter was primarily attributable to assets placed in service, including theNoble Don Taylor, Noble Globetrotter II, Noble Mick O’Brien, Noble Bob Douglas, Noble Regina AllenandNoble Houston Colbert.
Other
The following table sets forth the operating results for our other services for the three months ended June 30, 2014 and 2013 (dollars in thousands):
Three Months Ended | ||||||||||||||||
June 30, | Change | |||||||||||||||
2014 | 2013 | $ | % | |||||||||||||
Operating revenues: | ||||||||||||||||
Labor contract drilling services | $ | 8,146 | $ | 13,603 | $ | (5,457 | ) | -40 | % | |||||||
Reimbursables (1) | 2,520 | 260 | 2,260 | 869 | % | |||||||||||
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$ | 10,666 | $ | 13,863 | $ | (3,197 | ) | -23 | % | ||||||||
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Operating costs and expenses: | ||||||||||||||||
Labor contract drilling services | $ | 6,261 | $ | 9,349 | $ | (3,088 | ) | -33 | % | |||||||
Reimbursables (1) | 979 | 232 | 747 | 322 | % | |||||||||||
Depreciation and amortization | 4,693 | 3,507 | 1,186 | 34 | % | |||||||||||
General and administrative | 235 | 472 | (237 | ) | -50 | % | ||||||||||
Non-recurring spin-off related costs | 5,017 | 4,065 | 952 | 23 | % | |||||||||||
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17,185 | 17,625 | (440 | ) | -2 | % | |||||||||||
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Operating (loss)/income | $ | (6,519 | ) | $ | (3,762 | ) | $ | (2,757 | ) | 73 | % | |||||
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Operating Revenues and Costs and Expenses. The decrease in both revenue and expense primarily relates to the cancellation of a project with our customer, Shell, for one of its rigs that was operating under a labor contract in Alaska.
Other Income and Expenses
Non-recurring spin-off related costs. Non-recurring spin-off related costs increased $2 million in the Current Quarter from the Comparable Quarter for professional fees and other costs incurred related to the Paragon Offshore spin-off transaction.
Interest Expense, net of amount capitalized. Interest expense, net of amount capitalized, increased $12 million in the Current Quarter as compared to the Comparable Quarter. The increase is a result of a reduction in capitalized interest in the Current Quarter as compared to the Comparable Quarter due primarily to the completion of construction on three of our newbuild drillships and three of our newbuild jackups, coupled with increased borrowings outstanding under our credit facilities and commercial paper program. During the Current Quarter, we capitalized approximately 27 percent of total interest charges versus approximately 56 percent during the Comparable Quarter.
Income Tax Provision. Our income tax provision increased $16 million in the Current Quarter driven by higher pre-tax income. The 35 percent increase in pre-tax earnings generated a $13 million increase in income tax expense. Additionally, a 6 percent increase in the effective tax rate during the Current Quarter increased income tax expense by an additional $3 million. The increase in the effective tax rate was a result of a change in the geographic mix of pre-tax earnings.
For the Six Months Ended June 30, 2014 and 2013
Net income attributable to Noble-UK for the six months ended June 30, 2014 (the “Current Period”) was $491 million, or $1.90 per diluted share, on operating revenues of $2.5 billion, compared to net income for the six months ended June 30, 2013 (the “Comparable Period”) of $327 million, or $1.27 per diluted share, on operating revenues of $2.0 billion.
As a result of Noble-UK conducting all of its business through Noble-Cayman and its subsidiaries, the financial position and results of operations for Noble-Cayman, and the reasons for material changes in the amount of revenue and expense items between 2014 and 2013, would be the same as the information presented below regarding Noble-UK in all material respects, except operating income for Noble-Cayman for the six months ended June 30, 2014 and 2013 was $59 million and $37 million higher than operating income for Noble-UK for the same period. The operating income difference is primarily a result of executive costs directly attributable to Noble-UK for operations support and stewardship related services.
Rig Utilization, Operating Days and Average Dayrates
Operating results for our contract drilling services segment are dependent on three primary metrics: rig utilization, operating days and dayrates. The following table sets forth the average rig utilization, operating days and average dayrates for our rig fleet for the six months ended June 30, 2014 and 2013 (dollars in thousands):
Average Rig | Operating | Average | ||||||||||||||||||||||||||||||
Utilization (1) | Days (2) | Dayrates | ||||||||||||||||||||||||||||||
Six Months Ended | Six Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||
June 30, | June 30, |
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2014 | 2013 | 2014 | 2013 | % Change | 2014 | 2013 | % Change | |||||||||||||||||||||||||
Jackups | 83 | % | 92 | % | 6,684 | 7,192 | -7 | % | $ | 127,844 | $ | 110,908 | 15 | % | ||||||||||||||||||
Semisubmersibles | 76 | % | 80 | % | 1,917 | 2,023 | -5 | % | 393,577 | 344,568 | 14 | % | ||||||||||||||||||||
Drillships | 92 | % | 80 | % | 1,991 | 1,306 | 52 | % | 400,612 | 313,398 | 28 | % | ||||||||||||||||||||
Other | 0 | % | 0 | % | — | — | — | — | — | — | ||||||||||||||||||||||
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Total | 82 | % | 84 | % | 10,592 | 10,521 | 1 | % | $ | 227,211 | $ | 180,984 | 26 | % | ||||||||||||||||||
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Contract Drilling Services
The following table sets forth the operating results for our contract drilling services segment for the six months ended June 30, 2014 and 2013 (dollars in thousands):
Six Months Ended | ||||||||||||||||
June 30, | Change | |||||||||||||||
2014 | 2013 | $ | % | |||||||||||||
Operating revenues: | ||||||||||||||||
Contract drilling services | $ | 2,406,710 | $ | 1,904,192 | $ | 502,518 | 26 | % | ||||||||
Reimbursables (1) | 65,424 | 48,711 | 16,713 | 34 | % | |||||||||||
Other | 1 | 77 | (76 | ) | ** | |||||||||||
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$ | 2,472,135 | $ | 1,952,980 | $ | 519,155 | 27 | % | |||||||||
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Operating costs and expenses: | ||||||||||||||||
Contract drilling services | $ | 1,138,265 | $ | 968,097 | $ | 170,168 | 18 | % | ||||||||
Reimbursables (1) | 51,599 | 36,938 | 14,661 | 40 | % | |||||||||||
Depreciation and amortization | 491,275 | 411,701 | 79,574 | 19 | % | |||||||||||
General and administrative | 52,273 | 51,435 | 838 | 2 | % | |||||||||||
Non-recurring spin-off related costs | 1,761 | — | 1,761 | ** | ||||||||||||
Gain on contract extinguishments | — | (1,800 | ) | 1,800 | ** | |||||||||||
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1,735,173 | 1,466,371 | 268,802 | 18 | % | ||||||||||||
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Operating income | $ | 736,962 | $ | 486,609 | $ | 250,353 | 51 | % | ||||||||
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Operating Revenues. Changes in contract drilling services revenues for the Current Period as compared to the Comparable Period were driven by increases in both average dayrates and operating days. The 26 percent increase in average dayrates increased revenues by approximately $490 million while the 1 percent increase in operating days increased revenue by $13 million.
The change in contract drilling services revenues relates to our drillships, semisubmersibles and jackups, which generated approximately $389 million, $57 million and $57 million more revenue, respectively, in the Current Period.
The increase in drillship revenues was driven by a 52 percent increase in operating days and a 28 percent increase in average dayrates, resulting in a $215 million and a $174 million increase in revenues, respectively, from the Comparable Period. The increase in both average dayrates and operating days was the result of theNoble Don Taylor, Noble Globetrotter IIandNoble Bob Douglas, which commenced their contracts in August 2013, September 2013 and December 2013, respectively. Additionally, theNoble Roger Easonwas fully operational during the Current Period, after receiving a reduced rate while in the shipyard to undergo its reliability upgrade project for a portion of the Comparable Period.
The 14 percent increase in average dayrates on our semisubmersibles resulted in a $94 million increase in revenues from the Comparable Period. The increase in average dayrates is due to favorable dayrate changes on new contracts across the semisubmersible fleet, as well as theNoble Paul Romano returning to work during the Current Period. The 5 percent decline in operating days resulted in a $37 million decline in revenues driven by theNoble Paul WolffandNoble Homer Ferrington, which completed their respective contracts during the Current Period but experienced full utilization during the Comparable Period.
The 15 percent increase in jackup average dayrates resulted in a $113 million increase in revenues from the Comparable Period. The increase in average dayrates resulted from favorable dayrate changes on new contracts across the jackup fleet, as well as the newbuild jackups operating at favorable dayrates. The 7 percent decline in operating days resulted in a $56 million decline in revenues driven by theNoble Gus Androes, Noble Gene Rosser, Noble Charlie YesterandNoble David Tinsley, which werewas fully operational during the Current Quarter but was off contract for a portion ofduring the Comparable Quarter. This was partially offset by theNoble Mick O’Brien, which was off contract during the Current PeriodQuarter but experienced full utilization during the Comparable Period and increased downtimeQuarter. The 4 percent decline in average dayrates resulted in a $7 million decrease in revenues driven by unfavorable dayrate changes on theNoble Percy Johns andNoble Scott Marks duringcontracts across the Current Period. Additionally, theNoble Lewis Dugger, which was sold in July 2013, was fully utilized during the Comparable Period. These decreases were partially offset by the contract commencements of theNoble Mick O’Brien, Noble Regina AllenandNoble Houston Colbert in November 2013, January 2014 and March 2014, respectively.jackup fleet.
Operating Costs and Expenses. Contract drilling services operating costs and expenses increased $170decreased $52 million for the Current PeriodQuarter as compared to the Comparable Period. A significant portion of the increase was due to the crew-upQuarter. Crew-up and operating expenses for our newbuild rigs as they commenced, or prepared to commence, operating under contracts which added approximately $144$41 million in expenses duringexpense in the Current Period.Quarter. This was partially offset by decreased costs of $34 million related to the retirement of theNoble Jim Thompson, theNoble Driller and theNoble Paul Wolff and $34 million related to idle or stacked rigs. The remaining change$25 million decrease in costs was primarily driven by a $25$27 million increase in labor, the majority of which is due to rigs returning to work during the Current Period and a $16 million increasedecrease in mobilization dueand transportation expenses related to the amortization of certain rig moves during the Comparable Quarter and the demobilization of rigs. These increases werea $2 million decrease in insurance costs related to our policy renewal in March 2015, which was partially offset by a $15$4 million decreaseincrease in maintenance andother rig-related expense.expenses.
The increase in depreciation and amortization in the Current PeriodQuarter from the Comparable PeriodQuarter was primarily attributable to assets placed in service, including theNoble Don Taylor, Noble Globetrotter II, Noble Mick O’Brien, Noble Bob Douglas, Noble Regina AllenandNoble Houston Colbert. newbuilds noted above.
Other Income and Expenses
General and administrative expenses. Overall, general and administrative expenses decreased $5 million in the Current Quarter as compared to the Comparable Quarter primarily as a result of decreased legal and other professional fees.
Interest Expense, net of amount capitalized. Interest expense, net of amount capitalized, increased $21 million in the Current Quarter as compared to the Comparable Quarter. The increase is a result of the $1.1 billion of senior notes issued in March 2015, coupled with a reduction in capitalized interest in the Current Quarter as compared to the Comparable Quarter due primarily to the completion of construction on two of our newbuild drillships and two of our newbuild jackups. During the Current Quarter, we capitalized approximately 10 percent of total interest charges versus approximately 27 percent during the Comparable Quarter.
Income Tax Provision. Our income tax provision increased $5 million in the Current Quarter. A 10 percent increase in pre-tax earnings generated a $3 million increase in income tax expense. Additionally, a 5 percent increase in the worldwide effective tax rate generated a $2 million increase in income tax expense. The increase in the worldwide effective tax rate was primarily a result of a change in the geographic mix of pre-tax earnings.
Discontinued Operations. Net income from discontinued operations for the Comparable Quarter was $94 million. Revenues reported within discontinued operations were $437 million during the Comparable Quarter. Operating income included within discontinued operations was $111 million during the Comparable Quarter. There was no activity related to discontinued operations during the Current Quarter.
For the Six Months Ended June 30, 2015 and 2014
Net income from continuing operations attributable to Noble-UK for the six months ended June 30, 2015 (the “Current Period”) was $337 million, or $1.36 per diluted share, on operating revenues of $1.6 billion, compared to net income from continuing operations for the six months ended June 30, 2014 (the “Comparable Period”) of $295 million, or $1.14 per diluted share, on operating revenues of $1.6 billion.
As a result of Noble-UK conducting all of its business through Noble-Cayman and its subsidiaries, the financial position and results of operations for Noble-Cayman, and the reasons for material changes in the amount of revenue and expense items between the Current Period and the Comparable Period, would be the same as the information presented below regarding Noble-UK in all material respects, except operating income for Noble-Cayman for the six months ended June 30, 2015 and 2014 was $24 million and $41 million higher, respectively, than operating income for Noble-UK for the same periods. The operating income difference is primarily a result of executive costs directly attributable to Noble-UK for operations support and stewardship related services. In addition, we had non-recurring costs of $19 million during the Comparable Period related to the Spin-off, which we recognized as part of discontinued operations at the Noble-UK level.
Rig Utilization, Operating Days and Average Dayrates
Operating results from continuing operations for our contract drilling services segment are dependent on three primary metrics: rig utilization, operating days and dayrates. The following table sets forth the average rig utilization, operating days and average dayrates for our rig fleet for the six months ended June 30, 2015 and 2014:
Average Rig Utilization (1) | Operating Days (2) | Average Dayrates | ||||||||||||||||||||||||||||||
Six Months Ended June 30, | Six Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | % Change | 2015 | 2014 | % Change | |||||||||||||||||||||||||
Jackups | 88 | % | 92 | % | 1,983 | 1,740 | 14 | % | $ | 172,090 | $ | 170,672 | 1 | % | ||||||||||||||||||
Semisubmersibles | 64 | % | 78 | % | 948 | 1,556 | -39 | % | 397,839 | 421,250 | -6 | % | ||||||||||||||||||||
Drillships | 100 | % | 100 | % | 1,629 | 1,267 | 29 | % | 511,014 | 471,753 | 8 | % | ||||||||||||||||||||
Other | N/A | 0 | % | N/A | — | ** | N/A | — | ** | |||||||||||||||||||||||
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Total | 85 | % | 88 | % | 4,560 | 4,563 | 0 | % | $ | 340,089 | $ | 339,682 | 0 | % | ||||||||||||||||||
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(1) | We define utilization for a specific period as the total number of days our rigs are operating under contract, divided by the product of the total number of our rigs, including cold stacked rigs, and the number of calendar days in such period. Information reflects our policy of reporting on the basis of the number of available rigs in our fleet, excluding newbuild rigs under construction. |
(2) | Information reflects the number of days that our rigs were operating under contract. |
** | Not a meaningful percentage. |
Contract Drilling Services
The following table sets forth the operating results from continuing operations for our othercontract drilling services segment for the six months ended June 30, 20142015 and 20132014 (dollars in thousands):
Six Months Ended | ||||||||||||||||||||||||||||||||
June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||
2014 | 2013 | $ | % | 2015 | 2014 | $ | % | |||||||||||||||||||||||||
Operating revenues: | ||||||||||||||||||||||||||||||||
Labor contract drilling services | $ | 16,358 | $ | 34,657 | $ | (18,299 | ) | -53 | % | |||||||||||||||||||||||
Contract drilling services | $ | 1,550,668 | $ | 1,550,005 | $ | 663 | 0 | % | ||||||||||||||||||||||||
Reimbursables (1) | 3,040 | 723 | 2,317 | 320 | % | 47,229 | 46,793 | 436 | 1 | % | ||||||||||||||||||||||
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$ | 19,398 | $ | 35,380 | $ | (15,982 | ) | -45 | % | $ | 1,597,897 | $ | 1,596,798 | $ | 1,099 | 0 | % | ||||||||||||||||
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Labor contract drilling services | $ | 12,487 | $ | 21,598 | $ | (9,111 | ) | -42 | % | |||||||||||||||||||||||
Contract drilling services | $ | 640,957 | $ | 723,782 | $ | (82,825 | ) | -11 | % | |||||||||||||||||||||||
Reimbursables (1) | 1,467 | 685 | 782 | 114 | % | 37,809 | 38,600 | (791 | ) | -2 | % | |||||||||||||||||||||
Depreciation and amortization | 9,024 | 7,044 | 1,980 | 28 | % | 301,787 | 290,212 | 11,575 | 4 | % | ||||||||||||||||||||||
General and administrative | 444 | 984 | (540 | ) | -55 | % | 46,362 | 52,273 | (5,911 | ) | -11 | % | ||||||||||||||||||||
Non-recurring spin-off related costs | 17,102 | 8,027 | 9,075 | 113 | % | |||||||||||||||||||||||||||
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40,524 | 38,338 | 2,186 | 6 | % | 1,026,915 | 1,104,867 | (77,952 | ) | -7 | % | ||||||||||||||||||||||
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Operating income | $ | (21,126 | ) | $ | (2,958 | ) | $ | (18,168 | ) | 614 | % | $ | 570,982 | $ | 491,931 | $ | 79,051 | 16 | % | |||||||||||||
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(1) | We record reimbursements from customers for out-of-pocket expenses as operating revenues and the related direct costs as operating expenses. Changes in the amount of these reimbursables generally do not have a material effect on our financial position, results of operations or cash flows. |
Operating RevenuesRevenues. Changes in contract drilling services revenues for the Current Period as compared to the Comparable Period were driven by a slight increase in average dayrates, partially offset by a slight decrease in operating days. The slight increase in average dayrates increased revenues by approximately $2 million, while the slight decrease in operating days decreased revenues by $1 million.
The marginal increase in contract drilling services revenues relates to our drillships and jackups, which generated approximately $235 million and $44 million more revenue, respectively, in the Current Period. This was partially offset by decreased revenues related to our semisubmersibles, which declined $278 million from the Comparable Period.
The increase in drillship revenues was driven by a 29 percent increase in operating days and an 8 percent increase in average dayrates, resulting in a $171 million and a $64 million increase in revenues, respectively, from the Comparable Period. The increase in both average dayrates and operating days was the result of the newbuilds Noble Sam Croftand theNoble Tom Madden, which commenced their contracts in July 2014 and November 2014, respectively.
The increase in jackup revenues was driven by a 14 percent increase in operating days and a 1 percent increase in average dayrates, resulting in a $41 million and a $3 million increase in revenues, respectively, from the Comparable Period. The increase in both operating days and average dayrates was the result of the commencements of the following newbuilds:Noble Regina Allen, Noble Houston Colbertand Noble Sam Turner in January 2014, March 2014 and August 2014, respectively. This was partially offset by theNoble Mick O’Brien, which was off contract during the Current Period but experienced full utilization during the Comparable Period.
The decrease in semisubmersible revenues was driven by a 39 percent decline in operating days and a 6 percent decline in average dayrates, resulting in a $256 million and a $22 million decrease in revenues, respectively, from the Comparable Period. The decrease in both operating days and average dayrates was primarily attributable to the retirement of theNoble Jim Thompson, theNoble Driller and theNoble Paul Wolff during the Current Period as a result of our decision to discontinue marketing these rigs based on current market conditions. Additionally, theNoble Max Smith and Noble Paul Romano were operational during the Comparable Period but were off contract during the Current Period.
Operating Costs and Expenses. The change in both revenueContract drilling services operating costs and expense primarily relatesexpenses decreased $83 million for the Current Period as compared to the cancellation of a project withComparable Period. Crew-up and operating expenses for our customer, Shell, for one of itsnewbuild rigs as they commenced, or prepared to commence, operating under contracts added approximately $93 million in expense in the Current Period. This was partially offset by decreased costs of $74 million related to the retirement of theNoble Jim Thompson, theNoble Driller and theNoble Paul Wolff and $54 million related to idle or stacked rigs. The remaining $48 million decrease in costs was primarily driven by a $32 million decrease in mobilization and transportation expenses related to certain rig moves during the Comparable Period, an $8 million decrease in other rig-related expenses, a $5 million decrease in labor contractcosts and a $3 million decrease in Alaska during 2013.operations support.
The increase in depreciation and amortization in the Current Period from the Comparable Period was primarily attributable to assets placed in service, including the newbuilds noted above.
Other Income and Expenses
Non-recurring spin-off related costs.General and administrative expenses. Non-recurring spin-off related costs increased $11Overall, general and administrative expenses decreased $6 million in the Current Period fromas compared to the Comparable Period for professional feesprimarily as a result of decreased legal and other costs incurred related to the Paragon Offshore spin-off transaction.professional fees.
Interest Expense, net of amount capitalized. Interest expense, net of amount capitalized, increased $25$30 million in the Current Period as compared to the Comparable Period. The increase is a result of lowerthe $1.1 billion of senior notes issued in March 2015, coupled with a reduction in capitalized interest in the Current Period as compared to the Comparable Period due primarily to the completion of construction on three of our newbuild drillships and threefour of our newbuild jackups coupled with increased borrowings outstanding underand two of our credit facilities and commercial paper program.newbuild drillships. During the Current Period, we capitalized approximately 2610 percent of total interest charges versus approximately 5426 percent during the Comparable Period.
Income Tax Provision. Our income tax provision increased $36$13 million in the Current Period driven by higher pre-tax income. The 48Period. A 13 percent increase in pre-tax earnings generated a $34$9 million increase in income tax expense. Additionally, a 25 percent increase in the worldwide effective tax rate during the Current Period increasedgenerated a $4 million increase in income tax expense by an additional $2 million.expense. The increase in the worldwide effective tax rate was primarily a result of a change in the geographic mix of pre-tax earnings.earnings offset by favorable changes in discrete items.
Discontinued Operations. Net income from discontinued operations for the Comparable Period was $196 million. Revenues reported within discontinued operations were $893 million during the Comparable Period. Operating income included within discontinued operations was $232 million during the Comparable Period. There was no activity related to discontinued operations during the Current Period.
Liquidity and Capital Resources
Overview
Cash flows from discontinued operations are combined with cash flows from continuing operations within each cash flow statement category on our Consolidated Statements of Cash Flows for the six months ended June 30, 2014 included in this Quarterly Report on Form 10-Q. Net cash from operating activities forwas $768 million in the Current Period and $1.0 billion in the Comparable Period. We had working capital of $56 million and $260 million at June 30, 2015 and December 31, 2014, respectively.
Net cash used in investing activities in the Current Period was $1.0$209 million as compared to $1.2 billion and $646in the Comparable Period. The variance primarily relates to lower newbuild expenditures, coupled with expenditures for Paragon Offshore in the Comparable Period.
Net cash used in financing activities in the Current Period was $380 million as compared to net cash provided from financing activities of $222 million in the Comparable Period. The increase in net cash from operating activities invariance primarily relates to the Current Period was primarily attributableproceeds of $1.1 billion from the senior notes offering, which we used to a significant increase in net incomerepay indebtedness outstanding on our credit facilities and favorable collectionscommercial paper program, while the Comparable Period includes the repayment of accounts receivable. We had working capitalour $250 million 7.375% Senior Notes. Additionally, during the Current Period we repurchased
6.2 million shares as part of $511 million and $339 million at June 30, 2014 and December 31, 2013, respectively.our share repurchase program. Our total debt as a percentage of total debt plus equity increased to 38.8was 39.7 percent at June 30, 2014 from 38.02015 as compared to 40.1 percent at December 31, 2013, primarily2014. Although we issued $1.1 billion senior notes in March 2015, this amount was substantially offset by a net reduction in indebtedness outstanding on our Credit Facilities and commercial paper program during the Current Period as a result of an increase in commercial paper outstanding during the Current Period.application of proceeds from the senior note offering.
Our principal sources of capital in the Current Period were our $1.1 billion senior notes offering in March 2015 and the cash generated from operating activities noted above and borrowings under our commercial paper program.above. Cash generated during the Current Period was primarily used to fundfor the following:
Our currently anticipated cash flow needs, both in the short-term and long-term, may include the following:
We currently expect to fund these cash flow needs with cash generated by our operations, cash on hand, borrowings under our existing or future credit facilities and commercial paper program, potential issuances of long-term debt, or asset sales. However, to adequately cover our expected cash flow needs, we may require capital in excess of the amount available from these sources, and we may seek additional sources of liquidity and/or delay or cancel certain discretionary capital expenditures or other payments as necessary.
At June 30, 2014,2015, we had a total contract drilling services backlog of approximately $13.4$8.7 billion. Our backlog as of June 30, 2014 reflects2015 includes a commitment of 7479 percent of available days for the remainder of 20142015 and 5063 percent of available days for 2015.2016. For additional information regarding our backlog, see “Contract Drilling Services Backlog.”
Capital Expenditures
Our primary use of available liquidity during 2014 is for capital expenditures. Capital expenditures, including capitalized interest, totaled $170 million and $1.2 billion for the six months ended June 30, 2015 and 2014, and June 30, 2013, respectively.
At June 30, 2014, we had three rigs under construction, and capital expenditures, excluding capitalized interest, for new construction during the first six months of 2014 totaled $836 million, as follows (in millions):
Rig type/name | ||||
Currently under construction | ||||
Drillships | ||||
Noble Tom Madden | $ | 32.0 | ||
Jackups | ||||
Noble Sam Hartley | 4.6 | |||
Noble Jackup VII (CJ70-Mariner) | 4.3 | |||
Recently completed construction projects | ||||
Noble Sam Croft | 353.2 | |||
Noble Tom Prosser | 141.9 | |||
Noble Sam Turner | 140.8 | |||
Noble Houston Colbert | 134.9 | |||
Noble Globetrotter II | 10.2 | |||
Noble Bob Douglas | 9.3 | |||
Noble Don Taylor | 3.2 | |||
Noble Regina Allen | 1.3 | |||
Noble Mick O’Brien | 0.5 | |||
Other | 0.1 | |||
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Total Newbuild Capital Expenditures | $ | 836.3 | ||
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In addition to the newbuild expenditures noted above, capital Capital expenditures during the first six months of 20142015 consisted of the following:
• | $23 million on newbuilds, including costs for theNoble Lloyd Noble and trailing costs on our recently completed newbuilds; and |
Our total capital expenditure estimate for 20142015 is approximately $2.2 billion.$503 million. In addition, we anticipate incurringrecording capitalized interest, which may fluctuate as a result of the timing of completion of ongoing projects.
In connection with our capital expenditure program, as of June 30, 2014,2015, we had outstanding commitments, including shipyard and purchase commitments, for approximately $1.3 billion,$697 million, all of which we expect to spend approximately $932 million within the next twelve months.
From time to time we consider possible projects that would require expenditures that are not included in our capital budget, and such unbudgeted expenditures could be significant. In addition, we will continue to evaluate acquisitions of drilling units from time to time. Other factors that could cause actual capital expenditures to materially exceed plan include delays and cost overruns in shipyards (including costs attributable to labor shortages), shortages of equipment, latent damage or deterioration to hull, equipment and machinery in excess of engineering estimates and assumptions, changes in governmental regulations and requirements and changes in design criteria or specifications during repair or construction.
Dividends
Our most recent quarterly dividend payment to shareholders, totaling approximately $97$93 million (or $0.375 per share), was declared on April 25, 201424, 2015 and paid on May 15, 201414, 2015 to holders of record on May 5, 2014. This payment represents the final tranche ($0.25 per share) of our previously approved annual dividend payment to shareholders, as well as an additional $0.125 per share declared by the Board of Directors in accordance with our current dividend policy.4, 2015.
On July 25, 2014,24, 2015, our Board of Directors approved the payment of a quarterly dividend to shareholders of $0.375 per share. The payment is expected to total approximately $97$93 million, based on the number of shares currently outstanding.
The declaration and payment of dividends require authorization of the Board of Directors of Noble-UK and such dividends on issued share capital may be paid only out of Noble-UK’s “distributable reserves” on its statutory balance sheet. Noble-UK is not permitted to pay dividends out of share capital, which includes share premiums. The amount, or continuance, of future dividends will depend on our results of operations, financial condition, cash requirements, future business prospects, contractual restrictions, anticipated capital needs and other factors deemed relevant by our Board of Directors.Directors and we may decide to change our dividend at any time.
Share Repurchases
In December 2014, we received shareholder approval to repurchase up to 37,000,000 additional ordinary shares, or approximately 15 percent of our outstanding ordinary shares at the time of the shareholder approval. Any repurchases are expected to be funded using cash on hand, cash from operations or short-term borrowings under our credit facilities. The authority to make such repurchases will expire on the later of April 2016 or the end of the Company’s 2016 annual general meeting of shareholders, at which time we could seek shareholder approval for further repurchases.
In January 2015, we repurchased 6.2 million of our ordinary shares at an average price of $16.10 per share, excluding commissions and stamp tax. Including these items, the average price paid per share during January 2015 was $16.21. There can be no assurance as to the timing or amount of any such further repurchases. However, we intend to take a cautious approach to future share repurchases at least until market conditions in the offshore drilling business stabilize.
Credit Facilities and Senior Unsecured Notes
Credit Facilities and Commercial Paper Program
We currently have three separatetwo credit facilities with an aggregate maximum available capacity of $2.9$2.7 billion, which are comprised of a five year $2.4 billion senior unsecured credit facility that matures in January 2020 and a $225 million 364-day senior unsecured credit facility that matures in January 2016 (together, referred to as the “Credit Facilities”).
We have established a commercial paper program, which allows us to issue up to $2.7$2.4 billion in unsecured commercial paper notes. Amounts issued under the commercial paper program are supported by the unused capacity under our Credit Facilities and, therefore, are classified as long-term on our Consolidated Balance Sheet. OutstandingThe outstanding amounts of commercial paper reducesreduce availability under our Credit Facilities.
Our total debt related to the Credit Facilities and commercial paper program was $2.3 billion at June 30, 2014 as compared to $1.6$1.1 billion at December 31, 2013.2014. At June 30, 2014,2015, we had approximately $631 millionno amounts outstanding under the Credit Facilities and commercial paper program, therefore, we had $2.7 billion of available capacity under the Credit Facilities.
The Credit Facilities provide$2.4 billion facility provides us with the ability to issue up to $375$500 million in letters of credit in the aggregate.credit. The issuance of letters of credit under the Credit Facilitiesfacility reduces the amount available for borrowing. At June 30, 2014,2015, we had no letters of credit issued under the Credit Facilities.facility.
Senior Unsecured Notes
Our total debt related to senior unsecured notes was $3.7$4.8 billion at June 30, 20142015 as compared to $4.0$3.7 billion at December 31, 2013.2014. The decreaseincrease in senior unsecured notes outstanding is a result of the maturityissuance of $1.1 billion aggregate principal amount of senior notes in March 2015, which we issued through our indirect wholly-owned subsidiary, Noble Holding International Limited (“NHIL”). These senior notes were issued in three separate tranches, consisting of $250 million 7.375%of 4.00% Senior Notes during March 2014,due 2018, $450 million of 5.95% Senior Notes due 2025, and $400 million of 6.95% Senior Notes due 2045. The weighted average coupon of all three tranches is 5.87%. The interest rate on these senior notes may be increased if the credit rating applicable to the notes is downgraded below certain specified levels. The net proceeds of approximately $1.08 billion, after expenses, were used to repay indebtedness outstanding under our Credit Facilities and commercial paper program.
On August 1, 2015, our $350 million 3.45% Senior Notes matured, which waswe repaid using issuancescash on hand. We have, therefore, classified these balances as “Current maturities of long-term debt” on our Consolidated Balance Sheet as of June 30, 2015.
Our $300 million 3.05% Senior Notes mature during the first quarter of 2016. We anticipate using availability under our commercial paper program.Credit Facilities to repay the outstanding balances; therefore, we continue to report these balances as long-term as of June 30, 2015.
Covenants
The Credit Facilities and commercial paper program are guaranteed by our indirect wholly-owned subsidiaries, Noble Holding International Limited (“NHIL”)NHIL and Noble Holding Corporation (“NHC”). The covenants and events of default under the two Credit Facilities are substantially similar, and each facility contains a covenant that limits our ratio of debt to total tangible capitalization, as defined in the Credit Facilities, to 0.60. At June 30, 2014,2015, our ratio of debt to total tangible capitalization was approximately 0.39.0.40. We were in compliance with all covenants under the Credit Facilities as of June 30, 2014.2015.
In addition to the covenants from the Credit Facilities noted above, the indentures governing our outstanding senior unsecured notes contain covenants that place restrictions on certain merger and consolidation transactions, unless we are the surviving entity or the other party assumes the obligations under the indenture, and on the ability to sell or transfer all or substantially all of our assets. In addition, there are restrictions on incurring or assuming certain liens and entering into sale and lease-back transactions. At June 30, 2014,2015, we were in compliance with all of our debt covenants. We continually monitor compliance with the covenants under our notes and expect to remain in compliance during the remainder of 2014.2015.
Other
At June 30, 2014, we had letters of credit of $201 million and performance and temporary import bonds totaling $110 million supported by surety bonds outstanding. Certain of our subsidiaries issue guarantees to the temporary import status of rigs or equipment imported into certain countries in which we operate. These guarantees are issued in-lieu of payment of custom, value added or similar taxes in those countries.
New Accounting Pronouncements
In April 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-08, which amends FASB Accounting Standards Codification (“ASC”) Topic 205, “Presentation of Financial Statements” and ASC Topic 360, “Property, Plant, and Equipment.” This ASU alters the definition of a discontinued operation to cover only asset disposals that are a strategic shift with a major effect on an entity’s operations and finances, and calls for more extensive disclosures about a discontinued operation’s assets, liabilities, income and expenses. The guidance is effective for all disposals, or classifications as held-for-sale, of components of an entity that occur within annual periods beginning on or after December 15, 2014. We are still evaluating what impact, if any,This standard was not early adopted in connection with the Spin-Off. The adoption of this guidance willdid not have a material impact on our financial condition, results of operations, cash flows or financial disclosures.
In May 2014, the FASB issued ASU No. 2014-09, which amends ASC Topic 606, “Revenue from Contracts with Customers.” The amendments in this ASU are intended to provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices and improve disclosure
requirements. The amendments in this accounting standard update areUnder the deferred adoption date, the new guidance will be effective for interim and annual reporting periods beginning after December 15, 2016.2017. We are still evaluating what impact, if any, the adoption of this guidance will have on our financial condition, results of operations, cash flows or financial disclosures.
In June 2014, the FASB issued ASU No. 2014-12, which amends ASC Topic 718, “Compensation-Stock Compensation.” The guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition and should not be reflected in the estimate of the grant-date fair value of the award. The guidance is effective for annual periods beginning after December 15, 2015. The guidance can be applied prospectively for all awards granted or modified after the effective date or retrospectively to all awards with performance targets outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. We are still evaluating what impact, if any, the adoption of this guidance will have on our financial condition, results of operations, cash flows or financial disclosures.
In August 2014, the FASB issued ASU No. 2014-15, which amends ASC Subtopic 205-40, “Disclosure of Uncertainties about an Entity’s Ability to continue as a Going Concern.” The amendments in this ASU provide guidance related to management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The amendments are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. We are evaluating what impact, if any, the adoption of this guidance will have on our financial condition, results of operations, cash flows or financial disclosures.
In January 2015, the FASB issued ASU No. 2015-01, which amends ASC Subtopic 225-20, “Income Statement – Extraordinary and Unusual Items.” The amendment in this ASU eliminates from GAAP the concept of extraordinary items. The amendments in this update are effective for interim and annual reporting periods beginning after December 15, 2015. We are evaluating what impact, if any, the adoption of this guidance will have on our financial condition, results of operations, cash flows or financial disclosures.
In February 2015, the FASB issued ASU No. 2015-02 which amends ASC Subtopic 810, “Consolidations.” This amendment affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. Specifically, the amendments modify the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities; eliminate the presumption that a general partner should consolidate a limited partnership; affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships. The standard is effective for interim and annual reporting periods beginning after December 15, 2015. The standard may be applied retrospectively or through a cumulative effect adjustment to retained earnings as of the beginning of the year of adoption. We are evaluating what impact, if any, the adoption of this guidance will have on our financial condition, results of operations, cash flows or financial disclosures.
In April 2015, the FASB issued ASU No. 2015-03 which amends ASC Subtopic 835-30, “Interest – Imputation of Interest.” The guidance requires debt issuance costs to be presented in the balance sheet as a direct reduction from the associated debt liability. The standard is effective for interim and annual reporting periods beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued. The new guidance will be applied on a retrospective basis. We are evaluating what impact the adoption of this guidance will have on our financial condition, results of operations, cash flows or financial disclosures.
In April 2015, the FASB issued ASU No. 2015-04 which amends ASC Topic 715, “Compensation – Retirement Benefits.” The guidance gives an employer whose fiscal year end does not coincide with a calendar month end the ability, as a practical expedient, to measure defined benefit retirement obligations and related plan assets as of the month end that is closest to its fiscal year end. The ASU also provides a similar practical expedient for interim remeasurements of significant events. The standard is effective for interim and annual reporting periods beginning after December 15, 2015. Early adoption is permitted. We are evaluating what impact, if any, the adoption of this guidance will have on our financial condition, results of operations, cash flows or financial disclosures.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the potential for loss fromdue to a change in the value of a financial instrument as a result of fluctuations in interest rates, currency exchange rates or equity prices, as further described below.
Interest Rate Risk
We are subject to market risk exposure related to changes in interest rates on borrowings under the Credit Facilities and commercial paper program. Interest on borrowings under the Credit Facilities is at an agreed upon percentage point spread over LIBOR, or a base rate stated in the agreements. At June 30, 2014,2015, we had $2.3 billion inno borrowings outstanding under our Credit Facilities and commercial paper program, which is supported by the Credit Facilities. Assuming
Access to our current levelcommercial paper program is dependent upon our credit ratings. A decline in our credit ratings below investment grade would prohibit us from accessing the commercial paper market. If we were unable to access the commercial paper market, we would likely transfer any outstanding borrowings to our Credit Facilities. Our Credit Facilities have interest rates that are generally higher than those found in the commercial paper market, which would result in increased interest expense in the future.
In addition, our Credit Facilities and certain of debt, a change in LIBORour senior unsecured notes have provisions which vary the applicable interest rates based upon our credit ratings. If our credit ratings were to decline to certain specified levels, the interest expense under our Credit Facilities and certain of 1 percentour senior unsecured notes would increase our interest charges by approximately $23 million per year.increase.
We maintain certain debt instruments at a fixed rate whose fair value will fluctuate based on changes in interest rates and market perceptions of our credit risk. The fair value of our total debt was $6.3$4.6 billion and $5.7$4.5 billion at June 30, 20142015 and December 31, 2013,2014, respectively. The increasesenior notes issuance of $1.1 billion in fair valueMarch 2015 was primarilysubstantially offset by a result of increasedreduction in indebtedness outstanding under our Credit Facilities and commercial paper program coupled with changes in interest rates, partially offset by the repayment of our $250 million fixed rate senior note.program.
Foreign Currency Risk
Although we are a UKU.K. company, we define foreign currency as any non-U.S. denominated currency. Our functional currency is primarily the U.S. Dollar, which is consistent with the oil and gas industry. However, outside the United States, a portion of our expenses are incurred in local currencies. Therefore, when the U.S. Dollar weakens (strengthens) in relation to the currencies of the countries in which we operate, our expenses reported in U.S. Dollars will increase (decrease).
We are exposed to risks on future cash flows to the extent that local currency expenses exceed revenues denominated in local currency that are other than the functional currency. To help manage this potential risk, we periodically enter into derivative instruments to manage our exposure to fluctuations in currency exchange rates, and we may conduct hedging activities in future periods to mitigate such exposure. These contracts are primarily accounted for as cash flow hedges, with the effective portion of changes in the fair value of the hedge recorded on the Consolidated Balance Sheet and in “Accumulated other comprehensive loss” (“AOCL”). Amounts recorded in AOCL are reclassified into earnings in the same period or periods that the hedged item is recognized in earnings. The ineffective portion of changes in the fair value of the hedged item is recorded directly to earnings. We have documented policies and procedures to monitor and control the use of derivative instruments. We do not engage in derivative transactions for speculative or trading purposes, nor are we a party to leveraged derivatives.
Our North Sea, MexicoAustralian and BrazilBrazilian operations have a significant amount of their cash operating expenses payable in local currencies. To limit the potential risk of currency fluctuations, we periodically enter into forward contracts, which settle monthly in the operations’ respective local currencies. All of these contracts have a maturity of less than 12 months. The forward contract settlements in the remainder of 20142015 represent approximately 3560 percent of these forecasted local currency requirements. The notional amount of the forward contracts outstanding, expressed in U.S. dollars, was approximately $192$47 million at June 30, 2014.2015. Total unrealized gainslosses related to these forward contracts were approximately $7$0.1 million as of June 30, 20142015 and were recorded as part of AOCL. A 10 percent change in the exchange rate for the local currencies would change the fair value of these forward contracts by approximately $19$5 million.
Market Risk
We have a U.S. noncontributory defined benefit pension plan that covers certain salaried employees and a U.S. noncontributory defined benefit pension plan that covers certain hourly employees, whose initial date of employment is prior to August 1, 2004 (collectively referred to as our “qualified U.S. plans”). These plans are governed by the Noble Drilling Services Inc.Employees’ Retirement Trust. The benefits from these plans are based primarily on years of service and, for the salaried plan, employees’ compensation near retirement. These plans are designed to qualify under the Employee Retirement Income Security Act of 1974 (“ERISA”), and our funding policy is consistent with funding requirements of ERISA and other applicable laws and regulations. We make cash contributions, or utilize credits available to us, for the qualified U.S. plans when required. The benefit amount that can be covered by the qualified U.S. plans is limited under ERISA and the Internal Revenue Code (“IRC”) of 1986. Therefore, we maintain an unfunded, nonqualified excess benefit plan designed to maintain benefits for specified employees at the formula level in the qualified salary U.S. plan. We refer to the qualified U.S. plans and the excess benefit plan collectively as the “U.S. plans”.
In addition to the U.S. plans, each of Noble Drilling (Land Support) Limited Noble Enterprises Limited and Noble Drilling (Nederland) B.V., allResources Limited, both indirect, wholly-owned subsidiaries of Noble-UK, maintains a pension plan that covers all of its salaried, non-union employees, whose most recent date of employment is prior to April 1, 2014 (collectively referred to as our “non-U.S. plans”). Benefits are based on credited service and employees’ compensation, as defined by the plans.
Changes in market asset values related to the pension plans noted above could have a material impact upon our Consolidated Statement of Comprehensive Income and could result in material cash expenditures in future periods.
Item 4. Controls and Procedures
David W. Williams, Chairman, President and Chief Executive Officer of Noble-UK, and James A. MacLennan, Senior Vice President and Chief Financial Officer of Noble-UK, have evaluated the disclosure controls and procedures of Noble-UK as of the end of the period covered by this report. On the basis of this evaluation, Mr. Williams and Mr. MacLennan have concluded that Noble-UK’s disclosure controls and procedures were effective as of June 30, 2014.2015. Noble-UK’s disclosure controls and procedures are designed to ensure that information required to be disclosed by Noble-UK in the reports that it files with or submits to the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.
David W. Williams, President and Chief Executive Officer of Noble-Cayman, and Dennis J. Lubojacky, Vice President and Chief Financial Officer of Noble-Cayman, have evaluated the disclosure controls and procedures of Noble-Cayman as of the end of the period covered by this report. On the basis of this evaluation, Mr. Williams and Mr. Lubojacky have concluded that Noble-Cayman’s disclosure controls and procedures were effective as of June 30, 2014.2015. Noble-Cayman’s disclosure controls and procedures are designed to ensure that information required to be disclosed by Noble-Cayman in the reports that it files with or submits to the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.
There was no change in either Noble-UK’s or Noble-Cayman’s internal control over financial reporting that occurred during the quarter ended June 30, 20142015 that has materially affected, or is reasonably likely to materially affect, the internal control over financial reporting of each of Noble-UK or Noble-Cayman, respectively.
Information regarding legal proceedings is set forth in Notes 46 and 1214 to our consolidated financial statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q and is incorporated herein by reference.
Risk Factors Relating to Our Business
The risk factor below updates and supplements the risks described under “Risk Factors Relating to Our Business” in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, 2013, and should be considered together with the risk factors described in that report.
Recent changes in tax laws will, and possible future changes in tax laws or interpretations may, increase our tax rate.
We operate through various subsidiaries in numerous countries throughout the world. Consequently, we are subject to changes in tax laws, treaties or regulations or the interpretation or enforcement thereof in the United Kingdom, the U.S. or jurisdictions in which we or any of our subsidiaries operate or are incorporated. For example, in July 2014, the UK government issued legislation that restricts deductions on certain related party transactions, such as those relating to the bareboat charter agreements used in connection with our UK continental shelf operations. The legislation, which became effective retroactively to April 1, 2014, will result in an increase in the effective tax rate reducing our net income on our consolidated operations and will be shown in our statement of operations beginning in the third quarter of 2014.
Tax laws and regulations are highly complex and subject to interpretation. Our income tax expense is based upon our interpretation of the tax laws in effect in various countries at the time that the expense was incurred. If these laws, treaties or regulations change or other taxing authorities do not agree with our assessment of the effects of such laws, treaties and regulations, this could have a material adverse effect on us, resulting in a higher effective tax rate on our worldwide earnings or a reclassification of the tax impact of our significant corporate restructuring transactions.
In addition, the manner in which our shareholders are taxed on distributions on, and dispositions of, our shares could be affected by changes in tax laws, treaties or regulations or the interpretation or enforcement thereof in the United Kingdom, the U.S. or other jurisdictions in which our shareholders are resident. Any such changes could result in increased taxes for our shareholders and affect the trading price of our shares.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Under UK law, the company is only permitted to purchase its own shares by way of an “off market“off-market purchase” in a plan approved by shareholders. PriorIn December 2014, we received shareholder approval to repurchase up to 37,000,000 ordinary shares, or approximately 15 percent of our redomiciliation to the UK, a resolution was adopted by the Board of Directors authorizing the repurchase of 6,769,891outstanding ordinary shares during the five-year period commencing on the date of the redomiciliation. This number of shares corresponds to the number of shares that Noble Corporation, a Swiss corporation, had authority to repurchase at the time of the redomiciliation.shareholder approval. Any repurchases are expected to be funded using cash on hand, cash from operations or short-term borrowings under our Credit Facilities. The authority to make such repurchases will expire on the later of April 2016 or the end of the Company’s 2016 annual general meeting of shareholders, at which time we could seek shareholder approval for further repurchases. The company may only fund the purchase of its own shares out of distributable reserves or the proceeds of a new issue of shares made expressly for that purpose. The company currently has adequate distributable reserves to fund its currently approved repurchase plan. If any premium above the nominal value of the purchased shares is paid, it must be paid out of distributable reserves. Any shares purchased by the company out of distributable reserves may be held as treasury shares.shares or cancelled at the company’s election. During the sixthree months ended June 30, 2014,2015, there were no repurchases by Noble-UK of its shares.
The information required by this Item 6 is set forth in the Index to Exhibits accompanying this Quarterly Report on Form 10-Q and is incorporated herein by reference.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Noble Corporation plc, a public limited company registeredincorporated under the laws of England and Wales
/s/ David W. Williams | August | |||
David W. Williams | Date | |||
Chairman, President and Chief Executive Officer
| ||||
(Principal Executive Officer) | ||||
/s/ James A. MacLennan | ||||
James A. MacLennan | ||||
Senior Vice President and Chief Financial Officer | ||||
(Principal Financial Officer) | ||||
Noble Corporation, a Cayman Islands company | ||||
/s/ David W. Williams | August | |||
David W. Williams
| Date | |||
President and Chief Executive Officer | ||||
(Principal Executive Officer) | ||||
/s/ Dennis J. Lubojacky | ||||
Dennis J. Lubojacky | ||||
Vice President and Chief Financial Officer | ||||
(Principal Financial Officer) |
Exhibit | Exhibit | |
2.1 | Merger Agreement, dated as of June 30, 2013, between Noble Corporation, a Swiss corporation (“Noble-Swiss”) and Noble Corporation Limited (“Noble-UK”) | |
2.2 | Agreement and Plan of Merger, Reorganization and Consolidation, dated as of December 19, 2008, among Noble Corporation, a Swiss corporation (“Noble-Swiss”), Noble Corporation, a Cayman Islands company (“Noble-Cayman”), and Noble Cayman Acquisition Ltd. (filed as Exhibit 1.1 to Noble-Cayman’s Current Report on Form 8-K filed on December 22, 2008 and incorporated herein by reference). | |
2.3 | Amendment No. 1 to Agreement and Plan of Merger, Reorganization and Consolidation, dated as of February 4, 2009, among Noble-Swiss, Noble-Cayman and Noble Cayman Acquisition Ltd. (filed as Exhibit 2.2 to Noble-Cayman’s Current Report on Form 8-K filed on February 4, 2009 and incorporated herein by reference). | |
2.4 | Master Separation Agreement, dated as of July 31, 2014, between Noble-Cayman and Paragon Offshore plc. (filed as Exhibit 2.1 to Noble-UK’s Current Report on Form 8-K filed on August 5, 2014 and incorporated herein by reference). | |
3.1 | Composite Copy of Articles of Association of Noble-UK, as of June 10, 2014 (filed as Exhibit 3.1 to Noble-UK’s | |
3.2 | Memorandum and Articles of Association of Noble-Cayman (filed as Exhibit 3.1 to Noble-Cayman’s Current Report on Form 8-K filed on March 30, 2009 and incorporated herein by reference). | |
4.1 | Revolving Credit Agreement dated as of January 26, 2015, among Noble-Cayman and Noble International Finance Company, a Cayman Islands company, as borrowers; JPMorgan Chase Bank, N.A., as administrative agent and a swingline lender; Wells Fargo Bank, National Association, as a swingline lender; the lenders party thereto; Barclays Bank PLC, Citibank, N.A., DNB Bank ASA New York Branch, HSBC Bank USA, N.A., SunTrust Bank and Wells Fargo, asco-syndication agents; BNP Paribas, Credit Suisse AG, Cayman Islands Branch and Mizuho Bank, Ltd, asco-documentation agents; and J.P. Morgan Securities LLC, Barclays Bank PLC, Citigroup Global Markets Inc., DNB Markets, Inc., HSBC Securities (USA) Inc., SunTrust Robinson Humphrey, Inc. and Wells Fargo Securities, LLC, as joint lead arrangers and joint lead bookrunners (filed as Exhibit 4.1 to Noble-UK’s Current Report on Form 8-K filed on January 29, 2015 and incorporated herein by reference). | |
4.2 | 364-Day Revolving Credit Agreement dated as of January 29, 2015, among Noble-Cayman and Noble International Finance Company, a Cayman Islands company, as borrowers; JPMorgan, as administrative agent; the lenders party thereto; Barclays Bank PLC, Citibank, N.A. and HSBC Bank USA, N.A., as co-syndication agents; BNP Paribas, as documentation agent; and J.P. Morgan Securities LLC, Barclays Bank PLC, Citigroup Global Markets Inc., and HSBC Securities (USA) Inc., as joint lead arrangers and joint lead bookrunners (filed as Exhibit 4.2 to Noble-UK’s Current Report on Form 8-K filed on January 29, 2015 and incorporated herein by reference). | |
4.3 | Indenture, dated as of March 16, 2015, among Noble Holding International Limited, as Issuer, and Wells Fargo N.A., as Trustee, relating to 4.000% senior notes due 2018, 5.950% senior notes due 2025 and 6.95% senior notes due 2045 of Noble Holding International Limited (filed as Exhibit 4.1 to Noble-UK’s Current Report on Form 8-K filed on March 16, 2015 and incorporated herein by reference). | |
4.4 | First Supplemental Indenture, dated as of March 16, 2015, among Noble Holding International Limited, as Issuer, Noble Corporation, as Guarantor, and Wells Fargo N.A., as Trustee, relating to 4.000% senior notes due 2018, 5.950% senior notes due 2025 and 6.95% senior notes due 2045 of Noble Holding International Limited (filed as Exhibit 4.2 to Noble-UK’s Current Report on Form 8-K filed on March 16, 2015 and incorporated herein by reference). | |
10.1 | Tax Sharing Agreement, dated as of July 31, 2014, between Noble-UK and Paragon Offshore plc. (filed as Exhibit 10.1 to Noble-UK’s Current Report on Form 8-K filed on August 5, 2014 and incorporated herein by reference). | |
10.2 | Employee Matters Agreement, dated as of July 31, 2014, between Noble-Cayman and Paragon Offshore plc. (filed as Exhibit 10.2 to Noble-UK’s Current Report on Form 8-K filed on August 5, 2014 and incorporated herein by reference). | |
10.3 | Transition Services Agreement, dated as of July 31, 2014, between Noble-Cayman and Paragon Offshore plc. (filed as Exhibit 10.3 to Noble-UK’s Current Report on Form 8-K filed on August 5, 2014 and incorporated herein by reference). | |
10.4 | Transition Services Agreement (Brazil), dated as of July 31, 2014, among Paragon Offshore do Brasil Limitada, Paragon Offshore (Nederland) B.V., Paragon Offshore plc, Noble-Cayman, Noble Dave Beard Limited and Noble Drilling (Nederland) II B.V. (filed as Exhibit 10.4 to Noble-UK’s Current Report on Form 8-K filed on August 5, 2014 and incorporated herein by reference). |
10.5* | Noble Corporation 2015 Short Term Incentive Plan (filed as Exhibit 10.5 to Noble-UK’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 and incorporated herein by reference). | |
10.6* | Noble Corporation 2015 Omnibus Incentive Plan, effective May 1, 2015 (filed as Exhibit 10.1 to Noble-UK’s Current Report on Form 8-K filed on April 29, 2015 and incorporated herein by reference). | |
10.7* | Amended and Restated Form of Noble-UK 2013 Performance-Vested Restricted Stock Unit Award under the Noble-UK 1991 Stock Option and Restricted Stock Plan (filed as Exhibit 10.1 to Noble-UK’s Current Report on Form 8-K filed on October 16, 2014 and incorporated herein by reference). | |
10.8* | Amended and Restated Form of Noble-UK 2014 Performance-Vested Restricted Stock Unit Award under the Noble-UK 1991 Stock Option and Restricted Stock Plan (filed as Exhibit 10.2 to Noble-UK’s Current Report on Form 8-K filed on October 16, 2014 and incorporated herein by reference). | |
31.1 | Certification of David W. Williams pursuant to the U.S. Securities Exchange Act of 1934, as amended, Rule 13a-14(a) or Rule 15d-14(a), for Noble-UK and for Noble-Cayman. | |
31.2 | Certification of James A. MacLennan pursuant to the U.S. Securities Exchange Act of 1934, as amended, Rule 13a- 14(a) or Rule 15d-14(a), for Noble-UK. | |
31.3 | Certification of Dennis J. Lubojacky pursuant to the U.S. Securities Exchange Act of 1934, as amended, Rule 13a- 14(a) or Rule 15d-14(a), for Noble-Cayman. | |
32.1+ | Certification of David W. Williams pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, for Noble-UK and for Noble-Cayman. | |
32.2+ | Certification of James A. MacLennan pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, for Noble-UK. | |
32.3+ | Certification of Dennis J. Lubojacky pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, for Noble-Cayman. | |
101 | Interactive Data File |
* | Management contract or compensatory plan or arrangement |
+ | Furnished in accordance with Item 601(b)(32)(ii) of Regulation S-K. |
5458