Noble (NE) 8-K Other Events

Exhibit 99.1

FDR Holdings Limited
and Subsidiaries

Consolidated Financial Statements as of and for the Six
Months Ended June 30, 2010 and 2009 (Unaudited)

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FDR HOLDINGS LIMITED AND SUBSIDIARIES

	Page
Financial statements
Consolidated Balance Sheets		3
As of June 30, 2010 and December 31, 2009
Consolidated Statements of Operations		4
For the six months ended June 30, 2010 and 2009
Consolidated Statement of Equity		5
For the six months ended June 30, 2010
Consolidated Statements of Cash Flows		6
For the six months ended June 30, 2010 and 2009
Consolidated Statements of Other Comprehensive Loss		7
For the six months ended June 30, 2010 and 2009
Notes to Consolidated Financial Statements		8

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FDR HOLDINGS LIMITED AND SUBSIDIARIES
Consolidated Balance Sheets
As of June 30, 2010 and December 31, 2009
(in thousands)

	(unaudited)
	June 30, 2010			December 31, 2009
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	91,542		$	104,775
Accounts receivable — net		53,569			38,764
Deferred financing costs		9,654			8,126
Derivative assets		766			2,713
Other current assets		17,484			17,392
Total current assets		173,015			171,770
PROPERTY AND EQUIPMENT — Net		2,139,752			2,000,249
DEFERRED FINANCING COSTS		26,812			27,282
NONCURRENT DEFERRED TAX ASSET		69,420			40,730
DERIVATIVE ASSETS		—			6,521
OTHER LONG-TERM ASSETS		17,327			19,327
TOTAL ASSETS	$	2,426,326		$	2,265,879
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Trade accounts payable	$	77,852		$	68,027
Accrued liabilities		34,709			27,470
Current portion of long-term debt		155,250			63,000
Current portion of deferred revenue		40,222			10,001
Derivative liabilities		14,764			15,940
Total current liabilities		322,797			184,438
LONG-TERM DEBT		1,193,936			1,195,380
LONG-TERM SHAREHOLDER DEBT		340,728			279,322
MANDATORILY REDEEMABLE PREFERRED SHARES		348,509			332,223
DEFERRED REVENUE		10,216			10,711
DERIVATIVE LIABILITIES		13,982			2,741
OTHER LONG-TERM LIABILITIES		8,233			61
DIVIDENDS PAYABLE ON MANDATORILY REDEEMABLE PREFERRED SHARES		131,596			99,083
Total liabilities		2,369,997			2,103,959
COMMITMENTS AND CONTINGENCIES
Series A Frontier Drilling ASA Redeemable Preferred Shares		264,070			264,070
SHAREHOLDERS’ EQUITY:
Common shares, par value		169			167
Capital in excess of par value		77,434			75,981
Accumulated other comprehensive loss		(19,189	)		(13,400	)
Accumulated deficit		(328,363	)		(235,826	)
Total shareholders’ equity		(269,949	)		(173,078	)
NONCONTROLLING INTERESTS		62,208			70,928
TOTAL EQUITY		(207,741	)		(102,150	)
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,426,326		$	2,265,879

See accompanying notes to the unaudited consolidated financial statements.

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FDR HOLDINGS LIMITED AND SUBSIDIARIES
Consolidated Statements of Operations
For the six months ended June 30, 2010 and 2009
(in thousands)

	(unaudited)
	Six months ended June 30,
	2010			2009
REVENUES:
Contract drilling	$	143,010		$	139,294
Revenues related to reimbursable expenses		5,580			4,044
Total revenues		148,590			143,338
DIRECT COSTS:
Contract drilling		93,623			51,443
Reimbursable expenses		4,930			4,024
Total direct costs		98,553			55,467
SALES, GENERAL, AND ADMINISTRATIVE EXPENSES		31,591			20,260
DEPRECIATION AND AMORTIZATION		35,841			17,961
INCOME (LOSS) FROM OPERATIONS		(17,395	)		49,650
OTHER INCOME (EXPENSE):
Interest income		9			37
Interest expense- net of amounts capitalized		(63,188	)		(33,710	)
Foreign currency loss		(2,461	)		(1,689	)
Dividend expense		(32,513	)		(27,404	)
Gains (losses) on derivative instruments — net		(785	)		(2,605	)
Other income		107			128
Other expense — net		(98,831	)		(65,243	)
NET LOSS BEFORE INCOME TAX EXPENSE		(116,226	)		(15,593	)
INCOME TAX EXPENSE (BENEFIT)		(17,341	)		15,086
NET LOSS		(98,885	)		(30,679	)
NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS		6,348			8,580
NET LOSS ATTRIBUTABLE TO FDR HOLDINGS LIMITED	$	(92,537	)	$	(22,099	)

See accompanying notes to the unaudited consolidated financial statements.

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FDR HOLDINGS LIMITED AND SUBSIDIARIES
Consolidated Statement of Equity
For the six months ended June 30, 2010
(in thousands except share amounts)
(unaudited)

							Accumulated
							Other
	Common Shares				Capital in		Comprehensive			Accumulated			Shareholders			Noncontrolling			Total
	Shares		Amount		Excess of Par		Loss			Deficit			Equity			Interests			Equity
Balance- January 1, 2010		1,666,135,840	$	167	$	75,981	$	(13,400	)	$	(235,826	)	$	(173,078	)	$	70,928		$	(102,150	)
Net loss											(92,537	)		(92,537	)		(6,348	)		(98,885	)
Issuance of common shares net of discount		26,250,000		2		1,047		—			—			1,049			—			1,049
Share-based compensation		—		—		406		—			—			406			—			406
Other Comprehensive loss-
unrealized loss on hedges		—		—		—		(5,352	)		—			(5,352	)		(18,275	)		(23,627	)
reclassified to net loss		—		—		—		(437	)		—			(437	)		(97	)		(534	)
Noncontrolling interests contribution		—		—		—		—			—			—			16,000			16,000
Balance- June 30, 2010		1,692,385,840	$	169	$	77,434	$	(19,189	)	$	(328,363	)	$	(269,949	)	$	62,208		$	(207,741	)

See accompanying notes to the unaudited consolidated financial statements.

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FDR HOLDINGS LIMITED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the six months ended June 30, 2010 and 2009
(in thousands)
(unaudited)

	Six Months Ended June 30,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(98,885	)	$	(30,679	)
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		35,841			17,961
Deferred financing costs		9,825			7,082
Losses on derivative instruments		(5,628	)		(6,308	)
Deferred income tax provision		(28,690	)		8,233
Amortization of share based compensation		406			—
Amortization of deferred mobilization costs		2,632			4,617
Deferred revenue		16,573			(2,271	)
Dividend expense		32,513			27,405
Accretion of discount on long-term debt		1,932			2,788
Other changes in assets and liabilities:
Accounts receivable		(14,805	)		(36,820	)
Other current assets		(92	)		(1,120	)
Other assets		(632	)		(4,893	)
Accounts payable and accrued liabilities		26,805			20,751
Other liabilities		8,172			—
Net cash from operating activities		(14,033	)		6,746
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures		(148,267	)		(297,974	)
Net cash from investing activities		(148,267	)		(297,974	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt		(30,750	)		(15,750	)
Proceeds from common and preferred shares issued		1,049			104,333
Borrowings on long-term debt		170,000			157,500
Payments of deferred financing costs		(7,232	)		(959	)
Contributions from non controlling interests		16,000			17,500
Net cash from financing activities		149,067			262,624
NET DECREASE IN CASH AND CASH EQUIVALENTS		(13,233	)		(28,604	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		104,775			113,343
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	91,542		$	84,739

See accompanying notes to the unaudited consolidated financial statements.

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FDR HOLDINGS LIMITED AND SUBSIDIARIES
Consolidated Statements of Other Comprehensive Loss
For the six months ended June 30, 2010 and 2009
(in thousands)

	(unaudited)
	Six months ended June 30,
	2010			2009
Net loss	$	92,537		$	(30,679	)
Unrealized gain/(loss) on hedges		(5,352	)		3,041
Total Comprehensive Loss	$	97,889			(27,638	)
Less: net loss attributable to noncontrolling interests		6,348			8,580
Less: unrealized loss on hedges attributable to noncontrolling interests	$	18,275			(14,277	)
Net comprehensive loss attributable to FDR Holdings Limited and Subsidiaries	$	(73,266	)	$	(33,335	)

See accompanying notes to the unaudited consolidated financial statements.

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FDR HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009

1.	NATURE OF OPERATIONS AND BASIS OF PRESENTATION
	FDR Holdings Limited (“FDR”), together with its subsidiaries (collectively, “Frontier,” “Company,” “us,” “we,” or “our”), is a Cayman Islands entity formed in November 2003 to acquire all of the shares of Frontier Drilling ASA (“ASA”), a Norwegian offshore drilling company. Frontier is engaged in offshore drilling and completion of exploratory and developmental oil and gas wells in international locations, with a particular focus on the operation and management of conventional drillships, semisubmersibles, and a floating production, storage, offloading (FPSO) vessel. Frontier maintains local subsidiaries in the areas where it operates.
	Frontier is also a party to joint venture agreements with a subsidiary of Royal Dutch Shell, plc, (“Shell”) to build and deploy a new drillship concept, known as the Bully rig, which is a harsh environment drilling unit designed for a wide range of demanding services. TheBully I andBully IIdrillships are currently under construction in a Singapore shipyard and scheduled to begin operations in August 2011 and December 2011, respectively. BothBully IandBully II will begin operations under long-term contracts with Shell after completion. Bully 1, Ltd (“Bully 1”) is 50% owned by Frontier Drillships, Ltd (“Drillships”), a wholly-owned subsidiary of Frontier and 50% owned by Shell. Bully 2, Ltd (“Bully 2”) is 50% owned by Drillships 2, Ltd (“Drillships 2”) and 50% owned by Shell. Frontier holds a 30% interest while certain Frontier shareholders individually own a 70% interest in Drillships 2 (see Note 7).
	Our accompanying consolidated financial statements have been prepared without audit in accordance with accounting principles generally accepted in the United States of America (GAAP). Pursuant to such rules, these financial statements do not include all disclosures required by GAAP. The consolidated financial statements reflect all adjustments, which are in the opinion of management, necessary for a fair presentation of financial position, results of operations, and cash flows for the interim periods. Such adjustments are considered to be of a normal recurring nature unless otherwise identified. Operating results for the six months ended June 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010 or for any future period. The accompanying consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and notes of Frontier for the year ended December 31, 2009.
2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
	Consolidation— The accompanying consolidated financial statements include the accounts of Frontier and all subsidiaries required to be consolidated under Financial Accounting Standards Board (FASB) standards for the Consolidation of Variable Interest Entities. All intercompany balances and transactions between consolidated entities have been eliminated.
	Accounting Estimates— The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the balance sheet date, and the amounts of revenues and expenses recognized during the reporting period. On an ongoing basis, we evaluate our

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estimates and assumptions, including those related to financial instruments, depreciation and amortization of property and equipment, impairment of long-lived assets, income taxes, share-based compensation, and contingent liabilities. We base our estimates and assumptions on historical experience and on various other factors we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from such estimates.

Revenue Recognition— Operating revenues are recognized as earned, based on contractual daily rates. In connection with drilling contracts, we may receive revenues for preparation and mobilization of equipment and personnel or for capital improvements to rigs. Revenues earned and incremental costs incurred directly related to contract preparation and mobilization are deferred and recognized over the primary contract term of the drilling project using the straight-line method. Our policy to amortize the revenues and incremental costs related to contract preparation, mobilization, and capital upgrades on a straight-line basis over the primary contract term of drilling is consistent with the general pace of activity, level of services being provided, and dayrates being earned over the life of the contract. Upon completion of drilling contracts, any demobilization fees received are reported in income, as are any related expenses. Capital upgrade revenues received are deferred and recognized over the primary contract term of the drilling project. The actual cost incurred for the capital upgrade is depreciated over the estimated useful life of the asset.

We record reimbursements received for the purchase of supplies, equipment, personnel services, and other services provided at the request of our customers in accordance with a contract or agreement, for the gross amount billed to the customer, as “Revenues related to reimbursable expenses” in our Consolidated Statements of Operations.

Property and Equipment— We record property and equipment including renewals, replacements, and improvements at cost. Maintenance, routine repairs, and minor replacements are expensed as incurred. Once a rig is placed in service, it is depreciated up to its salvage value on a straight-line basis over its estimated useful life. Depreciation is discontinued during periods when a drilling unit is out of service while undergoing a significant upgrade that extends its useful life. Upon retirement or sale of a rig, the cost and related accumulated depreciation are removed from the respective accounts at the time of the disposition and any gains or losses are included in our results of operations. Depreciation is provided based on the following estimated lives:

	Years
Drilling vessels and related equipment		15-35
Office equipment and other		3-10

New Accounting Pronouncements— In June 2009, the FASB issued guidance which expanded disclosures that a reporting entity provides about transfers of financial assets and its effect on the financial statements. This guidance is effective for annual and interim reporting periods beginning after November 15, 2009. The adoption of this guidance did not have a material impact on our financial condition or results of operations or financial disclosures.

Also in June 2009, the FASB issued guidance that revises how an entity evaluates variable interest entities. This guidance is effective for annual and interim reporting periods

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beginning after November 15, 2009. The adoption of this guidance did not have a material impact on our financial condition or results of operations and cash flows.

In October 2009, the FASB issued guidance that impacts the recognition of revenue in multiple-deliverable arrangements. The guidance establishes a selling-price hierarchy for determining the selling price of a deliverable. The goal of this guidance is to clarify disclosures related to multiple-deliverable arrangements and to align the accounting with the underlying economics of the multiple-deliverable transaction. This guidance is effective for fiscal years beginning on or after June 15, 2010. We are in the process of evaluating this guidance but do not believe this guidance will have a material impact on our financial condition or results of operations and cash flows.

In January 2010, the FASB issued guidance relating to the disclosure of the fair value of assets. This guidance calls for additional information to be given regarding the transfer of items in and out of respective categories. In addition, it requires additional disclosures regarding the purchase, sales, issuances, and settlements of assets that are classified as level three within FASB’s fair value hierarchy. This guidance is effective for annual and interim periods beginning on or after December 15, 2010. These additional disclosures are not expected to have a significant impact on our financial disclosures or our financial condition.

3.	PROPERTY AND EQUIPMENT
	Cost and accumulated depreciation of property and equipment as of June 30, 2010 and December 31, 2009 are summarized as follows (in thousands):

	June 30, 2010			December 31, 2009
Drilling vessels and related equipment	$	2,294,924		$	2,121,874
Office equipment and other		11,593			11,254
		2,306,517			2,133,128
Less accumulated depreciation		(166,765	)		(132,879	)
Property and equipment, net	$	2,139,752		$	2,000,249

Construction-in-progress, recorded in property and equipment, was $869 million and $687 million as of June 30, 2010 and December 31, 2009, respectively. These amounts include property and equipment of a variable interest entity of $814 million and $675 million as of June 30, 2010 and December 31, 2009, respectively.

Depreciation expense was $36 million and $18 million for the six months ended June 30, 2010 and 2009, respectively.

Capitalized interest totaled $8 million for the six months ended June 30, 2010 and $29 million for the six months ended June 30, 2009.

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4.	THIRD-PARTY LONG-TERM DEBT
	A summary of third-party long-term debt as of June 30, 2010 and December 31, 2009 is as follows (in thousands):

	June 30,		December 31,
	2010		2009
ASA:
Senior secured revolving credit facility, due June 2011 (a)	$	60,000	$	60,000
Senior secured term loan, due June 2013		290,000		290,000
Second lien secured credit facility, due February 2014		100,000		100,000
Driller:
Senior secured revolving credit facility, due September 2011		15,000		15,000
Senior secured term loan, due September 2011 (b)		110,000		140,000
Senior secured standby cost overrun facility, due September 2011 (c)		11,250		12,000
Second lien secured credit facility, due December 2012		96,010		92,490
Bully 1:
Senior secured term loan ( c)		350,000		310,000
Bully 2:
Senior secured term loan		316,926		238,890
Total debt		1,349,186		1,258,380
Less debt due within one year, included in (a), (b) and ( c)		155,250		63,000
Total third-party long-term debt	$	1,193,936	$	1,195,380

Bully 1— In December 2007, Bully 1 entered into a $465 million senior secured term loan and credit facility (Bully 1 Credit Facility) with a group of lenders to finance the construction of theBully Idrillship. The Bully 1 Credit Facility consists of a $375 million senior secured term loan, a $40 million senior secured credit facility revolver, and a $50 million junior secured credit facility. No amounts have been drawn on either the senior secured credit facility revolver or the junior secured credit facility as of December 31, 2009. The senior secured term loan requires 20 quarterly payments of $15.75 million, starting the end of the first complete quarter after delivery of theBully Idrillship or March 2011. A final balloon payment of $60 million is due on the earlier occurrence of 4.75 years after the delivery of theBully Ior December 31, 2015. The senior secured credit facility revolver is also due in full on the final balloon payment date. The junior secured credit facility requires quarterly payments commencing after the third complete quarter following delivery and acceptance by Shell of theBully Idrillship with final payment to be made on the final balloon payment date. The Bully 1 Credit Facility is also subject to mandatory prepayments based on an excess cash flow calculation defined in the agreement.

The senior secured term loan provides for floating interest rates that are fixed for one-, three-, or six-month periods at LIBOR plus 2.5% prior to the completion and delivery of the drillship and 1.5% thereafter. Bully 1 is required to pay fees of approximately 1% on the unused portion of any undrawn amount under the senior secured term loan and senior secured credit facility revolver. Bully 1 is also required to pay fees of approximately 1.4% on the unused portion of any undrawn amount under the junior secured credit facility.

The Bully 1 Credit Facility contains representations, warranties, covenants, events of default, and indemnities, including the maintenance of interest rate derivative financial instruments

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for at least 75% of outstanding amount of the senior secured term loan and senior secured credit facility revolver. The Bully 1 Credit Facility is secured by assignments of the major contracts for the construction of the drillship and its equipment, the drilling contract for the drillship with Shell, assignment of the insurances on the drillship, and assignment of earnings from the drilling contract and charter parties concerning the drillship. In addition, when the drillship is registered under Marshall Islands flag following completion of construction, the Bully 1 Credit Facility will be secured by a Marshall Islands first-preferred ship mortgage on the drillship.

A total of $350 million was outstanding as of June 30, 2010 and includes $40 million which was drawn during the six months ended June 30, 2010.

Bully 2— In October 2008, Bully 2 entered into a $495 million senior secured term loan and credit facility (Bully 2 Credit Facility) with a lender to finance the construction of theBully IIdrillship. The Bully 2 Credit Facility consists of a senior secured term loan of $435 million, a senior secured revolving credit facility of $10 million, and a secured cost overrun term loan of $50 million. No amounts have been drawn on either the senior secured revolving credit facility or the secured cost overrun term loan as of June 30, 2010. The principal of the senior secured term loan is to be repaid in 28 consecutive quarterly installments beginning at the earlier of the end of the first complete quarter after delivery and acceptance by Shell of theBully IIdrillship or July 2011. The final amount will be paid together with a one-time balloon payment of $90 million and all amounts outstanding under the senior secured revolving credit facility on the final 28^th consecutive quarterly installment payment date.

The senior secured term loans as amended provide for floating interest rates that are fixed for three months, one month, one week, or such other period selected by Bully 2 and agreed by the agent, at LIBOR plus 2.5% prior to the occurrence of the delivery date of the hull, thereafter LIBOR plus 2.3% until contract commencement, thereafter LIBOR plus 2.25% until the first day of the sixth anniversary of the contract commencement, and thereafter 2.4%.

The secured cost overrun term loan has floating interest rates of LIBOR plus 3.5% prior to the occurrence of the contract commencement and 3.25% thereafter.

Bully 2 is required to pay fees of 1.25% on the unused portion of any undrawn amount under the Bully 2 Credit Facility.

Interest on the term loans is added to the principal during the period from the Bully 2 Credit Facility closing date until the earlier of construction completion date or March 30, 2011.

The Bully 2 Credit Facility contains representations, warranties, covenants, events of default, and indemnities, including the maintenance of interest rate derivative financial instruments at least 60% of the amount of the senior secured term loan and senior secured revolving credit facility and 100% of the amount of the secured cost overrun term loan. The Bully 2 Credit Facility is secured by assignments of the major contracts for the construction of the drillship and its equipment, the drilling contract for the drillship with Shell, assignment of the insurances on the drillship, and assignment of earnings from the drilling contract and charter parties concerning the drillship. In addition, following the completion of construction of theBully IIdrillship, the Bully 2 Credit Facility will be secured by first-preferred ship mortgage on the drillship.

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A total of $317 million was outstanding as of June 30, 2010 and includes $78 million which was either drawn or interest rolled into the debt balance during the six months ended June 30, 2010.

Frontier was in compliance with all financial debt covenants of third-party debt as of June 30, 2010.

5.	LONG-TERM SHAREHOLDER DEBT
	A summary of long-term shareholder debt as of June 30, 2010 and December 31, 2009, is as follows (in thousands):

	June 30,		December 31,
	2010		2009
FDR:
8% Shareholders’ guarantee fee notes, due September 2014	$	1,020	$	980
ASA:
7% Shareholders’ convertible subordinated notes, due August 2014		72,869		70,391
12% Senior shareholders’ notes, due August 2014		113,757		107,128
10% Shareholders’ guarantee fee notes, due August 2014		2,400		2,400
12% Shareholders’ guarantee fee interest notes, due August 2014		1,744		1,525
18% Shareholders’ subordinated notes , due May 2016		40,000		—
Driller:
15% Shareholders’ guarantee notes, due September 2014		44,155		40,472
15% Shareholders’ subordinated guarantee notes, due September 2014		39,320		36,116
15% Shareholders’ cost overrun paid-in-kind notes, due September 2014		538		500
Drillships:
8% Shareholders’ guarantee notes and cost overrun guarantee notes, due December 2016		17,379		14,510
8% Cost overrun notes, due April 2018		7,547		5,300
Total debt		340,728		279,322
Less debt due within one year		—		—
Total third-party long-term debt	$	340,728	$	279,322

FDR— During 2010, FDR did not issue debt nor take additional cash draws on outstanding lines. All increases relate to the accrual of payment-in-kind interest and commitment fees which were rolled into the principal balance.

ASA— During 2010, ASA issued $40 million of 18% subordinated shareholders’ notes to certain of its equity investors. These shareholder notes allow for payment-in-kind and therefore interest accumulates and is added to the principal amount of the loan. The debt is scheduled to mature in May 2016.

With the exception of the issuance of the $40 million shareholder note above there have been no issuance of shareholder debt nor have there been additional cash draws on the remaining shareholder notes. All increases relate to the accrual of payment-in-kind interest and commitment fees which were rolled into the principal balance.

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	Driller— During 2010, Driller did not issue debt nor take additional cash draws on outstanding lines. All increases relate to the accrual of payment-in-kind interest and commitment fees which were rolled into the principal balance.
	Drillships— During 2010, Drillships did not issue debt nor take additional cash draws on outstanding lines. All increases relate to the accrual of payment-in-kind interest and commitment fees which were rolled into the principal balance.
6.	MANDATORILY REDEEMABLE PREFERRED SHARES
	A summary of mandatorily redeemable preferred shares as of June 30, 2010 and December 31, 2009, is as follows (in thousands):

	June 30,		December 31,
	2010		2009
Driller:
15% Series A mandatorily redeemable preferred shares, due September 2014	$	82,954	$	82,112
15% Series B mandatorily redeemable preferred shares, due September 2014		159,228		157,901
Drillships:
8% Series A mandatorily redeemable preferred shares, due December 2016		55,485		41,368
Drillships 2:
12% Series A mandatorily redeemable preferred shares, due April 2014		50,842		50,842
Total mandatorily redeemable preferred shares		348,509		332,223
Less amounts due within one year		—		—
Total third-party long-term debt	$	348,509	$	332,223

Driller— During 2010 Driller did not issue preferred shares nor take additional cash draws on previously issued preferred shares. All increases are due to the amortization of discount between cash received and the issuance price of the shares.

Drillships— In March 2010, the Company issued 15,000,000 Series A Mandatorily Redeemable Drillships preferred shares and 26,250,000 of FDR common shares for proceeds of $15 million. The amount attributable to contributed capital has been deducted as a discount to the Series A Mandatorily Redeemable Drillships preferred share proceeds. The Series A Mandatorily Redeemable Drillships discount is amortized over the term of the preferred shares. The outstanding Drillships Series A mandatorily redeemable preferred shares bear dividends at 8% and mature on December 31, 2016.

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7.	VARIABLE INTEREST ENTITIES (“VIE”)
	Bully 1 —As a result of the consolidation of Bully 1, we have included on our Consolidated Balance Sheets the following assets and liabilities at June 30, 2010 and December 31, 2009:

	(unaudited)
	June 30,		December 31,
	2010		2009
Current assets	$	17,879	$	19,194
Long-term assets		444,013		388,723
Total assets	$	461,892	$	407,917
Current liabilities	$	54,894	$	34,582
Long-term liabilities		325,911		312,786
Total liabilities	$	380,805	$	347,368

Included in long-term liabilities are $319 million and $310 million of third-party non-recourse debt as of June 30, 2010 and December 31, 2009, respectively. For terms of the Bully 1 debt, see Note 4. Bully 1 debt is presented on the face of the Consolidated Balance Sheets within “Current portion of long-term debt” and “Long-term debt”. The debt was incurred to finance the construction of theBully Idrillship. Assets collateralizing the debt include cash and equivalents of $16 million and property and equipment of approximately $439 million as of June 30, 2010. Bully 1 property and equipment is presented on the face of the Consolidated Balance Sheets within “Property and Equipment-Net”. A total loss of $2 million and $4 million was recognized for the six months ended June 30, 2010 and 2009, respectively.

Bully 2 —As a result of the consolidation of Bully 2, we have included on our Consolidated Balance Sheets the following assets and liabilities at June 30, 2010 and December 31, 2009:

	(unaudited)
	June 30,		December 31,
	2010		2009
Current assets	$	55,707	$	49,134
Long-term assets		384,554		309,051
Total assets	$	440,261	$	358,185
Current liabilities	$	43,892	$	26,361
Long-term liabilities		323,449		238,890
Total liabilities	$	367,341	$	265,251

Included in long-term liabilities are $317 million and $239 million of third-party non-recourse debt as of June 30, 2010 and December 31, 2009, respectively. For terms of the Bully 2 debt, see Note 4. Bully 2 debt is presented on the face of the Consolidated Balance Sheets within “Current portion of long-term debt” and “Long-term debt”. The debt was incurred to finance the construction of theBully IIdrillship. Assets collateralizing the debt include cash and equivalents of $53 million and property and equipment of approximately $375 million as of June 30, 2010. Bully 2 property and equipment is presented on the face of

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the Consolidated Balance Sheets within “Property and Equipment-Net”. A total loss of $3 million was recognized both for the six months ended June 30, 2010 and 2009, respectively.

Drillships 2-As a result of the consolidation of Drillships 2, we have included on our Consolidated Balance Sheets the following assets and liabilities at June 30, 2010 and December 31, 2009:

	(unaudited)
	June 30,		December 31,
	2010		2009
Current assets	$	68	$	245
Long-term assets		4,384		4,384
Total assets	$	4,452	$	4,629
Current liabilities	$	—	$	—
Long-term liabilities		68,815		63,033
Total liabilities	$	68,815	$	63,033

A total loss of $1 million was recognized both for the six months ended June 30, 2010 and 2009, respectively.

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8.	FAIR VALUE OF FINANCIAL INSTRUMENTS
	The following table sets forth Frontier’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2010 and December 31, 2009 (in thousands):

			June 30, 2010
			Estimated Fair Value
			Measurements
			Quoted		Significant
			Prices in		Other		Significant
			Active		Observable		Unobservable
	Carrying		Markets		Inputs		Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)
Assets —
Foreign currency forward contracts	$	766	$	—	$	766	$	—
Liabilities —
Interest rate swaps	$	28,652	$	—	$	28,652	$	—
Foreign currency forward contracts		94		—		94		—

			December 31, 2009
			Estimated Fair Value
			Measurements
			Quoted		Significant
			Prices in		Other		Significant
			Active		Observable		Unobservable
	Carrying		Markets		Inputs		Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)
Assets —
Foreign currency forward contracts	$	2,713	$	—	$	2,713	$	—
Interest rate swaps		6,521		—		6,521		—
Liabilities —
Interest rate swaps	$	18,681	$	—	$	18,681	$	—

The derivative instruments have been valued using actively quoted prices and quotes obtained from counterparties to the derivative instruments. Our third-party debt contains a variable interest component as such the carrying value materially approximates the carrying value in the accompanying Consolidated Balance Sheets. 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 vale.

Refer to Note 9 for further discussion of the Company’s use of derivative instruments and their fair values.

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9.	DERIVATIVE FINANCIAL INSTRUMENTS
	We have established policies and procedures for derivative instruments. These policies and procedures provide for the prior approval of derivative instruments by the Chief Financial Officer of Frontier Drilling USA. From time to time, we may enter into a variety of derivative financial instruments in connection with the management of our exposure to fluctuations in foreign currency exchange rates and interest rates and to meet our debt covenant requirements. We do not enter into derivative transactions for speculative purposes; however, for accounting purposes, certain transactions may not meet the criteria for hedge accounting.
	Frontier is currently exposed to market risk from changes in foreign currency exchange rates and changes in interest rates. Frontier applies cash flow hedge accounting to certain derivative instruments, including interest rate swaps, costless collars, and forward foreign currency contracts designated as hedges of the variability of future cash flows. We record derivative financial instruments on our Consolidated Balance Sheets at fair value as either assets or liabilities. Changes in the fair value of derivatives designated as cash flow hedges, to the extent the hedge is effective, are recognized in accumulated other comprehensive loss (AOCL) until the hedged item is recognized in earnings. Hedge effectiveness is measured quarterly to ensure the ongoing validity of the hedges based on the relative cumulative changes in fair value between the derivative contract and the hedged item over time. Any change in fair value resulting from ineffectiveness is recognized immediately in earnings. Hedge accounting is discontinued prospectively if it is determined that the derivative is no longer effective in offsetting changes in the cash flows of the hedged item. If we determine that it is probable that a hedged forecasted transaction will not occur, deferred gains or losses on the hedging instrument are recognized in earnings immediately. For interest rate hedges of debt not used to construct fixed assets, other comprehensive income is released to earnings as interest expense is accrued on the underlying debt. For foreign currency swaps and interest rate hedges related to interest capitalized in the construction of fixed assets, other comprehensive loss is released to earnings as the vessel is depreciated over its useful life. Changes in the fair value of derivatives not designated as cash flow hedges are recognized immediately in earnings.
	The mark-to-market impact on undesignated derivatives on the Consolidated Statements of Operations for the six months ended June 30, 2010 and 2009 were net losses of approximately $27,000 and $1 million, respectively. The gains and losses above include earnings from derivatives that were not designated in cash flow hedge relationships at inception of the derivative contract.

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Ineffectiveness losses for the six months ended June 30, 2010 and 2009 were $0.1 million and $0.3 million, respectively. Frontier records time value on the costless collars designated as cash flow hedges currently in earnings, as it elected to exclude time value from its assessment of hedge effectiveness. Changes in time value of the costless collar for the six months ended June 30, 2010 were losses of $0.1 million. The change in time value of the costless collar as of June 30, 2009 was a gain of $0.3 million.

Interest Rate Swaps/Collar— As of June 30, 2010, Frontier had several interest rate swaps that we designated as cash flow hedges, which were entered into to reduce the variability of future cash flows in the interest payments for variable-rate debt. All interest rates swaps have been designated as cash flow hedges for accounting purposes.

As of June 30, 2010, the Company expects to reclassify a net loss of $12 million into earnings within the next 12 months.

Foreign Currency Forward Contracts— As of June 30, 2010, we had several foreign currency forward contracts with varying notional amounts, which were entered into to hedge exposure to currency fluctuations in various foreign currencies.

The following derivative transactions were outstanding with associated volumes and rates for the index specified as of June 30, 2010:

	Remaining			Base Fixed
Date	period	Derivative instrument	Volume	Price	Floor	Ceiling	Index
7/12/2007	Jul 10 - Dec 10	Interest rate swap	Various	5.39%	n/a	n/a	LIBOR
1/21/2008	Jul 10 - Oct 10	Foreign currency forward	Various	Various	n/a	n/a	SGD to US $ FX rate
1/22/2008	Jul 10 - Dec 14	Interest rate swap	Various	3.65%	n/a	n/a	LIBOR
1/22/2008	Jul 10 - Dec 14	Interest rate swap	Various	3.65%	n/a	n/a	LIBOR
1/22/2008	Jul 10 - Dec 14	Interest rate swap	Various	3.65%	n/a	n/a	LIBOR
11/11/2008	Jul 10	Foreign currency forward	Various	Various	n/a	n/a	SGD to US $ FX rate
12/5/2008	Jul 10 - Jan 18	Interest rate swap	Various	3.13%	n/a	n/a	LIBOR
6/22/2009	Jul 10 - Sept 11	Interest rate collar	Various	N/A	1.45%	4.00%	LIBOR

The table below provides data about the fair values of derivatives that are and are not designated as hedge instruments as of June 30, 2010 and December 31, 2009:

		Estimated fair value
	Balance sheet	June 30,		December 31,
	classification	2010		2009
Asset derivatives
Cash flow hedges
Short-term foreign currency forward contracts	Derivative asset	$	766	$	2,713
Long-term interest rate swaps	Derivative asset		—		6,521
Liability derivatives
Cash flow hedges
Short-term interest rate swaps	Derivative liabilities		14,650		15,940
Long-term interest rate swaps	Derivative liabilities		13,982		2,741
Non-designated derivatives
Short-term interest rate swaps	Derivative liabilities		20		—
Short-term foreign currency forward contracts	Derivative liabilities		94		—

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To supplement the fair value disclosures in Note 8, 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, 2010 and 2009:

						Gain/(loss)						Gain/(loss) recognized
						reclassified from						through
	Gain/(loss)					AOCL to						“Gains/(losses) on
	recognized through					“Gain/(losses) on						derivative instruments-
	AOCL					derivatives- net”						net”
	2010			2009		2010			2009			2010			2009
Cash flow hedges
Foreign currency forward contracts	$	—		$	15	$	—		$	(362	)	$	—		$	—
Interest rate swaps		(23,628	)		17,303		(534	)		(562	)		(224	)		(274	)
Non-designated derivatives
Foreign currency forward contracts	$	—		$	—	$	—		$	—		$	(27	)	$	(1,407	)

10.	INCOME TAXES
	At June 30, 2010, the reserves for uncertain tax positions totaled $9 million as compared to zero as of December 31, 2009. The increase results from an audit settlement during June 2010. If the June 30, 2010 reserves are not realized, the provision for income taxes would be reduced by $9 million. In addition, we maintain a long-term net tax asset of $69 million which we intend to utilize an immaterial benefit within the next 12 months and the balance utilized in periods greater than 12 months.
	We do not anticipate that any tax contingencies resolved in the next 12 months will have a material impact on our consolidated financial position or results of operations.
11.	CONTINGENCIES
	In November of 2006 and in subsequent related filings, Interoil Representacoes Ltda. filed suit against KS Frontier Seillean in Brazil claiming breach of agency agreement, and failure to pay for other miscellaneous services allegedly provided to KS Frontier Seillean. Approximately $3 million have been placed into a judicial escrow account as security for a potential judgment in connection with this litigation.
	In January of 2011, suit was filed by an individual against Frontier Drilling do Brasil Ltda. in Labor Court in Brazil. Claimant alleges he should have been compensated as an employee of Frontier do Brasil rather than compensated for his services through a corporate entity. Claimant seeks damages for Frontier do Brasil’s failure to pay wages and benefits due to claimant as an employee under Brazilian law.
	We are vigorously defending the above described claims in litigation. We do not believe the litigation of these will have a material adverse effect on our financial position, results of operations or cash flows.
12.	COMMITMENTS
	As of June 30, 2010, our purchase obligations are $160 million, which relates to shipyard commitments on theBully IandBully IIdrillships which are expected to be placed into service in August 2011 and December 2011, respectively.

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13.	LIQUIDITY
	We have suffered recurring losses from operations, and have limited available funds in addition to a significant working capital deficit. At June 30, 2010 current liabilities exceed current assets by $148 million and total liabilities and mezzanine credit exceed total assets by $206 million. Additionally in December 2010, we received a waiver under the Bully I credit facility relating to a delay in the delivery date for the Bully I drillship, which was originally scheduled for December 30, 2010 and is currently scheduled for August 2011. If we are unable to repay and terminate the facility or to amend or restructure the facility or obtain an extension of the waiver prior to its expiration on February 28, 2011, an event of default may result under the Bully I credit facility. If the lenders declared an event of default under the Bully I credit facility, the aggregate principal amount could come due. These factors raise doubt about the company’s ability to meet its current obligations absent additional funding. As of June 30, 2010 we were exploring alternatives to seek additional funding or solution to resolve the company’s ability to meet its current obligations. There can be no assurance that alternative sources of funding will be available to address the liquidity needs, that the facilities will be amended or that the lenders will not call our indebtedness.
14.	SUBSEQUENT EVENTS
	On July 28, 2010, we were acquired by a subsidiary of Noble Corporation, a Swiss corporation (“Noble”). Under the terms of the Agreement and Plan of Merger with us and certain of our shareholders, Noble merged with and into Frontier, with Frontier surviving as an indirect wholly-owned subsidiary of Noble. The purchase price was $1.7 billion in cash plus the assumption of joint venture liabilities. In connection with this deal we recognized $4 million in transaction costs in “Selling, General and Administrative Expenses” as of June 30, 2010. A total of $40 million was paid to former employees of Frontier as part of a change in control agreement.
	We have evaluated subsequent events through the date the financial statements were issued and have noted no additional undisclosed subsequent events.

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