| Related Party Transactions | 9 Months Ended |
| Sep. 30, 2014 |
| Related Party Transactions | ' |
| Related Party Transactions | ' |
| Note 9—Related Party Transactions |
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| Formation agreements |
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| Contribution agreement—On July 29, 2014, we entered into a contribution agreement with the Parent that gave effect to certain of the formation transactions, including the Parent’s transfer to us of a 51 percent ownership interest in each of the RigCos. In connection with the formation transactions under the contribution agreement, the Parent retained the obligation for the payment of the quarterly royalty fees under the dual-activity license agreement through the patent expiration. In the three and nine months ended September 30, 2014, we recognized patent expense of $3 million for fees paid by the Parent on our behalf with a corresponding entry to members’ equity (see “—Other agreements—dual activity license agreements”). |
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| Governing documents—Upon completion of the formation transactions, we own a 51 percent ownership interest in each of the RigCos and control their operations and activities. The Parent holds the remaining 49 percent noncontrolling interest in each of the RigCos. In connection with the formation transactions, we and the Parent entered into governing documents for each of the RigCos that govern the ownership and management of each of the RigCos. Each of the RigCos is managed by its board of directors. Pursuant to such governing documents, we are able to control the election of these boards of directors as the majority interest owner. Subject to certain prerequisites under applicable law and the approval of the board of directors of each of the RigCos, each RigCo intends to transfer its available cash to its equityholders each quarter. Approval of the conflicts committee of our board of directors is required to amend the RigCos’ governing documents. |
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| Master services and support agreements |
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| Secondment agreements—On August 5, 2014, we entered into secondment agreements with certain Transocean affiliates to provide executives, rig crews and other personnel. All persons provided to us pursuant to the secondment agreements will remain on the payroll and benefit plans of Transocean but will be under our day-to-day control and management. We will reimburse Transocean for the pro rata gross payroll costs of each seconded employee in proportion to the time allocated to us by the seconded employee, including base pay, any incentive compensation and any benefits costs. We will also reimburse Transocean for any applicable unemployment taxes, social security taxes, workers compensation coverage and severance costs, and any foreign equivalents of such taxes, in the amount allocable to the secondment. Transocean will invoice us quarterly for amounts payable under the secondment agreements. The secondment agreements may be terminated by Transocean or us upon 90 days written notice. In the three and nine months ended September 30, 2014, we recognized costs of $14 million, recorded in operating and maintenance costs and expenses, for personnel costs under the secondment agreements. |
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| Support agreement—On August 5, 2014, we entered into a support agreement with certain Transocean affiliates to provide the services of certain administrative professionals, including our chief financial officer. The persons providing such services to us pursuant to the support agreement will remain on Transocean’s payroll and will perform their services on or at Transocean’s facilities. Transocean will be solely responsible for all matters pertaining to their employment, compensation and discharge. Such persons may spend only a portion of their time providing services to us and they may be engaged in other work separate from support services on our behalf. We will reimburse Transocean for the pro rata expenses associated with the compensation and benefits of all persons covered by the support agreement according to the time spent by each person in providing us support services as well as certain direct costs and expenses incurred in offering the services. The support agreement may be terminated by mutual agreement of Transocean and us. In the three and nine months ended September 30, 2014, we recognized costs of less than $1 million, recorded in operating and maintenance costs and expenses, for services under the support agreement. |
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| Master services agreements—On August 5, 2014, we entered into master services agreements with certain Transocean affiliates, pursuant to which Transocean affiliates will provide certain administrative, technical and non-executive management services to us. Transocean affiliates will also provide insurance coverage to us commensurate with that provided to the Predecessor. The agreements have initial terms of five years. Each month, we will reimburse Transocean for the cost of all direct labor, materials and expenses incurred in connection with the provision of these services, plus an allocated portion of Transocean’s shared and pooled direct costs, indirect costs and general and administrative costs as determined by Transocean’s internal accounting procedures. In addition, we will pay Transocean a fee equal to the greater of (i) five percent of its costs and expenses incurred in connection with providing services to us for the month or, in the case of the provision of capital spares or inventory, a four percent markup on the capital spare or inventory plus a four percent markup on the allocable share of the costs of providing such services and, (ii) the markup required by applicable transfer pricing rules. If Transocean incurs costs and expenses from third parties in the course of subcontracting the performance of services, we must reimburse Transocean at cost and is not required to pay a service fee, unless required by applicable transfer pricing rules. Amounts payable under the master services agreements must be paid within 30 days after Transocean submits to us invoices for such fees, costs and expenses. Each of the master services agreements may be terminated prior to the end of its term by either Transocean or us within 90 days written notice under certain circumstances. In the three and nine months ended September 30, 2014, we recognized costs of $16 million, recorded in operating and maintenance costs and expenses, and $2 million, recorded in general and administrative costs and expenses, for services under the master services agreement. In the three and nine months ended September 30, 2014, we acquired $7 million of materials and supplies purchased through the procurement services of Transocean Offshore Deepwater Drilling Inc. (“TODDI”). In the three and nine months ended September 30, 2014, we recognized insurance costs of $2 million, recorded in operating and maintenance costs and expenses. |
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| Former master services agreements—Under the former master services agreement with TODDI, the Predecessor obtained services and assistance for certain activities, including accounting, legal, finance, marketing, tax, treasury, insurance, global procurement and technical services. In the three and nine months ended September 30, 2014, the Predecessor recognized costs of $5 million and $24 million, respectively, recorded in operating and maintenance costs and expenses, for such services and assistance. In the three and nine months ended September 30, 2013, the Predecessor recognized costs of $9 million and $26 million, respectively, recorded in operating and maintenance costs and expenses, for such services and assistance. |
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| Under the former master services agreement, TODDI purchased materials and supplies for the Predecessor’s drilling operations through its procurement services. In the three and nine months ended September 30, 2014, the Predecessor paid $5 million and $27 million, respectively, settled through its net investment, for materials and supplies purchased through TODDI’s procurement services. In the three and nine months ended September 30, 2013, the Predecessor paid $11 million and $28 million, respectively, settled through its net investment, for materials and supplies purchased through TODDI’s procurement services. |
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| Also under the former master services agreement, TODDI administered insurance coverage with and processed claims through Transocean’s commercial market and captive insurance policies (see Note 8—Commitments and Contingencies). In the three and nine months ended September 30, 2014, the Predecessor recognized allocated insurance costs of $2 million and $8 million, respectively, recorded in operating and maintenance costs and expenses. In the three and nine months ended September 30, 2013, the Predecessor recognized allocated insurance costs of $4 million and $10 million, respectively, recorded in operating and maintenance costs and expenses. |
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| TODDI and its affiliates charged the Predecessor under the former master services agreement for crew personnel provided to the Predecessor to operate its drilling rigs. In the three and nine months ended September 30, 2014, the Predecessor recognized costs of $9 million and $57 million, respectively, recorded in operating and maintenance costs and expenses, for such personnel costs. In the three and nine months ended September 30, 2013, the Predecessor recognized costs of $24 million and $70 million, respectively, recorded in operating and maintenance costs and expenses, for such personnel costs. In the three and nine months ended September 30, 2014, the Predecessor recognized costs of less than $1 million and $2 million, respectively, recorded in operating and maintenance costs and expenses, for the proportion of the benefit costs that covered the personnel supporting the Predecessor’s operations. In the three and nine months ended September 30, 2013, the Predecessor recognized costs of $2 million and $7 million, respectively, recorded in operating and maintenance costs and expenses, for the proportion of the benefit costs that covered the personnel supporting the Predecessor’s operations. |
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| Other agreements |
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| Omnibus agreement—On August 5, 2014, the Parent and we entered into an omnibus agreement (the “Omnibus Agreement”) with certain Transocean affiliates. Under the Omnibus Agreement, Transocean granted us a right of first offer for its remaining ownership interests in each of the RigCos should Transocean decide to sell such interests. Transocean also will be required to offer us within five years of the effective date of the agreement, the opportunity to purchase, subject to requisite government and other third-party consents, not less than a 51 percent interest in any four of the following six ultra-deepwater drillships: Deepwater Invictus, Deepwater Thalassa, Deepwater Proteus, Deepwater Pontus, Deepwater Poseidon and Deepwater Conqueror. The purchase price for each drillship will be equal to the greater of the fair market value, taking into account the anticipated cash flows under the associated drilling contracts, or the all-in construction cost, plus transaction costs. Transocean will select which of these drillships it will offer to us, the timing of the offers and whether it will offer us the opportunity to purchase a greater than 51 percent interest in any offered drillship. In addition, the Parent agreed not to acquire, own or operate any new drilling rig or contract for any drilling rig, in each case that was constructed in 2009 or later and is operating under a contract for five or more years (“Five-Year Drilling Rigs”), subject to certain exceptions. We also agreed not to acquire, own, operate, or contract for any drilling rig that is not a Five-Year Drilling Rig, subject to certain exceptions. |
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| Transocean agreed to indemnify us for a period of five years through August 5, 2019 against certain environmental and human health and safety liabilities with respect to the assets contributed or sold to us to the extent arising prior to the time they were contributed or sold to us. Liabilities resulting from a change in law after the closing of the offering are excluded from the environmental indemnity. The indemnity coverage provided by Transocean for such environmental and human health and safety liabilities will not exceed the aggregate amount of $10 million. No claim for indemnification may be made unless the aggregate dollar amount of all claims exceeds $500,000, in which case Transocean is liable for claims only to the extent such aggregate amount exceeds $500,000. |
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| In addition, Transocean agreed to indemnify us against any liabilities arising out of the Macondo well incident occurring prior to our initial public offering and any liabilities, other than taxes, arising from Transocean’s or its subsidiaries’ failure to comply with the Consent Decree or the EPA Agreement, each as it is defined in the Omnibus Agreement, or any similar decree or agreement. The indemnity coverage provided by Transocean related to the Macondo well incident, the Consent Decree, the EPA Agreement or any similar decree or agreement is unlimited. However, these indemnities do not cover or include any amount of consequential damages, including lost profits or revenues. |
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| Transocean also agreed to indemnify us to the full extent of any liabilities related to: |
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| · certain defects in title to Transocean’s assets contributed or sold to the RigCos and any failure to obtain, prior to the time they were contributed, certain consents and permits necessary to conduct, own and operate such assets, which liabilities arise within three years after the closing of the offering; |
| · any judicial determination substantially to the effect that the Transocean affiliate that transferred any of our initial assets to us pursuant to the contribution agreement did not receive reasonably equivalent value in exchange therefor or was rendered insolvent by such transfer; |
| · tax liabilities attributable to the operation of the assets contributed or sold to the RigCos prior to the closing of the offering; and |
| · any lost revenue, up to $100 million, arising out of the failure to receive an operating dayrate from Chevron for Discoverer Clear Leader, for the period commencing on the closing date of the offering through the completion of the rig’s 2014 special periodic survey, which is expected to occur during the three months ending December 31, 2014. |
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| In the three and nine months ended September 30, 2014, we submitted an indemnification claim for $9 million associated with lost revenues, and we recognized a receivable from affiliate with a corresponding entry to members’ equity. |
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| Dual-activity license agreements—All three of our drilling units are equipped with Transocean’s patented dual-activity technology. Dual-activity technology employs structures, equipment and techniques using two drilling stations within a dual derrick to perform drilling tasks. Dual-activity technology allows our rigs to perform simultaneous drilling tasks in a parallel rather than sequential manner and reduces critical path activity, improving efficiency in both exploration and development drilling. The Predecessor entered into license agreements with TODDI for the use of the patented technology through the expiration of the patents in May 2016. Under the license agreements, the Predecessor paid to TODDI an aggregate original license cost of $20 million, recorded in other assets. In the three and nine months ended September 30, 2014, the Predecessor recognized amortization of the license costs of less than $1 million and $2 million, respectively, recorded in operating and maintenance costs and expenses. In the three and nine months ended September 30, 2013, the Predecessor recognized amortization of the license costs of less than $1 million and $2 million, respectively, recorded in operating and maintenance costs and expenses. At September 30, 2014 and December 31, 2013, the carrying amount of the deferred license cost was $5 million and $7 million, respectively. |
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| Under the license agreements, the Predecessor also paid to TODDI quarterly royalty fees of between 3 percent and 5 percent of revenues. In the three and nine months ended September 30, 2014, the Predecessor recognized royalty fees of $2 million and $16 million, respectively, recorded in operating and maintenance costs and expenses. In the three and nine months ended September 30, 2013, the Predecessor recognized royalty fees of $5 million and $14 million, respectively, recorded in operating and maintenance costs and expenses. Under the contribution agreement, the Parent retained the obligation for the payment of the quarterly royalty fees (see “—Formation agreements—contribution agreement”). |
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| Credit agreements—In March 2014, we entered into credit agreements with TODDI, establishing three credit facilities with an aggregate borrowing capacity of $300 million, and effective as of August 5, 2014, we terminated these credit agreements. On July 29, 2014, we entered into agreements with a Transocean affiliate to establish a working capital note payable in the principal amount and for cash proceeds of $43 million. On August 5, 2014, we entered into the Five-Year Revolving Credit Facility with a Transocean affiliate. See Note 7—Credit Agreements. |
