Form 10-Q
Table of Contents

 

 

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, 2013

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: 000-53604

 

 

NOBLE CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Switzerland   98-0619597

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. employer

identification number)

Dorfstrasse 19A, Baar, Switzerland 6340

(Address of principal executive offices) (Zip Code)

Registrant’s Telephone Number, Including Area Code: 41 (41) 761-65-55

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) 949-8066

 

 

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-Swiss:

   Large accelerated filer x    Accelerated filer ¨    Non-accelerated filer ¨    Smaller reporting company ¨

Noble-Cayman:

   Large accelerated filer ¨    Accelerated filer ¨    Non-accelerated filer x    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, 2013: Noble Corporation (Switzerland) — 253,368,874

Number of shares outstanding at July 31, 2013: Noble Corporation (Cayman Islands) — 261,245,693

Noble Corporation, a Cayman Islands company and a wholly owned subsidiary of Noble Corporation, a Swiss corporation, meets the conditions set forth in General Instructions H(1) (a) and (b) to Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format contemplated by paragraphs (b) and (c) of General Instruction H(2) of Form 10-Q.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

     Page  

PART I FINANCIAL INFORMATION

  

Item 1 Financial Statements

  

Noble Corporation (Noble-Swiss) Financial Statements:

  

Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012

     3   

Consolidated Statements of Income for the three and six months ended June 30, 2013 and 2012

     4   

Consolidated Statements of Comprehensive Income for the three and six months ended June  30, 2013 and 2012

     5   

Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012

     6   

Consolidated Statements of Equity for the six months ended June 30, 2013 and 2012

     7   

Noble Corporation (Noble-Cayman) Financial Statements:

  

Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012

     8   

Consolidated Statements of Income for the three and six months ended June 30, 2013 and 2012

     9   

Consolidated Statements of Comprehensive Income for the three and six months ended June  30, 2013 and 2012

     10   

Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012

     11   

Consolidated Statements of Equity for the six months ended June 30, 2013 and 2012

     12   

Notes to Combined Consolidated Financial Statements

     13   

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations

     39   

Item 3 Quantitative and Qualitative Disclosures About Market Risk

     53   

Item 4 Controls and Procedures

     55   

PART II OTHER INFORMATION

  

Item 1 Legal Proceedings

     55   

Item 1A Risk Factors

     55   

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

     56   

Item 6 Exhibits

     56   

SIGNATURES

     57   

Index to Exhibits

     58   

This combined Quarterly Report on Form 10-Q is separately filed by Noble Corporation, a Swiss corporation (“Noble-Swiss”), and Noble Corporation, a Cayman Islands company (“Noble-Cayman”). Information in this filing relating to Noble-Cayman is filed by Noble-Swiss and separately by Noble-Cayman on its own behalf. Noble-Cayman makes no representation as to information relating to Noble-Swiss (except as it may relate to Noble-Cayman) or any other affiliate or subsidiary of Noble-Swiss. 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 owned subsidiaries of reporting companies. 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-Swiss and its consolidated subsidiaries, including Noble-Cayman.

 

2


Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NOBLE CORPORATION (NOBLE-SWISS) AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

     June 30,     December 31,  
     2013     2012  

ASSETS

    

Current assets

    

Cash and cash equivalents

   $ 166,207      $ 282,092   

Accounts receivable

     834,576        743,673   

Taxes receivable

     148,281        112,423   

Prepaid expenses

     71,824        43,962   

Other current assets

     123,338        123,175   
  

 

 

   

 

 

 

Total current assets

     1,344,226        1,305,325   
  

 

 

   

 

 

 

Property and equipment, at cost

     18,198,504        16,971,666   

Accumulated depreciation

     (4,354,168     (3,945,694
  

 

 

   

 

 

 

Property and equipment, net

     13,844,336        13,025,972   
  

 

 

   

 

 

 

Other assets

     277,524        276,477   
  

 

 

   

 

 

 

Total assets

   $ 15,466,086      $ 14,607,774   
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Current liabilities

    

Accounts payable

   $ 344,468      $ 350,147   

Accrued payroll and related costs

     126,267        132,728   

Interest payable

     67,255        68,436   

Taxes payable

     123,234        135,257   

Dividends payable

     256,420        66,369   

Other current liabilities

     168,946        158,512   
  

 

 

   

 

 

 

Total current liabilities

     1,086,590        911,449   
  

 

 

   

 

 

 

Long-term debt

     5,276,304        4,634,375   

Deferred income taxes

     218,513        226,045   

Other liabilities

     324,379        347,615   
  

 

 

   

 

 

 

Total liabilities

     6,905,786        6,119,484   
  

 

 

   

 

 

 

Commitments and contingencies

    

Shareholders’ equity

    

Shares; 254,080 and 253,348 shares outstanding

     712,183        710,130   

Treasury shares, at cost; 764 and 589 shares

     (28,146     (21,069

Additional paid-in capital

     103,878        83,531   

Retained earnings

     7,135,980        7,066,023   

Accumulated other comprehensive loss

     (116,429     (115,449
  

 

 

   

 

 

 

Total shareholders’ equity

     7,807,466        7,723,166   

Noncontrolling interests

     752,834        765,124   
  

 

 

   

 

 

 

Total equity

     8,560,300        8,488,290   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 15,466,086      $ 14,607,774   
  

 

 

   

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

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Table of Contents

NOBLE CORPORATION (NOBLE-SWISS) AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2013     2012     2013     2012  

Operating revenues

        

Contract drilling services

   $ 975,455      $ 848,237      $ 1,904,192      $ 1,594,547   

Reimbursables

     28,260        30,812        49,434        65,953   

Labor contract drilling services

     13,603        19,863        34,657        35,871   

Other

     67        11        77        242   
  

 

 

   

 

 

   

 

 

   

 

 

 
     1,017,385        898,923        1,988,360        1,696,613   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating costs and expenses

        

Contract drilling services

     491,983        423,502        976,070        843,513   

Reimbursables

     22,701        24,970        37,623        55,571   

Labor contract drilling services

     9,402        11,847        21,651        21,079   

Depreciation and amortization

     212,589        183,615        418,745        354,692   

General and administrative

     26,850        25,404        52,420        48,530   

Loss on impairment

     —          18,345        —          18,345   

Gain on contract settlements/extinguishments, net

     —          (33,255     (1,800     (33,255
  

 

 

   

 

 

   

 

 

   

 

 

 
     763,525        654,428        1,504,709        1,308,475   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     253,860        244,495        483,651        388,138   

Other income (expense)

        

Interest expense, net of amount capitalized

     (24,665     (20,652     (51,966     (31,148

Interest income and other, net

     955        1,188        530        2,973   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     230,150        225,031        432,215        359,963   

Income tax provision

     (36,824     (46,356     (71,176     (67,945
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     193,326        178,675        361,039        292,018   

Net income attributable to noncontrolling interests

     (16,706     (18,857     (34,359     (12,025
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Noble Corporation

   $ 176,620      $ 159,818      $ 326,680      $ 279,993   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share

        

Basic

   $ 0.69      $ 0.63      $ 1.28      $ 1.10   

Diluted

   $ 0.69      $ 0.63      $ 1.27      $ 1.10   

See accompanying notes to the unaudited consolidated financial statements.

 

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NOBLE CORPORATION (NOBLE-SWISS) AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2013     2012     2013     2012  

Net income

   $ 193,326      $ 178,675      $ 361,039      $ 292,018   

Other comprehensive income/(loss), net of tax

        

Foreign currency translation adjustments

     (2,180     (6,949     477        (7,027

Foreign currency forward contracts

     (3,529     644        (4,731     3,061   

Amortization of deferred pension plan amounts (net of tax provision of $730 and $647 for the three months ended June 30, 2013 and 2012, respectively, and $1,460 and $1,367 for the six months ended June 30, 2013 and 2012, respectively)

     1,632        1,404        3,274        2,826   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive loss, net

     (4,077     (4,901     (980     (1,140

Net comprehensive income attributable to noncontrolling interests

     (16,706     (18,857     (34,359     (12,025
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to Noble Corporation

   $ 172,543      $ 154,917      $ 325,700      $ 278,853   
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

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NOBLE CORPORATION (NOBLE-SWISS) AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

     Six Months Ended  
     June 30,  
     2013     2012  

Cash flows from operating activities

    

Net income

   $ 361,039      $ 292,018   

Adjustments to reconcile net income to net cash from operating activities:

    

Depreciation and amortization

     418,745        354,692   

Loss on impairment

     —          18,345   

Deferred income taxes

     (7,505     (7,765

Amortization of share-based compensation

     20,335        17,840   

Net change in other assets and liabilities

     (146,549     (139,184
  

 

 

   

 

 

 

Net cash from operating activities

     646,065        535,946   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (1,244,311     (665,140

Change in accrued capital expenditures

     (39,047     (159,134
  

 

 

   

 

 

 

Net cash from investing activities

     (1,283,358     (824,274
  

 

 

   

 

 

 

Cash flows from financing activities

    

Net change in borrowings outstanding on bank credit facilities

     941,653        (825,000

Repayment of long-term debt

     (300,000     —     

Proceeds from issuance of senior notes, net of debt issuance costs

     —          1,186,636   

Dividends paid to joint venture partner

     (46,649     —     

Contributions from joint venture partner

     —          40,000   

Financing costs on credit facilities

     (1,912     (5,014

Par value reduction/dividend payments

     (66,672     (71,897

Proceeds from employee stock transactions

     2,065        9,465   

Repurchases of employee shares surrendered for taxes

     (7,077     (9,765
  

 

 

   

 

 

 

Net cash from financing activities

     521,408        324,425   
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     (115,885     36,097   

Cash and cash equivalents, beginning of period

     282,092        239,196   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 166,207      $ 275,293   
  

 

 

   

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

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NOBLE CORPORATION (NOBLE-SWISS) AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands)

(Unaudited)

 

                                  Accumulated              
                Additional                 Other              
    Shares     Paid-in     Retained     Treasury     Comprehensive     Noncontrolling     Total  
    Balance     Par Value     Capital     Earnings     Shares     Loss     Interests     Equity  

Balance at December 31, 2011

    252,639      $  766,595      $ 48,356      $  6,676,444      $ (10,553   $ (74,321   $  691,331      $  8,097,852   

Employee related equity activity

               

Amortization of share-based compensation

    —          —          17,840        —          —          —          —          17,840   

Issuance of share-based compensation shares

    364        1,104        (1,099     —          —          —          —          5   

Exercise of stock options

    447        1,277        8,735        —          —          —          —          10,012   

Tax benefit of employee stock transactions

    —          —          (552     —          —          —          —          (552

Restricted shares forfeited or repurchased for taxes

    (374     (1,138     1,138        —          (9,765     —          —          (9,765

Net income

    —          —          —          279,993        —          —          12,025        292,018   

Equity contribution by joint venture partner

    —          —          —          —          —          —          40,000        40,000   

Other

    —          —          —          —          —          —          (1,527     (1,527

Par value reduction payments

    —          (58,470     (13,427     —          —          —          —          (71,897

Dividends payable

    —          —          —          (132,679     —          —          —          (132,679

Other comprehensive loss, net

    —          —          —          —          —          (1,140     —          (1,140
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2012

    253,076      $ 709,368      $ 60,991      $ 6,823,758      $ (20,318   $ (75,461   $ 741,829      $ 8,240,167   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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   

Issuance of share-based compensation shares

    601        1,688        (1,671     —          —          —          —          17   

Exercise of stock options

    131        365        3,161        —          —          —          —          3,526   

Tax benefit of employee stock transactions

    —          —          (1,478     —          —          —          —          (1,478

Restricted shares forfeited or repurchased for taxes

    —          —          —          —          (7,077     —          —          (7,077

Net income

    —          —          —          326,680        —          —          34,359        361,039   

Net change in dividends payable

    —          —          —          (256,723     —          —          —          (256,723

Dividends paid to joint venture partner

    —          —          —          —          —          —          (46,649     (46,649

Other comprehensive loss, net

    —          —          —          —          —          (980     —          (980
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2013

    254,080      $ 712,183      $ 103,878      $ 7,135,980      $ (28,146   $ (116,429   $ 752,834      $ 8,560,300   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

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Table of Contents

NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

     June 30,
2013
    December 31,
2012
 

ASSETS

    

Current assets

    

Cash and cash equivalents

   $ 162,029      $ 277,375   

Accounts receivable

     834,576        743,673   

Taxes receivable

     148,158        112,310   

Prepaid expenses

     70,180        41,232   

Other current assets

     123,336        122,649   
  

 

 

   

 

 

 

Total current assets

     1,338,279        1,297,239   
  

 

 

   

 

 

 

Property and equipment, at cost

     18,161,913        16,935,147   

Accumulated depreciation

     (4,346,230     (3,938,518
  

 

 

   

 

 

 

Property and equipment, net

     13,815,683        12,996,629   
  

 

 

   

 

 

 

Other assets

     277,609        276,558   
  

 

 

   

 

 

 

Total assets

   $ 15,431,571      $ 14,570,426   
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Current liabilities

    

Accounts payable

   $ 344,012      $ 349,594   

Accrued payroll and related costs

     117,340        123,936   

Interest payable

     67,255        68,436   

Taxes payable

     120,622        130,844   

Other current liabilities

     168,946        158,499   
  

 

 

   

 

 

 

Total current liabilities

     818,175        831,309   
  

 

 

   

 

 

 

Long-term debt

     5,276,304        4,634,375   

Deferred income taxes

     218,513        226,045   

Other liabilities

     324,379        347,615   
  

 

 

   

 

 

 

Total liabilities

     6,637,371        6,039,344   
  

 

 

   

 

 

 

Commitments and contingencies

    

Shareholders’ equity

    

Ordinary shares; 261,246 shares outstanding

     26,125        26,125   

Capital in excess of par value

     482,637        470,454   

Retained earnings

     7,649,033        7,384,828   

Accumulated other comprehensive loss

     (116,429     (115,449
  

 

 

   

 

 

 

Total shareholders’ equity

     8,041,366        7,765,958   

Noncontrolling interests

     752,834        765,124   
  

 

 

   

 

 

 

Total equity

     8,794,200        8,531,082   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 15,431,571      $ 14,570,426   
  

 

 

   

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

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Table of Contents

NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands)

(Unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2013     2012     2013     2012  

Operating revenues

        

Contract drilling services

   $ 975,455      $ 848,237      $ 1,904,192      $ 1,594,547   

Reimbursables

     28,260        30,812        49,434        65,953   

Labor contract drilling services

     13,603        19,863        34,657        35,871   

Other

     67        11        77        242   
  

 

 

   

 

 

   

 

 

   

 

 

 
     1,017,385        898,923        1,988,360        1,696,613   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating costs and expenses

        

Contract drilling services

     485,445        421,598        962,006        836,744   

Reimbursables

     22,701        24,970        37,623        55,571   

Labor contract drilling services

     9,402        11,847        21,651        21,079   

Depreciation and amortization

     212,232        183,103        417,983        353,676   

General and administrative

     15,588        15,467        30,431        29,477   

Loss on impairment

     —          18,345        —          18,345   

Gain on contract settlements/extinguishments, net

     —          (33,255     (1,800     (33,255
  

 

 

   

 

 

   

 

 

   

 

 

 
     745,368        642,075        1,467,894        1,281,637   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     272,017        256,848        520,466        414,976   

Other income (expense)

        

Interest expense, net of amount capitalized

     (24,665     (20,652     (51,966     (31,148

Interest income and other, net

     705        1,608        768        3,007   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     248,057        237,804        469,268        386,835   

Income tax provision

     (35,730     (45,977     (69,744     (67,188
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     212,327        191,827        399,524        319,647   

Net income attributable to noncontrolling interests

     (16,706     (18,857     (34,359     (12,025
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Noble Corporation

   $ 195,621      $ 172,970      $ 365,165      $ 307,622   
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

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NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2013     2012     2013     2012  

Net income

   $ 212,327      $ 191,827      $ 399,524      $ 319,647   

Other comprehensive income/(loss), net of tax

        

Foreign currency translation adjustments

     (2,180     (6,949     477        (7,027

Foreign currency forward contracts

     (3,529     644        (4,731     3,061   

Amortization of deferred pension plan amounts (net of tax provision of $730 and $647 for the three months ended June 30, 2013 and 2012, respectively, and $1,460 and $1,367 for the six months ended June 30, 2013 and 2012, respectively)

     1,632        1,404        3,274        2,826   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive loss, net

     (4,077     (4,901     (980     (1,140

Net comprehensive income attributable to noncontrolling interests

     (16,706     (18,857     (34,359     (12,025
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to Noble Corporation

   $ 191,544      $ 168,069      $ 364,185      $ 306,482   
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

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NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

     Six Months Ended
June 30,
 
     2013     2012  

Cash flows from operating activities

    

Net income

   $ 399,524      $ 319,647   

Adjustments to reconcile net income to net cash from operating activities:

    

Depreciation and amortization

     417,983        353,676   

Loss on impairment

     —          18,345   

Deferred income taxes

     (7,505     (7,765

Capital contribution by parent—share-based compensation

     12,183        10,438   

Net change in other assets and liabilities

     (146,377     (142,640
  

 

 

   

 

 

 

Net cash from operating activities

     675,808        551,701   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (1,244,239     (663,700

Change in accrued capital expenditures

     (39,047     (159,134
  

 

 

   

 

 

 

Net cash from investing activities

     (1,283,286     (822,834
  

 

 

   

 

 

 

Cash flows from financing activities

    

Net change in borrowings outstanding on bank credit facilities

     941,653        (825,000

Repayment of long-term debt

     (300,000     —     

Proceeds from issuance of senior notes, net of debt issuance costs

     —          1,186,636   

Dividends paid to joint venture partner

     (46,649     —     

Contributions from joint venture partner

     —          40,000   

Financing costs on credit facilities

     (1,912     (5,014

Distributions to parent company, net

     (100,960     (92,675
  

 

 

   

 

 

 

Net cash from financing activities

     492,132        303,947   
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     (115,346     32,814   

Cash and cash equivalents, beginning of period

     277,375        235,056   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 162,029      $ 267,870   
  

 

 

   

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

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NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands)

(Unaudited)

 

                   Capital in            Accumulated
Other
             
     Shares      Excess of      Retained     Comprehensive     Noncontrolling     Total  
     Balance      Par Value      Par Value      Earnings     Loss     Interests     Equity  

Balance at December 31, 2011

     261,246       $  26,125       $  450,616       $  6,979,882      $ (74,321   $  691,331      $  8,073,633   

Net income

     —           —           —           307,622        —          12,025        319,647   

Capital contributions by parent—share-based compensation

     —           —           10,438         —          —          —          10,438   

Distributions to parent

     —           —           —           (92,675     —          —          (92,675

Other

     —           —           —           —          —          (1,527     (1,527

Equity contribution by joint venture partner

     —           —           —           —          —          40,000        40,000   

Other comprehensive loss, net

     —           —           —           —          (1,140     —          (1,140
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2012

     261,246       $ 26,125       $ 461,054       $ 7,194,829      $ (75,461   $ 741,829      $ 8,348,376   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2012

     261,246       $ 26,125       $ 470,454       $ 7,384,828      $ (115,449   $ 765,124      $ 8,531,082   

Net income

     —           —           —           365,165        —          34,359        399,524   

Capital contributions by parent—share-based compensation

     —           —           12,183         —          —          —          12,183   

Distributions to parent

     —           —           —           (100,960     —          —          (100,960

Dividends paid to joint venture partner

     —           —           —           —          —          (46,649     (46,649

Other comprehensive loss, net

     —           —           —           —          (980     —          (980
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2013

     261,246       $ 26,125       $ 482,637       $ 7,649,033      $ (116,429   $ 752,834      $ 8,794,200   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

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NOBLE CORPORATION (NOBLE-SWISS) AND SUBSIDIARIES

NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)

Note 1 — Organization and Basis of Presentation

Noble Corporation, a Swiss corporation (“Noble-Swiss”), is a leading offshore drilling contractor for the oil and gas industry. We perform contract drilling services with our fleet of 79 mobile offshore drilling units located worldwide. We also own one floating production storage and offloading unit. Currently, our fleet consists of 14 semisubmersibles, 14 drillships, 49 jackups and two submersibles, including 10 units under construction as follows:

 

   

three dynamically positioned, ultra-deepwater, harsh environment drillships; and

 

   

seven high-specification heavy-duty, harsh environment jackups.

Our fleet is deployed globally in oil and gas producing regions. 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, wholly-owned subsidiary of Noble-Swiss, our publicly-traded parent company. Noble-Swiss’ principal asset is all of the shares of Noble-Cayman. Noble-Cayman has no public equity outstanding. The consolidated financial statements of Noble-Swiss include the accounts of Noble-Cayman, and Noble-Swiss conducts substantially all of its business through Noble-Cayman and its subsidiaries.

The accompanying unaudited consolidated financial statements of Noble-Swiss 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 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, 2012 Consolidated Balance Sheets presented herein are derived from the December 31, 2012 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, 2012, filed by both Noble-Swiss 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.

Proposed Transaction

In July 2013, we announced a proposed corporate reorganization transaction (the “Transaction”) of Noble-Swiss and the group of companies it controls. The Transaction would merge Noble-Swiss into a newly formed subsidiary incorporated under English law, Noble Corporation plc (“Noble-UK”), which would become our new holding company. The Transaction would effectively change the place of incorporation of the publicly traded parent company from Switzerland to the United Kingdom. We expect an extraordinary general meeting of Noble-Swiss shareholders to take place in October 2013 to consider the Transaction. If shareholders approve the Transaction at that meeting, and the other conditions to completing the Transaction are satisfied, the Transaction is expected to be completed in November 2013.

In the Transaction, all of the outstanding ordinary shares of Noble-Swiss will be cancelled, and Noble-UK will issue, through an exchange agent, one share of Noble-UK in exchange for each share of Noble-Swiss. Upon completion of the Transaction, Noble-UK will own and continue to conduct the same businesses through the Noble group as Noble-Swiss conducted prior to the Transaction, except that Noble-UK will be the parent company of the Noble group of companies. Noble-UK is expected to remain subject to SEC reporting requirements and will file an application with the New York Stock Exchange to have its ordinary shares listed.

 

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NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)

 

Note 2 — 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 two Bully-class drillships. We have determined that we are the primary beneficiary for accounting purposes. 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.

In April 2011, the Bully joint venture partners entered into capital contribution agreements whereby capital calls up to a total of $360 million could be made for funds needed to complete the construction of the drillships. All contributions under these agreements have been made, with the final contribution made in the first quarter of 2012.

In June 2013, the Bully joint venture partners approved and paid a dividend totaling $93 million.

The combined carrying amount of the Bully-class drillships at both June 30, 2013 and December 31, 2012 totaled $1.4 billion. These assets were primarily funded through partner equity contributions. During 2012, these rigs commenced operations. Operational results for the three and six months ended June 30, 2013 and 2012 are as follows:

 

     Three Months Ended      Six Months Ended  
     June 30,      June 30,  
     2013      2012      2013      2012  

Operating revenues

   $ 87,478       $ 78,691       $ 177,773       $ 84,445   

Net income

   $ 35,914       $ 40,773       $ 73,413       $ 26,429   

Note 3 — Share Data

Share capital

The following details Noble-Swiss’ share capital as of June 30, 2013 and December 31, 2012:

 

     June 30,      December 31,  
     2013      2012  

Shares outstanding and trading

     253,316         252,759   

Treasury shares

     764         589   
  

 

 

    

 

 

 

Total shares outstanding

     254,080         253,348   

Treasury shares held for share-based compensation plans

     12,070         12,802   
  

 

 

    

 

 

 

Total shares authorized for issuance

     266,150         266,150   
  

 

 

    

 

 

 

Par value per share (in Swiss Francs)

     3.15         3.15   

Repurchased treasury shares are recorded at cost, and relate to shares surrendered by employees for taxes payable upon the vesting of restricted stock.

Our Board of Directors may further increase Noble-Swiss’ share capital through the issuance of up to 133.1 million authorized shares without obtaining shareholder approval. The issuance of these authorized shares is subject to certain conditions regarding their use.

In April 2012, our shareholders approved the payment of a dividend aggregating $0.52 per share, which was paid in four equal installments. The final payment of this obligation was made in May 2013.

 

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NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)

 

In April 2013, our shareholders approved the payment of a dividend aggregating $1.00 per share to be paid in four equal installments currently scheduled for August 2013, November 2013, February 2014 and May 2014. In connection with this approval, and the resulting obligation to shareholders, we recorded dividends payable of approximately $256 million during the second quarter of 2013. Our Board of Directors has the authority to accelerate the payment of any installment, or portions thereof, at its sole discretion at any time prior to payment of the final installment.

Earnings per share

The following table sets forth the computation of basic and diluted earnings per share for Noble-Swiss:

 

     Three months ended     Six months ended  
     June 30,     June 30,  
     2013     2012     2013     2012  

Allocation of net income

        

Basic

        

Net income attributable to Noble Corporation

   $ 176,620      $ 159,818      $ 326,680      $ 279,993   

Earnings allocated to unvested share-based payment awards

     (2,169     (1,694     (3,822     (2,797
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income to common shareholders—basic

   $ 174,451      $ 158,124      $ 322,858      $ 277,196   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

        

Net income attributable to Noble Corporation

   $ 176,620      $ 159,818      $ 326,680      $ 279,993   

Earnings allocated to unvested share-based payment awards

     (2,167     (1,692     (3,819     (2,793
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income to common shareholders—diluted

   $ 174,453      $ 158,126      $ 322,861      $ 277,200   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding—basic

     253,295        252,387        253,184        252,179   

Incremental shares issuable from assumed exercise of stock options

     261        358        265        425   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding—diluted

     253,556        252,745        253,449        252,604   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average unvested share-based payment awards

     3,150        2,704        2,998        2,555   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share

        

Basic

   $ 0.69      $ 0.63      $ 1.28      $ 1.10   

Diluted

   $ 0.69      $ 0.63      $ 1.27      $ 1.10   

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, 2013 and 2012, stock options representing approximately 0.9 million and 1.2 million shares, respectively, were excluded from the diluted earnings per share as they were not dilutive.

Note 4 — Receivables from Customers

At June 30, 2013, we had receivables of approximately $14 million related to the Noble Max Smith, which are being disputed by our customer, Pemex Exploracion y Produccion (“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 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.

 

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NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)

 

Note 5 — Property and Equipment

Property and equipment, at cost, as of June 30, 2013 and December 31, 2012 consisted of the following:

 

     June 30,      December 31,  
     2013      2012  

Drilling equipment and facilities

   $ 14,461,241       $ 14,099,628   

Construction in progress

     3,548,650         2,677,385   

Other

     188,613         194,653   
  

 

 

    

 

 

 

Property and equipment, at cost

   $ 18,198,504       $ 16,971,666   
  

 

 

    

 

 

 

Capital expenditures, including capitalized interest, totaled $1.24 billion and $665 million for the six months ended June 30, 2013 and 2012, respectively. Interest is capitalized on construction-in-progress at the weighted average cost of debt outstanding during the period of construction. Capitalized interest was $32 million and $62 million for the three and six months ended June 30, 2013, respectively, as compared to $36 million and $77 million for the three and six months ended June 30, 2012.

Note 6 — Loss on Impairment

During the second quarter of 2012, our submersible rig fleet, consisting of two cold stacked rigs, was partially impaired due to the declining market outlook for drilling services for this rig type. We estimated the fair value of the rigs based on the salvage value of the rigs and a transaction involving a similar unit owned by a peer company (Level 2 fair value measurement). Based on these estimates, we recognized a charge of approximately $13 million in 2012.

Also, during the second quarter of 2012, we determined that certain corporate assets were partially impaired due to a declining market for, and the potential disposal of, the assets. We estimated the fair value of the assets based on transactions involving similar units in the market (Level 2 fair value measurement). Based on these estimates, we recognized a charge of approximately $5 million in 2012.

Note 7 — Gain on Contract Settlements/Extinguishments, net

During the second quarter of 2012, we received approximately $5 million from the settlement of a claim relating to the Noble David Tinsley, which had experienced a “punch-through” while being positioned on location in 2009. We had originally recorded a $17 million charge during 2009 related to this incident. Additionally, during the second quarter of 2012, we settled an action against certain vendors for damages sustained during Hurricane Ike. We recognized a net gain of approximately $28 million related to this settlement. We also resolved all outstanding matters with Anadarko Petroleum Company (“Anadarko”) in the second quarter of 2012 related to the previously disclosed force majeure action, Hurricane Ike matters and receivables relating to the Noble Amos Runner.

 

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NOBLE CORPORATION (NOBLE-SWISS) AND SUBSIDIARIES

NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)

 

Note 8 — Debt

Total debt consisted of the following at June 30, 2013 and December 31, 2012:

 

     June 30,      December 31,  
     2013      2012  

Senior unsecured notes:

     

5.875% Senior Notes due 2013

   $ —         $ 299,985   

7.375% Senior Notes due 2014

     249,880         249,799   

3.45% Senior Notes due 2015

     350,000         350,000   

3.05% Senior Notes due 2016

     299,959         299,952   

2.50% Senior Notes due 2017

     299,869         299,852   

7.50% Senior Notes due 2019

     201,695         201,695   

4.90% Senior Notes due 2020

     498,960         498,900   

4.625% Senior Notes due 2021

     399,551         399,527   

3.95% Senior Notes due 2022

     399,136         399,095   

6.20% Senior Notes due 2040

     399,892         399,891   

6.05% Senior Notes due 2041

     397,630         397,613   

5.25% Senior Notes due 2042

     498,270         498,257   
  

 

 

    

 

 

 

Total senior unsecured notes

     3,994,842         4,294,566   

Commercial paper program

     1,281,462         339,809   
  

 

 

    

 

 

 

Total long-term debt

   $ 5,276,304       $ 4,634,375   
  

 

 

    

 

 

 

Credit Facilities and Commercial Paper Program

We currently have two separate credit facilities with an aggregate maximum available capacity of $2.3 billion. One credit facility matures in 2015 and the other matures in 2017 (together, the “Credit Facilities”). In January 2013, we increased the maximum amount available under our credit facility maturing in 2015 from $600 million to $800 million and the maximum amount available under our credit facility maturing in 2017 from $1.2 billion to $1.5 billion. We have also established a commercial paper program, which allows us to issue up to $1.8 billion in unsecured commercial paper notes. Amounts issued under the commercial paper program are supported by our Credit Facilities and, therefore, are classified as long-term on our Consolidated Balance Sheet. At June 30, 2013, we had approximately $1.02 billion of available capacity under the Credit Facilities.

The Credit Facilities provide us with the ability to issue up to $375 million in letters of credit in the aggregate. The issuance of letters of credit does not increase our borrowings outstanding under the Credit Facilities, but it does reduce the amount available. At June 30, 2013, we had no letters of credit issued under the Credit Facilities.

Senior Unsecured Notes

In February 2012, we issued, through our indirect wholly-owned subsidiary, Noble Holding International Limited (“NHIL”), $1.2 billion aggregate principal amount of senior notes in three separate tranches, comprising $300 million of 2.50% Senior Notes due 2017, $400 million of 3.95% Senior Notes due 2022, and $500 million of 5.25% Senior Notes due 2042. The weighted average coupon of all three tranches is 4.13%. The net proceeds of approximately $1.19 billion, after expenses, were primarily used to repay the then outstanding balance on our Credit Facilities.

Our 5.875% Senior Notes matured during the second quarter of 2013. We used proceeds from our commercial paper program to repay the $300 million outstanding balance.

 

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NOBLE CORPORATION (NOBLE-SWISS) AND SUBSIDIARIES

NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)

 

Covenants

The Credit Facilities are guaranteed by our indirect wholly-owned subsidiaries, NHIL and Noble Drilling Corporation (“NDC”). The covenants and events of default under the 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, 2013, our ratio of debt to total tangible capitalization was approximately 0.38. We were in compliance with all covenants under the Credit Facilities as of June 30, 2013.

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 sale and lease-back transactions. At June 30, 2013, we were in compliance with all of our debt covenants. We continually monitor compliance with the covenants under our notes and, based on our expectations for 2013, expect to remain in compliance during the year.

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 fair value of our long-term debt as of June 30, 2013 and December 31, 2012, respectively:

 

     June 30, 2013      December 31, 2012  
     Carrying      Estimated      Carrying      Estimated  
     Value      Fair Value      Value      Fair Value  

Senior unsecured notes:

           

5.875% Senior Notes due 2013

   $ —         $ —         $ 299,985       $ 305,594   

7.375% Senior Notes due 2014

     249,880         260,845         249,799         269,008   

3.45% Senior Notes due 2015

     350,000         363,129         350,000         368,824   

3.05% Senior Notes due 2016

     299,959         308,116         299,952         316,268   

2.50% Senior Notes due 2017

     299,869         298,148         299,852         309,846   

7.50% Senior Notes due 2019

     201,695         242,129         201,695         249,358   

4.90% Senior Notes due 2020

     498,960         526,123         498,900         562,530   

4.625% Senior Notes due 2021

     399,551         412,416         399,527         442,776   

3.95% Senior Notes due 2022

     399,136         391,005         399,095         422,227   

6.20% Senior Notes due 2040

     399,892         417,943         399,891         477,327   

6.05% Senior Notes due 2041

     397,630         405,013         397,613         468,256   

5.25% Senior Notes due 2042

     498,270         453,567         498,257         533,422   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total senior unsecured notes

     3,994,842         4,078,434         4,294,566         4,725,436   

Commercial paper program

     1,281,462         1,281,462         339,809         339,809   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total long-term debt

   $ 5,276,304       $ 5,359,896       $ 4,634,375       $ 5,065,245   
  

 

 

    

 

 

    

 

 

    

 

 

 

Note 9 — Income Taxes

At December 31, 2012, the reserves for uncertain tax positions totaled $125 million (net of related tax benefits of $10 million). At June 30, 2013, the reserves for uncertain tax positions totaled $116 million (net of related tax benefits of $2 million), and if not utilized, would reduce the provision for income taxes by $116 million.

It is possible that our existing liabilities related to our reserves for uncertain tax positions may change 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.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)

 

Note 10 — Employee Benefit Plans

Pension costs include the following components:

 

     Three Months Ended June 30,  
     2013     2012  
     Non-U.S.     U.S.     Non-U.S.     U.S.  

Service cost

   $ 1,349      $ 2,681      $ 1,111      $ 2,375   

Interest cost

     1,252        2,262        1,350        2,164   

Return on plan assets

     (1,437     (3,276     (1,342     (2,793

Amortization of prior service cost

     —          57        —          57   

Recognized net actuarial loss

     395        1,910        201        1,793   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net pension expense

   $ 1,559      $ 3,634      $ 1,320      $ 3,596   
  

 

 

   

 

 

   

 

 

   

 

 

 
     Six Months Ended June 30,  
     2013     2012  
     Non-U.S.     U.S.     Non-U.S.     U.S.  

Service cost

   $ 2,728      $ 5,362      $ 2,234      $ 4,806   

Interest cost

     2,534        4,524        2,708        4,360   

Return on plan assets

     (2,908     (6,552     (2,688     (5,586

Amortization of prior service cost

     —          114        —          114   

Recognized net actuarial loss

     800        3,820        401        3,678   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net pension expense

   $ 3,154      $ 7,268      $ 2,655      $ 7,372   
  

 

 

   

 

 

   

 

 

   

 

 

 

During the three and six months ended June 30, 2013, we made contributions to our pension plans totaling $5 million and $8 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

Our North Sea and Brazil 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, all of which have a maturity of less than 12 months. The forward contracts maturing during the remainder of 2013 represent approximately 59 percent of these forecasted local currency requirements. The notional amount of the forward contracts outstanding, expressed in U.S. Dollars, was approximately $84 million at June 30, 2013. Total unrealized loss related to these forward contracts was approximately $5 million as of June 30, 2013 and was recorded as part of “Accumulated other comprehensive loss” (“AOCL”).

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)

 

The balance of the net unrealized loss related to our cash flow hedges included in AOCL and related activity is as follows:

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2013     2012     2013     2012  

Net unrealized loss at beginning of period

   $ (1,202   $ (644   $ —        $ (3,061

Activity during period:

        

Settlement of foreign currency forward contracts during the period

     265        644        —          3,061   

Net unrealized loss on outstanding foreign currency forward contracts

     (3,794     —          (4,731     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net unrealized loss at end of period

   $ (4,731   $ —        $ (4,731   $ —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Financial Statement Presentation

The following tables, together with Note 12, summarize the financial statement presentation and fair value of our derivative positions as of June 30, 2013 and December 31, 2012:

 

          Estimated fair value  
     Balance sheet
classification
   June 30,
2013
     December 31,
2012
 

Asset derivatives

        

Cash flow hedges

        

Short-term foreign currency forward contracts

   Other current assets    $ 700       $ —     

Liability derivatives

        

Cash flow hedges

        

Short-term foreign currency forward contracts

   Other current liabilities    $ 5,431       $ —     

To supplement the fair value disclosures in Note 12, the following summarizes the recognized gains and losses of cash flow hedges through AOCL or through “other income” for the three months ended June 30, 2013 and 2012:

 

     Gain/(loss) recognized
through AOCL
     Gain/(loss) reclassified
from AOCL to “other
income”
     Gain/(loss) recognized
through “other income”
 
     2013     2012      2013      2012      2013      2012  

Cash flow hedges

                

Foreign currency forward contracts

   $ (3,794   $ —         $ 265       $ 644       $ —         $ —     

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)

 

To supplement the fair value disclosures in Note 12, the following summarizes the recognized gains and losses of cash flow hedges through AOCL or through “other income” for the six months ended June 30, 2013 and 2012:

 

     Gain/(loss) recognized
through AOCL
     Gain/(loss) reclassified
from AOCL to “other
income”
     Gain/(loss) recognized
through “other income”
 
     2013     2012      2013      2012      2013      2012  

Cash flow hedges

                

Foreign currency forward contracts

   $ (4,996   $ —         $ 265       $ 3,061       $ —         $ —     

Note 12 — Fair Value of Financial Instruments

The following table presents the carrying amount and estimated fair value of our financial instruments recognized at fair value on a recurring basis:

 

     June 30, 2013  
            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 -

           

Marketable securities

   $ 6,178       $ 6,178       $ —         $ —     

Foreign currency forward contracts

     700         —           700         —     

Liabilities -

           

Foreign currency forward contracts

   $ 5,431       $ —         $ 5,431       $ —     
     December 31, 2012  
            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 -

           

Marketable securities

   $ 5,816       $ 5,816       $ —         $ —     

The foreign currency instruments have been valued using actively quoted prices and quotes obtained from the counterparties to the derivative instruments. 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.

 

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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 changes in AOCL by component for the three and six months ended June 30, 2013. All amounts within the tables are shown net of tax.

 

     Three months ended June 30, 2013  
           Defined              
     Losses on     Benefit     Foreign        
     Cash Flow     Pension     Currency        
     Hedges(1)     Items(2)     Items     Total  

Balance at beginning of period

   $ (1,202   $ (93,429   $ (17,721   $ (112,352
  

 

 

   

 

 

   

 

 

   

 

 

 

Activity during period:

        

Other comprehensive income/(loss) before reclassifications

     (3,794     —          (2,180     (5,974

Amounts reclassified from AOCL

     265        1,632        —          1,897   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net current period other comprehensive income/(loss)

     (3,529     1,632        (2,180     (4,077
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

   $ (4,731   $ (91,797   $ (19,901   $ (116,429
  

 

 

   

 

 

   

 

 

   

 

 

 
     Six months ended June 30, 2013  
           Defined              
     Losses on     Benefit     Foreign        
     Cash Flow     Pension     Currency        
     Hedges(1)     Items(2)     Items     Total  

Balance at beginning of period

   $ —        $ (95,071   $ (20,378   $ (115,449
  

 

 

   

 

 

   

 

 

   

 

 

 

Activity during period:

        

Other comprehensive income/(loss) before reclassifications

     (4,731     —          477        (4,254

Amounts reclassified from AOCL

     —          3,274        —          3,274   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net current period other comprehensive income/(loss)

     (4,731     3,274        477        (980
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

   $ (4,731   $ (91,797   $ (19,901   $ (116,429
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Losses on cash flow hedges are related to our foreign currency forward contracts. Reclassifications from AOCL are recognized through “other income” on our Consolidated Statement of Income. See Note 11 for additional information.
(2) Defined benefit pension items relate to actuarial losses and the amortization of prior service costs. Reclassifications from AOCL are recognized as expense on our Consolidated Statement of Income through either “contract drilling services” or “general and administrative”. See Note 10 for additional information

Note 14 — Commitments and Contingencies

The Noble 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.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)

 

In August 2007, we entered into a drilling contract with Marathon Oil Company (“Marathon”) for the Noble Jim Day to operate in the U.S. Gulf of Mexico. On January 1, 2011, Marathon provided notice that it was terminating the contract. Marathon’s stated reason for the termination was that the rig had not been accepted by Marathon by December 31, 2010, and Marathon also maintained that a force majeure condition existed under the contract. The contract contained a provision allowing Marathon to terminate if the rig had not commenced operations by December 31, 2010. We believe the rig was ready to commence operations and should have been accepted by Marathon. The contract term was for four years. No revenue has been recognized under this contract. We have contracted the rig for much of the original term with other customers. In March 2011, we filed suit in Texas State District Court against Marathon seeking damages for its actions. The suit is proceeding and we expect the trial to occur in the fourth quarter of 2013. We cannot predict the outcome of this lawsuit.

In November 2012, the U.S. Coast Guard in Alaska conducted an inspection of our drillship, the Noble Discoverer, and cited a number of deficiencies to be remediated, including issues relating to the main propulsion and safety management systems. We initiated a comprehensive effort to address the deficiencies identified by the Coast Guard and commenced an ongoing dialogue 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 believe were certain unauthorized disposals of collected deck and sea water from the Noble Discoverer, collected, treated deck water from the Kulluk and potential record-keeping issues with the oil record books for the Noble Discoverer, Kulluk and other rigs, and with the garbage log for the Kulluk. The Coast Guard referred the Noble Discoverer and Kulluk matters to the U.S. Department of Justice (“DOJ”) for further investigation. We are cooperating with the DOJ and Coast Guard in connection with their investigation, and are maintaining a dialogue with the DOJ. We cannot predict when the DOJ and Coast Guard will conclude the investigation and cannot provide any assurances with respect to the outcome. If the DOJ or Coast Guard determines that violations of applicable law have occurred, they could seek civil and criminal sanctions, including monetary penalties, against us and/or certain of our employees, as well as oversight of our operational compliance programs. Based on information obtained to date, we believe it is probable that we will have to pay some amount in fines and penalties to resolve this matter. However, at this time we cannot appropriately estimate the potential liability that may result and we have not made any accrual in our consolidated financial statements at June 30, 2013 related to the matter.

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, 2013, there were 33 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, including certain disputes with customers over receivables discussed in Note 4, 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. The U.S. Internal Revenue Service (“IRS”) has completed its examination of our tax reporting for the taxable year ended December 31, 2008. In June 2013, the IRS examination team notified us that they were no longer proposing any adjustments with respect to our tax reporting for the taxable year ended December 31, 2008. We are due a refund for the 2008 tax year, and our refund claim is currently under review. The IRS began its examination of our tax reporting for the taxable year ended December 31, 2009. We believe that we have accurately reported all amounts in our 2009 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.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)

 

During the second quarter of 2013, we reached an agreement with the Mexican tax authorities resolving certain previously disclosed tax assessments. This settlement removes potential contingent tax exposure of $502 million in Mexico for periods prior to 2007, which includes the assessments for years 2002 through 2005 of approximately $348 million, as well as settlement for 2006. The settlement of these assessments did not have a material impact on our consolidated financial statements. Tax authorities in Mexico and other jurisdictions 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.

Audit claims of approximately $115 million attributable to income, customs and other business taxes have been assessed against us in other jurisdictions. 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.

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 the Noble Jim Thompson, Noble Amos Runner and Noble Driller for “total loss only” when caused by a named windstorm. For the Noble 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 physical damage deductibles on our rigs ranging from $15 million to $25 million per occurrence, depending on location. 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 $2.7 billion at June 30, 2013.

 

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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-Swiss (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.

Nigerian Operations

During the fourth quarter of 2007, our Nigerian subsidiary received letters from the Nigerian Maritime Administration and Safety Agency (“NIMASA”) seeking to collect a 2 percent surcharge on contract amounts under contracts performed by “vessels,” within the meaning of Nigeria’s cabotage laws, engaged in the Nigerian coastal shipping trade. Although we do not believe that these laws apply to our ownership of drilling units, NIMASA is seeking to apply a provision of the Nigerian cabotage laws (which became effective on May 1, 2004) to our offshore drilling units by considering these units to be “vessels” within the meaning of those laws and therefore subject to the surcharge, which is imposed only upon “vessels.” Our offshore drilling units are not engaged in the Nigerian coastal shipping trade and are not in our view “vessels” within the meaning of Nigeria’s cabotage laws. In January 2008, we filed an originating summons against NIMASA and the Minister of Transportation in the Federal High Court of Lagos, Nigeria seeking, among other things, a declaration that our drilling operations do not constitute “coastal trade” or “cabotage” within the meaning of Nigeria’s cabotage laws and that our offshore drilling units are not “vessels” within the meaning of those laws. In February 2009, NIMASA filed suit against us in the Federal High Court of Nigeria seeking collection of the cabotage surcharge. In August 2009, the court issued a favorable ruling in response to our originating summons stating that drilling operations do not fall within the cabotage laws and that drilling rigs are not vessels for purposes of those laws. The court also issued an injunction against the defendants prohibiting their interference with our drilling rigs or drilling operations. NIMASA has appealed the court’s ruling, although the court dismissed NIMASA’s lawsuit filed against us in February 2009. We intend to take all further appropriate legal action to resist the application of Nigeria’s cabotage laws to our drilling units. The outcome of any such legal action and the extent to which we may ultimately be responsible for the surcharge is uncertain. If it is ultimately determined that offshore drilling units constitute vessels within the meaning of the Nigerian cabotage laws, we may be required to pay the surcharge and comply with other aspects of the Nigerian cabotage laws, which could adversely affect our operations in Nigerian waters and require us to incur additional costs of compliance.

NIMASA had previously informed the Nigerian Content Division of its position that we were not in compliance with the cabotage laws. The Nigerian Content Division makes determinations of companies’ compliance with applicable local content regulations for purposes of government contracting, including contracting for services in connection with oil and gas concessions where the Nigerian national oil company is a partner. The Nigerian Content Division had previously barred us from participating in new tenders as a result of NIMASA’s allegations, although the Division reversed its actions based on the favorable Federal High Court ruling. However, no assurance can be given with respect to our ability to bid for future work in Nigeria until our dispute with NIMASA is resolved.

Under the Nigerian Industrial Training Fund Act of 2004, as amended, (the “Act”), Nigerian companies with five or more employees must contribute annually 1 percent of their payroll to the Industrial Training Fund (“ITF”) established under the Act to be used for the training of Nigerian nationals with a view towards generating a pool of indigenously trained manpower. We have not paid this amount on our expatriate workers employed by our non-Nigerian employment entity in the past as we did not believe the contribution obligation was applicable to them. In October 2012, we received a demand from the ITF for payments going back to 2004 and associated penalties in respect of these expatriate employees. In February 2013, the ITF filed suit seeking payment of these amounts. We do not believe that we owe the amount claimed. We are in discussions with the ITF to resolve the issue and do not believe the resolution of this matter will have a material adverse effect on our financial position or cash flows.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)

 

Note 15 — Segment and Related Information

We report our contract drilling operations 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. Our contract drilling services segment conducts contract drilling operations in the United States, Mexico, Brazil, the North Sea, the Mediterranean, West Africa, the Middle East, India, Asia and Australia.

We evaluate the performance of our operating segment based on revenues from external customers and segment profit. Summarized financial information of our reportable segment for the three and six months ended June 30, 2013 and 2012 is shown in the following table. The “Other” column includes results of labor contract drilling services in Canada and Alaska, as well as corporate related items. The consolidated financial statements of Noble-Swiss include the accounts of Noble-Cayman, and Noble-Swiss 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-Swiss.

 

     Three Months Ended June 30,  
     2013     2012  
     Contract                 Contract              
     Drilling                 Drilling              
     Services     Other     Total     Services     Other     Total  

Revenues from external customers

   $ 1,003,522      $ 13,863      $ 1,017,385      $ 878,372      $ 20,551      $ 898,923   

Depreciation and amortization

     209,082        3,507        212,589        180,112        3,503        183,615   

Segment operating income/(loss)

     253,610        250        253,860        246,161        (1,666     244,495   

Interest expense, net of amount capitalized

     (102     (24,563     (24,665     (105     (20,547     (20,652

Income tax (provision)/benefit

     (40,600     3,776        (36,824     (51,098     4,742        (46,356

Segment profit/(loss)

     196,439        (19,819     176,620        178,094        (18,276     159,818   

Total assets (at end of period)

     14,777,991        688,095        15,466,086        13,483,083        552,933        14,036,016   
     Six Months Ended June 30,  
     2013     2012  
     Contract                 Contract              
     Drilling                 Drilling              
     Services     Other     Total     Services     Other     Total  

Revenues from external customers

   $ 1,952,980      $ 35,380      $ 1,988,360      $ 1,659,615      $ 36,998      $ 1,696,613   

Depreciation and amortization

     411,701        7,044        418,745        348,060        6,632        354,692   

Segment operating income/(loss

     478,744        4,907        483,651        386,428        1,710        388,138   

Interest expense, net of amount capitalized

     (222     (51,744     (51,966     (194     (30,954     (31,148

Income tax (provision)/benefit

     (78,841     7,665        (71,176     (73,698     5,753        (67,945

Segment profit/(loss)

     365,490        (38,810     326,680        303,578        (23,585     279,993   

Total assets (at end of period)

     14,777,991        688,095        15,466,086        13,483,083        552,933        14,036,016   

 

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NOBLE CORPORATION (NOBLE-SWISS) AND SUBSIDIARIES

NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)

 

Note 16 — Accounting Pronouncements

In February 2013, the FASB issued Accounting Standards Update (“ASU”) No. 2013-02, which amends FASB Accounting Standards Codification (“ASC”) Topic 220, “Comprehensive Income.” This amended guidance requires additional information about reclassification adjustments out of comprehensive income, including changes in comprehensive income balances by component and significant items reclassified out of comprehensive income. This guidance is effective for reporting periods beginning after December 15, 2012. The adoption of this guidance did not have a material impact on our financial condition, results of operations, cash flows or financial disclosures.

In March 2013, the FASB issued ASU No. 2013-05, which amends ASC Topic 830, “Foreign Currency Matters.” This ASU provides guidance on foreign currency translation adjustments when a parent entity ceases to have a controlling interest on a previously consolidated subsidiary or group of assets. The guidance is effective for fiscal years beginning on or after December 15, 2013. 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 July 2013, the FASB issued ASU No. 2013-11, which amends ASC Topic 740, “Taxes.” This ASU provides guidance on the presentation of tax benefits when a net operating loss carryforward or other tax credit carryforward exists. The guidance is effective for fiscal years beginning on or after December 15, 2013. 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.

Note 17 — Net Change in Other Assets and Liabilities

The net effect of changes in other assets and liabilities on cash flows from operating activities is as follows:

 

     Noble-Swiss     Noble-Cayman  
     Six months ended     Six months ended  
     June 30,     June 30,  
     2013     2012     2013     2012  

Accounts receivable

   $ (90,903   $ (87,244   $ (90,903   $ (87,244

Other current assets

     (68,614     (82,590     (70,214     (85,357

Other assets

     1,191        (10,452     1,145        (10,454

Accounts payable

     32,125        9,776        32,222        8,804   

Other current liabilities

     (8,057     (2,282     (6,336     (1,997

Other liabilities

     (12,291     33,608        (12,291     33,608   
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ (146,549   $ (139,184   $ (146,377   $ (142,640
  

 

 

   

 

 

   

 

 

   

 

 

 

Note 18 — Subsequent Event

In July 2013, we completed the sale of the Noble Lewis Dugger for $61 million to an unrelated third party in Mexico that owns and operates drilling units.

 

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NOBLE CORPORATION (NOBLE-SWISS) AND SUBSIDIARIES

NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)

 

Note 19 — Guarantees of Registered Securities

Guarantees of Registered Securities

Noble-Cayman, or one or more subsidiaries of Noble-Cayman, are a co-issuer or guarantor or otherwise obligated as of June 30, 2013 as follows:

 

     Issuer     

Notes

  

(Co-Issuer(s))

  

Guarantor(s)

$250 million 7.375% Senior Notes due 2014

   NHIL    Noble-Cayman

$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

$202 million 7.50% Senior Notes due 2019

   NDC;    Noble-Cayman;
   Noble Drilling Services 6 LLC (“NDS6”)   

Noble Holding (U.S.) Corporation (“NHC”);

Noble Drilling Holding LLC (“NDH”)

$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

$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

The following consolidating financial statements of Noble-Cayman, NHC and NDH combined, NDC, NHIL, NDS6 and all other subsidiaries present investments in both consolidated and unconsolidated affiliates using the equity method of accounting.

Revision

As part of our worldwide asset consolidation completed in 2009, NDC received a limited partnership interest in one of our Other Non-Guarantor Subsidiaries of Noble. This limited partnership interest has historically been included as a component of Total Shareholder Equity and income attributable to this limited partnership interest has been included in Net Income Attributable to Noble Corporation in the Other Non-Guarantor Subsidiaries of Noble column in the condensed consolidating financial statements. We concluded these errors were not material individually or in the aggregate to any of the previously issued financial statements taken as a whole.

During the first quarter of 2013, we amended the presentation of this limited partnership interest in the Other Non-guarantor Subsidiaries of Noble column to correctly present it as a noncontrolling interest and to record the income attributable to NDC as Net Income Attributable to Noncontrolling Interests. We also made appropriate adjustments to the Consolidating Adjustments column. The following chart presents the impact of this change in presentation in the Other Non-Guarantor Subsidiaries of Noble and Consolidating Adjustments columns on the historical Condensed Consolidating Balance Sheet and Condensed Consolidating Statement of Income. The revisions below did not impact our Condensed Consolidating Statement of Cash Flows.

 

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Table of Contents

NOBLE CORPORATION (NOBLE-SWISS) AND SUBSIDIARIES

NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)

 

    Other Non-Guarantor
Subsidiaries of Noble
    Consolidating Adjustments  
    As reported     As adjusted     As reported     As adjusted  

December 31, 2010

       

Income statement- Twelve months ended

       

Net income

  $ 1,023,782      $ 1,023,782      $ (2,963,512   $ (2,963,512

Net income attributable to noncontrolling interests

    (3     (41,889     —          41,886   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Noble Corporation

  $ 1,023,779      $ 981,893      $ (2,963,512   $ (2,921,626
 

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2011

       

Income statement- Twelve months ended

       

Net income

  $ 634,128      $ 634,128      $ (1,758,285   $ (1,758,285

Net loss attributable to noncontrolling interests

    7,273        (15,808     —          23,081   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Noble Corporation

  $ 641,401      $ 618,320      $ (1,758,285   $ (1,735,204
 

 

 

   

 

 

   

 

 

   

 

 

 

Balance Sheet

       

Total shareholder equity

  $ 9,853,129      $ 9,483,809      $ (28,268,572   $ (27,899,252

Noncontrolling interests

    691,331        1,060,651        —          (369,320
 

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

  $ 10,544,460      $ 10,544,460      $ (28,268,572   $ (28,268,572
 

 

 

   

 

 

   

 

 

   

 

 

 

March 31, 2012

       

Income statement- Three months ended

       

Net income

  $ 173,657      $ 173,657      $ (591,588   $ (591,588

Net income attributable to noncontrolling interests

    6,832        (1,196     —          8,028   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Noble Corporation

  $ 180,489      $ 172,461      $ (591,588   $ (583,560
 

 

 

   

 

 

   

 

 

   

 

 

 

June 30, 2012

       

Income statement- Three months ended

       

Net income

  $ 253,086      $ 253,086      $ (662,439   $ (662,439

Net income attributable to noncontrolling interests

    (18,857     (29,201     —          10,344   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Noble Corporation

  $ 234,229      $ 223,885      $ (662,439   $ (652,095
 

 

 

   

 

 

   

 

 

   

 

 

 

Income statement- Six months ended

       

Net income

  $ 426,743      $ 426,743      $ (1,254,027   $ (1,254,027

Net income attributable to noncontrolling interests

    (12,025     (30,397     —          18,372   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Noble Corporation

  $ 414,718      $ 396,346      $ (1,254,027   $ (1,235,655
 

 

 

   

 

 

   

 

 

   

 

 

 

September 30, 2012

       

Income statement- Three months ended

       

Net income

  $ 211,597      $ 211,597      $ (569,368   $ (569,368

Net income attributable to noncontrolling interests

    (14,906     (22,246     —          7,340   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Noble Corporation

  $ 196,691      $ 189,351      $ (569,368   $ (562,028
 

 

 

   

 

 

   

 

 

   

 

 

 

Income statement- Nine months ended

       

Net income

  $ 638,340      $ 638,340      $ (1,823,395   $ (1,823,395

Net income attributable to noncontrolling interests

    (26,931     (52,643     —          25,712   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Noble Corporation

  $ 611,409      $ 585,697      $ (1,823,395   $ (1,797,683
 

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

NOBLE CORPORATION (NOBLE-SWISS) AND SUBSIDIARIES

NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)

 

    Other Non-Guarantor
Subsidiaries of Noble
    Consolidating Adjustments  
    As reported     As adjusted     As reported     As adjusted  

December 31, 2012

       

Income statement- Twelve months ended

       

Net income

  $ 280,763      $ 280,763      $ (1,891,202   $ (1,891,202

Net income attributable to noncontrolling interests

    (33,793     (68,969     —          35,176   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Noble Corporation

  $ 246,970      $ 211,794      $ (1,891,202   $ (1,856,026
 

 

 

   

 

 

   

 

 

   

 

 

 

Balance Sheet

       

Total shareholder equity

  $ 9,913,839      $ 9,509,343      $ (29,719,135   $ (29,314,639

Noncontrolling interests

    765,124        1,169,620        —          (404,496
 

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

  $ 10,678,963      $ 10,678,963      $ (29,719,135   $ (29,719,135
 

 

 

   

 

 

   

 

 

   

 

 

 

 

30


Table of Contents

NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

June 30, 2013

(in thousands)

 

     Noble-
Cayman
     NHC and
NDH
Combined
    NDC     NHIL      NDS6      Other
Non-guarantor
Subsidiaries
of Noble
    Consolidating
Adjustments
    Total  

ASSETS

                   

Current assets

                   

Cash and cash equivalents

   $ 5       $ 244      $ —        $ 2       $ —         $ 161,778      $ —        $ 162,029   

Accounts receivable

     —           57,034        3,303        —           —           774,239        —          834,576   

Taxes receivable

     —           46,297        —          —           —           101,861        —          148,158   

Prepaid expenses

     —           487        8        —           —           69,685        —          70,180   

Short-term notes receivable from affiliates

     —           119,476        —          —           586,770         331,498        (1,037,744     —     

Accounts receivable from affiliates

     1,268,524         161,799        1,108,461        503,656         51,560         6,714,765        (9,808,765     —     

Other current assets

     —           639        196        —           —           122,501        —          123,336   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total current assets

     1,268,529         385,976        1,111,968        503,658         638,330         8,276,327        (10,846,509     1,338,279   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Property and equipment, at cost

     —           2,891,199        76,827        —           —           15,193,887        —          18,161,913   

Accumulated depreciation

     —           (313,094     (60,462     —           —           (3,972,674     —          (4,346,230
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Property and equipment, net

     —           2,578,105        16,365        —           —           11,221,213        —          13,815,683   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Notes receivable from affiliates

     3,816,463         1,206,000        —          3,524,814         479,107         2,110,379        (11,136,763     —     

Investments in affiliates

     8,205,962         10,353,399        3,313,219        7,879,478         1,952,694         —          (31,704,752     —     

Other assets

     6,390         443        360        24,231         696         245,489        —          277,609   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total assets

   $ 13,297,344       $ 14,523,923      $ 4,441,912      $ 11,932,181       $ 3,070,827       $ 21,853,408      $ (53,688,024   $ 15,431,571   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

                   

Current liabilities

                   

Short-term notes payables from affiliates

   $ 90,314       $ 127,036      $ 114,149      $ —         $ —         $ 706,245      $ (1,037,744   $ —     

Accounts payable

     —           4,393        521        —           —           339,098        —          344,012   

Accrued payroll and related costs

     —           7,327        8,628        —           —           101,385        —          117,340   

Accounts payable to affiliates

     1,023,571         5,573,240        3,404        190,753         100,405         2,917,392        (9,808,765     —     

Interest payable

     414         —          —          62,430         4,411         —          —          67,255   

Taxes payable

     —           11,476        9        —           —           109,137        —          120,622   

Other current liabilities

     —           —          241        —           —           168,705        —          168,946   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total current liabilities

     1,114,299         5,723,472        126,952        253,183         104,816         4,341,962        (10,846,509     818,175   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Long-term debt

     1,281,462         —          —          3,793,147         201,695         —          —          5,276,304   

Notes payable to affiliates

     2,840,287         586,979        —          975,000         1,342,000         5,392,497        (11,136,763     —     

Deferred income taxes

     —           —          15,731        —           —           202,782        —          218,513   

Other liabilities

     19,930         8,864        —          —           —           295,585        —          324,379   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total liabilities

     5,255,978         6,319,315        142,683        5,021,330         1,648,511         10,232,826        (21,983,272     6,637,371   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Commitments and contingencies

                   

Total shareholder equity

     8,041,366         8,204,608        4,299,229        6,910,851         1,422,316         10,442,890        (31,279,894     8,041,366   

Noncontrolling interest

     —           —          —          —           —           1,177,692        (424,858     752,834   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total equity

     8,041,366         8,204,608        4,299,229        6,910,851         1,422,316         11,620,582        (31,704,752     8,794,200   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 13,297,344       $ 14,523,923      $ 4,441,912      $ 11,932,181       $ 3,070,827       $ 21,853,408      $ (53,688,024   $ 15,431,571   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

31


Table of Contents

NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2012

(in thousands)

 

     Noble-
Cayman
     NHC and
NDH
Combined
    NDC     NHIL      NDS6      Other
Non-guarantor
Subsidiaries
of Noble
    Consolidating
Adjustments
    Total  

ASSETS

                   

Current assets

                   

Cash and cash equivalents

   $ 1,003       $ 904      $ —        $ 2       $ —         $ 275,466      $ —        $ 277,375   

Accounts receivable

     —           14,885        3,335        —           —           725,453        —          743,673   

Taxes receivable

     —           8,341        —          —           —           103,969        —          112,310   

Prepaid expenses

     —           396        9        —           —           40,827        —          41,232   

Short-term notes receivable from affiliates

     —           119,476        —          —           586,769         252,138        (958,383     —     

Accounts receivable from affiliates

     664,375         140,014        1,015,204        526,483         38,895         5,855,066        (8,240,037     —     

Other current assets

     235         639        196        —           —           121,579        —          122,649   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total current assets

     665,613         284,655        1,018,744        526,485         625,664         7,374,498        (9,198,420     1,297,239   
  

 

 

    

 

 

  &nbs