Document


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: September 30, 2016
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to
Commission file number: 001-36211
_____________________________________________________________________________________________________
Noble Corporation plc
(Exact name of registrant as specified in its charter)
_____________________________________________________________________________________________________
England and Wales (Registered Number 08354954)
 
98-0619597
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. employer
identification number)
Devonshire House, 1 Mayfair Place, London, England, W1J8AJ
(Address of principal executive offices) (Zip Code)
Registrant’s Telephone Number, Including Area Code: +44 20 3300 2300
Commission file number: 001-31306
_____________________________________________________________________________________________________
Noble Corporation
(Exact name of registrant as specified in its charter)
_____________________________________________________________________________________________________
Cayman Islands
 
98-0366361
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. employer
identification number)
Suite 3D Landmark Square, 64 Earth Close, P.O. Box 31327 George Town, Grand Cayman, Cayman Islands, KY1-1206
(Address of principal executive offices) (Zip Code)
Registrant’s Telephone Number, Including Area Code: (345) 938-0293
_______________________________________________________________________________________________
Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    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  þ    No  ¨
Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Noble Corporation plc:
Large accelerated filer þ
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
 
 
 
 
 
Noble Corporation:
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer þ
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  þ
Number of shares outstanding and trading at October 21, 2016: Noble Corporation plc —243,233,371
Number of shares outstanding: Noble Corporation — 261,245,693
Noble Corporation, a Cayman Islands company and a wholly owned subsidiary of Noble Corporation plc, a public limited company incorporated under the laws of England and Wales, meets the conditions set forth in General Instructions H(1) (a) and (b) to Form 10-Q and is therefore filing this Quarterly Report on Form 10-Q with the reduced disclosure format contemplated by paragraphs (b) and (c) of General Instruction H(2) of Form 10-Q.




TABLE OF CONTENTS
 
 
 
 
 
Page
PART I
 
 
 
Item 1
 
 
 
 
 
Noble Corporation plc (Noble-UK) Financial Statements:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noble Corporation (Noble-Cayman) Financial Statements:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2
 
 
Item 3
 
 
Item 4
 
 
PART II
 
 
 
Item 1
 
 
Item 2
 
 
Item 6
 
 
 
 
 
 
 
 
 
This combined Quarterly Report on Form 10-Q is separately filed by Noble Corporation plc, a public limited company incorporated under the laws of England and Wales (“Noble-UK”), and Noble Corporation, a Cayman Islands company (“Noble-Cayman”). Information in this filing relating to Noble-Cayman is filed by Noble-UK and separately by Noble-Cayman on its own behalf. Noble-Cayman makes no representation as to information relating to Noble-UK (except as it may relate to Noble-Cayman) or any other affiliate or subsidiary of Noble-UK. Since Noble-Cayman meets the conditions specified in General Instructions H(1)(a) and (b) to Form 10-Q, it is permitted to use the reduced disclosure format for wholly-owned subsidiaries of reporting companies as stated in General Instructions H(2). Accordingly, Noble-Cayman has omitted from this report the information called for by Item 3 (Quantitative and Qualitative Disclosures about Market Risk) of Part I of Form 10-Q and the following items of Part II of Form 10-Q: Item 2 (Unregistered Sales of Equity Securities and Use of Proceeds) and Item 3 (Defaults upon Senior Securities).
This report should be read in its entirety as it pertains to each Registrant. Except where indicated, the Consolidated Financial Statements and related Notes are combined. References in this Quarterly Report on Form 10-Q to “Noble,” the “Company,” “we,” “us,” “our” and words of similar meaning refer collectively to Noble-UK and its consolidated subsidiaries, including Noble-Cayman.


2



PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NOBLE CORPORATION PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
 
 
September 30,
2016
 
December 31,
2015
ASSETS
 
 

 
 

Current assets
 
 

 
 

Cash and cash equivalents
 
$
426,052

 
$
512,245

Accounts receivable
 
319,567

 
498,931

Taxes receivable
 
35,387

 
55,525

Prepaid expenses and other current assets
 
102,778

 
173,917

Total current assets
 
883,784

 
1,240,618

Property and equipment, at cost
 
14,604,796

 
14,056,323

Accumulated depreciation
 
(3,013,008
)
 
(2,572,700
)
Property and equipment, net
 
11,591,788

 
11,483,623

Other assets
 
108,566

 
141,404

Total assets
 
$
12,584,138

 
$
12,865,645

LIABILITIES AND EQUITY
 
 

 
 

Current liabilities
 
 

 
 

Current maturities of long-term debt
 
$
299,762

 
$
299,924

Accounts payable
 
114,392

 
223,221

Accrued payroll and related costs
 
53,377

 
81,464

Taxes payable
 
98,019

 
87,940

Interest payable
 
46,040

 
72,961

Other current liabilities
 
72,528

 
98,074

Total current liabilities
 
684,118

 
863,584

Long-term debt
 
3,830,224

 
4,162,638

Deferred income taxes
 
11,487

 
92,797

Other liabilities
 
300,326

 
324,396

Total liabilities
 
4,826,155

 
5,443,415

Commitments and contingencies
 


 


Shareholders' equity
 
 

 
 

Shares; 243,233 and 241,977 shares outstanding
 
2,432

 
2,420

Additional paid-in capital
 
646,601

 
628,483

Retained earnings
 
6,457,071

 
6,131,501

Accumulated other comprehensive loss
 
(61,169
)
 
(63,175
)
Total shareholders' equity
 
7,044,935

 
6,699,229

Noncontrolling interests
 
713,048

 
723,001

Total equity
 
7,757,983

 
7,422,230

Total liabilities and equity
 
$
12,584,138

 
$
12,865,645

 
See accompanying notes to the unaudited consolidated financial statements.


3



NOBLE CORPORATION PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
Operating revenues
 
 

 
 

 
 

 
 

Contract drilling services
 
$
373,257

 
$
873,813

 
$
1,841,321

 
$
2,424,481

Reimbursables
 
11,733

 
22,858

 
50,272

 
70,087

Other
 
163

 

 
316

 

 
 
385,153

 
896,671

 
1,891,909

 
2,494,568

Operating costs and expenses
 
 

 
 

 
 

 
 

Contract drilling services
 
207,204

 
293,067

 
702,628

 
934,024

Reimbursables
 
9,142

 
17,783

 
39,446

 
55,592

Depreciation and amortization
 
155,242

 
160,652

 
455,907

 
473,913

General and administrative
 
15,773

 
15,196

 
54,346

 
61,558

Loss on impairment
 

 

 
16,616

 

 
 
387,361

 
486,698

 
1,268,943

 
1,525,087

Operating income (loss)
 
(2,208
)
 
409,973

 
622,966

 
969,481

Other income (expense)
 
 

 
 

 
 

 
 

Interest expense, net of amount capitalized
 
(52,569
)
 
(54,687
)
 
(166,975
)
 
(161,196
)
Gain on extinguishment of debt, net
 

 

 
11,066

 

Interest income and other, net
 
540

 
30,934

 
(1,443
)
 
37,085

Income (loss) before income taxes
 
(54,237
)
 
386,220

 
465,614

 
845,370

Income tax benefit (provision)
 
10,002

 
(41,789
)
 
(40,317
)
 
(124,641
)
Net income (loss)
 
(44,235
)
 
344,431

 
425,297

 
720,729

Net income attributable to noncontrolling interests
 
(10,846
)
 
(18,624
)
 
(52,027
)
 
(57,488
)
Net income (loss) attributable to Noble Corporation plc
 
$
(55,081
)
 
$
325,807

 
$
373,270

 
$
663,241

Per share data:
 
 

 
 

 
 

 
 

Basic:
 
$
(0.23
)
 
$
1.32

 
$
1.48

 
$
2.68

Diluted:
 
$
(0.23
)
 
$
1.32

 
$
1.48

 
$
2.68

 
See accompanying notes to the unaudited consolidated financial statements.


4



NOBLE CORPORATION PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
Net income (loss)
 
$
(44,235
)
 
$
344,431

 
$
425,297

 
$
720,729

Other comprehensive income (loss), net of tax
 
 

 
 

 
 

 
 

Foreign currency translation adjustments
 
(543
)
 
(2,694
)
 
263

 
(4,568
)
Foreign currency forward contracts
 
463

 
(1,271
)
 
(605
)
 
(1,362
)
Amortization of deferred pension plan amounts (net of tax provision of $408 and $575 for the three months ended September 30, 2016 and 2015, respectively, and $1,227 and $1,723 for the nine months ended September 30, 2016 and 2015, respectively)
 
781

 
1,106

 
2,348

 
3,316

Other comprehensive income (loss), net
 
701

 
(2,859
)
 
2,006

 
(2,614
)
Net comprehensive income attributable to noncontrolling interests
 
(10,846
)
 
(18,624
)
 
(52,027
)
 
(57,488
)
Comprehensive income (loss) attributable to Noble Corporation plc
 
$
(54,380
)
 
$
322,948

 
$
375,276

 
$
660,627

 
See accompanying notes to the unaudited consolidated financial statements.


5



NOBLE CORPORATION PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 
 
Nine Months Ended September 30,
 
 
2016
 
2015
Cash flows from operating activities
 
 

 
 

Net income
 
$
425,297

 
$
720,729

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

 
 

Depreciation and amortization
 
455,907

 
473,913

Loss on impairment
 
16,616

 

Gain on extinguishment of debt, net
 
(11,066
)
 

Deferred income taxes
 
(82,774
)
 
(76,012
)
Amortization of share-based compensation
 
27,222

 
30,296

Net change in other assets and liabilities
 
131,473

 
103,299

Net cash from operating activities
 
962,675

 
1,252,225

Cash flows from investing activities
 
 

 
 

Capital expenditures
 
(592,038
)
 
(280,048
)
Change in accrued capital expenditures
 
(41,235
)
 
(43,440
)
Proceeds from disposal of assets
 
23,390

 
2,535

Net cash from investing activities
 
(609,883
)
 
(320,953
)
Cash flows from financing activities
 
 

 
 

Net change in borrowings outstanding on bank credit facilities
 

 
(1,123,495
)
Issuance of senior notes
 

 
1,092,728

Debt issuance costs on senior notes and credit facilities
 

 
(16,070
)
Repayment of long-term debt
 
(300,000
)
 
(350,000
)
Early repayment of long-term debt
 
(22,207
)
 

Premiums paid on early repayment of long-term debt
 
(1,781
)
 

Dividend payments
 
(47,534
)
 
(278,443
)
Dividends paid to noncontrolling interests
 
(61,980
)
 
(57,048
)
Repurchases of shares
 

 
(100,630
)
Employee stock transactions
 
(5,483
)
 
(2,394
)
Net cash from financing activities
 
(438,985
)
 
(835,352
)
Net change in cash and cash equivalents
 
(86,193
)
 
95,920

Cash and cash equivalents, beginning of period
 
512,245

 
68,510

Cash and cash equivalents, end of period
 
$
426,052

 
$
164,430

 
See accompanying notes to the unaudited consolidated financial statements.


6



NOBLE CORPORATION PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
(Unaudited)
 
 
 
Shares
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests
 
Total
Equity
 
 
Balance
 
Par Value
 
 
 
 
 
Balance at December 31, 2014
 
247,501

 
$
2,475

 
$
695,638

 
$
5,936,035

 
$
(69,418
)
 
$
722,304

 
$
7,287,034

Employee related equity activity
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Amortization of share-based compensation
 

 

 
30,296

 

 

 

 
30,296

Issuance of share-based compensation shares
 
678

 
7

 
(4,157
)
 

 

 

 
(4,150
)
Tax benefit of equity transactions
 

 

 
(2,401
)
 

 

 

 
(2,401
)
Repurchases of shares
 
(6,209
)
 
(62
)
 
(100,568
)
 

 

 

 
(100,630
)
Net income
 

 

 

 
663,241

 

 
57,488

 
720,729

Dividends paid to noncontrolling interests
 

 

 

 

 

 
(57,048
)
 
(57,048
)
Dividends
 

 

 

 
(278,443
)
 

 

 
(278,443
)
Other comprehensive loss, net
 

 

 

 

 
(2,614
)
 

 
(2,614
)
Balance at September 30, 2015
 
241,970

 
$
2,420

 
$
618,808

 
$
6,320,833

 
$
(72,032
)
 
$
722,744

 
$
7,592,773

Balance at December 31, 2015
 
241,977

 
$
2,420

 
$
628,483

 
$
6,131,501

 
$
(63,175
)
 
$
723,001

 
$
7,422,230

Employee related equity activity
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Amortization of share-based compensation
 

 

 
27,222

 

 

 

 
27,222

Issuance of share-based compensation shares
 
1,256

 
12

 
(3,609
)
 

 

 

 
(3,597
)
Tax benefit of equity transactions
 

 

 
(5,495
)
 

 

 

 
(5,495
)
Net income
 

 

 

 
373,270

 

 
52,027

 
425,297

Dividends paid to noncontrolling interests
 

 

 

 

 

 
(61,980
)
 
(61,980
)
Dividends
 

 

 

 
(47,700
)
 

 

 
(47,700
)
Other comprehensive income, net
 

 

 

 

 
2,006

 

 
2,006

Balance at September 30, 2016
 
243,233

 
$
2,432

 
$
646,601

 
$
6,457,071

 
$
(61,169
)
 
$
713,048

 
$
7,757,983

 
See accompanying notes to the unaudited consolidated financial statements.


7



NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
 
 
September 30,
2016
 
December 31,
2015
ASSETS
 
 

 
 

Current assets
 
 

 
 

Cash and cash equivalents
 
$
425,749

 
$
511,795

Accounts receivable
 
319,567

 
498,931

Taxes receivable
 
35,387

 
55,442

Prepaid expenses and other current assets
 
98,995

 
168,469

Total current assets
 
879,698

 
1,234,637

Property and equipment, at cost
 
14,604,796

 
14,054,558

Accumulated depreciation
 
(3,013,008
)
 
(2,572,331
)
Property and equipment, net
 
11,591,788

 
11,482,227

Other assets
 
101,564

 
132,319

Total assets
 
$
12,573,050

 
$
12,849,183

LIABILITIES AND EQUITY
 
 

 
 

Current liabilities
 
 

 
 

Current maturities of long-term debt
 
$
299,762

 
$
299,924

Accounts payable
 
114,117

 
221,077

Accrued payroll and related costs
 
53,337

 
81,364

Taxes payable
 
98,019

 
88,108

Interest payable
 
46,040

 
72,961

Other current liabilities
 
71,859

 
96,331

Total current liabilities
 
683,134

 
859,765

Long-term debt
 
3,830,224

 
4,162,638

Deferred income taxes
 
11,487

 
92,797

Other liabilities
 
295,443

 
319,512

Total liabilities
 
4,820,288

 
5,434,712

Commitments and contingencies
 


 


Shareholder equity
 
 

 
 

Ordinary shares; 261,246 shares outstanding
 
26,125

 
26,125

Capital in excess of par value
 
586,605

 
561,309

Retained earnings
 
6,488,153

 
6,167,211

Accumulated other comprehensive loss
 
(61,169
)
 
(63,175
)
Total shareholder equity
 
7,039,714

 
6,691,470

Noncontrolling interests
 
713,048

 
723,001

Total equity
 
7,752,762

 
7,414,471

Total liabilities and equity
 
$
12,573,050

 
$
12,849,183

 
See accompanying notes to the unaudited consolidated financial statements.


8



NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
Operating revenues
 
 

 
 

 
 

 
 

Contract drilling services
 
$
373,257

 
$
873,813

 
$
1,841,321

 
$
2,424,481

Reimbursables
 
11,733

 
22,858

 
50,272

 
70,087

Other
 
163

 

 
1,016

 

 
 
385,153

 
896,671

 
1,892,609

 
2,494,568

Operating costs and expenses
 
 

 
 

 
 

 
 

Contract drilling services
 
206,072

 
292,479

 
697,596

 
930,925

Reimbursables
 
9,142

 
17,783

 
39,446

 
55,592

Depreciation and amortization
 
155,242

 
160,383

 
455,853

 
473,046

General and administrative
 
12,033

 
10,376

 
36,491

 
36,093

Loss on impairment
 

 

 
16,616

 

 
 
382,489

 
481,021

 
1,246,002

 
1,495,656

Operating income
 
2,664

 
415,650

 
646,607

 
998,912

Other income (expense)
 
 

 
 

 
 

 
 

Interest expense, net of amount capitalized
 
(52,569
)
 
(54,687
)
 
(166,975
)
 
(161,196
)
Gain on extinguishment of debt, net
 

 

 
11,066

 

Interest income and other, net
 
568

 
31,066

 
(1,368
)
 
35,613

Income (loss) before income taxes
 
(49,337
)
 
392,029

 
489,330

 
873,329

Income tax benefit (provision)
 
9,307

 
(41,868
)
 
(40,310
)
 
(124,962
)
Net income (loss)
 
(40,030
)
 
350,161

 
449,020

 
748,367

Net income attributable to noncontrolling interests
 
(10,846
)
 
(18,624
)
 
(52,027
)
 
(57,488
)
Net income (loss) attributable to Noble Corporation
 
$
(50,876
)
 
$
331,537

 
$
396,993

 
$
690,879

 
See accompanying notes to the unaudited consolidated financial statements.


9



NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
Net income (loss)
 
$
(40,030
)
 
$
350,161

 
$
449,020

 
$
748,367

Other comprehensive income (loss), net of tax
 
 

 
 

 
 

 
 

Foreign currency translation adjustments
 
(543
)
 
(2,694
)
 
263

 
(4,568
)
Foreign currency forward contracts
 
463

 
(1,271
)
 
(605
)
 
(1,362
)
Amortization of deferred pension plan amounts (net of tax provision of $408 and $575 for the three months ended September 30, 2016 and 2015, respectively, and $1,227 and $1,723 for the nine months ended September 30, 2016 and 2015, respectively)
 
781

 
1,106

 
2,348

 
3,316

Other comprehensive income (loss), net
 
701

 
(2,859
)
 
2,006

 
(2,614
)
Net comprehensive income attributable to noncontrolling interests
 
(10,846
)
 
(18,624
)
 
(52,027
)
 
(57,488
)
Comprehensive income (loss) attributable to Noble Corporation
 
$
(50,175
)
 
$
328,678

 
$
398,999

 
$
688,265

 
See accompanying notes to the unaudited consolidated financial statements.


10



NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 
 
Nine Months Ended September 30,
 
 
2016
 
2015
Cash flows from operating activities
 
 
 
 
Net income
 
$
449,020

 
$
748,367

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
 
Depreciation and amortization
 
455,853

 
473,046

Loss on impairment
 
16,616

 

Gain on extinguishment of debt, net
 
(11,066
)
 

Deferred income taxes
 
(82,774
)
 
(76,012
)
Capital contribution by parent - share-based compensation
 
25,296

 
21,875

Net change in other assets and liabilities
 
132,911

 
78,821

Net cash from operating activities
 
985,856

 
1,246,097

Cash flows from investing activities
 
 
 
 
Capital expenditures
 
(592,038
)
 
(280,048
)
Change in accrued capital expenditures
 
(41,235
)
 
(43,440
)
Proceeds from disposal of assets
 
23,390

 
2,535

Net cash from investing activities
 
(609,883
)
 
(320,953
)
Cash flows from financing activities
 
 
 
 
Net change in borrowings outstanding on bank credit facilities
 

 
(1,123,495
)
Issuance of senior notes
 

 
1,092,728

Debt issuance costs on senior notes and credit facilities
 

 
(16,070
)
Repayment of long-term debt
 
(300,000
)
 
(350,000
)
Premiums paid on early repayment of long-term debt
 
(1,781
)
 

Early repayment of long-term debt
 
(22,207
)
 

Dividends paid to noncontrolling interests
 
(61,980
)
 
(57,048
)
Distributions to parent company, net
 
(76,051
)
 
(372,799
)
Net cash from financing activities
 
(462,019
)
 
(826,684
)
Net change in cash and cash equivalents
 
(86,046
)
 
98,460

Cash and cash equivalents, beginning of period
 
511,795

 
65,780

Cash and cash equivalents, end of period
 
$
425,749

 
$
164,240

 
See accompanying notes to the unaudited consolidated financial statements.


11



NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
(Unaudited)
 
 
 
Shares
 
Capital in
Excess of
Par Value
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests
 
Total
Equity
 
 
Balance
 
Par Value
 
 
 
 
 
Balance at December 31, 2014
 
261,246

 
$
26,125

 
$
530,657

 
$
6,009,114

 
$
(69,418
)
 
$
722,304

 
$
7,218,782

Distributions to parent company, net
 

 

 

 
(372,799
)
 

 

 
(372,799
)
Capital contribution by parent - share-based compensation
 

 

 
21,875

 

 

 

 
21,875

Net income
 

 

 

 
690,879

 

 
57,488

 
748,367

Dividends paid to noncontrolling interests
 

 

 

 

 

 
(57,048
)
 
(57,048
)
Other comprehensive loss, net
 

 

 

 

 
(2,614
)
 

 
(2,614
)
Balance at September 30, 2015
 
261,246

 
$
26,125

 
$
552,532

 
$
6,327,194

 
$
(72,032
)
 
$
722,744

 
$
7,556,563

Balance at December 31, 2015
 
261,246

 
$
26,125

 
$
561,309

 
$
6,167,211

 
$
(63,175
)
 
$
723,001

 
$
7,414,471

Distributions to parent company, net
 

 

 

 
(76,051
)
 

 

 
(76,051
)
Capital contribution by parent - share-based compensation
 

 

 
25,296

 

 

 

 
25,296

Net income
 

 

 

 
396,993

 

 
52,027

 
449,020

Dividends paid to noncontrolling interests
 

 

 

 

 

 
(61,980
)
 
(61,980
)
Other comprehensive income, net
 

 

 

 

 
2,006

 

 
2,006

Balance at September 30, 2016
 
261,246

 
$
26,125

 
$
586,605

 
$
6,488,153

 
$
(61,169
)
 
$
713,048

 
$
7,752,762

 
See accompanying notes to the unaudited consolidated financial statements.

12



NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)
Note 1 — Organization and Basis of Presentation
Noble Corporation plc, a public limited company incorporated under the laws of England and Wales (“Noble-UK”), is a leading offshore drilling contractor for the oil and gas industry. We perform contract drilling services with our global fleet of mobile offshore drilling units. As of the filing date of this Quarterly Report on Form 10-Q, our fleet consisted of 14 jackups, eight drillships and eight semisubmersibles.
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 and gas industry. The mobile offshore drilling units comprising our offshore rig fleet operate in a global market for contract drilling services and are often redeployed to different regions due to changing demands of our customers, which consist largely of major independent and government owned/controlled oil and gas companies throughout the world. As of September 30, 2016, our contract drilling services segment conducted operations in the United States, the North Sea, the Middle East, Asia and Australia. Noble and its predecessors have been engaged in the contract drilling of oil and gas wells since 1921.
Noble Corporation, a Cayman Islands company (“Noble-Cayman”), is an indirect, wholly-owned subsidiary of Noble-UK, our publicly-traded parent company. Noble-UK’s principal asset is all of the shares of Noble-Cayman. Noble-Cayman has no public equity outstanding. The consolidated financial statements of Noble-UK include the accounts of Noble-Cayman, and Noble-UK conducts substantially all of its business through Noble-Cayman and its subsidiaries.
The accompanying unaudited consolidated financial statements of Noble-UK and Noble-Cayman have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) as they pertain to Quarterly Reports on Form 10-Q. Accordingly, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The unaudited financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the financial position and results of operations for the interim periods, on a basis consistent with the annual audited consolidated financial statements. All such adjustments are of a recurring nature. The December 31, 2015 Consolidated Balance Sheets presented herein are derived from the December 31, 2015 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, 2015, filed by both Noble-UK and Noble-Cayman. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.
Certain amounts in prior periods have been reclassified to conform to the current year presentation. In accordance with our adoption of Accounting Standards Update (“ASU”) No. 2015-3 on January 1, 2016, unamortized debt issuance costs related to our senior notes of approximately $26 million as of December 31, 2015, which were previously included in “Other assets,” are included in either “Current maturities of long-term debt” or “Long-term debt” in the accompanying Consolidated Balance Sheets, based upon the maturity date of the respective senior notes. 
Note 2 — Spin-off of Paragon Offshore plc (“Paragon Offshore”)
On August 1, 2014, Noble-UK completed the separation and spin-off of a majority of its standard specification offshore drilling business (the “Spin-off”) through a pro rata distribution of all of the ordinary shares of its wholly-owned subsidiary, Paragon Offshore, to the holders of Noble’s ordinary shares.
In February 2016, we entered into an agreement in principle for a settlement with Paragon Offshore under which, in exchange for a full and unconditional release of any claims by Paragon Offshore in connection with the Spin-off (including certain claims that could be brought on behalf of Paragon Offshore’s creditors), we agreed to assume the administration of Mexican tax claims for specified years up to and including 2010, as well as the related bonding obligations and certain of the related tax liabilities. The settlement agreement with Paragon Offshore, which was signed by the parties on April 29, 2016, is subject to the approval of Paragon Offshore's bankruptcy plan by the bankruptcy court. On October 28, 2016, the bankruptcy court having jurisdiction over the Paragon Offshore bankruptcy denied confirmation of Paragon Offshore’s bankruptcy plan. In the oral ruling, the judge noted that his decision to deny confirmation did not preclude Paragon Offshore from restructuring, only that they could not do so under the existing plan. Paragon Offshore has announced that it is evaluating its options. (see Note 14 for additional information).

13

NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)


Prior to the completion of the Spin-off, Noble and Paragon Offshore entered into a series of agreements to effect the separation and Spin-off and govern the relationship between the parties after the Spin-off.
Master Separation Agreement (“MSA”)
The general terms and conditions relating to the separation and Spin-off are set forth in the MSA. The MSA identifies the assets transferred, liabilities assumed and contracts assigned either to Paragon Offshore by us or by Paragon Offshore to us in the separation and describes when and how these transfers, assumptions and assignments would occur. The MSA provides for, among other things, Paragon Offshore’s responsibility for liabilities relating to its business and the responsibility of Noble for liabilities related to our, and in certain limited cases, Paragon Offshore’s business, in each case irrespective of when the liability arose. The MSA also contains indemnification obligations and ongoing commitments by us and Paragon Offshore.
Employee Matters Agreement (“EMA”)
The EMA allocates liabilities and responsibilities between us and Paragon Offshore relating to employment, compensation and benefits and other employment related matters.
Tax Sharing Agreement (“TSA”)
The TSA provides for the allocation of tax liabilities and benefits between us and Paragon Offshore and governs the parties’ assistance with tax-related claims.
Transition Services Agreements
Under two transition services agreements, we agreed to continue, for a limited period of time, to provide various interim support services to Paragon Offshore, and Paragon Offshore agreed to provide various interim support services to us, including providing operational and administrative support for our remaining Brazilian operations.
Note 3 — 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 of the joint ventures. Accordingly, we consolidate the entities in our consolidated financial statements after eliminating intercompany transactions. Shell’s equity interests are presented as noncontrolling interests on our Consolidated Balance Sheets.
During the nine months ended September 30, 2016 and 2015, the Bully joint ventures approved and paid dividends totaling $124 million and $114 million, respectively. Of these amounts, 50 percent was paid to our joint venture partner.
The combined carrying amount of the Bully-class drillships at both September 30, 2016 and December 31, 2015 totaled $1.4 billion. These assets were primarily funded through partner equity contributions. Cash held by the Bully joint ventures totaled approximately $51 million at September 30, 2016 as compared to approximately $50 million at December 31, 2015.


14

NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)


Note 4 — Share Data
Earnings per share
The following table sets forth the computation of basic and diluted earnings per share for Noble-UK:
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
Numerator:
 
 

 
 

 
 

 
 

Basic
 
 

 
 

 
 

 
 

Net income (loss) attributable to Noble-UK
 
$
(55,081
)
 
$
325,807

 
$
373,270

 
$
663,241

Earnings allocated to unvested share-based payment awards
 

 
(7,143
)
 
(13,415
)
 
(14,661
)
Net income (loss) to common shareholders - basic
 
$
(55,081
)
 
$
318,664

 
$
359,855

 
$
648,580

Diluted
 
 

 
 

 
 

 
 

Net income (loss) attributable to Noble-UK
 
$
(55,081
)
 
$
325,807

 
$
373,270

 
$
663,241

Earnings allocated to unvested share-based payment awards
 

 
(7,143
)
 
(13,415
)
 
(14,661
)
Net income (loss) to common shareholders - diluted
 
$
(55,081
)
 
$
318,664

 
$
359,855

 
$
648,580

Denominator:
 
 

 
 

 
 

 
 

Weighted average shares outstanding - basic
 
243,224

 
241,970

 
243,089

 
242,204

Incremental shares issuable from assumed exercise of stock options
 

 

 

 

Weighted average shares outstanding - diluted
 
243,224

 
241,970

 
243,089

 
242,204

Weighted average unvested share-based payment awards
 

 
5,424

 
9,062

 
5,475

Earnings (loss) per share
 
 

 
 

 
 

 
 

Basic
 
$
(0.23
)
 
$
1.32

 
$
1.48

 
$
2.68

Diluted
 
$
(0.23
)
 
$
1.32

 
$
1.48

 
$
2.68

Dividends per share
 
$
0.020

 
$
0.375

 
$
0.190

 
$
1.125

 
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 September 30, 2016 and 2015, approximately 1.5 million and 1.7 million shares underlying stock options, respectively, were excluded from the diluted earnings per share as such stock options were not dilutive.
Share capital
As of September 30, 2016, Noble-UK had approximately 243.2 million shares outstanding and trading as compared to approximately 242.0 million shares outstanding and trading at December 31, 2015. Our Board of Directors may increase our share capital through the issuance of up to 53 million authorized shares (at current nominal value of $0.01 per share) without obtaining shareholder approval.
Our most recent quarterly dividend payment to shareholders, totaling approximately $5 million (or $0.02 per share), was declared on July 22, 2016 and paid on August 8, 2016 to holders of record on August 1, 2016.
Our Board of Directors eliminated our quarterly cash dividend of $0.02 per share, beginning with the Company's fourth quarter dividend. The elimination of the dividend will provide approximately $20 million of additional liquidity on an annual basis based on the most recent dividend amount.
The declaration and payment of dividends require authorization of the Board of Directors of Noble-UK, provided that such dividends on issued share capital may be paid only out of Noble-UK’s “distributable reserves” on its statutory balance sheet. Noble-UK is not permitted to pay dividends out of share capital, which includes share premiums. The resumption of the payment of future dividends will depend on our results of operations, financial condition, cash requirements, future business prospects, contractual restrictions and other factors deemed relevant by our Board of Directors.

15

NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)


Share repurchases
Under UK law, the Company is only permitted to purchase its own shares by way of an “off-market purchase” in a plan approved by shareholders. In December 2014, we received shareholder approval to repurchase up to 37 million ordinary shares, or approximately 15 percent of our outstanding ordinary shares at the time of the shareholder approval. The authority to make such repurchases expired at the end of the Company’s 2016 annual general meeting of shareholders, which was held on April 22, 2016. During 2015, we repurchased 6.2 million of our ordinary shares covered by this authorization for a total cost of approximately $101 million. During the nine months ended September 30, 2016, we did not repurchase any of our shares.
Note 5 — Contract Settlement and Termination Agreement with Freeport-McMoRan Inc.
On May 10, 2016, Freeport-McMoRan Inc. (“FCX”), Freeport-McMoRan Oil & Gas LLC and one of our subsidiaries entered into an agreement terminating the contracts on the Noble Sam Croft and the Noble Tom Madden (“FCX Settlement”), which were scheduled to end in July 2017 and November 2017, respectively. For the nine months ended September 30, 2016, Noble recognized approximately $379 million in “Contract drilling services revenue” associated with the FCX Settlement, which included $348 million recorded as a termination fee and $31 million for the accelerated recognition of other deferred contractual items. For the nine months ended September 30, 2016, $11 million was recognized in “Contract drilling services expense” for the accelerated recognition of deferred mobilization and other expenses.
Pursuant to the FCX Settlement, Noble may receive payments from FCX contingent upon the average price of oil over a 12 months period from June 30, 2016 through June 30, 2017. These contingent payments were not designated for hedge accounting treatment under FASB standards, and therefore, changes in fair value are recognized as either income or loss in the accompanying Consolidated Statements of Operations. For the nine months ended September 30, 2016, we recognized approximately $12.4 million in “Contract drilling services revenue,” related to the valuation of this contingent payment and during the three months ended September 30, 2016, we recognized a $5.2 million loss in “Contract drilling services revenue,” related to the valuation of this contingent payment. As of September 30, 2016, the estimated fair value of these contingent payments was $12.4 million which is included in “Prepaid expenses and other current assets” (see Note 11 for additional information).
Note 6 — Receivables from Customers
At September 30, 2016, we had receivables of approximately $14 million related to the Noble Max Smith, which are being disputed by our former customer, Petróleos Mexicanos (“Pemex”). These receivables have been classified as long-term and are included in “Other assets” on our Consolidated Balance Sheet. The disputed amounts relate to lost revenues for downtime that occurred after our rig was damaged when one of Pemex’s supply boats collided with our rig in 2010. In January 2012, we filed a lawsuit against Pemex in Mexican court seeking recovery of these amounts. While we can make no assurances as to the outcome of this dispute, we believe we are entitled to the disputed amounts.
Note 7 — Property and Equipment
Property and equipment, at cost, as of September 30, 2016 and December 31, 2015 for Noble-UK consisted of the following:

 
 
September 30,
2016
 
December 31,
2015
Drilling equipment and facilities
 
$
13,536,979

 
$
13,074,804

Construction in progress
 
864,140

 
761,347

Other
 
203,677

 
220,172

Property and equipment, at cost
 
$
14,604,796

 
$
14,056,323

 
Capital expenditures, including capitalized interest, totaled $592 million and $280 million for the nine months ended September 30, 2016 and 2015, respectively. Capitalized interest was $9 million and $16 million for the three and nine months ended September 30, 2016, respectively, as compared to $7 million and $18 million for the three and nine months ended September 30, 2015, respectively.

16

NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)


We took delivery of our remaining newbuild project, the heavy-duty, harsh environment jackup, Noble Lloyd Noble, on July 15, 2016. The Noble Lloyd Noble is on the drilling location undergoing final acceptance testing under a four-year contract in the North Sea, and is expected to commence operations during the fourth quarter.
During the nine months ended September 30, 2016, we completed the sale of certain corporate assets and the previously retired rigs, the jackup Noble Charles Copeland and the drillship Noble Discoverer. In connection with the sale of these assets, we received proceeds of approximately $23 million.
Also during the nine months ended September 30, 2016, we recorded an impairment charge of $17 million as a result of our decision to dispose of certain capital spare equipment.
Note 8 — Debt
Our total debt consisted of the following at September 30, 2016 and December 31, 2015:
 
 
 
September 30,
2016
 
December 31,
2015
Current
 
 

 
 

Current maturities of long-term debt
 
$
299,983

 
$
299,997

Less: Unamortized debt issuance costs
 
(221
)
 
(73
)
Current maturities of long-term debt, net of debt issuance costs
 
$
299,762

 
$
299,924

Long-term
 
 

 
 

3.05% Senior Notes due March 2016
 
$

 
$
299,997

2.50% Senior Notes due March 2017
 
299,983

 
299,956

5.25% Senior Notes due March 2018 (1)
 
249,725

 
249,602

7.50% Senior Notes due March 2019
 
201,695

 
201,695

4.90% Senior Notes due August 2020
 
467,195

 
499,287

4.625% Senior Notes due March 2021
 
396,337

 
399,680

3.95% Senior Notes due March 2022
 
399,424

 
399,354

6.95% Senior Notes due April 2025 (1)
 
448,886

 
448,814

6.20% Senior Notes due August 2040
 
399,898

 
399,896

6.05% Senior Notes due March 2041
 
397,748

 
397,719

5.25% Senior Notes due March 2042
 
498,361

 
498,338

7.95% Senior Notes due April 2045 (1)
 
394,601

 
394,563

Total senior unsecured notes
 
4,153,853

 
4,488,901

Credit facility & commercial paper program
 

 

Total debt
 
4,153,853

 
4,488,901

Less: Unamortized debt issuance costs
 
(23,646
)
 
(26,266
)
Less: Current maturities of long-term debt
 
(299,983
)
 
(299,997
)
Long-term debt, net of debt issuance costs
 
$
3,830,224

 
$
4,162,638


(1)     In February 2016, as a result of a reduction in our debt rating below investment grade by Moody’s Investors Service, the interest rates on our Senior Notes due 2018, Senior Notes due 2025 and Senior Notes due 2045 were increased 1.00% each to 5.00%, 6.95% and 7.95%, respectively, effective the first day of each interest period after which the downgrade occurred. As a result of an additional downgrade by S&P Global Ratings in July 2016, the interest rates on these Senior Notes were further increased by 0.25% each to 5.25%, 7.20% and 8.20%, respectively, with the interest rate increase taking effect during the third quarter for the Senior Notes due 2018 and during the fourth quarter for the Senior Notes due 2025 and the Senior Notes due 2045.

In accordance with our adoption of ASU No. 2015-3 on January 1, 2016, unamortized debt issuance costs related to our senior notes are shown as a direct reduction of the carrying amount of the related debt. The debt issuance costs previously included

17

NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)


in “Other assets,” are included in either “Current maturities of long-term debt” or “Long-term debt” in the accompanying Consolidated Balance Sheets, based upon the maturity date of the respective senior notes.
Credit Facility and Commercial Paper Program
We currently have a five-year $2.4 billion senior unsecured credit facility that matures in January 2020. The credit facility provides us with the ability to issue up to $500 million in letters of credit. The issuance of letters of credit under the facility reduces the amount available for borrowing. At September 30, 2016, we had no letters of credit issued under the facility.

During the three months ended September 30, 2016, we terminated our commercial paper program which had allowed us to issue up to $2.4 billion in unsecured commercial paper notes. This termination does not reduce the capacity under our credit facility. 
Our credit facility and certain of our senior notes, as discussed below, have provisions which vary the applicable interest rates based upon our credit ratings.
Senior Unsecured Notes
In February 2016, as a result of a reduction in our debt rating below investment grade by Moody’s Investors Service, the interest rates on our Senior Notes due 2018, Senior Notes due 2025 and Senior Notes due 2045 were increased 1.00% each to 5.00%, 6.95% and 7.95%, respectively, effective the first day of each interest period after which the downgrade occurred. As a result of an additional downgrade by S&P Global Ratings in July 2016, the interest rates on these Senior Notes were further increased by 0.25% each to 5.25%, 7.20% and 8.20%, respectively, with the interest rate increase taking effect during the third quarter for the Senior Notes due 2018 and during the fourth quarter for the Senior Notes due 2025 and the Senior Notes due 2045. The interest rates on these Senior Notes may be further increased if our debt rating were to be downgraded further (up to a maximum of an additional 75 basis points). Our other outstanding senior notes do not contain provisions varying applicable interest rates based upon our credit rating.
In March 2016, we repaid our maturing $300 million 3.05% Senior Notes using cash on hand.
In March 2016, we commenced cash tender offers for our 4.90% Senior Notes due 2020, of which $500 million principal amount was outstanding, and our 4.625% Senior Notes due 2021, of which $400 million principal amount was outstanding. On April 1, 2016, we purchased $36 million of these Senior Notes for $24 million, plus accrued interest, using cash on hand. As a result of this transaction, we recognized a net gain of approximately $11 million during the nine months ended September 30, 2016, which is reflected as “Gain on extinguishment of debt, net” in the accompanying Consolidated Statements of Operations.
Our $300 million 2.50% Senior Notes mature during the first quarter of 2017. We anticipate using cash on hand to repay the outstanding balances.
Covenants
The credit facility is guaranteed by Noble Holding International Limited (“NHIL”) and Noble Holding Corporation (“NHC”). The credit facility contains a covenant that limits our ratio of debt to total tangible capitalization, as defined in the credit facility, to 0.60. At September 30, 2016, our ratio of debt to total tangible capitalization was approximately 0.35. We were in compliance with all covenants under the credit facility as of September 30, 2016.
In addition to the covenants from the credit facility noted above, the indentures governing our outstanding senior unsecured notes contain covenants that place restrictions on certain merger and consolidation transactions, unless we are the surviving entity or the other party assumes the obligations under the indenture, and on the ability to sell or transfer all or substantially all of our assets. In addition, there are restrictions on incurring or assuming certain liens and on entering into sale and lease-back transactions. At September 30, 2016, we were in compliance with all of our debt covenants. We continually monitor compliance with the covenants under our notes and expect to remain in compliance during the remainder of 2016.

18

NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)


Fair Value of Debt
Fair value represents the amount at which an instrument could be exchanged in a current transaction between willing parties. The estimated fair value of our senior notes was based on the quoted market prices for similar issues or on the current rates offered to us for debt of similar remaining maturities (Level 2 measurement). All remaining fair value disclosures are presented in Note 12.
The following table presents the estimated fair value of our total debt, not including the effect of unamortized debt issuance costs, as of September 30, 2016 and December 31, 2015, respectively:

 
 
September 30, 2016
 
December 31, 2015
 
 
Carrying
Value
 
Estimated
Fair Value
 
Carrying
Value
 
Estimated
Fair Value
Senior unsecured notes:
 
 
 
 
 
 
 
 
3.05% Senior Notes due March 2016
 
$

 
$

 
$
299,997

 
$
299,340

2.50% Senior Notes due March 2017
 
299,983

 
296,357

 
299,956

 
284,334

5.25% Senior Notes due March 2018 (1)
 
249,725

 
246,641

 
249,602

 
227,285

7.50% Senior Notes due March 2019
 
201,695

 
201,947

 
201,695

 
194,273

4.90% Senior Notes due August 2020
 
467,195

 
399,846

 
499,287

 
378,761

4.625% Senior Notes due March 2021
 
396,337

 
319,611

 
399,680

 
289,450

3.95% Senior Notes due March 2022
 
399,424

 
294,700

 
399,354

 
265,643

6.95% Senior Notes due April 2025 (1)
 
448,886

 
355,500

 
448,814

 
308,870

6.20% Senior Notes due August 2040
 
399,898

 
235,000

 
399,896

 
237,005

6.05% Senior Notes due March 2041
 
397,748

 
234,475

 
397,719

 
239,464

5.25% Senior Notes due March 2042
 
498,361

 
286,250

 
498,338

 
279,919

7.95% Senior Notes due April 2045 (1)
 
394,601

 
278,871

 
394,563

 
255,887

Total senior unsecured notes
 
4,153,853

 
3,149,198

 
4,488,901

 
3,260,231

Credit facility & commercial paper program
 

 

 

 

Total debt
 
$
4,153,853

 
$
3,149,198

 
$
4,488,901

 
$
3,260,231

 

(1)     In February 2016, as a result of a reduction in our debt rating below investment grade by Moody’s Investors Service, the interest rates on our Senior Notes due 2018, Senior Notes due 2025 and Senior Notes due 2045 were increased 1.00% each to 5.00%, 6.95% and 7.95%, respectively, effective the first day of each interest period after which the downgrade occurred. As a result of an additional downgrade by S&P Global Ratings in July 2016, the interest rates on these Senior Notes were further increased by 0.25% each to 5.25%, 7.20% and 8.20%, respectively, with the interest rate increase taking effect during the third quarter for the Senior Notes due 2018 and during the fourth quarter for the Senior Notes due 2025 and the Senior Notes due 2045.
Note 9 — Income Taxes
At September 30, 2016, the reserves for uncertain tax positions totaled $172 million (net of related tax benefits of $1 million). If the September 30, 2016 reserves are not realized, the provision for income taxes would be reduced by $172 million. At December 31, 2015, the reserves for uncertain tax positions totaled $166 million (net of related tax benefits of $14 million).
It is reasonably possible that our existing liabilities related to our reserve for uncertain tax positions may fluctuate 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.


19

NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED 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 for the three months ended September 30, 2016 and 2015:

 
 
Three Months Ended September 30,
 
 
2016
 
2015
 
 
Non-U.S.
 
U.S.
 
Non-U.S.
 
U.S.
Service cost
 
$
763

 
$
1,662

 
$
862

 
$
2,149

Interest cost
 
589

 
2,389

 
653

 
2,300

Return on plan assets
 
(828
)
 
(3,097
)
 
(942
)
 
(3,286
)
Amortization of prior service cost
 
25

 
30

 
26

 
36

Recognized net actuarial loss
 
35

 
1,099

 
80

 
1,539

Net pension expense
 
$
584

 
$
2,083

 
$
679

 
$
2,738

 
Pension costs include the following components for the nine months ended September 30, 2016 and 2015:

 
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
 
Non-U.S.
 
U.S.
 
Non-U.S.
 
U.S.
Service cost
 
$
2,337

 
$
4,986

 
$
2,582

 
$
6,447

Interest cost
 
1,864

 
7,167

 
1,927

 
6,899

Return on plan assets
 
(2,627
)
 
(9,291
)
 
(2,779
)
 
(9,859
)
Amortization of prior service cost
 
78

 
88

 
79

 
107

Recognized net actuarial loss
 
110

 
3,299

 
235

 
4,618

Net pension expense
 
$
1,762

 
$
6,249

 
$
2,044

 
$
8,212

During the three and nine months ended September 30, 2016, we made contributions to our pension plans totaling approximately $0.1 million and $3 million, respectively.
After the conclusion of the current period, we approved amendments, effective as of December 31, 2016, to our Retirement Restoration Plan, our two U.S. noncontributory defined benefit plans and our two pension plans for certain employees operating in the North Sea. With these amendments, employees and alternate payees will accrue no future benefits under the plans after December 31, 2016. However, these amendments will not affect any benefits earned through that date. We estimate we will incur a net curtailment charge of less than $1 million in the fourth quarter of 2016, and will reduce our net pension expense from approximately $11 million in the current year to an estimated net pension gain of approximately $1 million in 2017.
Note 11 — Derivative Instruments and Hedging Activities
We periodically enter into derivative instruments to manage our exposure to fluctuations in 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.
The FCX Settlement includes two contingent payments, which are further discussed below. We are accounting for these contingent payments as derivative instruments that do not qualify under the Financial Accounting Standards Board (“FASB”) standards for hedge accounting treatment, and therefore, changes in fair values are recognized as either income or loss in the accompanying Consolidated Statements of Operations.
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.

20

NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)


Cash Flow Hedges
Several of our regional shorebases, including our North Sea and Australian operations, have a significant amount of their cash operating expenses payable in local currencies. To limit the potential risk of currency fluctuations, we periodically enter into forward contracts, which settle monthly in the operations’ respective local currencies. All of these contracts have a maturity of less than 12 months. The forward contract settlements in the remainder of 2016 represent approximately 60 percent of these forecasted local currency requirements. The notional amount of the forward contracts outstanding, expressed in U.S. Dollars, was approximately $15 million at September 30, 2016. Total unrealized losses related to these forward contracts were approximately $1 million as of September 30, 2016 and were recorded as part of “Accumulated other comprehensive loss” (“AOCL”).
FCX Settlement
As discussed in Note 5, pursuant to the FCX Settlement, Noble may receive contingent payments from FCX on September 30, 2017, depending on the average price of oil over a 12 months period from June 30, 2016 through June 30, 2017. The average price of oil will be calculated using the daily closing price of West Texas Intermediate crude oil (“WTI”) (CL1) on the New York Mercantile Exchange for the period of June 30, 2016 through June 30, 2017. If the price of WTI averages more than $50 per barrel during such period, FCX will pay $25 million to Noble. In addition to the $25 million contingent payment, if the price of WTI averages more than $65 per barrel during such period, FCX will pay an additional $50 million to Noble. These contingent payments do not qualify for hedge accounting treatment under FASB standards, and therefore, changes in fair values are recognized as either income or loss in the accompanying Consolidated Statements of Operations. These contingent payments are referred to as non-designated derivatives in the following tables.
For the nine months ended September 30, 2016, we recognized approximately $12.4 million in “Contract drilling services revenue,” related to the valuation of this contingent payment and during the three months ended September 30, 2016, we recognized a $5.2 million loss in “Contract drilling services revenue,” related to the valuation of this contingent payment. As of September 30, 2016, the estimated fair value of these contingent payments was $12.4 million which is included in “Prepaid expenses and other current assets”.
Financial Statement Presentation
The following table, together with Note 12, summarizes the financial statement presentation and fair value of our derivative positions as of September 30, 2016 and December 31, 2015:

 
 
 
 
Estimated fair value
 
 
Balance sheet
classification
 
September 30,
2016
 
December 31,
2015
Asset derivatives
 
 
 
 
 
 
Cash flow hedges
 
 
 
 
 
 
Short-term foreign currency forward contracts
 
Prepaid expenses and other current assets
 
$
329

 
$

Non-designated derivatives
 
 
 
 
 
 
FCX Settlement
 
Prepaid expenses and other current assets
 
12,406

 

Liability derivatives
 
 
 
 
 
 
Cash flow hedges
 
 
 
 
 
 
Short-term foreign currency forward contracts
 
Other current liabilities
 
$
934

 
$

 

21

NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED 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 table summarizes the recognized gains and losses of cash flow hedges and non-designated derivatives through AOCL or as “contract drilling services” revenue or expense for the three months ended September 30, 2016 and 2015:

 
 
 
Gain/(loss)
recognized through
AOCL
 
Gain/(loss)
reclassified from
AOCL to "contract
drilling services"
expense
 
Gain/(loss) recognized
through "contract
drilling services"
revenue
 
 
2016
 
2015
 
2016
 
2015
 
2016<