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: March 31, 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) 938-0293

 

 

Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether each registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Noble-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 April 26, 2013: Noble Corporation (Switzerland) — 253,273,925

Number of shares outstanding at April 26, 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 (a), (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 Sheet as of March 31, 2013 and December 31, 2012

     3   

Consolidated Statement of Income for the three months ended March 31, 2013 and 2012

     4   

Consolidated Statement of Comprehensive Income for the three months ended March 31, 2013 and 2012

     5   

Consolidated Statement of Cash Flows for the three months ended March 31, 2013 and 2012

     6   

Consolidated Statement of Equity for the three months ended March 31, 2013 and 2012

     7   

Noble Corporation (Noble-Cayman) Financial Statements:

  

Consolidated Balance Sheet as of March 31, 2013 and December 31, 2012

     8   

Consolidated Statement of Income for the three months ended March 31, 2013 and 2012

     9   

Consolidated Statement of Comprehensive Income for the three months ended March 31, 2013 and 2012

     10   

Consolidated Statement of Cash Flows for the three months ended March 31, 2013 and 2012

     11   

Consolidated Statement of Equity for the three months ended March 31, 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

     34   

Item 3 Quantitative and Qualitative Disclosures About Market Risk

     44   

Item 4 Controls and Procedures

     46   

PART II OTHER INFORMATION

  

Item 1 Legal Proceedings

     46   

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

     47   

Item 6 Exhibits

     47   

SIGNATURES

     48   

Index to Exhibits

     49   

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 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-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 SHEET

(In thousands)

(Unaudited)

 

     March 31,     December 31,  
     2013     2012  

ASSETS

    

Current assets

    

Cash and cash equivalents

   $ 214,528      $ 282,092   

Accounts receivable

     887,759        743,673   

Taxes receivable

     115,720        112,423   

Prepaid expenses

     97,961        43,962   

Other current assets

     112,597        123,175   
  

 

 

   

 

 

 

Total current assets

     1,428,565        1,305,325   
  

 

 

   

 

 

 

Property and equipment, at cost

     17,329,558        16,971,666   

Accumulated depreciation

     (4,144,693     (3,945,694
  

 

 

   

 

 

 

Property and equipment, net

     13,184,865        13,025,972   
  

 

 

   

 

 

 

Other assets

     276,528        276,477   
  

 

 

   

 

 

 

Total assets

   $ 14,889,958      $ 14,607,774   
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Current liabilities

    

Accounts payable

   $ 319,674      $ 350,147   

Accrued payroll and related costs

     118,706        132,728   

Interest payable

     23,701        68,436   

Taxes payable

     147,557        135,257   

Dividends payable

     33,340        66,369   

Other current liabilities

     169,207        158,512   
  

 

 

   

 

 

 

Total current liabilities

     812,185        911,449   
  

 

 

   

 

 

 

Long-term debt

     4,844,193        4,634,375   

Deferred income taxes

     223,500        226,045   

Other liabilities

     347,395        347,615   
  

 

 

   

 

 

 

Total liabilities

     6,227,273        6,119,484   
  

 

 

   

 

 

 

Commitments and contingencies

    

Shareholders’ equity

    

Shares; 254,014 and 253,348 shares outstanding

     712,000        710,130   

Treasury shares, at cost; 755 and 589 shares

     (27,806     (21,069

Additional paid-in capital

     92,289        83,531   

Retained earnings

     7,215,777        7,066,023   

Accumulated other comprehensive loss

     (112,352     (115,449
  

 

 

   

 

 

 

Total shareholders’ equity

     7,879,908        7,723,166   

Noncontrolling interests

     782,777        765,124   
  

 

 

   

 

 

 

Total equity

     8,662,685        8,488,290   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 14,889,958      $ 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 STATEMENT OF INCOME

(In thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended  
     March 31,  
     2013     2012  

Operating revenues

  

 

Contract drilling services

   $ 928,737      $ 746,310   

Reimbursables

     21,174        35,141   

Labor contract drilling services

     21,054        16,008   

Other

     10        231   
  

 

 

   

 

 

 
     970,975        797,690   
  

 

 

   

 

 

 

Operating costs and expenses

    

Contract drilling services

     484,087        420,011   

Reimbursables

     14,922        30,601   

Labor contract drilling services

     12,249        9,232   

Depreciation and amortization

     206,156        171,077   

General and administrative

     25,570        23,126   

Gain on contract extinguishment

     (1,800     —     
  

 

 

   

 

 

 
     741,184        654,047   
  

 

 

   

 

 

 

Operating income

     229,791        143,643   

Other income (expense)

    

Interest expense, net of amount capitalized

     (27,301     (10,496

Interest income and other, net

     (425     1,785   
  

 

 

   

 

 

 

Income before income taxes

     202,065        134,932   

Income tax provision

     (34,352     (21,589
  

 

 

   

 

 

 

Net income

     167,713        113,343   

Net (income) loss attributable to noncontrolling interests

     (17,653     6,832   
  

 

 

   

 

 

 

Net income attributable to Noble Corporation

   $ 150,060      $ 120,175   
  

 

 

   

 

 

 

Net income per share

    

Basic

   $ 0.59      $ 0.47   

Diluted

   $ 0.59      $ 0.47   

See accompanying notes to the unaudited consolidated financial statements.

 

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NOBLE CORPORATION (NOBLE-SWISS) AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

     Three Months Ended  
     March 31,  
     2013     2012  

Net income

   $ 167,713      $ 113,343   

Other comprehensive income (loss), net of tax

    

Foreign currency translation adjustments

     2,657        (41

Foreign currency forward contracts

     (1,202     2,417   

Amortization of deferred pension plan amounts (net of tax provision of $730 in 2013 and $720 in 2012)

     1,642        1,385   
  

 

 

   

 

 

 

Other comprehensive income, net

     3,097        3,761   

Net comprehensive (income) loss attributable to noncontrolling interests

     (17,653     6,832   
  

 

 

   

 

 

 

Comprehensive income attributable to Noble Corporation

   $ 153,157      $ 123,936   
  

 

 

   

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

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Table of Contents

NOBLE CORPORATION (NOBLE-SWISS) AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)

(Unaudited)

 

     Three Months Ended  
     March 31,  
     2013     2012  

Cash flows from operating activities

    

Net income

   $ 167,713      $ 113,343   

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

    

Depreciation and amortization

     206,156        171,077   

Deferred income taxes

     (2,735     (4,075

Amortization of share-based compensation

     10,155        8,753   

Net change in other assets and liabilities

     (178,737     (188,472
  

 

 

   

 

 

 

Net cash from operating activities

     202,552        100,626   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (371,990     (364,883

Change in accrued capital expenditures

     (66,312     (127,393
  

 

 

   

 

 

 

Net cash from investing activities

     (438,302     (492,276
  

 

 

   

 

 

 

Cash flows from financing activities

    

Net change in borrowings outstanding on bank credit facilities

     209,680        (825,000

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

     —          1,186,636   

Contributions from joint venture partners

     —          40,000   

Financing costs on credit facilities

     (1,895     —     

Par value reduction/dividend payments

     (33,335     (36,370

Proceeds from employee stock transactions

     473        2,479   

Repurchases of employee shares surrendered for taxes

     (6,737     (6,451
  

 

 

   

 

 

 

Net cash from financing activities

     168,186        361,294   
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     (67,564     (30,356

Cash and cash equivalents, beginning of period

     282,092        239,196   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 214,528      $ 208,840   
  

 

 

   

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

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NOBLE CORPORATION (NOBLE-SWISS) AND SUBSIDIARIES

CONSOLIDATED STATEMENT 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

    —          —          8,753        —          —          —          —          8,753   

Issuance of share-based compensation shares

    352        1,067        (1,067     —          —          —          —          —     

Exercise of stock options

    113        329        2,292        —          —          —          —          2,621   

Tax benefit of stock options exercised

    —          —          (142     —          —          —          —          (142

Restricted shares forfeited or repurchased for taxes

    (374     (1,138     1,138        —          (6,451     —          —          (6,451

Net income

    —          —          —          120,175        —          —          (6,832     113,343   

Par value reduction payments

    —          (29,220     (7,150     —          —          —          —          (36,370

Equity contribution by joint venture partner

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

Other comprehensive income, net

    —          —          —          —          —          3,761        —          3,761   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2012

    252,730      $ 737,633      $ 52,180      $ 6,796,619      $ (17,004   $ (70,560   $ 724,499      $ 8,223,367   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

    —          —          10,155        —          —          —          —          10,155   

Issuance of share-based compensation shares

    592        1,663        (1,649     —          —          —          —          14   

Exercise of stock options

    74        207        1,702        —          —          —          —          1,909   

Tax benefit of stock options exercised

    —          —          (1,450     —          —          —          —          (1,450

Restricted shares forfeited or repurchased for taxes

    —          —          —          —          (6,737     —          —          (6,737

Net income

    —          —          —          150,060        —          —          17,653        167,713   

Net change in dividends payable

    —          —          —          (306     —          —          —          (306

Other comprehensive income, net

    —          —          —          —          —          3,097        —          3,097   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2013

    254,014      $ 712,000      $ 92,289      $ 7,215,777      $ (27,806   $ (112,352   $ 782,777      $ 8,662,685   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

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Table of Contents

NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(In thousands)

(Unaudited)

 

     March 31,     December 31,  
     2013     2012  

ASSETS

    

Current assets

    

Cash and cash equivalents

   $ 208,043      $ 277,375   

Accounts receivable

     887,759        743,673   

Taxes receivable

     115,567        112,310   

Prepaid expenses

     95,891        41,232   

Other current assets

     112,548        122,649   
  

 

 

   

 

 

 

Total current assets

     1,419,808        1,297,239   
  

 

 

   

 

 

 

Property and equipment, at cost

     17,293,002        16,935,147   

Accumulated depreciation

     (4,137,112     (3,938,518
  

 

 

   

 

 

 

Property and equipment, net

     13,155,890        12,996,629   
  

 

 

   

 

 

 

Other assets

     276,611        276,558   
  

 

 

   

 

 

 

Total assets

   $ 14,852,309      $ 14,570,426   
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Current liabilities

    

Accounts payable

   $ 319,190      $ 349,594   

Accrued payroll and related costs

     107,838        123,936   

Interest payable

     23,701        68,436   

Taxes payable

     143,069        130,844   

Other current liabilities

     169,197        158,499   
  

 

 

   

 

 

 

Total current liabilities

     762,995        831,309   
  

 

 

   

 

 

 

Long-term debt

     4,844,193        4,634,375   

Deferred income taxes

     223,500        226,045   

Other liabilities

     347,395        347,615   
  

 

 

   

 

 

 

Total liabilities

     6,178,083        6,039,344   
  

 

 

   

 

 

 

Commitments and contingencies

    

Shareholder equity

    

Ordinary shares; 261,246 shares outstanding

     26,125        26,125   

Capital in excess of par value

     476,414        470,454   

Retained earnings

     7,501,262        7,384,828   

Accumulated other comprehensive loss

     (112,352     (115,449
  

 

 

   

 

 

 

Total shareholder equity

     7,891,449        7,765,958   

Noncontrolling interests

     782,777        765,124   
  

 

 

   

 

 

 

Total equity

     8,674,226        8,531,082   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 14,852,309      $ 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 STATEMENT OF INCOME

(In thousands)

(Unaudited)

 

     Three Months Ended  
     March 31,  
     2013     2012  

Operating revenues

    

Contract drilling services

   $ 928,737      $ 746,310   

Reimbursables

     21,174        35,141   

Labor contract drilling services

     21,054        16,008   

Other

     10        231   
  

 

 

   

 

 

 
     970,975        797,690   
  

 

 

   

 

 

 

Operating costs and expenses

    

Contract drilling services

     476,561        415,146   

Reimbursables

     14,922        30,601   

Labor contract drilling services

     12,249        9,232   

Depreciation and amortization

     205,751        170,573   

General and administrative

     14,843        14,010   

Gain on contract extinguishment

     (1,800     —     
  

 

 

   

 

 

 
     722,526        639,562   
  

 

 

   

 

 

 

Operating income

     248,449        158,128   

Other income (expense)

    

Interest expense, net of amount capitalized

     (27,301     (10,496

Interest income and other, net

     63        1,399   
  

 

 

   

 

 

 

Income before income taxes

     221,211        149,031   

Income tax provision

     (34,014     (21,211
  

 

 

   

 

 

 

Net income

     187,197        127,820   

Net (income) loss attributable to noncontrolling interests

     (17,653     6,832   
  

 

 

   

 

 

 

Net income attributable to Noble Corporation

   $ 169,544      $ 134,652   
  

 

 

   

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

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NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

     Three Months Ended  
     March 31,  
     2013     2012  

Net income

   $ 187,197      $ 127,820   

Other comprehensive income (loss), net of tax

    

Foreign currency translation adjustments

     2,657        (41

Foreign currency forward contracts

     (1,202     2,417   

Amortization of deferred pension plan amounts (net of tax provision of $730 in 2013 and $720 in 2012)

     1,642        1,385   
  

 

 

   

 

 

 

Other comprehensive income, net

     3,097        3,761   

Net comprehensive (income) loss attributable to noncontrolling interests

     (17,653     6,832   
  

 

 

   

 

 

 

Comprehensive income attributable to Noble Corporation

   $ 172,641      $ 138,413   
  

 

 

   

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

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NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)

(Unaudited)

 

     Three Months Ended  
     March 31,  
     2013     2012  

Cash flows from operating activities

    

Net income

   $ 187,197      $ 127,820   

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

    

Depreciation and amortization

     205,751        170,573   

Deferred income taxes

     (2,735     (4,075

Capital contribution by parent—share-based compensation

     5,960        5,070   

Net change in other assets and liabilities

     (181,915     (190,502
  

 

 

   

 

 

 

Net cash from operating activities

     214,258        108,886   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (371,953     (364,243

Change in accrued capital expenditures

     (66,312     (127,393
  

 

 

   

 

 

 

Net cash from investing activities

     (438,265     (491,636
  

 

 

   

 

 

 

Cash flows from financing activities

    

Net change in borrowings outstanding on bank credit facilities

     209,680        (825,000

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

     —          1,186,636   

Contributions from joint venture partners

     —          40,000   

Financing costs on credit facilities

     (1,895     —     

Distributions to parent company, net

     (53,110     (52,727
  

 

 

   

 

 

 

Net cash from financing activities

     154,675        348,909   
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     (69,332     (33,841

Cash and cash equivalents, beginning of period

     277,375        235,056   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 208,043      $ 201,215   
  

 

 

   

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

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NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EQUITY

(In thousands)

(Unaudited)

 

                            Accumulated              
                Capital in           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

    —          —          —          134,652        —          (6,832     127,820   

Capital contributions by parent— share-based compensation

    —          —          5,070        —          —          —          5,070   

Distributions to parent

    —          —          —          (52,727     —          —          (52,727

Noncontrolling interest contributions

    —          —          —          —          —          40,000        40,000   

Other comprehensive income, net

    —          —          —          —          3,761        —          3,761   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2012

    261,246      $ 26,125      $ 455,686      $ 7,061,807      $ (70,560   $ 724,499      $ 8,197,557   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2012

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

Net income

    —          —          —          169,544        —          17,653        187,197   

Capital contributions by parent— share-based compensation

    —          —          5,960        —          —          —          5,960   

Distributions to parent

    —          —          —          (53,110     —          —          (53,110

Other comprehensive income, net

    —          —          —          —          3,097        —          3,097   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2013

    261,246      $ 26,125      $ 476,414      $ 7,501,262      $ (112,352   $ 782,777      $ 8,674,226   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

(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. At March 31, 2013, our fleet consisted of 14 semisubmersibles, 14 drillships, 49 jackups and two submersibles, including 11 units under construction as follows:

 

  five dynamically positioned, ultra-deepwater, harsh environment drillships and

 

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

Our global fleet is currently located in the following areas: the United States, Mexico, Brazil, the North Sea, the Mediterranean, West Africa, the Middle East, India, Asia and Australia. Noble and its predecessors have been engaged in the contract drilling of oil and gas wells since 1921.

Noble Corporation, a Cayman Islands company (“Noble-Cayman”) is a direct, 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.

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.

The combined carrying amount of the Bully-class drillships at both March 31, 2013 and December 31, 2012 totaled $1.4 billion. These assets were primarily funded through partner equity contributions. During 2012, these rigs commenced operations. Revenues related to these joint ventures for the three months ended March 31, 2013 and 2012 were $90 million and $6 million, respectively. Net income totaled $37 million for the three months ended March 31, 2013 as compared to a net loss of $14 million for the three months ended March 31, 2012.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

 

Note 3 — Share Data

Share capital

The following is a detail of Noble-Swiss’ share capital as of March 31, 2013 and December 31, 2012:

 

     March 31,      December 31,  
     2013      2012  

Shares outstanding and trading

     253,259         252,759   

Treasury shares

     755         589   
  

 

 

    

 

 

 

Total shares outstanding

     254,014         253,348   

Treasury shares held for share-based compensation plans

     12,136         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 to be paid in four equal installments. At March 31, 2013, we had $33 million of dividends payable outstanding on this obligation.

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. 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.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

 

Earnings per share

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

 

     Three months ended  
     March 31,  
     2013     2012  

Allocation of net income

    

Basic

    

Net income attributable to Noble Corporation

   $ 150,060      $ 120,175   

Earnings allocated to unvested share-based payment awards

     (1,667     (1,126
  

 

 

   

 

 

 

Net income to common shareholders—basic

   $ 148,393      $ 119,049   
  

 

 

   

 

 

 

Diluted

    

Net income attributable to Noble Corporation

   $ 150,060      $ 120,175   

Earnings allocated to unvested share-based payment awards

     (1,664     (1,125
  

 

 

   

 

 

 

Net income to common shareholders—diluted

   $ 148,396      $ 119,050   
  

 

 

   

 

 

 

Weighted average shares outstanding—basic

     253,073        251,971   

Incremental shares issuable from assumed exercise of stock options

     268        491   
  

 

 

   

 

 

 

Weighted average shares outstanding—diluted

     253,341        252,462   
  

 

 

   

 

 

 

Weighted average unvested share-based payment awards

     2,844        2,407   
  

 

 

   

 

 

 

Earnings per share

    

Basic

   $ 0.59      $ 0.47   

Diluted

   $ 0.59      $ 0.47   

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 March 31, 2013 and 2012, stock options representing approximately 1.0 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 March 31, 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.

Note 5 — Property and Equipment

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

 

     March 31,      December 31,  
     2013      2012  

Drilling equipment and facilities

   $ 14,324,919       $ 14,099,628   

Construction in progress

     2,817,564         2,677,385   

Other

     187,075         194,653   
  

 

 

    

 

 

 

Property and equipment, at cost

   $ 17,329,558       $ 16,971,666   
  

 

 

    

 

 

 

 

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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)

 

Capital expenditures, including capitalized interest, totaled $372 million and $365 million for the three months ended March 31, 2013 and 2012, respectively. Capital expenditures for the first three months of 2013 consisted of the following:

 

  $138 million for newbuild construction;

 

  $153 million for major projects, including subsea related expenditures;

 

  $51 million for other capitalized expenditures, including upgrades and replacements to drilling equipment that generally have a useful life ranging from 3 to 5 years; and

 

  $30 million in capitalized interest.

Interest is capitalized on construction-in-progress at the weighted average cost of debt outstanding during the period of construction.

Note 6 — Debt

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

 

     March 31,      December 31,  
     2013      2012  

Senior unsecured notes:

     

5.875% Senior Notes due 2013

   $ 299,994       $ 299,985   

7.375% Senior Notes due 2014

     249,839         249,799   

3.45% Senior Notes due 2015

     350,000         350,000   

3.05% Senior Notes due 2016

     299,955         299,952   

2.50% Senior Notes due 2017

     299,861         299,852   

7.50% Senior Notes due 2019

     201,695         201,695   

4.90% Senior Notes due 2020

     498,929         498,900   

4.625% Senior Notes due 2021

     399,539         399,527   

3.95% Senior Notes due 2022

     399,115         399,095   

6.20% Senior Notes due 2040

     399,892         399,891   

6.05% Senior Notes due 2041

     397,622         397,613   

5.25% Senior Notes due 2042

     498,263         498,257   
  

 

 

    

 

 

 

Total senior unsecured notes

     4,294,704         4,294,566   

Commercial paper program

     549,489         339,809   
  

 

 

    

 

 

 

Total long-term debt

   $ 4,844,193       $ 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 referred to as 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 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 the unused capacity under our Credit Facilities and, as such, are classified as long-term on our Consolidated Balance Sheet. At March 31, 2013, we had approximately $1.75 billion of 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 March 31, 2013, we had no letters of credit issued under the Credit Facilities.

 

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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)

 

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, with $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 mature during the second quarter of 2013. We anticipate using availability under our Credit Facilities or commercial paper program to repay the outstanding balance; therefore, we continue to report the balance as long-term at March 31, 2013.

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 March 31, 2013, our ratio of debt to total tangible capitalization was approximately 0.36. We were in compliance with all covenants under the Credit Facilities as of March 31, 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 March 31, 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).

 

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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)

 

The following table presents the estimated fair value of our long-term debt as of March 31, 2013 and December 31, 2012, respectively:

 

     March 31, 2013      December 31, 2012  
     Carrying      Estimated      Carrying      Estimated  
     Value      Fair Value      Value      Fair Value  

Senior unsecured notes:

           

5.875% Senior Notes due 2013

   $ 299,994       $ 301,860       $ 299,985       $ 305,594   

7.375% Senior Notes due 2014

     249,839         265,191         249,799         269,008   

3.45% Senior Notes due 2015

     350,000         366,445         350,000         368,824   

3.05% Senior Notes due 2016

     299,955         312,637         299,952         316,268   

2.50% Senior Notes due 2017

     299,861         307,512         299,852         309,846   

7.50% Senior Notes due 2019

     201,695         251,615         201,695         249,358   

4.90% Senior Notes due 2020

     498,929         554,370         498,900         562,530   

4.625% Senior Notes due 2021

     399,539         435,232         399,527         442,776   

3.95% Senior Notes due 2022

     399,115         411,413         399,095         422,227   

6.20% Senior Notes due 2040

     399,892         448,844         399,891         477,327   

6.05% Senior Notes due 2041

     397,622         441,512         397,613         468,256   

5.25% Senior Notes due 2042

     498,263         503,988         498,257         533,422   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total senior unsecured notes

     4,294,704         4,600,619         4,294,566         4,725,436   

Commercial paper program

     549,489         549,489         339,809         339,809   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total long-term debt

   $ 4,844,193       $ 5,150,108       $ 4,634,375       $ 5,065,245   
  

 

 

    

 

 

    

 

 

    

 

 

 

Note 7 — Income Taxes

At December 31, 2012, the reserves for uncertain tax positions totaled $125 million (net of related tax benefits of $10 million). At March 31, 2013, the reserves for uncertain tax positions totaled $125 million (net of related tax benefits of $11 million). If the March 31, 2013 reserves are not realized, the provision for income taxes would be reduced by $125 million.

It is possible that our existing liabilities related to our reserves for uncertain tax positions may increase or decrease in the next 12 months primarily due to the completion of open audits or the expiration of statutes of limitation. However, we cannot reasonably estimate a range of changes in our existing liabilities due to various uncertainties, such as the unresolved nature of various audits.

Note 8 — Employee Benefit Plans

Pension costs include the following components:

 

     Three Months Ended March 31,  
     2013     2012  
     Non-U.S.     U.S.     Non-U.S.     U.S.  

Service cost

   $ 1,379      $ 2,681      $ 1,123      $ 2,431   

Interest cost

     1,282        2,262        1,358        2,196   

Return on plan assets

     (1,471     (3,276     (1,346     (2,793

Amortization of prior service cost

     —          57        —          57   

Recognized net actuarial loss

     405        1,910        200        1,885   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net pension expense

   $ 1,595      $ 3,634      $ 1,335      $ 3,776   
  

 

 

   

 

 

   

 

 

   

 

 

 

During the three months ended March 31, 2013 and 2012, we made contributions to our pension plans totaling $3 million and $4 million, respectively.

 

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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 9 — 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 settling monthly in their respective local currencies, all of which have a maturity of less than 12 months. The forward contract settlements in 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 $124 million at March 31, 2013. Total unrealized loss related to these forward contracts was approximately $1 million as of March 31, 2013 and was recorded as part of “Accumulated other comprehensive loss” (“AOCL”).

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  
     March 31,  
     2013     2012  

Net unrealized loss at beginning of period

   $ —        $ (3,061

Activity during period:

    

Settlement of foreign currency forward contracts during the period

     —          2,118   

Net unrealized gain/(loss) on outstanding foreign currency forward contracts

     (1,202     299   
  

 

 

   

 

 

 

Net unrealized loss at end of period

   $ (1,202   $ (644
  

 

 

   

 

 

 

Financial Statement Presentation

The following tables, together with Note 10, summarize the financial statement presentation and fair value of our derivative positions as of March 31, 2013 and December 31, 2012:

 

          Estimated fair value  
     Balance sheet
classification
   March 31,
2013
     December 31,
2012
 

Asset derivatives

     

Cash flow hedges

        

Short-term foreign currency forward contracts

   Other current assets    $ 776       $ —     

Liability derivatives

        

Cash flow hedges

        

Short-term foreign currency forward contracts

   Other current liabilities    $ 1,978       $ —     

 

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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)

 

To supplement the fair value disclosures in Note 10, the following summarizes the recognized gains and losses of cash flow hedges and non-designated derivatives through AOCL or through “other income” for the three months ended March 31, 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

   $ (1,202   $ 299       $ —         $ 2,118       $ —         $ —     

Note 10 — 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:

 

     March 31, 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

   $ 6,086       $ 6,086       $ —         $ —     

Foreign currency forward contracts

     776         —           776         —      

Liabilities—

           

Foreign currency forward contracts

   $ 1,978       $ —         $ 1,978       $ —     

 

     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 derivative 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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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 11 — Accumulated Other Comprehensive Loss

The following table sets forth the changes in AOCL by component for the period ended March 31, 2013. All amounts within the table are shown net of tax.

 

           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

     (1,202     —          2,657        1,455   

Amounts reclassified from AOCL

     —          1,642        —          1,642   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net current period other comprehensive income (loss)

     (1,202     1,642        2,657        3,097   
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

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

 

 

   

 

 

   

 

 

   

 

 

 

 

(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 9 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 8 for additional information.

Note 12 — 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 and the matter could have a material positive effect on our results of operations or cash flows in the period the matter is resolved should the arbitration panel ultimately rule in our favor.

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 third quarter of 2013. We cannot predict the outcome of this lawsuit.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

 

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 system. 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 matter to the U.S. Department of Justice (“DOJ”) for further investigation, and we have also been informed that the Coast Guard has referred the Kulluk matter to the DOJ. We are cooperating with the DOJ and Coast Guard in connection with their investigation. 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 an amount to resolve this matter. However, we are not in a position to estimate the potential liability that may result and have not made any accrual in our consolidated financial statements at March 31, 2013.

In January 2012, we were assessed a fine by the Brazilian government in the amount of R$1.8 million (approximately $889,000) in connection with the inadvertent discharge of drilling fluid from one of our rigs offshore Brazil in September 2011. We have accepted and paid the assessment.

In October 2011, we were assessed a fine by the Brazilian government in the amount of R$238,000 (approximately $118,000) in connection with the inadvertent discharge of approximately 200 barrels of drilling fluid from one of our vessels offshore Brazil in November 2010. We have accepted and paid the assessment.

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 March 31, 2013, there were 30 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. The examination team has proposed adjustments with respect to certain items that were reported by us for the 2008 tax year. We believe that we have accurately reported all amounts included in our 2008 tax returns, and have filed protests with the IRS Appeals Office contesting the examination team’s proposed adjustments, and we are still waiting on a final resolution of these issues. We intend to vigorously defend our reported positions. The IRS has begun 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 when we disagree with those assessments based on the technical merits of the positions established at the time of the filing of the tax return. 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 the 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)

 

Our Mexican income tax returns have been examined for the 2002 through 2007 periods and audit claims have been assessed for approximately $341 million (including interest and penalties). During 2011, we received from the Regional Chamber of the Federal Tax Court adverse decisions with respect to approximately $6 million in assessments related to depreciation deductions, which we are appealing. We are also contesting all other assessments in Mexico. 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.

Additional audit claims of approximately $126 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 $2.6 billion at March 31, 2013.

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.

 

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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)

 

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 and that, in the event we were to have any liability, it would not have a material adverse effect on our financial position or cash flows. We continue to investigate the matter and are also in discussions with the ITF to resolve the issue.

Note 13 — 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.

 

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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)

 

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 months ended March 31, 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 March 31,  
     2013     2012  
     Contract                 Contract              
     Drilling                 Drilling              
     Services     Other     Total     Services     Other     Total  

Revenues from external customers

   $ 949,458      $ 21,517      $ 970,975      $ 781,243      $ 16,447      $ 797,690   

Depreciation and amortization

     202,619        3,537        206,156        167,948        3,129        171,077   

Segment operating income

     225,134        4,657        229,791        140,267        3,376        143,643   

Interest expense, net of amount capitalized

     (120     (27,181     (27,301     (89     (10,407     (10,496

Income tax (provision)/ benefit

     (38,241     3,889        (34,352     (22,600     1,011        (21,589

Segment profit/ (loss)

     169,051        (18,991     150,060        125,484        (5,309     120,175   

Total assets (at end of period)

     14,212,435        677,523        14,889,958        13,248,321        646,880        13,895,201   

Note 14 — 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.

Note 15 — 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  
     Three months ended     Three months ended  
     March 31,     March 31,  
     2013     2012     2013     2012  

Accounts receivable

   $ (125,192   $ (88,969   $ (125,192   $ (88,969

Other current assets

     (47,920     (71,328     (49,017     (72,745

Other assets

     1,101        (1,313     1,099        (1,315

Accounts payable

     12,901        7,014        12,970        6,304   

Other current liabilities

     (18,947     (31,789     (21,095     (31,691

Other liabilities

     (680     (2,087     (680     (2,086
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ (178,737   $ (188,472   $ (181,915   $ (190,502
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

 

Note 16 — Information about Noble-Cayman

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 March 31, 2013 as follows:

 

    Issuer    

Notes

 

(Co-Issuer(s))

 

Guarantor(s)

$300 million 5.875% Senior Notes due 2013

  Noble-Cayman   NDC
    NHIL

$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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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 amended     As reported     As amended  

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 loss 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
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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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)

 

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

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
  

 

 

   

 

 

   

 

 

   

 

 

 

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
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

March 31, 2013

(in thousands)

 

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

ASSETS

               

Current assets

               

Cash and cash equivalents

  $ 5      $ 477      $ —        $ 2      $ —        $ 207,559      $ —        $ 208,043   

Accounts receivable

    —          20,680        3,226        —          —          863,853        —          887,759   

Taxes receivable

    —          8,341        —          —          —          107,226        —          115,567   

Prepaid expenses

    —          422        9        —          —          95,460        —          95,891   

Short-term notes receivable from affiliates

    —          119,476        —          —          586,769        326,671        (1,032,916     —     

Accounts receivable from affiliates

    822,677        150,838        1,062,522        467,184        45,200        6,009,283        (8,557,704     —     

Other current assets

    94        639        196        —          —          111,619        —          112,548   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

    822,776        300,873        1,065,953        467,186        631,969        7,721,671        (9,590,620     1,419,808   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Property and equipment, at cost

    —          2,898,924        76,394        —          —          14,317,684        —          17,293,002   

Accumulated depreciation

    —          (297,835     (59,403     —          —          (3,779,874     —          (4,137,112
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Property and equipment, net

    —          2,601,089        16,991        —          —          10,537,810        —          13,155,890   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Notes receivable from affiliates

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

Investments in affiliates

    7,972,834        9,496,533        3,350,670        7,638,820        1,865,269        —          (30,324,126     —     

Other assets

    7,061        301        452        25,068        728        243,001        —          276,611   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 12,619,134      $ 13,604,796      $ 4,434,066      $  11,655,888      $  2,977,073      $ 20,612,861      $ (51,051,509   $ 14,852,309   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

               

Current liabilities

               

Short-term notes payables from affiliates

  $ 90,314      $ 125,587      $ 110,770      $ —        $ —        $ 706,245      $ (1,032,916   $ —     

Accounts payable

    —          5,709        805        —          —          312,676        —          319,190   

Accrued payroll and related costs

    —          6,223        8,304        —          —          93,311        —          107,838   

Accounts payable to affiliates

    921,727        4,945,931        6,277        177,838        92,548        2,413,383        (8,557,704     —     

Taxes payable

    —          11,316        —          —          —          131,753        —          143,069   

Interest payable

    5,943        —          —          17,128        630        —          —          23,701   

Other current liabilities

    —          522        240        —          —          168,435        —          169,197   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

    1,017,984        5,095,288        126,396        194,966        93,178        3,825,803        (9,590,620     762,995   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Long-term debt

    849,483        —          —          3,793,015        201,695        —          —          4,844,193   

Notes payable to affiliates

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

Deferred income taxes

    —          (2,431     15,731        —          —          210,200        —          223,500   

Other liabilities

    19,931        17,960        —          —          —          309,504        —          347,395   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    4,727,685        5,697,796        142,127        4,962,981        1,636,873        9,738,004        (20,727,383     6,178,083   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commitments and contingencies

               

Total shareholder equity

    7,891,449        7,907,000        4,291,939        6,692,907        1,340,200        9,677,699        (29,909,745     7,891,449   

Noncontrolling interest

    —          —          —          —          —          1,197,158        (414,381     782,777   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

    7,891,449        7,907,000        4,291,939        6,692,907        1,340,200        10,874,857        (30,324,126     8,674,226   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

  $ 12,619,134      $ 13,604,796      $ 4,434,066      $ 11,655,888      $ 2,977,073      $ 20,612,861      $ (51,051,509   $ 14,852,309   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2012

As Amended

(in thousands)

 

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Property and equipment, at cost

    —          2,735,223        76,428        —          —          14,123,496        —          16,935,147   

Accumulated depreciation

    —          (283,028     (58,411     —          —          (3,597,079     —          (3,938,518
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Property and equipment, net

    —          2,452,195        18,017        —          —          10,526,417        —          12,996,629   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Notes receivable from affiliates

    3,816,463        1,206,000        —          3,524,814        479,107        2,171,875        (11,198,259     —     

Investments in affiliates

    7,770,066        9,170,923        3,386,879        7,413,361        1,977,906        —          (29,719,135     —     

Other assets

    5,798        320        543        25,895        759        243,243        —          276,558   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 12,257,940      $ 13,114,093      $ 4,424,183      $  11,490,555      $  3,083,436      $ 20,316,033      $ (50,115,814   $ 14,570,426   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

               

Current liabilities

               

Short-term notes payables from affiliates

  $ 90,314      $ 51,054      $ 110,770      $ —        $ —        $ 706,245      $ (958,383   $ —     

Accounts payable

    —          6,522        1,183        —          —          341,889        —          349,594   

Accrued payroll and related costs

    —          6,176        7,611        —          —          110,149        —          123,936   

Accounts payable to affiliates

    900,063        4,806,235        5,444        165,065        77,075        2,286,155        (8,240,037     —     

Taxes payable

    —          9,152        —          —          —          121,692        —          130,844   

Interest payable

    1,594        —          —          62,430        4,412        —          —          68,436   

Other current liabilities

    —          —          240        —          —          158,259        —          158,499   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

    991,971        4,879,139        125,248        227,495        81,487        3,724,389        (9,198,420     831,309   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Long-term debt

    639,794        —          —          3,792,886        201,695        —          —          4,634,375   

Notes payable to affiliates

    2,840,287        648,475        —          975,000        1,342,000        5,392,497        (11,198,259     —     

Deferred income taxes

    —          —          15,731        —          —          210,314        —          226,045   

Other liabilities

    19,930        17,815        —          —          —          309,870        —          347,615   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    4,491,982        5,545,429        140,979        4,995,381        1,625,182        9,637,070        (20,396,679     6,039,344   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commitments and contingencies

               

Total shareholder equity

    7,765,958        7,568,664        4,283,204        6,495,174        1,458,254        9,509,343        (29,314,639     7,765,958   

Noncontrolling interest

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

    7,765,958        7,568,664        4,283,204        6,495,174        1,458,254        10,678,963        (29,719,135     8,531,082   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

  $ 12,257,940      $ 13,114,093      $ 4,424,183      $ 11,490,555      $ 3,083,436      $ 20,316,033      $ (50,115,814   $ 14,570,426   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Three Months Ended March 31, 2013

(in thousands)

 

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

Operating revenues

                

Contract drilling services

   $ —        $ 46,957      $ 4,991      $ —        $ —        $ 897,239      $ (20,450   $ 928,737   

Reimbursables

     —          586        —          —          —          20,588        —          21,174   

Labor contract drilling services

     —          —          —          —          —          21,054        —          21,054   

Other

     —          —          —          —          —          10        —          10   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     —          47,543        4,991        —          —          938,891        (20,450     970,975   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating costs and expenses

                

Contract drilling services

     919        16,425        1,785        24,213        —          453,669        (20,450     476,561   

Reimbursables

     —          334        —          —          —          14,588        —          14,922   

Labor contract drilling services

     —          —          —          —          —          12,249        —          12,249   

Depreciation and amortization

     —          14,862        1,101        —          —          189,788        —          205,751   

General and administrative

     625        1,892        1        8,713        —          3,612        —          14,843   

Gain on contract extinguishment

     —          —          —          —          —          (1,800     —          (1,800
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     1,544        33,513        2,887        32,926        —          672,106        (20,450     722,526   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (1,544     14,030        2,104        (32,926     —          266,785        —          248,449   

Other income (expense)

                

Equity earnings in affiliates, net of tax

     202,765        96,943        7,453        225,457        116,028        —          (648,646     —     

Interest expense, net of amounts capitalized

     (33,307     (7,562