Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________________________________________________________
FORM 10-Q
_____________________________________________________________________________________________________
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2018
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission file number: 001-36211
_____________________________________________________________________________________________________
Noble Corporation plc
(Exact name of registrant as specified in its charter)
_____________________________________________________________________________________________________
England and Wales (Registered Number 08354954)
 
98-0619597
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. employer
identification number)
Devonshire House, 1 Mayfair Place, London, England, W1J8AJ
(Address of principal executive offices) (Zip Code)
Registrant’s Telephone Number, Including Area Code: +44 20 3300 2300
Commission file number: 001-31306
_____________________________________________________________________________________________________
Noble Corporation
(Exact name of registrant as specified in its charter)
_____________________________________________________________________________________________________
Cayman Islands
 
98-0366361
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. employer
identification number)
Suite 3D Landmark Square, 64 Earth Close, P.O. Box 31327 George Town, Grand Cayman, Cayman Islands, KY1-1206
(Address of principal executive offices) (Zip Code)
Registrant’s Telephone Number, Including Area Code: (345) 938-0293
_______________________________________________________________________________________________
Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨
Indicate by check mark whether each registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes  þ    No  ¨
Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Noble Corporation plc:
Large accelerated filer þ
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
Emerging growth company ¨
Noble Corporation:
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer þ
Smaller reporting company ¨
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ
Number of shares outstanding and trading at July 31, 2018: Noble Corporation plc — 246,783,435
Number of shares outstanding: Noble Corporation — 261,245,693
Noble Corporation, a Cayman Islands company and a wholly owned subsidiary of Noble Corporation plc, a public limited company incorporated under the laws of England and Wales, meets the conditions set forth in General Instructions H(1) (a) and (b) of Form 10-Q and is therefore filing this Quarterly Report on Form 10-Q with the reduced disclosure format contemplated by paragraphs (b) and (c) of General Instruction H(2) of Form 10-Q.



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

2


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NOBLE CORPORATION PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

 
 
June 30,
2018
 
December 31,
2017
ASSETS
Current assets
 
 
 
 
Cash and cash equivalents
 
$
411,492

 
$
662,829

Accounts receivable, net
 
212,229

 
204,696

Taxes receivable
 
12,811

 
105,345

Prepaid expenses and other current assets
 
60,721

 
66,105

Total current assets
 
697,253

 
1,038,975

Property and equipment, at cost
 
10,924,509

 
12,034,331

Accumulated depreciation
 
(2,403,099
)
 
(2,545,091
)
Property and equipment, net
 
8,521,410

 
9,489,240

Other assets
 
175,024

 
266,444

Total assets
 
$
9,393,687

 
$
10,794,659

LIABILITIES AND EQUITY
Current liabilities
 
 
 
 
Current maturities of long-term debt
 
$
—

 
$
249,843

Accounts payable
 
93,612

 
84,032

Accrued payroll and related costs
 
41,852

 
54,904

Taxes payable
 
33,278

 
34,391

Interest payable
 
103,407

 
98,189

Other current liabilities
 
65,087

 
71,665

Total current liabilities
 
337,236

 
593,024

Long-term debt
 
3,842,617

 
3,795,867

Deferred income taxes
 
155,961

 
164,962

Other liabilities
 
284,823

 
290,178

Total liabilities
 
4,620,637

 
4,844,031

Commitments and contingencies (Note 15)
 


 


Shareholders' equity
 
 
 
 
Common stock, $0.01 par value, ordinary shares; 246,760 and 244,971 shares outstanding as of June 30, 2018 and December 31, 2017, respectively
 
2,468

 
2,450

Additional paid-in capital
 
688,214

 
678,922

Retained earnings
 
3,721,433

 
4,637,677

Accumulated other comprehensive loss
 
(49,883
)
 
(42,888
)
Total shareholders' equity
 
4,362,232

 
5,276,161

Noncontrolling interests
 
410,818

 
674,467

Total equity
 
4,773,050

 
5,950,628

Total liabilities and equity
 
$
9,393,687

 
$
10,794,659

See accompanying notes to the unaudited condensed consolidated financial statements.

3


NOBLE CORPORATION PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2017
 
2018
 
2017
Operating revenues
 
 
 
 
 
 
 
 
Contract drilling services
 
$
247,689

 
$
271,532

 
$
476,795

 
$
626,191

Reimbursables and other
 
10,680

 
6,610

 
16,731

 
14,927

 
 
258,369

 
278,142

 
493,526

 
641,118

Operating costs and expenses
 
 
 
 
 
 
 
 
Contract drilling services
 
151,437

 
162,781

 
288,286

 
323,550

Reimbursables
 
8,297

 
4,394

 
12,647

 
9,540

Depreciation and amortization
 
129,681

 
136,594

 
258,436

 
272,312

General and administrative
 
21,717

 
18,658

 
43,800

 
34,538

Loss on impairment
 
792,843

 
—

 
792,843

 
—

 
 
1,103,975

 
322,427

 
1,396,012

 
639,940

Operating income (loss)
 
(845,606
)
 
(44,285
)
 
(902,486
)
 
1,178

Other income (expense)
 
 
 
 
 
 
 
 
Interest expense, net of amounts capitalized
 
(74,130
)
 
(73,209
)
 
(150,145
)
 
(146,656
)
Loss on extinguishment of debt, net
 
—

 
—

 
(8,768
)
 
—

Interest income and other, net
 
2,865

 
3,074

 
4,204

 
4,691

Loss from continuing operations before income taxes
 
(916,871
)
 
(114,420
)
 
(1,057,195
)
 
(140,787
)
Income tax benefit (provision)
 
38,839

 
18,213

 
35,843

 
(239,194
)
Net loss from continuing operations
 
(878,032
)
 
(96,207
)
 
(1,021,352
)
 
(379,981
)
Net loss from discontinued operations, net of tax
 
—

 
(1,486
)
 
—

 
(1,486
)
Net loss
 
(878,032
)
 
(97,693
)
 
(1,021,352
)
 
(381,467
)
Net (income) loss attributable to noncontrolling interests
 
249,969

 
4,343

 
250,955

 
(13,577
)
Net loss attributable to Noble Corporation plc
 
$
(628,063
)
 
$
(93,350
)
 
$
(770,397
)
 
$
(395,044
)
Net loss attributable to Noble Corporation plc
 
 
 
 
 
 
 
 
Loss from continuing operations
 
$
(628,063
)
 
$
(91,864
)
 
$
(770,397
)
 
$
(393,558
)
Net loss from discontinued operations, net of tax
 
—

 
(1,486
)
 
—

 
(1,486
)
Net loss attributable to Noble Corporation plc
 
$
(628,063
)
 
$
(93,350
)
 
$
(770,397
)
 
$
(395,044
)
Per share data
 
 
 
 
 
 
 
 
Basic:
 


 


 
 
 
 
Loss from continuing operations
 
$
(2.55
)
 
$
(0.37
)
 
$
(3.13
)
 
$
(1.61
)
Loss from discontinued operations
 
—

 
(0.01
)
 
—

 
(0.01
)
Net loss attributable to Noble Corporation plc
 
$
(2.55
)
 
$
(0.38
)
 
$
(3.13
)
 
$
(1.62
)
Diluted:
 

 

 
 
 
 
Loss from continuing operations
 
$
(2.55
)
 
$
(0.37
)
 
$
(3.13
)
 
$
(1.61
)
Loss from discontinued operations
 
—

 
(0.01
)
 
—

 
(0.01
)
Net loss attributable to Noble Corporation plc
 
$
(2.55
)
 
$
(0.38
)
 
$
(3.13
)
 
$
(1.62
)
See accompanying notes to the unaudited condensed consolidated financial statements.

4


NOBLE CORPORATION PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)

 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2017
 
2018
 
2017
Net loss
 
$
(878,032
)
 
$
(97,693
)
 
$
(1,021,352
)
 
$
(381,467
)
Other comprehensive income (loss)
 
 
 
 
 
 

 
 

Foreign currency translation adjustments
 
(2,771
)
 
94

 
(2,104
)
 
280

Foreign currency forward contracts
 
—

 
849

 
—

 
739

Amortization of deferred pension plan amounts (net of tax provision of $86 and $161 for the three months ended June 30, 2018 and 2017, respectively, and $173 and $328 for the six months ended June 30, 2018 and 2017, respectively)
 
325

 
375

 
649

 
767

Other comprehensive income (loss), net
 
(2,446
)
 
1,318

 
(1,455
)
 
1,786

Net comprehensive (income) loss attributable to noncontrolling interests
 
249,969

 
4,343

 
250,955

 
(13,577
)
Comprehensive loss attributable to Noble Corporation plc
 
$
(630,509
)
 
$
(92,032
)
 
$
(771,852
)
 
$
(393,258
)

See accompanying notes to the unaudited condensed consolidated financial statements.

5


NOBLE CORPORATION PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 
 
Six Months Ended June 30,
 
 
2018
 
2017
Cash flows from operating activities
 
 
 
 
Net loss
 
$
(1,021,352
)
 
$
(381,467
)
Adjustments to reconcile net loss to net cash flow from operating activities:
 
 
 
 
Depreciation and amortization
 
258,436

 
272,312

Loss on impairment
 
792,843

 
—

Loss on extinguishment of debt, net
 
8,768

 
—

Deferred income taxes
 
(51,724
)
 
303,084

Amortization of share-based compensation
 
12,735

 
15,187

Other long-term asset write-off
 
—

 
14,419

Other costs, net
 
3,226

 
2,800

Changes in components of working capital:
 
 
 
 
Change in taxes receivable
 
84,486

 
—

Net changes in other operating assets and liabilities
 
(33,524
)
 
27,950

Net cash provided by operating activities
 
53,894

 
254,285

Cash flows from investing activities
 
 
 
 
Capital expenditures
 
(75,874
)
 
(67,608
)
Proceeds from disposal of assets, net
 
3,755

 
314

Net cash used in investing activities
 
(72,119
)
 
(67,294
)
Cash flows from financing activities
 
 
 
 
Issuance of senior notes
 
750,000

 
—

Repayments of debt
 
(952,209
)
 
(300,000
)
Debt issuance costs on senior notes and credit facilities
 
(14,802
)
 
(42
)
Dividends paid to noncontrolling interests
 
(12,694
)
 
(5,393
)
Taxes withheld on employee stock transactions
 
(3,407
)
 
(4,301
)
Net cash used in financing activities
 
(233,112
)
 
(309,736
)
Net decrease in cash and cash equivalents
 
(251,337
)
 
(122,745
)
Cash and cash equivalents, beginning of period
 
662,829

 
725,722

Cash and cash equivalents, end of period
 
$
411,492

 
$
602,977

See accompanying notes to the unaudited condensed consolidated financial statements.

6


NOBLE CORPORATION PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
(Unaudited)
 
 
 
Shares
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Noncontrolling Interests
 
Total Equity
 
 
Balance
 
Par Value
 
 
 
 
 
Balance at December 31, 2016
 
243,239

 
$
2,432

 
$
654,168

 
$
5,154,221

 
$
(52,140
)
 
$
708,764

 
$
6,467,445

Employee related equity activity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of share-based compensation
 
—

 
—

 
15,187

 
—

 
—

 
—

 
15,187

Issuance of share-based compensation shares
 
1,664

 
17

 
(23
)
 
—

 
—

 
—

 
(6
)
Shares withheld for taxes on equity transactions
 
—

 
—

 
(4,318
)
 
—

 
—

 
—

 
(4,318
)
Net income (loss)
 
—

 
—

 
—

 
(395,044
)
 
—

 
13,577

 
(381,467
)
Dividends paid to noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
(5,393
)
 
(5,393
)
Dividends unpaid to noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
(20,900
)
 
(20,900
)
Dividend equivalents (1)
 
—

 
—

 
—

 
83

 
—

 
—

 
83

Other comprehensive income, net
 
—

 
—

 
—

 
—

 
1,786

 
—

 
1,786

Balance at June 30, 2017
 
244,903

 
$
2,449

 
$
665,014

 
$
4,759,260

 
$
(50,354
)
 
$
696,048

 
$
6,072,417

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
 
244,971

 
$
2,450

 
$
678,922

 
$
4,637,677

 
$
(42,888
)
 
$
674,467

 
$
5,950,628

Tax effect of intra-entity asset transfers (Note 2)
 
—

 
—

 
—

 
(149,938
)
 
—

 
—

 
(149,938
)
Stranded tax effect resulting from the Tax Cuts and Job Act (Note 2)
 
—

 
—

 
—

 
5,540

 
(5,540
)
 
—

 
—

Adjustment for adopting the revenue recognition standard
 
—

 
—

 
—

 
(1,488
)
 
—

 
—

 
(1,488
)
Balance at January 1, 2018
 
244,971

 
2,450

 
678,922

 
4,491,791

 
(48,428
)
 
674,467

 
5,799,202

Employee related equity activity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of share-based compensation
 
—

 
—

 
12,735

 
—

 
—

 
—

 
12,735

Issuance of share-based compensation shares
 
1,789

 
18

 
(18
)
 
—

 
—

 
—

 
—

Shares withheld for taxes on equity transactions
 
—

 
—

 
(3,425
)
 
—

 
—

 
—

 
(3,425
)
Net loss
 
—

 
—

 
—

 
(770,397
)
 
—

 
(250,955
)
 
(1,021,352
)
Dividends paid to noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
(12,694
)
 
(12,694
)
Dividend equivalents (1)
 
—

 
—

 
—

 
39

 
—

 
—

 
39

Other comprehensive loss, net
 
—

 
—

 
—

 
—

 
(1,455
)
 
—

 
(1,455
)
Balance at June 30, 2018
 
246,760

 
$
2,468

 
$
688,214

 
$
3,721,433

 
$
(49,883
)
 
$
410,818

 
$
4,773,050

(1) 
Activity associated with dividend equivalents, which are related to performance awards granted in 2016, to be paid upon vesting.
See accompanying notes to the unaudited condensed consolidated financial statements.



7


NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited) 

 
 
June 30,
2018
 
December 31,
2017
ASSETS
Current assets
 
 
 
 
Cash and cash equivalents
 
$
410,672

 
$
662,011

Accounts receivable, net
 
212,229

 
204,696

Taxes receivable
 
12,811

 
105,345

Prepaid expenses and other current assets
 
60,628

 
65,441

Total current assets
 
696,340

 
1,037,493

Property and equipment, at cost
 
10,924,509

 
12,034,331

Accumulated depreciation
 
(2,403,099
)
 
(2,545,091
)
Property and equipment, net
 
8,521,410

 
9,489,240

Other assets
 
175,109

 
266,528

Total assets
 
$
9,392,859

 
$
10,793,261

LIABILITIES AND EQUITY
Current liabilities
 
 
 
 
Current maturities of long-term debt
 
$
—

 
$
249,843

Accounts payable
 
93,431

 
83,873

Accrued payroll and related costs
 
41,821

 
54,904

Taxes payable
 
33,278

 
33,965

Interest payable
 
103,407

 
98,189

Other current liabilities
 
64,928

 
71,466

Total current liabilities
 
336,865

 
592,240

Long-term debt
 
3,842,617

 
3,795,867

Deferred income taxes
 
155,961

 
164,962

Other liabilities
 
284,823

 
290,178

Total liabilities
 
4,620,266

 
4,843,247

Commitments and contingencies (Note 15)
 


 


Shareholder equity
 
 
 
 
Common stock, $0.01 par value, ordinary shares; 261,246 shares outstanding as of June 30, 2018 and December 31, 2017
 
26,125

 
26,125

Capital in excess of par value
 
635,848

 
623,137

Retained earnings
 
3,749,685

 
4,669,173

Accumulated other comprehensive loss
 
(49,883
)
 
(42,888
)
Total shareholder equity
 
4,361,775

 
5,275,547

Noncontrolling interests
 
410,818

 
674,467

Total equity
 
4,772,593

 
5,950,014

Total liabilities and equity
 
$
9,392,859

 
$
10,793,261

See accompanying notes to the unaudited condensed consolidated financial statements.

8


NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2017
 
2018
 
2017
Operating revenues
 
 
 
 
 
 
 
 
Contract drilling services
 
$
247,689

 
$
271,532

 
$
476,795

 
$
626,191

Reimbursables and other
 
10,680

 
6,610

 
16,731

 
14,927

 
 
258,369

 
278,142

 
493,526

 
641,118

Operating costs and expenses
 
 
 
 
 
 
 
 
Contract drilling services
 
150,748

 
162,267

 
287,155

 
322,667

Reimbursables
 
8,297

 
4,394

 
12,647

 
9,540

Depreciation and amortization
 
128,173

 
134,633

 
255,812

 
270,351

General and administrative
 
8,121

 
13,231

 
21,578

 
22,295

Loss on impairment
 
792,843

 
—

 
792,843

 
—

 
 
1,088,182

 
314,525

 
1,370,035

 
624,853

Operating income (loss)
 
(829,813
)
 
(36,383
)
 
(876,509
)
 
16,265

Other income (expense)
 
 
 
 
 
 
 
 
Interest expense, net of amounts capitalized
 
(74,130
)
 
(73,209
)
 
(150,145
)
 
(146,656
)
Loss on extinguishment of debt, net
 
—

 
—

 
(8,768
)
 
—

Interest income and other, net
 
2,851

 
3,138

 
4,197

 
4,641

Loss from continuing operations before income taxes
 
(901,092
)
 
(106,454
)
 
(1,031,225
)
 
(125,750
)
Income tax benefit (provision)
 
38,733

 
18,213

 
35,737

 
(239,160
)
Net loss from continuing operations
 
(862,359
)
 
(88,241
)
 
(995,488
)
 
(364,910
)
Net income from discontinued operations, net of tax
 
—

 
2,967

 
—

 
2,967

Net loss
 
(862,359
)
 
(85,274
)
 
(995,488
)
 
(361,943
)
Net (income) loss attributable to noncontrolling interests
 
249,969

 
4,343

 
250,955

 
(13,577
)
Net loss attributable to Noble Corporation
 
$
(612,390
)
 
$
(80,931
)
 
$
(744,533
)
 
$
(375,520
)
See accompanying notes to the unaudited condensed consolidated financial statements.

9


NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)

 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2017
 
2018
 
2017
Net loss
 
$
(862,359
)
 
$
(85,274
)
 
$
(995,488
)
 
$
(361,943
)
Other comprehensive income (loss)
 
 
 
 
 
 

 
 

Foreign currency translation adjustments
 
(2,771
)
 
94

 
(2,104
)
 
280

Foreign currency forward contracts
 
—

 
849

 
—

 
739

Amortization of deferred pension plan amounts (net of tax provision of $86 and $161 for the three months ended June 30, 2018 and 2017, respectively, and $173 and $328 for the six months ended June 30, 2018 and 2017, respectively)
 
325

 
375

 
649

 
767

Other comprehensive income (loss), net
 
(2,446
)
 
1,318

 
(1,455
)
 
1,786

Net comprehensive (income) loss attributable to noncontrolling interests
 
249,969

 
4,343

 
250,955

 
(13,577
)
Comprehensive loss attributable to Noble Corporation
 
$
(614,836
)
 
$
(79,613
)
 
$
(745,988
)
 
$
(373,734
)
See accompanying notes to the unaudited condensed consolidated financial statements.



10


NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 
 
Six Months Ended June 30,
 
 
2018
 
2017
Cash flows from operating activities
 
 
 
 
Net loss
 
$
(995,488
)
 
$
(361,943
)
Adjustments to reconcile net loss to net cash flow from operating activities:
 
 
 
 
Depreciation and amortization
 
255,812

 
270,351

Loss on impairment
 
792,843

 
—

Loss on extinguishment of debt, net
 
8,768

 
—

Deferred income taxes
 
(51,724
)
 
303,084

Amortization of share-based compensation
 
12,711

 
15,154

Other long-term asset write-off
 
—

 
14,419

Other cost, net
 
3,226

 
2,800

Changes in components of working capital:
 
 
 
 
Change in taxes receivable
 
84,486

 
—

Net changes in other operating assets and liabilities
 
(31,080
)
 
25,504

Net cash provided by operating activities
 
79,554

 
269,369

Cash flows from investing activities
 
 
 
 
Capital expenditures
 
(75,874
)
 
(67,608
)
Proceeds from disposal of assets, net
 
3,755

 
314

Net cash used in investing activities
 
(72,119
)
 
(67,294
)
Cash flows from financing activities
 
 
 
 
Issuance of senior notes
 
750,000

 
—

Repayments of debt
 
(952,209
)
 
(300,000
)
Debt issuance costs on senior notes and credit facilities
 
(14,802
)
 
(42
)
Dividends paid to noncontrolling interests
 
(12,694
)
 
(5,393
)
Contributions from (distributions to) parent company, net
 
(29,069
)
 
51,705

Net cash used in financing activities
 
(258,774
)
 
(253,730
)
Net decrease in cash and cash equivalents
 
(251,339
)
 
(51,655
)
Cash and cash equivalents, beginning of period
 
662,011

 
653,833

Cash and cash equivalents, end of period
 
$
410,672

 
$
602,178

See accompanying notes to the unaudited condensed consolidated financial statements.

11


NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
(Unaudited)

 
 
Shares
 
Capital in Excess of Par Value
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Noncontrolling Interests
 
Total Equity
 
 
Balance
 
Par Value
 
 
 
 
 
Balance at December 31, 2016
 
261,246

 
$
26,125

 
$
594,091

 
$
5,115,137

 
$
(52,140
)
 
$
708,764

 
$
6,391,977

Contributions from parent company, net
 
—

 
—

 
—

 
51,705

 
—

 
—

 
51,705

Share-based compensation contribution by parent
 
—

 
—

 
15,154

 
—

 
—

 
—

 
15,154

Net income (loss)
 
—

 
—

 
—

 
(375,520
)
 
—

 
13,577

 
(361,943
)
Dividends paid to noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
(5,393
)
 
(5,393
)
Dividends unpaid to noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
(20,900
)
 
(20,900
)
Other comprehensive income, net
 
—

 
—

 
—

 
—

 
1,786

 
—

 
1,786

Balance at June 30, 2017
 
261,246

 
$
26,125

 
$
609,245

 
$
4,791,322

 
$
(50,354
)
 
$
696,048

 
$
6,072,386

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
 
261,246

 
$
26,125

 
$
623,137

 
$
4,669,173

 
$
(42,888
)
 
$
674,467

 
$
5,950,014

Tax effect of intra-entity asset transfers (Note 2)
 
—

 
—

 
—

 
(149,938
)
 
—

 
—

 
(149,938
)
Stranded tax effect resulting from the Tax Cuts and Job Act (Note 2)
 
—

 
—

 
—

 
5,540

 
(5,540
)
 
—

 
—

Adjustment for adopting the revenue recognition standard
 
—

 
—

 
—

 
(1,488
)
 
—

 
—

 
(1,488
)
Balance at January 1, 2018
 
261,246

 
26,125

 
623,137

 
4,523,287

 
(48,428
)
 
674,467

 
5,798,588

Distributions to parent company, net
 
—

 
—

 
—

 
(29,069
)
 
—

 
—

 
(29,069
)
Share-based compensation contribution by parent
 
—

 
—

 
12,711

 
—

 
—

 
—

 
12,711

Net loss
 
—

 
—

 
—

 
(744,533
)
 
—

 
(250,955
)
 
(995,488
)
Dividends paid to noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
(12,694
)
 
(12,694
)
Other comprehensive loss, net
 
—

 
—

 
—

 
—

 
(1,455
)
 
—

 
(1,455
)
Balance at June 30, 2018
 
261,246

 
$
26,125

 
$
635,848

 
$
3,749,685

 
$
(49,883
)
 
$
410,818

 
$
4,772,593

See accompanying notes to the unaudited condensed consolidated financial statements.

12
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)




Note 1— Organization and Basis of Presentation
Noble Corporation plc, a public limited company incorporated under the laws of England and Wales (“Noble-UK”), is a leading offshore drilling contractor for the oil and gas industry. We provide contract drilling services with our global fleet of mobile offshore drilling units. As of June 30, 2018, our fleet consisted of eight drillships, four semisubmersibles and 12 jackups.
We report our contract drilling operations as a single reportable segment, Contract Drilling Services, which reflects how we manage our business. The mobile offshore drilling units comprising our offshore rig fleet operate in a global market for contract drilling services and are often redeployed to different regions due to changing demands of our customers, which consist primarily of large, integrated, independent and government-owned or controlled oil and gas companies throughout the world.
Noble Corporation, a Cayman Islands company (“Noble-Cayman”), is an indirect, wholly-owned subsidiary of Noble-UK, our publicly-traded parent company. Noble-UK’s principal asset is all of the shares of Noble-Cayman. Noble-Cayman has no public equity outstanding. The condensed consolidated financial statements of Noble-UK include the accounts of Noble-Cayman, and Noble-UK conducts substantially all of its business through Noble-Cayman and its subsidiaries.
The accompanying unaudited condensed consolidated financial statements of Noble-UK and Noble-Cayman have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) as they pertain to Quarterly Reports on Form 10-Q. Accordingly, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The unaudited financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the financial position and results of operations for the interim periods, on a basis consistent with the annual audited consolidated financial statements. All such adjustments are of a recurring nature. The December 31, 2017 Condensed Consolidated Balance Sheets presented herein are derived from the December 31, 2017 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, 2017, filed by both Noble-UK and Noble-Cayman. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.
We have made certain reclassifications to our prior period amounts in our operating revenue by combining other revenue with reimbursables revenue to conform to the current period presentation. Such reclassification did not have a material effect on our condensed consolidated statements of operations.
We have made certain reclassifications to our prior period amounts in our investing activities by combining changes in accrued capital expenditures with capital expenditures to conform to the current period presentation. Such reclassification did not have a material effect on our condensed consolidated statements of cash flows.
Note 2— Accounting Pronouncements
Accounting Standards Adopted
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-9, which creates Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers,” and supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition,” including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, ASU No. 2014-9 supersedes the cost guidance in Subtopic 605-35, “Revenue Recognition—Construction-Type and Production-Type Contracts,” and creates new Subtopic 340-40, “Other Assets and Deferred Costs—Contracts with Customers.” Under the new guidance, revenue is recognized when a customer obtains control of promised goods or services and in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services.
We adopted ASU 2014-09 and its related amendments, or collectively Topic 606, effective January 1, 2018 using the modified retrospective implementation method. Accordingly, we have applied the five-step method outlined in Topic 606 for determining when and how revenue is recognized to all contracts that were not completed as of the date of adoption. Revenues for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts have not been adjusted and continue to be reported under the previous revenue recognition guidance. For contracts that were modified before the effective date, we have considered the modification guidance within the new standard and determined that the revenue recognized and contract balances recorded prior to adoption for such contracts were not impacted. While Topic 606 requires additional disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, its adoption has not had a material impact on the measurement or recognition of our revenues. Our modified retrospective adoption, for which we were not required to make any material changes to the prior year presentation, did not have a material effect on our condensed consolidated financial statements.

13
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)



In October 2016, the FASB issued ASU No. 2016-16, which amends ASC Topic 740, “Income Taxes.” The amendments in this update improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. This standard is effective for interim and annual reporting periods beginning after December 15, 2017. We have adopted the new standard effective January 1, 2018 under the modified retrospective approach. Accordingly, “Other Assets” is reduced in our Condensed Consolidated Balance Sheet with a cumulative adjustment to retained earnings of approximately $149.9 million.
In February 2018, the FASB issued ASU No. 2018-2, which amends ASC Topic 220, “Income Statement—Reporting Comprehensive Income.” The amendments in this update allow for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (the “Act”). This standard is effective for interim and annual reporting periods beginning after December 15, 2018 with early application permitted. We have elected to adopt the new standard effective January 1, 2018 under the modified retrospective approach. The amendment should be applied on a retrospective basis to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Act was recognized. As a result of the retrospective application, we will reduce “Accumulated Other Comprehensive Income” in our Condensed Consolidated Balance Sheet with a cumulative adjustment to “Retained Earnings” of approximately $5.5 million.
In March 2017, the FASB issued ASU No. 2017-7, which amends ASC Topic 715, “Compensation —Retirement Benefits; Improving the Presentation of Net Periodic Pension Cost and Postretirement Benefits Cost.” The amendments in this update require that an employer disaggregate the service cost component from the other components of net benefit cost for an entity's defined benefit pension and other postretirement plans. The amendments also provide explicit guidance on how to present the service cost component and the other components of net benefit cost in the income statement and allow only the service cost component of net benefit cost to be eligible for capitalization. The amendments in this update require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit costs, as defined in paragraphs 715-30-35-4 and 715-60-35-9, are required to be presented in the income statement separately from the service cost component and outside of income from operations. We adopted ASU No. 2017-7 effective January 1, 2018 and accordingly, we have made certain reclassifications between our “Contract drilling services” costs and “Interest income and other, net” on our Condensed Consolidated Statement of Operations.
Issued Accounting Standards
In February 2016, the FASB issued ASU No. 2016-2, which creates ASC Topic 842, “Leases.” This standard is effective for interim and annual reporting periods beginning after December 15, 2018. We expect to adopt, on a modified retrospective basis, ASC 842 effective January 1, 2019. Our adoption requires that, as lessees, we recognize a right to use asset and lease liability. In addition, as lessors, our drilling contracts contain a lease component, which requires revenue presentation analysis. The ultimate effect on our consolidated financial statements, will be based on an evaluation of the contract-specific facts and circumstances. We do not expect our adoption to materially affect our Condensed Consolidated Balance Sheet, Condensed Consolidated Statement of Operations, or Condensed Consolidated Statement of Cash Flows. We are currently evaluating what other effect, if any, ASC 842 will have on our condensed consolidated financial statements and related disclosures.
With the exception of the updated standards discussed above, there have been no new accounting pronouncements not yet effective that have significance, or potential significance, to our condensed consolidated financial statements.
Note 3— Consolidated Joint Ventures
We maintain a 50 percent interest in two joint ventures, each with a subsidiary of Royal Dutch Shell plc (“Shell”), that own and operate the two Bully-class drillships. We have determined that we are the primary beneficiary of the joint ventures. Accordingly, we consolidate the entities in our condensed consolidated financial statements after eliminating intercompany transactions. Shell’s equity interests are presented as noncontrolling interests on our Condensed Consolidated Balance Sheets.
During the six months ended June 30, 2018, the Bully joint ventures approved and paid dividends of $25.4 million. During the six months ended June 30, 2017, the Bully joint ventures approved dividends of $52.6 million and paid dividends of $10.8 million. Of these amounts, 50 percent was paid to our joint venture partner.
The combined carrying amount of the Bully-class drillships at June 30, 2018 and December 31, 2017 totaled $0.7 billion and $1.3 billion, respectively. These assets were primarily funded through partner equity contributions. During the three and six months ended June 30, 2018, we recognized a $550.3 million impairment on the Noble Bully I, of which $250.3 million is attributable to our joint venture partner. See “Note 10— Loss on Impairment” for additional information. Cash held by the Bully joint ventures totaled approximately $41.3 million at June 30, 2018 as compared to approximately $41.6 million at December 31, 2017.

14
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)



Note 4— Loss Per Share
The following table presents the computation of basic and diluted earnings per share for Noble-UK:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2017
 
2018
 
2017
Numerator:
 
 

 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
 
Net loss from continuing operations
 
$
(628,063
)
 
$
(91,864
)
 
$
(770,397
)
 
$
(393,558
)
Net loss from discontinued operations, net of tax
 
—

 
(1,486
)
 
—

 
(1,486
)
Net loss attributable to Noble Corporation plc
 
$
(628,063
)
 
$
(93,350
)
 
$
(770,397
)
 
$
(395,044
)
Diluted
 
 

 
 

 
 
 
 
Net loss from continuing operations
 
$
(628,063
)
 
$
(91,864
)
 
$
(770,397
)
 
$
(393,558
)
Net loss from discontinued operations, net of tax
 
—

 
(1,486
)
 
—

 
(1,486
)
Net loss attributable to Noble Corporation plc
 
$
(628,063
)
 
$
(93,350
)
 
$
(770,397
)
 
$
(395,044
)
Denominator:
 
 

 
 

 
 
 
 
Weighted average shares outstanding - basic
 
246,740

 
244,828

 
246,438

 
244,527

Weighted average shares outstanding - diluted
 
246,740

 
244,828

 
246,438

 
244,527

Loss per share
 
 

 
 

 
 
 
 
Basic:
 
 
 
 
 
 
 
 
Loss from continuing operations
 
$
(2.55
)
 
$
(0.37
)
 
$
(3.13
)
 
$
(1.61
)
Loss from discontinued operations
 
—

 
(0.01
)
 
—

 
(0.01
)
Net loss attributable to Noble Corporation plc
 
$
(2.55
)
 
$
(0.38
)
 
$
(3.13
)
 
$
(1.62
)
Diluted:
 
 
 
 
 
 
 
 
Loss from continuing operations
 
$
(2.55
)
 
$
(0.37
)
 
$
(3.13
)
 
$
(1.61
)
Loss from discontinued operations
 
—

 
(0.01
)
 
—

 
(0.01
)
Net loss attributable to Noble Corporation plc
 
$
(2.55
)
 
$
(0.38
)
 
$
(3.13
)
 
$
(1.62
)
Only those items having a dilutive impact on our basic earnings per share are included in diluted earnings per share. For the three and six months ended June 30, 2018, approximately 13.4 million share-based awards were excluded from diluted earnings per share since the effect would have been anti-dilutive. For the three and six months ended June 30, 2017, approximately 12.6 million share-based awards were excluded from diluted earnings per share for the same reason.
Share capital
As of June 30, 2018, Noble-UK had approximately 246.8 million shares outstanding and trading as compared to approximately 245.0 million shares outstanding and trading at December 31, 2017. At our 2018 Annual General Meeting shareholders approved a proposal to allow our Board of Directors to increase share capital through the issuance of up to 82.2 million ordinary shares (at current nominal value of $0.01 per share). The right of our directors to allot shares will expire at the end of our 2019 Annual General Meeting unless we seek an extension from shareholders at that time. There were no shares allotted during the six months ended June 30, 2018.
The declaration and payment of dividends require the authorization of the Board of Directors of Noble-UK, provided that such dividends on issued share capital may be paid only out of Noble-UK’s “distributable reserves” on its statutory balance sheet in accordance with UK law. Noble-UK is not permitted to pay dividends out of share capital, which includes share premiums. Noble has not paid dividends since the third quarter of 2016. The payment of future dividends will depend on our results of operations, financial condition, cash requirements, future business prospects, contractual and indenture restrictions and other factors deemed relevant by our Board of Directors.
Share repurchases
Under UK law, the Company is only permitted to purchase its own shares by way of an “off-market purchase” in a plan approved by shareholders. We currently do not have shareholder authority to repurchase shares.
Note 5— Receivables from Customers
At December 31, 2016, we had receivables of approximately $14.4 million related to the Noble Max Smith, which had been disputed by our former customer, Petróleos Mexicanos (“Pemex”) and were classified as long-term and included in “Other assets” on our Condensed

15
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)



Consolidated Balance Sheet. The receivables were related 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. A Mexican subsidiary of Paragon Offshore plc (“Paragon Offshore”), which had operated the Noble Max Smith, had been prosecuting the claim against Pemex. As of December 31, 2017, Paragon Offshore announced that, as part of its bankruptcy plan, it will liquidate the Mexican entity involved.
While Noble owns all rights to amounts from that claim and will take available actions to recover such amounts, we believe the announced actions by Paragon Offshore create uncertainty relating to the prosecution of the claim and associated recovery, and accordingly, the disputed amounts of approximately $14.4 million were written off through “Contract drilling services” costs during the six months ended June 30, 2017.
Note 6— Property and Equipment
Property and equipment, at cost, for Noble-UK consisted of the following:
 
 
June 30, 2018
 
December 31, 2017
Drilling equipment and facilities
 
$
10,610,440

 
$
11,746,629

Construction in progress
 
111,304

 
83,509

Other
 
202,765

 
204,193

Property and equipment, at cost
 
$
10,924,509

 
$
12,034,331

During the three and six months ended June 30, 2018, we recognized a non-cash loss on impairment of $792.8 million, related to our long-lived assets. See “Note 10— Loss on Impairment” for additional information.
Note 7— Debt
Credit Facilities
2015 Credit Facility
At December 31, 2017, we had a five-year $2.4 billion senior unsecured credit facility that will mature in January 2020 and is guaranteed by our indirect, wholly-owned subsidiaries, Noble Holding (U.S.) LLC (“NHUS”) and Noble Holding International Limited (“NHIL”) (the “2015 Credit Facility”). At December 31, 2017, the 2015 Credit Facility also provided us with the ability to issue up to $500.0 million in letters of credit.
On December 19, 2017, we entered into the First Amendment and Consent and Successor Agent Agreement (the “Amendment”) amending the 2015 Credit Facility. On January 3, 2018, the Amendment to the 2015 Credit Facility became fully effective. The Amendment caused, among other things, a reduction in the aggregate principal amount of commitments under the 2015 Credit Facility to $300.0 million and the termination of the 2015 Credit Facility's letter of credit sub-facility. The maturity of the 2015 Credit Facility remains January 2020. As a result of the 2015 Credit Facility's reduction in the aggregate principal amount of commitments, we recognized a net loss of approximately $2.3 million in the six months ended June 30, 2018. At June 30, 2018, we had no borrowings outstanding under the 2015 Credit Facility.
2017 Credit Facility
On December 21, 2017, Noble Cayman Limited, a Cayman Islands company and a wholly-owned indirect subsidiary of Noble-Cayman (“NCL”); Noble International Finance Company, a Cayman Islands company and a wholly-owned indirect subsidiary of Noble-Cayman (“NIFCO”); and Noble Holding UK Limited, a company incorporated under the laws of England and Wales and a wholly-owned direct subsidiary of Noble-UK (“NHUK”), as parent guarantor, entered into a new senior unsecured credit agreement (the “2017 Credit Facility” and, together with the 2015 Credit Facility, the “Credit Facilities”). The maximum aggregate amount of commitments under the 2017 Credit Facility of approximately $1.5 billion became available in January 2018 upon satisfaction of certain conditions, including the effectiveness of the commitment reduction under the 2015 Credit Facility. Borrowings under the 2017 Credit Facility are subject to certain conditions precedent, including that there be no unused commitments to advance loans under the 2015 Credit Facility. Borrowings may be used for working capital and other general corporate purposes. The 2017 Credit Facility provides for a letter of credit sub-facility currently in the amount of $15.0 million, with the ability to increase such amount up to $500.0 million with the approval of the lenders. The 2017 Credit Facility will mature in January 2023. At June 30, 2018, we had no borrowings outstanding or letters of credit issued under the 2017 Credit Facility.
Both of our Credit Facilities have provisions which vary the applicable interest rates for borrowings based upon our debt ratings. We also pay a facility fee under the 2015 Credit Facility on the full commitments thereunder (used or unused) and a commitment fee under the 2017 Credit

16
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)



Facility on the daily unused amount of the underlying commitments, in each case which varies depending on our credit ratings. At June 30, 2018, the interest rates in effect under our Credit Facilities are the highest permitted interest rates under those agreements.
Debt Issuance
In January 2018, we issued $750.0 million aggregate principal amount of our Senior Notes due 2026 (the “2026 Notes”) through our indirect wholly-owned subsidiary, NHIL. The net proceeds of the offering of approximately $737.4 million, after estimated expenses, were used to retire a portion of our near-term senior notes in a related tender offer.
The indenture for the 2026 Notes contains certain covenants and restrictions, including, among others, restrictions on our subsidiaries’ ability to incur certain additional indebtedness. Additionally, the Subsidiary Guarantors must own, directly or indirectly, (i) assets comprising at least 85% of the revenue of Noble-Cayman and its subsidiaries on a consolidated basis and (ii) jackups, semisubmersibles, drillships, submersibles or other mobile offshore drilling units of material importance, the combined book value of which comprises at least 85% of the combined book value of all such assets of Noble-Cayman and its subsidiaries on a consolidated basis, in each case, with respect to the most recently completed fiscal year.
Senior Notes Interest Rate Adjustments
During 2016 and 2017, we experienced debt rating downgrades by Moody’s Investors Service and S&P Global Ratings, which reduced our debt ratings below investment grade. As a result of these downgrades, we experienced interest rate increases during 2016 and 2017 on our Senior Notes due 2018 (the “2018 Notes”), our Senior Notes due 2025 (the “2025 Notes”) and our Senior Notes due 2045 (the “2045 Notes”), all of which are subject to provisions that vary the applicable interest rates based on our debt rating. On October 18, 2017, S&P Global Ratings further reduced our debt rating, which increased the interest rates on the 2025 Notes and the 2045 Notes to 7.95% and 8.95%, respectively, effective April 2018. These senior notes have reached the contractually defined maximum interest rate set for each rating agency and no further interest rate increases are possible. The interest rates on these senior notes may be decreased if our debt ratings were to be raised by either rating agency above specified levels. Our other outstanding senior notes do not contain provisions varying applicable interest rates based upon our credit ratings.
Debt Tender Offers and Repayments
In January 2018, we commenced cash tender offers for the 2018 Notes, our Senior Notes due 2019 (the “2019 Notes”), our Senior Notes due 2020, our Senior Notes due 2021, our Senior Notes due 2022 and our Senior Notes due 2024. In February 2018, we purchased $754.2 million aggregate principal amount of these senior notes for $750.0 million, plus accrued interest, using the net proceeds of the 2026 Notes issuance and cash on hand. As a result of this transaction, we recognized a net loss of approximately $3.5 million.
In February 2018, we redeemed the remaining principal amount of $61.9 million of the 2019 Notes for approximately $65.3 million, plus accrued interest. As a result of this transaction, we recognized a net loss of approximately $3.5 million.
In March 2018, we repaid the remaining aggregate principal amount of $126.6 million of the 2018 Notes at maturity using cash on hand.
In March 2018, we purchased $9.5 million aggregate principal amount of various tranches of our senior notes for approximately $8.7 million, plus accrued interest, as open market repurchases and recognized a net gain of approximately $0.5 million.
Covenants
The 2015 Credit Facility is guaranteed by NHUS and NHIL. The 2015 Credit Facility contains a covenant that limits our ratio of debt to total tangible capitalization, as defined in the 2015 Credit Facility, to 0.60 at the end of each fiscal quarter.
The 2017 Credit Facility contains certain financial covenants applicable to NHUK and its subsidiaries, including (i) a covenant restricting debt to total tangible capitalization to not greater than 0.55 at the end of each fiscal quarter, (ii) a minimum Liquidity requirement of $300.0 million, (iii) a covenant that, beginning with the fiscal quarter ending March 31, 2018, the ratio of the Rig Value (as defined in the 2017 Credit Facility) of Marketed Rigs (as defined in the 2017 Credit Facility) to the sum of commitments under the 2017 Credit Facility plus indebtedness for borrowed money of the borrowers and guarantors, in each case, that directly own Marketed Rigs, is not less than 3:00 to 1:00 at the end of each fiscal quarter and (iv) a covenant that, beginning with the fiscal quarter ending March 31, 2018, the ratio of (A) the Rig Value of the Closing Date Rigs (as defined in the 2017 Credit Facility) that are directly wholly owned by the borrowers and guarantors to (B) the Rig Value of the Closing Date Rigs owned by NHUK, subsidiaries of NHUK and certain local content affiliates, is not less than 80% at the end of each fiscal quarter (such covenants described in (iii) and (iv) of this paragraph, the “Guarantor Ratio Covenants”). The 2017 Credit Facility also includes restrictions on borrowings if, after giving effect to any such borrowings and the application of the proceeds thereof, the aggregate amount of Available Cash (as defined in the 2017 Credit Facility) would exceed $200.0 million.

17
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)



NHUK has guaranteed the obligations of the borrowers under the 2017 Credit Facility. In addition, on January 19, 2018 certain indirect subsidiaries of Noble-UK became guarantors under the 2017 Credit Facility, including Noble Dave Beard Limited, Noble Drilling (TVL) Ltd., Noble Resources Limited, Noble SA Limited, Noble Bob Douglas LLC, Noble Drilling Holding LLC, Noble Drilling International GmbH, Noble Leasing (Switzerland) GmbH, and Noble Leasing III (Switzerland) GmbH. Certain other subsidiaries of Noble-UK may be required from time to time to guarantee the obligations of the borrowers under the 2017 Credit Facility in order maintain compliance with the Guarantor Ratio Covenants.
The 2017 Credit Facility contains additional restrictive covenants generally applicable to NHUK and its subsidiaries, including restrictions on the incurrence of liens and indebtedness, mergers and other fundamental changes, restricted payments, repurchases and redemptions of indebtedness with maturities outside of the maturity of the 2017 Credit Facility, sale and leaseback transactions and transactions with affiliates.
In addition to the covenants from the Credit Facilities noted above and the covenants from the 2026 Notes described under “—Debt Issuance” above, the indentures governing our outstanding senior unsecured notes contain covenants that place restrictions on certain merger and consolidation transactions, unless we are the surviving entity or the other party assumes the obligations under the indenture, and on the ability to sell or transfer all or substantially all of our assets. In addition, there are restrictions on incurring or assuming certain liens and on entering into sale and lease-back transactions.
At June 30, 2018, we were in compliance with all applicable debt covenants. We continually monitor compliance with the covenants under our Credit Facilities and senior notes and expect to remain in compliance throughout 2018.

18
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)



Fair Value of Debt
Fair value represents the amount at which an instrument could be exchanged in a current transaction between willing parties. The estimated fair value of our senior notes was based on the quoted market prices for similar issues or on the current rates offered to us for debt of similar remaining maturities (Level 2 measurement). All remaining fair value disclosures are presented in “Note 14— Fair Value of Financial Instruments.”
The following table presents the carrying value, net of unamortized debt issuance costs and discounts, and the estimated fair value of our total debt, not including the effect of unamortized debt issuance costs, respectively:
 
 
June 30, 2018
 
December 31, 2017
 
 
Carrying Value
 
Estimated Fair Value
 
Carrying Value
 
Estimated Fair Value
Senior unsecured notes:
 
 
 
 
 
 
 
 
5.75% Senior Notes due March 2018
 
$
—

 
$
—

 
$
249,843

 
$
250,830

7.50% Senior Notes due March 2019
 
—

 
—

 
201,535

 
206,881

4.90% Senior Notes due August 2020
 
65,786

 
64,773

 
167,422

 
163,283

4.625% Senior Notes due March 2021
 
92,865

 
89,655

 
208,095

 
195,687

3.95% Senior Notes due March 2022
 
41,606

 
38,170

 
125,307

 
107,348

7.75% Senior Notes due January 2024
 
782,057

 
760,838

 
971,498

 
861,160

7.95% Senior Notes due April 2025
 
446,308

 
416,727

 
446,106

 
380,732

7.875% Senior Notes due February 2026
 
737,900

 
772,695

 
—

 
—

6.20% Senior Notes due August 2040
 
396,771

 
291,504

 
396,738

 
274,988

6.05% Senior Notes due March 2041
 
394,569

 
288,936

 
394,514

 
273,988

5.25% Senior Notes due March 2042
 
494,125

 
341,250

 
494,063

 
315,430

8.95% Senior Notes due April 2045
 
390,630

 
358,760

 
390,589

 
320,396

Total debt
 
3,842,617

 
3,423,308

 
4,045,710

 
3,350,723

Current maturities of long-term debt
 
—

 
—

 
249,843

 
250,830

Long-term debt
 
$
3,842,617

 
$
3,423,308

 
$
3,795,867

 
$
3,099,893


19
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)



Note 8— Accumulated Other Comprehensive Income (Loss)
The following table presents the changes in the accumulated balances for each component of AOCI for the six months ended June 30, 2018 and 2017. All amounts within the table are shown net of tax.
 
 
Unrealized Losses on Cash Flow Hedges (1)
 
Defined Benefit Pension Items (2)
 
Foreign Currency Items
 
Total
Balance at December 31, 2016
 
$
—

 
$
(35,865
)
 
$
(16,275
)
 
$
(52,140
)
Activity during period:
 
 
 
 
 
 
 
 
Other comprehensive income before reclassifications
 
739

 
—

 
280

 
1,019

Amounts reclassified from AOCI
 
—

 
767

 
—

 
767

Net other comprehensive income
 
739

 
767

 
280

 
1,786

Balance at June 30, 2017
 
$
739

 
$
(35,098
)
 
$
(15,995
)
 
$
(50,354
)
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
 
$
—

 
$
(27,603
)
 
$
(15,285
)
 
$
(42,888
)
Activity during period:
 
 
 
 
 
 
 
 
Stranded tax effect resulting from the Act (Note 2)
 
—

 
(5,540
)
 
—

 
(5,540
)
Balance at January 1, 2018
 
—

 
(33,143
)
 
(15,285
)
 
(48,428
)
Activity during period:
 
 
 
 
 
 
 
 
Other comprehensive loss before reclassifications
 
—

 
—

 
(2,104
)
 
(2,104
)
Amounts reclassified from AOCI
 
—

 
649

 
—

 
649

Net other comprehensive income (loss)
 
—

 
649

 
(2,104
)