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Contingencies | 9 Months Ended
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Sep. 30, 2015
Commitments and Contingencies Disclosure [Abstract] |
Contingencies | Contingencies Brazil Internal Investigation Pride International, Inc. (“Pride”), a company we acquired in 2011, commenced drilling operations in Brazil during 2001 and, in 2008, entered into a drilling contract with Petrobras for DS-5, a rig Pride had ordered from a shipyard in South Korea. Beginning in 2006, Pride conducted periodic compliance reviews of its business with Petrobras, and, after the acquisition, Ensco conducted similar compliance reviews, the most recent of which commenced in early 2015 after media reports were released regarding ongoing investigations of various kickback and bribery schemes in Brazil involving Petrobras. While conducting our compliance review, we became aware of an internal audit report by Petrobras alleging irregularities in relation to DS-5 - specifically, that Petrobras overpaid under the drilling contract. We believe this allegation is inaccurate, as publicly available data show that the contract’s compensation terms were in line with other contracts signed by Petrobras and other customers with our competitors during the same timeframe (late 2007 and early 2008). We provided this information to Petrobras in June 2015. We continue to operate DS-5 under its existing contract. In addition, all our other rigs contracted to Petrobras - ENSCO 6001, 6002, 6003 and 6004 - continue to work under their contracts. Upon learning of the Petrobras internal audit report, our Audit Committee appointed independent counsel to lead an investigation into the alleged irregularities. Subsequently, the internal audit report and the alleged irregularities were referenced in Brazilian court documents connected to the prosecution of former Petrobras directors and employees as well as certain other third parties, including a former marketing consultant who provided services to Pride in connection with DS-5. The former marketing consultant entered into a plea agreement with the Brazil authorities. This plea agreement was referenced in a Brazilian court proceeding relating to a project for a competitor having no connection to us. This court proceeding document states that another court action would be made public in due course with respect to DS-5; to date no further proceedings relating to DS-5 have been released. Independent counsel, under the direction of our Audit Committee, has substantially completed the investigation of these allegations by reviewing and analyzing available documents and correspondence and interviewing current and former employees involved in the contracting of DS-5 as well as the former marketing consultant. To date, our Audit Committee has found no evidence that Pride or Ensco or any of their current or former employees were aware of or involved in any wrongdoing, and our Audit Committee has found no evidence linking Ensco or Pride to any illegal acts committed by our former marketing consultant. Although the investigation is substantially complete, we cannot predict whether any new or additional allegations will be made and what impact those allegations will have on the timing or conclusions of the investigation. Our Audit Committee will examine any new or additional allegations and the facts and circumstances surrounding them. To date, we have not been contacted by Brazil authorities, and no authority has alleged wrongdoing by Pride or Ensco or any of their current or former employees. In June and July 2015, we voluntarily contacted the SEC and the U.S. Department of Justice (“DOJ”), respectively, to advise them of this matter and our Audit Committee’s independent investigation, and we provided them an update on the investigation in September 2015. We cannot predict whether any governmental authority will seek to investigate this matter, or if a proceeding were opened, the scope or ultimate outcome of any such investigation. If the SEC or DOJ determines that violations of the U.S. Foreign Corrupt Practices Act of 1977 (the "FCPA") have occurred, or if any governmental authority determines that we have violated applicable anti-bribery laws, they could seek civil and criminal sanctions, including monetary penalties, against us, as well as changes to our business practices and compliance programs, any of which could have a material adverse effect on our business and financial condition. ENSCO 74 Loss During 2008, ENSCO 74 was lost as a result of Hurricane Ike in the U.S. Gulf of Mexico. The ENSCO 74 sunken rig hull was located approximately 95 miles from the original drilling location when it was struck by an oil tanker during 2009. We filed a petition for exoneration or limitation of liability under U.S. admiralty and maritime law during 2009. Wreck removal operations on the sunken rig hull of ENSCO 74 were completed during 2010. The owner of the oil tanker that struck the hull of ENSCO 74 filed claims seeking monetary damages in excess of $5.0 million for losses incurred when the tanker struck the ENSCO 74 hull. This matter went to trial in June 2014, and we won a directed verdict on all claims. During the third quarter of 2015, the United States Court of Appeals for the Fifth Circuit affirmed the trial court's directed verdict. The deadline for further appeals has now passed, thereby closing this matter. ENSCO 29 Wreck Removal During 2005, a portion of the ENSCO 29 platform drilling rig was lost over the side of a customer's platform as a result of Hurricane Katrina. During 2014, we received a letter from an operator demanding that Ensco retrieve the derrick and drawworks from the seabed. Our property insurance policies include coverage for ENSCO 29 wreckage and debris removal costs up to $3.8 million. We also maintain liability insurance policies that provide coverage under certain circumstances for wreckage and debris removal costs in excess of the $3.8 million coverage provided under the property insurance policies. We believe that it is not probable a liability exists with respect to this matter, and no liability has been recorded on our condensed consolidated balance sheet as of September 30, 2015. While we cannot reasonably estimate a range of possible loss at this time, it is possible that removal costs may be in excess of our insurance coverage. Although we do not expect costs associated with the ENSCO 29 wreck removal to have a material adverse effect upon our financial position, operating results or cash flows, there can be no assurances as to the ultimate outcome. Asbestos Litigation We and certain subsidiaries have been named as defendants, along with numerous third-party companies as co-defendants, in multi-party lawsuits filed in Mississippi and Louisiana by approximately 60 plaintiffs. The lawsuits seek an unspecified amount of monetary damages on behalf of individuals alleging personal injury or death, primarily under the Jones Act, purportedly resulting from exposure to asbestos on drilling rigs and associated facilities during the 1960s through the 1980s. During 2013, we reached an agreement in principle with 58 plaintiffs to settle lawsuits filed in Mississippi for a nominal amount. A special master reviewed all 58 cases and made an allocation of settlement funds among the parties. The District Court Judge reviewed the allocations and accepted the special master’s recommendations and approved the settlements. The settlement documents for most of the individual plaintiffs have been processed and the cases have been dismissed. The settlement documents for approximately 18 individual plaintiffs are continuing to be processed. We intend to vigorously defend against the remaining claims and have filed responsive pleadings preserving all defenses and challenges to jurisdiction and venue. However, discovery is still ongoing and, therefore, available information regarding the nature of all pending claims is limited. At present, we cannot reasonably determine how many of the claimants may have valid claims under the Jones Act or estimate a range of potential liability exposure, if any. In addition to the pending cases in Mississippi and Louisiana, we have other asbestos or lung injury claims pending against us in litigation from time to time in other jurisdictions. Although we do not expect final disposition of these asbestos or lung injury lawsuits to have a material adverse effect upon our financial position, operating results or cash flows, there can be no assurances as to the ultimate outcome of the lawsuits. Other Matters In addition to the foregoing, we are named defendants or parties in certain other lawsuits, claims or proceedings incidental to our business and are involved from time to time as parties to governmental investigations or proceedings, including matters related to taxation, arising in the ordinary course of business. Although the outcome of such lawsuits or other proceedings cannot be predicted with certainty and the amount of any liability that could arise with respect to such lawsuits or other proceedings cannot be predicted accurately, we do not expect these matters to have a material adverse effect on our financial position, operating results or cash flows. In the ordinary course of business with customers and others, we have entered into letters of credit and surety bonds to guarantee our performance as it relates to our drilling contracts, contract bidding, customs duties, tax appeals and other obligations in various jurisdictions. Letters of credit and surety bonds outstanding as of September 30, 2015 totaled $95.8 million and were issued under facilities provided by various banks and other financial institutions. Obligations under these letters of credit and surety bonds are not normally called as we typically comply with the underlying performance requirement. As of September 30, 2015, we had not been required to make collateral deposits with respect to these agreements.

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