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Derivatives and Hedging
 6 Months Ended
Jun. 30, 2013
Derivatives and Hedging  
Derivatives and Hedging
Note 11—Derivatives and Hedging
 
Derivatives designated as hedging instruments—We previously had interest rate swaps, which were designated and qualified as fair value hedges, to reduce our exposure to changes in the fair values of the 5% Notes due February 2013 and the 5.25% Senior Notes due March 2013.  The interest rate swaps had aggregate notional amounts equal to the corresponding face values of the hedged instruments and have stated maturities that coincide with those of the hedged instruments.  During the six months ended June 30, 2013, these interest rate swaps expired.
 
We also previously had interest rate swaps, which were designated and qualified as a cash flow hedge, to reduce the variability of cash interest payments associated with the variable-rate borrowings under the TPDI Credit Facilities through December 31, 2014.  In June 2013, we repaid the borrowings under the TPDI Credit Facilities, and we terminated these interest rate swaps.  In connection with the termination, we made a net cash payment of $22 million, and we reclassified $9 million from accumulated other comprehensive loss to other expense, net.
 
Additionally, we had cross-currency interest rate swaps, which were designated and qualified as a cash flow hedge, to reduce the variability of cash interest payments and the final principal payment due at maturity in February 2016 associated with the changes in the U.S. dollar to Norwegian krone exchange rate.  In March 2013, in connection with our redemption of the 11% Callable Bonds, we terminated these cross-currency interest rate swaps and the related security agreement with respect to Transocean Spitsbergen and Transocean Barents.  As a result of the termination, we made a cash payment of $128 million and received a cash payment of NOK 705 million, applied to the redemption of the 11% Callable Bonds, and we reclassified $5 million from accumulated other comprehensive loss to other expense, net.  See Note 10—Debt.
 
The effect on our condensed consolidated statements of operations resulting from changes in the fair values of derivatives designated as cash flow hedges was as follows (in millions):
 
       
Three months ended
June 30,
    
Six months ended
June 30,
  
   
Statement of operations classification
  
2013
    
2012
    
2013
    
2012
  
Loss associated with effective portion
  
Interest expense, net of amounts capitalized
  
$
2
    
$
2
    
$
4
    
$
3
  
Loss associated with effective portion
  
Other, net
    
—
      
4
      
—
      
—
  
Loss associated with terminations
  
Other, net
    
9
      
—
      
14
      
—
  
 

 
The balance sheet classification and aggregate carrying amount of our derivatives designated as hedging instruments, measured at fair value, were as follows (in millions):
 
   
Balance sheet classification
  
June 30,
2013
    
December 31,
2012
  
Interest rate swaps, fair value hedges
  
Other current assets
  
$
—
    
$
6
  
Interest rate swaps, cash flow hedges
  
Other long-term liabilities
    
—
      
13
  
Cross-currency swaps, cash flow hedges
  
Other current assets
    
—
      
1
  
Cross-currency swaps, cash flow hedges
  
Other assets
    
—
      
1
  
 

 
Derivatives not designated as hedging instruments—In connection with our sale transactions with Shelf Drilling, we received non-cash proceeds in the form of preference shares with a stated value of $195 million.  The preference shares contain two embedded derivatives, which were not designated and did not qualify as hedging instruments for accounting purposes, including (a) a ceiling dividend rate indexed to the price of Brent Crude oil and (b) a dividend rate premium triggered in the event of credit default.  At December 31, 2012, the embedded derivatives not designated as hedging instruments had an aggregate carrying amount of $2 million, recorded in other long-term liabilities.  In June 2013, we completed the sale of the preference shares with the embedded derivatives.  See Note 7—Discontinued Operations.