XML 66 R14.htm IDEA: XBRL DOCUMENT v2.4.1.9
Discontinued Operations
 3 Months Ended
Mar. 31, 2015
Discontinued Operations  
Discontinued Operations

 

Note 7—Discontinued Operations

 

Summarized results of discontinued operations

 

The summarized results of operations included in income from discontinued operations were as follows (in millions):

 

 

 

Three months ended March 31,

 

 

 

2015

 

2014

 

Operating revenues

 

$

—

 

$
108

 

Operating and maintenance expense

 
(1

)
(104

)

Loss on disposal of assets in discontinued operations, net

 

—

 
(10

)

Loss from discontinued operations before income tax expense

 
(1

)
(6

)

Income tax expense

 
(1

)
(2

)

Loss from discontinued operations, net of tax

 

$
(2

)

$
(8

)

 

Standard jackup and swamp barge contract drilling services

 

Overview—In September 2012, in connection with our efforts to dispose of non-strategic assets and to reduce our exposure to low-specification drilling units, we committed to a plan to discontinue operations associated with the standard jackup and swamp barge asset groups, components of our contract drilling services operating segment.

 

Sale transactions with Shelf Drilling—In November 2012, we completed the sale of 38 drilling units to Shelf Drilling Holdings, Ltd. (“Shelf Drilling”).  For a transition period following the completion of the sale transactions, we agreed to continue to operate a substantial portion of the standard jackups under operating agreements with Shelf Drilling and to provide certain other transition services to Shelf Drilling.  Under the operating agreements, we agreed to remit the collections from our customers under the associated drilling contracts to Shelf Drilling, and Shelf Drilling agreed to reimburse us for our direct costs and expenses incurred while operating the standard jackups on behalf of Shelf Drilling with certain exceptions.  Amounts due to Shelf Drilling under the operating agreements and transition services agreement may be contractually offset against amounts due from Shelf Drilling.  The costs to us for providing such operating and transition services, including allocated indirect costs, have exceeded the amounts we receive from Shelf Drilling for providing such services.

 

Under the operating agreements, we agreed to continue to operate these standard jackups on behalf of Shelf Drilling for periods ranging from nine months to 27 months, until expiration or novation of the underlying drilling contracts by Shelf Drilling.  As of March 31, 2015, we no longer operated drilling units for Shelf Drilling.  Until the expiration or novation of such drilling contracts, we retained possession of the materials and supplies associated with the standard jackups that we operated under the operating agreements.  In the three months ended March 31, 2015 and 2014, we received cash proceeds of $2 million and $3 million, respectively, associated with the sale of equipment and materials and supplies to Shelf Drilling upon expiration or novation of the drilling contracts.  Under a transition services agreement, we provided certain transition services through May 2014.

 

For a period through November 2015, we agreed to provide to Shelf Drilling up to $125 million of financial support by maintaining letters of credit, surety bonds and guarantees for various contract bidding and performance activities associated with the drilling units sold to Shelf Drilling and in effect at the closing of the sale transactions.  At the time of the sale transactions, we had $113 million of outstanding letters of credit, issued under our committed and uncommitted credit lines, in support of rigs sold to Shelf Drilling.  Included within the $125 million maximum amount, we agreed to provide up to $65 million of additional financial support in connection with any new drilling contracts related to such drilling units.  Shelf Drilling is required to reimburse us in the event that any of these instruments are called.  At March 31, 2015 and December 31, 2014, we had $79 million and $91 million, respectively, of outstanding letters of credit, issued under our committed and uncommitted credit lines, in support of drilling units sold to Shelf Drilling.  See Note 13—Commitments and Contingencies.

 

Other dispositions—During the three months ended March 31, 2014, we recognized a net gain of $1 million, which had no tax effect, related to the disposal of assets unrelated to rig sales.

 

Drilling management services

 

Overview—In February 2014, in connection with our efforts to discontinue non-strategic operations, we completed the sale of ADTI, which performs drilling management services in the North Sea.  As a result of the sale, we reclassified the results of operations of our drilling management services operating segment to discontinued operations for all periods presented.

 

Disposition—In the three months ended March 31, 2014, we received net cash proceeds of $11 million and recognized a net loss of $11 million ($0.03 per diluted share), which had no tax effect, associated with the sale of the drilling management services business.  We also agreed to provide a $15 million working capital line of credit to the buyer through March 2016.  We earn interest on the outstanding borrowings at a fixed rate of 8.3 percent per annum, payable quarterly.  At March 31, 2015 and December 31, 2014, ADTI had borrowings of $15 million outstanding under the working capital line of credit, recorded in other assets.