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Commitments And Contingencies | 12 Months Ended
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Dec. 31, 2012
Commitments And Contingencies and Other Matters [Abstract] |
Commitments And Contingencies | Note 13 — Commitments and Contingencies and Other Matters Commitments Commitments Related to Expansion of Well Intervention Fleet In March 2012, we executed a contract with a shipyard in Singapore for the construction of a newbuild semisubmersible well intervention vessel, the Q5000. This $386.5 million shipyard contract represents the majority of the expected costs associated with the construction of the Q5000. Under the terms of this contract, payments are made in a fixed percentage of the contract price, together with any variations, on contractually scheduled dates. At December 31, 2012, our total investment in the Q5000 was $139.6 million, including $115.9 million of scheduled payments made to the shipyard in 2012. In July 2012, we contracted to charter the Skandi Constructor for use in our North Sea and Canadian well intervention operations. The initial term of the charter will be three years once the vessel is delivered to us in the first half of 2013. In August 2012, we acquired the Discoverer 534 drillship from a subsidiary of Transocean Ltd. for $85 milli on. The vessel, renamed the Helix 534, is currently undergoing upgrades and modifications in Singapore to render it suitable for use as a well intervention vessel. At December 31, 2012, our investment in the acquisition and subsequent upgrades and modifications of the Heli x 534 totaled $113.5 million. Lease Commitments We lease several facilities, ROVs and vessels under non-cancelable operating leases. Future minimum rentals under these leases at December 31, 2012 are as follows:
|  | ROVs and Vessels |  | Facilities and Other |  | Total |
2013 | $ | 84,409 | $ | 1,948 | $ | 86,357 |
2014 |  | 87,942 |  | 3,077 |  | 91,019 |
2015 |  | 86,155 |  | 3,620 |  | 89,775 |
2016 |  | 60,019 |  | 3,289 |  | 63,308 |
2017 |  | 38,188 |  | 3,153 |  | 41,341 |
Thereafter |  | 4,905 |  | 22,778 |  | 27,683 |
Total lease commitments | $ | 361,618 | $ | 37,865 | $ | 399,483 |
Total rental expense under these operating leases was approximately $85.0 million, $62.2 million and $66.2 million for the years ended December 31, 2012, 2011 and 2010, respectively. Contingencies and Claims Under terms of the ERT equity purchase agreement, we have required the buyer to provide bonding in a sufficient amount as determined by the BOEM to replace and allow for a full discharge of our existing guarant y to the BOEM for ERT’s lease obligations. The BOEM is in the process of reevaluating its decommissioning assessments for lease properties in the Gulf of Mexico and as such it is currently uncertain as to the amount of bonding that will be required, and thus also the amount of collateral that the buyer will be required to post to its surety/ies to secure such bonding. To the extent that the purchaser is required to post bonding collateral in an amount greater than $100 million to obtain bonds in the aggregate amount required by the BOEM in order for the BOEM to release our guaranty of ERT’s lease obligations, we have agreed to provide incremental collateral above that amount, if and to the extent required, to the surety/ies providing bonding for the deepwater properties (the Bushwood and Phoenix fields) in the form of letter(s) of credit, up to the next $50 million of required collateral, for a period not to exceed one year from issuance of the letter(s) of credit, after which the purchaser would then be required to provide all collateral associated with the bonding requirements with respect to our former oil and gas properties. As the BOEM conducts its review of the Gulf of Mexico decommissioning assessments, we intend to work closely with the purchaser to provide specific information regarding our former lease properties. We anticipate that the BOEM will determine its assessments of decommissioning costs for our former deepwater fields in the near term and that the bonding amounts, and therefore the bonding collateral requirements, to obtain a release of our guaranty with respect to ERT’s lease obligations will be known. At the time of this filing it is uncertain whether the amount of collateral will exceed the $100 million threshold so as to require an y incremental bonding collateral on our part. We were subcontracted to perform development work for a large gas field offshore India. Work commenced in the fourth quarter of 2007 and we completed our scope of work in the third quarter of 2009. To date we have collected approximately $303 million related to this project with an amount of trade receivables yet to be collected. We have requested arbitration in India pursuant to the terms of the subcontract to pursue our claims and the prime contractor has also requested arbitration and has asserted certain counterclaims against us. If we are not successful in resolving these matters through ongoing discussions with the prime contractor, then arbitration in India remains a potential remedy. Based on a number of factors associated with the ongoing negotiations with the prime contractor, in 2010, we established a $4 million a llowance against our trade receivable balance that reduces its balance to an amount we believe is ultimately realizable. However, at the time of this filing no final commercial resolution of this matter has been reached. We ha ve received value added tax (VAT) assessments from the State of Andhra Pradesh, India (the “State”) in the amount of approximately $28 million for the tax years 2010, 2009, 2008 and 2007 related to an Indian subsea construction and diving contract that we entered into in December 2006. The State claims we owe unpaid taxes related to products consumed by us during the period of the contract. We are of the opinion that the State has arbitrarily assessed this VAT tax and has no foundation for the assessment and believe that we ha ve complied with all rules and regulations as r elate d to VAT in the State. We also believe that our position is supported by law and intend to vigorously defend our position. However, the ultimate outcome of this assessment and our potential liability from it, if any, cannot be determined at this time. If the current assessment is upheld, it may have a material negative effect on our consolidated results of operations while also impacting our financial position. Litigation On July 8, 2011, a shareholder derivative lawsuit styled City of Sterling Heights Police & Fire Retirement System v. Owen Kratz, et al. was filed in the United States District Court for the Southern District of Texas, Houston Division. In the suit, the plaintiff makes claims against our Board of Directors, certain of our former directors, our top current and former executives and the independent compensation consultant to the Compensation Committee of our Board of Directors, for breaches of the fiduciary duty of loyalty, unjust enrichment and aiding and abetting the alleged breaches of fiduciary duty relating to the long-term equity awards granted in 2010 to certain of the Company’s executive officers. The Company filed a motion to dismiss the claim asserting that the plaintiff has not (i) pled specific facts excusing its failure to make pre-suit demand on the Company’s Board of Directors as required by Minnesota law; (ii) filed proper verification; or (iii) stated a claim. A ruling regarding the motion is pending. On May 12, 2012, a shareholder derivative lawsuit styled Mark Lucas v. Owen Kratz, et al. was filed in the 270th Judicial District in the District Court of Harris County, Texas. In the suit, the plaintiff makes claims against our Board of Directors, certain of our former directors, certain of our current and former executive officers and the independent compensation consultant to the Compensation Committee of our Board of Directors, for breaches of the fiduciary duties of candor, good faith and loyalty, unjust enrichment and aiding and abetting the alleged breaches of fiduciary duty relating to the long-term equity awards granted in 2010 to certain of our executive officers. This case is essentially a “copycat” complaint asserting similar causes of action arising out of the same facts as set forth in the federal action described above. We have filed a motion to stay, motion to dismiss, special exceptions, plea to the jurisdiction and an original answer asserting that: (i) the suit should be stayed in favor of a first-filed federal derivative case; (ii) the plaintiff has not pled specific facts showing wrongful refusal of demand; (iii) the plaintiff has not demonstrated he continually owned shares during the complained of action; and (iv) the plaintiff has not stated a claim. The plaintiff is generally demanding disgorgement of the excessive compensation, restraint on the disposition/exercise of the alleged improperly awarded equity, implementation of additional internal controls, and attorney’s fees and costs of litigation. We are involved in various legal proceedings, primarily involving claims for personal injury under the General Maritime Laws of the United States and the Jones Act based on alleged negligence. In addition, from time to time we incur other claims, such as contract disputes, in the normal course of business. Insurance We carry Hull and Increased Value insurance which provides coverage for physical damage up to an agreed amount for each vessel. The deductibles are based on the value of the vessel with a maximum deductible of $1.0 million on the Q4000, HP I and Well Enhancer, $500,000 on the Seawell, Express and Helix 534, and $750,000 on the Caesar. In addition to the primary deductibles, the vessels are subject to an annual aggregate deductible of $5 million. We also carry Protection and Indemnity (“P&I”) insurance which covers liabilities arising from the operation of the vessels and General Liability insurance which covers liabilities ar ising from construction operations. The deductible on both the P&I and General Liability is $100,000 per occurrence. Onshore employees are covered by Workers’ Compensation. Offshore employees and marine crews are covered by a Maritime Employers Liability (“MEL”) insurance policy which covers Jones Act exposures and includes a deductible of $100,000 per occurrence plus a $1.0 millio n annual aggregate deductible. In addition to the liability policies described above, we currently carry various layers of Umbrella Liability for total limits of $500 million excess of primary limits. Our self-insured retention on our medical and health benefits program for employees is $250,000 per partic ipant. We incur workers’ compensation, MEL, and other insurance claims in the normal course of business, which management believes are covered by insurance. The Company analyzes each claim for potential exposure and estimates the ultimate liability of each claim. At December 31, 2012, we did not have any claims exceeding our deductible limits. We have not incurred any significant losses as a result of claims denied by our insurance carriers. Our services are provided in hazardous environments where accidents involving catastrophic damage or loss of life could occur, and litigation arising from such an event may result in our being named a defendant in lawsuits asserting large claims. Although there can be no assurance the amount of insurance we carry is sufficient to protect us fully in all events, or that such insurance will continue to be available at current levels of cost or coverage, we believe that our insurance protection is adequate for our business operations. A successful liability claim for which we are underinsured or uninsured could have a material adverse effect on our business. Loss Contracts Whenever we have a contract that qualifies as a loss contract, we estimate the future shortfall between our anticipated future revenues and future costs. In 2010, we had two contracts that resulted in significant losses. The first of these contracts represented the initial project performed by the Caesar. The project, which included a primary work scope of laying 36-miles of pipe in the Gulf of Mexico, was completed in the third quarter of 2010 at a total loss of $12.0 million. The loss was primarily the result of certain start-up performance issues with the vessel as well as non-reimbursable costs associated with weather delays. The second contract was entered into by our WOSEA subsidiary to plug, abandon and salvage subsea wells in an oil and gas field located offshore China. The project commenced in the second half of 2010 and was initially expected to be completed by the end of October 2010. However, the subsea wells were structurally difficult to plug. WOSEA also experienced some start-up issues with its recently repaired subsea intervention device, which was significantly damaged in March 2009. In the fourth quarter of 2010, WOSEA experienced significant weather delays corresponding with the peak of typhoon season in the China Sea, which added additional non reimbursable time and related costs to the project. As a result of the continued weather delays, it was mutually agreed that WOSEA would discontinue the project and in connection with that decision, the parties also agreed to a reduced scope of work for this project. Our operating results for the year ending December 31, 2010 included an aggregate $30 million pre-tax loss, which reflects the costs to complete the project over the contractual revenues as modified. In the first quarter of 2011, this project ended and we recorded an additional pre-tax loss of approximately $0.2 million.

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