Transocean (RIG)

 

Accounting estimates>—To prepare financial statements in accordance with accounting principles generally accepted in the U.S., we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosures of contingent assets and liabilities.  On an ongoing basis, we evaluate our estimates and assumptions, including those related to our allowance for doubtful accounts, materials and supplies obsolescence, property and equipment, investments, notes receivable, goodwill and other intangible assets, income taxes, defined benefit pension plans and other postretirement benefits, contingencies and share-based compensation.  We base our estimates and assumptions on historical experience and on various other factors we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources.  Actual results could differ from such estimates.

 

Fair value measurements>—We estimate fair value at a price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market for the asset or liability.  Our valuation techniques require inputs that we categorize using a three-level hierarchy, from highest to lowest level of observable inputs, as follows: (1) unadjusted quoted prices for identical assets or liabilities in active markets (“Level 1”), (2) direct or indirect observable inputs, including quoted prices or other market data, for similar assets or liabilities in active markets or identical assets or liabilities in less active markets (“Level 2”) and (3) unobservable inputs that require significant judgment for which there is little or no market data (“Level 3”).  When multiple input levels are required for a valuation, we categorize the entire fair value measurement according to the lowest level of input that is significant to the measurement even though we may have also utilized significant inputs that are more readily observable.

 

Principles of consolidation>—We consolidate entities in which we have a majority voting interest and entities that meet the criteria for variable interest entities for which we are deemed to be the primary beneficiary for accounting purposes.  We eliminate intercompany transactions and accounts in consolidation.  We apply the equity method of accounting for investments in entities if we have the ability to exercise significant influence over the entity, which either (a) does not meet the variable interest entity criteria or (b) meets the variable interest entity criteria, but for which we are not deemed to be the primary beneficiary.  We apply the cost method of accounting for investments in other entities if we do not have the ability to exercise significant influence over the entity.  See Note 4—Variable Interest Entities.

 

- 6 -

 

 

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TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

 

Share-based compensation>—Share-based compensation expense was $27 million and $54 million for the three and six months ended June 30, 2011, respectively.  Share-based compensation expense was $18 million and $53 million for the three and six months ended June 30, 2010, respectively.

 

Capitalized interest>—We capitalize interest costs for qualifying construction and upgrade projects.  We capitalized interest costs on construction work in progress of $10 million and $25 million for the three and six months ended June 30, 2011, respectively.  We capitalized interest costs for construction work in progress of $19 million and $47 million for the three and six months ended June 30, 2010, respectively.

 

Reclassifications>—We have made certain reclassifications, which did not have an effect on net income, to prior period amounts to conform with the current period’s presentation, including certain reclassifications to our condensed consolidated statement of financial position, results of operations and cash flows to present our oil and gas properties operating segment and our Caspian Sea operations as discontinued operations (see Note 6—Discontinued Operations).  Other reclassifications did not have a material effect on our condensed consolidated statement of financial position, results of operations or cash flows.

 

Subsequent events>—We evaluate subsequent events through the time of our filing on the date we issue our financial statements.  See Note 16—Subsequent Events.

 

Note 3—New Accounting Pronouncements

 

Comprehensive Income>—Effective January 1, 2012, we will adopt the accounting standards update that amends the presentation requirements for comprehensive income and requires that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  Additionally, the update requires presentation of reclassification adjustments from other comprehensive income to net income on the face of the financial statements where the components of net income and the components of other comprehensive income are presented regardless of whether an entity chooses to present total comprehensive income in a single continuous statement or in two separate but consecutive statements.  The update is effective for interim and annual periods beginning after December 15, 2011.  We do not expect that our adoption will have a material effect on our consolidated financial statements.

 

Fair value measurements>—Effective January 1, 2012, we will adopt the accounting standards update that changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements.  Some of the amendments included in this update are intended to clarify the application of existing fair value measurement requirements.  The update is effective for annual periods beginning after December 15, 2011.  We do not expect that our adoption will have a material effect on the disclosures contained in our notes to consolidated financial statements.

 

Note 4—Variable Interest Entities

 

Consolidated variable interest entities>—We consolidate the assets and liabilities of Transocean Pacific Drilling Inc. (“TPDI”), a consolidated British Virgin Islands joint venture company, and Angola Deepwater Drilling Company Limited (“ADDCL”), a consolidated Cayman Islands joint venture company, which are two variable interest entities for which we are the primary beneficiary.  The carrying amounts associated with our consolidated variable interest entities, after eliminating the effect of intercompany transactions, were as follows (in millions):

 

	June 30, 2011												December 31, 2010
	Assets				Liabilities				Net carrying amount				Assets				Liabilities				Net carrying amount
Variable interest entity
TPDI	$	1,573			$	712			$	861			$	1,598			$	763			$	835
ADDCL		881				333				548				864				345				519
Total	$	2,454			$	1,045			$	1,409			$	2,462			$	1,108			$	1,354

 

 

Unconsolidated variable interest entity>—As holder of two notes receivable and a lender under a working capital loan, we hold a variable interest in Awilco Drilling plc (“Awilco”), a U.K. company (see Note 8—Drilling Fleet).  The notes receivable, originally issued in exchange for and secured by two drilling units, have stated interest rates of nine percent and are payable in scheduled quarterly installments of principal and interest through maturity in January 2015.  Additionally, we provide Awilco with a working capital loan, also secured by the drilling units, that has a stated interest rate of 10 percent and a maximum borrowing amount of $35 million.  We evaluate the credit quality and financial condition of Awilco quarterly.  The aggregate carrying amount of the notes receivable was $108 million and $109 million at June 30, 2011 and December 31, 2010, respectively.  The aggregate carrying amount of the working capital loan receivable was $35 million and $6 million at June 30, 2011 and December 31, 2010, respectively.

 

- 7 -

 

 

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TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

 

Note 5—Income Taxes

 

Tax rate>—Transocean Ltd., a holding company and Swiss resident, is exempt from cantonal and communal income tax in Switzerland, but is subject to Swiss federal income tax.  At the federal level, qualifying net dividend income and net capital gains on the sale of qualifying investments in subsidiaries are exempt from Swiss federal income tax.  Consequently, Transocean Ltd. expects dividends from its subsidiaries and capital gains from sales of investments in its subsidiaries to be exempt from Swiss federal income tax.

 

Our provision for income taxes is based on the tax laws and rates applicable in the jurisdictions in which we operate and earn income.  There is little to no expected relationship between the provision for or benefit from income taxes and income or loss before income taxes considering, among other factors, (a) changes in the blend of income that is taxed based on gross revenues rather than income before taxes, (b) rig movements between taxing jurisdictions and (c) our rig operating structures.

 

Our estimated annual effective tax rates were 22.6 percent and 16.2 percent for the six months ended June 30, 2011 and June 30, 2010, respectively.  These rates were based on estimated annual income before income taxes for each period after adjusting for various discrete items, including certain immaterial adjustments to prior period tax expense.

 

Deferred taxes>—The valuation allowance for our non-current deferred tax assets was as follows (in millions):

 

		June 30, 2011				December 31, 2010
Valuation allowance for non-current deferred tax assets		$	169			$	164

 

Unrecognized tax benefits>—The liabilities related to our unrecognized tax benefits, including related interest and penalties that we recognize as a component of income tax expense, were as follows (in millions):

 

		June 30, 2011				December 31, 2010
Unrecognized tax benefits, excluding interest and penalties		$	506			$	485
Interest and penalties			250				235
Unrecognized tax benefits, including interest and penalties		$	756			$	720

 

Tax returns>—We file federal and local tax returns in several jurisdictions throughout the world.  With few exceptions, we are no longer subject to examinations of our U.S. and non-U.S. tax matters for years prior to 2000.  For the six months ended June 30, 2011 and June 30, 2010, the amount of current tax benefit recognized from the settlement of disputes with tax authorities and from the expiration of statutes of limitations was insignificant.

 

Our tax returns in the major jurisdictions in which we operate, other than the U.S., Norway and Brazil which are mentioned below, are generally subject to examination for periods ranging from three to six years.  We have agreed to extensions beyond the statute of limitations in four major jurisdictions for up to 16 years.  Tax authorities in certain jurisdictions are examining our tax returns and in some cases have issued assessments.  We are defending our tax positions in those jurisdictions.  While we cannot predict or provide assurance as to the final outcome of these proceedings, we do not expect the ultimate liability to have a material adverse effect on our consolidated statement of financial position or results of operations, although it may have a material adverse effect on our consolidated cash flows.

 

U.S. tax investigations—With respect to our 2004 and 2005 U.S. federal income tax returns, the U.S. tax authorities have withdrawn all of their previously proposed tax adjustments, except a claim regarding transfer pricing for certain charters of drilling rigs between our subsidiaries, resulting in a total proposed adjustment of approximately $79 million, exclusive of interest.  We believe an unfavorable outcome on this assessment with respect to 2004 and 2005 activities would not result in a material adverse effect on our consolidated statement of financial position, results of operations or cash flows.  Although we believe the transfer pricing for these charters is materially correct, we have been unable to reach a resolution with the tax authorities.  This matter will be heard in U.S. Tax Court in January 2012.

 

In May 2010, we received an assessment from the U.S. tax authorities related to our 2006 and 2007 U.S. federal income tax returns.  In July 2010, we filed a protest letter with the U.S. tax authorities responding to this assessment.  The significant issues raised in the assessment relate to transfer pricing for certain charters of drilling rigs between our subsidiaries and the creation of intangible assets resulting from the performance of engineering services between our subsidiaries.  These two items would result in net adjustments of approximately $278 million of additional taxes, excluding interest.  An unfavorable outcome on these adjustments could result in a material adverse effect on our consolidated statement of financial position, results of operations or cash flows.  We believe our returns are materially correct as filed, and we intend to continue to vigorously defend against all such claims.

 

- 8 -

 

 

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TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

 

In addition, the May 2010 assessment included adjustments related to a series of restructuring transactions that occurred between 2001 and 2004.  These restructuring transactions impacted our basis in our former subsidiary, TODCO, which we disposed of in 2004 and 2005.  The authorities are disputing the amount of capital losses that resulted from the disposition of TODCO.  We utilized a portion of the capital losses to offset capital gains on our 2006, 2007, 2008 and 2009 tax returns.  The majority of the capital losses were unutilized and expired on December 31, 2009.  The adjustments would also impact the amount of certain net operating losses and other carryovers into 2006 and later years.  The authorities are also contesting the characterization of certain amounts of income received in 2006 and 2007 as capital gain and thus the availability of the capital gain for offset by the capital loss.  These claims with respect to our U.S. federal income tax returns for 2006 through 2009 could result in net tax adjustments of approximately $295 million.  An unfavorable outcome on these potential adjustments could result in a material adverse effect on our consolidated statement of financial position, results of operations or cash flows.  We believe that our tax returns are materially correct as filed, and we intend to vigorously defend against any potential claims.

 

The May 2010 assessment also included certain claims with respect to withholding taxes and certain other items resulting in net tax adjustments of approximately $163 million, exclusive of interest.  In addition, the tax authorities assessed penalties associated with the various tax adjustments for the 2006 and 2007 audits in the aggregate amount of approximately $92 million, exclusive of interest.  We believe that our tax returns are materially correct as filed, and we intend to vigorously defend against any potential claims.

 

Norway tax investigations—Norwegian civil tax and criminal authorities are investigating various transactions undertaken by our subsidiaries in 2001 and 2002 as well as the actions of certain employees of our former external tax advisors on these transactions.  The authorities issued tax assessments of (a) approximately $290 million plus interest, related to certain restructuring transactions, (b) approximately $127 million plus interest, related to the migration of a subsidiary that was previously subject to tax in Norway, (c) approximately $76 million plus interest, related to a 2001 dividend payment and (d) approximately $8 million plus interest, related to certain foreign exchange deductions and dividend withholding tax.  We have filed or expect to file appeals to these tax assessments.  We may be required to provide some form of financial security, in an amount up to $1.1 billion, including interest and penalties, for these assessed amounts as this dispute is appealed and addressed by the Norwegian courts.  The authorities have indicated that they plan to seek penalties of 60 percent on most but not all matters.  For these matters, we believe our returns are materially correct as filed, and we have and will continue to respond to all information requests from the Norwegian authorities.  In June 2011, the Norwegian authorities issued criminal indictments against two of our subsidiaries alleging misleading or incomplete disclosures in Norwegian tax returns for the years 1999 through 2002, as well as inaccuracies in Norwegian statutory financial statements for the years ended December 31, 1996 through 2001.  Two employees of our former external tax advisors were also issued indictments with respect to the disclosures in our tax returns.  We believe these charges are without merit and plan to vigorously defend our subsidiaries to the fullest extent.  We intend to vigorously contest any assertions by the Norwegian civil and criminal authorities in connection with the various transactions being investigated.  An unfavorable outcome on these Norwegian civil and criminal tax matters could result in a material adverse effect on our consolidated statement of financial position, results of operations or cash flows.  However, while we cannot predict or provide assurance as to the final outcome of these proceedings, we do not expect the ultimate resolution of these matters to have a material adverse effect on our consolidated statement of financial position or results of operations, although it may have a material adverse effect on our consolidated cash flows.

 

Brazil tax investigations—Certain of our Brazilian income tax returns for the years 2000 through 2004 are currently under examination.  The Brazilian tax authorities have issued tax assessments totaling $125 million, plus a 75 percent penalty of $94 million and $159 million of interest through June 30, 2011.  An unfavorable outcome on these proposed assessments could result in a material adverse effect on our consolidated statement of financial position, results of operations or cash flows.  We believe our returns are materially correct as filed, and we are vigorously contesting these assessments.  On January 25, 2008, we filed a protest letter with the Brazilian tax authorities, and we are currently engaged in the appeals process.

 

Other tax matters—We conduct operations through our various subsidiaries in a number of countries throughout the world.  Each country has its own tax regimes with varying nominal rates, deductions and tax attributes.  From time to time, we may identify changes to previously evaluated tax positions that could result in adjustments to our recorded assets and liabilities.  Although we are unable to predict the outcome of these changes, we do not expect the effect, if any, resulting from these assessments to have a material adverse effect on our consolidated statement of financial position, results of operations or cash flows.

 

Note 6—Discontinued Operations

 

Oil and gas properties>—In March 2011, in connection with our efforts to dispose of non-strategic assets, we engaged an unaffiliated advisor to coordinate the sale of the assets of our oil and gas properties reporting unit, a component of our other operations segment, which comprises the exploration, development and production activities performed by Challenger Minerals Inc. and Challenger Minerals (North Sea) Limited, our wholly owned oil and gas subsidiaries.  At June 30, 2011, the oil and gas properties and related assets of this reporting unit were classified as assets held for sale.

 

- 9 -

 

 

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TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

 

Caspian Sea operations>—In February 2011, in connection with our efforts to dispose of non-strategic assets, we sold the subsidiary that owns the High-Specification Jackup Trident 20, located in the Caspian Sea.  The disposal of this subsidiary, a component of our contract drilling services segment, reflects our decision to discontinue operations in the Caspian Sea.  As a result of the sale, we received net cash proceeds of $259 million and recognized a gain on the disposal of the discontinued operations of $173 million ($0.54 per diluted share from discontinued operations), which had no tax effect.  Through June 2011, we continued to operate Trident 20 under a bareboat charter to perform services for the customer and the buyer reimbursed us for the approximate cost of providing these services.  Additionally, we have agreed to provide certain transition services to the buyer through September 2011.

 

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

 

		Three months ended June 30,								Six months ended June 30,
		2011				2010				2011				2010
Operating revenues		$	22			$	26			$	48			$	49
Costs and expenses			18				18				41				57
Income (loss) from discontinued operations before income tax expense			4				8				7				(8	)
Income tax benefit (expense)			(2	)			—				(2	)			18
Gain on disposal of discontinued operations			—				—				173				—
Income from discontinued operations, net of tax		$	2			$	8			$	178			$	10

 

Assets and liabilities of discontinued operations—As of June 30, 2011, our oil and gas properties and related assets were classified as assets held for sale.  As a result of our decision to discontinue these operations and the operations of our Caspian Sea subsidiary, we also reclassified the assets and liabilities associated with our discontinued operations to other current assets, other assets, other current liabilities and other long-term liabilities as of December 31, 2010.  The carrying amounts of the major classes of assets and liabilities associated with these operations were classified as follows (in millions):

 

		June 30, 2011				December 31, 2010
Assets
Oil and gas properties, net		$	57			$	—
Other related assets			11				—
Assets held for sale		$	68			$	—
Accounts receivable		$	16			$	22
Other assets			5				17
Other current assets		$	21			$	39
Rig and related equipment, net		$	—			$	86
Oil and gas properties, net			—				53
Other assets		$	—			$	139
Liabilities
Accounts payable		$	22			$	15
Other liabilities			25				13
Other current liabilities		$	47			$	28
Asset retirement obligation		$	—			$	9
Deferred taxes			—				19
Other long-term liabilities		$	—			$	28

- 10 -

 

 

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TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

 

Note 7—Earnings Per Share

 

The reconciliation of the numerator and denominator used for the computation of basic and diluted per share earnings from continuing operations was as follows (in millions, except per share data):

 

		Three months ended June 30,																Six months ended June 30,
		2011								2010								2011								2010
		Basic				Diluted				Basic				Diluted				Basic				Diluted				Basic				Diluted
Numerator for earnings per share											(As adjusted)																(As adjusted)
Income from continuing operations attributable to controlling interest		$	153			$	153			$	707			$	707			$	287			$	287			$	1,382			$	1,382
Undistributed earnings allocable to participating securities			(1	)			(1	)			(4	)			(4	)			(2	)			(2	)			(8	)			(8	)
Income from continuing operations available to  shareholders		$	152			$	152			$	703			$	703			$	285			$	285			$	1,374			$	1,374
Denominator for earnings per share
Weighted-average shares outstanding			320				320				319				319				319				319				320				320
Effect of stock options and other share-based awards			—				—				—				1				—				1				—				1
Weighted-average shares for per share calculation			320				320				319				320				319				320				320				321
Per share earnings from continuing operations		$	0.47				0.47			$	2.20			$	2.20			$	0.89			$	0.89			$	4.29			$	4.28

 

For the three and six months ended June 30, 2011, respectively, 1.5 million and 1.7 million share-based awards were excluded from the calculation since the effect would have been anti-dilutive.  For the three and six months ended June 30, 2010, respectively, 2.3 million and 1.6 million share-based awards were excluded from the calculation since the effect would have been anti-dilutive.

 

The 1.625% Series A Convertible Senior Notes, 1.50% Series B Convertible Senior Notes and 1.50% Series C Convertible Senior Notes did not have an effect on the calculation for the periods presented (see Note 9—Debt).

 

- 11 -

 

 

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TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

 

Note 8—Drilling Fleet

 

Expansion>—Construction work in progress, recorded in property and equipment, was $843 million and $1.5 billion at June 30, 2011 and December 31, 2010, respectively.  Capital expenditures and other capital additions, including capitalized interest, for our major construction projects that were ongoing during the six months ended June 30, 2011 or during the year ended December 31, 2010 were as follows (in millions):

 

		Six months ended June 30, 2011				Through December 31, 2010				Total costs
Transocean Honor (a)		$	72			$	97			$	169
High-Specification Jackup TBN1 (b)			69				9				78
High-Specification Jackup TBN2 (b)			69				9				78
Deepwater Champion (c)(d)			49				733				782
High-Specification Jackup TBN3 (e)			10				—				10
Discoverer Luanda (d)(f)			8				709				717
Discoverer India (d)			—				744				744
Discoverer Inspiration (d)			—				679				679
Dhirubhai Deepwater KG2 (d)(g)			—				677				677
Capitalized interest			24				273				297
Mobilization costs			7				100				107
Total		$	308			$	4,030			$	4,338

__________________________

(a)	In November 2010, we purchased a PPL Pacific Class 400 design jackup, to be named Transocean Honor.  The High-Specification Jackup is under construction at PPL Shipyard Pte Ltd. in Singapore and is expected for delivery in the fourth quarter of 2011.

(b)	In December 2010, we purchased two Keppel FELS Super B class design jackups.  The two High-Specification Jackups TBN1 and TBN2 are under construction at Keppel FELS’ yard in Singapore and are expected for delivery in the fourth quarter of 2012 and first quarter of 2013, respectively.

(c)	These costs include our initial investment in Deepwater Champion of $109 million, representing the estimated fair value of the rig at the time of our merger with GlobalSantaFe Corporation (“GlobalSantaFe”) in November 2007.

(d)	The accumulated construction costs of these rigs are no longer included in construction work in progress, as their construction projects had been completed as of June 30, 2011.

(e)	In June 2011, we purchased a Keppel FELS Super B class design jackup.  The High-Specification Jackup TBN3 is under construction at Keppel FELS’ yard in Singapore and is expected for delivery in the third quarter of 2013.

(f)	The costs for Discoverer Luanda represent 100 percent of expenditures incurred since inception.  ADDCL is responsible for all of these costs.  We hold a 65 percent interest in the ADDCL joint venture, and Angco Cayman Limited holds the remaining 35 percent interest.

(g)

The costs for Dhirubhai Deepwater KG2 represent 100 percent of TPDI’s expenditures, including those incurred prior to our investment in the joint venture.  TPDI is responsible for all of these costs.  We hold a 50 percent interest in the TPDI joint venture, and Quantum Pacific Management Limited, a Cypriot company and successor in interest to Pacific Drilling Limited (“Quantum”), holds the remaining 50 percent interest.

 

Dispositions>—During the six months ended June 30, 2011, in connection with our efforts to dispose of non-strategic assets, we sold the High-Specification Jackup Trident 20 and the Standard Jackup Transocean Mercury.  The sale of Trident 20 reflected our decision to discontinue operations in the Caspian Sea (see Note 6—Discontinued Operations).  In connection with the sale of Transocean Mercury, we received net cash proceeds of $10 million and recognized a gain on disposal of the drilling unit of $9 million ($0.03 per diluted share from continuing operations), which had no tax effect.  For the three and six months ended June 30, 2011, we recognized a net loss on disposal of other unrelated assets in the amounts of $1 million and $2 million, respectively.

 

During the six months ended June 30, 2010, we sold two Midwater Floaters, GSF Arctic II and GSF Arctic IV.  In connection with the sales, we received net cash proceeds of $38 million and non-cash proceeds in the form of two notes receivable in the aggregate amount of $165 million (see Note 4—Variable Interest Entities).  We operated GSF Arctic IV under a short-term bareboat charter with the new owner of the vessel until November 2010.  As a result of the sales, we recognized a loss on disposal of assets in the amount of $15 million ($0.04 per diluted share from continuing operations), which had no tax effect for the six months ended June 30, 2010.  For the three and six months ended June 30, 2010, we recognized gains on disposal of unrelated assets in the amounts of $1 million and $2 million, respectively.

 

Assets held for sale>— During the six months ended June 30, 2011, in addition to our plan to sell the assets associated with our oil and gas properties operating segment (see Note 6—Discontinued Operations), we also committed to plans to sell our Standard Jackups GSF Britannia, George H. Galloway and GSF Labrador and related equipment.  In the three months ended June 30, 2011, we recognized a $25 million loss on impairment associated with GSF Britannia, George H. Galloway and GSF Labrador since the carrying amounts of these rigs and related assets exceeded the estimated fair values less costs to sell.  We estimated the fair values of the rigs and related assets using significant observable inputs, including binding sale and purchase agreements for the assets.  At June 30, 2011, GSF Britannia, George H. Galloway and GSF Labrador were classified as held for sale with an aggregate net carrying amount of $71 million.  At December 31, 2010, Transocean Mercury was classified as held for sale with a net carrying amount of less than $1 million.  See Note 16—Subsequent Events.

 

- 12 -

 

 

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TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

 

Note 9—Debt

 

Debt, net of unamortized discounts, premiums and fair value adjustments, was comprised of the following (in millions):

 

	June 30, 2011												December 31, 2010
	Transocean Ltd. and subsidiaries				Consolidated variable interest entities				Consolidated total				Transocean Ltd. and subsidiaries				Consolidated variable interest entities				Consolidated total
ODL Loan Facility	$	5			$	—			$	5			$	10			$	—			$	10
Commercial paper program (a)		144				—				144				88				—				88
6.625% Notes due April 2011 (a)		—				—				—				167				—				167
5% Notes due February 2013		255				—				255				255				—				255
5.25% Senior Notes due March 2013 (a)		511				—				511				511				—				511
TPDI Credit Facilities due March 2015		—				508				508				—				560				560
4.95% Senior Notes due November 2015 (a)		1,101				—				1,101				1,099				—				1,099
ADDCL Credit Facilities due December 2017		—				230				230				—				242				242
6.00% Senior Notes due March 2018 (a)		998				—				998				997				—				997
7.375% Senior Notes due April 2018 (a)		247				—				247				247				—				247
TPDI Notes due October 2019		—				148				148				—				148				148
6.50% Senior Notes due November 2020 (a)		899				—				899				899				—				899
8% Debentures due April 2027 (a)		57				—				57				57				—				57
7.45% Notes due April 2027 (a)		96				—				96				96				—				96
7% Notes due June 2028		313				—				313				313				—				313
Capital lease contract due August 2029		686				—				686				694				—				694
7.5% Notes due April 2031 (a)		598				—				598				598				—				598
1.625% Series A Convertible Senior Notes due December 2037 (a)		—				—				—				11				—				11
1.50% Series B Convertible Senior Notes due December 2037 (a)		1,653				—				1,653				1,625				—				1,625