Derivative Instruments

6 Months Ended

Jun. 30, 2011

Derivative Instruments [Abstract]

Derivative Instruments

7. Derivative Instruments

     The Company was issued warrants to purchase up to 5.0 million additional shares of Discovery Offshore stock at a strike price of 11.5 Norwegian Kroner (“NOK”) per share which is exercisable in the event that the Discovery Offshore stock price reaches an average equal to or higher than 23 Norwegian Kroner per share, which approximated $4.25 per share as of June 30, 2011, for 30 consecutive trading days. The warrants are being accounted for as a derivative instrument as the underlying security is readily convertible to cash. Subsequent changes in the fair value of the warrants are recognized to other income (expense). The fair value of the Discovery Offshore warrants was determined using a Monte Carlo simulation (See Note 8).

     The following table provides the fair values of the Company’s derivatives (in thousands):

June 30, 2011
Balance Sheet	Fair
Classification	Value
Derivatives:
Warrants	$	3,825
Other Assets, Net	$	3,825

     The following table provides the effect of the Company’s derivatives on the Consolidated Statements of Operations (in thousands):

	Three Months Ended June 30,
		2011		2010				2011			2010
Derivatives	I.	II.					III.	IV.
Interest rate contracts	Interest Expense	$	—	$	(2,972	)	Interest Expense	$	—		$	104
Warrants	N/A	$	—	$	—		Other Income (Expense)	$	(1,390)		$	—
	Six Months Ended June 30,
		2011		2010				2011			2010
Derivatives	I.	II.					III.	IV.
Interest rate contracts	Interest Expense	$	—	$	(6,170	)	Interest Expense	$	—		$	(259	)
Warrants	N/A	$	—	$	—		Other Income (Expense)	$	(1,220	)	$	—

I.	Classification of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Loss) (Effective Portion)
II.	Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Loss) (Effective Portion)
III.	Classification of Gain (Loss) Recognized in Income (Loss) on Derivative
IV.	Amount of Gain (Loss) Recognized in Income (Loss) on Derivative