Discontinued Operations

9 Months Ended

Sep. 30, 2011

Discontinued Operations

Discontinued Operations

Note 8—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 September 30, 2011, the oil and gas properties and related assets of this reporting unit were classified as assets held for sale.  See Note 18—Subsequent Events.

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 $169 million ($0.53 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 provided 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 September 30,					Nine months ended September 30,
	2011			2010		2011			2010
Operating revenues	$	11		$	28	$	59		$	77
Costs and expenses	5			18		46			73
Loss on impairment (a)	4			—		4			2
Income from discontinued operations before income tax expense	2			10		9			2
Gain (loss) on disposal of discontinued operations, net	(4		)	—		169			—
Income tax benefit (expense)	(5		)	5		(7		)	23
Income (loss) from discontinued operations, net of tax	$	(7	)	$	15	$	171		$	25

(a)In the three and nine months ended September 30, 2011, we recognized a loss on impairment of the oil and gas properties since the carrying amount of the properties exceeded the estimated fair value less costs to sell the properties.  We estimated fair value based on unobservable inputs that require significant judgment for which there is little or no market data, including non-binding price quotes from unaffiliated parties.  In the nine months ended September 30, 2010, we recognized a loss on impairment of goodwill associated with the oil and gas properties reporting unit.

Assets and liabilities of discontinued operations—As of September 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):

	September 30, 2011		December 31, 2010
Assets
Oil and gas properties, net	$	54	$	—
Other related assets	9		—
Assets held for sale	$	63	$	—
Accounts receivable	$	13	$	22
Other assets	1		17
Other current assets	$	14	$	39
Rig and related equipment, net	$	—	$	86
Oil and gas properties, net	—		53
Other assets	$	—	$	139
Liabilities
Accounts payable	$	13	$	15
Other liabilities	31		13
Other current liabilities	$	44	$	28
Asset retirement obligation	$	—	$	9
Deferred taxes	—		19
Other long-term liabilities	$	—	$	28