Subsequent Events

9 Months Ended

Sep. 30, 2011

Subsequent Events

Subsequent Events

Note 18—Subsequent Events

Business combination—Subsequent to September 30, 2011, we completed our acquisition of 100 percent of the outstanding shares of Aker Drilling.  We believe the acquisition of Aker Drilling enhances the composition of our High-Specification Floater fleet and strengthens our presence in Norway.

Including the amount paid for our initial 13.7 percent interest, we paid an aggregate amount of NOK 7.9 billion, equivalent to USD 1.4 billion.  We will account for the business combination using the acquisition method of accounting, recording the assets and liabilities of Aker Drilling at their estimated fair values as of October 3, 2011, the acquisition date.

As of October 3, 2011, the acquisition price included the following, measured at estimated fair value: current assets of $341 million, drilling rigs and other property and equipment of $1.8 billion, other assets of $738 million, and the assumption of current liabilities of $205 million, long-term debt of $1.8 billion and noncontrolling interest of $11 million.  The acquired assets included $907 million of cash investments restricted for the payment of certain assumed debt instruments.  The excess of the purchase price over the estimated fair value of net assets acquired was approximately $397 million, which will be recorded as goodwill.  Certain fair value measurements have not been completed, and the purchase price allocation remains preliminary due to the timing of the acquisition and due to the number of assets acquired and liabilities assumed.  We continue to review the estimated fair values of property and equipment, intangible assets, and other assets and liabilities, and to evaluate the assumed tax positions and contingencies.

On October 4, 2011, we completed our acquisition of 100 percent of the shares of Aker Drilling by acquiring the 0.8 percent noncontrolling interest from holders that were required to tender their shares pursuant to Norwegian law.

Unaudited pro forma combined operating results, assuming the acquisition was completed as of January 1, 2011 and 2010, respectively, were as follows (in millions, except per share data):

	Nine months ended September 30,
	2011		2010
Operating revenues	$	7,032	$	7,563
Operating income	1,181		2,594
Income from continuing operations	337		1,789
Per share earnings from continuing operations
Basic	$	0.89	$	5.49
Diluted	$	0.89	$	5.49

The unaudited pro forma combined financial information includes Aker Drilling’s historical operating results, adjusted for depreciation based on the fair values of the drilling rigs and other property and equipment acquired, the amortization of drilling contract intangible assets arising from the acquisition, and related adjustments for income taxes.  The unaudited pro forma combined financial information has not been adjusted for additional charges and expenses or for other potential cost savings and operational efficiencies that may be realized as a result of the acquisition.  The unaudited pro forma combined financial information is not necessarily indicative of the results of operations had the acquisition actually been completed on the assumed date or the results of operations for any future periods.

Five-Year Revolving Credit Facility—Subsequent to September 30, 2011, we entered into the Five-Year Revolving Credit Facility Agreement dated November 1, 2011, for a $2.0 billion, five-year revolving credit facility thereby replacing the Five-Year Revolving Credit Facility under the Five-Year Revolving Credit Facility Agreement dated November 27, 2007.

Discontinued operations—Subsequent to September 30, 2011, we completed the sale of Challenger Minerals (North Sea) Limited, and the sale of the assets of Challenger Minerals Inc. for aggregate net sale proceeds of $50 million.

Macondo well incident—On November 1, 2011, we filed a motion for partial summary judgment against BP to enforce its contractual obligations to us, including BP’s obligation to defend, indemnify and hold us harmless against pollution claims.  See Note 14—Contingencies—Contractual indemnity.

On November 1, 2011, we filed with the MDL court a motion for partial summary judgment against BP to enforce BP’s contractual obligations, including BP’s obligation to defend, indemnify, and hold us harmless against pollution claims.

Notices of alleged non-compliance—The final Joint Investigation Team report was issued on September 14, 2011.  Subsequently, the Department of the Interior’s Bureau of Safety and Environmental Enforcement issued four notices of alleged non-compliance with regulatory requirements to us on October 12, 2011.  While we cannot predict or provide assurance as to the full outcome of these citations, they could result in the assessment of civil penalties.  We have sixty days to appeal.

Norway tax investigations—Subsequent to September 30, 2011, the Norwegian authorities issued criminal indictments against a Norwegian tax attorney.  The indictments related to certain of our restructuring transactions and to a 2001 dividend payment.  The indicted Norwegian tax attorney worked for us in an advisory capacity on these transactions.  We believe these charges are without merit and do not alter our technical assessment of the underlying claims.  We plan to continue to vigorously defend our subsidiaries to the fullest extent.  While we cannot predict or provide assurance as to the final outcome of our Norway 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.