Redeemable Noncontrolling Interest

9 Months Ended

Sep. 30, 2012

Redeemable Noncontrolling Interest

Redeemable Noncontrolling Interest

Note 16—Redeemable Noncontrolling Interest

On February 29, 2012, Quantum exercised its rights under the put option agreement to exchange its interest in TPDI for our shares or cash, at its election.  Based on the redemption value of Quantum’s interest as of that date, we adjusted the carrying amount of the noncontrolling interest and reclassified Quantum’s interest to other current liabilities with a corresponding adjustment in the amount of $106 million to retained earnings within shareholders’ equity.  We measured the estimated fair value of Quantum’s interest using significant other observable inputs, representing a Level 2 fair value measurement.

On March 29, 2012, Quantum elected to exchange its interest in TPDI for our shares, net of Quantum’s share of TPDI’s indebtedness, as defined in the put option agreement.  Quantum had the right, prior to closing of this exchange, to change its election to cash, net of Quantum’s share of TPDI’s indebtedness.

The carrying amount of Quantum’s interest was measured at its estimated fair value through settlement of the exchange transaction on May 31, 2012, resulting in an adjustment of $25 million to increase the liability with corresponding adjustments to other expense on our condensed consolidated statement of operations.  On May 31, 2012, we issued 8,695,351 shares to Quantum in a non-cash exchange for its interest in TPDI to satisfy our obligation, resulting in an adjustment of $134 million and $233 million to shares and additional paid-in capital, respectively.  The adjustment included the extinguishment of $148 million of TPDI Notes payable to Quantum and accrued and unpaid interest of $16 million.  As a result of this transaction, TPDI became our wholly owned subsidiary.  In August 2012, we paid $72 million as the final cash settlement, representing 50 percent of TPDI’s working capital at May 29, 2012.

Until February 29, 2012, Quantum had the unilateral right, pursuant to a put option agreement, to exchange its 50 percent interest in TPDI for our shares or cash, at its election, at an amount based on an appraisal of the fair value of the drillships that are owned by TPDI, subject to certain adjustments.  Accordingly, we presented Quantum’s interest as redeemable noncontrolling interest on our condensed consolidated balance sheets until Quantum exercised its rights under the put option agreement.  Changes in redeemable noncontrolling interest were as follows (in millions):

	Nine months ended September 30,
	2012			2011
Redeemable noncontrolling interest
Balance, beginning of period	$	116		$	41
Net income attributable to noncontrolling interest	13			36
Other comprehensive loss attributable to noncontrolling interest	—			(6		)
Fair value adjustment to redeemable noncontrolling interest	106			—
Reclassification to accumulated other comprehensive loss	17			—
Reclassification to other current liabilities	(252		)	—
Balance, end of period	$	—		$	71