2.2.0.7 false Derivative Instruments and Hedging Activities 0209 - Disclosure - Derivative Instruments and Hedging Activities true false false false 1 USD false false USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 Shares Standard http://www.xbrl.org/2003/instance shares xbrli 0 Pure Standard http://www.xbrl.org/2003/instance pure xbrli 0 USDEPS Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares xbrli 0 $ 2 Derivative Instruments and Hedging Activities [Abstract] 0 us-gaap_DerivativeInstrumentsAndHedgesAbstract us-gaap true na duration No definition available. false false false false false true false false false false false false 1 false false false false 0 0 false false false xbrli:stringItemType string No definition available. false 3 Derivative Instruments and Hedging Activities 1 us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false verboselabel false 1 false false false false 0 0   <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Note 9 — Derivative Instruments and Hedging Activities</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We periodically enter into derivative instruments to manage our exposure to fluctuations in interest rates and foreign currency exchange rates, and we may conduct hedging activities in future periods to mitigate such exposure. We have documented policies and procedures to monitor and control the use of derivative instruments. We do not engage in derivative transactions for speculative or trading purposes, nor are we a party to leveraged derivatives. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Hedge effectiveness is evaluated based on the matching of critical terms between derivative contracts and the hedged item. Any change in fair value resulting from ineffectiveness is recognized immediately in earnings. We did not recognize a gain or loss due to hedge ineffectiveness in our Consolidated Statements of Income during the six months ended June 30, 2010 and 2009 related to these derivative instruments. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Cash Flow Hedges</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our North Sea and Brazil operations have a significant amount of their cash operating expenses payable in local currencies. We typically maintain forward contracts settling monthly in their respective local currencies to mitigate certain exchange exposure. The forward contract settlements in the remainder of 2010 represent approximately 40 percent of these forecasted local currency requirements. The notional amount of the forward contracts outstanding, expressed in U.S. Dollars, was approximately $65 million at June 30, 2010. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The balance of the net unrealized gain/(loss) related to our forward contracts included in “Accumulated other comprehensive loss” and related activity is as follows: </div> <div style="font-family: 'Times New Roman',Times,serif"> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="44%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>Six Months Ended</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> </tr>   <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net unrealized gain at beginning of period </div></td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(1,508</td> <td nowrap="nowrap">)</td> <td> </td> <td align="left">$</td> <td align="right">194</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">417</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Activity during period: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Settlement of forward contracts during period </div></td> <td> </td> <td> </td> <td align="right">617</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(60</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(356</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Net unrealized gain/(loss) on outstanding forward contracts </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(1,626</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">2,718</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(2,578</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">2,852</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net unrealized gain/(loss) at end of period </div></td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(2,517</td> <td nowrap="nowrap">)</td> <td> </td> <td align="left">$</td> <td align="right">2,852</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(2,517</td> <td nowrap="nowrap">)</td> <td> </td> <td align="left">$</td> <td align="right">2,852</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Fair Value Hedges</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">During 2008, we entered into a firm commitment for the construction of a newbuild drillship. The drillship will be constructed in two phases, with the second phase being installation and commissioning of the topside equipment. The contract for this second phase of construction is denominated in Euros, and in order to mitigate the risk of fluctuations in foreign currency exchange rates, we entered into forward contracts to purchase Euros. As of June 30, 2010, the aggregate notional amount of the forward contracts was 50 million Euros. Each forward contract settles in connection with required payments under the construction contract. We are accounting for these forward contracts as fair value hedges. The fair market value of these derivative instruments is included in “Other current assets/liabilities” or “Other assets/liabilities,” depending on when the forward contract is expected to be settled. Gains and losses from these fair value hedges would be recognized in earnings currently along with the change in fair value of the hedged item attributable to the risk being hedged, if any portion was found to be ineffective. The fair market value of these outstanding forward contracts, which are included in “Other current assets/liabilities” and “Other assets/liabilities,” totaled approximately $11 million at June 30, 2010 and $0.8 million at December 31, 2009. No amounts related to fair value hedges were recognized in the income statement for the three or six months ended June 30, 2010 and 2009. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="center" style="font-size: 10pt"> <b> </b> </div> <div align="center" style="font-size: 10pt; margin-top: 0pt"> </div> </div>  <!-- Begin Block Tagged Note false false false us-types:textBlockItemType textblock This element can be used to disclose the entity's entire derivative instruments and hedging activities disclosure as a single block of text. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising there from, and the amounts of and methodologies and assumptions used in determining the amounts of such items. 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