2.2.0.25falsefalse0201 - Disclosure - Organization and Significant Accounting Policiestruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 12/31/2010 USD ($) USD ($) / shares $TwelveMonthsEnded_31Dec2010http://www.sec.gov/CIK0001458891duration2010-01-01T00:00:002010-12-31T00:00:00PureStandardhttp://www.xbrl.org/2003/instancepurexbrli0USDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0USDUSD$2true0us-gaap_GeneralPoliciesAbstractus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalseOrganization and Significant Accounting Policies [Abstract]3false0ne_OrganizationAndSignificantAccountingPoliciesTextBlocknefalsenadurationOrganization and significant accounting policies.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00     <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="left"> </div> <div align="center" style="font-size: 10pt"><b></b></div> <div align="center" style="font-size: 10pt"></div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Note 1 — Organization and Significant Accounting Policies</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Organization and Business</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Noble Corporation, a Swiss corporation, is a leading offshore drilling contractor for the oil and gas industry. We perform contract drilling services with our fleet of 73 mobile offshore drilling units and one floating production storage and offloading unit (“FPSO”) located worldwide. Our fleet consists of 14 semisubmersibles, 12 drillships, 45 jackups and two submersibles. Our fleet includes eight units under construction: two dynamically positioned, ultra-deepwater, harsh environment <i>Globetrotter</i>-class drillships, two dynamically positioned, ultra-deepwater, harsh environment <i>Bully</i>-class drillships, two harsh environment jackup rigs announced in December 2010 and two ultra-deepwater drillships announced in January 2011. As of January 19, 2011, approximately 81 percent of our fleet was located outside the United States in the following areas: Middle East, India, Mexico, the Mediterranean, the North Sea, Brazil, West Africa and Asian Pacific. Noble and its predecessors have been engaged in the contract drilling of oil and gas wells since 1921. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Consummation of Migration and Worldwide Internal Restructuring</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">On March 26, 2009, we completed a series of transactions that effectively changed the place of incorporation of our parent holding company from the Cayman Islands to Switzerland. As a result of these transactions, Noble-Cayman, the previous publicly traded Cayman Islands parent holding company, became a direct, wholly-owned subsidiary of Noble-Swiss, the current parent company. Noble-Swiss’ principal asset is all of the shares of Noble-Cayman. The consolidated financial statements of Noble-Swiss include the accounts of Noble-Cayman, and Noble-Swiss conducts substantially all of its business through Noble-Cayman and its subsidiaries. In connection with this transaction, we relocated our principal executive offices, executive officers and selected personnel to Geneva, Switzerland. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Principles of Consolidation</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The consolidated financial statements include our accounts and those subsidiaries either wholly-owned or entities in which we hold a controlling financial interest. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Financial Accounting Standards Board (“FASB”) issued authoritative guidance for noncontrolling interests in December 2007, which establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The guidance clarifies that a noncontrolling interest in a subsidiary, which is sometimes referred to as an unconsolidated investment, is an ownership interest in the consolidated entity that should be reported as a component of equity in the consolidated financial statements. Among other requirements, the guidance requires consolidated net income to be reported at amounts attributable to both the parent and the noncontrolling interest. It also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. We adopted the provisions of the FASB guidance on January 1, 2009 and applied the provisions retrospectively, with no material impact. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our 2010 consolidated financial statements include the accounts of two 50 percent joint ventures where we hold a variable interest as defined under FASB codification where we have determined that we are the primary beneficiary. Intercompany balances and transactions have been eliminated in consolidation. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Foreign Currency Translation</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Although we are a Swiss corporation, we define foreign currency as any non-U.S. denominated currency. In non-U.S. locations where the U.S. Dollar has been designated as the functional currency (based on an evaluation of such factors as the markets in which the subsidiary operates, inflation, generation of cash flow, financing activities and intercompany arrangements), local currency transaction gains and losses are included in net income. In non-U.S. locations where the local currency is the functional currency, assets and liabilities are translated at the rates of exchange on the balance sheet date, while income and expense items are translated at average rates of exchange during the year. The resulting gains or losses arising from the translation of accounts from the functional currency to the U.S. Dollar are included in “Accumulated other comprehensive income (loss)” in the Consolidated Balance Sheets. We did not recognize any material gains or losses on foreign currency transactions or translations during the years ended December 31, 2010, 2009 and 2008. We use the Canadian Dollar as the functional currency for our labor contract drilling services in Canada. </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="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Cash and Cash Equivalents</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Cash and cash equivalents include cash on hand, demand deposits with banks and all highly liquid investments with original maturities of three months or less. Our cash, cash equivalents and short-term investments are subject to potential credit risk, and certain of our cash accounts carry balances greater than the federally insured limits. Cash and cash equivalents are held by major banks or investment firms. Our cash management and investment policies restrict investments to lower risk, highly liquid securities and we perform periodic evaluations of the relative credit standing of the financial institutions with which we conduct business. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In accordance with FASB standards, cash flows from our labor contract drilling services in Canada are calculated based on the Canadian Dollar. As a result, amounts related to assets and liabilities reported on the Consolidated Statements of Cash Flows will not necessarily agree with changes in the corresponding balances on the Consolidated Balance Sheets. The effect of exchange rate changes on cash balances held in foreign currencies was not material in 2010, 2009 or 2008. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Investments in Marketable Securities</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Investments in marketable securities held at December 31, 2010 and 2009 were classified as trading securities and carried at fair value in “Other Current Assets” with the unrealized gain or loss included in “Other Income” in the accompanying Consolidated Statements of Income. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Property and Equipment</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Property and equipment is stated at cost, reduced by provisions to recognize economic impairment in value whenever events or changes in circumstances indicate an asset’s carrying value may not be recoverable. At both December 31, 2010 and 2009, there was $3.6 billion and $2.3 billion of construction-in-progress, respectively. Such amounts are included in “Drilling equipment and facilities” in the accompanying Consolidated Balance Sheets. Major replacements and improvements are capitalized. When assets are sold, retired or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the accounts and the gain or loss is recognized. Drilling equipment and facilities are depreciated using the straight-line method over their estimated useful lives as of the date placed in service or date of major refurbishment. Estimated useful lives of our drilling equipment range from three to thirty years. Other property and equipment is depreciated using the straight-line method over useful lives ranging from two to twenty-five years. Included in accounts payable was $161 million and $47 million of capital accruals as of December 31, 2010 and 2009, respectively. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Interest is capitalized on construction-in-progress at the interest rate on debt incurred for construction or at the weighted average cost of debt outstanding during the period of construction. Capitalized interest for the years ended December 31, 2010, 2009 and 2008 was $83 million, $55 million and $48 million, respectively. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Overhauls and scheduled maintenance of equipment are performed based on the number of hours operated in accordance with our preventative maintenance program. Routine repair and maintenance costs are charged to expense as incurred; however, the costs of the overhauls and scheduled major maintenance projects that benefit future periods and which typically occur every three to five years are deferred when incurred and amortized over an equivalent period. The deferred portion of these major maintenance projects is included in “Other Assets” in the Consolidated Balance Sheets. Such amounts totaled $183 million and $181 million at December 31, 2010 and 2009, respectively. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Amortization of deferred costs for major maintenance projects is reflected in “Depreciation and amortization” in the accompanying Consolidated Statements of Income. The amount of such amortization was $107 million, $102 million and $91 million for the years ended December 31, 2010, 2009 and 2008, respectively. Total repair and maintenance expense for the years ended December 31, 2010, 2009 and 2008, exclusive of amortization of deferred costs for major maintenance projects, was $186 million, $175 million and $169 million, respectively. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We evaluate the realization of property and equipment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss on our property and equipment exists when estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Any impairment loss recognized represents the excess of the asset’s carrying value over the estimated fair value. </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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In May 2009, our jackup, the <i>Noble David Tinsley</i>, experienced a “punch-through” while the rig was being positioned on location offshore Qatar. The incident involved the sudden penetration of all three legs through the sea bottom, which resulted in severe damage to the legs and the rig. We recorded a charge of $17 million during the quarter ended June 30, 2009 related to this involuntary conversion, which includes approximately $9 million for the write-off of the damaged legs. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">During the first quarter of 2009, we recognized a charge of $12 million related to the <i>Noble Fri Rodli</i>, a submersible that has been cold stacked since October 2007. We recorded the charge as a result of a decision to evaluate disposition alternatives for this rig. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Deferred Costs</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Deferred debt issuance costs are being amortized over the life of the debt securities. The amortization of debt issuance costs is included in interest expense. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Insurance Reserves</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We maintain various levels of self-insured retention for certain losses including property damage, loss of hire, employment practices liability, employers’ liability, and general liability, among others. We accrue for property damage and loss of hire charges on a per event basis. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Employment practices liability claims are accrued based on actual claims during the year. Maritime employer’s liability claims are generally estimated using actuarial determinations. General liability claims are estimated by our internal claims department by evaluating the facts and circumstances of each claim (including incurred but not reported claims) and making estimates based upon historical experience with similar claims. At December 31, 2010 and 2009, loss reserves for personal injury and protection claims totaled $21 million and $23 million, respectively, and such amounts are included in “Other current liabilities” in the accompanying Consolidated Balance Sheets. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Revenue Recognition</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Revenues generated from our dayrate-basis drilling contracts and labor contracts are recognized as services are performed. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We may receive lump-sum fees for the mobilization of equipment and personnel. Mobilization fees received and costs incurred to mobilize a drilling unit from one market to another are recognized over the term of the related drilling contract. Costs incurred to relocate drilling units to more promising geographic areas in which a contract has not been secured are expensed as incurred. Lump-sum payments received from customers relating to specific contracts, including equipment modifications, are deferred and amortized to income over the term of the drilling contract. Deferred revenues under drilling contracts totaled $104 million at December 31, 2010, including $65 million in fair value contract adjustments in connection with our acquisition of FDR Holdings Ltd. discussed in Note 2, as compared to $32 million at December 31 2009. Such amounts are included in either “Other Current Liabilities” or “Current Liabilities” in our Consolidated Balance Sheets, based upon our expected time of recognition. As discussed in Note 19 “<i>Subsequent Events</i>,” in connection with the cancelation of the contract on the <i>Noble Phoenix</i>, we recognized a non-cash gain of approximately $55 million in the first quarter of 2011 which represented the unamortized balance of the contract’s fair value adjustment. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We record reimbursements from customers for “out-of-pocket” expenses as revenues and the related direct cost as operating expenses. Reimbursements for loss of hire under our insurance coverages are included in “(Gain)/loss on assets disposal/involuntary conversion, net” in the Consolidated Statements of Income. </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="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Income Taxes</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Income taxes have been provided based on the laws and rates in effect in the countries in which operations are conducted or in which we or our subsidiaries are considered resident for income tax purposes. Applicable income and withholding taxes have not been provided on undistributed earnings of our subsidiaries. We do not intend to repatriate such undistributed earnings for the foreseeable future except for distributions upon which incremental income and withholding taxes would not be material. In certain circumstances, we expect that, due to changing demands of the offshore drilling markets and the ability to redeploy our offshore drilling units, certain of such units will not reside in a location long enough to give rise to future tax consequences. As a result, no deferred tax asset or liability has been recognized in these circumstances. Should our expectations change regarding the length of time an offshore drilling unit will be used in a given location, we will adjust deferred taxes accordingly. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We operate through various subsidiaries in numerous countries throughout the world including the United States. Consequently, we are subject to changes in tax laws, treaties or regulations or the interpretation or enforcement thereof in the U.S., Switzerland or jurisdictions in which we or any of our subsidiaries operate or is resident. Our income tax expense is based upon our interpretation of the tax laws in effect in various countries at the time that the expense was incurred. If the U.S. Internal Revenue Service or other taxing authorities do not agree with our assessment of the effects of such laws, treaties and regulations, this could have a material adverse effect on us including the imposition of a higher effective tax rate on our worldwide earnings or a reclassification of the tax impact of our significant corporate restructuring transactions. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Net Income per Share</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">According to FASB standards, we have determined that our unvested share-based payment awards, which contain non-forfeitable rights to dividends, are participating securities and should be included in the computation of earnings per share pursuant to the “two-class” method. The “two-class” method allocates undistributed earnings between common shares and participating securities. The diluted earnings per share calculation under the “two-class” method also includes the dilutive effect of potential registered shares issued in connection with stock options. The dilutive effect of stock options is determined using the treasury stock method. Our adoption of the “two-class” method for calculating earnings per share did not have a material impact on prior year earnings per share amounts. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Share-Based Compensation Plans</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We account for share-based compensation pursuant to FASB standards. Accordingly, we record the grant date fair value of share-based compensation arrangements as compensation cost using a straight-line method over the service period. Share-based compensation is expensed or capitalized based on the nature of the employee’s activities. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Certain Significant Estimates</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Certain accounting policies involve judgments and uncertainties to such an extent that there is reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used. We evaluate our estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions used in preparation of our consolidated financial statements. </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="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Reclassifications</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Certain reclassifications have been made to amounts in prior period financial statements to conform to current period presentations. We believe these reclassifications are immaterial as they do not have a material impact on our financial position, results of operations or cash flows. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Accounting Pronouncements</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In June 2009, the FASB issued guidance which expanded disclosures that a reporting entity provides about transfers of financial assets and its effect on the financial statements. This guidance is effective for annual and interim reporting periods beginning after November 15, 2009. The adoption of this guidance did not have a material impact on our financial condition, results of operations, cash flows or financial disclosures. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Also in June 2009, the FASB issued guidance that revises how an entity evaluates variable interest entities. This guidance is effective for annual and interim reporting periods beginning after November 15, 2009. The adoption of this guidance did not have a material impact on our financial condition, results of operations, cash flows or financial disclosures. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In October 2009, the FASB issued guidance that impacts the recognition of revenue in multiple-deliverable arrangements. The guidance establishes a selling-price hierarchy for determining the selling price of a deliverable. The goal of this guidance is to clarify disclosures related to multiple-deliverable arrangements and to align the accounting with the underlying economics of the multiple-deliverable transaction. This guidance is effective for fiscal years beginning on or after June 15, 2010. We are in the process of evaluating this guidance but do not believe this guidance will have a material impact on our financial condition, results of operations, cash flows or financial disclosures. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In January 2010, the FASB issued guidance relating to the disclosure of the fair value of assets. This guidance calls for additional information to be given regarding the transfer of items in and out of respective categories. In addition, it requires additional disclosures regarding purchases, sales, issuances, and settlements of assets that are classified as level three within the FASB fair value hierarchy. This guidance is generally effective for annual and interim periods ending after December 15, 2009. However, the disclosures about purchases, sales, issuances and settlements in the roll-forward activity in level three fair value measurements is deferred until fiscal years beginning after December 15, 2010. These additional disclosures did not have and are not expected to have a material impact on our financial condition, results of operations, cash flows or financial disclosures. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In February 2010, the FASB issued guidance that clarifies the disclosure of subsequent events for SEC registrants. Under this guidance an SEC registrant can disclose that the company has considered subsequent events through the date of filing with the SEC as opposed to specifically stating the date to which subsequent events were considered. This guidance is effective upon the issuance of the guidance. Our adoption of this guidance did not have a material impact on our financial condition, results of operations, cash flows or financial disclosures. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In April 2010, the FASB issued guidance that codifies the need for disclosure relating to the disallowance of various credits as a result of the passage of both the Health Care and Education Reconciliation Act of 2010 and the Patient Protection and Affordable Care Act, which were signed into law in March 2010. The passage of these acts did not have an impact on our financial condition, results of operations, cash flows or financial disclosures. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In December 2010, the FASB issued guidance that requires a public entity to disclose pro forma information for business combinations that occurred in the current reporting period. The disclosures include pro forma revenue and earnings of the combined entity for the current reporting period as though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the annual reporting period. If comparative financial statements are presented, the pro forma revenue and earnings of the combined entity for the comparable prior reporting period should be reported as though the acquisition date for all business combinations that occurred during the current year had been as of the beginning of the comparable prior annual reporting period. The guidance is effective for annual reporting periods beginning on or after December 15, 2010. We do not anticipate the adoption of this guidance to have a material impact on our financial condition, results of operations, cash flows or financial disclosures. </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>  <!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringOrganization and significant accounting policies.No authoritative reference available.falsefalseOrganization and Significant Accounting Policies12Organization and Significant Accounting PoliciesUnKnownUnKnownUnKnownUnKnownfalsetrue