2.2.0.25falsefalse0214 - Disclosure - Commitments and Contingenciestruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 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$2true0ne_CommitmentsAndContingenciesAbstractnefalsenadurationCommitments and Contingencies.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringCommitments and Contingencies.falsefalseCommitments and Contingencies [Abstract]3false0us-gaap_CommitmentsAndContingenciesDisclosureTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00   <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Note 14 — Commitments and Contingencies</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Noble Asset Company Limited (“NACL”), our wholly-owned, indirect subsidiary, was named one of 21 parties served a Show Cause Notice (“SCN”) issued by the Commissioner of Customs (Prev.), Mumbai, India (the “Commissioner”) in August 2003. The SCN concerned alleged violations of Indian customs laws and regulations regarding one of our jackups. The Commissioner alleged certain violations to have occurred before, at the time of, and after NACL acquired the rig from the rig’s previous owner. In the purchase agreement for the rig, NACL received contractual indemnification against liability for Indian customs duty from the rig’s previous owner. In connection with the export of the rig from India in 2001, NACL posted a bank guarantee in the amount of 150 million Indian Rupees (or $3 million at December 31, 2010) and a customs bond in the amount of 970 million Indian Rupees (or $22 million at December 31, 2010), both of which remain in place. In March 2005, the Commissioner passed an order against NACL and the other parties cited in the SCN seeking (i) to invoke the bank guarantee posted on behalf of NACL as a fine, (ii) to demand duty of (a) $19 million plus interest related to a 1997 alleged import and (b) $22 million plus interest related to a 1999 alleged import, provided that the duty and interest demanded in (b) would not be payable if the duty and interest demanded in (a) were paid by NACL, and (iii) to assess a penalty of $500,000 against NACL. NACL appealed the order of the Commissioner to the Customs, Excise & Service Tax Appellate Tribunal (“CESTAT”). In 2006, CESTAT upheld NACL’s appeal and overturned the Commissioner’s March 2005 order against NACL in its entirety. The Commissioner filed an appeal in the Bombay High Court, which dismissed the appeal. In 2008, the Commissioner appealed to the Supreme Court of India, appealing the order of the Bombay High Court. NACL is opposing admission of the Appeal in the Supreme Court of India, and is seeking the return or cancellation of its previously posted custom bond and bank guarantee. NACL continues to pursue contractual indemnification against liability for Indian customs duty and related costs and expenses against the rig’s previous owner in arbitration proceedings in London, which proceedings the parties have temporarily stayed pending further developments in the Indian proceeding. We do not believe the ultimate resolution of this matter will have a material adverse effect on our financial position, results of operations or cash flows. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In May 2010, Anadarko Petroleum Corporation (“Anadarko”) sent a letter asserting that the initial attempted deepwater drilling moratorium in the U.S. Gulf of Mexico, issued on May 28, 2010 by U.S. Secretary of the Interior Ken Salazar, was an event of force majeure under the drilling contract for the <i>Noble Amos Runner</i>. In June 2010, Anadarko filed a declaratory judgment action in Federal District Court in Houston, Texas seeking to have the court declare that a force majeure condition had occurred and that the drilling contract was terminated by virtue of the initial proclaimed moratorium. We disagree that a force majeure event occurred and that Anadarko had the right to terminate the contract. In August 2010, we filed a counterclaim seeking damages from Anadarko for breach of contract. We do not believe the ultimate resolution of this matter will have a material adverse effect on our financial position, results of operations or cash flows. Due to the uncertainties noted above, we have not recognized any revenue under the disputed portion of this contract. As the amounts in dispute have been fully reserved, the matter could have a material positive effect on our results of operations or cash flows in the period the matter is resolved. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The <i>Noble Homer Ferrington </i>is under contract with a subsidiary of ExxonMobil Corporation (“ExxonMobil”), who entered into an assignment agreement with BP for a two well farmout of the rig in Libya after successfully drilling two wells with the rig for ExxonMobil. In August 2010, BP attempted to terminate the assignment agreement claiming that the rig was not in the required condition. ExxonMobil has informed us that we must look to BP for payment of the dayrate during the assignment period. In August 2010, we initiated arbitration proceedings under the drilling contract against both BP and ExxonMobil. We do not believe BP had the right to terminate the assignment agreement and believe the rig continues to be fully ready to operate under the drilling contract. We believe we are owed dayrate by either or both of these clients. The operating dayrate was approximately $538,000 per day for the work in Libya. We are proceeding with the arbitration process and intend to vigorously pursue these claims. Due to the uncertainties noted above, we have not recognized any revenue during the assignment period. We do not believe the ultimate resolution of these matters will have a material effect on our financial position. As the amounts in dispute have been fully reserved, the matter could have a material positive effect on our results of operations or cash flows in the period the matter is resolved. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We are from time to time a party to various lawsuits that are incidental to our operations in which the claimants seek an unspecified amount of monetary damages for personal injury, including injuries purportedly resulting from exposure to asbestos on drilling rigs and associated facilities. At December 31, 2010, there were approximately 36 of these lawsuits in which we are one of many defendants. These lawsuits have been filed in the United States in the states of Louisiana, Mississippi and Texas. We intend to defend vigorously against the litigation. We do not believe the ultimate resolution of these matters will have a material adverse effect on our financial position, results of operations or cash flows. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We are a defendant in certain claims and litigation arising out of operations in the ordinary course of business, including certain disputes with customers over receivables discussed in Note 5, the resolution of which, in the opinion of management, will not be material to our financial position, results of operations or cash flows. There is inherent risk in any litigation or dispute and no assurance can be given as to the outcome of these claims. </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%">During the fourth quarter of 2007, our Nigerian subsidiary received letters from the Nigerian Maritime Administration and Safety Agency (“NIMASA”) seeking to collect a two percent surcharge on contract amounts under contracts performed by “vessels,” within the meaning of Nigeria’s cabotage laws, engaged in the Nigerian coastal shipping trade. Although we do not believe that these laws apply to our ownership of drilling units, NIMASA is seeking to apply a provision of the Nigerian cabotage laws (which became effective on May 1, 2004) to our offshore drilling units by considering these units to be “vessels” within the meaning of those laws and therefore subject to the surcharge, which is imposed only upon “vessels.” Our offshore drilling units are not engaged in the Nigerian coastal shipping trade and are not in our view “vessels” within the meaning of Nigeria’s cabotage laws. In January 2008, we filed an originating summons against NIMASA and the Minister of Transportation in the Federal High Court of Lagos, Nigeria seeking, among other things, a declaration that our drilling operations do not constitute “coastal trade” or “cabotage” within the meaning of Nigeria’s cabotage laws and that our offshore drilling units are not “vessels” within the meaning of those laws. In February 2009, NIMASA filed suit against us in the Federal High Court of Nigeria seeking collection of the cabotage surcharge. In August 2009, the court issued a favorable ruling in response to our originating summons stating that drilling operations do not fall within the cabotage laws and that drilling rigs are not vessels for purposes of those laws. The court also issued an injunction against the defendants prohibiting their interference with our drilling rigs or drilling operations. NIMASA has appealed the court’s ruling, although the court dismissed NIMASA’s lawsuit filed against us in February 2009. We intend to take all further appropriate legal action to resist the application of Nigeria’s cabotage laws to our drilling units. The outcome of any such legal action and the extent to which we may ultimately be responsible for the surcharge is uncertain. If it is ultimately determined that offshore drilling units constitute vessels within the meaning of the Nigerian cabotage laws, we may be required to pay the surcharge and comply with other aspects of the Nigerian cabotage laws, which could adversely affect our operations in Nigerian waters and require us to incur additional costs of compliance. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">NIMASA had also informed the Nigerian Content Division of its position that we are not in compliance with the cabotage laws. The Nigerian Content Division makes determinations of companies’ compliance with applicable local content regulations for purposes of government contracting, including contracting for services in connection with oil and gas concessions where the Nigerian national oil company is a partner. The Nigerian Content Division had originally barred us from participating in new tenders as a result of NIMASA’s allegations, although the Division reversed its actions based on the favorable Federal High Court ruling. However, no assurance can be given with respect to our ability to bid for future work in Nigeria until our dispute with NIMASA is resolved. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We operate in a number of countries throughout the world and our income tax returns filed in those jurisdictions are subject to review and examination by tax authorities within those jurisdictions. We have been informed by the U.S. Internal Revenue Service that our 2008 tax return is currently under audit. In addition, a U.S. subsidiary of Frontier is also under audit for its 2007 and 2008 tax returns. Furthermore, we are currently contesting several non-U.S. tax assessments and may contest future assessments when we believe the assessments are in error. We cannot predict or provide assurance as to the ultimate outcome of the existing or future assessments. We believe the ultimate resolution of the outstanding assessments, for which we have not made any accrual, will not have a material adverse effect on our consolidated financial statements. We recognize uncertain tax positions that we believe have a greater than 50 percent likelihood of being sustained. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Certain of our non-U.S. income tax returns have been examined for the 2002 through 2008 periods and audit claims have been assessed for approximately $305 million (including interest and penalties), primarily in Mexico. We do not believe we owe these amounts and are defending our position. However, we expect increased audit activity in Mexico and anticipate the tax authorities will issue additional assessments and continue to pursue legal actions for all audit claims. We believe additional audit claims in the range of $16 to $18 million attributable to other business tax returns may be assessed against us. We have contested, or intend to contest, the audit findings, including through litigation if necessary, and we do not believe that there is greater than 50 percent likelihood that additional taxes will be incurred. Accordingly, no accrual has been made for such amounts. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We maintain certain insurance coverage against specified marine perils, including liability for physical damage to our drilling rigs, and loss of hire on certain of our rigs. The damage caused in 2005 and 2008 by Hurricanes Katrina, Rita and Ike to oil and gas assets situated in the U.S. Gulf of Mexico negatively impacted the energy insurance market, resulting in more restricted and more expensive coverage. We also cannot predict what the impact of the recent events in the U.S. Gulf of Mexico will have on the cost or availability of future insurance coverage. We evaluate and renew our operational insurance policies on a yearly basis during the month of March. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We have elected to self insure U.S. named windstorm physical damage and loss of hire exposures due to the high cost of coverage for these perils. This self insurance applies only to our units in the U.S. portion of the Gulf of Mexico. Our rigs located in the Mexican portion of the Gulf of Mexico remain covered by commercial insurance for windstorm damage. In addition, we maintain physical damage deductibles of $25 million per occurrence for rigs located in the U.S., Mexico, Brazil, Southeast Asia and the North Sea and $15 million per occurrence for rigs operating in West Africa, the Middle East, India, and the Mediterranean Sea. The loss of hire coverage applies only to our rigs operating under contract with a dayrate equal to or greater than $200,000 a day and is subject to a 45-day waiting period for each unit and each occurrence. </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%">Although we maintain insurance in the geographic areas in which we operate, pollution, reservoir damage and environmental risks generally are not fully insurable. Our insurance policies and contractual rights to indemnity may not adequately cover our losses or may have exclusions of coverage for some losses. We do not have insurance coverage or rights to indemnity for all risks, including loss of hire insurance on most of the rigs in our fleet. Uninsured exposures may include expatriate activities prohibited by U.S. laws and regulations, radiation hazards, certain loss or damage to property onboard our rigs and losses relating to shore-based terrorist acts or strikes. If a significant accident or other event occurs and is not fully covered by insurance or contractual indemnity, it could adversely affect our financial position, results of operations or cash flows. Additionally, there can be no assurance that those parties with contractual obligations to indemnify us will necessarily be financially able to indemnify us against all these risks. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We carry protection and indemnity insurance covering marine third party liability exposures, which also includes coverage for employer’s liability resulting from personal injury to our offshore drilling crews. Our protection and indemnity policy currently has a standard deductible of $10 million per occurrence, with maximum liability coverage of $750 million. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In connection with our capital expenditure program, we had outstanding commitments, including shipyard and purchase commitments of approximately $1.5 billion at December 31, 2010. Subsequent to December 31, 2010, we entered into shipyard commitments of approximately $1.0 billion in connection with the signing of construction contracts for two additional newbuild drillships, and canceled shipyard contracts totaling $77 million in connection with the decision not to proceed with the reliability upgrade on the <i>Noble Muravlenko</i>. See Note 19, “<i>Subsequent Events,</i>” for additional information regarding these transactions. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We have entered into agreements with certain of our executive officers, as well as certain other employees. These agreements become effective upon a change of control of Noble-Swiss (within the meaning set forth in the agreements) or a termination of employment in connection with or in anticipation of a change of control, and remain effective for three years thereafter. These agreements provide for compensation and certain other benefits under such circumstances. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Internal Investigation</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In 2007, we began, and voluntarily contacted the SEC and the U.S. Department of Justice (“DOJ”) to advise them of, an internal investigation of the legality under the United States Foreign Corrupt Practices Act (“FCPA”) and local laws of certain reimbursement payments made by our Nigerian affiliate to our customs agents in Nigeria. In November 2010, we finalized settlements of this matter with each of the SEC and the DOJ. In order to resolve the DOJ investigation, we entered into a non-prosecution agreement with the DOJ, which provides for the payment of a fine of $2.6 million, as well as certain undertakings, including continued cooperation with the DOJ, compliance with the FCPA, certain self-reporting and annual reporting obligations and certain restrictions on our public discussion regarding the agreement. The agreement does not require that we install a monitor to oversee our activities and compliance with laws. In order to resolve the SEC investigation, we agreed to the entry of a civil judgment against us for violations of the FCPA. Pursuant to the agreed judgment, we agreed to disgorge profits of $4.3 million, pay prejudgment interest of $1.3 million and refrain from denying the allegations contained in the SEC’s petition, except in other litigation to which the SEC is not a party. We also agreed to an injunction restraining us from violating the anti-bribery, books and records, and internal controls provisions of the FCPA, and we waived a variety of litigation rights with respect to the conduct at issue. The agreed judgment does not require a monitor. Our ability to comply with the terms of the settlements is dependent on the success of our ongoing compliance program, including our ability to continue to manage our agents and supervise, train and retain competent employees, and the efforts of our employees to comply with applicable law and our code of business conduct and ethics. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In January 2011, the Nigerian Economic and Financial Crimes Commission and the Nigerian Attorney General Office initiated an investigation into these same activities. A subsidiary of Noble-Swiss resolved this matter through the execution of a non-prosecution agreement dated January 28, 2011. Pursuant to this agreement, the subsidiary paid $2.5 million to resolve all charges and claims of the Nigerian government. Any additional sanctions we may incur as a result of any such investigation could damage our reputation and result in substantial fines, sanctions, civil and/or criminal penalties and curtailment of operations in certain jurisdictions and might adversely affect our business, results of operations or financial condition. Further, resolving any such investigation could be expensive and consume significant time and attention of our senior management. </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%"> We have one jackup rig in Nigeria which is operating under a temporary import permit which expired in November 2008 and we have a pending application to renew this permit. We have received approval from the Nigerian Customs office that we will be allowed to obtain a new temporary import permit for this rig. We recently received a new temporary import permit for another rig in Nigeria that had been waiting for a temporary import permit based on a long-standing application. We continue to seek to avoid material disruption to our Nigerian operations; however, there can be no assurance that we will be able to obtain new permits or further extensions of permits necessary to continue the operation of our rigs in Nigeria. If we cannot obtain a new permit or an extension necessary to continue operations of any rig, we may need to cease operations under the drilling contract for such rig and relocate such rig from Nigerian waters. We cannot predict what impact these events may have on any such contract or our business in Nigeria, and we could face additional fines and sanctions in Nigeria. Furthermore, we cannot predict what changes, if any, relating to temporary import permit policies and procedures may be established or implemented in Nigeria in the future, or how any such changes may impact our business there. </div> </div>  <!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringIncludes disclosure of commitments and contingencies. This element may be used as a single block of text to encapsulate the entire disclosure including data and tables.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name FASB Interpretation (FIN) -Number 14 -Paragraph 3 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 5 -Paragraph 9, 10, 11, 12 falsefalseCommitments and Contingencies12Commitments and ContingenciesUnKnownUnKnownUnKnownUnKnownfalsetrue