Commitments and Contingent Liabilities

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingent Liabilities

Commitments and Contingent Liabilities

The following table presents the status of the Company’s rigs under construction as of June 30, 2013.  Amounts include capitalized interest and an estimate for project contingencies (in millions):

	Scheduled delivery date	Total estimated project costs		Total costs incurred through June 30, 2013		Projected costs for the remainder of 2013		Projected costs in 2014		Projected costs in 2015		Total future costs
Rowan Renaissance	December 2013	$	729	$	232	$	486	$	11	$	—	$	497
Rowan Resolute	June 2014	737		261		44		432		—		476
Rowan Reliance	October 2014	732		194		34		500		4		538
Rowan Relentless	March 2015	755		180		26		103		446		575
		$	2,953	$	867	$	590	$	1,046	$	450	$	2,086

In addition, the Company expects to incur approximately $49 million of capital expenditures for the remainder of 2013 for riser gas-handling equipment, software certifications and drillship fleet spares to support its deepwater operations.

In July 2013, Hyundai Heavy Industries Co., Ltd, the builder of the four drillships currently under construction, extended the Company's option for construction of a fifth ultra-deepwater drillship to September 30, 2013, for delivery in the first quarter of 2016.

The Company periodically employs letters of credit in the normal course of its business, and had outstanding letters of credit of approximately $28.1 million at June 30, 2013.

Uncertain tax position – In 2009, the Company recognized a $25.4 million tax benefit as a result of applying the facts of a third-party tax case to the Company’s situation.  That case provided a more favorable tax treatment for certain foreign contracts entered into in prior years.  This position is currently under audit and is initially being challenged by field agents of the U.S. Internal Revenue Service.  We have appealed their findings and expect to come to a conclusion in the near term.  We plan to vigorously defend our position and continue to believe that we will more likely than not prevail.

Asbestos related claims – We are from time to time a party to various lawsuits filed by current or former employees that are incidental to our operations in which the claimants seek unspecified amounts of monetary damages for personal injury, including injuries purportedly resulting from exposure to asbestos on our drilling rigs.  At June 30, 2013, there were approximately 24 asbestos related lawsuits in which we are one of many defendants.  These lawsuits have been filed in the state courts ofLouisiana, Mississippi and Texas.  We intend to vigorously defend against the litigation.  We are unable to predict the ultimate outcome of these lawsuits; however, 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.

The Company is involved in various other legal proceedings incidental to its businesses and is vigorously defending its position in all such matters.  Management believes that there are no known contingencies, claims or lawsuits, other than those described above, that could have a material effect on the Company's financial position, results of operations or cash flows.