Commitments and Contingent Liabilities

9 Months Ended

Sep. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingent Liabilities

Commitments and Contingent Liabilities

The following table presents the status of the Company’s ultra-deepwater drillship construction program as of September 30, 2014.  Amounts include capitalized interest and an estimate for project contingencies (in millions):

	Actual/scheduled delivery date	Total estimated project costs		Total costs incurred through September 30, 2014		Projected costs for the remainder of 2014		Projected costs in 2015		Total future costs
Rowan Resolute	July 2014	$	723	$	682	$	41	$	—	$	41
Rowan Reliance	November 2014	742		277		458		7		465
Rowan Relentless	March 2015	755		232		38		485		523
		$	2,220	$	1,191	$	537	$	492	$	1,029

The Company expects to incur an additional approximately $77 million of capital expenditures for the remainder of 2014 for mobilization, commissioning, riser gas-handling equipment, software certifications and drillship fleet spares to support its deepwater operations.

The Company periodically employs letters of credit in the normal course of its business, and had outstanding letters of credit of approximately $25.6 million at September 30, 2014.

Uncertain tax positions – In 2009, the Company recognized certain tax benefits 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.  Our position was challenged by the U.S. Internal Revenue Service.  We appealed their findings and reached a settlement agreement in the third quarter of 2014 with respect to three of the four years under review. As a result of the agreement, we recognized a current income tax receivable at September 30, 2014, in the amount of $35 million, reduced long-term receivables by approximately $47 million and reduced other long-term liabilities by approximately $58 million, resulting in a net benefit to income taxes of approximately $46 million. We collected the current receivable in the fourth quarter of 2014. A remaining year continues to be under examination. We plan to vigorously defend our position.

We are involved in various other legal proceedings incidental to our business and are vigorously defending our 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.