Item 6. Selected Financial Data.
The following table presents selected financial data of us and our consolidated subsidiaries over the five-year period ended December 31, 2020, which information is derived from our audited financial statements. This information should be read in conjunction with, and is qualified in its entirety by, the more detailed information in our financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.
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Year Ended December 31,
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2020
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2019
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2018
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2017
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2016
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(In thousands, except per share amounts)
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Statement of Income Data
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|
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Operating revenues from continuing operations
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|
$
|
964,272
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|
|
$
|
1,305,438
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|
|
$
|
1,082,826
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|
|
$
|
1,236,915
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|
|
$
|
2,302,065
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Net income (loss) from continuing operations attributable to Noble (1)
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|
(3,978,459)
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|
|
(696,769)
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|
|
(885,050)
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|
|
(515,025)
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|
|
(929,580)
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Net income (loss) from continuing operations per share attributable to Noble:
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Basic
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(15.86)
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(2.79)
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(3.59)
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(2.10)
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(3.82)
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Diluted
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(15.86)
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(2.79)
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|
|
(3.59)
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(2.10)
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|
|
(3.82)
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Balance Sheet Data (at end of period)
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Cash and cash equivalents
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343,332
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|
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104,621
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|
|
375,232
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|
|
662,829
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|
|
725,722
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Property and equipment, net
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|
3,577,069
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|
|
7,733,924
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|
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8,480,718
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|
|
9,489,240
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|
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10,061,948
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Total assets
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|
4,263,937
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|
|
8,284,498
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|
|
9,264,923
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|
|
10,794,659
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|
|
11,440,117
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Long-term debt
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|
—
|
|
|
3,779,499
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|
|
3,877,402
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|
|
3,795,867
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|
|
4,040,229
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Total debt (2)
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|
—
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|
|
3,842,004
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|
|
3,877,402
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|
|
4,045,710
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|
|
4,340,111
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Total equity
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|
(311,388)
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|
|
3,658,972
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|
|
4,654,574
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|
|
5,950,628
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|
|
6,467,445
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|
Other Data
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|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
273,197
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|
|
186,771
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|
|
171,851
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|
|
416,675
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|
|
1,142,740
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Net cash used in investing activities
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|
(121,520)
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|
|
(256,030)
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|
|
(189,377)
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|
|
(118,325)
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|
|
(686,595)
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|
Net cash provided by (used in) financing activities
|
|
107,440
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|
|
(200,724)
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|
|
(269,396)
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|
|
(361,243)
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|
|
(242,668)
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|
Net cash used for capital expenditures
|
|
148,886
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|
|
268,783
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|
|
194,779
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|
|
120,707
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|
|
711,403
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|
Working capital (3)
|
|
383,933
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|
|
(94,821)
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|
|
293,599
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|
|
445,951
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|
|
559,321
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|
Cash distributions declared per share
|
|
—
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|
|
—
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|
|
—
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|
|
—
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|
|
0.20
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|
(1) Results for 2020, 2019, 2018, 2017 and 2016 include impairment charges of $3.9 billion, $615.3 million, $802.1 million, $121.6 million and $1.5 billion, respectively. Results for 2020 and 2019 include a gain of $15.0 million and loss of $100.0 million respectively, related to the final disposition of the Paragon Offshore litigation matter.
(2) Consists of long-term debt and current maturities of long-term debt. All of our Long-term debt as of December 31, 2020 has been presented as “Liabilities subject to compromise.”
(3) Working capital is calculated as current assets less current liabilities.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion is intended to assist you in understanding our financial position at December 31, 2020 and 2019, and our results of operations for each of the years in the three-year period ended December 31, 2020. The following discussion should be read in conjunction with the consolidated financial statements and related notes contained in this Annual Report on Form 10-K for the year ended December 31, 2020 filed by Noble and Finco.
Executive Overview
We provide contract drilling services to the international oil and gas industry with our global fleet of mobile offshore drilling units. Our business strategy focuses on a balanced, high-specification fleet of both floating and jackup rigs, and the deployment of our drilling rigs in established and emerging offshore oil and gas basins around the world.
We emphasize safe operations, environmental stewardship, social responsibility, and robust governance to sustain the superior performance and maximize stakeholder value achieved through our qualified and well-trained crews, the care of our surroundings and local communities, an effective management system, and a superior fleet. We also carefully manage rig operating costs through innovative systems and processes, including the use of data analytics and predictive maintenance technology.
As of the filing date of this Annual Report on Form 10-K, our fleet of 19 drilling rigs consisted of seven floaters and 12 jackups strategically deployed worldwide. We typically employ each drilling unit under an individual contract, and many contracts are awarded based upon a competitive bidding process.
Our 2020 financial and operating results from continuing operations include:
•operating revenues totaling $1.0 billion, a decrease of 26% from prior year;
•net loss attributable to Noble Corporation of $4.0 billion, or $15.86 per diluted share, which includes a $3.9 billion before-tax impairment charge recognized on 16 of our rigs and certain capital spare equipment; and
•net cash provided by operating activities totaling $273.2 million, an increase of 46% from prior year.
Demand for our services is highly competitive and, in significant part, a function of the worldwide demand for oil and gas and the global supply of mobile offshore drilling units. Since late 2014, the offshore drilling industry has experienced a severe and prolonged downturn stemming from the combination of an oversupply of competing drilling rigs that resulted from the new build rig influx of the 2010s, weak and volatile crude oil prices, and the advancement of onshore opportunities and technology. The Company entered 2020 cautiously optimistic with the prospects for the offshore drilling market continuing to improve; however, the combined effects of the pandemic and the steep decline in the demand for oil have resulted in significantly reduced global economic activity. These factors in concert led to heightened competition for opportunities to re-contract our rigs upon the expiration of existing contracts.
Recent Events
Emergence from Chapter 11. In connection with the Chapter 11 Cases (as defined below) and the Plan, on and prior to the Effective Date, Legacy Noble and certain of its subsidiaries effectuated certain restructuring transactions, pursuant to which Legacy Noble transferred to Noble substantially all of the subsidiaries, and other assets, of Legacy Noble. On the Effective Date, Legacy Noble successfully completed its financial restructuring and Legacy Noble and its debtor affiliates emerged from the Chapter 11 Cases. For additional information regarding the Chapter 11 Cases, see “—Chapter 11 Proceedings and Going Concern” below
As a result of the financial restructuring, Noble emerged from bankruptcy on the Effective Date with a substantially delevered balance sheet and less than $400.0 million of debt. Noble’s capital structure as of the Effective Date includes a $675.0 million revolving credit facility, of which $177.5 million is drawn as of March 10, 2021, and $216.0 million Second Lien Notes (as defined herein). On the Effective Date, Legacy Noble’s ordinary shares were cancelled and New Shares were issued to Legacy Noble’s former bondholders. Certain former bondholders and former equity holders of Legacy Noble were also issued warrants to purchase shares of the Company.
Paragon Matter. In August 2014, Legacy Noble completed the Spin-off through a pro rata distribution of all of the ordinary shares of its wholly-owned subsidiary, Paragon Offshore, to the holders of Legacy Noble’s ordinary shares. Paragon Offshore filed for protection under chapter 11 of the Bankruptcy Code in February 2016, and in connection with Paragon Offshore’s emergence from bankruptcy in July 2017, all claims it may have had against Legacy Noble were transferred to a litigation trust. In December 2017, a litigation trust filed fraudulent conveyance and related claims relating to the Spin-off in an action (the “Action”) against Legacy Noble and certain of its subsidiaries (the “Noble Defendants”), as well as certain of Legacy Noble’s and then current and former officers and directors (the “Individual Defendants”). The litigation trust sought total damages of approximately $2.6 billion and unspecified amounts against the Individual Defendants. On September 23, 2020, the Noble Defendants entered into a settlement agreement (the “Settlement Agreement”) with the litigation trust to fully and finally settle the disputes among them in the Action on the terms set forth in the Settlement Agreement and, subject to certain terms and conditions, to allow the litigation trust’s claims to proceed against the Individual Defendants in the Delaware Court. The Settlement Agreement further provided that it was a compromise settlement that is not in any respect, for any purpose, to be deemed or construed to be an express or implied admission of any liability or wrongdoing or otherwise. On October 9, 2020, the Bankruptcy Court (as defined below) entered an order approving the Debtors' (as defined below) entry into the Settlement Agreement, which also contemplated a potential global settlement including the Individual Defendants.
On February 3, 2021, the Noble Defendants, the Individual Defendants and the litigation trust entered into a global settlement. Pursuant to the global settlement, among other things, the Debtors made a $7.7 million payment to the litigation trust, and all claims brought against all
defendants, including the Noble Defendants and Individual Defendants were settled and released. The global settlement was subject to approval by the Delaware Court, which approval was granted on February 24, 2021. See “Note 16— Commitments and Contingencies” to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information.
Outlook
The offshore drilling industry remains highly competitive. We believe the convergence of events in 2020 and early 2021 have lengthened an already challenging and slow recovery in our industry. Despite these challenges and demand projections, we believe that oil and gas demand will rebalance and oil and gas will remain an important portion of the world’s energy mix. We expect that the return of stable oil demand and prices coupled with the continued attrition of rigs in the global offshore fleet will bring improved market conditions for our services.
Noble emerged from the Chapter 11 Cases with a high-specification fleet of 19 rigs, balanced across jackups and floaters. Our floating and jackup drilling fleet is among the youngest, most modern and versatile in the industry, with the majority of our rigs having been delivered since 2011, and is well positioned to compete as market dynamics improve. Our fleet consists predominately of technologically advanced units, equipped with sophisticated systems and components prepared to execute our customers’ increasingly complicated offshore drilling programs safely and with greater efficiency, contributing to an overall reduction of our carbon footprint. We remain committed to safely and efficiently serving the needs of our customers globally and we set several company safety records during 2020.
At December 31, 2020, we had a total contract drilling services backlog of approximately $1.6 billion, which includes a commitment of approximately 67 percent of available days for 2021. For additional information regarding our backlog, see “—Contract Drilling Services Backlog” below.
Chapter 11 Proceedings and Going Concern
On July 31, 2020 (the “Petition Date”), Legacy Noble and certain of its subsidiaries, including Finco, filed voluntary petitions in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) seeking relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”). On September 4, 2020, the Debtors filed with the Bankruptcy Court the Joint Plan of Reorganization of Noble Corporation plc and its Debtor Affiliates, which was subsequently amended on October 8, 2020 and October 13, 2020 and modified on November 18, 2020 (as amended, modified or supplemented, the “Plan”), and the related disclosure statement (the “Disclosure Statement”). On September 24, 2020, six additional subsidiaries of Legacy Noble (together with Legacy Noble and its subsidiaries that filed on the Petition Date, as the context requires, the “Debtors”) filed voluntary petitions in the Bankruptcy Court. The chapter 11 proceedings were jointly administered under the caption Noble Corporation plc, et al. (Case No. 20-33826) (the “Chapter 11 Cases”). As a result of the filing of the Chapter 11 Cases, Legacy Noble’s Board of Directors determined to cancel Legacy Noble’s share ownership policy applicable to the officers and directors. Noble is currently considering an appropriate policy subsequent to its emergence from bankruptcy.
The filing of the Chapter 11 Cases constituted events of default that accelerated the Company’s obligations under the indentures governing our outstanding senior notes and under our 2017 Credit Facility (as defined herein). In addition, the unpaid principal and interest due under our then outstanding senior notes and 2017 Credit Facility became immediately due and payable. However, any efforts to enforce such payment obligations with respect to such senior notes and 2017 Credit Facility were automatically stayed as a result of the filing of the Chapter 11 Cases, and the creditors’ rights of enforcement were subject to the applicable provisions of the Bankruptcy Code. We elected not to make the semiannual interest payment due in respect of the Senior Notes due 2024 (the “2024 Notes”), which was due on July 15, 2020, and did not made any additional interest payments due on any senior notes through the Effective Date.
On the Petition Date, the Debtors entered into a Restructuring Support Agreement (together with all exhibits and schedules thereto, and as amended by the First Amendment thereto dated as of August 20, 2020, the “Restructuring Support Agreement”) with an ad hoc group of certain holders of approximately 70% of the aggregate outstanding principal amount of the Senior Notes due 2026 (the “Guaranteed Notes”) and an ad hoc group of certain holders of approximately 45% of the aggregate outstanding principal amount of our other then outstanding senior notes, taken as a whole (the “Legacy Notes”). Legacy Noble entered into a Backstop Commitment Agreement (the “Backstop Commitment Agreement”) with the backstop parties thereto (the “Backstop Parties”) on October 12, 2020, pursuant to which the issuance of the senior secured second lien notes (the “Second Lien Notes”) were fully backstopped by the Ad Hoc Guaranteed Group and the Ad Hoc Legacy Group (each as defined in the Restructuring Support Agreement). Participation in the rights offering of Second Lien Notes (the “Rights Offering”) was offered to the holders of the Guaranteed Notes and the Legacy Notes. On November 20, 2020, the Bankruptcy Court entered an order confirming the Plan. On the Effective Date, the Plan became effective in accordance with its terms and the Debtors emerged from the Chapter 11 Cases.
On the Effective Date, and pursuant to the terms of the Plan, the Company:
•Appointed five new members to the Successor’s board of directors to replace all of the directors of the Predecessor, other than the director also serving as President and Chief Executive Officer, who was re-appointed pursuant to the Plan;
•Terminated and cancelled all common stock and equity-based awards of Legacy Noble that were outstanding immediately prior to the Effective Date;
•Transferred 31.7 million New Shares with a nominal value of $0.00001 per share to holders of the Guaranteed Notes in the cancellation of the Guaranteed Notes;
•Transferred 2.1 million New Shares, approximately 8.3 million seven-year warrants with Black-Scholes protection (the “Tranche 1 Warrants”) with an exercise price of $19.27 and approximately 8.3 million seven-year warrants with Black-Scholes protection (the “Tranche 2 Warrants”) with an exercise price of $23.13 to holders of the Legacy Notes in cancellation of the Legacy Notes;
•Issued approximately 7.7 million New Shares and Second Lien Notes to participants in the Rights Offering at an aggregate subscription price of $200 million;
•Issued approximately 5.6 million New Shares to the Backstop Parties as Holdback Securities (as defined in the Backstop Commitment Agreement);
•Issued approximately 1.7 million New Shares to the Backstop Parties in respect of their backstop commitment to subscribe for Unsubscribed Securities (as defined in the Backstop Commitment Agreement);
•Issued approximately 1.2 million New Shares to the Backstop Parties in connection with the payment of the Backstop Premiums (as defined in the Backstop Commitment Agreement);
•Issued 2.8 million five-year warrants with no Black-Sholes protection (the “Tranche 3 Warrants”) with an exercise price of $124.40 to the holders of Legacy Noble’s ordinary shares outstanding prior to the Effective Date;
•Entered into a senior secured revolving credit agreement (the “Exit Credit Agreement”) providing for a $675.0 million senior secured revolving credit facility (with a $67.5 million sublimit for the issuance of letters of credit thereunder) (the “Exit Credit Facility”);
•Entered into an exchange agreement with certain Backstop Parties which provided that, as soon as reasonably practicable after the Effective Date, the other parties to such agreement would deliver to the Company an aggregate of approximately 6.5 million New Shares issued pursuant to the Plan in exchange for the issuance of penny warrants to purchase up to approximately 6.5 million New Shares, with an exercise price of $0.01 per share (“Penny Warrants”) which were exchanged on a one-for-one basis for New Shares issued to certain initial holders of New Shares;
•Entered into an indenture governing the Second Lien Notes;
•Entered into a registration rights agreement with certain parties who received New Shares under the Plan (the “Equity Registration Rights Agreement”); and
•Entered into a registration rights agreement with certain parties who received Second Lien Notes under the Plan.
Management Incentive Plan. The Plan contemplated that on or after the Effective Date, (i) the Company would adopt a long-term incentive plan and authorize and reserve 7.7 million New Shares for issuance pursuant to equity incentive awards to be granted under such plan, and (ii) the initial awards under such plan would consist of at least 40% of such shares and be made as soon as practicable after the Effective Date on the terms and conditions as determined by Noble’s Board of Directors; provided that at least 40% of such initial awards would be in the form of time-based vesting awards vesting over a period of no shorter than three years and no longer than four years. As contemplated by the Plan, on February 18, 2021, the Company adopted a long-term incentive plan and authorized and reserved 7.7 million New Shares for issuance pursuant to equity incentive awards to be granted under such plan.
Sources of Cash for Plan Distribution. All cash required for payments made by the Company under the Plan on the Effective Date was obtained from cash on hand, proceeds of the Rights Offering, and proceeds of the Exit Credit Facility.
Going Concern. Legacy Noble performed the required assessments in conjunction with the filing of its Form 10-Q for the three months ended March 31, 2020 and determined, at that time, that substantial doubt about its ability to continue as a going concern existed. Subsequent to emergence from the Chapter 11 Cases, Noble performed a reassessment and concluded there was no longer substantial doubt regarding the Noble’s ability to continue as a going concern one year from the date of filing the Noble's Form 10-K for the year ended December 31, 2020. This was primarily due to the cancellation of Legacy Noble’s outstanding debt obligations and increased liquidity with the Exit Credit Agreement (as defined herein). Management’s assessment was based on the relevant conditions that were known and reasonably knowable at the issuance date and included the Noble’s post-emergence financial condition and liquidity sources, forecasted future cash flows, contractual obligations and commitments and other conditions that could adversely affect the Noble’s ability to meet its obligations through one year from the issuance date of the Form 10-K.
Impairment
As more thoroughly described in Part II, Item 8, “Financial Statements and Supplementary Data, Note 6— Loss on Impairment” we evaluate our property and equipment for impairment whenever there are changes in facts that suggest that the value of the asset is not recoverable. An impairment loss is recognized when and to the extent that an asset's carrying value exceeds its estimated fair value. As part of this analysis, we make assumptions and estimates regarding future market conditions. To the extent actual results do not meet our estimated assumptions for a given rig or piece of equipment, we may take an impairment loss in the future.
During the years ended December 31, 2020, 2019 and 2018, we recognized non-cash, before-tax impairment charges of $3.9 billion, $615.3 million and $802.1 million, respectively, related to certain rigs and related capital spares. These impairments were driven by factors such as customer suspensions of drilling programs, contract cancellations, a further reduction in the number of new contract opportunities, capital spare equipment obsolescence, and our belief that a drilling unit is no longer marketable and is unlikely to return to service.
There can be no assurance that we will not have to take additional impairment charges in the future if current depressed market conditions persist, or that we will be able to return cold stacked rigs to service in the time frame and at the reactivation costs or at the dayrates that we projected. It is reasonably possible that the estimate of undiscounted cash flows may change in the near term, resulting in the need to write down the affected assets to their corresponding estimated fair values.
Contract Drilling Services Backlog
We maintain a backlog of commitments for contract drilling services. Our contract drilling services backlog reflects estimated future revenues attributable to signed drilling contracts. While backlog did not include any letters of intent as of December 31, 2020, in the past we have included in backlog certain letters of intent that we expect to result in binding drilling contracts.
We calculate backlog for any given unit and period by multiplying the full contractual operating dayrate for such unit by the number of days remaining in the period, and include certain assumptions based on the terms of certain contractual arrangements, discussed in the notes to the table below. For the four rigs contracted with Exxon Mobil Corporation (“ExxonMobil”) mentioned below, we utilize the current market rate, adjusted for a moderate discount rate, as described in footnote (3) to the backlog table below. The reported contract drilling services backlog does not include amounts representing revenues for mobilization, demobilization and contract preparation, which are not expected to be significant to our contract drilling services revenues, amounts constituting reimbursables from customers or amounts attributable to uncommitted option periods under drilling contracts or letters of intent.
The table below presents the amount of our contract drilling services backlog and the percent of available operating days committed for the periods indicated:
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|
Year Ending December 31, (1)
|
|
|
Total
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025 - 2027
|
|
|
(In thousands)
|
Contract Drilling Services Backlog
|
|
|
|
|
|
|
|
|
|
|
|
|
Floaters (2) (3)
|
|
$
|
1,143,849
|
|
|
$
|
433,614
|
|
|
$
|
337,359
|
|
|
$
|
130,603
|
|
|
$
|
61,195
|
|
|
$
|
181,078
|
|
Jackups (4)
|
|
468,204
|
|
|
241,998
|
|
|
181,110
|
|
|
45,096
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
1,612,053
|
|
|
$
|
675,612
|
|
|
$
|
518,469
|
|
|
$
|
175,699
|
|
|
$
|
61,195
|
|
|
$
|
181,078
|
|
Percent of Available Days Committed (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
Floaters (3)
|
|
|
|
84
|
%
|
|
65
|
%
|
|
24
|
%
|
|
14
|
%
|
|
14
|
%
|
Jackups
|
|
|
|
57
|
%
|
|
37
|
%
|
|
7
|
%
|
|
—
|
%
|
|
—
|
%
|
Total
|
|
|
|
67
|
%
|
|
47
|
%
|
|
13
|
%
|
|
5
|
%
|
|
5
|
%
|
(1)Represents a twelve-month period beginning January 1. Some of our drilling contracts provide customers with certain early termination rights and, in limited cases, those termination rights require minimal or no notice and minimal financial penalties.
(2)Two of our long-term drilling contracts with Royal Dutch Shell plc (“Shell”), the Noble Globetrotter I and Noble Globetrotter II, contain a dayrate adjustment mechanism that utilizes an average of market rates that match a set of distinct technical attributes and is subject to a modest discount, beginning on the fifth-year anniversary of the contract and continuing every six months thereafter. On December 12, 2016, we amended those drilling contracts with Shell. As a result of the amendments, each of the contracts now has a contractual dayrate floor of $275,000 per day. Once the dayrate adjustment mechanism becomes effective and following any idle periods, the dayrate for these rigs will not be lower than the higher of (i) the contractual dayrate floor or (ii) the market rate as calculated under the adjustment mechanism. The impact to contract backlog from these amendments has been reflected in the table above and the backlog calculation assumes that, after any idle period at the contractual stacking rate, each rig will work at its respective dayrate floor for the remaining contract term.
(3)Noble entered into a multi-year Commercial Enabling Agreement (the “CEA”) with ExxonMobil in February 2020. Under the CEA, dayrates earned by each rig will be updated at least twice per year to the prevailing market rate, subject to a scale-based discount and a performance bonus that appropriately aligns the interests of Noble and ExxonMobil. Under the CEA, the table above includes awarded and remaining term of nine and a half years related to the Noble Tom Madden, six months to each of the Noble Bob Douglas and Noble Sam Croft, and one year to the Noble Don Taylor. Under the CEA, ExxonMobil may reassign term among rigs. The aforementioned additional backlog included in the table above was estimated using the current market rate, adjusted for a moderate discount rate.
(4)In April 2020, we received notice from Saudi Arabian Oil Company (“Saudi Aramco”) to suspend operations on the Noble Scott Marks for a period of up to 12 months. Beginning in early May 2020, we idled the Noble Scott Marks at a rate of $0 per day. The impact to contract backlog has been reflected in the table above and the backlog calculation assumes that, upon completion of the suspension period, the rig will resume operations at the contracted dayrate for the remaining contract term.
(5)Percent of available days committed is calculated by dividing the total number of days our rigs are operating under contract for such period by the product of the number of our rigs and the number of calendar days in such period.
The amount of actual revenues earned and the actual periods during which revenues are earned may be materially different than the backlog amounts and backlog periods presented in the table above due to various factors, including, but not limited to, the impact of the COVID-19 pandemic and related mitigation efforts on the demand for oil, current oversupply of oil, shipyard and maintenance projects, unplanned downtime, the operation of market benchmarks for dayrate resets, achievement of bonuses, weather conditions, reduced standby or mobilization rates and other factors that result in applicable dayrates lower than the full contractual operating dayrate. In addition, amounts included in the backlog may change because drilling contracts may be varied or modified by mutual consent or customers may exercise early termination rights contained in some of our drilling contracts or decline to enter into a drilling contract after executing a letter of intent. As a result, our backlog as of any particular date may not be indicative of our actual operating results for the periods for which the backlog is calculated. See Part I, Item 1A, “Risk Factors—Risks Related to Our Business and Operations—Our current backlog of contract drilling revenue may not be ultimately realized.”
For the year ended December 31, 2020, ExxonMobil, Shell, Saudi Aramco and Equinor ASA represented approximately 44.2 percent, 26.3 percent, 17.0 percent and 3.6 percent of our backlog, respectively.
Results of Operations
During 2020, the global mitigation efforts associated with preventing the spread of COVID-19 and production level disputes among OPEC+ members had significant adverse consequences for the financial condition of our customers, and uncertainty about the financial viability of offshore projects, resulting in contract delays, suspension and terminations as well as customers seeking to re-negotiate contracts to secure price reductions. Preliminary demand data compiled by the International Energy Agency (the “IEA”) indicates global liquid fuels consumption declined by 9 million barrels per day in 2020, the largest decline in IEA data since 1980. As a consequence, throughout 2020, we were under pressure to reduce dayrates on existing contracts and idle or suspend existing operations, and market dayrates for new contracts were lower compared to the end of 2019.
2020 Compared to 2019
Net loss from continuing operations attributable to Noble for the year ended December 31, 2020 was $4.0 billion, or $15.86 per diluted share, on operating revenues of $1.0 billion, compared to a net loss from continuing operations for the year ended December 31, 2019 of $696.8 million, or $2.79 per diluted share, on operating revenues of $1.3 billion.
As a result of Noble conducting substantially all of its business through Finco and its subsidiaries, the financial position and results of operations for Finco, and the reasons for material changes in the amount of revenue and expense items between December 31, 2020 and December 31, 2019, would be the same as the information presented below regarding Noble in all material respects, with the exception of operating income (loss). During the years ended December 31, 2020 and 2019, Finco's operating loss was $100.6 million and $138.8 million lower, respectively, than that of Noble. The operating loss difference is primarily a result of expenses related to ongoing litigation, administration, and Chapter 11 bankruptcy charges directly attributable to Noble for operations support and stewardship-related services. In the years ended December 31, 2020 and 2019, Noble recorded a $15.0 million gain and a $100.0 million expense related to ongoing litigation, which was not recognized by Finco.
Key Operating Metrics
Operating results for our contract drilling services segment are dependent on three primary metrics: operating days, dayrates and operating costs. We also track rig utilization, which is a function of operating days and the number of rigs in our fleet. For more information on operating costs, see “—Contract Drilling Services” below.
The following table presents the average rig utilization, operating days and average dayrates for our rig fleet for the years ended December 31, 2020 and 2019:
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Average Rig Utilization (1)
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Operating Days (2)
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Average Dayrates (2)
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December 31,
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December 31,
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December 31,
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2020
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2019
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2020
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2019
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% Change
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2020
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2019
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% Change
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Jackups
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71
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%
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93
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%
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3,147
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4,054
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(22)
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%
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$
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132,722
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$
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128,002
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4
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%
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Floaters
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60
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%
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62
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%
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2,354
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2,729
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(14)
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%
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208,723
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266,442
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(3)
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(22)
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%
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Total
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66
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%
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78
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%
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5,501
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6,783
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(19)
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%
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$
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165,276
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$
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183,706
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(3)
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(10)
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%
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(1)We define utilization for a specific period as the total number of days our rigs are operating under contract, divided by the product of the total number of our rigs, including cold stacked rigs, and the number of calendar days in such period. Information reflects our policy of reporting on the basis of the number of available rigs in our fleet, excluding newbuild rigs under construction.
(2)An operating day is defined as a calendar day during which a rig operated under a drilling contract. We define average dayrates as revenue from contract drilling services earned per operating day. Operating days include standby days which typically have a lower dayrate.
(3)Includes the impact of the Noble Bully II contract buyout during the year ended December 31, 2019. Exclusive of this item, the average dayrate for the year ended December 31, 2019 would have been $205,304 for floaters and $159,106 for total rigs.
Contract Drilling Services
The following table presents the operating results for our contract drilling services segment for the years ended December 31, 2020 and 2019 (dollars in thousands):
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Year Ended December 31,
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Change
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2020
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2019
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$
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%
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Operating revenues:
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Contract drilling services
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$
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909,236
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$
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1,246,058
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$
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(336,822)
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(27)
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%
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Reimbursables and other (1)
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55,036
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59,380
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(4,344)
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(7)
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%
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$
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964,272
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$
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1,305,438
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$
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(341,166)
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(26)
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%
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Operating costs and expenses:
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Contract drilling services
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$
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567,487
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$
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698,343
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$
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(130,856)
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(19)
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%
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Reimbursables (1)
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48,188
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49,061
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(873)
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(2)
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%
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Depreciation and amortization
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374,129
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440,221
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(66,092)
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(15)
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%
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General and administrative
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121,196
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168,792
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(47,596)
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(28)
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%
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Loss on impairment
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3,915,408
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615,294
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$
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3,300,114
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536
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%
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5,026,408
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1,971,711
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3,054,697
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155
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%
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Operating loss
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$
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(4,062,136)
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$
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(666,273)
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$
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(3,395,863)
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510
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%
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(1)We record reimbursements from customers for out-of-pocket expenses as operating revenues and the related direct costs as operating expenses. Changes in the amount of these reimbursables generally do not have a material effect on our financial position, results of operations or cash flows.
Operating Revenues. The $336.8 million decrease in contract drilling services revenues for the year ended December 31, 2020 as compared to the same period of 2019 was composed of a $330.1 million decrease due to a decreased number of operating days and a $6.7 million decrease from lower dayrates. The revenue decrease was due to decreases in both floater fleet revenues and jackup fleet revenues of $235.8 million and $101.0 million, respectively.
The $235.8 million revenue decrease in our floater fleet for the year ended December 31, 2020 is attributable to a $276.0 million decrease mainly due to fewer operating days on two rigs, the Noble Bully II, which completed its contract in late 2019, and the Noble Clyde Boudreaux, which completed its contract in the middle of 2020. These decreases were partially offset by an increase of $30.4 million primarily due to the Noble Sam Croft returning to service following its reactivation near the end of the three months ended March 31, 2019 and the Noble Don Taylor, which had time between contracts in 2019 related to contract preparation. Floater fleet revenue was also impacted by a decline in dayrates of $32.2 million as the legacy contract for the Noble Don Taylor and the legacy assignment for the Noble Globetrotter I were completed in early 2019. These revenue reductions were partially offset by a $42.0 million increase in revenues associated with an increase in dayrates on various other rigs, including a $17.1 million increase in revenue on the Noble Sam Croft as a result of starting a new contract at a higher dayrate in 2020.
The $101.0 million revenue decrease in our jackup fleet for the year ended December 31, 2020 is attributable to a $118.5 million decrease due to fewer operating days on the Noble Regina Allen mainly due to the rig relocating to Trinidad & Tobago from Canada to start a new contract, the Noble Sam Hartley which had downtime in between contracts in 2020 during which it was warm-stacked, the Noble Scott Marks contract being suspended in May 2020 for a period of up to 12 months, the Noble Houston Colbert which was warm-stacked for five months in 2019 as compared to eight months in 2020, the Noble Joe Beall which completed its final contract in early 2020 and was subsequently sold later in 2020, and the Noble Sam Turner and the Noble Hans Deul which were warm-stacked in early 2020 after their contract completions. This decrease was partially offset by an increase in revenue of $34.0 million primarily due to increased operating days on the Noble Tom Prosser, as well as the Noble Johnny Whitstine and the Noble Joe Knight being placed into service in 2019. Adjusting for the effect of operating days on the average dayrates, there was also a net decrease of revenue of $16.5 million due to a decline in dayrates across the jackup fleet.
Operating Costs and Expenses. Contract drilling services costs decreased $130.9 million for the year ended December 31, 2020 as compared to the same period of 2019. The primary cost decreases were due to: (i) a $52.5 million decrease due to rigs that had fewer operating days or were idled, (ii) a $37.3 million decrease across our active fleet in 2020 compared to 2019 mainly due to reductions in repair and maintenance activity, transportation costs and personnel-related expenses, (iii) a $35.6 million decrease due to the retirement of the Noble Bully I, Noble Bully II, Noble Danny Adkins, Noble Joe Beall, Noble Jim Day and Noble Paul Romano during 2020 and (iv) a $23.4 million decrease
in overhead across our fleet from lower personnel-related expenses in 2020 compared to 2019. These decreases were partially offset by: (i) a $9.9 million increase in expenses due to the Noble Joe Knight commencing operations in September 2019. Due to the effects of the ongoing COVID-19 pandemic, we experienced a $9.8 million increase primarily in labor expenses across our fleet in 2020.
Depreciation and amortization decreased $66.1 million for the year ended December 31, 2020 as compared to the same period of 2019. The decline was due to the effect of rig impairments recorded during 2019 and 2020.
Loss on Impairments. We recorded a loss on impairment of $3.9 billion for the year ended December 31, 2020 as compared to a loss on impairment of $615.3 million for the same period of 2019. We impaired the carrying value to estimated fair value for seven floaters and nine jackups and certain capital spare equipment during 2020 and two floaters and certain capital spare equipment during 2019. We impaired the carrying value to estimated fair value for the Noble Bully II during 2019, of which $265.0 million was attributable to our former joint venture partner. For additional information, see Part II, Item 8, “Financial Statements and Supplementary Data, Note 6— Loss on Impairment.”
Other Income and Expenses
General and Administrative Expenses. General and administrative expenses decreased $47.6 million during the year ended December 31, 2020 as compared to the same period of 2019, primarily as a result of a reduction to Noble’s ongoing litigation charge of $53.5 million, partially offset by an increase in Finco’s litigation charge of $7.5 million.
Pre-Petition Charges. Noble incurred $14.4 million of pre-petition charges during the year ended December 31, 2020 as compared to no charges for the same period of 2019. These costs relate to attorneys’ and financial advisors’ fees and other professional fees incurred in connection with the Chapter 11 Cases, prior to the Petition Date.
Reorganization Items, Net. Noble incurred net charges of $23.9 million for reorganization items during the year ended December 31, 2020 as compared to no charges for the same period of 2019. Finco incurred net charges of $50.8 million for reorganization items during the year ended December 31, 2020 as compared to no charges for the same period of 2019. These costs relate to attorneys’ and financial advisors’ fees, write-off of deferred financing costs and debt discounts, revisions of estimated claims, adjustments to legal contingencies and other professional fees incurred in connection with the Chapter 11 Cases.
Interest Expense. Interest expense decreased $114.8 million during the year ended December 31, 2020 as compared to the same period of 2019. This decrease was primarily due to the Bankruptcy Court ordering a stay on all interest expense starting on the Petition Date; therefore, we did not incur any interest expense after July 31, 2020 and the retirement of our 2015 Credit Facility in December 2019. For additional information, see Part II, Item 8, “Financial Statements and Supplementary Data, Note 7— Debt.”
Income Tax Benefit. Our income tax benefit increased by $221.9 million for the year ended December 31, 2020 as compared to the same period of 2019.
Significant items included in the income tax benefit in the same period of 2019 are as follows:
•Tax benefits related to the following:
•release of reserves related to the closure of the 2010-2011 US tax audit of $33.7 million; and
•reversal of UK valuation allowance of $19.2 million.
•Tax expense related to an internal restructuring of $36.8 million.
Significant items included in the income tax benefit in the current period of 2020 are as follows:
•Tax benefits related to the following:
•gross benefit of $192.4 million related to the impairment of rigs and certain capital spares partially offset by a corresponding increase in valuation allowance of $92.7 million;
•the application of the CARES Act of $39.0 million;
•release of reserves related to the closure of the 2012- 2017 US tax audit of $111.9 million; and
•tax impact of an internal restructuring net of resulting adjustment to the valuation allowance of $17.9 million.
•Tax expenses related to the following:
•a 2019 US return-to-provision adjustment and resulting adjustment to the valuation allowance of $21.2 million;
•an increase in UK valuation allowance of $31.1 million; and
•an increase in non-US tax reserves of $7.8 million.
Excluding the tax impact of the significant items as outlined above and other immaterial items, our income tax benefit increased by $25.0 million. This increase is primarily a result of an increase in US taxable losses partially offset by non-US recurring tax expense.
2019 Compared to 2018
Information related to a comparison of our results of operations for our fiscal year ended December 31, 2019 compared to our fiscal year ended December 31, 2018 is included in Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on February 20, 2020.
Liquidity and Capital Resources
As a result of the financial restructuring through the Chapter 11 Cases, Noble emerged with a new $675.0 million revolving credit facility and $216.0 million of Second Lien Notes (as defined herein). At emergence, Legacy Noble’s ordinary shares were cancelled and New Shares were issued to Legacy Noble’s former bondholders. Certain former bondholders and former equity holders of Legacy Noble were also issued warrants to purchase shares of the Company.
Post-emergence Debt
Senior Secured Exit Revolving Credit Facility
On the Effective Date, Finco and Noble International Finance Company (“NIFCO”) entered into the Exit Credit Agreement providing for the $675.0 million Exit Credit Facility and canceled all debt that existed immediately prior to the Effective Date. The Exit Credit Facility matures on July 31, 2025. Subject to the satisfaction of certain conditions, Finco may from time to time designate one or more of Finco’s other wholly-owned subsidiaries as additional borrowers under the Exit Credit Agreement (collectively with Finco and NIFCO, the “Borrowers”). As of the Effective Date, $177.5 million of loans were outstanding, and $8.8 million of letters of credit were issued, under the Exit Credit Facility.
All obligations of the Borrowers under the Exit Credit Agreement, certain cash management obligations and certain swap obligations are unconditionally guaranteed, on a joint and several basis, by Finco and certain of its direct and indirect subsidiaries (collectively with the Borrowers, the “Credit Parties”), including a guarantee by each Borrower of the obligations of each other Borrower under the Exit Credit Agreement. All such obligations, including the guarantees of the Exit Credit Facility, are secured by senior priority liens on substantially all assets of, and the equity interests in, each Credit Party, including all of the rigs owned by the Company as of the Effective Date or acquired thereafter and certain assets related thereto, in each case, subject to certain exceptions and limitations described in the Exit Credit Agreement.
The loans outstanding under the Exit Credit Facility bear interest at a rate per annum equal to the applicable margin plus, at Finco’s option, either: (i) the reserve-adjusted LIBOR or (ii) a base rate, determined as the greatest of (x) the prime loan rate as published in the Wall Street Journal, (y) the federal funds effective rate plus 1⁄2 of 1%, and (z) the reserve-adjusted one-month LIBOR plus 1%. The applicable margin is initially 4.75% per annum for LIBOR loans and 3.75% per annum for base rate loans and will be increased by 50 basis points after July 31, 2024, and may be increased by an additional 50 basis points under certain conditions described in the Exit Credit Agreement.
The Borrowers are required to pay a quarterly commitment fee to each lender under the Exit Credit Agreement, which accrues at a rate per annum equal to 0.50% on the average daily unused portion of such lender’s commitments under the Exit Credit Facility. The Borrowers are also required to pay customary letter of credit and fronting fees.
Borrowings under the Exit Credit Agreement may be used for working capital and other general corporate purposes. Availability of borrowings under the Exit Credit Agreement is subject to the satisfaction of certain conditions, including restrictions on borrowings if, after giving effect to any such borrowings and the application of the proceeds thereof, (i) the aggregate amount of Available Cash (as defined in the Exit Credit Agreement) would exceed $100 million, (ii) the Consolidated First Lien Net Leverage Ratio (as defined in the Exit Credit Agreement) would be greater than 5.50 to 1.00 and the aggregate principal amount outstanding under the Exit Credit Facility would exceed $610 million, or (iii) the Asset Coverage Ratio (as described below) would be less than 2.00 to 1.00.
Mandatory prepayments and, under certain circumstances, commitment reductions are required under the Exit Credit Facility in connection with (i) certain asset sales, asset swaps and events of loss (subject to reinvestment rights if no event of default exists) and (ii) certain debt issuances. Available Cash in excess of $150 million is also required to be applied periodically to prepay loans (without a commitment reduction). The loans under the Exit Credit Facility may be voluntarily prepaid, and the commitments thereunder voluntarily terminated or reduced, by the Borrowers at any time without premium or penalty, other than customary breakage costs.
The Exit Credit Agreement obligates Finco and its restricted subsidiaries to comply with the following financial maintenance covenants:
•as of the last day of each fiscal quarter in 2021, Adjusted EBITDA (as defined in the Exit Credit Agreement) is not permitted to be lower than (i) $70 million for the four fiscal quarter period ending March 31, 2021, (ii) $40 million for the four fiscal quarter period ending June 30, 2021 and (iii) $25 million for the four fiscal quarter periods ending on each of September 30, 2021 and December 31, 2021;
•as of the last day of each fiscal quarter ending on or after March 31, 2022, the ratio of Adjusted EBITDA to Cash Interest Expense (as defined in the Exit Credit Agreement) is not permitted to be less than (i) 2.00 to 1.00 for each four fiscal quarter
period ending on or after March 31, 2022 until June 30, 2024, and (ii) 2.25 to 1.00 for each four fiscal quarter period ending thereafter; and
•for each fiscal quarter ending on or after June 30, 2021, the ratio of (x) Asset Coverage Aggregate Rig Value (as defined in the Exit Credit Agreement) to (y) the aggregate principal amount of loans and letters of credit outstanding under the Exit Credit Facility (the “Asset Coverage Ratio”) as of the last day of any such fiscal quarter is not permitted to be less than 2.00 to 1.00.
The Exit Credit Facility contains affirmative and negative covenants, representations and warranties and events of default that the Company considers customary for facilities of this type.
Second Lien Notes Indenture
On the Effective Date, pursuant to the Backstop Commitment Agreement and in accordance with the Plan, Noble and Finco consummated the Rights Offering of Second Lien Notes and associated New Shares at an aggregate subscription price of $200 million.
On the Effective Date, Finco issued an aggregate principal amount of $216 million of Second Lien Notes, which includes the aggregate subscription price of $200.0 million plus a backstop fee of $16.0 million which was paid in kind. The Second Lien Notes mature on February 15, 2028.The Second Lien Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured second-priority basis, by the direct and indirect subsidiaries of Finco that are Credit Parties under the Exit Credit Facility. The Second Lien Notes and such guarantees are secured by senior priority liens on the assets subject to liens securing the Exit Credit Facility, including the equity interests in Finco and each guarantor of the Second Lien Notes, all of the rigs owned by the Company as of the Effective Date or acquired thereafter, certain assets related thereto, and substantially all other assets of Finco and such guarantors, in each case, subject to certain exceptions and limitations.
Interest on the Second Lien Notes accrues, at Finco’s option, at a rate of: (i) 11% per annum, payable in cash; (ii) 13% per annum, with 50% of such interest to be payable in cash and 50% of such interest to be payable by issuing additional Second Lien Notes (“PIK Notes”); or (iii) 15% per annum, with the entirety of such interest to be payable by issuing PIK Notes. Finco shall pay interest semi-annually in arrears on February 15 and August 15 of each year, commencing August 15, 2021.
On or after February 15, 2024, Finco may redeem all or part of the Second Lien Notes at fixed redemption prices (expressed as percentages of the principal amount), plus accrued and unpaid interest, if any, to, but excluding, the redemption date. Finco may also redeem the Second Lien Notes, in whole or in part, at any time and from time to time on or before February 14, 2025 at a redemption price equal to 106% of the principal amount plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date, plus a “make-whole” premium. Notwithstanding the foregoing, if a Change of Control (as defined in the Second Lien Notes Indenture) occurs prior to (but not including) February 15, 2024, then, within 120 days of such Change of Control, Finco may elect to purchase all remaining outstanding Second Lien Notes at a redemption price equal to 106% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.
The Second Lien Notes contain covenants and events of default that the Company considers customary for notes of this type.
Sources and Uses of Cash
Our principal sources of capital in 2020 were cash generated from operating activities, funding from our 2017 Credit Facility and the CARES Act. Cash on hand during 2020 was primarily used for the following:
•normal recurring operating expenses;
•fees and expenses related to the Chapter 11 Cases; and
•capital expenditures.
Our currently anticipated cash flow needs, both in the short-term and long-term, may include the following:
•normal recurring operating expenses;
•planned and discretionary capital expenditures; and
•repayments of debt and interest.
We currently expect to fund these cash flow needs with cash generated by our operations, cash on hand, borrowings under our Exit Credit Facility and potential issuances of equity or long-term debt.
On March 27, 2020, the 45th President of the United States signed the CARES Act into law. The CARES Act makes significant changes to various areas of US federal income tax law by, among other things, allowing a five-year carryback period for 2018, 2019 and 2020 NOLs, accelerating the realization of remaining alternative minimum tax credits, and increasing the interest expense limitation under Section 163(j) for years 2019 and 2020. The Company recognized an income tax benefit of $39.0 million as a result of the application of the CARES Act in its 2020 financial statements. Such $39.0 million tax benefit was comprised primarily of a current income tax receivable of $151.4 million, partially offset by non-cash deferred tax expense of $112.4 million related to NOL utilization. As of December 31, 2020, we had
received $134.0 million of the income tax receivable related to the CARES Act, along with an additional receipt of $4.4 million of related interest.
Net cash provided by operating activities was $273.2 million for the year ended December 31, 2020 as compared to $186.8 million for the year ended December 31, 2019. The increase in net cash provided by operating activities for the year ended December 31, 2020 was primarily attributable to $151.2 million in tax refunds received offset by a reduction in cash flows from operating activity. We had working capital of $383.9 million and negative working capital of $94.8 million at December 31, 2020 and December 31, 2019, respectively.
Net cash used in investing activities for the year ended December 31, 2020 was $121.5 million as compared to $256.0 million for the year ended December 31, 2019. The variance primarily relates to the purchase and preparation of the Noble Joe Knight and the preparation of the Noble Johnny Whitstine to commence operations for their contracts in the fourth quarter and the second quarter of 2019, respectively.
Net cash provided by financing activities for the year ended December 31, 2020 was $107.4 million as compared to net cash used in financing activities of $200.7 million for the year ended December 31, 2019. The variance primarily relates to higher net borrowings of $108.9 million in the current period as compared to net repayments of only $65.0 million in the year ended December 31, 2019 and the $106.7 million purchase of Shell's non-controlling interest in the Bully I and Bully II joint ventures in the year ended December 31, 2019.
In March 2019, we completed cash tender offers for our Senior Notes due 2020 (the “2020 Notes”), our Senior Notes due 2021 (the “2021 Notes”), our Senior Notes due 2022 (the “2022 Notes”)and the 2024 Notes. Pursuant to such tender offers, we purchased $440.9 million aggregate principal amount of these senior notes for $400.0 million, plus accrued interest, using borrowings under the 2015 Credit Facility (as defined herein) and cash on hand.
At December 31, 2020, we had a total contract drilling services backlog of approximately $1.6 billion, which includes a commitment of 67.0 percent of available days for 2021. For additional information regarding our backlog, see “—Contract Drilling Services Backlog.”
Capital Expenditures
Capital expenditures totaled $148.2 million, $306.4 million and $281.3 million for the years ended December 31, 2020, 2019 and 2018, respectively. Capital expenditures during 2020 consisted of the following:
•$65.8 million for sustaining capital;
•$23.9 million in major projects, including subsea and other related projects; and
•$58.5 million for rebillable capital modifications.
Our total capital expenditure estimate for 2021 is expected to range between $170.0 million and $190.0 million, of which approximately $80.0 to $90.0 million is currently anticipated to be spent for sustaining capital.
From time to time we consider possible projects that would require expenditures that are not included in our capital budget, and such unbudgeted expenditures could be significant. In addition, while liquidity and preservation of capital remains our top priority, we will continue to evaluate acquisitions of drilling units from time to time.
Pre-emergence Debt
2017 Credit Facility
In December 2017, Noble Cayman Limited, a Cayman Islands company and a wholly-owned indirect subsidiary of Finco; Noble International Finance Company, a Cayman Islands company and a wholly-owned indirect subsidiary of Finco; and Noble Holding UK Limited, a company incorporated under the laws of England and Wales and a wholly-owned direct subsidiary of Legacy Noble (“NHUK”), as parent guarantor, entered into a senior unsecured credit agreement (as amended, the “2017 Credit Facility”). In July 2019, we executed a first amendment to our 2017 Credit Facility, which, among other things, reduced the maximum aggregate amount of commitments thereunder from $1.5 billion to $1.3 billion. As a result of such reduction in the maximum aggregate amount of commitments, we recognized a net loss of approximately $0.7 million in the year ended December 31, 2019.
Prior to the filing of the Chapter 11 Cases, the 2017 Credit Facility was scheduled to mature in January 2023. Borrowings were available for working capital and other general corporate purposes. The 2017 Credit Facility provided for a letter of credit sub-facility in the amount of $15.0 million, with the ability to increase such amount up to $500.0 million with the approval of the lenders. The 2017 Credit Facility had provisions that varied the applicable interest rates for borrowings based upon our debt ratings. Borrowings under the 2017 Credit Facility bore interest at LIBOR plus an applicable margin. NHUK guaranteed the obligations of the borrowers under the 2017 Credit Facility. In addition, certain indirect subsidiaries of Legacy Noble that owned rigs were guarantors under the 2017 Credit Facility.
In April 2020, we borrowed $100.0 million under the 2017 Credit Facility to pay down our indebtedness under the Seller Loans (as defined herein) as further described below. At December 31, 2020, we had $545.0 million of borrowings outstanding under the 2017 Credit
Facility. At December 31, 2020, we had $8.8 million of letters of credit issued under the 2017 Credit Facility and an additional $6.0 million in letters of credit and surety bonds issued under unsecured or cash collateralized bilateral arrangements.
The filing of the Chapter 11 Cases constituted events of default that accelerated the Company’s obligations under the indentures governing our outstanding senior notes and under our 2017 Credit Facility. In addition, the unpaid principal and interest due under our indentures and the 2017 Credit Facility became immediately due and payable. However, any efforts to enforce such payment obligations with respect to our senior notes and 2017 Credit Facility were automatically stayed as a result of the filing of the Chapter 11 Cases, and the creditors’ rights of enforcement were subject to the applicable provisions of the Bankruptcy Code. See “Note 1— Organization and Basis of Presentation” to our consolidated financial statements for additional information.
On the Effective Date, all outstanding obligations under the 2017 Credit Facility were terminated and the holders of claims under the 2017 Credit Facility had such obligations refinanced through the Exit Credit Facility. On the Effective Date, all liens and security interests granted to secure such obligations were terminated and are of no further force and effect.
2015 Credit Facility
Effective January 2018, in connection with entering into the 2017 Credit Facility, we amended our $300.0 million senior unsecured credit facility that would have matured in January 2020 and was guaranteed by our indirect, wholly-owned subsidiaries, Noble Holding (U.S.) LLC and Noble Holding International Limited (“NHIL”), a finance subsidiary of Finco, (as amended, the “2015 Credit Facility”). As a result of the 2015 Credit Facility's reduction in the aggregate principal amount of commitments, we recognized a net loss of approximately $2.3 million in the year ended December 31, 2018. On December 20, 2019, we repaid $300.0 million of outstanding borrowings and terminated the 2015 Credit Facility.
Seller Loans
In February 2019, we purchased the Noble Joe Knight for $83.8 million with a $53.6 million seller-financed secured loan (the “2019 Seller Loan”). The 2019 Seller Loan had a term of four years and required a 5% principal payment at the end of the third year with the remaining 95% of the principal due at the end of the term. The 2019 Seller Loan bore a cash interest rate of 4.25% and the equivalent of a 1.25% interest rate paid-in-kind over the four-year term of the 2019 Seller Loan. Based on the terms of the 2019 Seller Loan, the 1.25% paid-in-kind interest rate was accelerated into the first year, resulting in an overall first year interest rate of 8.91%, of which only 4.25% was payable in cash. Thereafter, the paid-in-kind interest ended and the cash interest rate of 4.25% was payable for the remainder of the term.
In September 2018, we purchased the Noble Johnny Whitstine for $93.8 million with a $60.0 million seller-financed secured loan (the “2018 Seller Loan” and, together with the 2019 Seller Loan, the “Seller Loans”). The 2018 Seller Loan had a term of four years and required a 5% principal payment at the end of the third year with the remaining 95% of the principal due at the end of the term. The 2018 Seller Loan bore a cash interest rate of 4.25% and the equivalent of a 1.25% interest rate paid-in-kind over the four-year term of the 2018 Seller Loan. Based on the terms of the 2018 Seller Loan, the 1.25% paid-in-kind interest rate was accelerated into the first year, resulting in an overall first year interest rate of 8.91%, of which only 4.25% was payable in cash. Thereafter, the paid-in-kind interest ended and the cash interest rate of 4.25% was payable for the remainder of the term.
Both of the Seller Loans were guaranteed by Finco and each was secured by a mortgage on the applicable rig and by the pledge of the shares of the applicable single-purpose entity that owned the relevant rig. Each Seller Loan contained a debt to total capitalization ratio requirement that such ratio not exceed 0.55 at the end of each fiscal quarter, a $300.0 million minimum liquidity financial covenant and an asset and revenue covenant substantially similar to the Guaranteed Notes, as well as other covenants and provisions customarily found in secured transactions, including a cross default provision. Each Seller Loan required immediate repayment on the occurrence of certain events, including the termination of the drilling contract associated with the relevant rig or circumstances in connection with a material adverse effect.
In April 2020, the Company agreed with the lender under the Seller Loans to pay off 85% of the outstanding principal amount of the Seller Loans in exchange for a discount to the outstanding loan balance. On April 20, 2020, the Company made a payment of $48.1 million under the 2019 Seller Loan and $53.6 million under the 2018 Seller Loan, and, upon the lender’s receipt of such payment, interest ceased accruing, and the financial covenants set forth in the agreements relating to the Seller Loans ceased to apply. On July 20, 2020, at the conclusion of the 90-day period following the payment date, all outstanding amounts were reduced to zero, all security was released, and the Seller Loans were terminated.
As a result of the early repayment of the Seller Loans and the conclusion of the 90-day period following the payment date, we recognized gains of approximately $17.3 million in the year ended December 31, 2020.
Senior Notes
In March 2019, we completed cash tender offers for the 2020 Notes, the 2021 Notes, the 2022 Notes, and the 2024 Notes. Pursuant to such tender offers, we purchased $440.9 million aggregate principal amount of these senior notes for $400.0 million, plus accrued interest, using cash on hand and borrowings under the 2015 Credit Facility. As a result of these transactions, we recognized a net gain of approximately $31.3 million.
On the Effective Date, in accordance with the Plan, all outstanding obligations under our senior notes were cancelled and the indentures governing such obligations were cancelled, except to the limited extent expressly set forth in the Plan.
Share Capital
The declaration and payment of dividends required the authorization of the Board of Directors of Legacy Noble, provided that such dividends on issued share capital may be paid only out of Legacy Noble’s “distributable reserves” on its statutory balance sheet in accordance with UK law. Therefore, Legacy Noble was not permitted to pay dividends out of share capital, which includes share premium. Legacy Noble had not paid dividends since the third quarter of 2016. The payment of future dividends will depend on our results of operations, financial condition, cash requirements, future business prospects, contractual and indenture restrictions and other factors deemed relevant by our Board of Directors; however, at this time, we do not expect to pay any dividends in the foreseeable future.
At Legacy Noble’s 2020 Annual General Meeting, Legacy Noble’s shareholders authorized its Board of Directors to increase share capital through the issuance of up to approximately 8.7 million ordinary shares (at then current nominal value of $0.01 per share). That authority to allot shares has expired on the Effective Date. Other than shares issued to Legacy Noble’s directors under the Noble Corporation 2017 Director Omnibus Plan, the authority was not used to allot shares during the year ended December 31, 2020. Pursuant to the Memorandum of Association of Noble Corporation, the share capital of Noble is $6,000 divided into 500,000,000 ordinary shares of a par value of $0.00001 each and 100,000,000 shares of a par value of $0.00001, each of such class or classes having the rights as the Board may determine from time to time.
In accordance with the Plan, all agreements, instruments and other documents evidencing, relating to or otherwise connected with any of Legacy Noble’s equity interests outstanding prior to the Effective Date, including all equity-based awards, were cancelled and all such equity interests have no further force or effect after the Effective Date. Pursuant to the Plan, the holders of Legacy Noble’s ordinary shares, par value $0.01 per share, outstanding prior to the Effective Date received their pro rata share of the Tranche 3 Warrants to acquire New Shares.
Share Repurchases
Under UK law, Legacy Noble was only permitted to purchase its own shares by way of an “off-market purchase” in a plan approved by shareholders. We did not have shareholder authority to repurchase shares of Legacy Noble and there is currently no share repurchase plan in place for the Successor. During the years ended December 31, 2020, 2019 and 2018, we did not repurchase any of our shares.
Summary of Contractual Cash Obligations and Commitments
The following table summarizes our contractual cash obligations and commitments (in thousands):
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|
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|
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|
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Payments Due by Period
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For the Years Ending December 31,
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Total
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2021
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2022
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2023
|
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2024
|
|
2025
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Thereafter
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Other
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Contractual Cash Obligations
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|
|
|
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|
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|
|
|
|
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Debt obligations (1)
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$
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3,997,926
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|
|
$
|
3,997,926
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|
|
$
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—
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|
|
$
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—
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|
|
$
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—
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|
|
$
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—
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|
|
$
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—
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|
|
$
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—
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|
Interest payments (1)
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|
110,301
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|
|
110,301
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|
|
—
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|
|
—
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|
|
—
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|
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—
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|
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—
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|
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—
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Operating leases
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|
42,040
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|
|
8,594
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|
|
5,545
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|
|
3,567
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|
|
3,629
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|
|
3,687
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|
|
17,018
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|
|
—
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Pension plan contributions
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|
140,046
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|
|
19,390
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|
|
11,791
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|
|
12,375
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|
|
12,663
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|
|
13,200
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|
|
70,627
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|
|
—
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Tax reserves (2)
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|
42,501
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|
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—
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|
|
—
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|
|
—
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|
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—
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|
|
—
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|
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—
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|
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42,501
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Total contractual cash obligations
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$
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4,332,814
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|
|
$
|
4,136,211
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|
|
$
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17,336
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|
|
$
|
15,942
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|
|
$
|
16,292
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|
|
$
|
16,887
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|
|
$
|
87,645
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|
|
$
|
42,501
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|
(1) Debt obligations and interest payments are included in “Liabilities subject to compromise.” Since the Petition Date, the Company operated as a debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with provisions of the Bankruptcy Code. On the Effective Date, the Plan became effective in accordance with its terms and the Debtors emerged from the Chapter 11 Cases. See Part II, Item 8, “Financial Statements and Supplementary Data, Note 2— Chapter 11 Proceedings.”
(2) Tax reserves are included in “Other” due to the difficulty in making reasonably reliable estimates of the timing of cash settlements to taxing authorities. See Part II, Item 8, “Financial Statements and Supplementary Data, Note 12— Income Taxes.”
At December 31, 2020, we had other commitments that we are contractually obligated to fulfill with cash if the obligations are called. These obligations include letters of credit that guarantee our performance as it relates to our drilling contracts, tax and other obligations in various jurisdictions. These letters of credit obligations are not normally called, as we typically comply with the underlying performance requirement.
The following table summarizes our other commercial commitments at December 31, 2020 (in thousands):
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Amount of Commitment Expiration Per Period
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Total
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|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
Thereafter
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Total letters of credit and commercial
commitments
|
|
$
|
14,840
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|
|
$
|
9,184
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|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,656
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|
Guarantees of Registered Securities
NHIL is a finance subsidiary of Finco and prior to our emergence from the Chapter 11 Cases on the Effective Date, had issued the following registered securities, which, together with the indentures governing such registered securities, were cancelled on the Effective Date in accordance with the Plan: the 2020 Notes, the 2021 Notes, the 2022 Notes, the 2024 Notes, the Senior Notes due 2025, the Senior Notes due 2040, the Senior Notes due 2041, the Senior Notes due 2042 and the Senior Notes due 2045. Finco had fully and unconditionally guaranteed these registered securities and no other subsidiary of Finco had guaranteed these registered securities. Due to this fact pattern, separate financial information about NHIL and Finco will not be disclosed.
Critical Accounting Policies
We consider the following to be our critical accounting policies and estimates since they are very important to the understanding of our financial condition and results and require our most subjective and complex judgments. We have discussed the development, selection and disclosure of such policies and estimates with the Audit Committee of our Board of Directors. For a discussion of our significant accounting policies, refer to Part II, Item 8, “Financial Statements and Supplementary Data, Note 1— Organization and Significant Accounting Policies.”
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”), which require us to make estimates that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures of contingent assets and liabilities. These estimates require significant judgments and assumptions. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Principles of Consolidation
The consolidated financial statements include our accounts and those of our wholly-owned subsidiaries and entities in which we hold a controlling financial interest. Until December 3, 2019, our consolidated financial statements included the accounts of two joint ventures, in each of which we owned a 50 percent interest. On December 3, 2019, we acquired the remaining 50 percent interest not owned by us and as a result the two joint ventures became our wholly-owned subsidiaries. Our historical ownership interest in the joint ventures met the definition of variable interest under Financial Accounting Standards Board (“FASB”) codification and we determined that we were the primary beneficiary. Intercompany balances and transactions have been eliminated in consolidation.
Basis of Presentation-UK Companies Act 2006 Section 435 Statement
The accompanying consolidated financial statements have been prepared in accordance with GAAP, which the Board of Directors considers to be the most meaningful presentation of our results of operations and financial position. The accompanying consolidated financial statements do not constitute statutory accounts required by the UK Companies Act 2006 (“Companies Act”), which will be prepared in accordance with International Financial Reporting Standards, as adopted by the European Union and delivered to the Registrar of Companies in the UK following the annual general meeting of shareholders.
Property and Equipment
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 December 31, 2020 and 2019, we had $99.8 million and $88.9 million of construction-in-progress, respectively. Such amounts are included in “Property and equipment, at cost” 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 forty years.
Interest is capitalized on construction-in-progress using the weighted average cost of debt outstanding during the period of construction. During the years ended December 31, 2020, 2019 and 2018, there was zero, $9.6 million and $2.9 million capitalized interest, respectively.
Scheduled maintenance of equipment is 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 asset replacement projects that benefit future periods and which typically occur every three to five years are capitalized when incurred and depreciated over an equivalent period. These overhauls and asset replacement projects are included in “Property and equipment, at cost” in the Consolidated Balance Sheets. Such amounts, net of accumulated depreciation, totaled $129.6 million and $143.4 million at December 31, 2020 and 2019, respectively. Depreciation expense from continuing operations related to overhauls and asset replacement totaled $55.4 million, $61.3 million and $66.9 million for the years ended December 31, 2020, 2019 and 2018, respectively.
We evaluate the impairment of property and equipment whenever events or changes in circumstances (including the decision to cold stack, retire or sell a rig) indicate that the carrying amount of an asset may not be recoverable. An impairment loss on our property and equipment may exist when the 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. As part of this analysis, we make assumptions and estimates regarding future market conditions. To the extent actual results do not meet our estimated assumptions, for a given rig or piece of equipment, we may take an impairment loss in the future.
During the years ended December 31, 2020, 2019 and 2018, we recognized a non-cash loss on impairment of $3.9 billion, $615.3 million and $802.1 million, respectively, related to our long-lived assets. See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Executive Overview,” and Part II, Item 8, “Financial Statements and Supplementary Data, Note 6— Loss on Impairment” for additional information.
Revenue Recognition
The activities that primarily drive the revenue earned in our drilling contracts include (i) providing a drilling rig and the crew and supplies necessary to operate the rig, (ii) mobilizing and demobilizing the rig to and from the drill site, and (iii) performing rig preparation activities and/or modifications required for the contract. Consideration received for performing these activities may consist of dayrate drilling revenue, mobilization and demobilization revenue, contract preparation revenue and reimbursement revenue. We account for these integrated services provided within our drilling contracts as a single performance obligation satisfied over time and comprised of a series of distinct time increments in which we provide drilling services.
Our standard drilling contracts require that we operate the rig at the direction of the customer throughout the contract term (which is the period we estimate to benefit from the corresponding activities and generally ranges from two to 60 months). The activities performed and the level of service provided can vary hour to hour. Our obligation under a standard contract is to provide whatever level of service is required by the operator, or customer, over the term of the contract. We are, therefore, under a stand-ready obligation throughout the entire contract duration. Consideration for our stand-ready obligation corresponds to distinct time increments, though the rate may be variable depending on various factors, and is recognized in the period in which the services are performed. The total transaction price is determined for each individual contract by estimating both fixed and variable consideration expected to be earned over the term of the contract. We have elected to exclude from the transaction price measurement all taxes assessed by a governmental authority. See further discussion regarding the allocation of the transaction price to the remaining performance obligations below.
The amount estimated for variable consideration may be subject to interrupted or restricted rates and is only included in the transaction price to the extent that it is probable that a significant reversal of previously recognized revenue will not occur throughout the term of the contract (“constrained revenue”). When determining if variable consideration should be constrained, management considers whether there are factors outside the Company’s control that could result in a significant reversal of revenue as well as the likelihood and magnitude of a potential reversal of revenue. These estimates are re-assessed each reporting period as required.
Dayrate Drilling Revenue. Our drilling contracts generally provide for payment on a dayrate basis, with higher rates for periods when the drilling unit is operating and lower rates or zero rates for periods when drilling operations are interrupted or restricted. The dayrate invoices billed to the customer are typically determined based on the varying rates applicable to the specific activities performed on an hourly basis. Such dayrate consideration is allocated to the distinct hourly increment it relates to within the contract term, and therefore, recognized in line with the contractual rate billed for the services provided for any given hour.
Mobilization/Demobilization Revenue. We may receive fees (on either a fixed lump-sum or variable dayrate basis) for the mobilization and demobilization of our rigs. These activities are not considered to be distinct within the context of the contract and, therefore, the associated revenue is allocated to the overall performance obligation and the associated pre-operating costs are deferred. We record a contract liability for mobilization fees received and a deferred asset for costs. Both revenue and pre-operating costs are recognized ratably over the initial term of the related drilling contract.
In most contracts, there is uncertainty as to the amount of expected demobilization revenue due to contractual provisions that stipulate that certain conditions must be present at contract completion for such revenue to be received and as to the amount thereof, if any. For example, contractual provisions may require that a rig demobilize a certain distance before the demobilization revenue is payable or the amount may vary dependent upon whether or not the rig has additional contracted work within a certain distance from the wellsite. Therefore, the estimate for such revenue may be constrained, as described earlier, depending on the facts and circumstances pertaining to the specific contract. We assess the likelihood of receiving such revenue based on past experience and knowledge of the market conditions. In cases where demobilization revenue is expected to be received upon contract completion, it is estimated as part of the overall transaction price at contract inception and recognized in earnings ratably over the initial term of the contract with an offset to an accretive contract asset.
Contract Preparation Revenue. Some of our drilling contracts require downtime before the start of the contract to prepare the rig to meet customer requirements. At times, we may be compensated by the customer for such work (on either a fixed lump-sum or variable dayrate basis). These activities are not considered to be distinct within the context of the contract and, therefore, the related revenue is allocated to the overall performance obligation and recognized ratably over the initial term of the related drilling contract. We record a contract liability for contract preparation fees received, which is amortized ratably to contract drilling revenue over the initial term of the related drilling contract.
Bonuses, Penalties and Other Variable Consideration. We may receive bonus increases to revenue or penalty decreases to revenue. Based on historical data and ongoing communication with the operator/customer, we are able to reasonably estimate this variable consideration. We will record such estimated variable consideration and re-measure our estimates at each reporting date. For revenue estimated, but not received, we will record to “Prepaid expenses and other current assets” on our Consolidated Balance Sheets.
Capital Modification Revenue. From time to time, we may receive fees from our customers for capital improvements to our rigs to meet contractual requirements (on either a fixed lump-sum or variable dayrate basis). Such revenue is allocated to the overall performance obligation and recognized ratably over the initial term of the related drilling contract as these activities are integral to our drilling activities and are not considered to be a stand-alone service provided to the customer within the context of our contracts. We record a contract liability for such fees and recognize them ratably as contract drilling revenue over the initial term of the related drilling contract.
Revenues Related to Reimbursable Expenses. We generally receive reimbursements from our customers for the purchase of supplies, equipment, personnel services and other services provided at their request in accordance with a drilling contract or other agreement. Such reimbursable revenue is variable and subject to uncertainty, as the amounts received and timing thereof is highly dependent on factors outside of our influence. Accordingly, reimbursable revenue is constrained revenue and not included in the total transaction price until the uncertainty is resolved, which typically occurs when the related costs are incurred on behalf of a customer. We are generally considered a principal in such transactions and record the associated revenue at the gross amount billed to the customer as “Reimbursables and other” in our Consolidated Statements of Operations. Such amounts are recognized ratably over the period within the contract term during which the corresponding goods and services are to be consumed.
Deferred revenues from drilling contracts totaled $59.9 million and $65.1 million at December 31, 2020 and 2019, respectively. Such amounts are included in either “Other current liabilities” or “Other liabilities” in the accompanying Consolidated Balance Sheets, based upon our expected time of recognition. Related expenses deferred under drilling contracts totaled $13.9 million at December 31, 2020 as compared to $30.8 million at December 31, 2019 and are included in either “Prepaid expenses and other current assets,” “Other assets,” or “Property and equipment, net” in the accompanying Consolidated Balance Sheets, based upon our expected time of recognition.
We record reimbursements from customers for “out-of-pocket” expenses as revenues and the related direct cost as operating expenses.
Income Taxes
We currently operate, and have in the past operated, in a number of countries throughout the world and our tax returns filed in those jurisdictions are subject to review and examination by tax authorities within those jurisdictions. We recognize uncertain tax positions that we believe have a greater than 50 percent likelihood of being sustained upon challenge by a tax authority. We cannot predict or provide assurance as to the ultimate outcome of any existing or future assessments. Our gross deferred tax asset balance at year-end reflects the application of our income tax accounting policies and is based on management’s estimates, judgments and assumptions regarding realizability. If it is more likely than not that a portion of the deferred tax assets will not be realized in a future period, the deferred tax assets will be reduced by a valuation allowance based on management’s estimates. The Company has adopted an accounting policy to look through the outside basis of partnerships and all other flow-through entities and exclude these from the computation of deferred taxes.
The Internal Revenue Service (“IRS”) has completed its examination procedures, including all appeals and administrative reviews, for the taxable years ended December 31, 2012 through December 31,2017. In May 2020, the IRS examination team notified us that it was no longer proposing any adjustments with respect to our tax reporting for the taxable years ended December 31, 2012 through December 31, 2017. Subsequent to our filing of an Application for Tentative Refund with the IRS under the CARES Act in the months of April and August 2020, the IRS informed us that it would be conducting a limited scope examination of the taxable years ended December 31, 2012, 2013, 2014, 2018 and 2019. In the first quarter of 2020, we filed a foreign tax credit refund claim for taxable year 2009. The IRS is currently auditing taxable year 2009 in relation to our refund claim. We believe that we have accurately reported all amounts in our returns.
Audit claims of approximately $96.1 million attributable to income and other business taxes were assessed against Noble entities in Mexico related to tax years 2007, 2009 and 2010, in Australia related to tax years 2013 to 2016, in Guyana related to tax years 2019 and 2020 and in Saudi Arabia related to tax years 2015 to 2018. We intend to vigorously defend our reported positions, and believe the ultimate resolution of the audit claims will not have a material adverse effect on our consolidated financial statements.
Insurance Reserves
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.
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, 2020 and 2019, loss reserves for personal injury and protection claims totaled $30.9 million and $27.9 million, respectively, and such amounts are included in “Other liabilities” and “Liabilities subject compromise” in the accompanying Consolidated Balance Sheets.
Certain Significant Estimates and Contingent Liabilities
The preparation of financial statements in conformity with GAAP 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. We follow FASB standards regarding contingent liabilities, which are discussed in Part II, Item 8, “Financial Statements and Supplementary Data, Note 16— Commitments and Contingencies.”
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements as that term is defined in Item 303(a)(4)(ii) of Regulation S-K.
New Accounting Pronouncements
See Part II, Item 8, “Financial Statements and Supplementary Data, Note 1— Organization and Significant Accounting Policies” for a description of the recent accounting pronouncements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Market risk is the potential for loss due to a change in the value of a financial instrument as a result of fluctuations currency exchange rates or equity prices, as further described below.
Foreign Currency Risk
Although we are a Cayman Islands company, we define foreign currency as any non-US denominated currency. Our functional currency is the US Dollar. However, outside the United States, a portion of our expenses are incurred in local currencies. Therefore, when the US Dollar weakens (strengthens) in relation to the currencies of the countries in which we operate, our expenses reported in US Dollars will increase (decrease).
We are exposed to risks on future cash flows to the extent that local currency expenses exceed revenues denominated in local currency that are other than the functional currency. To help manage this potential risk, we periodically enter into derivative instruments to manage our
exposure to fluctuations in currency exchange rates, and we may conduct hedging activities in future periods to mitigate such exposure. These contracts are primarily accounted for as cash flow hedges, with the effective portion of changes in the fair value of the hedge recorded on the Consolidated Balance Sheets and in “Accumulated other comprehensive income (loss)” (“AOCI”). Amounts recorded in AOCI are reclassified into earnings in the same period or periods that the hedged item is recognized in earnings. The ineffective portion of changes in the fair value of the hedged item is recorded directly to earnings. 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.
Several of our regional shorebases have a significant amount of their cash operating expenses payable in local currencies. To limit the potential risk of currency fluctuations, we periodically enter into forward contracts, which have historically settled monthly in the operations’ respective local currencies. All of these contracts had a maturity of less than 12 months. During 2020, we did not enter into any forward contracts. During 2019, we entered into forward contracts of approximately $15.8 million, all of which settled during 2019. At both December 31, 2020 and 2019, we had no outstanding derivative contracts. Based on current projections, a 10% increase in the average exchange rates of all foreign currencies would hypothetically increase our future estimated operating expenses by approximately $11.0 million.
Market Risk
We have a US noncontributory defined benefit pension plan that covers certain salaried employees and a US noncontributory defined benefit pension plan that covers certain hourly employees, whose initial date of employment is prior to August 1, 2004 (collectively referred to as our “qualified US plans”). These plans are governed by the Noble Drilling Employees’ Retirement Trust. The benefits from these plans are based primarily on years of service and, for the salaried plan, employees’ compensation near retirement. These plans are designed to qualify under the Employee Retirement Income Security Act of 1974 (“ERISA”), and our funding policy is consistent with funding requirements of ERISA and other applicable laws and regulations. We make cash contributions, or utilize credits available to us, for the qualified US plans when required. The benefit amount that can be covered by the qualified US plans is limited under ERISA and the Internal Revenue Code of 1986. Therefore, we maintain an unfunded, nonqualified excess benefit plan designed to maintain benefits for specified employees at the formula level in the qualified salary US plan. We refer to the qualified US plans and the excess benefit plan collectively as the “US plans.”
In addition to the US plans, Noble Drilling (Land Support) Limited, an indirect, wholly-owned subsidiary of Noble, maintains a pension plan that covers all of its salaried, non-union employees, whose most recent date of employment is prior to April 1, 2014 (referred to as our “non-US plan”). Benefits are based on credited service and employees’ compensation, as defined by the non-US plan.
The Company’s pension plan assets are exposed to the market prices of debt and equity securities. Changes to the pension plan asset values can impact the Company’s pension expense, funded status and future minimum funding requirements. The Company aims to reduce risk through asset diversification and by investing in long duration fixed-income securities that have a duration similar to that of its pension liabilities. At December 31, 2020, the value of the investments in the pension funds was $306.2 million, and a hypothetical 10.0% percent decrease in the value of the investments in the fund would have reduced the value of the fund by approximately $30.6 million. A significant decline in the value of pension assets could require Noble to increase funding of its pension plans in future periods, which could adversely affect cash flows in those periods. In addition, a decline in the fair value of these plan assets, in the absence of additional cash contributions to the plans by Noble, could increase the amount of pension cost required to be recorded in future periods by Noble.
Item 8. Financial Statements and Supplementary Data.
The following financial statements are filed in this Item 8:
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Noble Corporation:
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Noble Corporation (formerly known as Noble Holding Corporation plc) and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of comprehensive income (loss), of equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Impairment Assessment – Certain Rigs Within Drilling Equipment and Facilities Assets
As described in Notes 1, 5 and 6 to the consolidated financial statements, the balance of drilling equipment and facilities was $4.5 billion as of December 31, 2020, which included a $2.8 billion impairment related to certain rigs for the year ended December 31, 2020. Management evaluates property and equipment for impairment whenever there are changes in facts that suggest that the carrying value of the asset is not recoverable. As part of this analysis, management makes assumptions and estimates regarding future market conditions. When circumstances indicate that the carrying value of the assets may not be recoverable, management compares the carrying value to the expected undiscounted pre-tax future cash flows (estimated using an undiscounted cash flow model) for the associated rig for which identifiable cash flows are independent of cash flows of other assets. If the expected undiscounted pre-tax future cash flows are lower than the carrying value, the capitalized costs are reduced to fair value. An impairment loss is recognized to the extent that an asset's carrying value exceeds its estimated fair value. Management estimated the fair values of these units using a weighting between an income valuation approach and a market approach, utilizing significant unobservable inputs, representative of a Level 3 fair value measurement. Assumptions used in the assessment included, but were not limited to, future marketability of each unit in light of the current market conditions and its current technical specifications, timing of future contract awards and expected operating dayrates, operating costs, utilization rates, discount rates, capital expenditures, market values, weighting of market values, reactivation costs, estimated economic useful lives and, in certain cases, the belief that a drilling unit is no longer marketable and is unlikely to return to service in the near to medium term.
The principal considerations for our determination that performing procedures relating to the impairment assessment of certain rigs within drilling equipment and facilities assets is a critical audit matter are (i) the significant judgment by management when developing the undiscounted pre-tax future cash flows and estimated fair values of the drilling equipment and facilities assets; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the expected operating dayrates, operating costs, utilization rates, and the discount rate; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the drilling equipment and facilities assets impairment assessment. These procedures also included, among others (i) testing management’s process for developing the undiscounted pre-tax future cash flows and fair value estimates; (ii) evaluating the appropriateness of the undiscounted pre-tax cash flow and discounted cash flow model; (iii) testing the completeness and accuracy of underlying data used in the model; and (iv) evaluating the significant assumptions used by management related to the expected operating dayrates, operating costs, utilization rates, and the discount rate. Evaluating management’s assumptions related to the expected operating day rates, operating costs and utilization rates involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the assets; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the discounted cash flow model and the discount rate.
|
|
|
|
/s/ PricewaterhouseCoopers LLP
|
|
Houston, Texas
|
March 12, 2021
|
We have served as the Company’s auditor since 1994.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc)
AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2020
|
|
December 31,
2019
|
ASSETS
|
Current assets
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
343,332
|
|
|
$
|
104,621
|
|
Accounts receivable, net of allowance for credit losses of $1,069 and $1,939, respectively
|
|
147,863
|
|
|
198,665
|
|
Taxes receivable
|
|
30,767
|
|
|
59,771
|
|
Prepaid expenses and other current assets
|
|
80,322
|
|
|
59,050
|
|
Total current assets
|
|
602,284
|
|
|
422,107
|
|
Property and equipment, at cost
|
|
4,777,697
|
|
|
10,306,625
|
|
Accumulated depreciation
|
|
(1,200,628)
|
|
|
(2,572,701)
|
|
Property and equipment, net
|
|
3,577,069
|
|
|
7,733,924
|
|
Other assets
|
|
84,584
|
|
|
128,467
|
|
Total assets
|
|
$
|
4,263,937
|
|
|
$
|
8,284,498
|
|
LIABILITIES AND EQUITY
|
Current liabilities
|
|
|
|
|
Current maturities of long-term debt
|
|
$
|
—
|
|
|
$
|
62,505
|
|
Accounts payable
|
|
95,159
|
|
|
108,208
|
|
Accrued payroll and related costs
|
|
36,553
|
|
|
56,056
|
|
Taxes payable
|
|
36,819
|
|
|
30,715
|
|
Interest payable
|
|
—
|
|
|
88,047
|
|
Other current liabilities
|
|
49,820
|
|
|
171,397
|
|
Total current liabilities
|
|
218,351
|
|
|
516,928
|
|
Long-term debt
|
|
—
|
|
|
3,779,499
|
|
Deferred income taxes
|
|
9,292
|
|
|
68,201
|
|
Other liabilities
|
|
108,039
|
|
|
260,898
|
|
Liabilities subject to compromise
|
|
4,239,643
|
|
|
—
|
|
Total liabilities
|
|
4,575,325
|
|
|
4,625,526
|
|
Commitments and contingencies (Note 16)
|
|
|
|
|
Shareholders' equity
|
|
|
|
|
Common stock, $0.01 par value, ordinary shares; 251,084 and 249,200 shares outstanding as of December 31, 2020 and December 31, 2019, respectively.
|
|
2,511
|
|
|
2,492
|
|
Additional paid-in capital
|
|
814,796
|
|
|
807,093
|
|
Retained earnings (accumulated deficit)
|
|
(1,070,683)
|
|
|
2,907,776
|
|
Accumulated other comprehensive loss
|
|
(58,012)
|
|
|
(58,389)
|
|
Total shareholders' equity
|
|
(311,388)
|
|
|
3,658,972
|
|
Total liabilities and equity
|
|
$
|
4,263,937
|
|
|
$
|
8,284,498
|
|
See accompanying notes to the consolidated financial statements.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc)
AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
Operating revenues
|
|
|
|
|
|
|
|
|
|
|
Contract drilling services
|
|
$
|
909,236
|
|
|
$
|
1,246,058
|
|
|
$
|
1,036,082
|
|
|
|
|
|
Reimbursables and other
|
|
55,036
|
|
|
59,380
|
|
|
46,744
|
|
|
|
|
|
|
|
964,272
|
|
|
1,305,438
|
|
|
1,082,826
|
|
|
|
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
Contract drilling services
|
|
567,487
|
|
|
698,343
|
|
|
629,937
|
|
|
|
|
|
Reimbursables
|
|
48,188
|
|
|
49,061
|
|
|
37,084
|
|
|
|
|
|
Depreciation and amortization
|
|
374,129
|
|
|
440,221
|
|
|
486,530
|
|
|
|
|
|
General and administrative
|
|
121,196
|
|
|
168,792
|
|
|
73,216
|
|
|
|
|
|
Pre-petition charges
|
|
14,409
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Loss on impairment
|
|
3,915,408
|
|
|
615,294
|
|
|
802,133
|
|
|
|
|
|
|
|
5,040,817
|
|
|
1,971,711
|
|
|
2,028,900
|
|
|
|
|
|
Operating loss
|
|
(4,076,545)
|
|
|
(666,273)
|
|
|
(946,074)
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net of amount capitalized
|
|
(164,653)
|
|
|
(279,435)
|
|
|
(297,611)
|
|
|
|
|
|
Gain (loss) on extinguishment of debt, net
|
|
17,254
|
|
|
30,616
|
|
|
(1,793)
|
|
|
|
|
|
Interest income and other, net
|
|
9,012
|
|
|
6,007
|
|
|
8,302
|
|
|
|
|
|
Reorganization items, net
|
|
(23,930)
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Loss from continuing operations before income taxes
|
|
(4,238,862)
|
|
|
(909,085)
|
|
|
(1,237,176)
|
|
|
|
|
|
Income tax benefit
|
|
260,403
|
|
|
38,540
|
|
|
106,641
|
|
|
|
|
|
Net loss from continuing operations
|
|
(3,978,459)
|
|
|
(870,545)
|
|
|
(1,130,535)
|
|
|
|
|
|
Net loss from discontinued operations, net of tax
|
|
—
|
|
|
(3,821)
|
|
|
—
|
|
|
|
|
|
Net loss
|
|
(3,978,459)
|
|
|
(874,366)
|
|
|
(1,130,535)
|
|
|
|
|
|
Net loss attributable to noncontrolling interests
|
|
—
|
|
|
173,776
|
|
|
245,485
|
|
|
|
|
|
Net loss attributable to Noble Corporation
|
|
$
|
(3,978,459)
|
|
|
$
|
(700,590)
|
|
|
$
|
(885,050)
|
|
|
|
|
|
Net loss attributable to Noble Corporation
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(3,978,459)
|
|
|
$
|
(696,769)
|
|
|
$
|
(885,050)
|
|
|
|
|
|
Net loss from discontinued operations, net of tax
|
|
—
|
|
|
(3,821)
|
|
|
—
|
|
|
|
|
|
Net loss attributable to Noble Corporation
|
|
$
|
(3,978,459)
|
|
|
$
|
(700,590)
|
|
|
$
|
(885,050)
|
|
|
|
|
|
Per share data
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(15.86)
|
|
|
$
|
(2.79)
|
|
|
$
|
(3.59)
|
|
|
|
|
|
Loss from discontinued operations
|
|
—
|
|
|
(0.02)
|
|
|
—
|
|
|
|
|
|
Net loss attributable to Noble Corporation
|
|
$
|
(15.86)
|
|
|
$
|
(2.81)
|
|
|
$
|
(3.59)
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(15.86)
|
|
|
$
|
(2.79)
|
|
|
$
|
(3.59)
|
|
|
|
|
|
Loss from discontinued operations
|
|
—
|
|
|
(0.02)
|
|
|
—
|
|
|
|
|
|
Net loss attributable to Noble Corporation
|
|
$
|
(15.86)
|
|
|
$
|
(2.81)
|
|
|
$
|
(3.59)
|
|
|
|
|
|
Weighted- Average Shares Outstanding
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
250,792
|
|
|
248,949
|
|
|
246,614
|
|
|
|
|
|
Diluted
|
|
250,792
|
|
|
248,949
|
|
|
246,614
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc)
AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unless otherwise indicated, dollar amounts in tables are in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
Net loss
|
|
$
|
(3,978,459)
|
|
|
$
|
(874,366)
|
|
|
$
|
(1,130,535)
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
(521)
|
|
|
260
|
|
|
(2,729)
|
|
|
|
|
|
|
|
|
Net pension plan gain (loss) (net of tax provision (benefit) of $(537), $(924) and $(1,828) for the year ended December 31, 2020, 2019 and 2018, respectively)
|
|
(1,407)
|
|
|
(3,744)
|
|
|
(7,099)
|
|
Amortization of deferred pension plan amounts (net of tax provision of $583, $584 and $345 for the year ended December 31, 2020, 2019 and 2018, respectively)
|
|
2,183
|
|
|
2,197
|
|
|
1,298
|
|
Net pension plan curtailment and settlement gain (loss) (net of tax provision (benefit) of $32, $(8) and $28 for the year ended December 31, 2020, 2019 and 2018, respectively)
|
|
122
|
|
|
(30)
|
|
|
107
|
|
Prior service cost arising during the period (net of tax provision (benefit) of zero, zero and $(55) for the year ended December 31, 2020, 2019 and 2018, respectively)
|
|
—
|
|
|
—
|
|
|
(221)
|
|
Other comprehensive income (loss), net
|
|
377
|
|
|
(1,317)
|
|
|
(8,644)
|
|
Net comprehensive loss attributable to noncontrolling interests
|
|
—
|
|
|
173,776
|
|
|
245,485
|
|
Comprehensive loss attributable to Noble Corporation
|
|
$
|
(3,978,082)
|
|
|
$
|
(701,907)
|
|
|
$
|
(893,694)
|
|
See accompanying notes to the consolidated financial statements.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc)
AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unless otherwise indicated, dollar amounts in tables are in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
Cash flows from operating activities
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,978,459)
|
|
|
$
|
(874,366)
|
|
|
$
|
(1,130,535)
|
|
Adjustments to reconcile net loss to net cash flow from operating activities:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
374,129
|
|
|
440,221
|
|
|
486,530
|
|
Loss on impairment
|
|
3,915,408
|
|
|
615,294
|
|
|
802,133
|
|
(Gain) loss on extinguishment of debt, net
|
|
(17,254)
|
|
|
(30,616)
|
|
|
1,793
|
|
Reorganization items, net
|
|
(17,366)
|
|
|
—
|
|
|
—
|
|
Deferred income taxes
|
|
(26,325)
|
|
|
(17,825)
|
|
|
(68,416)
|
|
Amortization of share-based compensation
|
|
9,169
|
|
|
14,737
|
|
|
23,993
|
|
|
|
|
|
|
|
|
Other costs, net
|
|
(61,550)
|
|
|
60,259
|
|
|
6,446
|
|
Changes in components of working capital
|
|
|
|
|
|
|
Change in taxes receivable
|
|
29,880
|
|
|
(11,225)
|
|
|
84,847
|
|
Net changes in other operating assets and liabilities
|
|
45,565
|
|
|
(9,708)
|
|
|
(34,940)
|
|
Net cash provided by operating activities
|
|
273,197
|
|
|
186,771
|
|
|
171,851
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
Capital expenditures
|
|
(148,886)
|
|
|
(268,783)
|
|
|
(194,779)
|
|
|
|
|
|
|
|
|
Proceeds from disposal of assets, net
|
|
27,366
|
|
|
12,753
|
|
|
5,402
|
|
Net cash used in investing activities
|
|
(121,520)
|
|
|
(256,030)
|
|
|
(189,377)
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of senior notes
|
|
—
|
|
|
—
|
|
|
750,000
|
|
Borrowings on credit facilities
|
|
210,000
|
|
|
755,000
|
|
|
—
|
|
Repayments of credit facilities
|
|
—
|
|
|
(420,000)
|
|
|
—
|
|
Repayments of debt
|
|
(101,132)
|
|
|
(400,000)
|
|
|
(972,708)
|
|
Debt issuance costs
|
|
—
|
|
|
(1,092)
|
|
|
(15,639)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of noncontrolling interests
|
|
—
|
|
|
(106,744)
|
|
|
—
|
|
Dividends paid to noncontrolling interests
|
|
—
|
|
|
(25,109)
|
|
|
(27,579)
|
|
Cash paid to settle equity awards
|
|
(1,010)
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes withheld on employee stock transactions
|
|
(418)
|
|
|
(2,779)
|
|
|
(3,470)
|
|
Net cash provided by (used in) financing activities
|
|
107,440
|
|
|
(200,724)
|
|
|
(269,396)
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash
|
|
259,117
|
|
|
(269,983)
|
|
|
(286,922)
|
|
Cash, cash equivalents and restricted cash, beginning of period
|
|
105,924
|
|
|
375,907
|
|
|
662,829
|
|
Cash, cash equivalents and restricted cash, end of period
|
|
$
|
365,041
|
|
|
$
|
105,924
|
|
|
$
|
375,907
|
|
See accompanying notes to the consolidated financial statements.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc)
AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF EQUITY
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Additional Paid-in Capital
|
|
Retained Earnings (accumulated deficit)
|
|
Accumulated Other Comprehensive Loss
|
|
Noncontrolling Interests
|
|
Total Equity
|
|
|
Balance
|
|
Par Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2017
|
|
244,971
|
|
|
$
|
2,450
|
|
|
$
|
678,922
|
|
|
$
|
4,637,677
|
|
|
$
|
(42,888)
|
|
|
$
|
674,467
|
|
|
$
|
5,950,628
|
|
Tax effects of intra-entity asset transfers
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(148,393)
|
|
|
—
|
|
|
—
|
|
|
(148,393)
|
|
Stranded tax effect resulting from the Tax Cuts and Jobs Act
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,540
|
|
|
(5,540)
|
|
|
—
|
|
|
—
|
|
Adjustment for adopting the revenue recognition standard
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,488)
|
|
|
—
|
|
|
—
|
|
|
(1,488)
|
|
Balance at January 1, 2018
|
|
244,971
|
|
|
$
|
2,450
|
|
|
$
|
678,922
|
|
|
$
|
4,493,336
|
|
|
$
|
(48,428)
|
|
|
$
|
674,467
|
|
|
$
|
5,800,747
|
|
Employee related equity activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of share-based compensation
|
|
—
|
|
|
—
|
|
|
23,993
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23,993
|
|
Issuance of share-based compensation shares
|
|
1,823
|
|
|
18
|
|
|
(18)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Tax benefit of equity transactions
|
|
—
|
|
|
—
|
|
|
(3,488)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,488)
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(885,050)
|
|
|
—
|
|
|
(245,485)
|
|
|
(1,130,535)
|
|
Dividends paid to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27,579)
|
|
|
(27,579)
|
|
Dividend equivalents (1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
80
|
|
|
—
|
|
|
—
|
|
|
80
|
|
Other comprehensive loss, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,644)
|
|
|
—
|
|
|
(8,644)
|
|
Balance at December 31, 2018
|
|
246,794
|
|
|
$
|
2,468
|
|
|
$
|
699,409
|
|
|
$
|
3,608,366
|
|
|
$
|
(57,072)
|
|
|
$
|
401,403
|
|
|
$
|
4,654,574
|
|
Employee related equity activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of share-based compensation
|
|
—
|
|
|
—
|
|
|
14,737
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,737
|
|
Issuance of share-based compensation shares
|
|
2,406
|
|
|
24
|
|
|
(24)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Tax benefit of equity transactions
|
|
—
|
|
|
—
|
|
|
(2,803)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,803)
|
|
Purchase of noncontrolling interests
|
|
—
|
|
|
—
|
|
|
95,774
|
|
|
—
|
|
|
—
|
|
|
(202,518)
|
|
|
(106,744)
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(700,590)
|
|
|
—
|
|
|
(173,776)
|
|
|
(874,366)
|
|
Dividends paid to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(25,109)
|
|
|
(25,109)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,317)
|
|
|
—
|
|
|
(1,317)
|
|
Balance at December 31, 2019
|
|
249,200
|
|
|
$
|
2,492
|
|
|
$
|
807,093
|
|
|
$
|
2,907,776
|
|
|
$
|
(58,389)
|
|
|
$
|
—
|
|
|
$
|
3,658,972
|
|
Employee related equity activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of share-based compensation
|
|
—
|
|
|
—
|
|
|
8,159
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,159
|
|
Issuance of share-based compensation shares
|
|
1,884
|
|
|
19
|
|
|
(19)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Tax benefit of equity transactions
|
|
—
|
|
|
—
|
|
|
(437)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(437)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,978,459)
|
|
|
—
|
|
|
|
|
(3,978,459)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
377
|
|
|
—
|
|
|
377
|
|
Balance at December 31, 2020
|
|
251,084
|
|
|
$
|
2,511
|
|
|
$
|
814,796
|
|
|
$
|
(1,070,683)
|
|
|
$
|
(58,012)
|
|
|
$
|
—
|
|
|
$
|
(311,388)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Activity associated with dividend equivalents, which are related to 2016 performance awards to be paid upon vesting.
See accompanying notes to the consolidated financial statements.
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholder of Noble Finance Company:
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Noble Finance Company (formerly known as Noble Corporation) and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of comprehensive income (loss), of equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Impairment Assessment – Certain Rigs Within Drilling Equipment and Facilities Assets
As described in Notes 1, 5 and 6 to the consolidated financial statements, the balance of drilling equipment and facilities was $4.5 billion as of December 31, 2020, which included a $2.8 billion impairment related to certain rigs for the year ended December 31, 2020. Management evaluates property and equipment for impairment whenever there are changes in facts that suggest that the carrying value of the asset is not recoverable. As part of this analysis, management makes assumptions and estimates regarding future market conditions. When circumstances indicate that the carrying value of the assets may not be recoverable, management compares the carrying value to the expected undiscounted pre-tax future cash flows (estimated using an undiscounted cash flow model) for the associated rig for which identifiable cash flows are independent of cash flows of other assets. If the expected undiscounted pre-tax future cash flows are lower than the carrying value, the capitalized costs are reduced to fair value. An impairment loss is recognized to the extent that an asset's carrying value exceeds its estimated fair value. Management estimated the fair values of these units using a weighting between an income valuation approach and a market approach, utilizing significant unobservable inputs, representative of a Level 3 fair value measurement. Assumptions used in the assessment included, but were not limited to, future marketability of each unit in light of the current market conditions and its current technical specifications, timing of future contract awards and expected operating dayrates, operating costs, utilization rates, discount rates , capital expenditures, market values, weighting of market values, reactivation costs, estimated economic useful lives and, in certain cases, the belief that a drilling unit is no longer marketable and is unlikely to return to service in the near to medium term.
The principal considerations for our determination that performing procedures relating to the impairment assessment of certain rigs within drilling equipment and facilities assets is a critical audit matter are (i) the significant judgment by management when developing the undiscounted pre-tax future cash flows and estimated fair values of the drilling equipment and facilities assets; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the expected operating dayrates, operating costs, utilization rates, and the discount rate; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the drilling equipment and facilities assets impairment assessment. These procedures also included, among others (i) testing management’s process for developing the undiscounted pre-tax future cash flow and fair value estimates; (ii) evaluating the appropriateness of the undiscounted pre-tax cash flow and discounted cash flow model; (iii) testing the completeness and accuracy of underlying data used in the model; and (iv) evaluating the significant assumptions used by management related to the expected operating dayrates, operating costs, utilization rates, and the discount rate. Evaluating management’s assumptions related to the expected operating day rates, operating costs and utilization rates involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the assets; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the discounted cash flow model and the discount rate.
|
|
|
|
/s/ PricewaterhouseCoopers LLP
|
|
Houston, Texas
|
March 12, 2021
|
We have served as the Company’s auditor since 1994.
NOBLE FINANCE COMPANY (formerly known as Noble Corporation)
AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2020
|
|
December 31,
2019
|
ASSETS
|
Current assets
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
343,332
|
|
|
$
|
104,575
|
|
Accounts receivable, net of allowance for credit losses of $1,069 and $1,939, respectively
|
|
147,863
|
|
|
198,665
|
|
Accounts receivable from affiliates
|
|
31,214
|
|
|
—
|
|
Taxes receivable
|
|
30,767
|
|
|
59,771
|
|
Prepaid expenses and other current assets
|
|
50,469
|
|
|
57,890
|
|
Total current assets
|
|
603,645
|
|
|
420,901
|
|
Property and equipment, at cost
|
|
4,777,697
|
|
|
10,306,625
|
|
Accumulated depreciation
|
|
(1,200,628)
|
|
|
(2,572,701)
|
|
Property and equipment, net
|
|
3,577,069
|
|
|
7,733,924
|
|
Other assets
|
|
84,584
|
|
|
128,467
|
|
Total assets
|
|
$
|
4,265,298
|
|
|
$
|
8,283,292
|
|
LIABILITIES AND EQUITY
|
Current liabilities
|
|
|
|
|
Current maturities of long-term debt
|
|
$
|
—
|
|
|
$
|
62,505
|
|
Accounts payable
|
|
83,649
|
|
|
107,985
|
|
Accrued payroll and related costs
|
|
36,516
|
|
|
56,065
|
|
Taxes payable
|
|
36,819
|
|
|
30,715
|
|
Interest payable
|
|
—
|
|
|
88,047
|
|
Other current liabilities
|
|
49,820
|
|
|
71,397
|
|
Total current liabilities
|
|
206,804
|
|
|
416,714
|
|
Long-term debt
|
|
—
|
|
|
3,779,499
|
|
Deferred income taxes
|
|
9,292
|
|
|
68,201
|
|
Other liabilities
|
|
108,039
|
|
|
260,898
|
|
Liabilities subject to compromise
|
|
4,154,555
|
|
|
—
|
|
Total liabilities
|
|
4,478,690
|
|
|
4,525,312
|
|
Commitments and contingencies (Note 16)
|
|
|
|
|
Shareholder equity
|
|
|
|
|
Common stock, $0.10 par value, 261,246 ordinary shares; 261,246 shares outstanding as of December 31, 2020 and December 31, 2019
|
|
26,125
|
|
|
26,125
|
|
Capital in excess of par value
|
|
766,714
|
|
|
757,545
|
|
Retained earnings (accumulated deficit)
|
|
(948,219)
|
|
|
3,032,699
|
|
Accumulated other comprehensive loss
|
|
(58,012)
|
|
|
(58,389)
|
|
Total shareholder equity
|
|
(213,392)
|
|
|
3,757,980
|
|
Total liabilities and equity
|
|
$
|
4,265,298
|
|
|
$
|
8,283,292
|
|
See accompanying notes to the consolidated financial statements.
NOBLE FINANCE COMPANY (formerly known as Noble Corporation)
AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
Operating revenues
|
|
|
|
|
|
|
|
|
|
|
Contract drilling services
|
|
$
|
909,236
|
|
|
$
|
1,246,058
|
|
|
$
|
1,036,082
|
|
|
|
|
|
Reimbursables and other
|
|
55,036
|
|
|
59,380
|
|
|
46,744
|
|
|
|
|
|
|
|
964,272
|
|
|
1,305,438
|
|
|
1,082,826
|
|
|
|
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
Contract drilling services
|
|
566,231
|
|
|
696,265
|
|
|
628,128
|
|
|
|
|
|
Reimbursables
|
|
48,188
|
|
|
49,061
|
|
|
37,084
|
|
|
|
|
|
Depreciation and amortization
|
|
372,560
|
|
|
437,690
|
|
|
482,660
|
|
|
|
|
|
General and administrative
|
|
37,798
|
|
|
34,602
|
|
|
38,203
|
|
|
|
|
|
Loss on impairment
|
|
3,915,408
|
|
|
615,294
|
|
|
802,133
|
|
|
|
|
|
|
|
4,940,185
|
|
|
1,832,912
|
|
|
1,988,208
|
|
|
|
|
|
Operating loss
|
|
(3,975,913)
|
|
|
(527,474)
|
|
|
(905,382)
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net of amount capitalized
|
|
(164,653)
|
|
|
(279,435)
|
|
|
(297,611)
|
|
|
|
|
|
Gain (loss) on extinguishment of debt, net
|
|
17,254
|
|
|
30,616
|
|
|
(1,793)
|
|
|
|
|
|
Interest income and other, net
|
|
9,014
|
|
|
6,670
|
|
|
8,282
|
|
|
|
|
|
Reorganization items, net
|
|
(50,778)
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Loss from continuing operations before income taxes
|
|
(4,165,076)
|
|
|
(769,623)
|
|
|
(1,196,504)
|
|
|
|
|
|
Income tax benefit
|
|
260,403
|
|
|
38,540
|
|
|
106,534
|
|
|
|
|
|
Net loss from continuing operations
|
|
(3,904,673)
|
|
|
(731,083)
|
|
|
(1,089,970)
|
|
|
|
|
|
Net income from discontinued operations, net of tax
|
|
—
|
|
|
(3,821)
|
|
|
—
|
|
|
|
|
|
Net loss
|
|
(3,904,673)
|
|
|
(734,904)
|
|
|
(1,089,970)
|
|
|
|
|
|
Net loss attributable to noncontrolling interests
|
|
—
|
|
|
173,776
|
|
|
245,485
|
|
|
|
|
|
Net loss attributable to Noble Finance Company
|
|
$
|
(3,904,673)
|
|
|
$
|
(561,128)
|
|
|
$
|
(844,485)
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
NOBLE FINANCE COMPANY (formerly known as Noble Corporation)
AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unless otherwise indicated, dollar amounts in tables are in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
Net loss
|
|
$
|
(3,904,673)
|
|
|
$
|
(734,904)
|
|
|
$
|
(1,089,970)
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
(521)
|
|
|
260
|
|
|
(2,729)
|
|
|
|
|
|
|
|
|
Net pension plan gain (loss) (net of tax provision (benefit) of $(537), $(924) and $(1,828) for the year ended December 31, 2020, 2019 and 2018, respectively)
|
|
(1,407)
|
|
|
(3,744)
|
|
|
(7,099)
|
|
Amortization of deferred pension plan amounts (net of tax provision of $583, $584 and $345 for the year ended December 31, 2020, 2019 and 2018, respectively)
|
|
2,183
|
|
|
2,197
|
|
|
1,298
|
|
Net pension plan curtailment and settlement gain (loss) (net of tax provision (benefit) of $32, $(8) and $28 for the year ended December 31, 2020, 2019 and 2018, respectively)
|
|
122
|
|
|
(30)
|
|
|
107
|
|
Prior service cost arising during the period (net of tax provision (benefit) of zero, zero and $(55) for the year ended December 31, 2020, 2019 and 2018, respectively)
|
|
—
|
|
|
—
|
|
|
(221)
|
|
Other comprehensive income (loss), net
|
|
377
|
|
|
(1,317)
|
|
|
(8,644)
|
|
Net comprehensive loss attributable to noncontrolling interests
|
|
—
|
|
|
173,776
|
|
|
245,485
|
|
Comprehensive loss attributable to Noble Finance Company
|
|
$
|
(3,904,296)
|
|
|
$
|
(562,445)
|
|
|
$
|
(853,129)
|
|
See accompanying notes to the consolidated financial statements.
NOBLE FINANCE COMPANY (formerly known as Noble Corporation)
AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unless otherwise indicated, dollar amounts in tables are in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
Cash flows from operating activities
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,904,673)
|
|
|
$
|
(734,904)
|
|
|
$
|
(1,089,970)
|
|
Adjustments to reconcile net loss to net cash flow from operating activities:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
372,560
|
|
|
437,690
|
|
|
482,660
|
|
Loss on impairment
|
|
3,915,408
|
|
|
615,294
|
|
|
802,133
|
|
(Gain) loss on extinguishment of debt, net
|
|
(17,254)
|
|
|
(30,616)
|
|
|
1,793
|
|
Reorganization items, net
|
|
44,134
|
|
|
—
|
|
|
—
|
|
Deferred income taxes
|
|
(26,325)
|
|
|
(17,825)
|
|
|
(68,416)
|
|
Amortization of share-based compensation
|
|
9,169
|
|
|
14,689
|
|
|
23,945
|
|
|
|
|
|
|
|
|
Other costs, net
|
|
(115,550)
|
|
|
(39,741)
|
|
|
6,446
|
|
Change in components of working capital
|
|
|
|
|
|
|
Change in taxes receivable
|
|
29,880
|
|
|
(11,225)
|
|
|
84,847
|
|
Net changes in other operating assets and liabilities
|
|
20,714
|
|
|
(6,456)
|
|
|
(30,679)
|
|
Net cash provided by operating activities
|
|
328,063
|
|
|
226,906
|
|
|
212,759
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
Capital expenditures
|
|
(148,886)
|
|
|
(268,783)
|
|
|
(194,779)
|
|
|
|
|
|
|
|
|
Proceeds from disposal of assets
|
|
27,366
|
|
|
12,753
|
|
|
5,402
|
|
Net cash used in investing activities
|
|
(121,520)
|
|
|
(256,030)
|
|
|
(189,377)
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
Borrowings on credit facilities
|
|
210,000
|
|
|
755,000
|
|
|
—
|
|
Issuance of senior notes
|
|
—
|
|
|
—
|
|
|
750,000
|
|
Repayment of credit facilities
|
|
—
|
|
|
(420,000)
|
|
|
—
|
|
Repayments of debt
|
|
(101,132)
|
|
|
(400,000)
|
|
|
(972,708)
|
|
Debt issuance costs
|
|
—
|
|
|
(1,092)
|
|
|
(15,639)
|
|
|
|
|
|
|
|
|
Purchase of noncontrolling interests
|
|
—
|
|
|
(106,744)
|
|
|
—
|
|
Dividends paid to noncontrolling interests
|
|
—
|
|
|
(25,109)
|
|
|
(27,579)
|
|
Contributions (distributions) from (to) parent company, net
|
|
(76,245)
|
|
|
(42,103)
|
|
|
(44,417)
|
|
Net cash provided by (used in) financing activities
|
|
32,623
|
|
|
(240,048)
|
|
|
(310,343)
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash
|
|
239,166
|
|
|
(269,172)
|
|
|
(286,961)
|
|
Cash, cash equivalents and restricted cash, beginning of period
|
|
105,878
|
|
|
375,050
|
|
|
662,011
|
|
Cash, cash equivalents and restricted cash, end of period
|
|
$
|
345,044
|
|
|
$
|
105,878
|
|
|
$
|
375,050
|
|
See accompanying notes to the consolidated financial statements.
NOBLE FINANCE COMPANY (formerly known as Noble Corporation)
AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF EQUITY
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Additional Paid-in Capital
|
|
Retained Earnings (accumulated deficit)
|
|
Accumulated Other Comprehensive Loss
|
|
Noncontrolling Interests
|
|
Total Equity
|
|
|
Balance
|
|
Par Value
|
|
|
|
|
|
Balance at December 31, 2017
|
|
261,246
|
|
|
$
|
26,125
|
|
|
$
|
623,137
|
|
|
$
|
4,669,173
|
|
|
$
|
(42,888)
|
|
|
$
|
674,467
|
|
|
$
|
5,950,014
|
|
Tax effects of intra-entity asset transfers
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(148,393)
|
|
|
—
|
|
|
—
|
|
|
(148,393)
|
|
Stranded tax effect resulting from the Tax Cuts and Jobs Act
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,540
|
|
|
(5,540)
|
|
|
—
|
|
|
—
|
|
Adjustment for adopting the revenue recognition standard
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,488)
|
|
|
—
|
|
|
—
|
|
|
(1,488)
|
|
Balance at January 1, 2018
|
|
261,246
|
|
|
$
|
26,125
|
|
|
$
|
623,137
|
|
|
$
|
4,524,832
|
|
|
$
|
(48,428)
|
|
|
$
|
674,467
|
|
|
$
|
5,800,133
|
|
Contributions from parent company, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(44,417)
|
|
|
—
|
|
|
—
|
|
|
(44,417)
|
|
Capital contribution by parent - share-based compensation
|
|
—
|
|
|
—
|
|
|
23,945
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23,945
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(844,485)
|
|
|
—
|
|
|
(245,485)
|
|
|
(1,089,970)
|
|
Dividends paid to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27,579)
|
|
|
(27,579)
|
|
Other comprehensive income, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,644)
|
|
|
—
|
|
|
(8,644)
|
|
Balance at December 31, 2018
|
|
261,246
|
|
|
$
|
26,125
|
|
|
$
|
647,082
|
|
|
$
|
3,635,930
|
|
|
$
|
(57,072)
|
|
|
$
|
401,403
|
|
|
$
|
4,653,468
|
|
Distributions to parent company, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(42,103)
|
|
|
—
|
|
|
—
|
|
|
(42,103)
|
|
Capital contribution by parent - share-based compensation
|
|
—
|
|
|
—
|
|
|
14,689
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,689
|
|
Purchase of noncontrolling interests
|
|
—
|
|
|
—
|
|
|
95,774
|
|
|
—
|
|
|
—
|
|
|
(202,518)
|
|
|
(106,744)
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(561,128)
|
|
|
—
|
|
|
(173,776)
|
|
|
(734,904)
|
|
Dividends paid to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(25,109)
|
|
|
(25,109)
|
|
Other comprehensive loss, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,317)
|
|
|
—
|
|
|
(1,317)
|
|
Balance at December 31, 2019
|
|
261,246
|
|
|
$
|
26,125
|
|
|
$
|
757,545
|
|
|
$
|
3,032,699
|
|
|
$
|
(58,389)
|
|
|
$
|
—
|
|
|
$
|
3,757,980
|
|
Distributions to parent company, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(76,245)
|
|
|
—
|
|
|
—
|
|
|
(76,245)
|
|
Capital contribution by parent - share-based compensation
|
|
—
|
|
|
—
|
|
|
9,169
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,904,673)
|
|
|
—
|
|
|
—
|
|
|
(3,904,673)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
377
|
|
|
—
|
|
|
377
|
|
Balance at December 31, 2020
|
|
261,246
|
|
|
$
|
26,125
|
|
|
$
|
766,714
|
|
|
$
|
(948,219)
|
|
|
$
|
(58,012)
|
|
|
$
|
—
|
|
|
$
|
(213,392)
|
|
See accompanying notes to the consolidated financial statements.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
Note 1— Organization and Significant Accounting Policies
Noble Corporation, an exempted company incorporated in the Cayman Islands with limited liability (“Noble” or “Successor”), is a leading offshore drilling contractor for the oil and gas industry. We provide contract drilling services to the international oil and gas industry with our global fleet of mobile offshore drilling units. Noble and its predecessors have been engaged in the contract drilling of oil and gas wells since 1921. As of December 31, 2020, our fleet of 19 drilling rigs consisted of 7 floaters and 12 jackups.
We report our contract drilling operations as a single reportable segment, Contract Drilling Services, which reflects how we manage our business. The mobile offshore drilling units comprising our offshore rig fleet operate in a global market for contract drilling services and are often redeployed to different regions due to changing demands of our customers, which consist primarily of large, integrated, independent and government-owned or controlled oil and gas companies throughout the world.
On July 31, 2020 (the “Petition Date”), our former parent company, Noble Holding Corporation plc (formerly known as Noble Corporation plc), a public limited company incorporated under the laws of England and Wales (“Legacy Noble” or the “Predecessor”), and certain of its subsidiaries, including Noble Finance Company (formerly known as Noble Corporation), a Cayman Islands company (“Finco”), filed voluntary petitions in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) seeking relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”). On September 4, 2020, the Debtors (as defined herein) filed with the Bankruptcy Court the Joint Plan of Reorganization of Noble Corporation plc and its Debtor Affiliates, which was subsequently amended on October 8, 2020 and October 13, 2020 and modified on November 18, 2020 (as amended, modified or supplemented, the “Plan”), and the related disclosure statement (the “Disclosure Statement”). On September 24, 2020, six additional subsidiaries of Legacy Noble (together with Legacy Noble and its subsidiaries that filed on the Petition Date, as the context requires, the “Debtors”) filed voluntary petitions in the Bankruptcy Court. The chapter 11 proceedings were jointly administered under the caption Noble Corporation plc, et al. (Case No. 20-33826) (the “Chapter 11 Cases”). On November 20, 2020, the Bankruptcy Court entered an order confirming the Plan. In connection with the Chapter 11 Cases and the Plan, on and prior to the Effective Date (as defined herein), Legacy Noble and certain of its subsidiaries effectuated certain restructuring transactions pursuant to which Legacy Noble formed Noble as an indirect wholly-owned subsidiary of Legacy Noble and transferred to Noble substantially all of the subsidiaries and other assets of Legacy Noble. On February 5, 2021 (the “Effective Date”), the Plan became effective in accordance with its terms and the Debtors emerged from the Chapter 11 Cases.
Noble is the successor issuer to Legacy Noble for purposes of and pursuant to Rule 15d-5 of the Exchange Act. References to the “Company,” “we,” “us” or “our” in this Annual Report are to Noble, together with its consolidated subsidiaries, when referring to periods following the Effective Date, and to Legacy Noble, together with its consolidated subsidiaries, when referring to periods prior to the Effective Date.
Finco was an indirect, wholly-owned subsidiary of Legacy Noble prior to the Effective Date and has been a direct, wholly-owned subsidiary of Noble, our parent company, since the Effective Date. Noble’s principal asset is all of the shares of Finco. Finco has no public equity outstanding. The consolidated financial statements of Noble include the accounts of Finco, and Noble conducts substantially all of its business through Finco and its subsidiaries.
Going Concern
A prolonged offshore industry downturn which began in 2014 was further exacerbated throughout 2020 by a steep decline in crude oil demand and crude oil price instability. The severity and length of these industry challenges negatively impacted our liquidity position resulting in higher than previously anticipated free cash flow deficits, increased borrowings and reduced availability under our 2017 Credit Facility (as defined herein), and significantly reduced access to sources of new capital. We actively pursued a variety of transactions and cost-cutting measures during the first half of 2020, including, but not limited to, potential refinancing transactions by us or our subsidiaries, potential capital exchange transactions, and a potential waiver from lenders under, or amendment to, our 2017 Credit Facility.
Legacy Noble performed the required assessments in conjunction with the filing of its Form 10-Q for the three months ended March 31, 2020 and determined, at that time, that substantial doubt about its ability to continue as a going concern existed. Subsequent to emergence from the Chapter 11 Cases, Noble performed a reassessment and concluded there was no longer substantial doubt regarding the Noble’s ability to continue as a going concern one year from the date of filing the Noble's Form 10-K for the year ended December 31, 2020. This was primarily due to the cancellation of Legacy Noble’s outstanding debt obligations and increased liquidity with the Exit Credit Agreement (as defined herein). Management’s assessment was based on the relevant conditions that were known and reasonably knowable at the issuance date and included the Noble’s post-emergence financial condition and liquidity sources, forecasted future cash flows, contractual obligations and
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
commitments and other conditions that could adversely affect the Noble’s ability to meet its obligations through one year from the issuance date of the Form 10-K.
Principles of Consolidation
The consolidated financial statements include our accounts and those of our wholly-owned subsidiaries and entities in which we hold a controlling financial interest. Until December 3, 2019 our consolidated financial statements included the accounts of two joint ventures, in each of which we owned a 50 percent interest. On December 3, 2019, we acquired the remaining 50 percent interest not owned by us and as a result the two joint ventures became our wholly-owned subsidiaries. Our historical ownership interest in the joint ventures met the definition of variable interest under Financial Accounting Standards Board (“FASB”) codification and we determined that we were the primary beneficiary. Intercompany balances and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
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 primarily 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.
Restricted Cash
We classify restricted cash balances in current assets if the restriction is expected to expire or otherwise be resolved within one year and in other assets if the restriction is expected to expire or otherwise be resolved in more than one year. As of December 31, 2020 and 2019, our Noble restricted cash balance consisted of $21.7 million and $1.3 million, respectively. As of December 31, 2020 and 2019, our Finco restricted cash balance consisted of $1.7 million and $1.3 million, respectively. All restricted cash is recorded in “Prepaid expenses and other current assets.” As of December 31, 2019, our restricted cash balance was associated with our financing of the Noble Johnny Whitstine and Noble Joe Knight. As of December 31, 2020, our restricted cash balance is to comply with restrictions from a Bankruptcy Court order to settle certain professional fees incurred upon or prior to our emergence from bankruptcy.
Accounts Receivable
We record accounts receivable at the amount we invoice our clients, net of allowance for credit losses. We provide an allowance for uncollectible accounts, as necessary. Our allowance for doubtful accounts as of December 31, 2020 and 2019 was $1.1 million and $1.9 million, respectively.
Property and Equipment
Property and equipment is stated at cost, reduced by provisions to recognize economic impairment. 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 forty years. Included in accounts payable were $35.3 million and $36.0 million of capital accruals as of December 31, 2020 and 2019, respectively.
Interest is capitalized on long-term construction project using the weighted average cost of debt outstanding during the period of construction.
Scheduled maintenance of equipment is 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 asset replacement projects that benefit future periods and which typically occur every three to five years are capitalized when incurred and depreciated over an equivalent period. These overhauls and asset replacement projects are included in “Drilling equipment and facilities” in “Note 5— Property and Equipment.”
We evaluate our property and equipment for impairment whenever there are changes in facts that suggest that the value of the asset is not recoverable. As part of this analysis, we make assumptions and estimates regarding future market conditions. When circumstances indicate that the carrying value of the assets may not be recoverable, management compares the carrying value to the expected undiscounted pre-tax
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
future cash flows for the associated rig for which identifiable cash flows are independent of cash flows of other assets. If the expected undiscounted pre-tax future cash flows are lower than the carrying value, the net capitalized costs are reduced to fair value. An impairment loss is recognized to the extent that an asset's carrying value exceeds its estimated fair value. Fair value is generally estimated using a discounted cash flow model. The expected future cash flows used for impairment assessment and related fair value measurements are typically based on judgmental assessments of, but were not limited to, timing of future contract awards and expected operating dayrates, operating costs, utilization rates, discount rates, capital expenditures, reactivation costs, estimated economic useful lives and, in certain cases, our belief that a drilling unit is no longer marketable and is unlikely to return to service in the near to medium term, and considering all available information at the date of assessment. For more detailed information, see “Note 6— Loss on Impairment.”
Fair Value Measurements
We measure certain of our assets and liabilities based on a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three-level hierarchy, from highest to lowest level of observable inputs, are as follows:
Level 1 - Valuations based on quoted prices in active markets for identical assets;
Level 2 - Valuations based on observable inputs that do not meet the criteria for Level 1, including quoted prices in inactive markets and quoted prices in active markets for similar but not identical instruments; and
Level 3 - Valuations based on unobservable inputs.
Revenue Recognition
The activities that primarily drive the revenue earned in our drilling contracts include (i) providing a drilling rig and the crew and supplies necessary to operate the rig, (ii) mobilizing and demobilizing the rig to and from the drill site, and (iii) performing rig preparation activities and/or modifications required for the contract. Consideration received for performing these activities may consist of dayrate drilling revenue, mobilization and demobilization revenue, contract preparation revenue and reimbursement revenue. We account for these integrated services provided within our drilling contracts as a single performance obligation satisfied over time and comprised of a series of distinct time increments in which we provide drilling services.
Our standard drilling contracts require that we operate the rig at the direction of the customer throughout the contract term (which is the period we estimate to benefit from the corresponding activities and generally ranges from two to 60 months). The activities performed and the level of service provided can vary hour to hour. Our obligation under a standard contract is to provide whatever level of service is required by the operator, or customer, over the term of the contract. We are, therefore, under a stand-ready obligation throughout the entire contract duration. Consideration for our stand-ready obligation corresponds to distinct time increments, though the rate may be variable depending on various factors, and is recognized in the period in which the services are performed. The total transaction price is determined for each individual contract by estimating both fixed and variable consideration expected to be earned over the term of the contract. We have elected to exclude from the transaction price measurement all taxes assessed by a governmental authority. See further discussion regarding the allocation of the transaction price to the remaining performance obligations below.
The amount estimated for variable consideration may be subject to interrupted or restricted rates and is only included in the transaction price to the extent that it is probable that a significant reversal of previously recognized revenue will not occur throughout the term of the contract (“constrained revenue”). When determining if variable consideration should be constrained, management considers whether there are factors outside the Company’s control that could result in a significant reversal of revenue as well as the likelihood and magnitude of a potential reversal of revenue. These estimates are re-assessed each reporting period as required.
Dayrate Drilling Revenue. Our drilling contracts generally provide for payment on a dayrate basis, with higher rates for periods when the drilling unit is operating and lower rates or zero rates for periods when drilling operations are interrupted or restricted. The dayrate invoices billed to the customer are typically determined based on the varying rates applicable to the specific activities performed on an hourly basis. Such dayrate consideration is allocated to the distinct hourly increment it relates to within the contract term, and therefore, recognized in line with the contractual rate billed for the services provided for any given hour.
Mobilization/Demobilization Revenue. We may receive fees (on either a fixed lump-sum or variable dayrate basis) for the mobilization and demobilization of our rigs. These activities are not considered to be distinct within the context of the contract and, therefore, the associated revenue is allocated to the overall performance obligation and the associated pre-operating costs are deferred. We record a contract liability for mobilization fees received and a deferred asset for costs. Both revenue and pre-operating costs are recognized ratably over the initial term of the related drilling contract.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
In most contracts, there is uncertainty as to the amount of expected demobilization revenue due to contractual provisions that stipulate that certain conditions must be present at contract completion for such revenue to be received and as to the amount thereof, if any. For example, contractual provisions may require that a rig demobilize a certain distance before the demobilization revenue is payable or the amount may vary dependent upon whether or not the rig has additional contracted work within a certain distance from the wellsite. Therefore, the estimate for such revenue may be constrained, as described earlier, depending on the facts and circumstances pertaining to the specific contract. We assess the likelihood of receiving such revenue based on past experience and knowledge of the market conditions. In cases where demobilization revenue is expected to be received upon contract completion, it is estimated as part of the overall transaction price at contract inception and recognized in earnings ratably over the initial term of the contract with an offset to an accretive contract asset.
Contract Preparation Revenue. Some of our drilling contracts require downtime before the start of the contract to prepare the rig to meet customer requirements. At times, we may be compensated by the customer for such work (on either a fixed lump-sum or variable dayrate basis). These activities are not considered to be distinct within the context of the contract and, therefore, the related revenue is allocated to the overall performance obligation and recognized ratably over the initial term of the related drilling contract. We record a contract liability for contract preparation fees received, which is amortized ratably to contract drilling revenue over the initial term of the related drilling contract.
Bonuses, Penalties and Other Variable Consideration. We may receive bonus increases to revenue or penalty decreases to revenue. Based on historical data and ongoing communication with the operator/customer, we are able to reasonably estimate this variable consideration. We will record such estimated variable consideration and re-measure our estimates at each reporting date. For revenue estimated, but not received, we will record to “Prepaid expenses and other current assets” on our Consolidated Balance Sheets.
Capital Modification Revenue. From time to time, we may receive fees from our customers for capital improvements to our rigs to meet contractual requirements (on either a fixed lump-sum or variable dayrate basis). Such revenue is allocated to the overall performance obligation and recognized ratably over the initial term of the related drilling contract as these activities are integral to our drilling activities and are not considered to be a stand-alone service provided to the customer within the context of our contracts. We record a contract liability for such fees and recognize them ratably as contract drilling revenue over the initial term of the related drilling contract.
Revenues Related to Reimbursable Expenses. We generally receive reimbursements from our customers for the purchase of supplies, equipment, personnel services and other services provided at their request in accordance with a drilling contract or other agreement. Such reimbursable revenue is variable and subject to uncertainty, as the amounts received and timing thereof is highly dependent on factors outside of our influence. Accordingly, reimbursable revenue is constrained revenue and not included in the total transaction price until the uncertainty is resolved, which typically occurs when the related costs are incurred on behalf of a customer. We are generally considered a principal in such transactions and record the associated revenue at the gross amount billed to the customer as “Reimbursables and other” in our Consolidated Statements of Operations. Such amounts are recognized ratably over the period within the contract term during which the corresponding goods and services are to be consumed.
Deferred revenues from drilling contracts totaled $59.9 million and $65.1 million at December 31, 2020 and 2019, respectively. Such amounts are included in either “Other current liabilities” or “Other liabilities” in the accompanying Consolidated Balance Sheets, based upon our expected time of recognition. Related expenses deferred under drilling contracts totaled $13.9 million at December 31, 2020 as compared to $30.8 million at December 31, 2019 and are included in either “Prepaid expenses and other current assets,” “Other assets” or “Property and equipment, net” in the accompanying Consolidated Balance Sheets, based upon our expected time of recognition.
We record reimbursements from customers for “out-of-pocket” expenses as revenues and the related direct cost as operating expenses.
Income Taxes
Income taxes are 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. 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.
Deferred tax assets and liabilities are recognized for the anticipated future tax effects of temporary differences between the financial statement basis and the tax basis of our assets and liabilities using the applicable jurisdictional tax rates at year-end. A valuation allowance for deferred tax assets is recorded when it is more likely than not that the deferred tax asset will not be realized in a future period.
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 United States, UK and any other jurisdictions in which we or any of our subsidiaries operate or are resident. Our income tax expense is based upon our interpretation of the tax
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
laws in effect in various countries at the time that the expense was incurred. If the IRS 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. The Company has adopted an accounting policy to look through the outside basis of partnerships and all other flow-through entities and exclude these from the computation of deferred taxes.
Insurance Reserves
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.
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, 2020 and 2019, loss reserves for personal injury and protection claims totaled $30.9 million and $27.9 million, respectively, and such amounts are included in “Other current liabilities” or “Liabilities subject to compromise” in the accompanying Consolidated Balance Sheets.
Earnings per Share
Our unvested share-based payment awards, which contain non-forfeitable rights to dividends, are participating securities and are 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 shares issued in connection with stock options. The dilutive effect of stock options is determined using the treasury stock method.
Share-Based Compensation Plans
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.
Liability-Classified Awards
The Company classified certain awards that will be settled in cash as liability awards. The fair value of a liability-classified award is determined on a quarterly basis beginning at the grant date until final vesting. Changes in the fair value of liability-classified awards are expensed or capitalized based on the nature of the employee’s activities over the vesting period of the award.
Litigation Contingencies
We are involved in legal proceedings, claims, and regulatory, tax or government inquiries and investigations that arise in the ordinary course of business. Certain of these matters include speculative claims for substantial or indeterminate amounts of damages. We record a liability when we believe that it is both probable that a loss has been incurred and the amount can be reasonably estimated. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the possible loss in the notes to the consolidated financial statements.
We review the developments in our contingencies that could affect the amount of the provisions that has been previously recorded, and the matters and related possible losses disclosed. We make adjustments to our provisions and changes to our disclosures accordingly to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information. Significant judgement is required to determine both the probability and the estimated amount.
Foreign Currency Translation
Although we are a Cayman Islands company, our functional currency is the US dollar, and we define any non-US dollar denominated currency as “foreign currencies.” In non-US locations where the US Dollar has been designated as the functional currency (based on an evaluation of factors including 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 or loss. In non-US 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 statement of operations items are translated at average rates of exchange during the year. The resulting gains or losses arising from the translation of
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
accounts from the functional currency to the US Dollar are included in “Accumulated other comprehensive loss” in the Consolidated Balance Sheets. We did not recognize any material gains or losses on foreign currency transactions or translations during the three years ended December 31, 2020.
Discontinued Operations
On August 1, 2014, Legacy Noble completed the separation and spin-off of a majority of its standard specification offshore drilling business (the “Spin-off”) through a pro rata distribution of all of the ordinary shares of its wholly-owned subsidiary, Paragon Offshore plc (“Paragon Offshore”), to the holders of Noble’s ordinary shares. Paragon Offshore, which had been reflected as continuing operations in our consolidated financial statements prior to the Spin-off, meets the criteria for being reported as discontinued operations and has been reclassified as such in our results of operations.
Prior to the completion of the Spin-off, Legacy Noble and Paragon Offshore entered into a series of agreements to effect the separation and Spin-off and govern the relationship between the parties after the Spin-off (the “Separation Agreements”), including the Master Separation Agreement (the “MSA”) and the Tax Sharing Agreement (the “TSA”). During the year ended December 31, 2019, we recognized charges of $3.8 million recorded in “Net loss from discontinued operations, net of tax” on our Consolidated Statement of Operations relating to settlement of Mexico customs audits from rigs included in the Spin-off. For additional information related to the Spin-off, refer to “Note 16— Commitments and Contingencies.”
Certain Significant Estimates
The preparation of financial statements in conformity with GAAP 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.
Accounting Pronouncements
Accounting Standards Adopted
In August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-14, which amends Accounting Standards Codification (“ASC”) Subtopic 715-20, “Compensation — Retirement Benefits — Defined Benefit Plans — General.” This update applies to all employers that sponsor defined benefit pension or other postretirement plans and is part of the disclosure framework project to improve the effectiveness of disclosures in notes to the financial statements. The amendment is effective for fiscal years ending after December 15, 2020. We adopted this standard effective January 1, 2020 and our adoption did not have a material effect on our consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13 (Topic 326, “Measurement of Credit Losses on Financial Instruments”), which requires changes to the recognition of credit losses on financial instruments not accounted for at fair value through net income, including loans, debt securities, trade receivables, net investments in leases and available-for-sale debt securities. This guidance is effective for annual and interim periods beginning after December 15, 2019. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. We adopted this standard effective January 1, 2020 and our adoption did not have a material effect on our consolidated financial statements.
Recently Issued Accounting Standards
In December 2019, the FASB issued ASU No. 2019-12, which amends ASC Topic 740, “Income Taxes” This update simplifies the accounting for income taxes by removing certain exceptions to general principles. The amendment is effective for fiscal years beginning after December 15, 2020 and is required to be adopted on a retrospective basis for all periods presented. We do not expect the adoption of this guidance to materially affect our consolidated financial statements.
With the exception of the updated standards discussed above, there have been no new accounting pronouncements not yet effective that have significance, or potential significance, to our consolidated financial statements.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
Note 2— Chapter 11 Proceedings
Bankruptcy Petition and Emergence
On the Petition Date, Legacy Noble and certain of its subsidiaries, including Finco, filed voluntary petitions in the Bankruptcy Court seeking relief under chapter 11 of the Bankruptcy Code. In September 2020, the Debtors filed the Plan and the Disclosure Statement with the Bankruptcy Court and six additional subsidiaries of Legacy Noble filed voluntary petitions in the Bankruptcy Court. During the proceedings, the Debtors operated their business as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court pursuant to sections 1107 and 1108 of the Bankruptcy Code and orders of the Bankruptcy Court. To ensure the Debtors’ ability to continue operating in the ordinary course of business, on August 3, 2020, the Bankruptcy Court entered a variety of orders providing “first day” relief to the Debtors, including the authority for the Debtors to continue using their cash management system, pay employee wages and benefits and pay vendors and suppliers in the ordinary course of business. As of the Petition Date, the Company began applying ASC Topic 852, Reorganizations (“ASC 852”).
The filing of the Chapter 11 Cases constituted events of default that accelerated the Company’s obligations under the indentures governing its outstanding senior notes and under our 2017 Credit Facility. In addition, the unpaid principal and interest due under our then-outstanding senior notes and 2017 Credit Facility became immediately due and payable. As of December 31, 2020, the estimated claim amounts of our senior notes and the 2017 Credit Facility have been presented as “Liabilities subject to compromise” in our Consolidated Balance Sheet. However, any efforts to enforce such payment obligations with respect to such senior notes and 2017 Credit Facility were automatically stayed as a result of the filing of the Chapter 11 Cases, and the creditors’ rights of enforcement were subject to the applicable provisions of the Bankruptcy Code. As of December 31, 2020, we had an aggregate outstanding principal amount of approximately $3.4 billion in senior notes with stated maturities at various times from 2020 through 2045 and $545.0 million of borrowings outstanding under our 2017 Credit Facility. We elected not to make the semiannual interest payment due in respect of our Senior Notes due 2024 (the “2024 Notes”), which was due on July 15, 2020, and did not make any additional interest payments due on any senior notes through the Effective Date.
As a result of the filing of the Chapter 11 Cases, Legacy Noble’s Board of Directors determined to cancel Legacy Noble’s share ownership policy applicable to the officers and directors, and the Company will consider an appropriate policy in due course.
On the Petition Date, the Debtors entered into a Restructuring Support Agreement (together with all exhibits and schedules thereto, and as amended by the First Amendment thereto dated as of August 20, 2020, the “Restructuring Support Agreement”) with an ad hoc group of certain holders of approximately 70% of the aggregate outstanding principal amount of the outstanding Senior Notes due 2026 (the “Guaranteed Notes”) and an ad hoc group of certain holders of approximately 45% of the aggregate principal amount of our other then-outstanding senior notes, taken as a whole (the “Legacy Notes”). Legacy Noble entered into a Backstop Commitment Agreement (the “Backstop Commitment Agreement”) with the backstop parties thereto (the “Backstop Parties”) on October 12, 2020, pursuant to which the issuance of the senior secured second lien notes (the “Second Lien Notes”) as part of the rights offering contemplated by the Restructuring Support Agreement and the Plan (the “Rights Offering”) were fully backstopped by the Ad Hoc Guaranteed Group and the Ad Hoc Legacy Group (each as defined in the Restructuring Support Agreement). Participation in the Rights Offering was offered to the holders of the Guaranteed Notes and the Legacy Notes.
The Restructuring Support Agreement, among other things, provides that the Consenting Creditors (as defined in the Restructuring Support Agreement) will support the Debtors' restructuring efforts as set forth in, and subject to the terms and conditions of, the Restructuring Support Agreement. The Restructuring Support Agreement contains customary conditions, representations, and warranties of the parties and is subject to a number of conditions, including, among others, the accuracy of the representations and warranties of the parties and compliance with the obligations set forth in the Restructuring Support Agreement. The Restructuring Support Agreement also provides for termination by the parties upon the occurrence of certain events.
On the Effective Date, and pursuant to the terms of the Plan, the Company:
•Appointed five new members to the Successor’s board of directors to replace all of the directors of the Predecessor, other than the director also serving as President and Chief Executive Officer, who was re-appointed pursuant to the Plan;
•Terminated and cancelled all common stock and equity-based awards of Legacy Noble that were outstanding immediately prior to the Effective Date;
•Transferred approximately 31.7 million ordinary shares of Noble with a nominal value of $0.00001 per share (“New Shares”) to holders of the Guaranteed Notes in the cancellation of the Guaranteed Notes;
•Transferred approximately 2.1 million New Shares, approximately 8.3 million seven-year warrants with Black-Scholes protection (the “Tranche 1 Warrants”) with an exercise price of $19.27 and approximately 8.3 million seven-year warrants with Black-Scholes protection (the “Tranche 2 Warrants”) with an exercise price of $23.13 to holders of the Legacy Notes in cancellation of the Legacy Notes;
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
•Issued approximately 7.7 million New Shares and Second Lien Notes to participants in the Rights Offering at an aggregate subscription price of $200 million;
•Issued approximately 5.6 million New Shares to the Backstop Parties as Holdback Securities (as defined in the Backstop Commitment Agreement);
•Issued approximately 1.7 million New Shares to the Backstop Parties in respect of their backstop commitment to subscribe for Unsubscribed Securities (as defined in the Backstop Commitment Agreement);
•Issued approximately 1.2 million New Shares to the Backstop Parties in connection with the payment of the Backstop Premiums (as defined in the Backstop Commitment Agreement);
•Issued 2.8 million five-year warrants with no Black-Scholes protection (the “Tranche 3 Warrants”) with an exercise price of $124.40 to the holders of Legacy Noble’s ordinary shares outstanding prior to the Effective Date;
•Entered into a senior secured revolving credit agreement (the “Exit Credit Agreement”) that provides for a $675.0 million senior secured revolving credit facility (with a $67.5 million sublimit for the issuance of letters of credit thereunder) (the “Exit Credit Facility”);
•Entered into an exchange agreement with certain Backstop Parties which provided that, as soon as reasonably practicable after the Effective Date, the other parties to such agreement would deliver to the Company an aggregate of approximately 6.5 million New Shares issued pursuant to the Plan in exchange for the issuance of penny warrants to purchase up to approximately 6.5 million New Shares, with an exercise price of $0.01 per share (“Penny Warrants”) which were exchanged on a one-for-one basis for New Shares issued to certain initial holders of New Shares;
•Entered into an indenture governing the Second Lien Notes;
•Entered into a registration rights agreement with certain parties who received New Shares under the Plan; and
•Entered into a registration rights agreement with certain parties who received Second Lien Notes under the Plan.
Management Incentive Plan. The Plan contemplated that on or after the Effective Date, (i) the Company would adopt a long-term incentive plan and authorize and reserve 7.7 million New Shares for issuance pursuant to equity incentive awards to be granted under such plan, and (ii) the initial awards under such plan would consist of at least 40% of such shares and be made as soon as practicable after the Effective Date on the terms and conditions as determined by Noble’s Board of Directors; provided that at least 40% of such initial awards would be in the form of time-based vesting awards vesting over a period of no shorter than three years and no longer than four years. As contemplated by the Plan, on February 18, 2021, the Company adopted a long-term incentive plan and authorized and reserved 7.7 million New Shares for issuance pursuant to equity incentive awards to be granted under such plan.
Sources of Cash for Plan Distribution. All cash required for payments made by the Company under the Plan on the Effective Date was obtained from cash on hand, proceeds of the Rights Offering, and proceeds of the Exit Credit Facility.
Under ASC Topic 852, fresh start accounting is required upon emergence from Chapter 11 if (i) the value of the assets of the emerging entity immediately before the date of confirmation is less than the total of all post-petition liabilities and allowed claims; and (ii) holders of existing voting shares immediately before confirmation receive less than 50% of the voting shares of the emerging entity. The value of the assets of Legacy Noble immediately before the date of confirmation is expected to be less than the total of all postpetition liabilities and allowed claims. Additionally, the holders of the existing voting shares of Legacy Noble immediately before the date of confirmation held less than 50% of the voting shares of Noble. The same test was performed for Finco and yielded the same result. As such, Noble and Finco will adopt fresh start accounting as of the Effective Date. Adopting fresh start accounting results in a new reporting entity with no beginning retained earnings or accumulated deficit. In accordance with ASC Topic 852, with the application of fresh start accounting, the Company will be required to allocate its reorganization value to its individual assets based on their estimated fair values in conformity with ASC Topic 805, “Business Combinations.” The reorganization value represents the fair value of the Successor Company's assets before considering liabilities. The Company is in the process of evaluating the potential impact of the fresh start accounting on its consolidated financial statements. We cannot currently estimate the financial effect of emergence from bankruptcy on our financial statements, although we expect to record material adjustments related to our Plan and the application of fresh start accounting as of the Effective Date.
The Company’s financial advisor performed a valuation of the reorganized Company dated as of August 24, 2020. According to the valuation, which was included in the Disclosure Statement related to the Plan, the post-confirmation estimated enterprise value of the Company to be in a range between $1.1 billion and $1.6 billion. The following assumptions were made in the valuation of the projected amounts upon emergence; $430.0 million of debt under the Exit Financing Facility and the Second Lien Notes and cash on hand of $100.0 million.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
Executory Contracts
Subject to certain exceptions, under the Bankruptcy Code, the Debtors may assume, assign, or reject certain executory contracts and unexpired leases subject to the approval of the Bankruptcy Court and certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a pre-petition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the Debtors from performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a pre-petition general unsecured claim for damages caused by such deemed breach. Typically, the assumption of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance. Accordingly, any description of an executory contract or unexpired lease with the Debtors in this Annual Report on Form 10-K, including where applicable a quantification of the Company’s obligations under any such executory contract or unexpired lease of the Debtors, is qualified by any overriding rejection rights the Company has under the Bankruptcy Code. As of December 31, 2020, the Debtors have rejected three immaterial executory contracts and have not rejected any unexpired leases.
Claims Reconciliation
The Debtors have filed with the Bankruptcy Court schedules and statements setting forth, among other things, the assets and liabilities of each Debtor, subject to the assumptions filed in connection therewith. These schedules and statements may be subject to further amendment or modification after filing. Certain holders of pre-petition claims that are not governmental units were required to file proofs of claim by the deadline for general claims, which was set by the Bankruptcy Court as October 6, 2020 and November 13, 2020 for the initial Debtors that filed on July 31, 2020 (the “Initial Debtors”) and the additional Debtors that filed on September 24, 2020 (the “Additional Debtors”), respectively. The governmental bar date has been set as January 27, 2021 and March 23, 2021, for the Initial Debtors and the Additional Debtors, respectively.
The Debtors received approximately 1,200 proofs of claim as of March 5, 2021 for an amount of approximately $23.0 billion. Such amount includes duplicate claims across multiple Debtor legal entities. These claims are being reconciled to amounts recorded in the Debtors’ accounting records. Differences between amounts recorded by the Debtors and claims filed by creditors will be investigated and resolved, at the direction of the Debtors, including through proceedings before the Bankruptcy Court. In addition, the Debtors have been identifying claims that have been amended or superseded, are without merit, are overstated or should be adjusted or expunged for other reasons. As a result of this process, the Debtors may identify additional liabilities that will need to be recorded or reclassified to Liabilities subject to compromise. In light of the number of claims filed, the claims resolution process will continue after the Debtors emerge from bankruptcy.
Pre-petition Charges
Pre-petition charges consist primarily of legal and other professional advisory fees incurred in relation to the Chapter 11 Cases, but prior to the Petition Date, and are presented as “Pre-petition charges” in our Consolidated Statements of Operations for the year ended December 31, 2020.
Reorganization Items, Net
In accordance with ASC Topic 852, any incremental expenses, gains and losses that are realized or incurred as of or subsequent to the Petition Date and as a direct result of the Chapter 11 Cases are recorded under “Reorganization items, net”. The following table summarizes the components of reorganization items included in our Consolidated Statements of Operations for the year ended December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noble
|
|
Finco
|
|
|
December 31, 2020
|
|
December 31, 2020
|
Adjustments for estimated litigation claims (1)
|
|
(57,000)
|
|
|
4,500
|
|
Write-off of debt financing costs and discount
|
|
45,469
|
|
|
45,469
|
|
Professional fees (1)
|
|
37,296
|
|
|
2,644
|
|
|
|
|
|
|
Revision of estimated claims
|
|
(1,835)
|
|
|
(1,835)
|
|
Total Reorganization items, net
|
|
$
|
23,930
|
|
|
$
|
50,778
|
|
(1)Payments of $25.6 million and $5.0 million related to professional fees and the first installment payment for the previously disclosed patent infringement settlement with Transocean Ltd. (“Transocean”) have been presented as cash outflows from operating activities in our Consolidated Statements of Cash Flows for the year ended December 31, 2020 for Noble and Finco, respectively.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
Liabilities Subject to Compromise
Since the Petition Date, the Company operated as a debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with provisions of the Bankruptcy Code. In accordance with ASC 852, on our Balance Sheets, the caption “Liabilities subject to compromise” reflects the expected allowed amount of the pre-petition claims that are not fully secured and that have at least a possibility of not being repaid at the full claim amount. The Company has considered the chapter 11 motions approved by the Bankruptcy Court with respect to the amount and classification of its pre-petition liabilities. However, the determination of the value at which liabilities will ultimately be settled was made on the Effective Date. The Company will evaluate and adjust the amount and classification of its pre-petition liabilities through the Effective Date.
The following table summarizes the components of liabilities subject to compromise included on our Consolidated Balance Sheet as of December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noble
|
|
Finco
|
|
|
December 31, 2020
|
|
December 31, 2020
|
|
|
|
|
|
4.900% Senior Notes due August 2020
|
|
$
|
62,535
|
|
|
$
|
62,535
|
|
4.625% Senior Notes due March 2021
|
|
79,936
|
|
|
79,936
|
|
3.950% Senior Notes due March 2022
|
|
21,213
|
|
|
21,213
|
|
7.750% Senior Notes due January 2024
|
|
397,025
|
|
|
397,025
|
|
7.950% Senior Notes due April 2025
|
|
450,000
|
|
|
450,000
|
|
7.875% Senior Notes due February 2026
|
|
750,000
|
|
|
750,000
|
|
6.200% Senior Notes due August 2040
|
|
393,596
|
|
|
393,596
|
|
6.050% Senior Notes due March 2041
|
|
395,002
|
|
|
395,002
|
|
5.250% Senior Notes due March 2042
|
|
483,619
|
|
|
483,619
|
|
8.950% Senior Notes due April 2045
|
|
400,000
|
|
|
400,000
|
|
2017 Credit Facility
|
|
545,000
|
|
|
545,000
|
|
Litigation
|
|
93,000
|
|
|
8,000
|
|
Accrued and unpaid interest
|
|
110,301
|
|
|
110,301
|
|
Accounts payable and other liabilities
|
|
37,447
|
|
|
37,359
|
|
Lease liabilities
|
|
20,969
|
|
|
20,969
|
|
Total consolidated liabilities subject to compromise
|
|
$
|
4,239,643
|
|
|
$
|
4,154,555
|
|
Since the filing of the Chapter 11 Cases on the Petition Date, the Company ceased accruing interest on all debt. As a result, the Company did not record $112.9 million of contractual interest expense related to the Guaranteed Notes, Legacy Notes, and 2017 Credit Facility.
Note 3— Consolidated Joint Ventures
On December 3, 2019, we completed a transaction with a subsidiary of Royal Dutch Shell plc (“Shell”), in which Shell bought out the remaining term of its drilling contract for the drillship Noble Bully II for $166.9 million, and we acquired Shell’s 50 percent interests in the Bully I and Bully II joint ventures for $106.7 million. As a result of this transaction, the former joint venture entities became our wholly-owned subsidiaries.
Prior to this transaction, we maintained a 50 percent interest in the two joint ventures, each with Shell, that owned and operated the two Bully-class drillships. We had determined that we were the primary beneficiary of the joint ventures. Accordingly, we consolidated the entities in our consolidated financial statements after eliminating intercompany transactions. Shell’s equity interests were presented as noncontrolling interests on our Consolidated Balance Sheets.
During the years ended December 31, 2019 and 2018, the Bully joint ventures approved and paid dividends totaling $50.2 million and $55.2 million, respectively. Of these amounts, 50 percent was paid to our former joint venture partner, Shell.
During the year ended December 31, 2019, we recognized a $595.5 million impairment charge on the Noble Bully II, of which $265.0 million is attributable to Shell, our former joint venture partner. During the year ended December 31, 2018, we recognized a $550.3 million
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
impairment on the Noble Bully I, of which $250.3 million is attributable to our former joint venture partner. See “Note 6— Loss on Impairment” for additional information.
Note 4— Loss Per Share
The following table presents the computation of basic and diluted loss per share for Legacy Noble:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
Numerator:
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
$
|
(3,978,459)
|
|
|
$
|
(696,769)
|
|
|
$
|
(885,050)
|
|
Net loss from discontinued operations, net of tax
|
|
—
|
|
|
(3,821)
|
|
|
—
|
|
|
|
|
|
|
|
|
Net loss attributable to Noble Corporation
|
|
$
|
(3,978,459)
|
|
|
$
|
(700,590)
|
|
|
$
|
(885,050)
|
|
Diluted
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
$
|
(3,978,459)
|
|
|
$
|
(696,769)
|
|
|
$
|
(885,050)
|
|
Net loss from discontinued operations, net of tax
|
|
—
|
|
|
(3,821)
|
|
|
—
|
|
Net loss attributable to Noble Corporation
|
|
$
|
(3,978,459)
|
|
|
$
|
(700,590)
|
|
|
$
|
(885,050)
|
|
Denominator:
|
|
|
|
|
|
|
Weighted average shares outstanding — basic
|
|
250,792
|
|
|
248,949
|
|
|
246,614
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding — diluted
|
|
250,792
|
|
|
248,949
|
|
|
246,614
|
|
Loss per share
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(15.86)
|
|
|
$
|
(2.79)
|
|
|
$
|
(3.59)
|
|
Loss from discontinued operations
|
|
—
|
|
|
(0.02)
|
|
|
—
|
|
Net loss attributable to Noble Corporation
|
|
$
|
(15.86)
|
|
|
$
|
(2.81)
|
|
|
$
|
(3.59)
|
|
Diluted:
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(15.86)
|
|
|
$
|
(2.79)
|
|
|
$
|
(3.59)
|
|
Loss from discontinued operations
|
|
—
|
|
|
(0.02)
|
|
|
—
|
|
Net loss attributable to Noble Corporation
|
|
$
|
(15.86)
|
|
|
$
|
(2.81)
|
|
|
$
|
(3.59)
|
|
Dividends per share
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Only those items having a dilutive impact on our basic loss per share are included in diluted loss per share. For the years ended December 31, 2020, 2019 and 2018, 6.1 million, 11.9 million and 12.5 million share-based awards, respectively, were excluded from the diluted loss per share since the effect would have been anti-dilutive. On the Effective Date, all issued and outstanding shares of common stock, including all share-based awards, were cancelled and extinguished. See “Note 2— Chapter 11 Proceedings” for additional information.
Note 5— Property and Equipment
Property and equipment, at cost, for Noble consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2020
|
|
2019
|
Drilling equipment and facilities
|
|
$
|
4,476,960
|
|
|
$
|
10,014,314
|
|
Construction in progress
|
|
99,812
|
|
|
88,904
|
|
Other
|
|
200,925
|
|
|
203,407
|
|
Property and equipment, at cost
|
|
$
|
4,777,697
|
|
|
$
|
10,306,625
|
|
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
Capital expenditures, including capitalized interest, totaled $148.2 million, $306.4 million and $281.3 million for the years ended December 31, 2020, 2019 and 2018, respectively. During the years ended December 31, 2020, 2019 and 2018, capitalized interest was zero, $9.6 million and $2.9 million, respectively.
On February 28, 2019, we purchased a new GustoMSC CJ46 rig, the Noble Joe Knight, from the PaxOcean Group in connection with a concurrently awarded drilling contract in the Middle East region. We paid $83.8 million for the rig, with $30.2 million paid in cash and the remaining $53.6 million of the purchase price financed with a loan by the seller. See “Note 7— Debt” for additional information.
During the years ended December 31, 2020, 2019 and 2018, we recognized a non-cash loss on impairment of $3.9 billion, $615.3 million and $802.1 million, respectively, related to our long-lived assets. See “Note 6— Loss on Impairment” for additional information.
For the year ended December 31, 2020, we sold six rigs, which had a net book value of $17.1 million for total proceeds of $26.7 million, resulting in a gain of $8.9 million.
Note 6— Loss on Impairment
Asset Impairments
As discussed in “Note 1— Organization and Significant Accounting Policies,” during the first quarter of 2020, the pandemic and OPEC+ production level disagreements resulted in an unprecedented steep decline in the demand for oil and a substantial surplus of oil. We considered these events to be an impairment indicator and based on our assumptions and analysis, we impaired the carrying value of four floaters. For our impaired units, the carrying values were written down to scrap value and subsequently sold in late 2020.
During the fourth quarter of 2020, the combination of the growing commitments by many of our customers to a transition to cleaner energy options, and the prolonged impacts of the pandemic, the continued oversupply of offshore drilling units placed further downward pressure on global oil demand and on our industry, potentially lengthening what was already expected to be a slow recovery. We considered these events to be an impairment indicator and based on our assumptions and analysis, we impaired the carrying value of three floaters and nine jackups. We estimated the fair values of these units using a weighting between an income valuation approach and a market approach, utilizing significant unobservable inputs, representative of a Level 3 fair value measurement. Assumptions used in our assessment included, but were not limited to, future marketability of each unit in light of the current market conditions and its current technical specifications, timing of future contract awards and expected operating dayrates, operating costs, utilization rates, discount rates, capital expenditures, market values, weighting of market values, reactivation costs, estimated economic useful lives and, in certain cases, our belief that a drilling unit is no longer marketable and is unlikely to return to service in the near to medium term.
During the quarters ended March 31, 2020 and December 31, 2020, we recognized non-cash losses on impairment of $1.1 billion and $2.8 billion, respectively, related to certain rigs and related capital spares. If we experience prolonged unfavorable changes to current market conditions, reactivation costs or dayrates or if we are unable to secure new or extended contracts for our rigs, it is reasonably possible that the estimate of undiscounted cash flows may change in the near term, resulting in the need to write down the affected assets to their corresponding estimated fair values. The impact of the current global economic turmoil on our customers’ and our business continues to be uncertain. During the year ended December 31, 2020, we recognized approximately $3.9 billion in impairment charges for seven floaters and nine jackups, and $24.0 million of impairment charges related to certain capital spare equipment.
Based upon our impairment analysis, we impaired the carrying values to their corresponding estimated fair values for two floaters, and certain capital spare equipment, which resulted in an impairment charge of approximately $615.3 million for the year ended December 31, 2019. During the year ended December 31, 2019, we recognized a $595.5 million impairment on the Noble Bully II, of which $265.0 million was attributable to our joint venture partner at the time of impairment. See “Note 3— Consolidated Joint Ventures” for additional information. For our impaired units, we estimated the fair value of these units by applying the income valuation approach utilizing significant unobservable inputs, representative of a Level 3 fair value measurement. If we experience unfavorable changes to current market conditions, reactivation costs or dayrates, or we are unable to return cold stacked rigs to service in the anticipated time frame or if we are unable to secure new or extended contracts for our active rigs, it is reasonably possible that the estimate of undiscounted cash flows may change in the near term, resulting in the need to write down the affected assets to their corresponding estimated fair values.
Based upon our impairment analysis, we impaired the carrying values to their corresponding estimated fair values for three floaters and two jackups, and certain capital spare equipment. During the year ended December 31, 2018, impairment charges related to these units and certain capital spare equipment were approximately $802.1 million. For our impaired units, we estimated the fair values of these units by applying the income valuation approach utilizing significant unobservable inputs, representative of a Level 3 fair value measurement. During the year ended December 31, 2018, we recognized a $550.3 million impairment on the Noble Bully I, of which $250.3 million was attributable to our joint venture partner at the time of impairment. See “Note 3— Consolidated Joint Ventures” for additional information.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
Note 7— Debt
Pre-emergence Debt
2017 Credit Facility
In December 2017, Noble Cayman Limited, a Cayman Islands company and a wholly-owned indirect subsidiary of Finco; Noble International Finance Company, a Cayman Islands company and a wholly-owned indirect subsidiary of Finco; and Noble Holding UK Limited, a company incorporated under the laws of England and Wales and a wholly-owned direct subsidiary of Legacy Noble (“NHUK”), as parent guarantor, entered into a senior unsecured credit agreement (as amended, the “2017 Credit Facility”). In July 2019, we executed a first amendment to our 2017 Credit Facility, which, among other things, reduced the maximum aggregate amount of commitments thereunder from $1.5 billion to $1.3 billion. As a result of such reduction in the maximum aggregate amount of commitments, we recognized a net loss of approximately $0.7 million in the year ended December 31, 2019.
Prior to the filing of the Chapter 11 Cases, the 2017 Credit Facility was scheduled to mature in January 2023. Borrowings were available for working capital and other general corporate purposes. The 2017 Credit Facility provided for a letter of credit sub-facility in the amount of $15.0 million, with the ability to increase such amount up to $500.0 million with the approval of the lenders. The 2017 Credit Facility had provisions that varied the applicable interest rates for borrowings based upon our debt ratings. Borrowings under the 2017 Credit Facility bore interest at LIBOR plus an applicable margin. NHUK guaranteed the obligations of the borrowers under the 2017 Credit Facility. In addition, certain indirect subsidiaries of Legacy Noble that owned rigs were guarantors under the 2017 Credit Facility.
In April 2020, we borrowed $100.0 million under the 2017 Credit Facility to pay down our indebtedness under the Seller Loans (as defined herein) as further described below. At December 31, 2020, we had $545.0 million of borrowings outstanding under the 2017 Credit Facility. At December 31, 2020, we had $8.8 million of letters of credit issued under the 2017 Credit Facility and an additional $6.0 million in letters of credit and surety bonds issued under unsecured or cash collateralized bilateral arrangements.
The filing of the Chapter 11 Cases constituted events of default that accelerated the Company’s obligations under the indentures governing our outstanding senior notes and under our 2017 Credit Facility. In addition, the unpaid principal and interest due under our indentures and the 2017 Credit Facility became immediately due and payable. However, any efforts to enforce such payment obligations with respect to our senior notes and 2017 Credit Facility were automatically stayed as a result of the filing of the Chapter 11 Cases, and the creditors’ rights of enforcement were subject to the applicable provisions of the Bankruptcy Code. See “Note 1— Organization and Basis of Presentation” for additional information.
On the Effective Date, all outstanding obligations under the 2017 Credit Facility were terminated and the holders of claims under the 2017 Credit Facility had such obligations refinanced through the Exit Credit Facility. On the Effective Date, all liens and security interests granted to secure such obligations were terminated and are of no further force and effect.
2015 Credit Facility
Effective January 2018, in connection with entering into the 2017 Credit Facility, we amended our $300.0 million senior unsecured credit facility that would have matured in January 2020 and was guaranteed by our indirect, wholly-owned subsidiaries, Noble Holding (U.S.) LLC and Noble Holding International Limited (“NHIL”), a finance subsidiary of Finco, (as amended, the “2015 Credit Facility”). As a result of the 2015 Credit Facility's reduction in the aggregate principal amount of commitments, we recognized a net loss of approximately $2.3 million in the year ended December 31, 2018. On December 20, 2019, we repaid $300.0 million of outstanding borrowings and terminated the 2015 Credit Facility.
Seller Loans
In February 2019, we purchased the Noble Joe Knight for $83.8 million with a $53.6 million seller-financed secured loan (the “2019 Seller Loan”). The 2019 Seller Loan had a term of four years and required a 5% principal payment at the end of the third year with the remaining 95% of the principal due at the end of the term. The 2019 Seller Loan bore a cash interest rate of 4.25% and the equivalent of a 1.25% interest rate paid-in-kind over the four-year term of the 2019 Seller Loan. Based on the terms of the 2019 Seller Loan, the 1.25% paid-in-kind interest rate was accelerated into the first year, resulting in an overall first year interest rate of 8.91%, of which only 4.25% was payable in cash. Thereafter, the paid-in-kind interest ended and the cash interest rate of 4.25% was payable for the remainder of the term.
In September 2018, we purchased the Noble Johnny Whitstine for $93.8 million with a $60.0 million seller-financed secured loan (the “2018 Seller Loan” and, together with the 2019 Seller Loan, the “Seller Loans”). The 2018 Seller Loan had a term of four years and required a 5% principal payment at the end of the third year with the remaining 95% of the principal due at the end of the term. The 2018 Seller Loan bore
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
a cash interest rate of 4.25% and the equivalent of a 1.25% interest rate paid-in-kind over the four-year term of the 2018 Seller Loan. Based on the terms of the 2018 Seller Loan, the 1.25% paid-in-kind interest rate was accelerated into the first year, resulting in an overall first year interest rate of 8.91%, of which only 4.25% was payable in cash. Thereafter, the paid-in-kind interest ended and the cash interest rate of 4.25% was payable for the remainder of the term.
Both of the Seller Loans were guaranteed by Finco and each was secured by a mortgage on the applicable rig and by the pledge of the shares of the applicable single-purpose entity that owned the relevant rig. Each Seller Loan contained a debt to total capitalization ratio requirement that such ratio not exceed 0.55 at the end of each fiscal quarter, a $300.0 million minimum liquidity financial covenant and an asset and revenue covenant substantially similar to the Guaranteed Notes, as well as other covenants and provisions customarily found in secured transactions, including a cross-default provision. Each Seller Loan required immediate repayment on the occurrence of certain events, including the termination of the drilling contract associated with the relevant rig or circumstances in connection with a material adverse effect.
In April 2020, the Company agreed with the lender under the Seller Loans to pay off 85% of the outstanding principal amount of the Seller Loans in exchange for a discount to the outstanding loan balance. On April 20, 2020, the Company made a payment of $48.1 million under the 2019 Seller Loan and $53.6 million under the 2018 Seller Loan, and, upon the lender’s receipt of such payment, interest ceased accruing, and the financial covenants set forth in the agreements relating to the Seller Loans ceased to apply. On July 20, 2020, at the conclusion of the 90-day period following the payment date, all outstanding amounts were reduced to zero, all security was released, and the Seller Loans were terminated.
As a result of the early repayment of the Seller Loans and the conclusion of the 90-day period following the payment date, we recognized gains of approximately and $17.3 million in the year ended December 31, 2020.
Senior Notes
In March 2019, we completed cash tender offers for our Senior Notes due 2020, Senior Notes due 2021, Senior Notes due 2022 and Senior Notes due 2024. Pursuant to such tender offers, we purchased $440.9 million aggregate principal amount of these senior notes for $400.0 million, plus accrued interest, using cash on hand and borrowings under the 2015 Credit Facility. As a result of these transactions, we recognized a net gain of approximately $31.3 million.
On the Effective Date, in accordance with the Plan, all outstanding obligations under our senior notes were cancelled and the indentures governing such obligations were cancelled, except to the limited extent expressly set forth in the Plan.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
Fair Value of Debt
Fair value represents the amount at which an instrument could be exchanged in a current transaction between willing parties. The estimated fair value of our debt instruments was based on the quoted market prices for similar issues or on the current rates offered to us for debt of similar remaining maturities (Level 2 measurement). All remaining fair value disclosures are presented in “Note 15— Fair Value of Financial Instruments.”
The following table presents the carrying value, net of unamortized debt issuance costs and discounts, and the estimated fair value of our total debt, not including the effect of unamortized debt issuance costs, respectively:
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December 31, 2020 (1)
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December 31, 2019
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Carrying Value
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Estimated Fair Value
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Carrying Value
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Estimated Fair Value
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Senior unsecured notes
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4.900% Senior Notes due August 2020
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$
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62,535
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|
|
$
|
1,366
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|
|
$
|
62,505
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|
|
$
|
60,660
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4.625% Senior Notes due March 2021
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|
79,936
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|
|
1,596
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|
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79,854
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|
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64,262
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3.950% Senior Notes due March 2022
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21,213
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|
|
354
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|
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21,181
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|
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12,170
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7.750% Senior Notes due January 2024
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397,025
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|
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7,925
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389,800
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211,035
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7.950% Senior Notes due April 2025
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450,000
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8,348
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446,962
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228,515
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7.875% Senior Notes due February 2026
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750,000
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301,935
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739,371
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546,353
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6.200% Senior Notes due August 2040
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393,596
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7,966
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390,526
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149,134
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6.050% Senior Notes due March 2041
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395,002
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7,327
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389,809
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|
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142,646
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5.250% Senior Notes due March 2042
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483,619
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9,701
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478,122
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176,265
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8.950% Senior Notes due April 2045
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400,000
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7,420
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390,763
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164,664
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Seller loans:
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Seller-financed secured loan due September 2022
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—
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—
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62,453
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36,968
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Seller-financed secured loan due February 2023
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—
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—
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55,658
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31,175
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Credit facility:
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2017 Credit Facility due to mature January 2023
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545,000
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545,000
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|
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335,000
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335,000
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Total debt
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3,977,926
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898,938
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3,842,004
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2,158,847
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Less: Current maturities of long-term debt
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—
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—
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62,505
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60,660
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Long-term debt (2)
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$
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—
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$
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—
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$
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3,779,499
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$
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2,098,187
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(1) Includes write-off of applicable deferred financing cost and discounts of $45.5 million. See “Note 2— Chapter 11 Proceedings” for additional information.
(2) All of our long-term debt as of December 31, 2020 has been presented as “Liabilities subject to compromise”. See “Note 2— Chapter 11 Proceedings” for additional information.
As discussed in “Note 1— Organization and Basis of Presentation,” since the Petition Date, the Company operated as a debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with provisions of the Bankruptcy Code. Accordingly, all of our long-term debt obligations have been presented as “Liabilities subject to compromise” on our Consolidated Balance Sheet at December 31, 2020.
On the Effective Date, in accordance with the Plan, all outstanding obligations under our senior notes were cancelled and the indentures governing such obligations were cancelled, except to the limited extent expressly set forth in the Plan. See “Note 2— Chapter 11 Proceedings” for additional information.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
Post-emergence Debt
Senior Secured Exit Revolving Credit Facility
On the Effective Date, Finco and Noble International Finance Company (“NIFCO”) entered into the Exit Credit Agreement providing for the $675.0 million Exit Credit Facility and canceled all debt that existed immediately prior to the Effective Date. The Exit Credit Facility matures on July 31, 2025. Subject to the satisfaction of certain conditions, Finco may from time to time designate one or more of Finco’s other wholly-owned subsidiaries as additional borrowers under the Exit Credit Agreement (collectively with Finco and NIFCO, the “Borrowers”). As of the Effective Date, $177.5 million of loans were outstanding, and $8.8 million of letters of credit were issued, under the Exit Credit Facility.
All obligations of the Borrowers under the Exit Credit Agreement, certain cash management obligations and certain swap obligations are unconditionally guaranteed, on a joint and several basis, by Finco and certain of its direct and indirect subsidiaries (collectively with the Borrowers, the “Credit Parties”), including a guarantee by each Borrower of the obligations of each other Borrower under the Exit Credit Agreement. All such obligations, including the guarantees of the Exit Credit Facility, are secured by senior priority liens on substantially all assets of, and the equity interests in, each Credit Party, including all of the rigs owned by the Company as of the Effective Date or acquired thereafter and certain assets related thereto, in each case, subject to certain exceptions and limitations described in the Exit Credit Agreement.
The loans outstanding under the Exit Credit Facility bear interest at a rate per annum equal to the applicable margin plus, at Finco’s option, either: (i) the reserve-adjusted LIBOR or (ii) a base rate, determined as the greatest of (x) the prime loan rate as published in the Wall Street Journal, (y) the federal funds effective rate plus 1⁄2 of 1%, and (z) the reserve-adjusted one-month LIBOR plus 1%. The applicable margin is initially 4.75% per annum for LIBOR loans and 3.75% per annum for base rate loans and will be increased by 50 basis points after July 31, 2024, and may be increased by an additional 50 basis points under certain conditions described in the Exit Credit Agreement.
The Borrowers are required to pay a quarterly commitment fee to each lender under the Exit Credit Agreement, which accrues at a rate per annum equal to 0.50% on the average daily unused portion of such lender’s commitments under the Exit Credit Facility. The Borrowers are also required to pay customary letter of credit and fronting fees.
Borrowings under the Exit Credit Agreement may be used for working capital and other general corporate purposes. Availability of borrowings under the Exit Credit Agreement is subject to the satisfaction of certain conditions, including restrictions on borrowings if, after giving effect to any such borrowings and the application of the proceeds thereof, (i) the aggregate amount of Available Cash (as defined in the Exit Credit Agreement) would exceed $100 million, (ii) the Consolidated First Lien Net Leverage Ratio (as defined in the Exit Credit Agreement) would be greater than 5.50 to 1.00 and the aggregate principal amount outstanding under the Exit Credit Facility would exceed $610 million, or (iii) the Asset Coverage Ratio (as described below) would be less than 2.00 to 1.00.
Mandatory prepayments and, under certain circumstances, commitment reductions are required under the Exit Credit Facility in connection with (i) certain asset sales, asset swaps and events of loss (subject to reinvestment rights if no event of default exists) and (ii) certain debt issuances. Available Cash in excess of $150 million is also required to be applied periodically to prepay loans (without a commitment reduction). The loans under the Exit Credit Facility may be voluntarily prepaid, and the commitments thereunder voluntarily terminated or reduced, by the Borrowers at any time without premium or penalty, other than customary breakage costs.
The Exit Credit Agreement obligates Finco and its restricted subsidiaries to comply with the following financial maintenance covenants:
•as of the last day of each fiscal quarter in 2021, Adjusted EBITDA (as defined in the Exit Credit Agreement) is not permitted to be lower than (i) $70 million for the four fiscal quarter period ending March 31, 2021, (ii) $40 million for the four fiscal quarter period ending June 30, 2021 and (iii) $25 million for the four fiscal quarter periods ending on each of September 30, 2021 and December 31, 2021;
•as of the last day of each fiscal quarter ending on or after March 31, 2022, the ratio of Adjusted EBITDA to Cash Interest Expense (as defined in the Exit Credit Agreement) is not permitted to be less than (i) 2.00 to 1.00 for each four fiscal quarter period ending on or after March 31, 2022 until June 30, 2024, and (ii) 2.25 to 1.00 for each four fiscal quarter period ending thereafter; and
•for each fiscal quarter ending on or after June 30, 2021, the ratio of (x) Asset Coverage Aggregate Rig Value (as defined in the Exit Credit Agreement) to (y) the aggregate principal amount of loans and letters of credit outstanding under the Exit Credit Facility (the “Asset Coverage Ratio”) as of the last day of any such fiscal quarter is not permitted to be less than 2.00 to 1.00.
The Exit Credit Facility contains affirmative and negative covenants, representations and warranties and events of default that the Company considers customary for facilities of this type.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
Second Lien Notes Indenture
On the Effective Date, pursuant to the Backstop Commitment Agreement and in accordance with the Plan, Noble and Finco consummated the Rights Offering of Second Lien Notes and associated New Shares at an aggregate subscription price of $200.0 million.
On the Effective Date, Finco issued an aggregate principal amount of $216 million of Second Lien Notes, which includes the aggregate subscription price of $200.0 million plus a backstop fee of $16.0 million which was paid in kind. The Second Lien Notes mature on February 15, 2028. The Second Lien Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured second-priority basis, by the direct and indirect subsidiaries of Finco that are Credit Parties under the Exit Credit Facility. The Second Lien Notes and such guarantees are secured by senior priority liens on the assets subject to liens securing the Exit Credit Facility, including the equity interests in Finco and each guarantor of the Second Lien Notes, all of the rigs owned by the Company as of the Effective Date or acquired thereafter, certain assets related thereto, and substantially all other assets of Finco and such guarantors, in each case, subject to certain exceptions and limitations.
Interest on the Second Lien Notes accrues, at Finco’s option, at a rate of: (i) 11% per annum, payable in cash; (ii) 13% per annum, with 50% of such interest to be payable in cash and 50% of such interest to be payable by issuing additional Second Lien Notes (“PIK Notes”); or (iii) 15% per annum, with the entirety of such interest to be payable by issuing PIK Notes. Finco shall pay interest semi-annually in arrears on February 15 and August 15 of each year, commencing August 15, 2021.
On or after February 15, 2024, Finco may redeem all or part of the Second Lien Notes at fixed redemption prices (expressed as percentages of the principal amount), plus accrued and unpaid interest, if any, to, but excluding, the redemption date. Finco may also redeem the Second Lien Notes, in whole or in part, at any time and from time to time on or before February 14, 2025 at a redemption price equal to 106% of the principal amount plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date, plus a “make-whole” premium. Notwithstanding the foregoing, if a Change of Control (as defined in the Second Lien Notes Indenture) occurs prior to (but not including) February 15, 2024, then, within 120 days of such Change of Control, Finco may elect to purchase all remaining outstanding Second Lien Notes at a redemption price equal to 106% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.
The Second Lien Notes contain covenants and events of default that the Company considers customary for notes of this type.
Note 8— Equity
Share Capital
As of December 31, 2020, Noble had approximately 251.1 million shares outstanding and trading as compared to approximately 249.2 million shares outstanding and trading at December 31, 2019. At Legacy Noble’s 2020 Annual General Meeting, Legacy Noble’s shareholders authorized its Board of Directors to increase share capital through the issuance of up to approximately 8.7 million ordinary shares (at then current nominal value of $0.01 per share). That authority to allot shares has expired on the Effective Date. Other than shares issued to Legacy Noble’s directors under the Noble Corporation 2017 Director Omnibus Plan, the authority was not used to allot shares during the year ended December 31, 2020. Pursuant to the Memorandum of Association of Noble Corporation, the share capital of Noble is $6,000 divided into 500,000,000 ordinary shares of a par value of $0.00001 each and 100,000,000 shares of a par value of $0.00001, each of such class or classes having the rights as the Board may determine from time to time.
The declaration and payment of dividends required the authorization of the Board of Directors of Legacy Noble, provided that such dividends on issued share capital may be paid only out of Legacy Noble’s “distributable reserves” on its statutory balance sheet in accordance with UK law. Therefore, Legacy Noble was not permitted to pay dividends out of share capital, which includes share premium. Noble has not paid dividends since the third quarter of 2016. The payment of future dividends will depend on our results of operations, financial condition, cash requirements, future business prospects, contractual and indenture restrictions and other factors deemed relevant by our current Board of Directors; however, at this time, we do not expect to pay any dividends in the foreseeable future.
In accordance with the Plan, all agreements, instruments and other documents evidencing, relating to or otherwise connected with any of Legacy Noble’s equity interests outstanding prior to the Effective Date, including all equity-based awards, were cancelled and all such equity interests have no further force or effect after the Effective Date. Pursuant to the Plan, the holders of Legacy Noble’s ordinary shares, par value $0.01 per share, outstanding prior to the Effective Date received their pro rata share of the Tranche 3 Warrants to acquire New Shares.
Share Repurchases
Under UK law, Legacy Noble was only permitted to purchase its own shares by way of an “off-market purchase” in a plan approved by shareholders. We currently do not have shareholder authority to repurchase shares of Legacy Noble and there is currently no share repurchase plan in place for the Successor. During the years ended December 31, 2020, 2019 and 2018, we did not repurchase any of our shares.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
Share-Based Compensation Plans
Stock Plans
During 2015, Noble Corporation shareholders approved a new equity plan, the Noble Corporation plc 2015 Omnibus Incentive Plan (the “Noble Incentive Plan”), which permits grants of options, stock appreciation rights (“SARs”), stock or stock unit awards or cash awards, any of which may be structured as a performance award, from time to time to employees who are to be granted awards under the Noble Incentive Plan. Neither consultants nor non-employee directors are eligible for awards under the Noble Incentive Plan. The Noble Incentive Plan replaced the Noble Corporation 1991 Stock Options and Restricted Stock Plan, as amended (the “1991 Plan”). The 1991 Plan was terminated, and equity awards have thereafter only been made under the Noble Incentive Plan. Stock option awards previously granted under the 1991 Plan remain outstanding in accordance with their terms.
During 2020, 2019 and 2018, the Noble Incentive Plan was restated and shareholders approved amendments, primarily to increase the number of ordinary shares available for issuance as long-term incentive compensation under the Noble Incentive Plan by 8.7 million, 5.8 million and 5.0 million shares, respectively. The maximum aggregate number of ordinary shares that may be granted for any and all awards under the Noble Incentive Plan will not exceed 40.0 million shares and at December 31, 2020, we had 25.0 million shares remaining available for grants to employees.
During 2017, upon shareholder approval, the Noble Corporation 2017 Director Omnibus Plan (the “Director Plan”) replaced the previous plans that were terminated. Equity awards to our non-employee directors have thereafter only been made under the Director Plan. No awards made under previous plans remain outstanding.
During 2019, shareholders approved amendments to increase the number of ordinary shares available for issuance under the Director Plan by 0.9 million shares, bringing the maximum aggregate number of ordinary shares that may be granted for any and all awards under the Director Plan to 1.8 million shares. At December 31, 2020, we had 1.0 million shares remaining for grants to non-employee directors.
Stock Options
Options have a term of 10 years, an exercise price equal to the fair market value of a share on the date of grant and generally vest over a three-year period. A summary of the status of stock options granted under the 1991 Plan as of December 31, 2020, 2019 and 2018 and the changes during the year ended on those dates is presented below:
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2020
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2019
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2018
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Number of
Shares
Underlying
Options
|
|
Weighted
Average
Exercise
Price
|
|
Number of
Shares
Underlying
Options
|
|
Weighted
Average
Exercise
Price
|
|
Number of
Shares
Underlying
Options
|
|
Weighted
Average
Exercise
Price
|
Outstanding at beginning of year
|
|
708,400
|
|
|
$
|
30.90
|
|
|
1,103,242
|
|
|
$
|
28.74
|
|
|
1,313,155
|
|
|
$
|
29.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
(152,245)
|
|
|
32.78
|
|
|
(394,842)
|
|
|
24.85
|
|
|
(209,913)
|
|
|
33.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year (1)
|
|
556,155
|
|
|
30.39
|
|
|
708,400
|
|
|
30.90
|
|
|
1,103,242
|
|
|
28.74
|
|
Exercisable at end of year (1)
|
|
556,155
|
|
|
$
|
30.39
|
|
|
708,400
|
|
|
$
|
30.90
|
|
|
1,103,242
|
|
|
$
|
28.74
|
|
(1)Options outstanding and exercisable at December 31, 2020 had no intrinsic value.
The following table summarizes additional information about stock options outstanding at December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding and Exercisable
|
|
|
Number of
Shares
Underlying
Options
|
|
Weighted
Average
Remaining
Life (Years)
|
|
Weighted
Average
Exercise
Price
|
$20.49 to $25.41
|
|
53,934
|
|
|
1.02
|
|
$
|
25.41
|
|
$25.42 to $30.59
|
|
277,177
|
|
|
1.09
|
|
30.59
|
|
$30.60 to $32.78
|
|
225,044
|
|
|
0.10
|
|
31.33
|
|
Total
|
|
556,155
|
|
|
0.68
|
|
$
|
30.39
|
|
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
The fair value of each option is estimated on the date of grant using a Black-Scholes pricing model. The expected term of options granted represents the period of time that the options are expected to be outstanding and is derived from historical exercise behavior, current trends and values derived from lattice-based models. Expected volatilities are based on implied volatilities of traded options on our shares, historical volatility of our shares, and other factors. The expected dividend yield is based on historical yields on the date of grant. The risk-free rate is based on the US Treasury yield curve in effect at the time of grant.
There were no non-vested stock option balances at December 31, 2020 or any changes during the year ended December 31, 2020. No new stock options were granted during the years ended December 31, 2020, 2019 and 2018. There was no compensation cost recognized during the years ended December 31, 2020, 2019 and 2018 related to stock options.
All outstanding options were cancelled as a result of the Chapter 11 Cases.
Restricted Stock Units (“RSUs”)
We have awarded both Time Vested (“TVRSUs”) and Performance Vested (“PVRSUs”) RSUs under the Noble Incentive Plan. The TVRSUs generally vest over a three-year period. The number of PVRSUs which vest will depend on the degree of achievement of specified corporate performance criteria over a three-year performance period. Depending on the date the PVRSU was awarded, these criteria consist of market based criteria or market and performance based criteria.
The TVRSUs are valued on the date of award at our underlying share price. The total compensation for units that ultimately vest is recognized over the service period. The shares and related nominal value are recorded when the restricted stock unit vests and additional paid-in capital is adjusted as the share-based compensation cost is recognized for financial reporting purposes.
The market-based PVRSUs are valued on the date of grant based on the estimated fair value. Estimated fair value is determined based on numerous assumptions, including an estimate of the likelihood that our stock price performance will achieve the targeted thresholds and the expected forfeiture rate. The fair value is calculated using a Monte Carlo Simulation Model. The assumptions used to value the PVRSUs include historical volatility and risk-free interest rates over a time period commensurate with the remaining term prior to vesting, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Valuation assumptions:
|
|
|
|
|
|
|
Expected volatility
|
|
69.8
|
%
|
|
59.6
|
%
|
|
61.8
|
%
|
|
|
|
|
|
|
|
Risk-free interest rate
|
|
1.40
|
%
|
|
2.50
|
%
|
|
2.31
|
%
|
Additionally, similar assumptions were made for each of the companies included in the defined index and the peer group of companies in order to simulate the future outcome using the Monte Carlo Simulation Model.
A summary of the RSUs awarded for each of the years ended December 31, 2020, 2019 and 2018 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
TVRSU
|
|
|
|
|
|
|
Units awarded
|
|
5,559,678
|
|
|
4,639,119
|
|
|
3,578,212
|
|
Weighted-average share price at award date
|
|
$
|
0.82
|
|
|
$
|
3.02
|
|
|
$
|
4.71
|
|
Weighted-average vesting period (years)
|
|
3.0
|
|
3.0
|
|
3.0
|
PVRSU
|
|
|
|
|
|
|
Units awarded
|
|
2,696,774
|
|
|
1,623,399
|
|
|
2,733,906
|
|
Weighted-average share price at award date
|
|
$
|
0.91
|
|
|
$
|
3.13
|
|
|
$
|
4.55
|
|
Three-year performance period ended December 31
|
|
2022
|
|
2021
|
|
2020
|
Weighted-average award date fair value
|
|
$
|
1.14
|
|
|
$
|
3.61
|
|
|
$
|
2.96
|
|
During the years ended December 31, 2020, 2019 and 2018, we awarded zero, 280,635 and 267,204 shares, respectively, to our non-employee directors.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
A summary of the status of non-vested RSUs at December 31, 2020 and changes during the year ended December 31, 2020 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TVRSUs
Outstanding
|
|
Weighted
Average
Award-Date
Fair Value
|
|
PVRSUs
Outstanding (1)
|
|
Weighted
Average
Award-Date
Fair Value
|
Non-vested RSUs at January 1, 2020
|
|
6,329,029
|
|
|
$
|
3.89
|
|
|
4,854,352
|
|
|
$
|
3.56
|
|
Awarded
|
|
5,559,678
|
|
|
0.82
|
|
|
2,696,774
|
|
|
1.14
|
|
Vested
|
|
(2,924,900)
|
|
|
4.24
|
|
|
(1,063,242)
|
|
|
4.37
|
|
Forfeited
|
|
(6,601,307)
|
|
|
1.19
|
|
|
(3,324,771)
|
|
|
1.67
|
|
Non-vested RSUs at December 31, 2020
|
|
2,362,500
|
|
|
$
|
3.43
|
|
|
3,163,113
|
|
|
$
|
3.22
|
|
(1)For awards granted prior to 2019, the number of PVRSUs shown equals the units that would vest if the “maximum” level of performance is achieved. The minimum number of units is zero and the “target” level of performance is 50 percent of the amounts shown. For awards granted during 2020 and 2019, the number of PVRSUs shown equals the units that would vest if the “target” level of performance is achieved. The minimum number of units is zero and the “maximum” level of performance is 200 percent of the amounts shown.
At December 31, 2020, there was $3.5 million of total unrecognized compensation cost related to the TVRSUs, to be recognized over a remaining weighted-average period of 0.9 years. The total award-date fair value of TVRSUs vested during the year ended December 31, 2020 was $12.4 million.
At December 31, 2020, there was $1.7 million of total unrecognized compensation cost related to the PVRSUs, to be recognized over a remaining weighted-average period of 0.5 years. The total potential compensation for PVRSUs is recognized over the service period regardless of whether the performance thresholds are ultimately achieved.
Share-based amortization recognized during the years ended December 31, 2020, 2019 and 2018 related to all restricted stock totaled $9.2 million ($8.6 million net of income tax), $14.7 million ($14.1 million net of income tax) and $24.0 million ($21.9 million net of income tax), respectively. During the years ended December 31, 2020, 2019 and 2018, capitalized share-based amortization was zero.
All outstanding shares and equity awards were cancelled as a result of the Chapter 11 Cases.
Liability-Classified Cash Incentive Awards
In 2020, the Company granted cash incentive awards that vest over a three-year period and the final cash payment depends on the degree of achievement of specified corporate performance criteria over a three-year performance period. These criteria consist of market based criteria or market and performance based criteria. These awards were valued on the date of grant based on the estimated fair value. Estimated fair value is determined based on numerous assumptions, including an estimate of the likelihood that our stock price performance will achieve the targeted thresholds and the expected forfeiture rate. The fair value is calculated using a Monte Carlo Simulation Model. The assumptions used to value the awards include historical volatility of 69.8% and a risk-free interest rate of 1.4% over a time period commensurate with the remaining term prior to vesting. Additionally, similar assumptions were made for each of the companies included in the defined index and the peer group of companies in order to simulate the future outcome using the Monte Carlo Simulation Model.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
A summary of the status of non-vested RSUs at December 31, 2020 and changes during the year ended December 31, 2020 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Awards
|
|
Weighted
Average
Award-Date
Fair Value
|
Non-vested Liability-Classified Award at January 1, 2020
|
|
—
|
|
|
$
|
—
|
|
Awarded
|
|
3,619,000
|
|
|
0.77
|
|
Vested (1)
|
|
(2,401,362)
|
|
|
0.77
|
|
Forfeited
|
|
(1,217,638)
|
|
|
0.77
|
|
Non-vested Liability-Classified Awards at December 31, 2020
|
|
—
|
|
|
$
|
—
|
|
(1) As of December 31, 2020, approximately 91,362 awards are still outstanding and fully vested. The remaining balance of the vested awards were cancelled and replaced as part of the 2020 Other Cash Award Plan.
All outstanding shares and equity awards were cancelled as a result of the Chapter 11 Cases.
Note 9— Accumulated Other Comprehensive Income (Loss)
The following table presents the changes in the accumulated balances for each component of “Accumulated other comprehensive income (loss)” for the years ended December 31, 2020 and 2019. All amounts within the tables are shown net of tax.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit Pension Items (1)
|
|
Foreign Currency Items
|
|
Total
|
Balance at December 31, 2018
|
|
$
|
(39,058)
|
|
|
$
|
(18,014)
|
|
|
$
|
(57,072)
|
|
Activity during period:
|
|
|
|
|
|
|
Other comprehensive loss before reclassifications
|
|
—
|
|
|
260
|
|
|
260
|
|
Amounts reclassified from AOCI
|
|
(1,577)
|
|
|
—
|
|
|
(1,577)
|
|
Net other comprehensive loss
|
|
(1,577)
|
|
|
260
|
|
|
(1,317)
|
|
Balance at December 31, 2019
|
|
$
|
(40,635)
|
|
|
$
|
(17,754)
|
|
|
$
|
(58,389)
|
|
Activity during period:
|
|
|
|
|
|
|
Other comprehensive income before reclassifications
|
|
—
|
|
|
(521)
|
|
|
(521)
|
|
Amounts reclassified from AOCI
|
|
898
|
|
|
—
|
|
|
898
|
|
Net other comprehensive income (loss)
|
|
898
|
|
|
(521)
|
|
|
377
|
|
Balance at December 31, 2020
|
|
$
|
(39,737)
|
|
|
$
|
(18,275)
|
|
|
$
|
(58,012)
|
|
(1)Defined benefit pension items relate to actuarial changes and the amortization of prior service costs. Reclassifications from AOCI are recognized as expense on our Consolidated Statements of Operations through “Other income (expense).” See “Note 13— Employee Benefit Plans” for additional information.
Note 10— Revenue and Customers
Contract Balances
Accounts receivable are recognized when the right to consideration becomes unconditional based upon contractual billing schedules. Payment terms on invoiced amounts are typically 30 days. Current contract asset and liability balances are included in “Prepaid expenses and other current assets” and “Other current liabilities,” respectively, and noncurrent contract assets and liabilities are included in “Other assets” and “Other liabilities,” respectively, on our Consolidated Balance Sheets.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
The following table provides information about contract assets and contract liabilities from contracts with customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
Current contract assets
|
|
$
|
10,687
|
|
|
$
|
21,292
|
|
Noncurrent contract assets
|
|
3,174
|
|
|
9,508
|
|
Total contract assets
|
|
13,861
|
|
|
30,800
|
|
|
|
|
|
|
Current contract liabilities (deferred revenue)
|
|
(34,990)
|
|
|
(34,196)
|
|
Noncurrent contract liabilities (deferred revenue)
|
|
(24,896)
|
|
|
(30,859)
|
|
Total contract liabilities
|
|
$
|
(59,886)
|
|
|
$
|
(65,055)
|
|
Significant changes in the remaining performance obligation contract assets and the contract liabilities balances for the years ended December 31, 2020 and 2019 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract Assets
|
|
Contract Liabilities
|
Net balance at December 31, 2018
|
|
$
|
47,664
|
|
|
$
|
(80,753)
|
|
|
|
|
|
|
Amortization of deferred costs
|
|
(39,936)
|
|
|
—
|
|
Additions to deferred costs
|
|
23,072
|
|
|
—
|
|
Amortization of deferred revenue
|
|
—
|
|
|
65,312
|
|
Additions to deferred revenue
|
|
—
|
|
|
(49,614)
|
|
Total
|
|
(16,864)
|
|
|
15,698
|
|
|
|
|
|
|
Net balance at December 31, 2019
|
|
$
|
30,800
|
|
|
$
|
(65,055)
|
|
|
|
|
|
|
Amortization of deferred costs
|
|
(27,043)
|
|
|
—
|
|
Additions to deferred costs
|
|
10,104
|
|
|
—
|
|
Amortization of deferred revenue
|
|
—
|
|
|
57,915
|
|
Additions to deferred revenue
|
|
—
|
|
|
(52,746)
|
|
Total
|
|
(16,939)
|
|
|
5,169
|
|
|
|
|
|
|
Net balance at December 31, 2020
|
|
$
|
13,861
|
|
|
$
|
(59,886)
|
|
Contract Costs
Certain direct and incremental costs incurred for upfront preparation, initial rig mobilization and modifications are costs of fulfilling a contract and are recoverable. These recoverable costs are deferred and amortized ratably to contract drilling expense as services are rendered over the initial term of the related drilling contract. Certain of our contracts include capital rig enhancements used to satisfy our performance obligations. These capital items are capitalized and depreciated in accordance with our existing property and equipment accounting policy.
Costs incurred for the demobilization of rigs at contract completion are recognized as incurred during the demobilization process. Costs incurred for rig modifications or upgrades required for a contract, which are considered to be capital improvements, are capitalized as drilling and other property and equipment and depreciated over the estimated useful life of the improvement.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
Transaction Price Allocated to the Remaining Performance Obligations
The following table reflects revenue expected to be recognized in the future related to unsatisfied performance obligations, by rig type, at the end of the reporting period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31,
|
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025 and beyond
|
|
Total
|
Floaters
|
|
$
|
27,005
|
|
|
$
|
13,487
|
|
|
$
|
9,199
|
|
|
$
|
915
|
|
|
$
|
—
|
|
|
$
|
50,606
|
|
Jackups
|
|
7,539
|
|
|
1,741
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,280
|
|
Total
|
|
$
|
34,544
|
|
|
$
|
15,228
|
|
|
$
|
9,199
|
|
|
$
|
915
|
|
|
$
|
—
|
|
|
$
|
59,886
|
|
The revenue included above consists of expected mobilization, demobilization, and upgrade revenue for unsatisfied performance obligations. The amounts are derived from the specific terms within drilling contracts that contain such provisions, and the expected timing for recognition of such revenue is based on the estimated start date and duration of each respective contract based on information known at December 31, 2020. The actual timing of recognition of such amounts may vary due to factors outside of our control. We have taken the optional exemption, permitted by accounting standards, to exclude disclosure of the estimated transaction price related to the variable portion of unsatisfied performance obligations at the end of the reporting period, as our transaction price is based on a single performance obligation consisting of a series of distinct hourly, or more frequent, periods, the variability of which will be resolved at the time of the future services.
Disaggregation of Revenue
The following table provides information about contract drilling revenue by rig types:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
|
Year Ended December 31, 2019
|
Floaters (1)
|
|
491,407
|
|
|
727,177
|
|
Jackups
|
|
417,829
|
|
|
518,881
|
|
Total (1)
|
|
909,236
|
|
|
1,246,058
|
|
(1) Includes the impact of the Noble Bully II contract buyout during the year ended December 31, 2019. Exclusive of this item, revenue for the year ended December 31, 2019 would have been $560,319 for floaters and $1,079,200 for total rigs.
Note 11— Leases
Leases
We determine if an arrangement is a lease at inception. Our operating lease agreements are primarily for real estate, equipment, storage, dock space and automobiles and are included within “Other current liabilities,” “Other assets” and “Other liabilities,” on our Consolidated Balance Sheets. As discussed in “Note 1— Organization and Basis of Presentation,” since the Petition Date, the Company operated as a debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with provisions of the Bankruptcy Code. Accordingly, all of the leases liabilities on the Debtor companies have been presented as “Liabilities subject to compromise” on our Consolidated Balance Sheet at December 31, 2020.
As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Certain of our lease agreements include options to extend or terminate the lease, which we do not include in our minimum lease terms unless management is reasonably certain to exercise and reasonably certain not to exercise, respectively.
In early January 2021, the Company entered into agreements to surrender a portion of the Sugar Land office lease and to terminate the Brook Street London office leases with the respective lessors. This will reduce the Right of Use Asset and Lease Liability by approximately $11.3 million and $11.9 million, respectively.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
Supplemental balance sheet information related to leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
Operating Leases
|
|
|
|
|
Operating lease right-of-use assets
|
|
$
|
26,648
|
|
|
$
|
33,480
|
|
Current operating lease liabilities
|
|
1,942
|
|
|
6,591
|
|
Long-term operating lease liabilities
|
|
4,969
|
|
|
26,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining lease term for operating leases (years)
|
|
7.8
|
|
7.7
|
Weighted average discounted rate for operating leases
|
|
11.1
|
%
|
|
9.7
|
%
|
The components of lease cost were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
|
Year Ended December 31, 2019
|
Operating lease cost
|
|
$
|
9,065
|
|
|
$
|
8,878
|
|
Short-term lease cost
|
|
2,893
|
|
|
7,012
|
|
Variable lease cost
|
|
1,265
|
|
|
1,620
|
|
Total lease cost
|
|
$
|
13,223
|
|
|
$
|
17,510
|
|
Supplemental cash flow information related to leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
|
Year Ended December 31, 2019
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
Operating cash flows from operating leases
|
|
$
|
9,614
|
|
|
$
|
8,812
|
|
Maturities of lease liabilities as of December 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Operating Leases
|
2021
|
|
$
|
8,594
|
|
2022
|
|
5,545
|
|
2023
|
|
3,567
|
|
2024
|
|
3,629
|
|
2025
|
|
3,687
|
|
Thereafter
|
|
17,018
|
|
Total lease payments
|
|
42,040
|
|
Less: Interest
|
|
(14,343)
|
|
Present value of lease liability (1)
|
|
$
|
27,697
|
|
(1) Includes $21.0 million of lease liabilities which are currently classified as “Liabilities subject to compromise” on our Consolidated Balance Sheet.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
Note 12— Income Taxes
Legacy Noble is a tax resident in the UK and, as such, is subject to UK corporation tax on its taxable profits and gains. A UK tax exemption is available in respect of qualifying dividends income and capital gains related to the sale of qualifying participations. We operate in various countries throughout the world, including the United States. The income or loss of the non-UK subsidiaries is not expected to be subject to UK corporation tax.
Consequently, we have taken account of the above exemption and provided for income taxes based on the laws and rates in effect in the countries in which operations are conducted, or in which we or our subsidiaries have a taxable presence for income tax purposes.
The components of the net deferred taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Deferred tax assets
|
|
|
|
|
United States
|
|
|
|
|
Net operating loss carry forwards
|
|
$
|
79,047
|
|
|
$
|
129,695
|
|
Disallowed interest deduction carryforwards
|
|
62,337
|
|
|
92,030
|
|
Deferred pension plan amounts
|
|
10,568
|
|
|
10,447
|
|
Accrued expenses not currently deductible
|
|
5,625
|
|
|
8,434
|
|
Other
|
|
3,178
|
|
|
2,356
|
|
Non-United States
|
|
|
|
|
Net operating loss carry forwards
|
|
47,187
|
|
|
22,426
|
|
Disallowed interest deduction carryforwards
|
|
13,625
|
|
|
13,942
|
|
Deferred pension plan amounts
|
|
558
|
|
|
787
|
|
|
|
|
|
|
Deferred tax assets
|
|
222,125
|
|
|
280,117
|
|
Less: valuation allowance
|
|
(191,835)
|
|
|
(8,084)
|
|
Net deferred tax assets
|
|
$
|
30,290
|
|
|
$
|
272,033
|
|
Deferred tax liabilities
|
|
|
|
|
United States
|
|
|
|
|
Excess of net book basis over remaining tax basis
|
|
$
|
(30,349)
|
|
|
$
|
(299,136)
|
|
Other
|
|
(1,796)
|
|
|
(2,420)
|
|
Non-United States
|
|
|
|
|
Excess of net book basis over remaining tax basis
|
|
(5,474)
|
|
|
(4,780)
|
|
Other
|
|
(1,272)
|
|
|
(1,342)
|
|
Deferred tax liabilities
|
|
(38,891)
|
|
|
(307,678)
|
|
Net deferred tax liabilities
|
|
$
|
(8,601)
|
|
|
$
|
(35,645)
|
|
Loss from continuing operations before income taxes consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
United States
|
|
$
|
(2,150,591)
|
|
|
$
|
(65,062)
|
|
|
$
|
(136,083)
|
|
Non-United States
|
|
(2,088,271)
|
|
|
(844,022)
|
|
|
(1,101,093)
|
|
Total
|
|
$
|
(4,238,862)
|
|
|
$
|
(909,084)
|
|
|
$
|
(1,237,176)
|
|
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
The income tax provision (benefit) for continuing operations consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
Current- United States
|
|
$
|
(257,552)
|
|
|
$
|
(34,726)
|
|
|
$
|
(56,574)
|
|
Current- Non-United States
|
|
23,474
|
|
|
14,011
|
|
|
18,348
|
|
Deferred- United States
|
|
(57,514)
|
|
|
(5,307)
|
|
|
(67,371)
|
|
Deferred- Non-United States
|
|
31,189
|
|
|
(12,518)
|
|
|
(1,044)
|
|
Total
|
|
$
|
(260,403)
|
|
|
$
|
(38,540)
|
|
|
$
|
(106,641)
|
|
The following is a reconciliation of our reserve for uncertain tax positions, excluding interest and penalties.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Gross balance at January 1,
|
|
$
|
130,837
|
|
|
$
|
161,256
|
|
|
$
|
174,437
|
|
Additions based on tax positions related to current year
|
|
20,266
|
|
|
934
|
|
|
97
|
|
Additions for tax positions of prior years
|
|
206
|
|
|
224
|
|
|
25
|
|
Reductions for tax positions of prior years
|
|
(109,330)
|
|
|
(28,542)
|
|
|
(12,806)
|
|
Expiration of statutes
|
|
(4,258)
|
|
|
(1,629)
|
|
|
(497)
|
|
Tax settlements
|
|
—
|
|
|
(1,406)
|
|
|
—
|
|
Gross balance at December 31,
|
|
37,721
|
|
|
130,837
|
|
|
161,256
|
|
Related tax benefits
|
|
(384)
|
|
|
(400)
|
|
|
(1,008)
|
|
Net reserve at December 31,
|
|
$
|
37,337
|
|
|
$
|
130,437
|
|
|
$
|
160,248
|
|
The liabilities related to our reserve for uncertain tax positions are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Reserve for uncertain tax positions, excluding interest and penalties
|
|
$
|
37,337
|
|
|
$
|
130,437
|
|
Interest and penalties included in “Other liabilities”
|
|
5,164
|
|
|
29,232
|
|
Reserve for uncertain tax positions, including interest and penalties
|
|
$
|
42,501
|
|
|
$
|
159,669
|
|
At December 31, 2020, the reserves for uncertain tax positions totaled $42.5 million (net of related tax benefits of $0.4 million). If a portion or all of the December 31, 2020 reserves are not realized, the provision for income taxes could be reduced by up to $42.5 million. At December 31, 2019, the reserves for uncertain tax positions totaled $159.7 million (net of related tax benefits of $0.4 million).
It is reasonably possible that our existing liabilities related to our reserve for uncertain tax positions may fluctuate in the next 12 months primarily due to the completion of open audits or the expiration of statutes of limitation. We estimate the potential changes could range up to $14.0 million.
On March 27, 2020, the 45th President of the United States signed the CARES Act into law. The CARES Act makes significant changes to various areas of US federal income tax law by, among other things, allowing a five-year carryback period for 2018, 2019 and 2020 NOLs, accelerating the realization of remaining alternative minimum tax credits, and increasing the interest expense limitation under Section 163(j) for years 2019 and 2020. The Company recognized an income tax benefit of $39.0 million as a result of the application of the CARES Act in its 2020 financial statements. Such $39.0 million tax benefit was comprised primarily of a current income tax receivable of $151.4 million, partially offset by non-cash deferred tax expense of $112.4 million related to NOL utilization. As of December 31, 2020, we had received $134.0 million of the income tax receivable related to the CARES Act, along with an additional receipt of $4.4 million of related interest.
We include, as a component of our “Income tax benefit (provision),” potential interest and penalties related to recognized tax contingencies within our global operations. Interest and penalties resulted in an income tax benefit of $24.1 million in 2020, an income tax benefit of $3.0 million in 2019 and an income tax expense of $5.1 million in 2018.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
During the year ended December 31, 2020, our income tax provision included the following non-recurring significant items:
Tax benefit related to the following:
•gross benefit of $192.4 million related to the impairment of rigs and certain capital spares partially offset by a corresponding increase in valuation allowance of $92.7 million;
•the application of the CARES Act of $39.0 million;
• release of reserves related to the closure of the 2012-2017 US tax audit of $111.9 million; and
• tax impact of an internal restructuring net of resulting adjustment of the valuation allowance of $17.9 million.
Tax expenses related to the following:
•a 2019 US return-to-provision adjustment and resulting adjustment to the valuation allowance of $21.2 million;
•an increase in UK valuation allowance of $31.1 million; and
•an increase in non-US reserve of $7.8 million.
Our gross deferred tax asset balance at year-end reflects the application of our income tax accounting policies and is based on management’s estimates, judgments and assumptions regarding realizability. If it is more likely than not that a portion of the deferred tax assets will not be realized in a future period, the deferred tax assets will be reduced by a valuation allowance based on management’s estimates. During the year ended December 31, 2020, we recorded additional valuation allowance of $183.8 million for deferred tax assets in the US, Guyana and the UK.
We conduct business globally and, as a result, we file numerous income tax returns in the US and in non-US jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world, including in jurisdictions such as Brazil, Brunei, Bulgaria, Canada, Cyprus, Egypt, Ghana, Guyana, Hungary, Malta, Mexico, Nigeria, Norway, Saudi Arabia, Argentina, Australia, Denmark, Gabon, Luxembourg, Malaysia, Morocco, Myanmar, the Netherlands, Oman, Qatar, Tanzania, Timor-Leste, Singapore, Suriname, Switzerland, the United Kingdom and the United States. We are no longer subject to US Federal income tax examinations for years before 2009 and non-US income tax examinations for years before 2007.
Legacy Noble conducted substantially all of its business through Finco and its subsidiaries. The income or loss of our non-UK subsidiaries is not subject to UK income tax. Earnings are taxable in the United Kingdom at the UK statutory rate of 19 percent. The ongoing consultative process in the United Kingdom and a possible change in law could materially impact our tax rate on operations in the United Kingdom continental shelf. A reconciliation of tax rates outside of the United Kingdom and the Cayman Islands to our Legacy Noble effective rate for continuing operations is shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
Effect of:
|
|
|
|
|
|
|
Tax rates which are different than the UK and Cayman Island rates
|
|
0.4
|
%
|
|
4.3
|
%
|
|
5.0
|
%
|
Tax impact of asset impairment and disposition
|
|
4.5
|
%
|
|
0.3
|
%
|
|
2.9
|
%
|
Tax impact of restructuring
|
|
2.1
|
%
|
|
(4.1)
|
%
|
|
—
|
%
|
Tax impact of the tax regulation change
|
|
0.9
|
%
|
|
—
|
%
|
|
2.1
|
%
|
Tax impact of valuation allowance
|
|
(4.3)
|
%
|
|
0.5
|
%
|
|
(1.0)
|
%
|
Resolution of (reserve for) tax authority audits
|
|
2.5
|
%
|
|
3.2
|
%
|
|
(0.4)
|
%
|
Total
|
|
6.1
|
%
|
|
4.2
|
%
|
|
8.6
|
%
|
Due to US foreign tax credit limitation constraints, for the years ended December 31, 2020, 2019 and 2018, the Company has made the determination to take foreign tax expense as a deduction against US taxable income.
At December 31, 2020, the Company asserts that its unremitted earnings and/or book/tax outside basis differences in certain of its subsidiaries are either permanently reinvested or are not expected to result in a taxable event in the foreseeable future. Therefore, no deferred taxes have been recorded related to such earnings and/or investments.
Certain of the restructuring transactions effected by the Company in connection with the Plan have a material impact on the Company, the full extent of which is still being finalized. For example, cancellation of indebtedness income resulting from such restructuring transactions
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
has significantly reduced the Company’s US tax attributes, including but not limited to NOL carryforwards. Further, the Plan was approved by the Bankruptcy Court on November 20, 2020. As a result, on the Effective Date, the Company experienced an ownership change under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), which is anticipated to subject certain remaining tax attributes to an annual limitation under Section 382 of the Code.
Note 13— Employee Benefit Plans
Defined Benefit Plans
Noble Drilling (Land Support) Limited, an indirect, wholly-owned subsidiary of Noble (“NDLS”), maintains a pension plan that covers all of its salaried, non-union employees, whose most recent date of employment is prior to April 1, 2014 (referred to as our “non-US plan”).
In addition to the non-US plan discussed above, we have a US noncontributory defined benefit pension plan that covers certain salaried employees and a US noncontributory defined benefit pension plan that covers certain hourly employees, whose initial date of employment is prior to August 1, 2004 (collectively referred to as our “qualified US plans”). These plans are governed by the Noble Drilling Employees’ Retirement Trust (the “Trust”). The benefits from these plans are based primarily on years of service and, for the salaried plan, employees' compensation near retirement. These plans are designed to qualify under the Employee Retirement Income Security Act of 1974 (“ERISA”), and our funding policy is consistent with funding requirements of ERISA and other applicable laws and regulations. We make cash contributions, or utilize credits available to us, for the qualified US plans when required. The benefit amount that can be covered by the qualified US plans is limited under ERISA and the Internal Revenue Code of 1986. Therefore, we maintain an unfunded, nonqualified excess benefit plan designed to maintain benefits for specified employees at the formula level in the qualified salaried US plan. We refer to the qualified US plans and the excess benefit plan collectively as the “US plans.”
During the fourth quarter of 2016, we approved amendments, effective as of December 31, 2016, to our non-US and US defined benefit plans. With these amendments, employees and alternate payees will accrue no future benefits under the plans after December 31, 2016. However, these amendments will not affect any benefits earned through that date.
A reconciliation of the changes in projected benefit obligations (“PBO”) for our non-US and US plans is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2020
|
|
2019
|
|
|
Non-US
|
|
US
|
|
Non-US
|
|
US
|
Benefit obligation at beginning of year
|
|
$
|
62,485
|
|
|
$
|
240,249
|
|
|
$
|
54,898
|
|
|
$
|
210,944
|
|
Service cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Interest cost
|
|
1,877
|
|
|
7,567
|
|
|
1,814
|
|
|
8,711
|
|
Actuarial loss (gain)
|
|
7,190
|
|
|
28,266
|
|
|
6,649
|
|
|
29,078
|
|
Plan amendments
|
|
104
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Benefits paid
|
|
(2,261)
|
|
|
(8,024)
|
|
|
(2,821)
|
|
|
(7,201)
|
|
Settlements and curtailments
|
|
(3,751)
|
|
|
(1,968)
|
|
|
—
|
|
|
(1,283)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange rate changes
|
|
2,299
|
|
|
—
|
|
|
1,945
|
|
|
—
|
|
Benefit obligation at end of year
|
|
$
|
67,943
|
|
|
$
|
266,090
|
|
|
$
|
62,485
|
|
|
$
|
240,249
|
|
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
A reconciliation of the changes in fair value of plan assets is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2020
|
|
2019
|
|
|
Non-US
|
|
US
|
|
Non-US
|
|
US
|
Fair value of plan assets at beginning of year
|
|
$
|
76,429
|
|
|
$
|
194,160
|
|
|
$
|
68,597
|
|
|
$
|
165,730
|
|
Actual return on plan assets
|
|
8,741
|
|
|
36,247
|
|
|
8,282
|
|
|
35,597
|
|
Employer contributions
|
|
—
|
|
|
2,002
|
|
|
—
|
|
|
1,317
|
|
Benefits paid
|
|
(2,261)
|
|
|
(8,024)
|
|
|
(2,821)
|
|
|
(7,201)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement and curtailment
|
|
(3,751)
|
|
|
(1,968)
|
|
|
—
|
|
|
(1,283)
|
|
Foreign exchange rate changes
|
|
4,650
|
|
|
—
|
|
|
2,371
|
|
|
—
|
|
Fair value of plan assets at end of year
|
|
$
|
83,808
|
|
|
$
|
222,417
|
|
|
$
|
76,429
|
|
|
$
|
194,160
|
|
The funded status of the plans is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2020
|
|
2019
|
|
|
Non-US
|
|
US
|
|
Non-US
|
|
US
|
Funded status
|
|
$
|
15,865
|
|
|
$
|
(43,673)
|
|
|
$
|
13,944
|
|
|
$
|
(46,089)
|
|
Amounts recognized in the Consolidated Balance Sheets consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2020
|
|
2019
|
|
|
Non-US
|
|
US
|
|
Non-US
|
|
US
|
Other assets (noncurrent)
|
|
$
|
15,865
|
|
|
$
|
—
|
|
|
$
|
13,944
|
|
|
$
|
—
|
|
Other liabilities (current)
|
|
—
|
|
|
(8,169)
|
|
|
—
|
|
|
(2,535)
|
|
Other liabilities (noncurrent)
|
|
—
|
|
|
(35,504)
|
|
|
—
|
|
|
(43,554)
|
|
Net amount recognized
|
|
$
|
15,865
|
|
|
$
|
(43,673)
|
|
|
$
|
13,944
|
|
|
$
|
(46,089)
|
|
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
Amounts recognized in AOCI consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2020
|
|
2019
|
|
|
Non-US
|
|
US
|
|
Non-US
|
|
US
|
Net actuarial loss
|
|
$
|
3,108
|
|
|
$
|
47,094
|
|
|
$
|
4,758
|
|
|
$
|
46,420
|
|
Prior service cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Deferred income tax asset
|
|
(558)
|
|
|
(9,890)
|
|
|
(787)
|
|
|
(9,748)
|
|
Accumulated other comprehensive loss
|
|
$
|
2,550
|
|
|
$
|
37,204
|
|
|
$
|
3,971
|
|
|
$
|
36,672
|
|
Pension costs include the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
Non-US
|
|
US
|
|
Non-US
|
|
US
|
|
Non-US
|
|
US
|
Service cost
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
|
1,877
|
|
|
7,567
|
|
|
1,814
|
|
|
8,711
|
|
|
1,747
|
|
|
8,179
|
|
Return on plan assets
|
|
(1,649)
|
|
|
(11,676)
|
|
|
(2,471)
|
|
|
(10,313)
|
|
|
(2,762)
|
|
|
(11,914)
|
|
Amortization of prior service cost
|
|
10
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Recognized net actuarial loss
|
|
—
|
|
|
2,866
|
|
|
—
|
|
|
2,771
|
|
|
—
|
|
|
1,642
|
|
Settlement and curtailment gains
|
|
9
|
|
|
154
|
|
|
—
|
|
|
(37)
|
|
|
—
|
|
|
135
|
|
Net pension benefit cost (gain)
|
|
$
|
247
|
|
|
$
|
(1,089)
|
|
|
$
|
(647)
|
|
|
$
|
1,132
|
|
|
$
|
(1,015)
|
|
|
$
|
(1,958)
|
|
There is less than $0.1 million and $2.9 million estimated net actuarial losses and prior service costs for the non-US plan and the US plans, respectively, that will be amortized from AOCI into net periodic pension cost in 2021.
During the years ended December 31, 2020, 2019 and 2018, we adopted the Retirement Plan (“RP”) mortality tables with the Mortality Projection (“MP”) scale as issued by the Society of Actuaries for each of the respective years. The RP 2020, 2019 and 2018 mortality tables represent the new standard for defined benefit mortality assumptions due to adjusted life expectancies. The adoption of the updated mortality tables and the mortality improvement scales decreased our pension liability on our US plans by approximately $1.7 million, $2.1 million and $0.6 million as of December 31, 2020, 2019 and 2018.
During the fourth quarter of 2018, the UK High Court made a judgement confirming that UK pension schemes are required to equalize male and female members’ benefits for the effect of guaranteed minimum pensions (GMP). We have accounted for the impact of the GMP equalization as a plan amendment to our non-US plan, and the impact is included as a prior service cost as of December 31, 2020, which will be amortized over the average life expectancy of the members at that date.
Defined Benefit Plans—Disaggregated Plan Information
Disaggregated information regarding our non-US and US plans is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2020
|
|
2019
|
|
|
Non-US
|
|
US
|
|
Non-US
|
|
US
|
Projected benefit obligation
|
|
$
|
67,943
|
|
|
$
|
266,090
|
|
|
$
|
62,485
|
|
|
$
|
240,249
|
|
Accumulated benefit obligation
|
|
67,943
|
|
|
266,090
|
|
|
62,485
|
|
|
240,249
|
|
Fair value of plan assets
|
|
83,808
|
|
|
222,417
|
|
|
76,429
|
|
|
194,160
|
|
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
The following table provides information related to those plans in which the PBO exceeded the fair value of the plan assets at December 31, 2020 and 2019. The PBO is the actuarially computed present value of earned benefits based on service to date and includes the estimated effect of any future salary increases. Employees and alternate payees have no longer accrued future benefits under the plans since December 31, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2020
|
|
2019
|
|
|
Non-US
|
|
US
|
|
Non-US
|
|
US
|
Projected benefit obligation
|
|
$
|
—
|
|
|
$
|
266,090
|
|
|
$
|
—
|
|
|
$
|
240,249
|
|
Fair value of plan assets
|
|
—
|
|
|
222,417
|
|
|
—
|
|
|
194,160
|
|
The PBO for the unfunded excess benefit plan was $9.7 million at December 31, 2020 as compared to $10.8 million in 2019, and is included under “US” in the above tables.
The following table provides information related to those plans in which the accumulated benefit obligation (“ABO”) exceeded the fair value of plan assets at December 31, 2020 and 2019. The ABO is the actuarially computed present value of earned benefits based on service to date, but differs from the PBO in that it is based on current salary levels. Employees and alternate payees have no longer accrued future benefits under the plans since December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2020
|
|
2019
|
|
|
Non-US
|
|
US
|
|
Non-US
|
|
US
|
Accumulated benefit obligation
|
|
$
|
—
|
|
|
$
|
266,090
|
|
|
$
|
—
|
|
|
$
|
240,249
|
|
Fair value of plan assets
|
|
—
|
|
|
222,417
|
|
|
—
|
|
|
194,160
|
|
The ABO for the unfunded excess benefit plan was $9.7 million at December 31, 2020 as compared to $10.8 million in 2019, and is included under “US” in the above tables.
Defined Benefit Plans—Key Assumptions
The key assumptions for the plans are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2020
|
|
2019
|
|
|
Non-US
|
|
US
|
|
Non-US
|
|
US
|
Weighted-average assumptions used to determine benefit obligations:
|
|
|
|
|
|
|
|
|
Discount Rate
|
|
1.40%
|
|
1.82% -2.60%
|
|
2.10%
|
|
2.56% - 3.32%
|
Rate of compensation increase
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
Non-US
|
|
US
|
|
Non-US
|
|
US
|
|
Non-US
|
|
US
|
Weighted-average assumptions used to determine periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount Rate
|
|
2.10%
|
|
2.56% - 3.32%
|
|
2.90%
|
|
3.65% - 4.29%
|
|
2.60%
|
|
2.84% - 3.66%
|
Expected long-term return on assets
|
|
2.90%
|
|
5.40% - 6.30%
|
|
3.70%
|
|
5.40% -6.50%
|
|
3.70%
|
|
5.75% -6.50%
|
Rate of compensation increase
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
The discount rates used to calculate the net present value of future benefit obligations for our US plans is based on the average of current rates earned on long-term bonds that receive a Moody’s rating of “Aa” or better. We have determined that the timing and amount of expected
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
cash outflows on our plans reasonably match this index. For our non-US plan, the discount rate used to calculate the net present value of future benefit obligations is determined by using a yield curve of high quality bond portfolios with an average maturity approximating that of the liabilities.
In developing the expected long-term rate of return on assets, we considered the current level of expected returns on risk free investments (primarily government bonds), the historical level of risk premium associated with the other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset class was then weighted based on the target asset allocation to develop the expected long-term rate of return on assets for the portfolio. To assist us with this analysis, we employ third-party consultants for our US and non-US plans that use a portfolio return model.
Defined Benefit Plans—Plan Assets
Non-US Plan
As of December 31, 2020, the NDLS pension Scheme targets an asset allocation of 10.0% return-seeking securities (Growth) and 90.0% debt securities (Matching) in order to protect the strong funding position the Scheme had achieved and reduce the level of funding level volatility arising as a result of the Scheme’s investment portfolio while the Trustees and Company considered entering into a buy-out contract with an insurance provider. However, following the year end and the conclusion of the assessment of a buy-out contract, the Trustees increased the Scheme's target an asset allocation of 20.0% return-seeking securities (Growth) and 80.0% in debt securities (Matching) and recommended the de-risking strategy whereby the level of investment risk reduces as the Scheme’s funding level improves. The overall investment objective of the Scheme, as adopted by the Scheme’s Trustees, is to reach a fully funded position on the agreed de-risking basis of Gilts - 0.20% per annum. The objectives within the Scheme’s overall investment strategy is to outperform the cash + 4% per annum long term objective for Growth assets and to sufficiently hedge interest rate and inflation risk within the Matching portfolio in relation to the Scheme’s liabilities. By achieving these objectives, the Trustees believe the Scheme will be able to avoid significant volatility in the contribution rate and provide sufficient assets to cover the Scheme’s benefit obligations. To achieve this the Trustees have given Mercer, the appointed investment manager, full discretion in the day-to-day management of the Scheme’s assets and implementation of the de-risking strategy, who in turn invests in multiple underlying investment managers where appropriate. The Trustees meet with Mercer periodically to review and discuss their investment performance.
The actual fair values of the non-US plan are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
|
|
|
|
Estimated Fair Value Measurements
|
|
|
Carrying Amount
|
|
Quoted Prices in Active Markets (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
Cash and cash equivalents
|
|
$
|
5,405
|
|
|
$
|
5,405
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
International companies
|
|
4,179
|
|
|
4,179
|
|
|
—
|
|
|
—
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
72,407
|
|
|
72,407
|
|
|
—
|
|
|
—
|
|
Other
|
|
1,817
|
|
|
1,817
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
83,808
|
|
|
$
|
83,808
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
|
|
|
|
Estimated Fair Value
Measurements
|
|
|
Carrying Amount
|
|
Quoted Prices in Active Markets (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
Cash and cash equivalents
|
|
$
|
903
|
|
|
$
|
903
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
International companies
|
|
26,131
|
|
|
26,131
|
|
|
—
|
|
|
—
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
49,395
|
|
|
49,395
|
|
|
—
|
|
|
—
|
|
Other
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
76,429
|
|
|
$
|
76,429
|
|
|
$
|
—
|
|
|
$
|
—
|
|
US Plans
The fundamental objective of the US plan is to provide the capital assets necessary to meet the financial obligations made to plan participants. In order to meet this objective, the Investment Policy Statement depicts how the investment assets of the plan are to be managed in accordance with the overall target asset allocation of approximately 41.0% equity securities, 57.7% fixed income securities, and 1.3% in cash and equivalents. The target asset allocation is intended to generate sufficient capital to meet plan obligations and provide a portfolio rate of return equal to or greater than the return realized using appropriate blended, market benchmark over a full market cycle (usually a five to seven year time period). Actual allocations may deviate from the target range, however any deviation from the target range of asset allocations must be approved by the Trust’s governing committee.
For investments in mutual funds, the assets of the Trust are subject to the guidelines and limits imposed by such mutual fund’s prospectus and the other governing documentation at the fund level.
No shares of Noble were included in equity securities at either December 31, 2020 or 2019.
The actual fair values of US plan assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
|
|
|
|
Estimated Fair Value
Measurements
|
|
|
Carrying
Amount
|
|
Quoted
Prices in
Active
Markets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Cash and cash equivalents
|
|
$
|
1,727
|
|
|
$
|
1,727
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
United States
|
|
78,019
|
|
|
32,387
|
|
|
45,632
|
|
|
—
|
|
International
|
|
32,310
|
|
|
32,310
|
|
|
—
|
|
|
—
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
83,645
|
|
|
82,669
|
|
|
976
|
|
|
—
|
|
Municipal bonds
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
Treasury bonds
|
|
26,716
|
|
|
26,716
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
222,417
|
|
|
$
|
175,809
|
|
|
$
|
46,608
|
|
|
$
|
—
|
|
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
|
|
|
|
Estimated Fair Value
Measurements
|
|
|
Carrying
Amount
|
|
Quoted
Prices in
Active
Markets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Cash and cash equivalents
|
|
$
|
2,254
|
|
|
$
|
2,254
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
United States
|
|
60,422
|
|
|
21,502
|
|
|
38,920
|
|
|
—
|
|
International
|
|
23,470
|
|
|
23,470
|
|
|
—
|
|
|
—
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
75,131
|
|
|
74,253
|
|
|
878
|
|
|
—
|
|
Municipal bonds
|
|
1,064
|
|
|
$
|
—
|
|
|
$
|
1,064
|
|
|
|
Treasury bonds
|
|
31,819
|
|
|
31,819
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
194,160
|
|
|
$
|
153,298
|
|
|
$
|
40,862
|
|
|
$
|
—
|
|
Defined Benefit Plans—Cash Flows
In 2020, we made no contributions to our non-US plan and we made contributions of $2.0 million to our US plans. In 2019, we made no contributions to our non-US plan and contributions of $1.3 million to our US plans. In 2018, we made no contributions to our non-US plan and contributions of $4.6 million to our US plans. We expect our aggregate minimum contributions to our non-US and US plans in 2021, subject to applicable law, to be zero and $8.2 million, respectively. We continue to monitor and evaluate funding options based upon market conditions and may increase contributions at our discretion.
The following table summarizes our estimated benefit payments at December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments by Period
|
|
|
Total
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
Thereafter
|
Estimated benefit payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-US plans
|
|
$
|
24,311
|
|
|
$
|
2,071
|
|
|
$
|
2,143
|
|
|
$
|
2,218
|
|
|
$
|
2,296
|
|
|
$
|
2,376
|
|
|
$
|
13,207
|
|
US plans
|
|
115,735
|
|
|
17,319
|
|
|
9,648
|
|
|
10,157
|
|
|
10,367
|
|
|
10,824
|
|
|
57,420
|
|
Total estimated benefit payments
|
|
$
|
140,046
|
|
|
$
|
19,390
|
|
|
$
|
11,791
|
|
|
$
|
12,375
|
|
|
$
|
12,663
|
|
|
$
|
13,200
|
|
|
$
|
70,627
|
|
Other Benefit Plans
We sponsor a 401(k) Restoration Plan, which is a nonqualified, unfunded employee benefit plan under which specified employees may elect to defer compensation in excess of amounts deferrable under our 401(k) savings plan. The 401(k) Restoration Plan has no assets, and amounts withheld for the 401(k) Restoration Plan are kept by us for general corporate purposes. The investments selected by employees and associated returns are tracked on a phantom basis. Accordingly, we have a liability to the employee for amounts originally withheld plus phantom investment income or less phantom investment losses. We are at risk for phantom investment income and, conversely, benefit should phantom investment losses occur. At December 31, 2020 and 2019, our liability for the 401(k) Restoration Plan was $7.8 million and $8.4 million, respectively, and is included in “Accrued payroll and related costs.”
In 2005, we enacted a profit sharing plan, the Noble Drilling Services Inc. Profit Sharing Plan, which covers eligible employees, as defined in the plan. Participants in the plan become fully vested in the plan after three years of service. We sponsor other retirement, health and welfare plans and a 401(k) savings plan for the benefit of our employees. On January 1, 2019, the 401(k) savings plan and the profit sharing plan were merged into the Noble Drilling Services Inc. 401(k) and Profit Sharing Plan.
Profit sharing contributions are discretionary, require Board of Directors approval and are made in the form of cash. Contributions recorded related to this plan totaled $2.4 million, $2.4 million and $2.3 million, respectively, for three years ended December 31, 2020, 2019
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
and 2018. The cost of maintaining these plans for continuing operations aggregated approximately $24.9 million, $28.1 million and $25.0 million in 2020, 2019 and 2018, respectively. We do not provide post-retirement benefits (other than pensions) or any post-employment benefits to our employees.
Note 14— Derivative Instruments and Hedging Activities
We are exposed to certain concentrations of interest rate and foreign currency exchange rate risk: periodically, we enter into derivative instruments to manage our exposure to fluctuations in these rates. 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.
For foreign currency forward contracts, hedge effectiveness is evaluated at inception 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.
Cash Flow Hedges
Several of our regional shorebases have a significant amount of their cash operating expenses payable in local currencies. To limit the potential risk of currency fluctuations, we periodically enter into forward contracts, which have historically settled monthly in the operations’ respective local currencies. All of these contracts had a maturity of less than 12 months. During 2020, we did not enter into any forward contracts. During 2019, we entered into forward contracts of approximately $15.8 million, all of which settled during 2019. At both December 31, 2020 and 2019, we had no outstanding derivative contracts.
Financial Statement Presentation
The following table, together with “Note 15— Fair Value of Financial Instruments,” summarizes the recognized gains and losses of cash flow hedges and non-designated derivatives through AOCI or as “Contract drilling services” revenue or costs for the years ended December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
Gain/(loss) reclassified from AOCI to “Contract drilling services” costs
|
Cash flow hedges
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
|
|
|
|
|
|
$
|
—
|
|
|
$
|
320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no foreign currency forward contracts outstanding as of December 31, 2020.
Note 15— Fair Value of Financial Instruments
The following tables present the carrying amount and estimated fair value of our financial instruments recognized at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
|
Estimated Fair Value Measurements
|
|
|
Carrying Amount
|
|
Quoted Prices in Active Markets (Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
Assets -
|
|
|
|
|
|
|
|
|
Marketable securities
|
|
$
|
12,326
|
|
|
$
|
12,326
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
Estimated Fair Value Measurements
|
|
|
Carrying Amount
|
|
Quoted Prices in Active Markets (Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
Assets -
|
|
|
|
|
|
|
|
|
Marketable securities
|
|
$
|
10,433
|
|
|
$
|
10,433
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Our cash and cash equivalents, and restricted cash, accounts receivable, marketable securities and accounts payable are by their nature short-term. As a result, the carrying values included in our Consolidated Balance Sheets approximate fair value.
Note 16— Commitments and Contingencies
Transocean Ltd.
In January 2017, a subsidiary of Transocean Ltd. filed suit against us and certain of our subsidiaries seeking damages for patent infringement in a Texas federal court. The suit claimed that five of our newbuild rigs that operated in the US Gulf of Mexico violated Transocean patents relating to what is generally referred to as dual-activity drilling, and Transocean sought royalties of a $10.0 million fee and a five percent license fee for the pertinent period of operation for each vessel and damages for the breach of contract alleged in February 2019, regarding a 2007 settlement agreement that we entered into with Transocean relating to patent claims in respect of another Noble rig. On September 15, 2020, the Company entered into a settlement agreement with Transocean to settle this matter in exchange for payment by the Company of an immaterial amount to be paid in three installment payments due 2020, 2021 and 2022, which was approved by the Bankruptcy Court on October 9, 2020 and is included in “Liabilities subject to compromise” on our Consolidated Balance Sheet as of December 31, 2020.
Paragon Offshore
On August 1, 2014, Legacy Noble completed the separation and spin-off of a majority of its standard specification offshore drilling business (the “Spin-off”) through a pro rata distribution of all of the ordinary shares of its wholly-owned subsidiary, Paragon Offshore plc (“Paragon Offshore”), to the holders of Legacy Noble’s ordinary shares. Paragon Offshore filed for protection under chapter 11 of the Bankruptcy Code in February 2016, and in connection with Paragon Offshore’s emergence from bankruptcy in July 2017, all claims it may have had against Legacy Noble were transferred to a litigation trust.
On December 15, 2017, the litigation trust filed fraudulent conveyance and related claims relating to the Spin-off in an action (the “Action”) against Legacy Noble and certain of its subsidiaries (the “Noble Defendants”) and certain of Legacy Noble’s then current and former officers and directors (the “Individual Defendants”) in the Delaware bankruptcy court that heard Paragon Offshore’s bankruptcy (the “Delaware Court”). The litigation trust sought total damages of approximately $2.6 billion and unspecified amounts in respect of the claims against the officer and director defendants, all of whom had indemnification agreements with Legacy Noble.
On September 23, 2020, the Noble Defendants entered into a settlement agreement (the “Settlement Agreement”) with the litigation trust to fully and finally settle the disputes among them in the Action on the terms set forth in the Settlement Agreement and, subject to certain terms and conditions, to allow the litigation trust’s claims to proceed against the Individual Defendants in the Delaware Court. Among other things, the Settlement Agreement provided that the claims asserted by the litigation trust against each of the Noble Defendants in the Action would be allowed as a prepetition unsecured claim in the Chapter 11 Cases in the aggregate amount of $85 million, and, on account of that claim, required the Debtors to either (a) make a $10 million payment to the litigation trust, if a full settlement and release of (i) all claims brought against all defendants in the Action, including the Noble Defendants and the Individual Defendants, (ii) the Noble Defense Cost Claim (as defined in the Settlement Agreement), and (iii) the Noble Indemnity Claim (as defined in the Settlement Agreement) (a “Global Resolution”) is reached on or before October 1, 2020, or (b) if a Global Resolution was not reached on or before October 1, 2020, make an up-front payment of $7.5 million for a release of only the claims against the Noble Defendants, and bring litigation against the insurers with respect to the Individual Defendants’ director and officer’s liability insurance policies the proceeds of which would be shared with the litigation trust on the terms and conditions set forth in the Settlement Agreement and with respect to a determination of the insurance coverage for the Noble Defendants. On October 9, 2020, the Bankruptcy Court entered an order approving the Debtors' entry into the Settlement Agreement.
On February 3, 2021, the Noble Defendants, the Individual Defendants and the litigation trust entered into an agreement (the “Global Resolution Agreement”) to effectuate the global resolution contemplated by the Settlement Agreement. Pursuant to the Global Resolution Agreement, among other things, the Debtors made a $7.7 million payment into escrow which, together with $82.7 million contributed by
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
certain insurers, will be paid to the litigation trust upon the satisfaction of certain conditions precedent, and all claims brought against all defendants, including the Noble Defendants and Individual Defendants will be settled and released. The Global Resolution Agreement was subject to approval by the Delaware Court, which approval was granted on February 24, 2021. All claims related to the Action have now been fully settled.
Tax matters
The Internal Revenue Service (“IRS”) has completed its examination procedures, including all appeals and administrative reviews, for the taxable years ended December 31, 2012 through December 31, 2017. In May 2020, the IRS examination team notified us that it was no longer proposing any adjustments with respect to our tax reporting for the taxable years ended December 31, 2012 through December 31, 2017. Subsequent to our filing of an Application for Tentative Refund with the IRS under the CARES Act in the months of April and August 2020, the IRS informed us that it would be conducting a limited scope examination of the taxable years ended December 31, 2012, 2013, 2014, 2018 and 2019. In the first quarter of 2020, we filed a foreign tax credit refund claim for taxable year 2009. The IRS is currently auditing taxable year 2009 in relation to our refund claim. We believe that we have accurately reported all amounts in our returns.
Audit claims of approximately $96.1 million attributable to income and other business taxes were assessed against Noble entities in Mexico related to tax years 2007, 2009 and 2010, in Australia related to tax years 2013 to 2016, in Guyana related to tax years 2019 and 2020 and in Saudi Arabia related to tax years 2015 to 2018. We intend to vigorously defend our reported positions and believe the ultimate resolution of the audit claims will not have a material adverse effect on our consolidated financial statements.
We operate in a number of countries throughout the world and our tax returns filed in those jurisdictions are subject to review and examination by tax authorities within those jurisdictions. We recognize uncertain tax positions that we believe have a greater than 50 percent likelihood of being sustained upon challenge by a tax authority. We cannot predict or provide assurance as to the ultimate outcome of any existing or future assessments.
Other contingencies
Legacy Noble had entered into agreements with certain of our executive officers, as well as certain other employees. These agreements were effective upon a change of control of Noble (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 remained effective for three years thereafter. These agreements provided for compensation and certain other benefits under such circumstances. On the Effective Date of our emergence from the Chapter 11 Cases, the Legacy Noble agreements were superseded by new employment agreements.
We are a defendant in certain claims and litigation arising out of operations in the ordinary course of business, including personal injury claims, 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.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
Note 17— Segment and Related Information
We report our contract drilling operations as a single reportable segment, Contract Drilling Services, which reflects how we manage our business. The mobile offshore drilling units comprising our offshore rig fleet operate in a global market for contract drilling services and are often redeployed to different regions due to changing demands of our customers, which consist primarily of large, integrated, independent and government-owned or controlled oil and gas companies throughout the world. As of December 31, 2020, our contract drilling services segment conducts contract drilling operations in Canada, Far East Asia, the Middle East, the North Sea, Oceania, South America and the US Gulf of Mexico.
The following table presents revenues and identifiable assets by country based on the location of the service provided:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues for Year Ended December 31,
|
|
Identifiable Assets as of December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Australia
|
|
$
|
50,434
|
|
|
$
|
33,623
|
|
|
$
|
—
|
|
|
$
|
30,498
|
|
|
$
|
244,244
|
|
Brazil
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,184
|
|
|
8,910
|
|
Brunei
|
|
—
|
|
|
—
|
|
|
3,080
|
|
|
—
|
|
|
—
|
|
Bulgaria
|
|
—
|
|
|
61,525
|
|
|
84,757
|
|
|
—
|
|
|
—
|
|
Canada
|
|
28,915
|
|
|
46,147
|
|
|
47,085
|
|
|
4,579
|
|
|
199,696
|
|
Curacao
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
75,776
|
|
Denmark
|
|
7,662
|
|
|
31,076
|
|
|
35,855
|
|
|
—
|
|
|
238,413
|
|
East Timor
|
|
—
|
|
|
—
|
|
|
33,733
|
|
|
—
|
|
|
—
|
|
Egypt
|
|
—
|
|
|
49,209
|
|
|
112,473
|
|
|
—
|
|
|
—
|
|
Gabon
|
|
147
|
|
|
—
|
|
|
—
|
|
|
4,509
|
|
|
4,160
|
|
|
|
|
|
|
|
|
|
|
|
|
Guyana
|
|
222,088
|
|
|
132,414
|
|
|
50,839
|
|
|
1,824,921
|
|
|
1,807,296
|
|
Malaysia
|
|
—
|
|
|
251,497
|
|
|
91,052
|
|
|
9,199
|
|
|
30,012
|
|
Mexico
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,297
|
|
|
28,032
|
|
Myanmar
|
|
21,084
|
|
|
56,207
|
|
|
16,572
|
|
|
—
|
|
|
151,116
|
|
Qatar
|
|
31,024
|
|
|
36,948
|
|
|
35,180
|
|
|
24,024
|
|
|
219,569
|
|
Saudi Arabia
|
|
133,246
|
|
|
154,807
|
|
|
156,989
|
|
|
398,093
|
|
|
673,884
|
|
Singapore
|
|
—
|
|
|
—
|
|
|
1,769
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Suriname
|
|
61,474
|
|
|
17,374
|
|
|
(3)
|
|
|
585,994
|
|
|
599,659
|
|
Tanzania
|
|
—
|
|
|
—
|
|
|
381
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Trinidad and Tobago
|
|
9,468
|
|
|
—
|
|
|
—
|
|
|
19,031
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
United Arab Emirates
|
|
—
|
|
|
—
|
|
|
(17)
|
|
|
52,266
|
|
|
31,150
|
|
United Kingdom
|
|
180,610
|
|
|
243,063
|
|
|
194,602
|
|
|
749,416
|
|
|
1,373,524
|
|
United States
|
|
209,401
|
|
|
191,548
|
|
|
218,479
|
|
|
545,926
|
|
|
2,599,057
|
|
Vietnam
|
|
8,719
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
964,272
|
|
|
$
|
1,305,438
|
|
|
$
|
1,082,826
|
|
|
$
|
4,263,937
|
|
|
$
|
8,284,498
|
|
Note 18— Supplemental Financial Information
Consolidated Balance Sheets Information
Deferred revenues from drilling contracts totaled $59.9 million and $65.1 million at December 31, 2020 and 2019, respectively. Such amounts are included in either “Other current liabilities” or “Other liabilities” in the accompanying Consolidated Balance Sheets, based upon our expected time of recognition. Related expenses deferred under drilling contracts totaled $13.9 million at December 31, 2020 as compared to $30.8 million at December 31, 2019, and are included in either “Prepaid expenses and other current assets,” “Other assets” or “Property and equipment, net” in the accompanying Consolidated Balance Sheets, based upon our expected time of recognition.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
Consolidated Statements of Cash Flows Information
Operating cash activities
The net effect of changes in other assets and liabilities on cash flows from operating activities is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noble
|
|
Finco
|
|
|
December 31,
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
2018
|
Accounts receivable
|
|
$
|
50,802
|
|
|
$
|
2,057
|
|
|
$
|
3,974
|
|
|
$
|
19,588
|
|
|
$
|
2,057
|
|
|
$
|
3,974
|
|
Other current assets
|
|
(866)
|
|
|
3,573
|
|
|
(2,722)
|
|
|
7,830
|
|
|
4,046
|
|
|
(2,700)
|
|
Other assets
|
|
(2,369)
|
|
|
16,218
|
|
|
(10,378)
|
|
|
(800)
|
|
|
18,749
|
|
|
(6,424)
|
|
Accounts payable
|
|
357
|
|
|
(2,279)
|
|
|
14,955
|
|
|
(11,018)
|
|
|
(2,182)
|
|
|
14,795
|
|
Other current liabilities
|
|
8,582
|
|
|
(4,700)
|
|
|
(13,940)
|
|
|
16,055
|
|
|
(4,549)
|
|
|
(13,495)
|
|
Other liabilities
|
|
(10,941)
|
|
|
(24,577)
|
|
|
(26,829)
|
|
|
(10,941)
|
|
|
(24,577)
|
|
|
(26,829)
|
|
Total net change in assets and liabilities
|
|
$
|
45,565
|
|
|
$
|
(9,708)
|
|
|
$
|
(34,940)
|
|
|
$
|
20,714
|
|
|
$
|
(6,456)
|
|
|
$
|
(30,679)
|
|
Non-cash investing and financing activities
Additions to property and equipment, at cost for which we had accrued a corresponding liability in accounts payable as of December 31, 2020, 2019 and 2018 were $35.3 million, $36.0 million and $52.1 million, respectively.
We entered into the $60.0 million 2018 Seller Loan to finance a portion of the purchase price for the Noble Johnny Whitstine in September 2018. We entered into the $53.6 million 2019 Seller Loan to finance a portion of the purchase price for the Noble Joe Knight in February 2019. See “Note 7— Debt” for additional information.
Additional cash flow information is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noble
|
|
Finco
|
|
|
December 31,
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
2018
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net of amounts capitalized
|
|
$
|
138,040
|
|
|
$
|
289,457
|
|
|
$
|
286,506
|
|
|
$
|
138,040
|
|
|
$
|
289,457
|
|
|
$
|
286,506
|
|
Income taxes paid (refunded), net
|
|
(133,708)
|
|
|
8,181
|
|
|
(107,554)
|
|
|
(133,708)
|
|
|
8,181
|
|
|
(107,554)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 19— Combined Debtor-In-Possession Financial Information
The financial statements included below represent the combined financial statements of the Debtors only. These statements reflect the results of operations, financial position and cash flows of the combined Debtor subsidiaries, including certain amounts and activities between Debtor and non-Debtor subsidiaries of the Company, which are eliminated in the consolidated financial statements.
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
COMBINED DEBTORS’ BALANCE SHEET
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
ASSETS
|
Current assets
|
|
|
Cash and cash equivalents
|
|
$
|
201,239
|
|
Accounts receivable
|
|
117,179
|
|
Receivables from non-debtor affiliates
|
|
2,921,225
|
|
Taxes receivable
|
|
24,475
|
|
Prepaid expenses and other current assets
|
|
58,973
|
|
Short-term notes receivable from non-debtor affiliates
|
|
365,112
|
|
Total current assets
|
|
3,688,203
|
|
Property and equipment, at cost
|
|
4,728,956
|
|
Accumulated depreciation
|
|
(1,184,698)
|
|
Property and equipment, net
|
|
3,544,258
|
|
Investment in non-debtor affiliates
|
|
19,622,028
|
|
Receivables from non-debtor affiliates
|
|
551,368
|
|
Other assets
|
|
60,173
|
|
Total assets
|
|
$
|
27,466,030
|
|
LIABILITIES AND EQUITY
|
Current liabilities
|
|
|
Accounts payable
|
|
$
|
76,190
|
|
Accounts payable to non-debtor affiliates
|
|
36,140
|
|
Accrued payroll and related costs
|
|
31,327
|
|
Taxes payable
|
|
24,865
|
|
|
|
|
Other current liabilities
|
|
40,652
|
|
Total current liabilities
|
|
209,174
|
|
Deferred income taxes
|
|
8,678
|
|
Other liabilities
|
|
99,441
|
|
Liabilities subject to compromise, inclusive of payables to non-debtor affiliates of $6,217,729
|
|
10,457,372
|
|
Total liabilities
|
|
10,774,665
|
|
Total debtors’ equity
|
|
16,691,365
|
|
|
|
|
|
|
|
Total liabilities and debtors’ equity
|
|
$
|
27,466,030
|
|
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
COMBINED DEBTORS’ STATEMENTS OF OPERATIONS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
Operating revenues
|
|
|
|
|
Contract drilling services
|
|
|
|
$
|
717,655
|
|
Reimbursables and other
|
|
|
|
53,284
|
|
Non-debtor affiliates
|
|
|
|
103,551
|
|
|
|
|
|
874,490
|
|
Operating costs and expenses
|
|
|
|
|
Contract drilling services
|
|
|
|
477,144
|
|
Reimbursables
|
|
|
|
47,794
|
|
Depreciation and amortization
|
|
|
|
372,663
|
|
General and administrative
|
|
|
|
120,497
|
|
Pre-petition charges
|
|
|
|
14,409
|
|
Loss on impairment
|
|
|
|
3,914,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,947,115
|
|
Operating loss
|
|
|
|
(4,072,625)
|
|
Other income (expense)
|
|
|
|
|
Interest expense, net of amounts capitalized
|
|
|
|
(164,421)
|
|
Interest expense from non-debtor affiliates
|
|
|
|
(33,421)
|
|
Gain on extinguishment of debt, net
|
|
|
|
17,254
|
|
Interest income and other, net
|
|
|
|
9,548
|
|
Interest income from non-debtor affiliates
|
|
|
|
31,751
|
|
Reorganization items, net
|
|
|
|
(23,930)
|
|
Loss from continuing operations before income taxes
|
|
|
|
(4,235,844)
|
|
Income tax benefit (provision)
|
|
|
|
247,021
|
|
Net loss
|
|
|
|
$
|
(3,988,823)
|
|
|
|
|
|
|
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
COMBINED DEBTORS’ STATEMENTS OF CASH FLOWS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
Cash flows from operating activities
|
|
|
Net loss
|
|
$
|
(3,988,823)
|
|
Adjustments to reconcile net loss to net cash flow from operating activities:
|
|
|
Depreciation and amortization
|
|
372,663
|
|
Loss on impairment
|
|
3,914,608
|
|
Reorganization items, net
|
|
(17,366)
|
|
Gain on extinguishment of debt, net
|
|
(17,254)
|
|
Deferred income taxes
|
|
(26,435)
|
|
Amortization of share-based compensation
|
|
9,169
|
|
|
|
|
Other costs, net
|
|
(42,020)
|
|
Changes in components of working capital:
|
|
|
Change in taxes receivable
|
|
28,117
|
|
Net changes in other operating assets and liabilities
|
|
(274,902)
|
|
Net changes in other operating assets and liabilities with non-debtor affiliates
|
|
(143,759)
|
|
Net cash used in operating activities
|
|
(186,002)
|
|
Cash flows from investing activities
|
|
|
Capital expenditures
|
|
(148,028)
|
|
Proceeds from disposal of assets, net
|
|
26,999
|
|
Net cash used in investing activities
|
|
(121,029)
|
|
Cash flows from financing activities
|
|
|
Borrowings on credit facilities
|
|
210,000
|
|
Repayments of senior notes
|
|
(101,132)
|
|
Cash paid to settle equity awards
|
|
(1,010)
|
|
Other financing activities with non-debtor affiliates
|
|
348,107
|
|
|
|
|
Taxes withheld on employee stock transactions
|
|
(418)
|
|
Net cash provided by financing activities
|
|
455,547
|
|
Net increase in cash, cash equivalents and restricted cash
|
|
148,516
|
|
Cash, cash equivalents and restricted cash, beginning of period
|
|
73,682
|
|
Cash, cash equivalents and restricted cash, end of period
|
|
$
|
222,198
|
|
NOBLE CORPORATION (formerly known as Noble Holding Corporation plc) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOBLE FINANCE COMPANY (formerly known as Noble Corporation) AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands)
Note 20— Unaudited Interim Financial Data
Unaudited interim consolidated financial information from continuing operations for Noble is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
2020
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
$
|
281,311
|
|
|
$
|
237,918
|
|
|
$
|
241,836
|
|
|
$
|
203,207
|
|
Operating income (loss)
|
|
(1,132,555)
|
|
|
(95,453)
|
|
|
(18,875)
|
|
|
(2,829,662)
|
|
Net loss from continuing operations
|
|
(1,062,677)
|
|
|
(42,194)
|
|
|
(50,868)
|
|
|
(2,822,720)
|
|
|
|
|
|
|
|
|
|
|
Net loss per share from continuing operations attributable to Noble (1)
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
(4.25)
|
|
|
(0.17)
|
|
|
(0.20)
|
|
|
(11.24)
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
(4.25)
|
|
|
(0.17)
|
|
|
(0.20)
|
|
|
(11.24)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
2019
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
$
|
282,888
|
|
|
$
|
292,936
|
|
|
$
|
275,526
|
|
|
$
|
454,088
|
|
Operating loss
|
|
(23,812)
|
|
|
(118,710)
|
|
|
(640,012)
|
|
|
116,261
|
|
Net loss from continuing operations
|
|
(67,068)
|
|
|
(151,960)
|
|
|
(444,871)
|
|
|
(32,870)
|
|
Net loss from discontinued operations, net of tax
|
|
(3,821)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net loss per share from continuing operations attributable to Noble (1)
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
(0.27)
|
|
|
(0.61)
|
|
|
(1.79)
|
|
|
(0.13)
|
|
Loss from discontinued operations
|
|
(0.02)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Diluted
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
(0.27)
|
|
|
(0.61)
|
|
|
(1.79)
|
|
|
(0.13)
|
|
Loss from discontinued operations
|
|
(0.02)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(1)Net loss per share is computed independently for each of the quarters presented. Therefore, the sum of the quarters’ net loss per share may not equal the total computed for the year.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Evaluation of Disclosure Controls and Procedures
Noble Corporation
Conclusions Regarding Disclosure Controls and Procedures
Robert W. Eifler, President and Chief Executive Officer (Principal Executive Officer) of Noble, and Richard B. Barker, Senior Vice President and Chief Financial Officer (Principal Financial Officer) of Noble, have evaluated the disclosure controls and procedures of Noble as of the end of the period covered by this report. On the basis of this evaluation, Mr. Eifler and Mr. Barker have concluded that Noble’s disclosure controls and procedures were effective as of December 31, 2020. Noble’s disclosure controls and procedures are designed to ensure that information required to be disclosed by Noble in the reports that it files with or submits to the SEC are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in Noble’s internal control over financial reporting that occurred during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting of Noble.
Management’s Annual Report on Internal Control Over Financial Reporting
The management of Noble is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) promulgated under the US Securities Exchange Act of 1934, as amended.
Internal control over financial reporting includes the controls themselves, monitoring (including internal auditing practices), and actions taken to correct deficiencies as identified. There are inherent limitations to the effectiveness of internal control over financial reporting, however well designed, including the possibility of human error and the possible circumvention or overriding of controls. The design of an internal control system is also based in part upon assumptions and judgments made by management about the likelihood of future events, and there can be no assurance that an internal control will be effective under all potential future conditions. As a result, even an effective system of internal controls can provide no more than reasonable assurance with respect to the fair presentation of financial statements and the processes under which they were prepared.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on the assessment by management of Noble, Noble maintained effective internal control over financial reporting as of December 31, 2020.
PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited our financial statements included in this Annual Report on Form 10-K, has audited the effectiveness of internal control over financial reporting as of December 31, 2020 as stated in their report, which is provided in Part II, Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.
Noble Finance Company
Conclusions Regarding Disclosure Controls and Procedures
Robert W. Eifler, President and Chief Executive Officer (Principal Executive Officer) of Finco, and Richard B. Barker, Director, Senior Vice President and Chief Financial Officer (Principal Financial Officer) of Finco, have evaluated the disclosure controls and procedures of Finco as of the end of the period covered by this report. On the basis of this evaluation, Mr. Eifler and Mr. Barker have concluded that Finco’s disclosure controls and procedures were effective as of December 31, 2020. Finco’s disclosure controls and procedures are designed to ensure that information required to be disclosed by Finco in the reports that it files with or submits to the SEC are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in Finco’s internal control over financial reporting that occurred during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting of Finco.
Management’s Annual Report on Internal Control Over Financial Reporting
The management of Finco is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) promulgated under the US Securities Exchange Act of 1934, as amended.
Internal control over financial reporting includes the controls themselves, monitoring (including internal auditing practices), and actions taken to correct deficiencies as identified. There are inherent limitations to the effectiveness of internal control over financial reporting, however well designed, including the possibility of human error and the possible circumvention or overriding of controls. The design of an internal control system is also based in part upon assumptions and judgments made by management about the likelihood of future events, and there can be no assurance that an internal control will be effective under all potential future conditions. As a result, even an effective system of internal controls can provide no more than reasonable assurance with respect to the fair presentation of financial statements and the processes under which they were prepared.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on the assessment by management of Finco, Finco maintained effective internal control over financial reporting as of December 31, 2020.
PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited our financial statements included in this Annual Report on Form 10-K, has audited the effectiveness of internal control over financial reporting as of December 31, 2020 as stated in their report, which is provided in Part II, Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.
Item 9B. Other Information.
None.