ENSCO PLC, 10-Q filed on 10/27/2016
Quarterly Report
Document And Entity Information
9 Months Ended
Sep. 30, 2016
Oct. 21, 2016
Document And Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Sep. 30, 2016 
 
Document Fiscal Year Focus
2016 
 
Document Fiscal Period Focus
Q3 
 
Entity Registrant Name
Ensco plc 
 
Entity Central Index Key
0000314808 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Shares, Shares Outstanding
 
303,047,563 
Condensed Consolidated Statements Of Income (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Income Statement [Abstract]
 
 
 
 
OPERATING REVENUES
$ 548.2 
$ 1,012.2 
$ 2,271.8 
$ 3,235.1 
OPERATING EXPENSES
 
 
 
 
Contract drilling (exclusive of depreciation)
298.1 
433.5 
1,012.0 
1,454.4 
Depreciation
109.4 
145.2 
335.1 
422.8 
Loss on impairment
2.4 
2.4 
General and administrative
25.3 
28.4 
76.1 
88.2 
Total operating expenses
432.8 
609.5 
1,423.2 
1,967.8 
OPERATING INCOME
115.4 
402.7 
848.6 
1,267.3 
OTHER INCOME (EXPENSE)
 
 
 
 
Interest income
3.8 
1.0 
8.6 
6.8 
Interest expense, net
(53.4)
(55.3)
(172.5)
(158.9)
Other, net
18.7 
1.9 
278.3 
(28.3)
Other income (expense), net
(30.9)
(52.4)
114.4 
(180.4)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
84.5 
350.3 
963.0 
1,086.9 
PROVISION FOR INCOME TAXES
 
 
 
 
Current income tax (benefit) expense
(5.7)
6.9 
81.0 
113.5 
Deferred income tax expense
2.2 
26.3 
23.6 
55.4 
Total provision for income taxes
(3.5)
33.2 
104.6 
168.9 
INCOME FROM CONTINUING OPERATIONS
88.0 
317.1 
858.4 
918.0 
DISCONTINUED OPERATIONS
 
 
 
 
LOSS FROM DISCONTINUED OPERATIONS, NET
0.7 
23.3 
1.8 
33.6 
NET INCOME
87.3 
293.8 
856.6 
884.4 
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
(2.0)
(1.8)
(5.4)
(7.4)
NET INCOME ATTRIBUTABLE TO ENSCO
85.3 
292.0 
851.2 
877.0 
EARNINGS PER SHARE - BASIC AND DILUTED
 
 
 
 
Income (Loss) from Continuing Operations, Per Basic and Diluted Share
$ 0.28 
$ 1.34 
$ 3.07 
$ 3.87 
Discontinued Operation, Income (Loss) from Discontinued Operation, Net of Tax, Per Basic and Diluted Share
$ 0.00 
$ (0.10)
$ 0.00 
$ (0.14)
Earnings Per Share, Basic and Diluted
$ 0.28 
$ 1.24 
$ 3.07 
$ 3.73 
NET INCOME ATTRIBUTABLE TO ENSCO SHARES - BASIC AND DILUTED
$ 83.5 
$ 287.5 
$ 836.1 
$ 865.2 
WEIGHTED-AVERAGE SHARES OUTSTANDING
 
 
 
 
Basic (in shares)
298.6 
232.4 
272.0 
232.2 
Diluted (in shares)
298.6 
232.5 
272.0 
232.2 
CASH DIVIDENDS PER SHARE (in dollars per share)
$ 0.01 
$ 0.15 
$ 0.03 
$ 0.45 
Condensed Consolidated Statements of Comprehensive Income (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Statement of Comprehensive Income [Abstract]
 
 
 
 
NET INCOME
$ 87.3 
$ 293.8 
$ 856.6 
$ 884.4 
OTHER COMPREHENSIVE INCOME (LOSS), NET
 
 
 
 
Net change in fair value of derivatives
(14.8)
(0.6)
(23.5)
Reclassification of net losses on derivative instruments from other comprehensive income into net income
2.2 
5.8 
10.1 
15.9 
Other
(0.5)
2.9 
(0.5)
4.2 
NET OTHER COMPREHENSIVE (LOSS) INCOME
1.7 
(6.1)
9.0 
(3.4)
COMPREHENSIVE INCOME
89.0 
287.7 
865.6 
881.0 
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
(2.0)
(1.8)
(5.4)
(7.4)
COMPREHENSIVE INCOME ATTRIBUTABLE TO ENSCO
$ 87.0 
$ 285.9 
$ 860.2 
$ 873.6 
Condensed Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Sep. 30, 2016
Dec. 31, 2015
CURRENT ASSETS
 
 
Cash and cash equivalents
$ 465.4 
$ 121.3 
Short-term Investments
1,302.0 
1,180.0 
Accounts receivable, net
352.1 
582.0 
Other
346.2 
401.8 
Total current assets
2,465.7 
2,285.1 
PROPERTY AND EQUIPMENT, AT COST
12,923.9 
12,719.4 
Less accumulated depreciation
1,964.2 
1,631.6 
Property and equipment, net
10,959.7 
11,087.8 
OTHER ASSETS, NET
176.9 
237.6 
TOTAL ASSETS
13,602.3 
13,610.5 
CURRENT LIABILITIES
 
 
Accounts payable - trade
156.5 
224.6 
Accrued liabilities and other
408.1 
550.9 
Current maturities of long-term debt
25.6 
Total current liabilities
590.2 
775.5 
LONG-TERM DEBT
4,677.0 
5,868.6 
OTHER LIABILITIES
354.1 
449.2 
COMMITMENTS AND CONTINGENCIES
   
   
ENSCO SHAREHOLDERS' EQUITY
 
 
Additional paid-in capital
6,157.6 
5,554.5 
Retained earnings
1,828.2 
985.3 
Accumulated other comprehensive income
21.5 
12.5 
Treasury shares, at cost
(65.6)
(63.8)
Total Ensco shareholders' equity
7,972.7 
6,512.9 
NONCONTROLLING INTERESTS
8.3 
4.3 
Total equity
7,981.0 
6,517.2 
Total liabilities and shareholders' equity
13,602.3 
13,610.5 
Class A ordinary shares, U.S. [Member]
 
 
ENSCO SHAREHOLDERS' EQUITY
 
 
Common shares, value
30.9 
24.3 
Common Class B, Par Value In GBP [Member]
 
 
ENSCO SHAREHOLDERS' EQUITY
 
 
Common shares, value
$ 0.1 
$ 0.1 
Condensed Consolidated Balance Sheets (Parenthetical)
Sep. 30, 2016
Dec. 31, 2015
Sep. 30, 2016
Class A ordinary shares, U.S. [Member]
USD ($)
Dec. 31, 2015
Class A ordinary shares, U.S. [Member]
USD ($)
Sep. 30, 2016
Common Class B, Par Value In GBP [Member]
GBP (£)
Dec. 31, 2015
Common Class B, Par Value In GBP [Member]
GBP (£)
Common stock, par value per share (in dollars per share or pounds sterling per share)
 
 
$ 0.10 
$ 0.1 
£ 1 
£ 1 
Common shares, shares authorized (in shares)
 
 
450,000,000.0 
450,000,000 
50,000 
50,000 
Common shares, shares issued (in shares)
 
 
308,500,000 
242,900,000 
50,000 
50,000 
Treasury shares, shares held (in shares)
7,200,000 
7,600,000 
 
 
 
 
Condensed Consolidated Statements Of Cash Flows (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
OPERATING ACTIVITIES
 
 
NET INCOME
$ 856.6 
$ 884.4 
Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:
 
 
Depreciation expense
335.1 
422.8 
Gain (Loss) on Extinguishment of Debt
279.0 
(33.5)
Share-based compensation expense
28.7 
33.9 
Deferred income tax expense
23.6 
55.4 
Amortization of intangibles and other, net
(16.2)
2.7 
LOSS FROM DISCONTINUED OPERATIONS, NET
1.8 
33.6 
Other
(4.7)
(12.5)
Changes in operating assets and liabilities
48.9 
(179.2)
Net cash provided by operating activities of continuing operations
994.8 
1,274.6 
INVESTING ACTIVITIES
 
 
Purchases of short-term investments
(1,704.0)
(850.0)
Maturities of short-term investments
1,582.0 
757.3 
Additions to property and equipment
(255.5)
(1,445.8)
Other
7.7 
1.4 
Net cash used in investing activities of continuing operations
(369.8)
(1,537.1)
FINANCING ACTIVITIES
 
 
Reduction of long-term borrowings
(862.4)
(1,072.5)
Proceeds from equity issuance
585.5 
Cash dividends paid
(8.5)
(105.9)
Proceeds from issuance of senior notes
1,078.7 
Premium paid on redemption of debt
(30.3)
Debt financing costs
(10.5)
Other
(2.3)
(8.4)
Net cash used in financing activities
(287.7)
(148.9)
DISCONTINUED OPERATIONS
 
 
Operating activities
1.2 
(12.7)
Investing activities
6.2 
(0.3)
Net cash provided by (used in) discontinued operations
7.4 
(13.0)
Effect of exchange rate changes on cash and cash equivalents
(0.6)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
344.1 
(424.4)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
121.3 
664.8 
CASH AND CASH EQUIVALENTS, END OF PERIOD
$ 465.4 
$ 240.4 
Unaudited Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Financial Statements
 
We prepared the accompanying condensed consolidated financial statements of Ensco plc and subsidiaries (the "Company," "Ensco," "our," "we" or "us") in accordance with accounting principles generally accepted in the United States of America ("GAAP"), pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") included in the instructions to Form 10-Q and Article 10 of Regulation S-X. The financial information included in this report is unaudited but, in our opinion, includes all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented. The December 31, 2015 condensed consolidated balance sheet data were derived from our 2015 audited consolidated financial statements but do not include all disclosures required by GAAP. Certain previously reported amounts have been reclassified to conform to the current year presentation. The preparation of our condensed consolidated financial statements requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the related revenues and expenses and disclosures of gain and loss contingencies as of the date of the financial statements. Actual results could differ from those estimates.
 
The financial data for the three-month and nine-month periods ended September 30, 2016 and 2015 included herein have been subjected to a limited review by KPMG LLP, our independent registered public accounting firm. The accompanying independent registered public accounting firm's review report is not a report within the meaning of Sections 7 and 11 of the Securities Act, and the independent registered public accounting firm's liability under Section 11 does not extend to it.
 
Results of operations for the three-month and nine-month periods ended September 30, 2016 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2016.  We recommend these condensed consolidated financial statements be read in conjunction with our annual report on Form 10-K for the year ended December 31, 2015 filed with the SEC on February 24, 2016 and our quarterly reports on Form 10-Q filed with the SEC on April 28, 2016 and July 28, 2016.

Operating Revenues and Expenses

During the nine-month period ended September 30, 2016, operating revenues included $185.0 million for the lump-sum consideration received in settlement and release of the ENSCO DS-9 customer's ongoing early termination obligations. The ENSCO DS-9 contract was terminated for convenience by the customer in July 2015, whereby our customer was obligated to pay us monthly termination fees for two years under the termination provisions of the contract. Operating revenues also included $20.0 million for the lump-sum consideration received in settlement of the ENSCO 8503 customer's remaining obligations under the contract. The lump-sum settlements for the ENSCO DS-9 termination obligations and ENSCO 8503 remaining contractual obligations were collected in June 2016.

During the three-month and nine-month periods ended September 30, 2015, operating revenues included $129.0 million related to lump-sum payments associated with the ENSCO DS-4 and ENSCO DS-9 contract terminations.

New Accounting Pronouncements

In October 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (“Update 2016-16”), which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transaction occurs as opposed to deferring tax consequences and amortizing them into future periods. This update is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. A modified retrospective approach with a cumulative-effect adjustment directly to retained earnings at the beginning of the period of adoption is required. We are currently evaluating the effect that Update 2016-16 will have on our condensed consolidated financial statements and related disclosures.
In August 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-15, Statement of Cash flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments ("Update 2016-15"), which addresses the cash flow presentation of eight specific cash flow issues including, debt repayment and extinguishment costs, with the objective of reducing the existing diversity in practice. This update is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. We do not anticipate that our adoption of Update 2016-15 will have a material impact on our condensed consolidated financial statements and related disclosures.

In March 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-09, Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("Update 2016-09"), which simplifies several aspects of accounting for share-based payment transactions including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This update is effective for annual and interim periods beginning after December 15, 2016, with early adoption permitted. Transition methods vary for the related amendments. We will apply Update 2016-09 in our Annual Report on Form 10-K for the year ended December 31, 2016. We do not anticipate that our adoption of Update 2016-09 will have a material impact on our condensed consolidated financial statements and related disclosures.

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-02, Leases (Topic 842): Amendments to the FASB Accounting Standards Codification ("Update 2016-02"), which requires an entity to recognize lease assets and lease liabilities on the balance sheet and to disclose key qualitative and quantitative information about the entity's leasing arrangements. This update is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. A modified retrospective approach is required. We are currently evaluating the effect that Update 2016-02 will have on our condensed consolidated financial statements and related disclosures.

During 2015, the Financial Accounting Standards Board issued Accounting Standards Update 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs ("Update 2015-03"), as updated by Update 2015-15, Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements - Amendments to SEC Paragraphs Pursuant to Staff Announcements at June 18, 2015 EITF Meeting ("Update 2015-15"), which require that debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the carrying amount of the related debt liability, consistent with debt discounts. Debt issuance costs related to line-of-credit arrangements may be presented as an asset regardless of whether there are any outstanding borrowings on the arrangement. We adopted Update 2015-03 and Update 2015-15 on a retrospective basis effective January 1, 2016. Accordingly, all debt issuance costs, except for the balance related to our line-of-credit arrangement, were presented as a deduction from the carrying amount of the related debt liability on our condensed consolidated balance sheet for all periods presented. As a result of retrospective application, we reclassified debt issuance costs of $26.5 million on our condensed consolidated balance sheet as of December 31, 2015. There is no impact to the manner in which debt issuance costs are amortized in our condensed consolidated financial statements.

During 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) ("Update 2014-09"), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. During 2015, the Financial Accounting Standards Board voted to delay the effective date one year. Update 2014-09 is now effective for annual and interim periods for fiscal years beginning after December 15, 2017, though companies have an option of adopting the standard for fiscal years beginning after December 15, 2016. During 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations ("Update 2016-08"), Accounting Standards Update 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing ("Update 2016-10") and Account Standards Update 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients ("Update 2016-12"). The amendments in Update 2016-08, 2016-10 and 2016-12 do not change the core principle of Update 2014-09 but instead clarify the implementation guidance on principle versus agent considerations, identify performance obligations and the licensing implementation guidance, and provide narrow-scope improvements, respectively. Update 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP and may be adopted using a retrospective, modified retrospective or prospective with a cumulative catch-up approach. We are currently evaluating the effect that Update 2014-09 will have on our condensed consolidated financial statements and related disclosures.
Fair Value Measurements
Fair Value Measurements
Fair Value Measurements
 
The following fair value hierarchy table categorizes information regarding our financial assets and liabilities measured at fair value on a recurring basis (in millions):
 
Quoted Prices in Active Markets for Identical Assets
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
 
Total
As of September 30, 2016
 
 
 

 
 

 
 

Supplemental executive retirement plan assets 
$
28.3

 
$

 
$

 
$
28.3

Total financial assets
$
28.3

 
$

 
$

 
$
28.3

Derivatives, net 
$

 
$
(4.3
)
 
$

 
$
(4.3
)
Total financial liabilities
$

 
$
(4.3
)
 
$

 
$
(4.3
)
 
 
 
 
 
 
 
 
As of December 31, 2015
 
 
 

 
 

 
 

Supplemental executive retirement plan assets
$
33.1

 
$

 
$

 
$
33.1

Total financial assets
$
33.1

 
$

 
$

 
$
33.1

Derivatives, net 
$

 
$
(19.7
)
 
$

 
$
(19.7
)
Total financial liabilities
$

 
$
(19.7
)
 
$

 
$
(19.7
)


Supplemental Executive Retirement Plan Assets
 
Our supplemental executive retirement plans (the "SERP") are non-qualified plans that provide eligible employees an opportunity to defer a portion of their compensation for use after retirement. Assets held in the SERP were marketable securities measured at fair value on a recurring basis using Level 1 inputs and were included in other assets, net, in our condensed consolidated balance sheets. The fair value measurement of assets held in the SERP was based on quoted market prices.
 
Derivatives
 
Our derivatives were measured at fair value on a recurring basis using Level 2 inputs. See "Note 3 - Derivative Instruments" for additional information on our derivatives, including a description of our foreign currency hedging activities and related methodologies used to manage foreign currency exchange rate risk. The fair value measurement of our derivatives was based on market prices that are generally observable for similar assets or liabilities at commonly-quoted intervals.
 Other Financial Instruments
 
The carrying values and estimated fair values of our long-term debt instruments were as follows (in millions):
 
September 30,
2016
 
December 31,
2015
 
Carrying Value  
 
Estimated Fair Value  
 
Carrying Value  
 
Estimated Fair Value  
8.50% Senior notes due 2019
$
486.1

 
$
473.0

 
$
566.4

 
$
510.2

6.875% Senior notes due 2020
739.4

 
674.8

 
990.9

 
850.5

4.70% Senior notes due 2021
673.9

 
613.0

 
1,476.7

 
1,254.0

4.50% Senior notes due 2024
618.5

 
449.7

 
619.7

 
417.4

5.20% Senior notes due 2025
662.6

 
505.3

 
692.5

 
505.2

7.20% Debentures due 2027
149.1

 
123.4

 
149.1

 
133.5

7.875% Senior notes due 2040
378.7

 
240.7

 
379.8

 
244.0

5.75% Senior notes due 2044
994.3

 
650.3

 
993.5

 
707.1

Total
$
4,702.6

 
$
3,730.2

 
$
5,868.6

 
$
4,621.9



The estimated fair values of our senior notes and debentures were determined using quoted market prices. The decline in the carrying value of long-term debt instruments from December 31, 2015 to September 30, 2016 is due to debt repurchases as discussed in "Note 6 - Debt." The estimated fair values of our cash and cash equivalents, short-term investments, receivables, trade payables and other liabilities approximated their carrying values as of September 30, 2016 and December 31, 2015. Our short-term investments consisted of time deposits with initial maturities in excess of three months but less than one year as of each respective balance sheet date.
Derivative Instruments
Derivative Instruments
Derivative Instruments
    
Our functional currency is the U.S. dollar. As is customary in the oil and gas industry, a majority of our revenues are denominated in U.S. dollars; however, a portion of the revenues earned and expenses incurred by certain of our subsidiaries are denominated in currencies other than the U.S. dollar. These transactions are remeasured in U.S. dollars based on a combination of both current and historical exchange rates. We use foreign currency forward contracts to reduce our exposure to various market risks, primarily foreign currency exchange rate risk.
 
All derivatives were recorded in our condensed consolidated balance sheets at fair value. Derivatives subject to legally enforceable master netting agreements were not offset in our condensed consolidated balance sheets. Accounting for the gains and losses resulting from changes in derivative fair value depends on the use of the derivative and whether it qualifies for hedge accounting.  Net liabilities of $4.3 million and $19.7 million associated with our foreign currency forward contracts were included in our condensed consolidated balance sheets as of September 30, 2016 and December 31, 2015, respectively.  All of our derivatives mature during the next 18 months.  See "Note 2 - Fair Value Measurements" for additional information on the fair value measurement of our derivatives.
 
Derivatives recorded at fair value in our condensed consolidated balance sheets consisted of the following (in millions):
 
Derivative Assets
 
Derivative Liabilities
 
September 30,
2016
 
December 31,
2015
 
September 30,
2016
 
December 31,
2015
Derivatives Designated as Hedging Instruments
 
 
 

 
 

 
 

Foreign currency forward contracts - current(1)
$
5.9

 
$
.6

 
$
9.8

 
$
20.7

Foreign currency forward contracts - non-current(2)
.4

 
.2

 
.7

 
1.5

 
6.3

 
.8

 
10.5

 
22.2

 
 
 
 
 
 
 
 
Derivatives Not Designated as Hedging Instruments
 
 
 

 
 

 
 

Foreign currency forward contracts - current(1)
.8

 
2.6

 
.9

 
.9

 
.8

 
2.6

 
.9

 
.9

Total
$
7.1

 
$
3.4

 
$
11.4

 
$
23.1

 
(1) 
Derivative assets and liabilities with maturity dates equal to or less than twelve months from the respective balance sheet date were included in other current assets and accrued liabilities and other, respectively, in our condensed consolidated balance sheets.

(2) 
Derivative assets and liabilities with maturity dates greater than twelve months from the respective balance sheet date were included in other assets, net, and other liabilities, respectively, in our condensed consolidated balance sheets.
 
We utilize cash flow hedges to hedge forecasted foreign currency denominated transactions, primarily to reduce our exposure to foreign currency exchange rate risk associated with contract drilling expenses and capital expenditures denominated in various currencies. As of September 30, 2016, we had cash flow hedges outstanding to exchange an aggregate $204.0 million for various foreign currencies, including $95.9 million for British pounds, $40.5 million for Australian dollars, $30.3 million for euros, $23.4 million for Brazilian reais and $13.9 million for other currencies.

Gains and losses, net of tax, on derivatives designated as cash flow hedges included in our condensed consolidated statements of operations and comprehensive income were as follows (in millions):

Three Months Ended September 30, 2016 and 2015
 
Loss Recognized in Other Comprehensive Income (Effective Portion)  
 
Loss Reclassified from Accumulated Other Comprehensive Income ("AOCI") into Income (Effective Portion)(1)
 
Gain (Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)(2)
 
2016
 
2015
 
2016
 
2015
 
2016
 
2015
Interest rate lock contracts(3)
$

 
$

 
$
(.1
)
 
$
(.1
)
 
$

 
$

Foreign currency forward contracts(4)

 
(14.8
)
 
(2.1
)
 
(5.7
)
 
.2

 
(.3
)
Total
$

 
$
(14.8
)
 
$
(2.2
)
 
$
(5.8
)
 
$
.2

 
$
(.3
)

Nine Months Ended September 30, 2016 and 2015
 
Loss Recognized in Other Comprehensive Income (Effective Portion)  
 
Loss Reclassified from AOCI into Income (Effective Portion)(1)
 
Gain (Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)(2)
 
2016
 
2015
 
2016
 
2015
 
2016
 
2015
Interest rate lock contracts(3)
$

 
$

 
$
(.2
)
 
$
(.6
)
 
$

 
$

Foreign currency forward contracts(5)
(.6
)
 
(23.5
)
 
(9.9
)
 
(15.3
)
 
2.1

 
(.1
)
Total
$
(.6
)
 
$
(23.5
)
 
$
(10.1
)
 
$
(15.9
)
 
$
2.1

 
$
(.1
)


(1)
Changes in the effective portion of cash flow hedge fair values are recorded in AOCI.  Amounts recorded in AOCI associated with cash flow hedges are subsequently reclassified into contract drilling, depreciation or interest expense as earnings are affected by the underlying hedged forecasted transaction.

(2)
Gains and losses recognized in income for ineffectiveness and amounts excluded from effectiveness testing were included in other, net, in our condensed consolidated statements of operations.

(3)
Losses on interest rate lock derivatives reclassified from AOCI into income were included in interest expense, net, in our condensed consolidated statements of operations.

(4) 
During the three-month period ended September 30, 2016, $2.3 million of losses were reclassified from AOCI into contract drilling expense and $200,000 of gains were reclassified from AOCI into depreciation expense in our condensed consolidated statement of operations. During the three-month period ended September 30, 2015, $5.9 million of losses were reclassified from AOCI into contract drilling expense and $200,000 of gains were reclassified from AOCI into depreciation expense in our condensed consolidated statement of operations.

(5) 
During the nine-month period ended September 30, 2016, $10.5 million of losses were reclassified from AOCI into contract drilling expense and $600,000 of gains were reclassified from AOCI into depreciation expense in our condensed consolidated statement of operations. During the nine-month period ended September 30, 2015, $15.9 million of losses were reclassified from AOCI into contract drilling expense and $600,000 of gains were reclassified from AOCI into depreciation expense in our condensed consolidated statement of operations.

We have net assets and liabilities denominated in numerous foreign currencies and use various methods to manage our exposure to foreign currency exchange rate risk. We predominantly structure our drilling contracts in U.S. dollars, which significantly reduces the portion of our cash flows and assets denominated in foreign currencies. We occasionally enter into derivatives that hedge the fair value of recognized foreign currency denominated assets or liabilities but do not designate such derivatives as hedging instruments.  In these situations, a natural hedging relationship generally exists whereby changes in the fair value of the derivatives offset changes in the fair value of the underlying hedged items. As of September 30, 2016, we held derivatives not designated as hedging instruments to exchange an aggregate $144.1 million for various foreign currencies, including $81.3 million for euros, $18.2 million for Swiss francs, $13.1 million for British pounds, $11.4 million for Indonesian rupiah, $10.7 million for Brazilian reais and $9.4 million for other currencies.
     
Net losses of $400,000 and $4.2 million associated with our derivatives not designated as hedging instruments were included in other, net, in our condensed consolidated statements of operations for the three-month periods ended September 30, 2016 and 2015, respectively. Net gains of $500,000 and net losses of $13.2 million associated with our derivatives not designated as hedging instruments were included in other, net, in our condensed consolidated statements of operations for the nine-month periods ended September 30, 2016 and 2015, respectively. These gains and losses were largely offset by net foreign currency exchange gains and losses during the respective periods.

As of September 30, 2016, the estimated amount of net losses associated with derivative instruments, net of tax, that would be reclassified into earnings during the next twelve months totaled $2.4 million.
Noncontrolling Interests (Notes)
Noncontrolling Interests
Noncontrolling Interests

Third parties hold a noncontrolling ownership interest in certain of our non-U.S. subsidiaries. Noncontrolling interests are classified as equity in our condensed consolidated balance sheets, and net income attributable to noncontrolling interests is presented separately in our condensed consolidated statements of operations.
    
Income from continuing operations attributable to Ensco for the three-month and nine-month periods ended September 30, 2016 and 2015 was as follows (in millions):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Income from continuing operations
$
88.0

 
$
317.1

 
$
858.4

 
$
918

Income from continuing operations attributable to noncontrolling interests
(2.0
)
 
(1.7
)
 
(5.4
)
 
(7.3
)
Income from continuing operations attributable to Ensco
$
86.0

 
$
315.4

 
$
853.0

 
$
910.7



Loss from discontinued operations attributable to Ensco for the three-month and nine-month periods ended September 30, 2016 and 2015 was as follows (in millions):

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Loss from discontinued operations
$
(.7
)
 
$
(23.3
)
 
$
(1.8
)
 
$
(33.6
)
Loss from discontinued operations attributable to noncontrolling interests

 
(.1
)
 

 
(.1
)
Loss from discontinued operations attributable to Ensco
$
(.7
)
 
$
(23.4
)
 
$
(1.8
)
 
$
(33.7
)
Earnings Per Share
Earnings Per Share
Earnings Per Share
 
We compute basic and diluted earnings per share ("EPS") in accordance with the two-class method. Net income attributable to Ensco used in our computations of basic and diluted EPS is adjusted to exclude net income allocated to non-vested shares granted to our employees and non-employee directors. Weighted-average shares outstanding used in our computation of diluted EPS is calculated using the treasury stock method and excludes non-vested shares.

The following table is a reconciliation of income from continuing operations attributable to Ensco shares used in our basic and diluted EPS computations for the three-month and nine-month periods ended September 30, 2016 and 2015 (in millions):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Income from continuing operations attributable to Ensco
$
86.0

 
$
315.4

 
$
853.0

 
$
910.7

Income from continuing operations allocated to non-vested share awards
(1.8
)
 
(4.8
)
 
(15.1
)
 
(12.2
)
Income from continuing operations attributable to Ensco shares
$
84.2

 
$
310.6

 
$
837.9

 
$
898.5


 
The following table is a reconciliation of the weighted-average shares used in our basic and diluted EPS computations for the three-month and nine-month periods ended September 30, 2016 and 2015 (in millions):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Weighted-average shares - basic
298.6

 
232.4

 
272.0

 
232.2

Potentially dilutive shares

 
.1

 

 

Weighted-average shares - diluted
298.6

 
232.5

 
272.0

 
232.2


 
Antidilutive share awards totaling 1,200,000 were excluded from the computation of diluted EPS for the three-month and nine-month periods ended September 30, 2016. Antidilutive share awards totaling 900,000 were excluded from the computation of diluted EPS for the three-month and nine-month periods ended September 30, 2015.
Debt (Notes)
Debt Disclosure [Text Block]
Debt

Tender Offers and Open Market Repurchases

In March 2016, we launched cash tender offers (the "Tender Offers") to repurchase up to $750.0 million aggregate purchase price of our outstanding debt. We received tenders totaling $860.7 million for an aggregate purchase price of $622.3 million. In April, we used cash on-hand to settle the tendered debt.

During the three-month and nine-month period ended September 30, 2016, we repurchased on the open market $188.7 million and $268.2 million of outstanding debt for an aggregate purchase price of $177.3 million and $239.8 million, respectively.
    
Our Tender Offers and open market repurchases during the nine-month period ended September 30, 2016 were as follows (in millions):
 
 
Aggregate Principal Amount Repurchased
 
Aggregate Repurchase Price(1)
 
Discount %
8.50% Senior Notes due 2019
 
$
60.3

 
$
53.9

 
10.6
%
6.875% Senior Notes due 2020
 
219.2

 
181.5

 
17.2
%
4.70% Senior Notes due 2021
 
817.0

 
609.0

 
25.5
%
4.50% Senior Notes due 2024
 
1.7

 
.9

 
47.1
%
5.20% Senior Notes due 2025
 
30.7

 
16.8

 
45.3
%
Total
 
$
1,128.9

 
$
862.1

 
23.6
%
(1) 
The aggregate repurchase price excludes accrued interest.
During the three-month and nine-month periods ended September 30, 2016, we recognized pre-tax gains from debt extinguishment of $18.2 million and $279.0 million, respectively, included in other, net, in our consolidated statements of operations related to the Tender Offers and open market repurchases, net of discounts, premiums, debt issuance costs and transaction costs.

After giving effect to the debt maturities impacted by the Tender Offers and open market repurchases, our next debt maturity is $439.9 million during 2019, followed by $680.8 million, $683.0 million, $623.2 million and $669.3 million during 2020, 2021, 2024 and 2025, respectively.

Revolving Credit

We have a $2.25 billion senior unsecured revolving credit facility with a syndicate of banks to be used for general corporate purposes with a term expiring on September 30, 2019 (the "Credit Facility"). In October, we extended the maturity of $1.13 billion of the $2.25 billion commitment for one year to September 30, 2020. All other terms of the Credit Facility are unchanged. Advances under the Credit Facility bear interest at Base Rate or LIBOR plus an applicable margin rate, depending on our credit ratings. We are required to pay a quarterly commitment fee on the undrawn portion of the commitment, which is also based on our credit rating.

In February, Moody’s announced a downgrade of our credit rating to B1, which is below investment grade. Following the downgrade, the applicable margin rates are 0.50% per annum for Base Rate advances and 1.50% per annum for LIBOR advances. Our quarterly commitment fee is 0.225% per annum on the undrawn portion of the commitment. 

In July, Standard & Poor's downgraded our credit rating one notch to BBB-, which maintains our investment grade rating with the rating agency. As previous rating actions resulted in the highest applicable margin rate and commitment fees under our Credit Facility, the July downgrade did not impact our applicable margin rate on borrowings or our quarterly commitment fee. We have limited or no access to the commercial paper market as a result of our current credit ratings.

The Credit Facility requires us to maintain a total debt to total capitalization ratio that is less than or equal to 60%. The Credit Facility also contains customary restrictive covenants, including, among others, prohibitions on creating, incurring or assuming certain debt and liens; entering into certain merger arrangements; selling, leasing, transferring or otherwise disposing of all or substantially all of our assets; making a material change in the nature of the business; and entering into certain transactions with affiliates. We have the right, subject to receipt of commitments from new or existing lenders, to increase the commitments under the Credit Facility by an amount not exceeding $500 million and to extend the maturity of the commitments under the Credit Facility by one additional year.

As of September 30, 2016, we were in compliance in all material respects with our covenants under the Credit Facility. We had no amounts outstanding under the Credit Facility as of September 30, 2016 and December 31, 2015.

Our access to credit and capital markets depends on the credit ratings assigned to our debt. There can be no assurance that we will be able to maintain our credit ratings, and any additional actual or anticipated downgrades in our credit ratings, including any announcement that our ratings are under review for a downgrade, could limit our available options when accessing credit and capital markets, or when restructuring or refinancing our debt. In addition, future financings or refinancings may result in higher borrowing costs and require more restrictive terms and covenants.
Shareholders' Equity (Notes)
Stockholders' Equity Note Disclosure [Text Block]
In April 2016, we closed an underwritten public offering of 65,550,000 Class A ordinary shares at $9.25 per share, inclusive of shares purchased under an underwriters' option. We received net proceeds from the offering of $585.5 million. The offering resulted in an increase in Class A ordinary shares and Additional Paid-in Capital in our condensed consolidated balance sheet of $6.6 million and $578.9 million, respectively.

On October 1, 2016, we entered into a privately-negotiated exchange agreement whereby we issued 1,822,432 Class A ordinary shares in exchange for $24.5 million principal amount of our 5.75% Senior Notes due 2044. The $24.5 million principal, net of unamortized debt issuance costs and discounts, is classified as current maturities of long term debt on our condensed consolidated balance sheet as of September 30, 2016. A gain of approximately $9.0 million from the exchange will be recognized during the fourth quarter. Upon settlement of this transaction, the outstanding principal amount of our 5.75% Senior Notes due 2044 declined from $1.025 billion to $1.0 billion.
Discontinued Operations (Notes)
Discontinued Operations
Discontinued Operations
    
The following table summarizes loss from discontinued operations, net, for the three-month and nine-month periods ended September 30, 2016 and 2015 (in millions):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Revenues
$

 
$
1.7

 
$

 
$
19.4

Operating expenses
.3

 
5.6

 
2.7

 
38.8

Operating loss
(.3
)

(3.9
)
 
(2.7
)
 
(19.4
)
Income tax (expense) benefit
(.5
)
 
(2.1
)
 
(.2
)
 
7.1

Loss on impairment, net

 
(17.3
)
 

 
(24.5
)
Gain on disposal of discontinued operations, net
.1

 

 
1.1

 
3.2

Loss from discontinued operations, net
$
(.7
)
 
$
(23.3
)
 
$
(1.8
)
 
$
(33.6
)


During the nine-month period ended September 30, 2016, we sold ENSCO DS-2, ENSCO 6000 and ENSCO 58 for scrap value resulting in a net pre-tax gain on sale of $1.2 million included in loss from discontinued operations, net, in our condensed consolidated statements of operations.

ENSCO 7500 and ENSCO 90 remain classified as held-for-sale in our September 30, 2016 condensed consolidated balance sheet and are included in discontinued operations.

For the three-month and nine-month period ended September 30, 2015, loss from discontinued operations, net, included pre-tax impairment losses of $25.6 million and $32.8 million, respectively, as a result of declines in the estimated fair values of several held-for-sale rigs, the operating results of ENSCO 93 and ENSCO 58, and stacking costs for uncontracted rigs included in discontinued operations. A discrete tax benefit of $11.9 million was included in loss from discontinued operations, net, in the nine-month period ended September 30, 2015.

Debt and interest expense are not allocated to our discontinued operations.
Income Taxes
Income Taxes
Income Taxes
 
Our consolidated effective income tax rate for the three-month and nine-month periods ended September 30, 2016, excluding the impact of discrete tax items, was 6.0% and 21.9%, respectively. Discrete tax items for the three-month and nine-month period ended September 30, 2016 were primarily attributable to the gain on debt extinguishment, changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior years and other resolutions of prior year tax matters. Discrete tax items for the nine-month period ended September 30, 2016 also resulted from restructuring transactions involving certain of our subsidiaries.

Our consolidated effective income tax rate for the three-month and nine-month periods ended September 30, 2015 excluding the impact of discrete tax items, was 12.6% and 16.4%, respectively. Discrete tax items for the three-month and nine-month periods were primarily attributable to the early termination of the ENSCO DS-4 drilling contract and the recognition of liabilities for unrecognized tax benefits associated with tax positions taken in prior years.

The changes in our consolidated effective tax rate, excluding discrete items, for the three-month and nine-month periods ended September 30, 2016 as compared to the prior year period is primarily attributable to changes in the relative components of our estimated 2016 earnings, excluding discrete items, generated in tax jurisdictions with higher tax rates and to the impact of 2016 restructuring transactions involving certain of our subsidiaries.
Contingencies
Contingencies
nducting our compliance review, we became aware of an internal audit report by Petrobras alleging irregularities in relation to the DSA. Upon learning of the Petrobras internal audit report, our Audit Committee appointed independent counsel to lead an investigation into the alleged irregularities. Further, in June and July 2015, we voluntarily contacted the SEC and the DOJ, respectively, to advise them of this matter and our Audit Committee’s investigation. Independent counsel, under the direction of our Audit Committee, has substantially completed its investigation by reviewing and analyzing available documents and correspondence and interviewing current and former employees involved in the DSA negotiations and the negotiation of the ENSCO DS-5 construction contract with SHI (the "DS-5 Construction Contract").
    
To date, our Audit Committee has found no evidence that Pride or Ensco or any of their current or former employees were aware of or involved in any wrongdoing, and our Audit Committee has found no evidence linking Ensco or Pride to any illegal acts committed by our former marketing consultant, who provided services to Pride and Ensco in connection with the DSA. Independent counsel has continued to provide the SEC and DOJ with updates throughout the investigation, including detailed briefings regarding its investigation and findings. On December 21, 2015, we entered into a one-year tolling agreement with the DOJ. On March 7, 2016, we entered into a one-year tolling agreement with the SEC.

Subsequent to initiating our Audit Committee investigation, Brazilian court documents connected to the prosecution of former Petrobras directors and employees as well as certain other third parties, including our former marketing consultant, referenced the alleged irregularities cited in the Petrobras internal audit report. Our former marketing consultant has entered into a plea agreement with the Brazilian authorities. On January 10, 2016, Brazilian authorities filed an indictment against a former Petrobras director. This indictment states that the former Petrobras director received bribes paid out of proceeds from a brokerage agreement entered into for purposes of intermediating a drillship construction contract between SHI and Pride, which we believe to be the DS-5 Construction Contract. The parties to the brokerage agreement were a company affiliated with a person acting on behalf of the former Petrobras director, a company affiliated with our former marketing consultant, and SHI. The indictment alleges that amounts paid by SHI under the brokerage agreement ultimately were used to pay bribes to the former Petrobras director. The indictment does not state that Pride or Ensco or any of their current or former employees were involved in the bribery scheme or had any knowledge of the bribery scheme.    

On January 4, 2016, we received a notice from Petrobras declaring the DSA void effective immediately. Petrobras’ notice alleges that our former marketing consultant both received and procured improper payments from SHI for employees of Petrobras and that Pride had knowledge of this activity and assisted in the procurement of and/or facilitated these improper payments. We disagree with Petrobras’ allegations. See "—DSA Dispute" below for additional information.

Outside of Petrobras’ allegations, we have not been contacted by any Brazil governmental authority regarding alleged wrongdoing by Pride or Ensco or any of their current or former employees related to this matter. We cannot predict whether any U.S., Brazilian or other governmental authority will seek to investigate Pride's involvement in this matter, or if a proceeding were opened, the scope or ultimate outcome of any such investigation. If the SEC or DOJ determines that violations of the FCPA have occurred, or if any governmental authority determines that we have violated applicable anti-bribery laws, they could seek civil and criminal sanctions, including monetary penalties, against us, as well as changes to our business practices and compliance programs, any of which could have a material adverse effect on our business and financial condition. Although our internal investigation is substantially complete, we cannot predict whether any additional allegations will be made or whether any additional facts relevant to the investigation will be uncovered during the course of the investigation and what impact those allegations and additional facts will have on the timing or conclusions of the investigation. Our Audit Committee will examine any such additional allegations and additional facts and the circumstances surrounding them.

DSA Dispute

As described above, on January 4, 2016, Petrobras sent a notice to us declaring the DSA void effective immediately, reserving its rights and stating its intention to seek any restitution to which it may be entitled. We disagree with Petrobras’ declaration that the DSA is void. We believe that Petrobras has repudiated the DSA and have therefore accepted the DSA as terminated on April 8, 2016 (the "Termination Date"). At this time, we cannot reasonably determine the validity of Petrobras' claim or the range of our potential exposure, if any. As a result, there can be no assurance as to how this dispute will ultimately be resolved.

We did not recognize revenue for amounts owed to us under the DSA from the beginning of the fourth quarter of 2015 through the Termination Date, as we concluded that collectability of these amounts was not reasonably assured. Additionally, our receivables from Petrobras related to the DSA from prior to the fourth quarter of 2015 are fully reserved in our condensed consolidated balance sheet as of September 30, 2016. We have initiated arbitration proceedings in the U.K. against Petrobras seeking payment of all amounts owed to us under the DSA, in addition to any other amounts to which we are entitled, and intend to vigorously pursue our claims. Petrobras subsequently filed a counterclaim seeking restitution of certain sums paid under the DSA less value received by Petrobras under the DSA. We have also initiated separate arbitration proceedings in the U.K. against SHI for any losses we have incurred in connection with the foregoing. There can be no assurance as to how these arbitration proceedings will ultimately be resolved.
    
Asbestos Litigation

We and certain subsidiaries have been named as defendants, along with numerous third-party companies as co-defendants, in multi-party lawsuits filed in Mississippi and Louisiana by approximately 43 plaintiffs. The lawsuits seek an unspecified amount of monetary damages on behalf of individuals alleging personal injury or death, primarily under the Jones Act, purportedly resulting from exposure to asbestos on drilling rigs and associated facilities during the 1960s through the 1980s.
    
During 2013, we reached an agreement in principle with 58 plaintiffs to settle lawsuits filed in Mississippi for a nominal amount. A special master reviewed all 58 cases and made an allocation of settlement funds among the parties.  The District Court Judge reviewed the allocations and accepted the special master’s recommendations and approved the settlements.  The settlement documents for most of the individual plaintiffs have been processed, and the cases dismissed. The settlement documents for approximately 10 individual plaintiffs continue to be processed.

We intend to vigorously defend against the remaining claims and have filed responsive pleadings preserving all defenses and challenges to jurisdiction and venue. However, discovery is still ongoing and, therefore, available information regarding the nature of all pending claims is limited. At present, we cannot reasonably determine how many of the claimants may have valid claims under the Jones Act or estimate a range of potential liability exposure, if any. 
    
In addition to the pending cases in Mississippi and Louisiana, we have other asbestos or lung injury claims pending against us in litigation in other jurisdictions. Although we do not expect final disposition of these asbestos or lung injury lawsuits to have a material adverse effect upon our financial position, operating results or cash flows, there can be no assurances as to the ultimate outcome of the lawsuits.

   Other Matters

In addition to the foregoing, we are named defendants or parties in certain other lawsuits, claims or proceedings incidental to our business and are involved from time to time as parties to governmental investigations or proceedings, including matters related to taxation, arising in the ordinary course of business. Although the outcome of such lawsuits or other proceedings cannot be predicted with certainty and the amount of any liability that could arise with respect to such lawsuits or other proceedings cannot be predicted accurately, we do not expect these matters to have a material adverse effect on our financial position, operating results or cash flows.

In the ordinary course of business with customers and others, we have entered into letters of credit and surety bonds to guarantee our performance as it relates to our drilling contracts, contract bidding, customs duties, tax appeals and other obligations in various jurisdictions. Letters of credit and surety bonds outstanding as of September 30, 2016 totaled $61.3 million and were issued under facilities provided by various banks and other financial institutions. Obligations under these letters of credit and surety bonds are not normally called as we typically comply with the underlying performance requirement. As of September 30, 2016, we were not required to make collateral deposits with respect to these agreements.
Segment Information
Segment Information
Segment Information
 
Our business consists of three operating segments: (1) Floaters, which includes our drillships and semisubmersible rigs, (2) Jackups and (3) Other, which consists of management services on rigs owned by third-parties. Our two reportable segments, Floaters and Jackups, provide one service, contract drilling.
    
Segment information for the three-month and nine-month periods ended 2016 and 2015 is presented below (in millions). General and administrative expense and depreciation expense incurred by our corporate office are not allocated to our operating segments for purposes of measuring segment operating income and are included in "Reconciling Items." We measure segment assets as property and equipment.

Three Months Ended September 30, 2016
 
Floaters
 
Jackups
 
Other
 
Operating Segments Total
 
Reconciling Items
 
Consolidated Total
Revenues
$
319.3

 
$
213.8

 
$
15.1

 
$
548.2

 
$

 
$
548.2

Operating expenses
 
 
 
 
 
 
 
 
 
 
 
Contract drilling (exclusive of depreciation)
153.7

 
133.2

 
11.2

 
298.1

 

 
298.1

Depreciation
72.9

 
32.1

 

 
105.0

 
4.4

 
109.4

General and administrative

 

 

 

 
25.3

 
25.3

Operating income
$
92.7

 
$
48.5

 
$
3.9

 
$
145.1

 
$
(29.7
)
 
$
115.4

Property and equipment, net
$
8,360.4

 
$
2,537.9

 
$

 
$
10,898.3

 
$
61.4

 
$
10,959.7


Three Months Ended September 30, 2015
 
Floaters
 
Jackups
 
Other
 
Operating Segments Total
 
Reconciling Items
 
Consolidated Total
Revenues
$
646.4

 
$
325.8

 
$
40.0

 
$
1,012.2

 
$

 
$
1,012.2

Operating expenses
 
 
 
 
 
 
 
 
 
 
 
Contract drilling (exclusive of depreciation)
242.4

 
160.0

 
31.1

 
433.5

 

 
433.5

Depreciation
95.7

 
44.8

 

 
140.5

 
4.7

 
145.2

Loss on impairment

 
2.4

 

 
2.4

 

 
2.4

General and administrative

 

 

 

 
28.4

 
28.4

Operating income
$
308.3

 
$
118.6

 
$
8.9

 
$
435.8

 
$
(33.1
)
 
$
402.7

Property and equipment, net
$
10,260.5

 
$
3,194.6

 
$

 
$
13,455.1

 
$
73.8

 
$
13,528.9


Nine Months Ended September 30, 2016
 
Floaters
 
Jackups
 
Other
 
Operating Segments Total
 
Reconciling Items
 
Consolidated Total
Revenues
$
1,468.3

 
$
743.0

 
$
60.5

 
$
2,271.8

 
$

 
$
2,271.8

Operating expenses
 
 
 
 
 
 
 
 
 
 
 
Contract drilling (exclusive of depreciation)
573.6

 
390.0

 
48.4

 
1,012.0

 

 
1,012.0

Depreciation
231.0

 
90.8

 

 
321.8

 
13.3

 
335.1

General and administrative

 

 

 

 
76.1

 
76.1

Operating income
$
663.7

 
$
262.2

 
$
12.1

 
$
938.0

 
$
(89.4
)
 
$
848.6

Property and equipment, net
$
8,360.4

 
$
2,537.9

 
$

 
$
10,898.3

 
$
61.4

 
$
10,959.7


Nine Months Ended September 30, 2015
 
Floaters
 
Jackups
 
Other
 
Operating Segments Total
 
Reconciling Items
 
Consolidated Total
Revenues
$
1,975.7

 
$
1,138.2

 
$
121.2

 
$
3,235.1

 
$

 
$
3,235.1

Operating expenses
 
 
 
 
 
 
 
 
 
 
 
Contract drilling (exclusive of depreciation)
813.6

 
544.2

 
96.6

 
1,454.4

 

 
1,454.4

Depreciation
283.1

 
129.9

 

 
413.0

 
9.8

 
422.8

Loss on impairment

 
2.4

 

 
2.4

 

 
2.4

General and administrative

 


 

 

 
88.2

 
88.2

Operating income
$
879.0

 
$
461.7

 
$
24.6

 
$
1,365.3

 
$
(98.0
)
 
$
1,267.3

Property and equipment, net
$
10,260.5

 
$
3,194.6

 
$

 
$
13,455.1

 
$
73.8

 
$
13,528.9



Information about Geographic Areas    

As of September 30, 2016, the geographic distribution of our drilling rigs by reportable segment was as follows:
 
Floaters
 
Jackups
 
Total(1)
North & South America
8
 
7
 
15
Europe & Mediterranean
5
 
11
 
16
Middle East & Africa
2
 
10
 
12
Asia & Pacific Rim
4
 
7
 
11
Asia & Pacific Rim (under construction)
1
 
2
 
3
Held-for-sale
1
 
3
 
4
Total
21
 
40
 
61

(1) 
We provide management services on two rigs owned by third-parties not included in the table above.
Supplemental Financial Information
Supplemental Financial Information
Supplemental Financial Information

Consolidated Balance Sheet Information

Accounts receivable, net, consisted of the following (in millions):
 
September 30,
2016
 
December 31,
2015
Trade
$
355.7

 
$
595.0

Other
21.5

 
16.3

 
377.2

 
611.3

Allowance for doubtful accounts
(25.1
)
 
(29.3
)
 
$
352.1

 
$
582.0



Other current assets consisted of the following (in millions):
 
September 30,
2016
 
December 31,
2015
Inventory
$
231.3

 
$
235.3

Prepaid taxes
51.2

 
73.5

Deferred costs
34.9

 
52.1

Prepaid expenses
11.7

 
20.5

Assets held-for-sale
2.4

 
5.5

Other
14.7

 
14.9

 
$
346.2

 
$
401.8

 
    
Other assets, net, consisted of the following (in millions):
 
September 30,
2016
 
December 31,
2015
Deferred tax assets
$
67.5

 
$
94.8

Deferred costs
38.9

 
55.8

Prepaid taxes on intercompany transfers of property
33.4

 
37.1

Supplemental executive retirement plan assets
28.3

 
33.1

Other
8.8

 
16.8

 
$
176.9

 
$
237.6


    
Accrued liabilities and other consisted of the following (in millions):
 
September 30,
2016
 
December 31,
2015
Deferred revenue
$
135.1

 
$
197.2

Personnel costs
116.1

 
161.6

Accrued interest
70.2

 
88.4

Taxes
65.0

 
70.8

Derivative liabilities
10.7

 
21.6

Other
11.0

 
11.3

 
$
408.1

 
$
550.9

            
Other liabilities consisted of the following (in millions):
 
September 30,
2016
 
December 31,
2015
Unrecognized tax benefits (inclusive of interest and penalties)
$
154.0

 
$
149.7

Deferred revenue
139.2

 
218.6

Supplemental executive retirement plan liabilities
29.4

 
34.4

Personnel costs
11.3

 
17.7

Deferred tax liabilities
9.3

 
4.4

Other
10.9

 
24.4

 
$
354.1

 
$
449.2


    
Accumulated other comprehensive income consisted of the following (in millions):
 
September 30,
2016
 
December 31,
2015
Derivative instruments
$
16.1

 
$
6.6

Currency translation adjustment
7.6

 
7.8

Other
(2.2
)
 
(1.9
)
 
$
21.5

 
$
12.5



Concentration of Risk

We are exposed to credit risk relating to our receivables from customers, our cash and cash equivalents, our short-term investments and our use of derivatives in connection with the management of foreign currency exchange rate risk. We mitigate our credit risk relating to receivables from customers, which consist primarily of major international, government-owned and independent oil and gas companies, by performing ongoing credit evaluations. We also maintain reserves for potential credit losses, which generally have been within management's expectations. We mitigate our credit risk relating to cash and cash equivalents by focusing on diversification and quality of instruments. Cash equivalents consist of a portfolio of high-grade instruments. Custody of cash and cash equivalents is maintained at several well-capitalized financial institutions, and we monitor the financial condition of those financial institutions.  

We mitigate our credit risk relating to derivative counterparties through a variety of techniques, including transacting with multiple, high-quality financial institutions, thereby limiting our exposure to individual counterparties and by entering into International Swaps and Derivatives Association, Inc. (“ISDA”) Master Agreements, which include provisions for a legally enforceable master netting agreement, with our derivative counterparties. The terms of the ISDA agreements may also include credit support requirements, cross default provisions, termination events or set-off provisions.  Legally enforceable master netting agreements reduce credit risk by providing protection in bankruptcy in certain circumstances and generally permitting the closeout and netting of transactions with the same counterparty upon the occurrence of certain events.  See "Note 3 - Derivative Instruments" for additional information on our derivatives.

Consolidated revenues by customer for the three-month and nine-month periods ended September 30, 2016 and 2015 were as follows:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Total(1)
23
%
 
7
%
 
16
%
 
8
%
BP (2)(3)
13
%
 
27
%
 
12
%
 
18
%
Petrobras(1)
9
%
 
16
%
 
11
%
 
14
%
ConocoPhillips(4)
2
%
 
6
%
 
12
%
 
4
%
Other
53
%
 
44
%
 
49
%
 
56
%
 
100
%
 
100
%
 
100
%
 
100
%

(1) 
During the three-month and nine-month periods ended September 30, 2016 and 2015, all revenues were attributable to our Floater segment.

(2) 
During the three-month periods ended September 30, 2016 and 2015, 73% and 86% of the revenues provided by BP, respectively, were attributable to our Floaters segment. During the nine-month periods ended September 30, 2016 and 2015, 75% and 84% of the revenues provided by BP, respectively, were attributable to our Floaters segment.

(3) 
During the three-month and nine-month periods ended September 30, 2015, excluding the impact of ENSCO DS-4 lump-sum termination payments of $110.6 million, revenues from BP represented 18% and 15%, respectively.

(4) 
During the nine-month period ended September 30, 2016, excluding the impact of the ENSCO DS-9 lump-sum termination payment of $185.0 million, revenues from ConocoPhillips represented 3% of our consolidated revenues. During the three-month and nine-month period ended September 30, 2015, excluding the impact of a lump-sum payment of $18.4 million associated with the ENSCO DS-9 contract termination, revenues from ConocoPhillips represented 5% and 3%, respectively.

Consolidated revenues by region for the three-month and nine-month periods ended September 30, 2016 and 2015 were as follows (in millions):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Angola(1)
$
142.7

 
$
136.6

 
$
411.3

 
$
488.3

United Kingdom(2)
60.5

 
91.5

 
204.0

 
316.4

Brazil(3)
48.6

 
112.9

 
251.3

 
351.3

U.S. Gulf of Mexico(4)
33.6

 
363.0

 
498.3

 
972.8

Other
262.8

 
308.2

 
906.9

 
1,106.3

 
$
548.2

 
$
1,012.2

 
$
2,271.8

 
$
3,235.1


(1) 
During the three-month periods ended September 30, 2016 and 2015, 87% of the revenues earned in Angola were attributable to our Floaters segment. During the nine-month period ended September 30, 2016 and 2015, 87% and 90% of the revenues earned in Angola, respectively, were attributable to our Floaters segment.

(2) 
During the three-month and nine-month periods ended September 30, 2016 and 2015, all revenues were attributable to our Jackups segment.

(3) 
During the three-month and nine-month periods ended September 30, 2016 and 2015, all revenues were attributable to our Floaters segment.

(4) 
During the three-month periods ended September 30, 2016 and 2015, 41% and 90% of the revenues earned in the U.S. Gulf of Mexico, respectively, were attributable to our Floaters segment. During the nine-month periods ended September 30, 2016 and 2015, 86% of the revenues earned in the U.S. Gulf of Mexico were attributable to our Floaters segment. Revenue recognized during the nine-month period ended September 30, 2016 and three-month and nine-month periods ended September 30, 2015 included lump-sum payments totaling $205.0 million and $129.0 million, respectively, as discussed in "Note 1 - Unaudited Condensed Consolidated Financial Statements." ENSCO DS-9 termination revenues were attributed to the U.S. Gulf of Mexico as the related drilling contract was intended for operations in that region.
Guarantee Of Registered Securities
Guarantee Of Registered Securities
Guarantee of Registered Securities

Ensco plc provides for the full and unconditional guarantee of Pride International, Inc.'s, a wholly-owned subsidiary of Ensco plc, 8.5% unsecured senior notes due 2019, 6.875% unsecured senior notes due 2020 and 7.875% unsecured senior notes due 2040, which had an aggregate outstanding principal balance of $1.4 billion as of September 30, 2016. The Ensco plc guarantee provides for the unconditional and irrevocable guarantee of the prompt payment, when due, of any amount owed to the note holders.
 
Ensco plc is also a full and unconditional guarantor of the 7.2% debentures due 2027 issued by ENSCO International Incorporated, a wholly-owned subsidiary of Ensco plc, during 1997, which had an aggregate outstanding principal balance of $150.0 million as of September 30, 2016.
    
All guarantees are unsecured obligations of Ensco plc ranking equal in right of payment with all of its existing and future unsecured and unsubordinated indebtedness.
   
The following tables present the unaudited condensed consolidating statements of operations for the three-month and nine-month periods ended September 30, 2016 and 2015; the unaudited condensed consolidating statements of comprehensive income for the three-month and nine-month periods ended September 30, 2016 and 2015; the condensed consolidating balance sheets as of September 30, 2016 (unaudited) and December 31, 2015; and the unaudited condensed consolidating statements of cash flows for the nine-month periods ended September 30, 2016 and 2015, in accordance with Rule 3-10 of Regulation S-X.

ENSCO PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Three Months Ended September 30, 2016
(in millions)
(Unaudited)

 
Ensco plc
 
ENSCO International Incorporated
 
Pride International, Inc.
 
Other Non-Guarantor Subsidiaries of Ensco
 
Consolidating Adjustments
 
Total
OPERATING REVENUES
$
6.7

 
$
36.1

 
$

 
$
581.0

 
$
(75.6
)
 
$
548.2

OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
 
 
Contract drilling (exclusive of depreciation)
6.7

 
36.5

 

 
330.5

 
(75.6
)
 
298.1

Depreciation

 
4.2

 

 
105.2

 

 
109.4

General and administrative
9.1

 
.1

 

 
16.1

 

 
25.3

OPERATING (LOSS) INCOME
(9.1
)
 
(4.7
)



129.2




115.4

OTHER INCOME (EXPENSE), NET
6.9

 
(32.5
)
 
(18.9
)
 
7.8

 
5.8

 
(30.9
)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
(2.2
)
 
(37.2
)

(18.9
)

137.0


5.8


84.5

INCOME TAX PROVISION

 
(3.5
)
 
(.6
)
 
.6

 

 
(3.5
)
DISCONTINUED OPERATIONS, NET

 

 

 
(.7
)
 

 
(.7
)
EQUITY EARNINGS IN AFFILIATES, NET OF TAX
87.5

 
60.2

 
23.2

 

 
(170.9
)
 

NET INCOME
85.3


26.5


4.9


135.7


(165.1
)

87.3

NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

 

 

 
(2.0
)
 

 
(2.0
)
NET INCOME ATTRIBUTABLE TO ENSCO
$
85.3

 
$
26.5


$
4.9


$
133.7


$
(165.1
)

$
85.3

ENSCO PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Three Months Ended September 30, 2015
(in millions)
(Unaudited)

 
Ensco plc
 
ENSCO International Incorporated
 
Pride International, Inc.
 
Other Non-Guarantor Subsidiaries of Ensco
 
Consolidating Adjustments
 
Total
OPERATING REVENUES
$
9.8

 
$
34.8

 
$

 
$
1,039.4

 
$
(71.8
)
 
$
1,012.2

OPERATING EXPENSES
 

 
 

 
 

 
 

 
 

 


Contract drilling (exclusive of depreciation)
7.3

 
34.8

 

 
463.2

 
(71.8
)
 
433.5

Depreciation

 
4.3

 

 
140.9

 

 
145.2

Loss on impairment

 

 

 
2.4

 

 
2.4

General and administrative
11.8

 
.1

 

 
16.5

 

 
28.4

OPERATING (LOSS) INCOME
(9.3
)

(4.4
)



416.4




402.7

OTHER (EXPENSE) INCOME, NET
(37.1
)
 
(7.2
)
 
(15.7
)
 
7.6

 

 
(52.4
)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
(46.4
)

(11.6
)

(15.7
)

424.0




350.3

INCOME TAX PROVISION

 
.9

 

 
32.3

 

 
33.2

DISCONTINUED OPERATIONS, NET

 

 

 
(23.3
)
 

 
(23.3
)
EQUITY EARNINGS IN AFFILIATES, NET OF TAX
338.4

 
111.2

 
14.6

 

 
(464.2
)
 

NET INCOME (LOSS)
292.0

 
98.7


(1.1
)

368.4


(464.2
)

293.8

NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

 

 

 
(1.8
)
 

 
(1.8
)
NET INCOME (LOSS) ATTRIBUTABLE TO ENSCO
$
292.0


$
98.7


$
(1.1
)

$
366.6


$
(464.2
)

$
292.0



ENSCO PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Nine Months Ended September 30, 2016
(in millions)
(Unaudited)

 
Ensco plc
 
ENSCO International Incorporated
 
Pride International, Inc.
 
Other Non-Guarantor Subsidiaries of Ensco
 
Consolidating Adjustments
 
Total
OPERATING REVENUES
$
21.5

 
$
108.2

 
$

 
$
2,361.7

 
$
(219.6
)
 
$
2,271.8

OPERATING EXPENSES