ENSCO ROWAN PLC, 10-Q filed on 5/2/2019
Quarterly Report
v3.19.1
Document And Entity Information - shares
3 Months Ended
Mar. 31, 2019
Apr. 26, 2019
Document And Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2019  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q1  
Entity Registrant Name Ensco Rowan plc  
Entity Central Index Key 0000314808  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Entity Common Shares, Shares Outstanding   197,536,254
Entity Small Business false  
Entity Emerging Growth Company false  
v3.19.1
Condensed Consolidated Statements Of Income - USD ($)
shares in Millions, $ in Millions
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Income Statement [Abstract]    
Revenues $ 405.9 $ 417.0
OPERATING EXPENSES    
Contract drilling (exclusive of depreciation) 332.6 325.2
Cost, Depreciation 125.0 115.2
General and administrative 29.6 27.9
Total operating expenses 487.2 468.3
OPERATING LOSS (81.3) (51.3)
OTHER INCOME (EXPENSE)    
Interest income 3.5 3.0
Interest expense, net (81.0) (65.6)
Other, net 2.3 (8.1)
Other income (expense), net (75.2) (70.7)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (156.5) (122.0)
PROVISION FOR INCOME TAXES    
Current income tax expense 25.6 7.1
Deferred income tax expense 5.9 11.3
Total provision for income taxes 31.5 18.4
LOSS FROM CONTINUING OPERATIONS (188.0) (140.4)
LOSS FROM DISCONTINUED OPERATIONS, NET 0.0 (0.1)
NET LOSS (188.0) (140.5)
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS (2.4) 0.4
NET LOSS ATTRIBUTABLE TO ENSCOROWAN $ (190.4) $ (140.1)
EARNINGS (LOSS) PER SHARE - BASIC AND DILUTED    
Income (Loss) from Continuing Operations, Per Basic and Diluted Share $ (1.75) $ (1.29)
Income (Loss) from Discontinued Operations and Disposal of Discontinued Operations, Net of Tax, Per Basic and Diluted Share 0.00 0.00
Loss Per Share, Basic and Diluted $ (1.75) $ (1.29)
WEIGHTED-AVERAGE SHARES OUTSTANDING    
Weighted Average Number of Shares Outstanding, Basic and Diluted 108.7 108.4
v3.19.1
Condensed Consolidated Statements of Comprehensive Income - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Statement of Comprehensive Income [Abstract]    
NET LOSS $ (188.0) $ (140.5)
OTHER COMPREHENSIVE (LOSS) INCOME, NET    
Net change in fair value of derivatives 0.0 1.9
Reclassification of net (gains) losses on derivative instruments from other comprehensive income into net income 1.6 (2.2)
Other (0.1) (0.1)
NET OTHER COMPREHENSIVE INCOME 1.5 (0.4)
COMPREHENSIVE LOSS (186.5) (140.9)
COMPREHENSIVE (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS (2.4) 0.4
COMPREHENSIVE LOSS ATTRIBUTABLE TO ENSCO $ (188.9) $ (140.5)
v3.19.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Millions
Mar. 31, 2019
Dec. 31, 2018
CURRENT ASSETS    
Cash and cash equivalents $ 298.4 $ 275.1
Short-term Investments 245.0 329.0
Accounts receivable, net 313.7 344.7
Other 354.8 360.9
Total current assets 1,211.9 1,309.7
PROPERTY AND EQUIPMENT, AT COST 15,368.6 15,517.0
Less accumulated depreciation 2,859.7 2,900.8
Property and equipment, net 12,508.9 12,616.2
OTHER ASSETS, NET 142.2 97.8
TOTAL ASSETS 13,863.0 14,023.7
CURRENT LIABILITIES    
Accounts payable - trade 214.2 210.5
Accrued liabilities and other 302.7 318.0
Total current liabilities 516.9 528.5
LONG-TERM DEBT 5,018.5 5,010.4
OTHER LIABILITIES 427.3 396.0
COMMITMENTS AND CONTINGENCIES
ENSCO SHAREHOLDERS' EQUITY    
Additional paid-in capital 7,230.2 7,225.0
Retained earnings 679.3 874.2
Accumulated other comprehensive income 19.7 18.2
Treasury shares, at cost (74.9) (72.2)
Total Ensco shareholders' equity 7,900.5 8,091.4
NONCONTROLLING INTERESTS (0.2) (2.6)
Total equity 7,900.3 8,088.8
Total liabilities and shareholders' equity 13,863.0 14,023.7
Class A ordinary shares, U.S. [Member]    
ENSCO SHAREHOLDERS' EQUITY    
Common shares, value 46.1 46.1
Common Class B, Par Value In GBP [Member]    
ENSCO SHAREHOLDERS' EQUITY    
Common shares, value $ 0.1 $ 0.1
v3.19.1
Condensed Consolidated Balance Sheets (Parenthetical)
Mar. 31, 2019
£ / shares
shares
Mar. 31, 2019
$ / shares
shares
Dec. 31, 2018
£ / shares
shares
Dec. 31, 2018
$ / shares
shares
Common Stock, Par or Stated Value Per Share | $ / shares   $ 0.10    
Treasury shares, shares held (in shares) 5,900,000 5,900,000 5,900,000 5,900,000
Class A ordinary shares, U.S. [Member]        
Common Stock, Par or Stated Value Per Share | $ / shares   $ 0.4   $ 0.4
Common shares, shares issued (in shares) 115,200,000 115,200,000 115,200,000 115,200,000
Common Class B, Par Value In GBP [Member]        
Common Stock, Par or Stated Value Per Share | £ / shares £ 1   £ 1  
Common shares, shares authorized (in shares) 50,000 50,000 50,000 50,000
Common shares, shares issued (in shares) 50,000 50,000 50,000 50,000
v3.19.1
Condensed Consolidated Statements Of Cash Flows - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
OPERATING ACTIVITIES    
NET LOSS $ (188.0) $ (140.5)
Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:    
Cost, Depreciation 125.0 115.2
Amortization, net (14.5) (16.8)
Share-based compensation expense 7.8 8.4
Deferred income tax expense 5.9 11.3
Loss on debt extinguishment 0.0 18.8
Gain on bargain purchase 0.0 (16.6)
Other 1.4 (2.1)
Changes in operating assets and liabilities 38.0 61.8
Net cash provided by operating activities of continuing operations (24.4) 39.5
INVESTING ACTIVITIES    
Maturities of short-term investments 204.0 390.0
Purchases of short-term investments (120.0) (349.0)
Additions to property and equipment (29.0) (269.3)
Other 0.3 0.1
Net cash provided by (used in) investing activities 55.3 (228.2)
FINANCING ACTIVITIES    
Cash dividends paid (4.5) (4.5)
Proceeds from Issuance of senior notes 0.0 1,000.0
Reduction of long-term borrowings 0.0 (771.0)
Debt financing costs 0.0 (16.8)
Other (2.8) (1.2)
Net cash (used in) provided by financing activities (7.3) 206.5
DISCONTINUED OPERATIONS    
Net cash provided by discontinued operations 0.0 2.5
Effect of exchange rate changes on cash and cash equivalents (0.3) (0.3)
INCREASE IN CASH AND CASH EQUIVALENTS 23.3 20.0
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 275.1 445.4
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 298.4 $ 465.4
v3.19.1
Unaudited Condensed Consolidated Financial Statements
3 Months Ended
Mar. 31, 2019
Unaudited Condensed Consolidated Financial Statements [Abstract]  
Unaudited Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Financial Statements
 
We prepared the accompanying condensed consolidated financial statements of Ensco Rowan plc and subsidiaries (the "Company," "EnscoRowan," "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, 2018 condensed consolidated balance sheet data was derived from our 2018 audited consolidated financial statements, but does not include all disclosures required by GAAP. 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 quarters ended March 31, 2019 and 2018 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 quarter ended March 31, 2019 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2019. 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, 2018, filed with the SEC on February 28, 2019. On April 11, 2019, we completed our combination with Rowan Companies plc and effected a four-to-one share consolidation (being a reverse stock under English law). See "Note 3 - Rowan Transaction" and "Note 14 - Subsequent Events" for additional information.

New Accounting Pronouncements

Recently adopted accounting standards
    
In August 2017, the FASB issued Update 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities ("Update 2017-12"), which makes more hedging strategies eligible for hedge accounting, amends presentation and disclosure requirements and changes how companies assess effectiveness, including the elimination of separate measurement and recognition of ineffectiveness on designated hedging instruments. This update is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. We adopted Updated 2017-12 effective January 1, 2019. As a result, beginning on the effective date, we will no longer separately measure and recognize ineffectiveness on our designated cash flow hedges. Update 2017-02 requires a modified retrospective adoption approach whereby amounts previously recorded to earnings for hedge ineffectiveness on hedging relationships that exist as of the adoption date are recorded as a cumulative effect adjustment to opening retained earnings. As of our adoption date, we had no amounts previously recorded for ineffectiveness for hedging relationships that existed as of our adoption date and therefore no cumulative effect adjustment to retained earnings was recorded.

During 2016, the FASB issued Update 2016-02, Leases (Topic 842) ("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. During our evaluation of Update 2016-02, we concluded that our drilling contracts contain a lease component. In July 2018, the FASB issued Accounting Standard Update 2018-11, Leases (Topic 842), Targeted Improvements, which (1) provides for a new transition method whereby entities may elect to adopt the Update using a prospective with cumulative catch-up approach (the "effective date method") and (2) provides lessors with a practical expedient, by class of underlying asset, to not separate lease and non-lease components and account for the combined component under Topic 606 when the non-lease component is the predominant element of the combined component. The lessor practical expedient is limited to circumstances in which the lease, if accounted for separately, would be classified as an operating lease under Topic 842. We adopted ASU 2016-02, effective January 1, 2019, using the effective date method.

With respect to our drilling contracts, which contain a lease component, we elected to apply the practical expedient to not separate the lease and non-lease components and account for the combined component under Topic 606. With respect to all of our drilling contracts that existed on the adoption date, we concluded that the criteria to elect the lessor practical expedient had been met. As a result, we will continue to recognize the revenue associated with our drilling contracts under Topic 606. Therefore, we do not expect any change in our revenue recognition patterns or disclosures as a result of our adoption of Topic 842.

With respect to leases whereby we are the lessee, we elected several practical expedients afforded under Topic 842. We elected the package of practical expedients permitted under the transition guidance of Topic 842, including the hindsight practical expedient which permits entities to use hindsight in determining the lease term and assessing impairment. We also elected the practical expedient to not separate lease components from non-lease components for all asset classes, with the exception of office space. Furthermore, we also elected the practical expedient that permits entities not to apply the recognition requirements for leases with a term of 12 months or less. Upon adoption of ASU 2016-02 on January 1, 2019, we recognized lease liabilities and right-of-use assets of $64.6 million and $53.7 million, respectively. See "Note 10 - Leases" for additional information.
v3.19.1
Revenue Recognition (Notes)
3 Months Ended
Mar. 31, 2019
Revenue from Contract with Customer [Abstract]  
Revenue from Contract with Customer
Revenue from Contracts with Customers
 
Our drilling contracts with customers provide a drilling rig and drilling services on a day rate contract basis. Under day rate contracts, we provide an integrated service that includes the provision of a drilling rig and rig crews for which we receive a daily rate that may vary between the full rate and zero rate throughout the duration of the contractual term, depending on the operations of the rig.

We also may receive lump-sum fees or similar compensation for the mobilization, demobilization and capital upgrades of our rigs. Our customers bear substantially all of the costs of constructing the well and supporting drilling operations, as well as the economic risk relative to the success of the well.

Our integrated drilling service provided under each drilling contract is a single performance obligation satisfied over time and comprised of a series of distinct time increments, or service periods. Total revenue is determined for each individual drilling contract by estimating both fixed and variable consideration expected to be earned over the contract term. Fixed consideration generally relates to activities such as mobilization, demobilization and capital upgrades of our rigs that are not distinct within the context of our contracts and is recognized on a straight-line basis over the contract term. Variable consideration generally relates to distinct service periods during the contract term and is recognized in the period when the services are performed.

The amount estimated for variable consideration is only recognized as revenue to the extent that it is probable that a significant reversal will not occur during the contract term. We have applied the optional exemption afforded in Update 2014-09 and have not disclosed the variable consideration related to our estimated future day rate revenues. The remaining duration of our drilling contracts based on those in place as of March 31, 2019 was between approximately one month and four years.

Day Rate Drilling Revenue

Our drilling contracts provide for payment on a day rate basis and include a rate schedule 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 day rate invoiced to the customer is determined based on the varying rates applicable to specific activities performed on an hourly or other time increment basis. Day rate consideration is allocated to the distinct hourly or other time increment to which it relates within the contract term and is generally recognized consistent with the contractual rate invoiced for the services provided during the respective period. Invoices are typically billed to our customers on a monthly basis and payment terms on customer invoices typically range 30 - 45 days.

Certain of our contracts contain performance incentives whereby we may earn a bonus based on pre-established performance criteria. Such incentives are generally based on our performance over individual monthly or other time periods or individual wells. Consideration related to performance bonus is generally recognized in the specific time period to which the performance criteria was attributed.

We may receive termination fees if certain drilling contracts are terminated by the customer prior to the end of the contractual term. Such compensation is recognized as revenues whereby our performance obligation is satisfied, the termination fee can be reasonably measured and collection is probable.
 
Mobilization / Demobilization Revenue

In connection with certain contracts, we receive lump-sum fees or similar compensation for the mobilization of equipment and personnel prior to the commencement of drilling services or the demobilization of equipment and personnel upon contract completion. Fees received for the mobilization or demobilization of equipment and personnel are included in operating revenues. The costs incurred in connection with the mobilization and demobilization of equipment and personnel are included in contract drilling expense.

Mobilization fees received prior to commencement of drilling operations are recorded as a contract liability and amortized on a straight-line basis over the contract term. Demobilization fees expected to be received upon contract completion are estimated at contract inception and recognized on a straight-line basis over the contract term. In some cases, demobilization fees may be contingent upon the occurrence or non-occurrence of a future event. In such cases, this may result in cumulative-effect adjustments to demobilization revenues upon changes in our estimates of future events during the contract term.
 
Capital Upgrade / Contract Preparation Revenue

In connection with certain contracts, we receive lump-sum fees or similar compensation for requested capital upgrades to our drilling rigs or for other contract preparation work. Fees received are recorded as a contract liability and amortized on a straight-line basis over the contract term to operating revenues. Costs incurred for capital upgrades are capitalized and depreciated over the useful life of the asset.

Contract Assets and Liabilities

Contract assets and liabilities are presented net on our condensed consolidated balance sheet on a contract-by-contract basis. Current contract assets and liabilities are included in other current assets and accrued liabilities and other, respectively, and noncurrent contract assets and liabilities are included in other assets and other liabilities, respectively, on our condensed consolidated balance sheets.

Contract assets represent amounts previously recognized as revenue but for which the right to invoice the customer is dependent upon our future performance. Once the previously recognized revenue is invoiced, the corresponding contract asset, or a portion thereof, is transferred to accounts receivable. Contract liabilities generally represent fees received for mobilization or capital upgrades.

The following table summarizes our trade receivables, contract assets and contract liabilities (in millions):
 
March 31, 2019
 
December 31, 2018
Current contract assets
$
3.1


$
4.0

Current contract liabilities (deferred revenue)
$
55.9

 
$
56.9

Noncurrent contract liabilities (deferred revenue)
$
17.8

 
$
20.5

Significant changes in contract assets and liabilities during the three-month period ended March 31, 2019 are as follows (in millions):
 
Contract Assets
 
Contract Liabilities
Balance as of December 31, 2018
$
4.0

 
$
77.4

Revenue recognized in advance of right to bill customer
.1

 

Increase due to cash received

 
22.3

Decrease due to amortization of deferred revenue that was included in the beginning contract liability balance

 
(24.6
)
Decrease due to amortization of deferred revenue that was added during the period

 
(1.4
)
Decrease due to transfer to receivables during the period
(1.0
)
 

Balance as of March 31, 2019
$
3.1

 
$
73.7



Deferred Contract Costs

Costs incurred for upfront rig mobilizations and certain contract preparation are attributable to our future performance obligation under each respective drilling contract. Such costs are deferred and amortized on a straight-line basis over the contract term. Demobilization costs are recognized as incurred upon contract completion. Costs associated with the mobilization of equipment and personnel to more promising market areas without contracts are expensed as incurred. Deferred contract costs were included in other current assets and other assets on our condensed consolidated balance sheets and totaled $26.6 million and $23.5 million as of March 31, 2019 and December 31, 2018, respectively. During the three months ended March 31, 2019 and 2018, amortization of such costs totaled $6.4 million and $6.8 million, respectively.

Deferred Certification Costs

We must obtain certifications from various regulatory bodies in order to operate our drilling rigs and must maintain such certifications through periodic inspections and surveys. The costs incurred in connection with maintaining such certifications, including inspections, tests, surveys and drydock, as well as remedial structural work and other compliance costs, are deferred and amortized on a straight-line basis over the corresponding certification periods. Deferred regulatory certification and compliance costs were included in other current assets and other assets on our condensed consolidated balance sheets and totaled $13.4 million and $13.6 million as of March 31, 2019 and December 31, 2018, respectively. During the three months ended March 31, 2019 and 2018, amortization of such costs totaled $2.8 million and $3.1 million, respectively.    

Future Amortization of Contract Liabilities and Deferred Costs

Our contract liabilities and deferred costs are amortized on a straight-line basis over the contract term or corresponding certification period to operating revenues and contract drilling expense, respectively. Expected future amortization of our contract liabilities and deferred costs recorded as of March 31, 2019 is set forth in the table below (in millions):
 
Remaining 2019
 
2020
 
2021
 
2022 and Thereafter
 
Total
Amortization of contract liabilities
$
52.4

 
$
11.8

 
$
7.7

 
$
1.8

 
$
73.7

Amortization of deferred costs
$
25.4

 
$
10.4

 
$
2.7

 
$
1.5

 
$
40.0

v3.19.1
Rowan Transaction Rowan Transaction (Notes)
3 Months Ended
Mar. 31, 2019
Business Combinations [Abstract]  
Business Combination Disclosure [Text Block]
Rowan Transaction

On October 7, 2018, we entered into a transaction agreement ("the Transaction Agreement") with Rowan Companies plc ("Rowan"). On April 11, 2019 (the "Transaction Date"), we completed our combination with Rowan pursuant to the Transaction Agreement (the "Rowan Transaction"). On the Transaction Date, we changed our name to Ensco Rowan plc. Rowan's financial results will be included in our consolidated results beginning on the Transaction Date.

Prior to the Rowan Transaction, Rowan and Saudi Aramco formed a 50/50 joint venture to own, manage and operate drilling rigs offshore Saudi Arabia ("Saudi Aramco Rowan Offshore Drilling Company" or "ARO"). ARO currently owns a fleet of seven jackup rigs, leases another nine jackup rigs from us and has plans to order up to 20 newbuild jackup rigs over the next 10 years.

The Rowan Transaction is expected to enhance the market leadership of the combined company with a fleet of high-specification floaters and jackups and position us well to meet increasing and evolving customer demand. The increased scale, diversification and financial strength of the combined company will provide us advantages to better serve our customers. Exclusive of two older jackup rigs marked for retirement, Rowan’s offshore rig fleet consists of four ultra-deepwater drillships and 19 jackup rigs.

Consideration

As a result of the Rowan Transaction, Rowan shareholders received 2.750 Ensco Class A Ordinary shares for each Rowan Class A ordinary share, representing a value of $43.67 per Rowan share based on a closing price of $15.88 per Ensco share on April 10, 2019, the last trading day before the Transaction Date. Total consideration delivered in the Rowan Transaction consisted of 88.3 million Ensco shares with an aggregate value of $1.4 billion, inclusive of $2.6 million for the estimated fair value of replacement employee equity awards. All share and per share data included in this report have been retroactively adjusted to reflect the reverse stock split discussed in "Note 14 - Subsequent Events".

Assets Acquired and Liabilities Assumed
    
Under U.S. GAAP, Ensco plc is considered to be the acquirer for accounting purposes. As a result, Rowan's assets acquired and liabilities assumed in the Rowan Transaction will be recorded at their estimated fair values as of the Transaction Date under the acquisition method of accounting. When the fair value of the net assets acquired exceeds the consideration transferred in an acquisition, the difference is recorded as a bargain purchase gain in the period in which the transaction occurs. We have not finalized the fair values of assets acquired and liabilities assumed; therefore, the fair value estimates set forth below are subject to adjustment during a one year measurement period subsequent to the Transaction Date. The estimated fair values of certain assets and liabilities including materials and supplies, long-lived assets and contingencies require judgments and assumptions that increase the likelihood that adjustments may be made to these estimates during the measurement period, and those adjustments could be material.

The provisional amounts for assets acquired and liabilities assumed are based on preliminary estimates of their fair values as of the Transaction Date and are as follows (in millions):
 
Estimated Fair Value
Assets:
 
Cash and cash equivalents
$
928.9

Accounts receivable(1)
199.1

Other current assets
200.0

Long-term notes receivable from ARO
454.5

Investment in ARO
152.3

Property and equipment
2,755.3

Other assets
184.4

Liabilities:


Accounts payable and accrued liabilities
252.1

Current portion of long-term debt
181.2

Long-term debt
1,910.9

Other liabilities
372.0

Net assets acquired
2,158.3

Less: Transaction consideration
(1,404.6
)
Bargain purchase gain
$
753.7


(1) 
Gross contractual amounts receivable totaled $201.1 million as of the Transaction Date.

Bargain Purchase Gain

The estimated fair values assigned to assets acquired net of liabilities assumed exceeded the consideration transferred, resulting in a bargain purchase gain primarily driven by the decline in our share price from $33.92 to $15.88 between the last trading day prior to the announcement of the Rowan Transaction and the Transaction Date. The estimated gain will be reflected in other, net, in our condensed consolidated statement of operations during the second quarter.

Transaction-Related Costs

Transaction-related costs were expensed as incurred and consisted of various advisory, legal, accounting, valuation and other professional or consulting fees totaling $5.9 million during the three-month period ended March 31, 2019. These costs were included in general and administrative expense in our condensed consolidated statements of operations. Upon closing of the Rowan Transaction, we incurred additional transaction-related costs of $14.2 million.

Pro Forma Impact of the Rowan Transaction

The following unaudited supplemental pro forma results present consolidated information as if the Rowan Transaction was completed on January 1, 2018. The pro forma results include, among others, (i) the amortization associated with acquired intangible assets and liabilities (ii) a reduction in depreciation expense for adjustments to property and equipment (iii) the amortization of premiums and discounts recorded on Rowan's debt (iv) removal of the historical amortization of unrealized gains and losses related to Rowan's pension plans and (v) the amortization of basis differences in assets and liabilities of ARO. The pro forma results do not include any potential synergies or non-recurring charges that may result directly from the Rowan Transaction.
(in millions, except per share amounts)
Three Months Ended March 31,
 
2019(1)
 
2018
Revenues
$
580.4

 
$
628.2

Net loss
$
(271.6
)
 
$
(191.4
)
Earnings per share - basic and diluted
$
(1.38
)
 
$
(0.97
)
(1) 
Pro forma net income and earnings per share were adjusted to exclude an aggregate $9.4 million of transaction-related and integration costs incurred during the three-month period ended March 31, 2019.
v3.19.1
Fair Value Measurements
3 Months Ended
Mar. 31, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
 
The following fair value hierarchy table categorizes information regarding our net financial assets 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 March 31, 2019
 
 
 

 
 

 
 

Supplemental executive retirement plan assets 
$
29.3

 
$

 
$

 
$
29.3

Total financial assets
$
29.3

 
$

 
$

 
$
29.3

Derivatives, net 
$

 
$
(6.9
)
 
$

 
$
(6.9
)
Total financial liabilities
$

 
$
(6.9
)
 
$

 
$
(6.9
)
 
 
 
 
 
 
 
 
As of December 31, 2018
 
 
 

 
 

 
 

Supplemental executive retirement plan assets
$
27.2

 
$

 
$

 
$
27.2

Total financial assets
$
27.2

 
$

 
$

 
$
27.2

Derivatives, net 
$

 
$
(10.7
)
 
$

 
$
(10.7
)
Total financial liabilities
$

 
$
(10.7
)
 
$

 
$
(10.7
)


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 on 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 5 - 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 debt instruments were as follows (in millions):
 
March 31,
2019
 
December 31,
2018
 
Carrying Value  
 
Estimated Fair Value  
 
Carrying Value  
 
Estimated Fair Value  
6.875% senior notes due 2020
$
126.9

 
$
122.8

 
$
127.5

 
$
121.6

4.70% senior notes due 2021
112.9

 
108.5

 
112.7

 
101.8

3.00% exchangeable senior notes due 2024(1)
674.7

 
655.5

 
666.8

 
575.5

4.50% senior notes due 2024
620.0

 
476.0

 
619.8

 
405.2

8.00% senior notes due 2024
336.7

 
305.1

 
337.0

 
273.7

5.20% senior notes due 2025
664.6

 
517.7

 
664.4

 
443.9

7.75% senior notes due 2026
985.6

 
849.8

 
985.0

 
725.5

7.20% debentures due 2027
149.4

 
121.1

 
149.3

 
109.1

7.875% senior notes due 2040
374.6

 
238.2

 
375.0

 
223.2

5.75% senior notes due 2044
973.1

 
648.2

 
972.9

 
566.3

Total
$
5,018.5

 
$
4,042.9

 
$
5,010.4

 
$
3,545.8



(1) 
Our exchangeable senior notes due 2024 (the "2024 Convertible Notes") were issued with a conversion feature. The 2024 Convertible Notes were separated into their liability and equity components on our condensed consolidated balance sheet. The equity component was initially recorded to additional paid-in capital and as a debt discount that will be amortized to interest expense over the life of the instrument. Excluding the unamortized discount, the carrying value of the 2024 Convertible Notes was $836.9 million as of March 31, 2019.

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 March 31, 2019 and December 31, 2018. 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. The estimated fair values of our senior notes and debentures were determined using quoted market prices.
v3.19.1
Derivative Instruments
3 Months Ended
Mar. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
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 of our derivatives were recorded on 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 the fair value of derivatives depends on the use of the derivative and whether it qualifies for hedge accounting.  Net liabilities of $6.9 million and $10.7 million associated with our derivatives were included on our condensed consolidated balance sheets as of March 31, 2019 and December 31, 2018, respectively.  All of our derivatives mature during the next 18 months.  See "Note 4 - Fair Value Measurements" for additional information on the fair value measurement of our derivatives.
 
Derivatives recorded at fair value on our condensed consolidated balance sheets consisted of the following (in millions):
 
Derivative Assets
 
Derivative Liabilities
 
March 31,
2019
 
December 31,
2018
 
March 31,
2019
 
December 31,
2018
Derivatives Designated as Hedging Instruments
 
 
 

 
 

 
 

Foreign currency forward contracts - current(1)
$
.2

 
$
.2

 
$
5.1

 
$
8.3

Foreign currency forward contracts - non-current(2)
.1

 

 
.2

 
.4

 
.3

 
.2

 
5.3

 
8.7

Derivatives Not Designated as Hedging Instruments
 
 
 

 
 

 
 

Foreign currency forward contracts - current(1)
.2

 
.4

 
2.1

 
2.6

Total
$
.5

 
$
.6

 
$
7.4

 
$
11.3

 
(1) 
Derivative assets and liabilities that have 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, on our condensed consolidated balance sheets.

(2) 
Derivative assets and liabilities that have maturity dates greater than twelve months from the respective balance sheet date were included in other assets and other liabilities, respectively, on 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 March 31, 2019, we had cash flow hedges outstanding to exchange an aggregate $169.6 million for various foreign currencies, including $88.3 million for British pounds, $39.8 million for Australian dollars, $21.5 million for euros, $12.9 million for Brazilian reals and $7.1 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 loss for the quarters ended March 31, 2019 and 2018 were as follows (in millions):

 
Gain Recognized in Other Comprehensive Income ("OCI") (Effective Portion)  
 
(Gain) Loss Reclassified from Accumulated Other Comprehensive Income ("AOCI") into Income (Effective Portion)(1)
 
Loss Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)(2)
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Interest rate lock contracts(3)
$

 
$

 
$
.1

 
$
.1

 
$

 
$

Foreign currency forward contracts(4)

 
1.9

 
1.5

 
(2.3
)
 

 
(.2
)
Total
$

 
$
1.9

 
$
1.6

 
$
(2.2
)
 
$

 
$
(.2
)


(1)
Changes in the fair value of cash flow hedges 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. As a result of our adoption of Update 2017-12, which we adopted effective January 1, 2019, ineffectiveness is no longer separately measured and recognized. See additional information in "Note 1 - Unaudited Condensed Consolidated Financial Statements".

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

(4) 
During the first quarter of 2019, $1.7 million of losses were reclassified from AOCI into contract drilling expense and $0.2 million of gains were reclassified from AOCI into depreciation expense in our condensed consolidated statement of operations. During the prior year quarter, $2.1 million of gains were reclassified from AOCI into contract drilling expense and $0.2 million 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 March 31, 2019, we held derivatives not designated as hedging instruments to exchange an aggregate $191.8 million for various foreign currencies, including $84.3 million for euros, $31.7 million for Australian dollars, $18.5 million for Qatari riyals, $13.2 million for British pounds, $10.1 million for Indonesian rupiahs and $34.0 million for other currencies.
     
Net losses of $3.1 million and net gains of $1.8 million associated with our derivatives not designated as hedging instruments were included in other, net, in our condensed consolidated statements of operations for the quarters ended March 31, 2019 and 2018, respectively.

As of March 31, 2019, 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 $3.0 million.
v3.19.1
Earnings Per Share
3 Months Ended
Mar. 31, 2019
Earnings Per Share [Abstract]  
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 EnscoRowan 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.

During the three-month period ended March 31, 2019, all income attributable to noncontrolling interest was from continuing operations. The following table is a reconciliation of income from continuing operations attributable to EnscoRowan shares used in our basic and diluted EPS computations for the quarters ended March 31, 2019 and 2018 (in millions):
 
2019
 
2018
Loss from continuing operations attributable to EnscoRowan
$
(190.4
)
 
$
(140.0
)
Income from continuing operations allocated to non-vested share awards
(.1
)
 
(.1
)
Loss from continuing operations attributable to EnscoRowan shares
$
(190.5
)
 
$
(140.1
)
 
Anti-dilutive share awards totaling 200,000 and 400,000 were excluded from the computation of diluted EPS for the quarters ended March 31, 2019 and 2018, respectively.

We have the option to settle our 2024 Convertible Notes in cash, shares or a combination thereof for the aggregate amount due upon conversion. Our intent is to settle the principal amount of the 2024 Convertible Notes in cash upon conversion. If the conversion value exceeds the principal amount, (i.e., our share price exceeds the exchange price on the date of conversion), we expect to deliver shares equal to the remainder of our conversion obligation in excess of the principal amount.

During each reporting period that our average share price exceeds the exchange price, an assumed number of shares required to settle the conversion obligation in excess of the principal amount will be included in our denominator for the computation of diluted EPS using the treasury stock method. Our average share price did not exceed the exchange price during the quarters ended March 31, 2019 or 2018.
v3.19.1
Shareholders' Equity Shareholders' Equity
3 Months Ended
Mar. 31, 2019
Shareholders' Equity [Abstract]  
Shareholders' Equity and Share-based Payments [Text Block]
Shareholders' Equity

Activity in our various shareholders' equity accounts for the three-month periods ended March 31, 2019 and 2018 were as follows (in millions):
 
 Shares 
 
Par Value
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
AOCI 
 
Treasury
Shares
 
Non-controlling
Interest
BALANCE, December 31, 2018
115.2

 
$
46.2

 
$
7,225.0

 
$
874.2

 
$
18.2

 
$
(72.2
)
 
$
(2.6
)
Net loss

 

 

 
(190.4
)
 

 

 
2.4

Dividends paid ($0.04 per share)

 

 

 
(4.5
)
 

 

 

Shares issued under share-based compensation plans, net

 

 
(.1
)
 

 

 
.1

 

Repurchase of shares

 

 

 

 

 
(2.8
)
 

Share-based compensation cost

 

 
5.3

 

 

 

 

Net other comprehensive income

 

 

 

 
1.5

 

 

BALANCE, March 31, 2019
115.2

 
$
46.2

 
$
7,230.2

 
$
679.3

 
$
19.7

 
$
(74.9
)
 
$
(0.2
)

 
 Shares 
 
Par Value
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
AOCI 
 
Treasury
Shares
 
Non-controlling
Interest
BALANCE, December 31, 2017
111.8

 
$
44.8

 
$
7,195.0

 
$
1,532.7

 
$
28.6

 
$
(69.0
)
 
$
(2.1
)
Net loss

 

 

 
(140.1
)
 

 

 
(.4
)
Dividends paid ($0.04 per share)

 

 

 
(4.4
)
 

 

 

Cumulative-effect due to ASU 2018-02

 

 

 
(.8
)
 
.8

 

 

Shares issued under share-based compensation plans, net

 

 
(.1
)
 

 

 
.1

 

Repurchase of shares

 

 

 

 

 
(1.1
)
 

Share-based compensation cost

 

 
7.5

 

 

 

 

Net other comprehensive loss

 

 

 

 
(.4
)
 

 

BALANCE, March 31, 2018
111.8

 
$
44.8

 
$
7,202.4

 
$
1,387.4

 
$
29.0

 
$
(70.0
)
 
$
(2.5
)


In connection with the Rowan Transaction, on April 11, 2019, we issued 88.3 million Class A Ordinary shares with an aggregate value of $1.4 billion. See "Note 3 - Rowan Transaction" for additional information.

Additionally, on April 11, 2019, we effected a four-for-one reverse stock split. See "Note 14 - Subsequent Events" for additional information.
v3.19.1
Income Taxes
3 Months Ended
Mar. 31, 2019
Components of Income Tax Expense (Benefit), Continuing Operations [Abstract]  
Income Taxes
Income Taxes

Ensco Rowan plc, our parent company, is domiciled and resident in the U.K. Our subsidiaries conduct operations and earn income in numerous countries and are subject to the laws of taxing jurisdictions within those countries. The income of our non-U.K. subsidiaries is generally not subject to U.K. taxation. Income tax rates imposed in the tax jurisdictions in which our subsidiaries conduct operations vary, as does the tax base to which the rates are applied. In some cases, tax rates may be applicable to gross revenues, statutory or negotiated deemed profits or other bases utilized under local tax laws, rather than to net income. Therefore, we generally incur income tax expense in periods in which we operate at a loss.
    
Our drilling rigs frequently move from one taxing jurisdiction to another to perform contract drilling services. In some instances, the movement of our drilling rigs among taxing jurisdictions will involve the transfer of ownership of the drilling rigs among our subsidiaries. As a result of frequent changes in the taxing jurisdictions in which our drilling rigs are operated and/or owned, changes in the overall level of our income and changes in tax laws, our consolidated effective income tax rate may vary substantially from one reporting period to another.

Income tax rates and taxation systems in the jurisdictions in which our subsidiaries conduct operations vary and our subsidiaries are frequently subjected to minimum taxation regimes. In some jurisdictions, tax liabilities are based on gross revenues, statutory or negotiated deemed profits or other factors, rather than on net income and our subsidiaries are frequently unable to realize tax benefits when they operate at a loss. Accordingly, during periods of declining profitability, our consolidated income tax expense generally does not decline proportionally with consolidated income, which results in higher effective income tax rates. Furthermore, we generally continue to incur income tax expense in periods in which we operate at a loss on a consolidated basis.
    
Historically, we calculated our provision for income taxes during interim reporting periods by applying the estimated annual effective tax rate for the full fiscal year to pre-tax income or loss, excluding discrete items, for the reporting period. We determined that since small changes in estimated pre-tax income or loss would result in significant changes in the estimated annual effective tax rate, the historical method would not provide a reliable estimate of income taxes for the quarter ended March 31, 2019. We used a discrete effective tax rate method to calculate income taxes for the quarters ended March 31, 2019 and 2018. We will continue to evaluate income tax estimates under the historical method in subsequent quarters and employ a discrete effective tax rate method if warranted.

Discrete income tax expense for the quarter ended March 31, 2019 was $0.6 million and was attributable to unrecognized tax benefits associated with tax positions taken in prior years. Discrete income tax benefit for the quarter ended March 31, 2018 was $8.9 million and was primarily attributable to U.S. tax reform and a restructuring transaction, partially offset by discrete tax expense related to the repurchase and redemption of senior notes and unrecognized tax benefits associated with tax positions taken in prior years.
v3.19.1
Contingencies
3 Months Ended
Mar. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
Contingencies
Contingencies

DSA Dispute

On January 4, 2016, Petrobras sent a notice to us declaring the drilling services agreement with Petrobras (the "DSA") for ENSCO DS-5, a drillship ordered from Samsung Heavy Industries, a shipyard in South Korea ("SHI"), void effective immediately, reserving its rights and stating its intention to seek any restitution to which it may be entitled. The previously disclosed arbitral hearing on liability related to the matter was held in March 2018. Prior to the arbitration tribunal issuing its decision, we and Petrobras agreed in August 2018 to a settlement of all claims relating to the DSA. No payments were made by either party in connection with the settlement agreement. The parties agreed to normalize business relations and the settlement agreement provides for our participation in current and future Petrobras tenders on the same basis as all other companies invited to these tenders. No losses were recognized during 2018 with respect to this settlement as all disputed receivables with Petrobras related to the DSA were fully reserved in 2015.

In November 2016, we initiated separate arbitration proceedings in the U.K. against SHI for the losses incurred in connection with the foregoing Petrobras arbitration and certain other losses relating to the DSA. SHI subsequently filed a statement of defense disputing our claim. In January 2018, the arbitration tribunal for the SHI matter issued an award on liability fully in our favor. In August 2018, the tribunal awarded us approximately $2.8 million in costs and legal fees incurred to date, plus interest, which was collected during the fourth quarter of 2018.

The January 2018 arbitration award provides that SHI is liable to us for $10.0 million or damages that we can prove. We submitted our claim for damages to the tribunal, and the arbitral hearing on damages owed to us by SHI took place in the first quarter of 2019. We are awaiting the result of the tribunal’s decision, and we are unable to estimate the ultimate outcome of recovery for damages at this time.

  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 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 outstanding as of March 31, 2019 totaled $128.0 million and are 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 March 31, 2019, we had not been required to make collateral deposits with respect to these agreements.
v3.19.1
Leases (Notes)
3 Months Ended
Mar. 31, 2019
Leases [Abstract]  
Leases
Leases

We have operating leases for office space, facilities, equipment, employee housing and certain rig berthing facilities. For all asset classes, except office space, we account for the lease component and the non-lease component as a single lease component. Our leases have remaining lease terms of less than one year to 11 years, some of which include options to extend. Additionally, we sublease certain office space to third parties.

The components of lease expense are as follows (in millions):
 
Three Months Ended March 31, 2019
Long-term operating lease cost
$
6.2

Short-term operating lease cost
3.1

Sublease income
(.4
)
Total operating lease cost
$
8.9



Supplemental balance sheet information related to our operating leases is as follows (in millions, except lease term and discount rate):
 
March 31, 2019
Operating lease right-of-use assets
$
47.9

 
 
Current lease liability
$
17.9

Long-term lease liability
41.1

Total operating lease liabilities
$
59.0

 
 
Weighted-average remaining lease term (in years)
5.2

 
 
Weighted-average discount rate (1)
8.71
%

(1) 
Represents our estimated incremental borrowing cost on a secured basis for similar terms as the underlying lease.

For the quarter ended March 31, 2019, cash paid for amounts included in the measurement of our operating lease liabilities was $7.0 million. Right-of-use assets and lease liabilities recorded for leases commencing during the quarter ended March 31, 2019 were insignificant.

Maturities of lease liabilities as of March 31, 2019 were as follows (in millions):
Year Ending December 31,
Total
2019 (excluding the three months ended March 31, 2019)
$
18.2

2020
15.0

2021
9.3

2022
8.5

2023
8.8

Thereafter
15.3

Total lease payments
$
75.1

Less imputed interest
(16.1
)
Total
$
59.0

v3.19.1
Segment Information
3 Months Ended
Mar. 31, 2019
Segment Reporting Information, Revenue for Reportable Segment [Abstract]  
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 quarters ended March 31, 2019 and 2018 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 were included in "Reconciling Items." We measure segment assets as property and equipment.

Three Months Ended March 31, 2019
 
Floaters
 
Jackups
 
Other
 
Operating Segments Total
 
Reconciling Items
 
Consolidated Total
Revenues
$
232.7

 
$
157.0

 
$
16.2

 
$
405.9

 
$

 
$
405.9

Operating expenses
 
 
 
 
 
 
 
 
 
 
 
Contract drilling (exclusive of depreciation)
181.8

 
135.4

 
15.4

 
332.6

 

 
332.6

Depreciation
84.8

 
36.9

 

 
121.7

 
3.3

 
125.0

General and administrative

 

 

 

 
29.6

 
29.6

Operating income (loss)
$
(33.9
)
 
$
(15.3
)
 
$
.8

 
$
(48.4
)
 
$
(32.9
)
 
$
(81.3
)
Property and equipment, net
$
9,383.6

 
$
3,091.7

 
$

 
$
12,475.3

 
$
33.6

 
$
12,508.9


Three Months Ended March 31, 2018
 
Floaters
 
Jackups
 
Other
 
Operating Segments Total
 
Reconciling Items
 
Consolidated Total
Revenues
$
259.0

 
$
143.4

 
$
14.6

 
$
417.0

 
$

 
$
417.0

Operating expenses
 
 
 
 
 
 
 
 
 
 
 
Contract drilling (exclusive of depreciation)
185.1

 
126.9

 
13.2

 
325.2

 

 
325.2

Depreciation
75.3

 
36.5

 

 
111.8

 
3.4

 
115.2

General and administrative

 

 

 

 
27.9

 
27.9

Operating income (loss)
$
(1.4
)
 
$
(20.0
)
 
$
1.4

 
$
(20.0
)
 
$
(31.3
)
 
$
(51.3
)
Property and equipment, net
$
9,636.9

 
$
3,154.3

 
$

 
$
12,791.2

 
$
43.6

 
$
12,834.8


Information about Geographic Areas    

As of March 31, 2019, the geographic distribution of our drilling rigs by reportable segment was as follows:
 
Floaters
 
Jackups
 
Total(1)
North & South America
8
 
4
 
12
Europe & Mediterranean
6
 
11
 
17
Middle East & Africa
4
 
11
 
15
Asia & Pacific Rim
4
 
7
 
11
Asia & Pacific Rim (under construction)(2)
2
 
1
 
3
Held-for-Sale(3)
 
1
 
1
Total
24
 
35
 
59


(1) 
We provide management services on two rigs owned by third-parties in the U.S. Gulf of Mexico which are not included in the table above.
(2) 
In April 2019, we accepted delivery of ENSCO 123 which will be presented within jackups beginning in the second quarter.
(3) 
One jackup classified as held-for-sale as of March 31, 2019 was sold in April 2019.
v3.19.1
Supplemental Financial Information
3 Months Ended
Mar. 31, 2019
Supplemental Financial Information [Abstract]  
Supplemental Financial Information
Supplemental Financial Information

Condensed Consolidated Balance Sheet Information

Accounts receivable, net, consisted of the following (in millions):
 
March 31,
2019
 
December 31,
2018
Trade
$
274.8

 
$
301.7

Other
42.2

 
46.4

 
317.0

 
348.1

Allowance for doubtful accounts
(3.3
)
 
(3.4
)
 
$
313.7

 
$
344.7



Other current assets consisted of the following (in millions):
 
March 31,
2019
 
December 31,
2018
Materials and supplies
$
263.8

 
$
268.1

Prepaid taxes
35.0

 
35.0

Deferred costs
28.2

 
23.5

Prepaid expenses
9.7

 
15.2

Other
18.1

 
19.1

 
$
354.8

 
$
360.9

 
    
Other assets consisted of the following (in millions):
 
March 31,
2019
 
December 31,
2018
Right-of-use assets
$
47.9

 
$

Supplemental executive retirement plan assets
29.3

 
27.2

Deferred tax assets
27.8

 
29.4

Deferred costs
19.1

 
21.5

Other
18.1

 
19.7

 
$
142.2

 
$
97.8



Accrued liabilities and other consisted of the following (in millions):
 
March 31,
2019
 
December 31,
2018
Accrued interest
$
78.0

 
$
100.6

Personnel costs
61.9

 
82.5

Deferred revenue
55.9

 
56.9

Income and other taxes payable
50.3

 
36.9

Lease liabilities
17.9

 

Accrued rig holding costs
15.9

 
14.3

Derivative liabilities
7.2

 
10.9

Other
15.6

 
15.9

 
$
302.7

 
$
318.0


    
Other liabilities consisted of the following (in millions):
 
March 31,
2019
 
December 31,
2018
Unrecognized tax benefits (inclusive of interest and penalties)
$
173.1

 
$
177.0

Deferred tax liabilities
75.5

 
70.7

Intangible liabilities
52.7

 
53.5

Lease liabilities
41.1

 

Supplemental executive retirement plan liabilities
30.3

 
28.1

Personnel costs
27.8

 
25.1

Deferred revenue
17.8

 
20.5

Deferred rent

 
11.7

Other
9.0

 
9.4

 
$
427.3

 
$
396.0


 
Accumulated other comprehensive income consisted of the following (in millions):
 
March 31,
2019
 
December 31,
2018
Derivative instruments
$
14.2

 
$
12.6

Currency translation adjustment
7.3

 
7.3

Other
(1.8
)
 
(1.7
)
 
$
19.7

 
$
18.2



Concentration of Risk

We are exposed to credit risk related 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 our 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 almost all of 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 5 - Derivative Instruments" for additional information on our derivatives.

Consolidated revenues by customer for the quarters ended March 31, 2019 and 2018 were as follows:
 
March 31,
2019
 
March 31,
2018
Total(1)
18
%
 
14
%
Saudi Aramco(2)
13
%
 
10
%
BP (3)
5
%
 
12
%
Petrobras(4)
5
%
 
12
%
Other
59
%
 
52
%
 
100
%
 
100
%


(1) 
During the quarters ended March 31, 2019 and 2018, all revenues were attributable to our floaters segment.

(2) 
During the quarters ended March 31, 2019 and 2018, all revenues were attributable to our jackups segment.

(3) 
During the quarter ended March 31, 2019, 27% of the revenues were attributable to our jackups segment while 73% of the revenues were attributable to our managed rigs. During the quarter ended March 31, 2018, 61% of the revenues provided by BP were attributable to our floaters segment, 10% of the revenues were attributable to our jackups segment and the remainder was attributable to our managed rigs.

(4) 
During the quarters ended March 31, 2019 and 2018, all revenues were attributable to our floaters segment.

Consolidated revenues by region for the quarters ended March 31, 2019 and 2018 were as follows:
 
March 31,
2019
 
March 31,
2018
Angola(1)
$
70.6

 
$
61.1

Australia(2)
67.3

 
52.2

U.S. Gulf of Mexico(3)
54.7

 
53.6

Saudi Arabia(4)
53.4

 
43.2

United Kingdom(4)
43.4

 
46.6

Brazil(5)
22.0

 
50.3

Other
94.5

 
110.0

 
$
405.9

 
$
417.0



(1)
During the quarters ended March 31, 2019 and 2018, 86% and 98% of the revenues earned, respectively, were attributable to our floaters segment. The remaining revenues were attributable to our jackups segment.

(2)
During the quarters ended March 31, 2019 and 2018, 94% and 100% of the revenues earned, respectively, were attributable to our floaters segment. The remaining revenues were attributable our jackups segment.

(3)
During the quarters ended March 31, 2019 and 2018, 25% and 38% of the revenues earned, respectively, were attributable to our floaters segment, 45% and 34% of revenues earned, respectively, were attributable to our jackups segment and the remainder was attributable to our managed rigs.

(4)     During the quarters ended March 31, 2019 and 2018, all revenues were attributable to our jackups segment.

(5)     During the quarters ended March 31, 2019 and 2018, all revenues were attributable to our floaters segment.
v3.19.1
Guarantee Of Registered Securities
3 Months Ended
Mar. 31, 2019
Guarantees [Abstract]  
Guarantee Of Registered Securities
Guarantee of Registered Securities

In connection with the Pride acquisition in 2011, Ensco Rowan plc and Pride entered into a supplemental indenture to the indenture dated as of July 1, 2004, between Pride and the Bank of New York Mellon, as indenture trustee, providing for, among other matters, the full and unconditional guarantee by Ensco Rowan plc of Pride’s 6.875% unsecured senior notes due 2020 and 7.875% unsecured senior notes due 2040, which had an aggregate outstanding principal balance of $422.9 million as of March 31, 2019. The Ensco Rowan plc guarantee provides for the unconditional and irrevocable guarantee of the prompt payment, when due, of any amount owed to the holders of the notes.
 
Ensco Rowan plc is also a full and unconditional guarantor of the 7.2% debentures due 2027 issued by ENSCO International Incorporated during 1997, which had an aggregate outstanding principal balance of $150.0 million as of March 31, 2019.
    
Pride and Ensco International Incorporated are 100% owned subsidiaries of Ensco Rowan plc. All guarantees are unsecured obligations of Ensco Rowan 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 periods ended March 31, 2019 and 2018; the unaudited condensed consolidating statements of comprehensive loss for the three month periods ended March 31, 2019 and 2018; the condensed consolidating balance sheets as of March 31, 2019 (unaudited) and December 31, 2018; and the unaudited condensed consolidating statements of cash flows for the three month periods ended March 31, 2019 and 2018, in accordance with Rule 3-10 of Regulation S-X.
ENSCO ROWAN PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Three Months Ended March 31, 2019
(in millions)
(Unaudited)

 
Ensco Rowan plc
 
ENSCO International Incorporated
 
Pride International LLC
 
Other Non-Guarantor Subsidiaries
 
Consolidating Adjustments
 
Total
OPERATING REVENUES
$
11.4

 
$
39.5

 
$

 
$
430.4

 
$
(75.4
)
 
$
405.9

OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
 
 
Contract drilling (exclusive of depreciation)
11.7

 
35.7

 

 
360.6

 
(75.4
)
 
332.6

Depreciation

 
3.7

 

 
121.3

 

 
125.0

General and administrative
14.9

 
.1

 

 
14.6

 

 
29.6

OPERATING LOSS
(15.2
)
 




(66.1
)



(81.3
)
OTHER EXPENSE, NET
(16.1
)
 
(15.4
)
 
(20.5
)
 
(27.3
)
 
4.1

 
(75.2
)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
(31.3
)
 
(15.4
)

(20.5
)

(93.4
)

4.1


(156.5
)
INCOME TAX PROVISION