Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________________________________________________________
FORM 10-Q
_____________________________________________________________________________________________________
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2018
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission file number: 001-36211
_____________________________________________________________________________________________________
Noble Corporation plc
(Exact name of registrant as specified in its charter)
_____________________________________________________________________________________________________
England and Wales (Registered Number 08354954)
 
98-0619597
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. employer
identification number)
10 Brook Street, London, England, W1S1BG
(Address of principal executive offices) (Zip Code)
Registrant’s Telephone Number, Including Area Code: +44 20 3300 2300
Devonshire House, 1 Mayfair Place, London, England, W1J8AJ
(Former address, if changed since last report)
Commission file number: 001-31306
_____________________________________________________________________________________________________
Noble Corporation
(Exact name of registrant as specified in its charter)
_____________________________________________________________________________________________________
Cayman Islands
 
98-0366361
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. employer
identification number)
Suite 3D Landmark Square, 64 Earth Close, P.O. Box 31327 George Town, Grand Cayman, Cayman Islands, KY1-1206
(Address of principal executive offices) (Zip Code)
Registrant’s Telephone Number, Including Area Code: (345) 938-0293
_______________________________________________________________________________________________
Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨
Indicate by check mark whether each registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  þ    No  ¨
Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Noble Corporation plc:
Large accelerated filer þ
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
Emerging growth company ¨
Noble Corporation:
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer þ
Smaller reporting company ¨
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ
Number of shares outstanding and trading at October 31, 2018: Noble Corporation plc — 246,794,399
Number of shares outstanding: Noble Corporation — 261,245,693
Noble Corporation, a Cayman Islands company and a wholly owned subsidiary of Noble Corporation plc, a public limited company incorporated under the laws of England and Wales, meets the conditions set forth in General Instructions H(1) (a) and (b) of Form 10-Q and is therefore filing this Quarterly Report on Form 10-Q with the reduced disclosure format contemplated by paragraphs (b) and (c) of General Instruction H(2) of Form 10-Q.



TABLE OF CONTENTS
 
 
 
 
 
Page
PART I
 
 
 
Item 1
 
 
 
 
 
Noble Corporation plc (Noble-UK) Financial Statements:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noble Corporation (Noble-Cayman) Financial Statements:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2
 
 
Item 3
 
 
Item 4
 
 
PART II
 
 
 
Item 1
 
 
Item 1A
 
 
Item 2
 
 
Item 6
 
 
 
 
 
 
 
 
This combined Quarterly Report on Form 10-Q is separately filed by Noble Corporation plc, a public limited company incorporated under the laws of England and Wales (“Noble-UK”), and Noble Corporation, a Cayman Islands company (“Noble-Cayman”). Information in this filing relating to Noble-Cayman is filed by Noble-UK and separately by Noble-Cayman on its own behalf. Noble-Cayman makes no representation as to information relating to Noble-UK (except as it may relate to Noble-Cayman) or any other affiliate or subsidiary of Noble-UK. Since Noble-Cayman meets the conditions specified in General Instructions H(1)(a) and (b) to Form 10-Q, it is permitted to use the reduced disclosure format for wholly-owned subsidiaries of reporting companies as stated in General Instructions H(2). Accordingly, Noble-Cayman has omitted from this report the information called for by “Item 3 (Quantitative and Qualitative Disclosures about Market Risk)” of Part I of Form 10-Q and the following items of Part II of Form 10-Q, “Item 2 (Unregistered Sales of Equity Securities and Use of Proceeds),” and “Item 3 (Defaults upon Senior Securities).”
This report should be read in its entirety as it pertains to each Registrant. Except where indicated, the Condensed Consolidated Financial Statements and related Notes are combined. References in this Quarterly Report on Form 10-Q to “Noble,” the “Company,” “we,” “us,” “our” and words of similar meaning refer collectively to Noble-UK and its condensed consolidated subsidiaries, including Noble-Cayman.

2


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NOBLE CORPORATION PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

 
 
September 30,
2018
 
December 31,
2017
ASSETS
Current assets
 
 
 
 
Cash and cash equivalents
 
$
326,320

 
$
662,829

Accounts receivable, net
 
200,215

 
204,696

Taxes receivable
 
64,486

 
105,345

Prepaid expenses and other current assets
 
69,754

 
66,105

Total current assets
 
660,775

 
1,038,975

Property and equipment, at cost
 
11,059,775

 
12,034,331

Accumulated depreciation
 
(2,516,353
)
 
(2,545,091
)
Property and equipment, net
 
8,543,422

 
9,489,240

Other assets
 
196,894

 
266,444

Total assets
 
$
9,401,091

 
$
10,794,659

LIABILITIES AND EQUITY
Current liabilities
 
 
 
 
Current maturities of long-term debt
 
$
—

 
$
249,843

Accounts payable
 
103,285

 
84,032

Accrued payroll and related costs
 
43,313

 
54,904

Taxes payable
 
30,638

 
34,391

Interest payable
 
70,006

 
98,189

Other current liabilities
 
68,577

 
71,665

Total current liabilities
 
315,819

 
593,024

Long-term debt
 
3,902,976

 
3,795,867

Deferred income taxes
 
215,861

 
164,962

Other liabilities
 
274,768

 
290,178

Total liabilities
 
4,709,424

 
4,844,031

Commitments and contingencies (Note 15)
 


 


Shareholders' equity
 
 
 
 
Common stock, $0.01 par value, ordinary shares; 246,789 and 244,971 shares outstanding as of September 30, 2018 and December 31, 2017, respectively
 
2,468

 
2,450

Additional paid-in capital
 
694,093

 
678,922

Retained earnings
 
3,641,447

 
4,637,677

Accumulated other comprehensive loss
 
(50,042
)
 
(42,888
)
Total shareholders' equity
 
4,287,966

 
5,276,161

Noncontrolling interests
 
403,701

 
674,467

Total equity
 
4,691,667

 
5,950,628

Total liabilities and equity
 
$
9,401,091

 
$
10,794,659

See accompanying notes to the unaudited condensed consolidated financial statements.

3


NOBLE CORPORATION PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2018
 
2017
 
2018
 
2017
Operating revenues
 
 
 
 
 
 
 
 
Contract drilling services
 
$
267,238

 
$
259,740

 
$
744,033

 
$
885,931

Reimbursables and other
 
12,170

 
6,472

 
28,901

 
21,399

 
 
279,408

 
266,212

 
772,934

 
907,330

Operating costs and expenses
 
 
 
 
 
 
 
 
Contract drilling services
 
162,985

 
166,044

 
451,271

 
489,594

Reimbursables
 
9,676

 
3,834

 
22,323

 
13,374

Depreciation and amortization
 
113,868

 
137,607

 
372,304

 
409,919

General and administrative
 
14,722

 
15,331

 
58,522

 
49,869

Loss on impairment
 
—

 
—

 
792,843

 
—

 
 
301,251

 
322,816

 
1,697,263

 
962,756

Operating loss
 
(21,843
)
 
(56,604
)
 
(924,329
)
 
(55,426
)
Other income (expense)
 
 
 
 
 
 
 
 
Interest expense, net of amounts capitalized
 
(73,725
)
 
(72,887
)
 
(223,870
)
 
(219,543
)
Gain (loss) on extinguishment of debt, net
 
109

 
—

 
(8,659
)
 
—

Interest income and other, net
 
2,610

 
1,405

 
6,814

 
6,096

Loss from continuing operations before income taxes
 
(92,849
)
 
(128,086
)
 
(1,150,044
)
 
(268,873
)
Income tax benefit (provision)
 
14,491

 
28,605

 
50,334

 
(210,589
)
Net loss from continuing operations
 
(78,358
)
 
(99,481
)
 
(1,099,710
)
 
(479,462
)
Net loss from discontinued operations, net of tax
 
—

 
—

 
—

 
(1,486
)
Net loss
 
(78,358
)
 
(99,481
)
 
(1,099,710
)
 
(480,948
)
Net (income) loss attributable to noncontrolling interests
 
(3,233
)
 
2,689

 
247,722

 
(10,888
)
Net loss attributable to Noble Corporation plc
 
$
(81,591
)
 
$
(96,792
)
 
$
(851,988
)
 
$
(491,836
)
Net loss attributable to Noble Corporation plc
 
 
 
 
 
 
 
 
Loss from continuing operations
 
$
(81,591
)
 
$
(96,792
)
 
$
(851,988
)
 
$
(490,350
)
Net loss from discontinued operations, net of tax
 
—

 
—

 
—

 
(1,486
)
Net loss attributable to Noble Corporation plc
 
$
(81,591
)
 
$
(96,792
)
 
$
(851,988
)
 
$
(491,836
)
Per share data
 
 
 
 
 
 
 
 
Basic:
 


 


 
 
 
 
Loss from continuing operations
 
$
(0.33
)
 
$
(0.40
)
 
$
(3.46
)
 
$
(2.00
)
Loss from discontinued operations
 
—

 
—

 
—

 
(0.01
)
Net loss attributable to Noble Corporation plc
 
$
(0.33
)
 
$
(0.40
)
 
$
(3.46
)
 
$
(2.01
)
Diluted:
 

 

 
 
 
 
Loss from continuing operations
 
$
(0.33
)
 
$
(0.40
)
 
$
(3.46
)
 
$
(2.00
)
Loss from discontinued operations
 
—

 
—

 
—

 
(0.01
)
Net loss attributable to Noble Corporation plc
 
$
(0.33
)
 
$
(0.40
)
 
$
(3.46
)
 
$
(2.01
)
See accompanying notes to the unaudited condensed consolidated financial statements.

4


NOBLE CORPORATION PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)

 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2018
 
2017
 
2018
 
2017
Net loss
 
$
(78,358
)
 
$
(99,481
)
 
$
(1,099,710
)
 
$
(480,948
)
Other comprehensive income (loss)
 
 
 
 
 
 

 
 

Foreign currency translation adjustments
 
(483
)
 
469

 
(2,587
)
 
749

Foreign currency forward contracts
 
—

 
(65
)
 
—

 
674

Amortization of deferred pension plan amounts (net of tax provision of $87 and $165 for the three months ended September 30, 2018 and 2017, respectively, and $260 and $493 for the nine months ended September 30, 2018 and 2017, respectively)
 
324

 
389

 
973

 
1,156

Other comprehensive income (loss), net
 
(159
)
 
793

 
(1,614
)
 
2,579

Net comprehensive (income) loss attributable to noncontrolling interests
 
(3,233
)
 
2,689

 
247,722

 
(10,888
)
Comprehensive loss attributable to Noble Corporation plc
 
$
(81,750
)
 
$
(95,999
)
 
$
(853,602
)
 
$
(489,257
)

See accompanying notes to the unaudited condensed consolidated financial statements.

5


NOBLE CORPORATION PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 
 
Nine Months Ended September 30,
 
 
2018
 
2017
Cash flows from operating activities
 
 
 
 
Net loss
 
$
(1,099,710
)
 
$
(480,948
)
Adjustments to reconcile net loss to net cash flow from operating activities:
 
 
 
 
Depreciation and amortization
 
372,304

 
409,919

Loss on impairment
 
792,843

 
—

Loss on extinguishment of debt, net
 
8,659

 
—

Deferred income taxes
 
(10,965
)
 
343,962

Amortization of share-based compensation
 
18,665

 
21,788

Other long-term asset write-off
 
—

 
28,689

Other costs, net
 
3,482

 
7,147

Changes in components of working capital:
 
 
 
 
Change in taxes receivable
 
40,859

 
86

Net changes in other operating assets and liabilities
 
(82,821
)
 
(31,563
)
Net cash provided by operating activities
 
43,316

 
299,080

Cash flows from investing activities
 
 
 
 
Capital expenditures
 
(149,329
)
 
(86,700
)
Proceeds from disposal of assets, net
 
4,135

 
1,306

Net cash used in investing activities
 
(145,194
)
 
(85,394
)
Cash flows from financing activities
 
 
 
 
Issuance of senior notes
 
750,000

 
—

Repayments of debt
 
(952,477
)
 
(300,000
)
Debt issuance costs
 
(15,327
)
 
(42
)
Dividends paid to noncontrolling interests
 
(12,694
)
 
(26,293
)
Taxes withheld on employee stock transactions
 
(3,458
)
 
(4,310
)
Net cash used in financing activities
 
(233,956
)
 
(330,645
)
Net decrease in cash, cash equivalents and restricted cash
 
(335,834
)
 
(116,959
)
Cash, cash equivalents and restricted cash, beginning of period
 
662,829

 
725,722

Cash, cash equivalents and restricted cash, end of period
 
$
326,995

 
$
608,763

See accompanying notes to the unaudited condensed consolidated financial statements.

6


NOBLE CORPORATION PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
(Unaudited)
 
 
 
Shares
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Noncontrolling Interests
 
Total Equity
 
 
Balance
 
Par Value
 
 
 
 
 
Balance at December 31, 2016
 
243,239

 
$
2,432

 
$
654,168

 
$
5,154,221

 
$
(52,140
)
 
$
708,764

 
$
6,467,445

Employee related equity activity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of share-based compensation
 
—

 
—

 
21,788

 
—

 
—

 
—

 
21,788

Issuance of share-based compensation shares
 
1,726

 
18

 
(23
)
 
—

 
—

 
—

 
(5
)
Shares withheld for taxes on equity transactions
 
—

 
—

 
(4,328
)
 
—

 
—

 
—

 
(4,328
)
Net income (loss)
 
—

 
—

 
—

 
(491,836
)
 
—

 
10,888

 
(480,948
)
Dividends paid to noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
(26,293
)
 
(26,293
)
Dividends unpaid to noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
(15,464
)
 
(15,464
)
Dividend equivalents (1)
 
—

 
—

 
—

 
83

 
—

 
—

 
83

Other comprehensive income, net
 
—

 
—

 
—

 
—

 
2,579

 
—

 
2,579

Balance at September 30, 2017
 
244,965

 
$
2,450

 
$
671,605

 
$
4,662,468

 
$
(49,561
)
 
$
677,895

 
$
5,964,857

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
 
244,971

 
$
2,450

 
$
678,922

 
$
4,637,677

 
$
(42,888
)
 
$
674,467

 
$
5,950,628

Tax effect of intra-entity asset transfers (Note 2)
 
—

 
—

 
—

 
(148,393
)
 
—

 
—

 
(148,393
)
Stranded tax effect resulting from the Tax Cuts and Job Act (Note 2)
 
—

 
—

 
—

 
5,540

 
(5,540
)
 
—

 
—

Adjustment for adopting the revenue recognition standard
 
—

 
—

 
—

 
(1,488
)
 
—

 
—

 
(1,488
)
Balance at January 1, 2018
 
244,971

 
2,450

 
678,922

 
4,493,336

 
(48,428
)
 
674,467

 
5,800,747

Employee related equity activity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of share-based compensation
 
—

 
—

 
18,665

 
—

 
—

 
—

 
18,665

Issuance of share-based compensation shares
 
1,818

 
18

 
(18
)
 
—

 
—

 
—

 
—

Shares withheld for taxes on equity transactions
 
—

 
—

 
(3,476
)
 
—

 
—

 
—

 
(3,476
)
Net loss
 
—

 
—

 
—

 
(851,988
)
 
—

 
(247,722
)
 
(1,099,710
)
Dividends paid to noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
(12,694
)
 
(12,694
)
Dividends unpaid to noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
(10,350
)
 
(10,350
)
Dividend equivalents (1)
 
—

 
—

 
—

 
99

 
—

 
—

 
99

Other comprehensive loss, net
 
—

 
—

 
—

 
—

 
(1,614
)
 
—

 
(1,614
)
Balance at September 30, 2018
 
246,789

 
$
2,468

 
$
694,093

 
$
3,641,447

 
$
(50,042
)
 
$
403,701

 
$
4,691,667

(1) 
Activity associated with dividend equivalents, which are related to performance awards granted in 2016, to be paid upon vesting.
See accompanying notes to the unaudited condensed consolidated financial statements.



7


NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited) 

 
 
September 30,
2018
 
December 31,
2017
ASSETS
Current assets
 
 
 
 
Cash and cash equivalents
 
$
325,515

 
$
662,011

Accounts receivable, net
 
200,215

 
204,696

Taxes receivable
 
64,486

 
105,345

Prepaid expenses and other current assets
 
68,774

 
65,441

Total current assets
 
658,990

 
1,037,493

Property and equipment, at cost
 
11,059,775

 
12,034,331

Accumulated depreciation
 
(2,516,353
)
 
(2,545,091
)
Property and equipment, net
 
8,543,422

 
9,489,240

Other assets
 
196,894

 
266,528

Total assets
 
$
9,399,306

 
$
10,793,261

LIABILITIES AND EQUITY
Current liabilities
 
 
 
 
Current maturities of long-term debt
 
$
—

 
$
249,843

Accounts payable
 
103,103

 
83,873

Accrued payroll and related costs
 
43,485

 
54,904

Taxes payable
 
30,638

 
33,965

Interest payable
 
70,006

 
98,189

Other current liabilities
 
68,479

 
71,466

Total current liabilities
 
315,711

 
592,240

Long-term debt
 
3,902,976

 
3,795,867

Deferred income taxes
 
215,861

 
164,962

Other liabilities
 
274,768

 
290,178

Total liabilities
 
4,709,316

 
4,843,247

Commitments and contingencies (Note 15)
 


 


Shareholder equity
 
 
 
 
Common stock, $0.01 par value, ordinary shares; 261,246 shares outstanding as of September 30, 2018 and December 31, 2017
 
26,125

 
26,125

Capital in excess of par value
 
641,765

 
623,137

Retained earnings
 
3,668,441

 
4,669,173

Accumulated other comprehensive loss
 
(50,042
)
 
(42,888
)
Total shareholder equity
 
4,286,289

 
5,275,547

Noncontrolling interests
 
403,701

 
674,467

Total equity
 
4,689,990

 
5,950,014

Total liabilities and equity
 
$
9,399,306

 
$
10,793,261

See accompanying notes to the unaudited condensed consolidated financial statements.

8


NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2018
 
2017
 
2018
 
2017
Operating revenues
 
 
 
 
 
 
 
 
Contract drilling services
 
$
267,238

 
$
259,740

 
$
744,033

 
$
885,931

Reimbursables and other
 
12,170

 
6,472

 
28,901

 
21,399

 
 
279,408

 
266,212

 
772,934

 
907,330

Operating costs and expenses
 
 
 
 
 
 
 
 
Contract drilling services
 
162,801

 
165,584

 
449,956

 
488,251

Reimbursables
 
9,676

 
3,834

 
22,323

 
13,374

Depreciation and amortization
 
113,127

 
136,651

 
368,939

 
407,002

General and administrative
 
8,672

 
9,823

 
30,250

 
32,118

Loss on impairment
 
—

 
—

 
792,843

 
—

 
 
294,276

 
315,892

 
1,664,311

 
940,745

Operating loss
 
(14,868
)
 
(49,680
)
 
(891,377
)
 
(33,415
)
Other income (expense)
 
 
 
 
 
 
 
 
Interest expense, net of amounts capitalized
 
(73,725
)
 
(72,887
)
 
(223,870
)
 
(219,543
)
Gain (loss) on extinguishment of debt, net
 
109

 
—

 
(8,659
)
 
—

Interest income and other, net
 
2,610

 
1,290

 
6,807

 
5,931

Loss from continuing operations before income taxes
 
(85,874
)
 
(121,277
)
 
(1,117,099
)
 
(247,027
)
Income tax benefit (provision)
 
14,490

 
28,605

 
50,227

 
(210,555
)
Net loss from continuing operations
 
(71,384
)
 
(92,672
)
 
(1,066,872
)
 
(457,582
)
Net income from discontinued operations, net of tax
 
—

 
—

 
—

 
2,967

Net loss
 
(71,384
)
 
(92,672
)
 
(1,066,872
)
 
(454,615
)
Net (income) loss attributable to noncontrolling interests
 
(3,233
)
 
2,689

 
247,722

 
(10,888
)
Net loss attributable to Noble Corporation
 
$
(74,617
)
 
$
(89,983
)
 
$
(819,150
)
 
$
(465,503
)
See accompanying notes to the unaudited condensed consolidated financial statements.

9


NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)

 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2018
 
2017
 
2018
 
2017
Net loss
 
$
(71,384
)
 
$
(92,672
)
 
$
(1,066,872
)
 
$
(454,615
)
Other comprehensive income (loss)
 
 
 
 
 
 

 
 

Foreign currency translation adjustments
 
(483
)
 
469

 
(2,587
)
 
749

Foreign currency forward contracts
 
—

 
(65
)
 
—

 
674

Amortization of deferred pension plan amounts (net of tax provision of $87 and $165 for the three months ended September 30, 2018 and 2017, respectively, and $260 and $493 for the nine months ended September 30, 2018 and 2017, respectively)
 
324

 
389

 
973

 
1,156

Other comprehensive income (loss), net
 
(159
)
 
793

 
(1,614
)
 
2,579

Net comprehensive (income) loss attributable to noncontrolling interests
 
(3,233
)
 
2,689

 
247,722

 
(10,888
)
Comprehensive loss attributable to Noble Corporation
 
$
(74,776
)
 
$
(89,190
)
 
$
(820,764
)
 
$
(462,924
)
See accompanying notes to the unaudited condensed consolidated financial statements.



10


NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 
 
Nine Months Ended September 30,
 
 
2018
 
2017
Cash flows from operating activities
 
 
 
 
Net loss
 
$
(1,066,872
)
 
$
(454,615
)
Adjustments to reconcile net loss to net cash flow from operating activities:
 
 
 
 
Depreciation and amortization
 
368,939

 
407,002

Loss on impairment
 
792,843

 
—

Loss on extinguishment of debt, net
 
8,659

 
—

Deferred income taxes
 
(10,965
)
 
343,961

Amortization of share-based compensation
 
18,628

 
21,731

Other long-term asset write-off
 
—

 
28,689

Other cost, net
 
3,482

 
7,147

Changes in components of working capital:
 
 
 
 
Change in taxes receivable
 
40,859

 
86

Net changes in other operating assets and liabilities
 
(78,461
)
 
(32,038
)
Net cash provided by operating activities
 
77,112

 
321,963

Cash flows from investing activities
 
 
 
 
Capital expenditures
 
(149,329
)
 
(86,700
)
Proceeds from disposal of assets, net
 
4,135

 
1,306

Net cash used in investing activities
 
(145,194
)
 
(85,394
)
Cash flows from financing activities
 
 
 
 
Issuance of senior notes
 
750,000

 
—

Repayments of debt
 
(952,477
)
 
(300,000
)
Debt issuance costs
 
(15,327
)
 
(42
)
Dividends paid to noncontrolling interests
 
(12,694
)
 
(26,293
)
Contributions from (distributions to) parent company, net
 
(37,241
)
 
43,891

Net cash used in financing activities
 
(267,739
)
 
(282,444
)
Net decrease in cash, cash equivalents and restricted cash
 
(335,821
)
 
(45,875
)
Cash, cash equivalents and restricted cash, beginning of period
 
662,011

 
653,833

Cash, cash equivalents and restricted cash, end of period
 
$
326,190

 
$
607,958

See accompanying notes to the unaudited condensed consolidated financial statements.

11


NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
(Unaudited)

 
 
Shares
 
Capital in Excess of Par Value
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Noncontrolling Interests
 
Total Equity
 
 
Balance
 
Par Value
 
 
 
 
 
Balance at December 31, 2016
 
261,246

 
$
26,125

 
$
594,091

 
$
5,115,137

 
$
(52,140
)
 
$
708,764

 
$
6,391,977

Contributions from parent company, net
 
—

 
—

 
—

 
43,891

 
—

 
—

 
43,891

Share-based compensation contribution by parent
 
—

 
—

 
21,731

 
—

 
—

 
—

 
21,731

Net income (loss)
 
—

 
—

 
—

 
(465,503
)
 
—

 
10,888

 
(454,615
)
Dividends paid to noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
(26,293
)
 
(26,293
)
Dividends unpaid to noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
(15,464
)
 
(15,464
)
Other comprehensive income, net
 
—

 
—

 
—

 
—

 
2,579

 
—

 
2,579

Balance at September 30, 2017
 
261,246

 
$
26,125

 
$
615,822

 
$
4,693,525

 
$
(49,561
)
 
$
677,895

 
$
5,963,806

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
 
261,246

 
$
26,125

 
$
623,137

 
$
4,669,173

 
$
(42,888
)
 
$
674,467

 
$
5,950,014

Tax effect of intra-entity asset transfers (Note 2)
 
—

 
—

 
—

 
(148,393
)
 
—

 
—

 
(148,393
)
Stranded tax effect resulting from the Tax Cuts and Job Act (Note 2)
 
—

 
—

 
—

 
5,540

 
(5,540
)
 
—

 
—

Adjustment for adopting the revenue recognition standard
 
—

 
—

 
—

 
(1,488
)
 
—

 
—

 
(1,488
)
Balance at January 1, 2018
 
261,246

 
26,125

 
623,137

 
4,524,832

 
(48,428
)
 
674,467

 
5,800,133

Distributions to parent company, net
 
—

 
—

 
—

 
(37,241
)
 
—

 
—

 
(37,241
)
Share-based compensation contribution by parent
 
—

 
—

 
18,628

 
—

 
—

 
—

 
18,628

Net loss
 
—

 
—

 
—

 
(819,150
)
 
—

 
(247,722
)
 
(1,066,872
)
Dividends paid to noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
(12,694
)
 
(12,694
)
Dividends declared to noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
(10,350
)
 
(10,350
)
Other comprehensive loss, net
 
—

 
—

 
—

 
—

 
(1,614
)
 
—

 
(1,614
)
Balance at September 30, 2018
 
261,246

 
$
26,125

 
$
641,765

 
$
3,668,441

 
$
(50,042
)
 
$
403,701

 
$
4,689,990

See accompanying notes to the unaudited condensed consolidated financial statements.

12
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)


Note 1— Organization and Basis of Presentation
Noble Corporation plc, a public limited company incorporated under the laws of England and Wales (“Noble-UK”), is a leading offshore drilling contractor for the oil and gas industry. We provide contract drilling services with our global fleet of mobile offshore drilling units. As of September 30, 2018, our fleet consisted of eight drillships, four semisubmersibles and 13 jackups.
We report our contract drilling operations as a single reportable segment, Contract Drilling Services, which reflects how we manage our business. The mobile offshore drilling units comprising our offshore rig fleet operate in a global market for contract drilling services and are often redeployed to different regions due to changing demands of our customers, which consist primarily of large, integrated, independent and government-owned or controlled oil and gas companies throughout the world.
Noble Corporation, a Cayman Islands company (“Noble-Cayman”), is an indirect, wholly-owned subsidiary of Noble-UK, our publicly-traded parent company. Noble-UK’s principal asset is all of the shares of Noble-Cayman. Noble-Cayman has no public equity outstanding. The condensed consolidated financial statements of Noble-UK include the accounts of Noble-Cayman, and Noble-UK conducts substantially all of its business through Noble-Cayman and its subsidiaries.
The accompanying unaudited condensed consolidated financial statements of Noble-UK and Noble-Cayman have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) as they pertain to Quarterly Reports on Form 10-Q. Accordingly, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The unaudited financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the financial position and results of operations for the interim periods, on a basis consistent with the annual audited consolidated financial statements. All such adjustments are of a recurring nature. The December 31, 2017 Condensed Consolidated Balance Sheets presented herein are derived from the December 31, 2017 audited consolidated financial statements. These interim financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2017, filed by both Noble-UK and Noble-Cayman. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.
We have made certain reclassifications to our prior period amounts in our investing activities by combining changes in accrued capital expenditures with capital expenditures to conform to the current period presentation. Such reclassification did not have a material effect on our condensed consolidated statements of cash flows.
Restricted Cash
We classify restricted cash balances in current assets if the restriction is expected to expire or otherwise be resolved within one year and in other assets if the restriction is expected to expire or otherwise be resolved in more than one year. As of September 30, 2018, our restricted cash balance consists of $0.7 million of restricted cash accounts for interest payments associated with our financing of the Noble Johnny Whitstine, recorded in other current assets. As of December 31, 2017, we had no restricted cash balances.
Note 2— Accounting Pronouncements
Accounting Standards Adopted
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-9, which creates Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers,” and supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition,” including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, ASU No. 2014-9 supersedes the cost guidance in Subtopic 605-35, “Revenue Recognition—Construction-Type and Production-Type Contracts,” and creates new Subtopic 340-40, “Other Assets and Deferred Costs—Contracts with Customers.” Under the new guidance, revenue is recognized when a customer obtains control of promised goods or services and in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services.
We adopted ASU 2014-9 and its related amendments, or collectively Topic 606, effective January 1, 2018 using the modified retrospective implementation method. Accordingly, we have applied the five-step method outlined in Topic 606 for determining when and how revenue is recognized to all contracts that were not completed as of the date of adoption. Revenues for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts have not been adjusted and continue to be reported under the previous revenue recognition guidance. For contracts that were modified before the effective date, we have considered the modification guidance within the new standard and determined that the revenue recognized and contract balances recorded prior to adoption for such contracts were not impacted. While Topic 606 requires additional disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, its adoption has not had a material impact on the measurement or recognition of our revenues. Our modified retrospective adoption, for which we

13
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)

were not required to make any material changes to the prior year presentation, did not have a material effect on our condensed consolidated financial statements.
In October 2016, the FASB issued ASU No. 2016-16, which amends ASC Topic 740, “Income Taxes.” The amendments in this update improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. This standard is effective for interim and annual reporting periods beginning after December 15, 2017. We have adopted the new standard effective January 1, 2018 under the modified retrospective approach. Accordingly, “Other assets” is reduced in our Condensed Consolidated Balance Sheet with a cumulative adjustment to “Retained earnings” of approximately $148.4 million.
In March 2017, the FASB issued ASU No. 2017-7, which amends ASC Topic 715, “Compensation—Retirement Benefits; Improving the Presentation of Net Periodic Pension Cost and Postretirement Benefits Cost.” The amendments in this update require that an employer disaggregate the service cost component from the other components of net benefit cost for an entity's defined benefit pension and other postretirement plans. The amendments also provide explicit guidance on how to present the service cost component and the other components of net benefit cost in the income statement and allow only the service cost component of net benefit cost to be eligible for capitalization. The amendments in this update require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit costs, as defined in paragraphs 715-30-35-4 and 715-60-35-9, are required to be presented in the income statement separately from the service cost component and outside of income from operations. We adopted ASU No. 2017-7 effective January 1, 2018 and accordingly, we have made certain reclassifications between our “Contract drilling services” costs and “Interest income and other, net” on our Condensed Consolidated Statement of Operations.
In February 2018, the FASB issued ASU No. 2018-2, which amends ASC Topic 220, “Income Statement—Reporting Comprehensive Income.” The amendments in this update allow for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (the “Act”). This standard is effective for interim and annual reporting periods beginning after December 15, 2018 with early application permitted. We have elected to adopt the new standard effective January 1, 2018 under the modified retrospective approach. The amendment should be applied on a retrospective basis to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Act was recognized. As a result of the retrospective application, we reduced “Accumulated other comprehensive loss” in our Condensed Consolidated Balance Sheet with a cumulative adjustment to “Retained earnings” of approximately $5.5 million.
In August 2018, the FASB issued ASU No. 2018-15, which amends ASC Subtopic 350-40, “Intangibles—Goodwill and Other—Internal—Use Software.” The amendments in this update require an entity in a hosting arrangement that is a service contract to capitalize implementation costs. Entities are to follow the guidance in ASC Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The amendment also requires the entity to expense these capitalized implementation costs over the term of the hosting arrangement. We elected to early adopt ASU No. 2018-15 effective September 30, 2018, on a prospective basis. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements.
Issued Accounting Standards
In February 2016, the FASB issued ASU No. 2016-2, which creates ASC Topic 842, “Leases.” This standard is effective for interim and annual reporting periods beginning after December 15, 2018. We expect to adopt this standard, on a modified retrospective basis, effective January 1, 2019. Our adoption requires that, as lessees, we recognize a right of use asset and lease liability. In addition, as lessors, our drilling contracts contain a lease component, which requires revenue presentation analysis. The ultimate effect on our consolidated financial statements will be based on an evaluation of the contract-specific facts and circumstances. With respect to leases in which we are the lessee, we expect to recognize a lease liability and a corresponding right of use asset. With respect to our drilling contracts in which we are the lessor, we plan to utilize the FASB practical expedient to combine lease and non-lease components. The expedient, for circumstances in which bifurcation of revenue between lease and non-lease components does not affect total revenue, operating income, or net income, permits us to combine lease and non-lease components. We are currently evaluating what other effect, if any, ASC 842 will have on our condensed consolidated financial statements and related disclosures. We do not expect our adoption to materially affect our Condensed Consolidated Balance Sheet, Condensed Consolidated Statement of Operations, or Condensed Consolidated Statement of Cash Flows.
In August 2018, the FASB issued ASU No. 2018-14, which amends ASC Subtopic 715-20, “Compensation — Retirement Benefits — Defined Benefit Plans — General.” This update applies to all employers that sponsor defined benefit pension or other postretirement plans and is part of the disclosure framework project to improve the effectiveness of disclosures in notes to the financial statements. The amendment is effective for fiscal years ending after December 15, 2020 and is required to be adopted on a retrospective basis for all periods presented. We do not expect the adoption of this guidance to materially affect our condensed consolidated financial statements.

14
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)

With the exception of the updated standards discussed above, there have been no new accounting pronouncements not yet effective that have significance, or potential significance, to our condensed consolidated financial statements.
Note 3— Consolidated Joint Ventures
We maintain a 50 percent interest in two joint ventures, each with a subsidiary of Royal Dutch Shell plc (“Shell”), that own and operate the two Bully-class drillships. We have determined that we are the primary beneficiary of the joint ventures. Accordingly, we consolidate the entities in our condensed consolidated financial statements after eliminating intercompany transactions. Shell’s equity interests are presented as noncontrolling interests on our Condensed Consolidated Balance Sheets.
During the three and nine months ended September 30, 2018, the Bully joint ventures approved dividends of $20.7 million and $46.1 million, respectively, and paid dividends of zero and $25.4 million, respectively. During the three and nine months ended September 30, 2017, the Bully joint ventures approved dividends of $30.9 million and $83.5 million, respectively, and paid dividends of $41.8 million and $52.6 million, respectively. Of these amounts, 50 percent is owed to our joint venture partner.
The combined carrying amount of the Bully-class drillships at September 30, 2018 and December 31, 2017 totaled $0.7 billion and $1.3 billion, respectively. These assets were primarily funded through partner equity contributions. During the nine months ended September 30, 2018, we recognized a $550.3 million impairment on the Noble Bully I, of which $250.3 million is attributable to our joint venture partner. See “Note 10— Loss on Impairment” for additional information. Cash held by the Bully joint ventures totaled approximately $64.8 million at September 30, 2018 as compared to approximately $41.6 million at December 31, 2017.
Note 4— Loss Per Share
The following table presents the computation of basic and diluted earnings per share for Noble-UK:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2018
 
2017
 
2018
 
2017
Numerator:
 
 

 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
 
Net loss from continuing operations
 
$
(81,591
)
 
$
(96,792
)
 
$
(851,988
)
 
$
(490,350
)
Net loss from discontinued operations, net of tax
 
—

 
—

 
—

 
(1,486
)
Net loss attributable to Noble Corporation plc
 
$
(81,591
)
 
$
(96,792
)
 
$
(851,988
)
 
$
(491,836
)
Diluted
 
 

 
 

 
 
 
 
Net loss from continuing operations
 
$
(81,591
)
 
$
(96,792
)
 
$
(851,988
)
 
$
(490,350
)
Net loss from discontinued operations, net of tax
 
—

 
—

 
—

 
(1,486
)
Net loss attributable to Noble Corporation plc
 
$
(81,591
)
 
$
(96,792
)
 
$
(851,988
)
 
$
(491,836
)
Denominator:
 
 

 
 

 
 
 
 
Weighted average shares outstanding - basic
 
246,780

 
244,940

 
246,553

 
244,666

Weighted average shares outstanding - diluted
 
246,780

 
244,940

 
246,553

 
244,666

Loss per share
 
 

 
 

 
 
 
 
Basic:
 
 
 
 
 
 
 
 
Loss from continuing operations
 
$
(0.33
)
 
$
(0.40
)
 
$
(3.46
)
 
$
(2.00
)
Loss from discontinued operations
 
—

 
—

 
—

 
(0.01
)
Net loss attributable to Noble Corporation plc
 
$
(0.33
)
 
$
(0.40
)
 
$
(3.46
)
 
$
(2.01
)
Diluted:
 
 
 
 
 
 
 
 
Loss from continuing operations
 
$
(0.33
)
 
$
(0.40
)
 
$
(3.46
)
 
$
(2.00
)
Loss from discontinued operations
 
—

 
—

 
—

 
(0.01
)
Net loss attributable to Noble Corporation plc
 
$
(0.33
)
 
$
(0.40
)
 
$
(3.46
)
 
$
(2.01
)
Only those items having a dilutive impact on our basic earnings per share are included in diluted earnings per share. For the three and nine months ended September 30, 2018, approximately 13.2 million share-based awards were excluded from diluted earnings per share since the effect would have been anti-dilutive. For the three and nine months ended September 30, 2017, approximately 12.1 million share-based awards were excluded from diluted earnings per share since the effect would have been anti-dilutive.
Share capital

15
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)

As of September 30, 2018, Noble-UK had approximately 246.8 million shares outstanding and trading as compared to approximately 245.0 million shares outstanding and trading at December 31, 2017. At our 2018 Annual General Meeting, shareholders approved a proposal to allow our Board of Directors to increase share capital through the issuance of up to 82.2 million ordinary shares (at current nominal value of $0.01 per share). The right of our directors to allot shares will expire at the end of our 2019 Annual General Meeting unless we seek an extension from shareholders at that time. There were no shares allotted during the nine months ended September 30, 2018.
The declaration and payment of dividends require the authorization of the Board of Directors of Noble-UK, provided that such dividends on issued share capital may be paid only out of Noble-UK’s “distributable reserves” on its statutory balance sheet in accordance with UK law. Noble-UK is not permitted to pay dividends out of share capital, which includes share premium. Noble has not paid dividends since the third quarter of 2016. The payment of future dividends will depend on our results of operations, financial condition, cash requirements, future business prospects, contractual and indenture restrictions and other factors deemed relevant by our Board of Directors.
Share repurchases
Under UK law, the Company is only permitted to purchase its own shares by way of an “off-market purchase” in a plan approved by shareholders. We currently do not have shareholder authority to repurchase shares.
Note 5— Receivables from Customers
At December 31, 2016, we had receivables of approximately $14.4 million related to the Noble Max Smith, which had been disputed by our former customer, Petróleos Mexicanos (“Pemex”) and were classified as long-term and included in “Other assets” on our Condensed Consolidated Balance Sheet. The receivables were related to lost revenues for downtime that occurred after our rig was damaged when one of Pemex’s supply boats collided with our rig in 2010. A Mexican subsidiary of Paragon Offshore plc (“Paragon Offshore”), which had operated the Noble Max Smith, had been prosecuting the claim against Pemex. As of December 31, 2017, Paragon Offshore announced that, as part of its bankruptcy plan, it will liquidate the Mexican entity involved.
While Noble owns all rights to amounts from that claim and will take available actions to recover such amounts, we believe the announced actions by Paragon Offshore create uncertainty relating to the prosecution of the claim and associated recovery, and accordingly, the disputed amounts of approximately $14.4 million were written off through “Contract drilling services” costs on our Condensed Consolidated Statement of Operations during the nine months ended September 30, 2017.
Note 6— Property and Equipment
Property and equipment, at cost, for Noble-UK consisted of the following:
 
 
September 30, 2018
 
December 31, 2017
Drilling equipment and facilities
 
$
10,664,732

 
$
11,746,629

Construction in progress
 
192,188

 
83,509

Other
 
202,855

 
204,193

Property and equipment, at cost
 
$
11,059,775

 
$
12,034,331

During the nine months ended September 30, 2018, we recognized a non-cash loss on impairment of $792.8 million, related to our long-lived assets. See “Note 10— Loss on Impairment” for additional information.
On September 21, 2018, we purchased the Noble Johnny Whitstine, a new Gusto MSC CJ46 design jackup rig, from the PaxOcean Group (“PaxOcean”) in connection with a concurrently awarded drilling contract in the Middle East region. We paid $93.8 million for the rig, with $33.8 million paid in cash and the remaining $60.0 million of the purchase price financed by the seller. See “Note 7— Debt” for additional information.
Note 7— Debt
Credit Facilities
2015 Credit Facility
At December 31, 2017, we had a five-year $2.4 billion senior unsecured credit facility that will mature in January 2020 and is guaranteed by our indirect, wholly-owned subsidiaries, Noble Holding (U.S.) LLC (“NHUS”) and Noble Holding International Limited (“NHIL”) (the “2015 Credit Facility”). At December 31, 2017, the 2015 Credit Facility also provided us with the ability to issue up to $500.0 million in letters of credit.

16
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)

On December 19, 2017, we entered into the First Amendment and Consent and Successor Agent Agreement (the “Amendment”) amending the 2015 Credit Facility. On January 3, 2018, the Amendment to the 2015 Credit Facility became fully effective. The Amendment caused, among other things, a reduction in the aggregate principal amount of commitments under the 2015 Credit Facility to $300.0 million and the termination of the 2015 Credit Facility's letter of credit sub-facility. The maturity of the 2015 Credit Facility remains January 2020. As a result of the 2015 Credit Facility's reduction in the aggregate principal amount of commitments, we recognized a net loss of approximately $2.3 million in the nine months ended September 30, 2018. At September 30, 2018, we had no borrowings outstanding under the 2015 Credit Facility.
2017 Credit Facility
On December 21, 2017, Noble Cayman Limited, a Cayman Islands company and a wholly-owned indirect subsidiary of Noble-Cayman (“NCL”); Noble International Finance Company, a Cayman Islands company and a wholly-owned indirect subsidiary of Noble-Cayman (“NIFCO”); and Noble Holding UK Limited, a company incorporated under the laws of England and Wales and a wholly-owned direct subsidiary of Noble-UK (“NHUK”), as parent guarantor, entered into a new senior unsecured credit agreement (the “2017 Credit Facility” and, together with the 2015 Credit Facility, the “Credit Facilities”). The maximum aggregate amount of commitments under the 2017 Credit Facility of approximately $1.5 billion became available in January 2018 upon satisfaction of certain conditions, including the effectiveness of the commitment reduction under the 2015 Credit Facility. Borrowings under the 2017 Credit Facility are subject to certain conditions precedent, including that there be no unused commitments to advance loans under the 2015 Credit Facility. The 2017 Credit Facility will mature in January 2023. Borrowings may be used for working capital and other general corporate purposes. The 2017 Credit Facility provides for a letter of credit sub-facility currently in the amount of $15.0 million, with the ability to increase such amount up to $500.0 million with the approval of the lenders. At September 30, 2018, we had $3.4 million of performance letters of credit outstanding under the 2017 Credit Facility. At September 30, 2018, other than the performance letters of credit, we had no borrowings outstanding under the 2017 Credit Facility.
Both of our Credit Facilities have provisions which vary the applicable interest rates for borrowings based upon our debt ratings. We also pay a facility fee under the 2015 Credit Facility on the full commitments thereunder (used or unused) and a commitment fee under the 2017 Credit Facility on the daily unused amount of the underlying commitments, in each case which varies depending on our credit ratings. At September 30, 2018, the interest rates in effect under our Credit Facilities are the highest permitted interest rates under those agreements.
Debt Issuance
In January 2018, we issued $750.0 million aggregate principal amount of our Senior Notes due 2026 (the “2026 Notes”) through our indirect wholly-owned subsidiary, NHIL. The net proceeds of the offering of approximately $737.4 million, after estimated expenses, were used to retire a portion of our near-term senior notes in a related tender offer.
The indenture for the 2026 Notes contains certain covenants and restrictions, including, among others, restrictions on our subsidiaries’ ability to incur certain additional indebtedness. Additionally, the subsidiary guarantors must own, directly or indirectly, (i) assets comprising at least 85% of the revenue of Noble-Cayman and its subsidiaries on a consolidated basis and (ii) jackups, semisubmersibles, drillships, submersibles or other mobile offshore drilling units of material importance, the combined book value of which comprises at least 85% of the combined book value of all such assets of Noble-Cayman and its subsidiaries on a consolidated basis, in each case, with respect to the most recently completed fiscal year.
Seller Financing of Rig
In September 2018, we purchased the Noble Johnny Whitstine for $93.8 million with a $60.0 million seller-financed secured loan (the “Seller Loan”), in which 95% of the principal is due at the end of the four-year term. The Seller Loan bears a cash interest rate of 4.25% and the equivalent of a 1.25% interest rate paid-in-kind over the four-year term of the Seller Loan. Based on the terms of the Seller Loan, the 1.25% paid-in-kind interest rate is accelerated into the first year, resulting in an overall first year interest rate of 8.91%, of which only 4.25% is payable in cash. Thereafter, the paid-in-kind interest ends and the cash interest rate of 4.25% is payable for the remainder of the term.
The Seller Loan is guaranteed by Noble-Cayman and is secured by a mortgage on the Noble Johnny Whitstine and by the pledge of the shares of the single-purpose entity that owns the rig. The Seller Loan contains debt to total capitalization ratio and minimum liquidity financial covenants substantially similar to the 2017 Credit Facility, and an asset and revenue covenant substantially similar to the 2026 Notes as well as other covenants and provisions customarily found in secured transactions. The Seller Loan requires immediate repayment on the occurrence of certain events, including the termination of the drilling contract entered into at the time of the purchase of the rig.
Senior Notes Interest Rate Adjustments
During 2016 and 2017, we experienced debt rating downgrades by Moody’s Investors Service and S&P Global Ratings, which reduced our debt ratings below investment grade. As a result of these downgrades, we experienced interest rate increases during 2016 and 2017 on our Senior

17
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)

Notes due 2018 (the “2018 Notes”), our Senior Notes due 2025 (the “2025 Notes”) and our Senior Notes due 2045 (the “2045 Notes”), all of which are subject to provisions that vary the applicable interest rates based on our debt rating. On October 18, 2017, S&P Global Ratings further reduced our debt rating, which increased the interest rates on the 2025 Notes and the 2045 Notes to 7.95% and 8.95%, respectively, effective April 2018. These senior notes have reached the contractually defined maximum interest rate set for each rating agency and no further interest rate increases are possible. The interest rates on these senior notes may be decreased if our debt ratings were to be raised by either rating agency above specified levels. Our other outstanding senior notes do not contain provisions varying applicable interest rates based upon our credit ratings.
Debt Tender Offers, Repayments, and Open Market Repurchases
In January 2018, we commenced cash tender offers for the 2018 Notes, our Senior Notes due 2019 (the “2019 Notes”), our Senior Notes due 2020, our Senior Notes due 2021, our Senior Notes due 2022 and our Senior Notes due 2024. In February 2018, we purchased $754.2 million aggregate principal amount of these senior notes for $750.0 million, plus accrued interest, using the net proceeds of the 2026 Notes issuance and cash on hand. As a result of this transaction, we recognized a net loss of approximately $3.5 million.
In February 2018, we redeemed the remaining principal amount of $61.9 million of the 2019 Notes for approximately $65.3 million, plus accrued interest. As a result of this transaction, we recognized a net loss of approximately $3.5 million.
In March 2018, we repaid the remaining aggregate principal amount of $126.6 million of the 2018 Notes at maturity using cash on hand.
In March 2018, we purchased $9.5 million aggregate principal amount of various tranches of our senior notes for approximately $8.7 million, plus accrued interest, as open market repurchases and recognized a net gain of approximately $0.5 million.
In August 2018, we purchased $0.4 million aggregate principal amount of our Senior Notes due 2042 (the “2042 Notes”) for approximately $0.3 million, plus accrued interest, as open market repurchases and recognized a net gain of approximately $0.1 million.
Covenants
The 2015 Credit Facility is guaranteed by NHUS and NHIL. The 2015 Credit Facility contains a covenant that limits our ratio of debt to total tangible capitalization, as defined in the 2015 Credit Facility, to 0.60 at the end of each fiscal quarter.
The 2017 Credit Facility contains certain financial covenants applicable to NHUK and its subsidiaries, including (i) a covenant restricting debt to total tangible capitalization to not greater than 0.55 at the end of each fiscal quarter, (ii) a minimum Liquidity requirement of $300.0 million, (iii) a covenant that, beginning with the fiscal quarter ending March 31, 2018, the ratio of the Rig Value (as defined in the 2017 Credit Facility) of Marketed Rigs (as defined in the 2017 Credit Facility) to the sum of commitments under the 2017 Credit Facility plus indebtedness for borrowed money of the borrowers and guarantors, in each case, that directly own Marketed Rigs, is not less than 3:00 to 1:00 at the end of each fiscal quarter and (iv) a covenant that, beginning with the fiscal quarter ending March 31, 2018, the ratio of (A) the Rig Value of the Closing Date Rigs (as defined in the 2017 Credit Facility) that are directly wholly owned by the borrowers and guarantors to (B) the Rig Value of the Closing Date Rigs owned by NHUK, subsidiaries of NHUK and certain local content affiliates, is not less than 80% at the end of each fiscal quarter (such covenants described in (iii) and (iv) of this paragraph, the “Guarantor Ratio Covenants”). The 2017 Credit Facility also includes restrictions on borrowings if, after giving effect to any such borrowings and the application of the proceeds thereof, the aggregate amount of Available Cash (as defined in the 2017 Credit Facility) would exceed $200.0 million.
NHUK has guaranteed the obligations of the borrowers under the 2017 Credit Facility. In addition, on January 19, 2018 certain indirect subsidiaries of Noble-UK became guarantors under the 2017 Credit Facility, including Noble Dave Beard Limited, Noble Drilling (TVL) Ltd., Noble Resources Limited, Noble SA Limited, Noble Bob Douglas LLC, Noble Drilling Holding LLC, Noble Drilling International GmbH, Noble Leasing (Switzerland) GmbH, and Noble Leasing III (Switzerland) GmbH. Certain other subsidiaries of Noble-UK may be required from time to time to guarantee the obligations of the borrowers under the 2017 Credit Facility in order maintain compliance with the Guarantor Ratio Covenants.
The 2017 Credit Facility contains additional restrictive covenants generally applicable to NHUK and its subsidiaries, including restrictions on the incurrence of liens and indebtedness, mergers and other fundamental changes, restricted payments, repurchases and redemptions of indebtedness with maturities outside of the maturity of the 2017 Credit Facility, sale and leaseback transactions and transactions with affiliates.
In addition to the covenants from the Credit Facilities noted above, the covenants from the 2026 Notes described under “—Debt Issuance” above, and the covenants from the Seller Loan described under"—Seller Financing of Rig" above, the indentures governing our outstanding senior unsecured notes contain covenants that place restrictions on certain merger and consolidation transactions, unless we are the surviving entity or the other party assumes the obligations under the indenture, and on the ability to sell or transfer all or substantially all of our assets. There are also restrictions on incurring or assuming certain liens and on entering into sale and lease-back transactions.
At September 30, 2018, we were in compliance with all applicable debt covenants. We continually monitor compliance with the covenants under our Credit Facilities, senior notes and Seller Loan and expect to remain in compliance throughout 2018.

18
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)

Fair Value of Debt
Fair value represents the amount at which an instrument could be exchanged in a current transaction between willing parties. The estimated fair value of our debt instruments was based on the quoted market prices for similar issues or on the current rates offered to us for debt of similar remaining maturities (Level 2 measurement). All remaining fair value disclosures are presented in “Note 14— Fair Value of Financial Instruments.”
The following table presents the carrying value, net of unamortized debt issuance costs and discounts, and the estimated fair value of our total debt, not including the effect of unamortized debt issuance costs, respectively:
 
 
September 30, 2018
 
December 31, 2017
 
 
Carrying Value
 
Estimated Fair Value
 
Carrying Value
 
Estimated Fair Value
Senior unsecured notes:
 
 
 
 
 
 
 
 
5.75% Senior Notes due March 2018
 
$
—

 
$
—

 
$
249,843

 
$
250,830

7.50% Senior Notes due March 2019
 
—

 
—

 
201,535

 
206,881

4.90% Senior Notes due August 2020
 
65,798

 
65,776

 
167,422

 
163,283

4.625% Senior Notes due March 2021
 
92,947

 
91,437

 
208,095

 
195,687

3.95% Senior Notes due March 2022
 
41,612

 
38,424

 
125,307

 
107,348

7.75% Senior Notes due January 2024
 
782,661

 
795,651

 
971,498

 
861,160

7.95% Senior Notes due April 2025
 
446,413

 
439,222

 
446,106

 
380,732

7.875% Senior Notes due February 2026
 
738,188

 
777,690

 
—

 
—

6.20% Senior Notes due August 2040
 
396,788

 
307,740

 
396,738

 
274,988

6.05% Senior Notes due March 2041
 
394,596

 
305,368

 
394,514

 
273,988

5.25% Senior Notes due March 2042
 
493,778

 
361,169

 
494,063

 
315,430

8.95% Senior Notes due April 2045
 
390,651

 
387,048

 
390,589

 
320,396

Other:
 
 
 
 
 
 
 
 
Seller-financed secured loan due September 2022
 
59,544

 
58,547

 
—

 
—

Total debt
 
3,902,976

 
3,628,072

 
4,045,710

 
3,350,723

Current maturities of long-term debt
 
—

 
—

 
249,843

 
250,830

Long-term debt
 
$
3,902,976

 
$
3,628,072

 
$
3,795,867

 
$
3,099,893


19
NOBLE CORPORATION PLC AND SUBSIDIARIES
NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share data)

Note 8— Accumulated Other Comprehensive Income (Loss)
The following table presents the changes in the accumulated balances for each component of AOCI for the nine months ended September 30, 2018 and 2017. All amounts within the table are shown net of tax.
 
 
Unrealized Losses on Cash Flow Hedges (1)
 
Defined Benefit Pension Items (2)
 
Foreign Currency Items
 
Total
Balance at December 31, 2016
 
$
—

 
$
(35,865
)
 
$
(16,275
)
 
$
(52,140
)
Activity during period:
 
 
 
 
 
 
 
 
Other comprehensive income before reclassifications
 
674

 
—

 
749

 
1,423

Amounts reclassified from AOCI
 
—

 
1,156

 
—

 
1,156

Net other comprehensive income
 
674

 
1,156

 
749

 
2,579

Balance at September 30, 2017
 
$
674

 
$
(34,709
)
 
$
(15,526
)
 
$
(49,561
)