ENSCO PLC, 10-K filed on 2/25/2016
Annual Report
Document And Entity Information (USD $)
12 Months Ended
Dec. 31, 2015
Feb. 19, 2016
Jun. 30, 2015
Document And Entity Information [Abstract]
 
 
 
Document Type
10-K 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Dec. 31, 2015 
 
 
Entity Registrant Name
Ensco plc 
 
 
Entity Central Index Key
0000314808 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Document Fiscal Year Focus
2015 
 
 
Document Fiscal Period Focus
FY 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Public Float
 
 
$ 5,225,851,000 
Entity Common Shares, Shares Outstanding
 
235,274,198 
 
Consolidated Statements Of Income (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Income Statement [Abstract]
 
 
 
OPERATING REVENUES
$ 4,063.4 
$ 4,564.5 
$ 4,323.4 
OPERATING EXPENSES
 
 
 
Contract drilling (exclusive of depreciation)
1,869.6 
2,076.9 
1,947.1 
Asset Impairment Charges
2,746.4 
4,218.7 
Depreciation
572.5 
537.9 
496.2 
General and administrative
118.4 
131.9 
146.8 
Total operating expenses
5,306.9 
6,965.4 
2,590.1 
OPERATING INCOME
(1,243.5)
(2,400.9)
1,733.3 
OTHER INCOME (EXPENSE)
 
 
 
Interest income
9.9 
13.0 
16.6 
Interest expense, net
(216.3)
(161.4)
(158.8)
Other, net
(21.3)
0.5 
42.1 
Other income (expense), net
(227.7)
(147.9)
(100.1)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
(1,471.2)
(2,548.8)
1,633.2 
PROVISION FOR INCOME TAXES
 
 
 
Current income tax expense
144.1 
264.0 
193.0 
Deferred income tax expense (benefit)
(158.0)
(123.5)
10.1 
Total provision for income taxes
(13.9)
140.5 
203.1 
INCOME FROM CONTINUING OPERATIONS
(1,457.3)
(2,689.3)
1,430.1 
DISCONTINUED OPERATIONS, NET
(128.6)
(1,199.2)
(2.2)
NET INCOME
(1,585.9)
(3,888.5)
1,427.9 
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
(8.9)
(14.1)
(9.7)
NET INCOME ATTRIBUTABLE TO ENSCO
(1,594.8)
(3,902.6)
1,418.2 
EARNINGS PER SHARE - BASIC
 
 
 
Continuing operations
$ (6.33)
$ (11.70)
$ 6.09 
Discontinued operations
$ (0.55)
$ (5.18)
$ (0.01)
Total earnings per share - basic
$ (6.88)
$ (16.88)
$ 6.08 
EARNINGS PER SHARE - DILUTED
 
 
 
Continuing operations
$ (6.33)
$ (11.70)
$ 6.08 
Discontinued operations
$ (0.55)
$ (5.18)
$ (0.01)
Total earnings per share - diluted
$ (6.88)
$ (16.88)
$ 6.07 
NET INCOME ATTRIBUTABLE TO ENSCO SHARES - BASIC AND DILUTED
$ (1,596.8)
$ (3,910.5)
$ 1,403.1 
WEIGHTED-AVERAGE SHARES OUTSTANDING
 
 
 
Basic
232.2 
231.6 
230.9 
Diluted
232.2 
231.6 
231.1 
CASH DIVIDENDS PER SHARE
$ 0.6 
$ 3.0 
$ 2.25 
Consolidated Statements of Comprehensive Income (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2015
Sep. 30, 2015
Jun. 30, 2015
Mar. 31, 2015
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Statement of Comprehensive Income [Abstract]
 
 
 
 
 
 
 
 
 
 
 
NET INCOME
$ (2,470.3)
$ 293.8 
$ 262.7 
$ 327.9 
$ (3,448.5)
$ 432.9 
$ (1,169.6)
$ 296.7 
$ (1,585.9)
$ (3,888.5)
$ 1,427.9 
OTHER COMPREHENSIVE INCOME (LOSS), NET
 
 
 
 
 
 
 
 
 
 
 
Net change in fair value of derivatives
 
 
 
 
 
 
 
 
(23.6)
(11.7)
(5.8)
Reclassification of gains and losses on derivative instruments from other comprehensive (income) loss into net income
 
 
 
 
 
 
 
 
22.2 
(0.9)
2.0 
Other
 
 
 
 
 
 
 
 
2.0 
6.3 
1.9 
NET OTHER COMPREHENSIVE INCOME (LOSS)
 
 
 
 
 
 
 
 
0.6 
(6.3)
(1.9)
COMPREHENSIVE INCOME
 
 
 
 
 
 
 
 
(1,585.3)
(3,894.8)
1,426.0 
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
 
 
 
 
 
 
 
 
(8.9)
(14.1)
(9.7)
COMPREHENSIVE INCOME ATTRIBUTABLE TO ENSCO
 
 
 
 
 
 
 
 
$ (1,594.2)
$ (3,908.9)
$ 1,416.3 
Consolidated Balance Sheets (USD $)
Dec. 31, 2015
Dec. 31, 2014
CURRENT ASSETS
 
 
Cash and cash equivalents
$ 121,300,000 
$ 664,800,000 
Short-term Investments
1,180,000,000 
757,300,000 
Accounts receivable, net
582,000,000 
883,300,000 
Other
401,800,000 
585,600,000 
Total current assets
2,285,100,000 
2,891,000,000 
PROPERTY AND EQUIPMENT, AT COST
12,719,400,000 
14,975,500,000 
Less accumulated depreciation
1,631,600,000 
2,440,700,000 
Property and equipment, net
11,087,800,000 
12,534,800,000 
GOODWILL
276,100,000 
OTHER ASSETS, NET
264,100,000 
338,900,000 
TOTAL ASSETS
13,637,000,000 
16,040,800,000 
CURRENT LIABILITIES
 
 
Accounts payable - trade
224,600,000 
373,200,000 
Accrued liabilities and other
550,900,000 
694,100,000 
Short-term debt
Current maturities of long-term debt
34,800,000 
Total current liabilities
775,500,000 
1,102,100,000 
LONG-TERM DEBT
5,895,100,000 
5,885,600,000 
DEFERRED INCOME TAXES
4,400,000 
162,900,000 
OTHER LIABILITIES
444,800,000 
667,300,000 
ENSCO SHAREHOLDERS' EQUITY
 
 
Additional paid-in capital
5,554,500,000 
5,517,500,000 
Retained earnings
985,300,000 
2,720,400,000 
Accumulated other comprehensive income
12,500,000 
11,900,000 
Treasury shares, at cost, 7.8 million shares and 6.5 million shares as of December 31, 2015 and 2014
(63,800,000)
(59,000,000)
Total Ensco shareholders' equity
6,512,900,000 
8,215,000,000 
NONCONTROLLING INTERESTS
4,300,000 
7,900,000 
Total equity
6,517,200,000 
8,222,900,000 
Total liabilities and shareholders' equity
13,637,000,000 
16,040,800,000 
Class A Ordinary Shares, U.S. [Member]
 
 
ENSCO SHAREHOLDERS' EQUITY
 
 
Common shares, value
24,300,000 
24,100,000 
Common Class B, Par Value In GBP [Member]
 
 
ENSCO SHAREHOLDERS' EQUITY
 
 
Common shares, value
$ 100,000 
$ 100,000 
Consolidated Balance Sheets (Parenthetical)
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Class A Ordinary Shares, U.S. [Member]
USD ($)
Dec. 31, 2014
Class A Ordinary Shares, U.S. [Member]
USD ($)
Dec. 31, 2015
Common Class B, Par Value In GBP [Member]
GBP (£)
Dec. 31, 2014
Common Class B, Par Value In GBP [Member]
GBP (£)
Common shares, par value
 
 
$ 0.10 
$ 0.10 
£ 1 
£ 1 
Common shares, shares authorized
 
 
450,000,000 
450,000,000.0 
50,000 
50,000 
Common shares, shares issued
 
 
243,100,000 
240,700,000 
50,000 
50,000 
Treasury shares, shares held
7,800,000 
6,500,000 
 
 
 
 
Consolidated Statements Of Cash Flows (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
OPERATING ACTIVITIES
 
 
 
Net income
$ (1,585.9)
$ (3,888.5)
$ 1,427.9 
Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:
 
 
 
Asset Impairment Charges
2,746.4 
4,218.7 
Cost of Services, Depreciation
572.5 
537.9 
496.2 
Deferred income tax expense (benefit)
(158.0)
(123.5)
10.1 
Discontinued operations, net
128.6 
1,199.2 
2.2 
Share-based compensation expense
40.2 
45.1 
50.3 
Gains (Losses) on Extinguishment of Debt
33.5 
Provision for Doubtful Accounts
24.1 
(5.0)
11.7 
Amortization of intangibles and other, net
(1.4)
(7.9)
(28.4)
Other
(18.1)
(11.4)
(7.7)
Changes in operating assets and liabilities
(84.0)
93.3 
(151.1)
Net cash provided by operating activities of continuing operations
1,697.9 
2,057.9 
1,811.2 
INVESTING ACTIVITIES
 
 
 
Purchases of short-term investments
(1,780.0)
(790.6)
(50.0)
Additions to property and equipment
(1,619.5)
(1,566.7)
(1,763.5)
Maturities of short-term investments
1,357.3 
83.3 
50.0 
Proceeds from Sale of Property, Plant, and Equipment
1.6 
169.2 
6.0 
Net cash used in investing activities of continuing operations
(2,040.6)
(2,104.8)
(1,757.5)
FINANCING ACTIVITIES
 
 
 
Proceeds from issuance of senior notes
1,078.7 
1,246.4 
Reduction of long-term borrowings
(1,072.5)
(60.1)
(47.5)
Cash dividends paid
(141.2)
(703.0)
(525.6)
Equity financing costs
(30.3)
Debt financing costs
(10.5)
(13.4)
(4.6)
Proceeds from exercise of share options
0.3 
2.6 
22.3 
Other
(16.3)
(29.8)
(21.7)
Net cash (used in) provided by financing activities of continuing operations
(191.8)
442.7 
(577.1)
DISCONTINUED OPERATIONS
 
 
 
Operating activities
(10.9)
(3.8)
169.3 
Investing activities
2.2 
107.2 
32.8 
Net Cash Provided by (Used in) Discontinued Operations
(8.7)
103.4 
202.1 
Effect of exchange rate changes on cash and cash equivalents
(0.3)
(0.2)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(543.5)
499.2 
(321.5)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
664.8 
165.6 
487.1 
CASH AND CASH EQUIVALENTS, END OF YEAR
$ 121.3 
$ 664.8 
$ 165.6 
Description Of The Business And Summary Of Significant Accounting Policies
DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    Business
 
We are one of the leading providers of offshore contract drilling services to the international oil and gas industry. We own and operate an offshore drilling rig fleet of 64 rigs spanning most of the strategic markets around the globe. Our rig fleet includes ten drillships, 13 dynamically positioned semisubmersible rigs, three moored semisubmersible rigs and 42 jackup rigs, including four rigs under construction.  Our fleet is the world's second largest amongst competitive rigs, our ultra-deepwater fleet is one of the newest in the industry, and our premium jackup fleet is the largest of any offshore drilling company.

Our customers include many of the leading national and international oil companies, in addition to many independent operators. We are among the most geographically diverse offshore drilling companies, with current operations spanning approximately 15 countries on six continents. The markets in which we operate include the U.S. Gulf of Mexico, Mexico, Brazil, the Mediterranean, the North Sea, the Middle East, West Africa, Australia and Southeast Asia.

We provide drilling services on a "day rate" contract basis. Under day rate contracts, we provide a drilling rig and rig crews and receive a fixed amount per day for each day we are performing drilling or related services. 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. In addition, our customers may pay all or a portion of the cost of moving our equipment and personnel to and from the well site.

Redomestication

During 2009, we completed a reorganization of the corporate structure of the group of companies controlled by our predecessor, ENSCO International Incorporated ("Ensco Delaware"), pursuant to which an indirect, wholly-owned subsidiary merged with Ensco Delaware, and Ensco plc became our publicly-held parent company incorporated under English law (the "redomestication").

We remain subject to the U.S. Securities and Exchange Commission (the "SEC") reporting requirements, the mandates of the Sarbanes-Oxley Act of 2002, as amended, and the applicable corporate governance rules of the New York Stock Exchange ("NYSE"), and we continue to report our consolidated financial results in U.S. dollars and in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). We also comply with additional reporting requirements of English law.

Basis of Presentation—U.K. Companies Act 2006 Section 435 Statement

The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP, which the Board of Directors consider to be the most meaningful presentation of our results of operations and financial position.  The accompanying consolidated financial statements do not constitute statutory accounts required by the U.K. Companies Act 2006, which will be prepared in accordance with Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (“FRS 102”) as issued in August 2014. An explanation of how the transition to FRS 102 has affected financial position and financial performance of the Group will be provided in those statements, which will be delivered to the Registrar of Companies in the U.K. following the annual general meeting of shareholders.  The U.K. statutory accounts are expected to include an unqualified auditor’s report, which is not expected to contain any references to matters on which the auditors drew attention by way of emphasis without qualifying the report or any statements under Sections 498(2) or 498(3) of the U.K. Companies Act 2006.
 
Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Ensco plc and its majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Certain previously reported amounts have been reclassified to conform to the current year presentation.

Pervasiveness of Estimates

The preparation of financial statements in conformity with U.S. GAAP 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.

Foreign Currency Remeasurement and Translation

Our functional currency is the U.S. dollar. As is customary in the oil and gas industry, a majority of our revenues and expenses 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 ("foreign currencies"). These transactions are remeasured in U.S. dollars based on a combination of both current and historical exchange rates. Most transaction gains and losses, including certain gains and losses on our derivative instruments, are included in other, net, in our consolidated statement of operations.  Certain gains and losses from the translation of foreign currency balances of our non-U.S. dollar functional currency subsidiaries are included in accumulated other comprehensive income on our consolidated balance sheet.  Net foreign currency exchange gains and losses, inclusive of offsetting fair value derivatives, were $5.4 million of gains, $2.6 million of losses and $6.4 million of gains, and were included in other, net, in our consolidated statements of operations for the years ended December 31, 2015, 2014 and 2013, respectively.

Cash Equivalents and Short-Term Investments

Highly liquid investments with maturities of three months or less at the date of purchase are considered cash equivalents. Highly liquid investments with maturities of greater than three months but less than one year at the date of purchase are classified as short-term investments.

Short-term investments, consisting of time deposits with initial maturities in excess of three months but less than one year, were included in other current assets on our consolidated balance sheets and totaled $1.2 billion and $757.3 million as of December 31, 2015 and 2014, respectively. Cash flows from purchases and maturities of short-term investments were classified as investing activities in our consolidated statements of cash flows for the years ended December 31, 2015, 2014 and 2013. To mitigate our credit risk, our investments in time deposits are diversified across multiple, high-quality financial institutions.
    
Property and Equipment

All costs incurred in connection with the acquisition, construction, major enhancement and improvement of assets are capitalized, including allocations of interest incurred during periods that our drilling rigs are under construction or undergoing major enhancements and improvements. Repair and maintenance costs are charged to contract drilling expense in the period in which they are incurred. Upon sale or retirement of assets, the related cost and accumulated depreciation are removed from the balance sheet, and the resulting gain or loss is included in contract drilling expense, unless reclassified to discontinued operations.

Our property and equipment is depreciated on a straight-line basis, after allowing for salvage values, over the estimated useful lives of our assets. Drilling rigs and related equipment are depreciated over estimated useful lives ranging from four to 35 years. Buildings and improvements are depreciated over estimated useful lives ranging from two to 30 years. Other equipment, including computer and communications hardware and software costs, is depreciated over estimated useful lives ranging from three to six years.

On December 31, 2015, we evaluated our current judgments and assumptions used in determining the useful lives of our drilling rigs. We considered both historical experience and expectations of future operations, utilization and performance of our assets based on recent changes in the current market environment. As a result, we reduced the useful lives of certain floaters and jackups effective January 1, 2016. We estimate this reduction in useful lives will increase depreciation expense by approximately $20.0 million for the year ended December 31, 2016.
 
We evaluate the carrying value of our property and equipment for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. For property and equipment used in our operations, recoverability generally is determined by comparing the carrying value of an asset to the expected undiscounted future cash flows of the asset. If the carrying value of an asset is not recoverable, the amount of impairment loss is measured as the difference between the carrying value of the asset and its estimated fair value. Property and equipment held-for-sale is recorded at the lower of net book value or net realizable value.

During 2015, we recorded a pre-tax, non cash loss on impairment of long-lived assets of $2.6 billion, of which $2.5 billion related to our long-lived assets held-for-use. See "Note 3 - Property and Equipment" for additional information on these impairments. We estimate the impairment charge on our held-for-use assets will cause a decline in depreciation expense of approximately $170 million for the year ended December 31, 2016.
    
If the global economy deteriorates and/or our expectation relative to future offshore drilling industry conditions decline, it is reasonably possible that additional impairment charges may occur with respect to specific individual rigs, groups of rigs, such as a specific type of drilling rig, or rigs in a certain geographic location.

Goodwill
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, represent our reporting units.

We test goodwill for impairment on an annual basis as of December 31 or when events or changes in circumstances indicate that a potential impairment exists.  When testing goodwill for impairment, we first consider whether or not to assess qualitative factors to determine whether the existence of events or circumstances lead to a determination that is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. If we conclude that the fair value of one or both of our reporting units has more-likely-than-not declined below its carrying amount after qualitatively assessing existing facts and circumstances, or, alternatively, if we elect to forgo the qualitative assessment, we perform a quantitative assessment whereby we estimate the fair value of each reporting unit.  In most instances, our calculation of the fair value of our reporting units is based on estimates of future discounted cash flows to be generated by the drilling rigs in the reporting unit.

As of December 31, 2015, given the deterioration in forecasted day rates and utilization, the sustained decline in our stock price and the impairment charge on certain rigs during the fourth quarter, we elected to forgo the qualitative assessment and performed a quantitative assessment on both reporting units. As a result of the quantitative assessment, we concluded that our Floater and Jackup reporting units' goodwill balances were impaired. We recorded a non-cash loss on impairment of $192.6 million and $83.5 million for the Jackups and Floaters reporting units, respectively, which was included in loss on impairment in our consolidated statement of operations for the year ended December 31, 2015. There is no remaining goodwill on our consolidated balance sheet as of December 31, 2015. See "Note 8 - Goodwill and Other Intangible Assets and Liabilities" for additional information on our goodwill.
 
Operating Revenues and Expenses    

Our drilling contracts ("contracts") are performed on a day rate basis, and the terms of such contracts are typically for a specific period of time or the period of time required to complete a specific task, such as drill a well. Contract revenues and expenses are recognized on a per day basis, as the work is performed. Day rate revenues are typically earned, and contract drilling expense is typically incurred, on a uniform basis over the terms of our contracts.

In connection with some 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 and costs incurred prior to commencement of drilling operations are deferred and recognized on a straight-line basis over the period that the related drilling services are performed. Demobilization fees and related 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 mobilization costs were included in other current assets and other assets, net, on our consolidated balance sheets and totaled $77.0 million and $95.7 million as of December 31, 2015 and 2014, respectively. Deferred mobilization revenue was included in accrued liabilities and other, and other liabilities on our consolidated balance sheets and totaled $111.8 million and $149.4 million as of December 31, 2015 and 2014, respectively.

In connection with some contracts, we receive up-front lump-sum fees or similar compensation for capital improvements to our drilling rigs. Such compensation is deferred and recognized as revenue over the period that the related drilling services are performed, and the cost is capitalized and depreciated over the useful life of the asset. Deferred revenue associated with capital improvements was included in accrued liabilities and other, and other liabilities on our consolidated balance sheets and totaled $287.2 million and $428.9 million as of December 31, 2015 and 2014, respectively.

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 when services have been completed under the terms of the contract, the termination fee can be reasonably measured and collectability is reasonably assured.

For the year ended December 31, 2015, operating revenues included $110.6 million for the ENSCO DS-4 lump sum termination fee, which we collected in October, as well as $98.3 million related to the ENSCO DS-9 termination, which included an $18.4 million lump-sum fee for mobilization, capital upgrades and day rate revenue earned during initial acceptance testing. Under the terms of the ENSCO DS-9 contract, our customer is obligated to pay us monthly termination fees for a period of two years equal to the operating day rate (approximately $550,000), which will be reduced pursuant to our obligation to mitigate idle rig costs, such as manning and maintenance activity, while the rig is idle and without a contract. We are in discussions with our customer on the amount of this reduction.  The day rate may also be adjusted if we recontract the rig.

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 over the corresponding certification periods. Deferred regulatory certification and compliance costs were included in other current assets and other assets, net, on our consolidated balance sheets and totaled $21.2 million and $20.0 million as of December 31, 2015 and 2014, respectively.

In certain countries in which we operate, taxes such as sales, use, value-added, gross receipts and excise may be assessed by the local government on our revenues. We generally record our tax-assessed revenue transactions on a net basis in our consolidated statement of operations.

Derivative Instruments

We use derivatives to reduce our exposure to various market risks, primarily foreign currency exchange rate risk. See "Note 5 - Derivative Instruments" for additional information on how and why we use derivatives.

All derivatives are recorded on our consolidated balance sheet at fair value. Derivatives subject to legally enforceable master netting agreements are not offset on our consolidated balance sheet. 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. Derivatives qualify for hedge accounting when they are formally designated as hedges and are effective in reducing the risk exposure that they are designated to hedge. Our assessment of hedge effectiveness is formally documented at hedge inception, and we review hedge effectiveness and measure any ineffectiveness throughout the designated hedge period on at least a quarterly basis.

Changes in the fair value of derivatives that are designated as hedges of the variability in expected future cash flows associated with existing recognized assets or liabilities or forecasted transactions ("cash flow hedges") are recorded in accumulated other comprehensive income ("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 transactions.

Gains and losses on a cash flow hedge, or a portion of a cash flow hedge, that no longer qualifies as effective due to an unanticipated change in the forecasted transaction are recognized currently in earnings and included in other, net, in our consolidated statement of operations based on the change in the fair value of the derivative. When a forecasted transaction is probable of not occurring, gains and losses on the derivative previously recorded in AOCI are reclassified currently into earnings and included in other, net, in our consolidated statement of operations.

We occasionally enter into derivatives that hedge the fair value of recognized assets or liabilities, but do not designate such derivatives as hedges or the derivatives otherwise do not qualify for hedge accounting. In these situations, a natural hedging relationship generally exists where changes in the fair value of the derivatives offset changes in the fair value of the underlying hedged items. Changes in the fair value of these derivatives are recognized currently in earnings in other, net, in our consolidated statement of operations.

Derivatives with asset fair values are reported in other current assets or other assets, net, on our consolidated balance sheet depending on maturity date. Derivatives with liability fair values are reported in accrued liabilities and other, or other liabilities on our consolidated balance sheet depending on maturity date.

Income Taxes

We conduct operations and earn income in numerous countries. Current income taxes are recognized for the amount of taxes payable or refundable based on the laws and income tax rates in the taxing jurisdictions in which operations are conducted and income is earned.
 
Deferred tax assets and liabilities are recognized for the anticipated future tax effects of temporary differences between the financial statement basis and the tax basis of our assets and liabilities using the enacted tax rates in effect at year-end. A valuation allowance for deferred tax assets is recorded when it is more-likely-than-not that the benefit from the deferred tax asset will not be realized. We do not offset deferred tax assets and deferred tax liabilities attributable to different tax paying jurisdictions.
    
We operate in certain jurisdictions where tax laws relating to the offshore drilling industry are not well developed and change frequently. Furthermore, we may enter into transactions with affiliates or employ other tax planning strategies that generally are subject to complex tax regulations. As a result of the foregoing, the tax liabilities and assets we recognize in our financial statements may differ from the tax positions taken, or expected to be taken, in our tax returns. Our tax positions are evaluated for recognition using a more-likely-than-not threshold, and those tax positions requiring recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon effective settlement with a taxing authority that has full knowledge of all relevant information. Interest and penalties relating to income taxes are included in current income tax expense in our consolidated statement of operations.

Our drilling rigs frequently move from one taxing jurisdiction to another based on where they are contracted to perform drilling services. The movement of drilling rigs among taxing jurisdictions may involve a transfer of drilling rig ownership among our subsidiaries (“intercompany rig sale”). The pre-tax profit resulting from an intercompany rig sale is eliminated from our consolidated financial statements, and the carrying value of a rig sold in an intercompany transaction remains at historical net depreciated cost prior to the transaction. Our consolidated financial statements do not reflect the asset disposition transaction of the selling subsidiary or the asset acquisition transaction of the acquiring subsidiary. Income taxes resulting from an intercompany rig sale, as well as the tax effect of any reversing temporary differences resulting from the sale, are deferred and amortized on a straight-line basis over the remaining useful life of the rig.

In some instances, we may determine that certain temporary differences will not result in a taxable or deductible amount in future years, as it is more-likely-than-not we will commence operations and depart from a given taxing jurisdiction without such temporary differences being recovered or settled. Under these circumstances, no future tax consequences are expected and no deferred taxes are recognized in connection with such operations. We evaluate these determinations on a periodic basis and, in the event our expectations relative to future tax consequences change, the applicable deferred taxes are recognized or derecognized.
   
We do not provide deferred taxes on the undistributed earnings of certain subsidiaries because our policy and intention is to reinvest such earnings indefinitely. See "Note 9 - Income Taxes" for additional information on our deferred taxes, unrecognized tax benefits, intercompany transfers of drilling rigs and undistributed earnings.
 
Share-Based Compensation

We sponsor share-based compensation plans that provide equity compensation to our key employees, officers and non-employee directors. Share-based compensation cost is measured at fair value on the date of grant and recognized on a straight-line basis over the requisite service period (usually the vesting period). The amount of compensation cost recognized in our consolidated statement of operations is based on the awards ultimately expected to vest and, therefore, reduced for estimated forfeitures. All changes in estimated forfeitures are based on historical experience and are recognized as a cumulative adjustment to compensation cost in the period in which they occur. See "Note 7 - Benefit Plans" for additional information on our share-based compensation.

Fair Value Measurements

We measure certain of our assets and liabilities based on a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy assigns the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities ("Level 1") and the lowest priority to unobservable inputs ("Level 3").  Level 2 measurements represent inputs that are observable for similar assets or liabilities, either directly or indirectly, other than quoted prices included within Level 1.  See "Note 2 - Fair Value Measurements" for additional information on the fair value measurement of certain of our assets and liabilities.

Earnings Per Share
    
We compute basic and diluted earnings per share ("EPS") in accordance with the two-class method. Net (loss) income attributable to Ensco used in our computations of basic and diluted EPS is adjusted to exclude net income allocated to non-vested shares granted to our employees and non-employee directors. Weighted-average shares outstanding used in our computation of diluted EPS is calculated using the treasury stock method and includes the effect of all potentially dilutive performance awards and excludes non-vested shares.
 
The following table is a reconciliation of (loss) income from continuing operations attributable to Ensco shares used in our basic and diluted EPS computations for each of the years in the three-year period ended December 31, 2015 (in millions):

 
2015
 
2014
 
2013
(Loss) income from continuing operations attributable to Ensco
$
(1,466.1
)
 
$
(2,703.1
)
 
$
1,421.6

Income from continuing operations allocated to non-vested share awards
(2.0
)
 
(7.9
)
 
(15.1
)
(Loss) income from continuing operations attributable to Ensco shares
$
(1,468.1
)
 
$
(2,711.0
)
 
$
1,406.5



The following table is a reconciliation of the weighted-average shares used in our basic and diluted earnings per share computations for each of the years in the three-year period ended December 31, 2015 (in millions):

 
2015
 
2014
 
2013
Weighted-average shares - basic
232.2

 
231.6

 
230.9

Potentially dilutive shares

 

 
.2

Weighted-average shares - diluted
232.2

 
231.6

 
231.1



Antidilutive share options totaling 800,000, 400,000 and 300,000 for the years ended December 31, 2015, 2014 and 2013, respectively, were excluded from the computation of diluted EPS.
 
Noncontrolling Interests

Third parties hold a noncontrolling ownership interest in certain of our non-U.S. subsidiaries. Noncontrolling interests are classified as equity on our consolidated balance sheet and net income attributable to noncontrolling interests is presented separately in our consolidated statement of operations. 

Loss (income) from continuing operations attributable to Ensco for each of the years in the three-year period ended December 31, 2015 was as follows (in millions):

 
2015
 
2014
 
2013
(Loss) income from continuing operations
$
(1,457.3
)
 
$
(2,689.3
)
 
$
1,430.1

Income from continuing operations attributable to noncontrolling interests
(8.8
)
 
(13.8
)
 
(8.5
)
(Loss) income from continuing operations attributable to Ensco
$
(1,466.1
)
 
$
(2,703.1
)
 
$
1,421.6


    
Loss from discontinued operations attributable to Ensco for each of the years in the three-year period ended December 31, 2015 was as follows (in millions):

 
2015
 
2014
 
2013
Loss from discontinued operations
$
(128.6
)
 
$
(1,199.2
)
 
$
(2.2
)
Income from discontinued operations attributable to noncontrolling interests
(.1
)
 
(.3
)
 
(1.2
)
Loss from discontinued operations attributable to Ensco
$
(128.7
)
 
$
(1,199.5
)
 
$
(3.4
)

New Accounting Pronouncements
    
In November 2015, the Financial Accounting Standards Board issued Accounting Standards Update 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which requires that deferred tax assets and liabilities be classified as noncurrent on the balance sheet. This update is effective for annual and interim periods beginning after December 15, 2016. Early adoption is permitted for all entities as of the beginning of an interim or annual reporting period. This update may be applied either prospectively to all deferred tax assets and liabilities or retrospectively to all periods presented. We elected to early adopt this update on a retrospective basis effective December 31, 2015. Accordingly, all current deferred tax assets and liabilities were reclassified to noncurrent on the balance sheet for all periods presented. As a result of adopting this update retrospectively, we reclassified current deferred tax assets and liabilities of $43.8 million and $2.5 million, respectively, on our consolidated balance sheet as of December 31, 2014.

In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, as updated by Update 2015-15, Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements - Amendments to SEC Paragraphs Pursuant to Staff Announcements at June 18, 2015 EITF Meeting, which require that debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the carrying amount of the related debt liability, consistent with debt discounts. Debt issuance costs related to line-of-credit arrangements may be presented as an asset regardless of whether there are any outstanding borrowings on the arrangement. These updates are effective for annual and interim periods for fiscal years beginning after December 15, 2015. Early application is permitted. We will adopt these accounting standards on a retrospective basis effective January 1, 2016. There will be no impact to the manner in which debt issuance costs are amortized on our consolidated financial statements.

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) ("Update 2014-09"), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. In July 2015, the Financial Accounting Standards Board voted to delay the effective date one year. Update 2014-09 is now effective for annual and interim periods for fiscal years beginning after December 15, 2017, though companies have an option of adopting the standard for fiscal years beginning after December 15, 2016. Update 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP and may be adopted using a retrospective, modified retrospective or cumulative effect approach. We are currently evaluating the effect that Update 2014-09 will have on our consolidated financial statements and related disclosures.

In April 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity ("Update 2014-08"). The new guidance changes the criteria for reporting discontinued operations and enhances disclosure requirements. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. We adopted Update 2014-08 effective January 1, 2015. Our adoption will generally reduce the number of rig disposals reported as discontinued operations since only rig disposals representing a strategic shift in operations will be reported as discontinued operations prospectively in our condensed consolidated financial statements. Operating results related to rigs classified as held-for-sale prior to the adoption of Update 2014-08 will continue to be reported as discontinued operations.
Noncontrolling Interests

Third parties hold a noncontrolling ownership interest in certain of our non-U.S. subsidiaries. Noncontrolling interests are classified as equity on our consolidated balance sheet and net income attributable to noncontrolling interests is presented separately in our consolidated statement of operations. 

Loss (income) from continuing operations attributable to Ensco for each of the years in the three-year period ended December 31, 2015 was as follows (in millions):

 
2015
 
2014
 
2013
(Loss) income from continuing operations
$
(1,457.3
)
 
$
(2,689.3
)
 
$
1,430.1

Income from continuing operations attributable to noncontrolling interests
(8.8
)
 
(13.8
)
 
(8.5
)
(Loss) income from continuing operations attributable to Ensco
$
(1,466.1
)
 
$
(2,703.1
)
 
$
1,421.6


    
Loss from discontinued operations attributable to Ensco for each of the years in the three-year period ended December 31, 2015 was as follows (in millions):

 
2015
 
2014
 
2013
Loss from discontinued operations
$
(128.6
)
 
$
(1,199.2
)
 
$
(2.2
)
Income from discontinued operations attributable to noncontrolling interests
(.1
)
 
(.3
)
 
(1.2
)
Loss from discontinued operations attributable to Ensco
$
(128.7
)
 
$
(1,199.5
)
 
$
(3.4
)

Fair Value Measurements
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 as of December 31, 2015 and 2014 (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 December 31, 2015
 

 
 

 
 

 
 

Supplemental executive retirement plan assets
$
33.1

 
$

 
$

 
$
33.1

Total financial assets
33.1

 

 

 
33.1

Derivatives, net

 
(19.7
)
 

 
(19.7
)
Total financial liabilities
$

 
$
(19.7
)
 
$

 
$
(19.7
)
As of December 31, 2014
 

 
 

 
 

 
 

Supplemental executive retirement plan assets
$
43.2

 
$

 
$

 
$
43.2

Total financial assets
43.2

 

 

 
43.2

Derivatives, net

 
(26.3
)
 

 
(26.3
)
Total financial liabilities
$

 
$
(26.3
)
 
$

 
$
(26.3
)


Supplemental Executive Retirement Plans

Our Ensco supplemental executive retirement plans (the "SERP") are non-qualified plans that provide for eligible employees to defer a portion of their compensation for use after retirement. Assets held in the SERP were marketable securities measured at fair value on a recurring basis using Level 1 inputs and were included in other assets, net, on our consolidated balance sheets as of December 31, 2015 and 2014.  The fair value measurements of assets held in the SERP were based on quoted market prices. Net unrealized gains of $700,000, $2.3 million and $6.2 million from marketable securities held in our SERP were included in other, net, in our consolidated statements of operations for the years ended December 31, 2015, 2014 and 2013, respectively.
 
Derivatives

Our derivatives were measured at fair value on a recurring basis using Level 2 inputs as of December 31, 2015 and 2014.  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 measurements of our derivatives were 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 as of December 31, 2015 and 2014 were as follows (in millions):
 
 
December 31, 2015
 
December 31, 2014
 
 
Carrying
Value
 
Estimated
  Fair
Value
 
Carrying
Value
 
Estimated
  Fair
Value
 
 
 
 
 
 
 
 
 
4.70% Senior notes due 2021
 
$
1,482.7

 
$
1,254.0

 
$
1,479.9

 
$
1,505.3

5.75% Senior notes due 2044
 
1,004.2

 
707.1

 
622.3

 
615.8

6.875% Senior notes due 2020
 
990.9

 
850.5

 
1,008.2

 
1,008.5

5.20% Senior notes due 2025
 
697.6

 
505.2

 

 

4.50% Senior notes due 2024
 
624.3

 
417.4

 
624.2

 
602.0

8.50% Senior notes due 2019
 
566.4

 
510.2

 
583.8

 
611.8

7.875% Senior notes due 2040
 
379.8

 
244.0

 
381.2

 
363.8

7.20% Debentures due 2027
 
149.2

 
133.5

 
149.2

 
171.4

3.25% Senior notes due 2016
 

 

 
998.0

 
1,018.3

4.33% MARAD bonds due 2016
 

 

 
46.6

 
46.8

4.65% MARAD bonds due 2020
 

 

 
27.0

 
29.7

Total 
 
$
5,895.1

 
$
4,621.9

 
$
5,920.4

 
$
5,973.4


 
The estimated fair values of our senior notes and debentures were determined using quoted market prices. The estimated fair values of our U.S. Maritime Administration ("MARAD") bonds were determined using an income approach valuation model. 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 December 31, 2015 and 2014.

See "Note 3 - Property and Equipment" for additional information on the fair value measurement of property and equipment and "Note 8 - Goodwill and Other Intangible Assets and Liabilities" for additional information on the fair value measurement of goodwill.
Property And Equipment
Property And Equipment
PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 2015 and 2014 consisted of the following (in millions):
 
 
2015
 
2014
Drilling rigs and equipment
 
$
11,001.8

 
$
13,253.2

Other
 
180.0

 
135.0

Work in progress
 
1,537.6

 
1,587.3

 
 
$
12,719.4

 
$
14,975.5


 
During 2015, drilling rigs and equipment declined $2.3 billion primarily due to a loss on impairment of $2.6 billion and depreciation expense of $572.5 million. These declines were partially offset by ENSCO DS-8 and ENSCO 110, which were placed into service during 2015, and capital upgrades to the existing rig fleet.
 
Work in progress as of December 31, 2015 primarily consisted of $1.1 billion related to the construction of ultra deepwater drillships ENSCO DS-9 and ENSCO DS-10, $259.8 million related to the construction of ENSCO 140 and ENSCO 141 premium jackups rigs and $71.1 million related to the construction of ENSCO 123, an ultra-premium harsh environment jackup rig. ENSCO DS-9 has been delivered but has not been placed into service.

Work in progress as of December 31, 2014 primarily consisted of $820.1 million related to the construction of ENSCO DS-8, ENSCO DS-9 and ENSCO DS-10 ultra-deepwater drillships, $233.1 million related to a capital enhancement project on ENSCO 5006, $179.3 million related to the construction of ENSCO 110, ENSCO 140 and ENSCO 141 premium jackup rigs, $59.2 million related to the construction of ENSCO 123 ultra-premium harsh environment jackup rig and costs associated with various modification and enhancement projects.

Impairment of Long-Lived Assets

Year Ended December 31, 2015 - During 2015, we recorded a pre-tax, non-cash loss on impairment of long-lived assets of $2,618.9 million, of which $2,470.3 million was included in (loss) income from continuing operations and $148.6 million was included in loss from discontinued operations, net in our consolidated statement of operations.

Assets held-for-sale

We continually assess our rig portfolio and actively work with our rig broker to market certain rigs that no longer meet our standards for economic returns or are not part of our long-term strategic plan. On a quarterly basis, we assess whether any rig meets the criteria established by Financial Accounting Standards Board 360-10-45 for held-for-sale classification on our balance sheet. All rigs classified as held-for-sale are recorded at fair value, less costs to sell. We measure the fair value of our assets held-for-sale by applying a market approach based on unobservable third-party estimated prices that would be received in exchange for the assets in an orderly transaction between market participants. We reassess the fair value of our held-for-sale assets on a quarterly basis and adjust the carrying value, as necessary.

During 2015, we adopted the Financial Accounting Standards Board’s Accounting Standards Update 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity ("Update 2014-08"). Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. As a result, individual assets that were classified as held-for-sale during 2015 are not reported as discontinued operations. Rigs that were classified as held-for-sale prior to 2015 continue to be reported as discontinued operations.

During the third quarter, we began marketing for sale ENSCO 91, an older, less capable jackup rig that we cold-stacked during the second quarter. We concluded that the rig met the held-for-sale criteria during the third quarter and its carrying value was reduced to fair value, less costs to sell, based on its estimated sales price. We recorded a pre-tax, non-cash loss on impairment totaling $10.0 million, which was included in loss on impairment within income from continuing operations in our consolidated statement of operations for the year ended December 31, 2015.

Also during the third quarter, we concluded that impairments were required on certain held-for-sale rigs as a result of declines in fair value. We recorded a pre-tax, non-cash loss on impairment totaling $25.6 million, which was included in loss from discontinued operations, net, in our consolidated statement of operations for the year ended December 31, 2015.

During the fourth quarter, we concluded that additional impairments were required due to our decision to sell our held-for-sale rigs for scrap value. As a result, we recognized a pre-tax, non-cash loss on impairment of $115.8 million, which was included in loss from discontinued operations, net, in our consolidated statement of operations for the year ended December 31, 2015. See “Note 10 - Discontinued Operations” for additional information on rigs classified as held-for-sale and presented in discontinued operations.

Our six held-for-sale rigs have a remaining aggregate carrying value of $5.5 million and are included in other assets, net, on our consolidated balance sheet as of December 31, 2015.

Assets held-for-use

On a quarterly basis, we evaluate the carrying value of our property and equipment to identify events or changes in circumstances ("triggering events") that indicate the carrying value may not be recoverable.

During the fourth quarter, commodity prices declined with Brent crude oil prices trading around $35 per barrel as of December 31, 2015. Commodity prices continued to decline further into 2016, and Brent crude oil prices reached a ten-year low of approximately $26 per barrel in January 2016. These prices resulted in significant capital spending reductions by our customers, causing a decline in day rates for the few contracts executed during the fourth quarter. Customers have delayed drilling programs and are exploring subletting opportunities for contracted rigs thereby exacerbating supply pressure. In addition, certain customers are requesting contract concessions or terminating drilling contracts. Customers are expected to continue to operate under reduced budgets until we see a meaningful recovery in commodity prices. The significant supply and demand imbalance will continue to be adversely impacted by future newbuild deliveries, program delays and lower capital spending by operators. These adverse changes resulted in further deterioration in our forecasted day rates and utilization during the fourth quarter. As a result, we concluded that a triggering event had occurred.

Based on the asset impairment analysis performed as of December 31, 2015, we recorded a pre-tax, non-cash loss on impairment with respect to certain floaters and jackups totaling $2,460.3 million. The impairment charge was included in loss on impairment in our consolidated statement of operations for the year ended December 31, 2015. We measured the fair value of these rigs by applying either an income approach, using projected discounted cash flows, or a market approach. These valuations were based on unobservable inputs that require significant judgments for which there is limited information, including assumptions regarding future day rates, utilization, operating costs and capital requirements.

In instances where we applied an income approach, forecasted day rates and utilization take into account current market conditions and our anticipated business outlook, both of which have been impacted by the adverse changes in the business environment observed during the fourth quarter. The day rates reflect contracted rates during the respective contracted periods and our estimate of market day rates in uncontracted periods. The forecasted market day rates were depressed in the near-term but were forecasted to grow in the longer-term and terminal period. Operating costs were forecasted using a combination of our historical average operating costs and expected future costs, adjusted for an estimated inflation factor. Capital requirements were based on our estimates of future capital costs, taking into consideration our historical trends. The estimated capital requirements included cash outflows to maintain the current operating condition of our rigs through their remaining useful lives.

In instances where we applied a market approach, the fair value was based on unobservable third-party estimated prices that would be received in exchange for the assets in an orderly transaction between market participants. We validated all third-party estimated prices using our forecasts of economic returns for the respective rigs or other market data.

If the global economy, our overall business outlook, and/or our expectations regarding the marketability of one or more of our drilling rigs deteriorate further, we may conclude that a triggering event has occurred and perform a recoverability test that could lead to a material impairment charge in future periods.

Year Ended December 31, 2014 - During 2014, we recorded a pre-tax, non-cash loss on impairment of long-lived assets of $2,463.1 million, of which $1,220.8 million was included in (loss) income from continuing operations and $1,242.3 million was included in loss from discontinued operations, net, in our consolidated statement of operations. These losses were recorded during the second and fourth quarters of 2014.

During the second quarter of 2014, demand for floaters deteriorated as a result of continued reductions in capital spending by operators in addition to delays in operators’ drilling programs. The reduction in demand, combined with the increasing supply from newbuild floater deliveries, led to a very competitive market. In general, contracting activity declined significantly, and day rates and utilization came under pressure, especially for older, less capable floaters.

In response to the adverse change in the floaters business climate, we evaluated our older, less capable floaters and committed to a plan to sell five rigs. ENSCO 5000, ENSCO 5001, ENSCO 5002, ENSCO 6000 and ENSCO 7500 were removed from our portfolio of rigs marketed for contract drilling services and classified as held-for-sale. These rigs were written down to fair value, less costs to sell. We recorded a pre-tax, non-cash loss on impairment totaling $546.4 million during the second quarter associated with these rigs. The impairment charge was included in loss from discontinued operations, net, in our consolidated statement of operations for the year ended December 31, 2014.

Also during the second quarter of 2014, as a result of the adverse change in the floater business climate, our decision to sell five floaters and the impairment charge incurred on the held-for-sale floaters, we concluded that a triggering event had occurred and performed an asset impairment analysis on our remaining older, less capable floaters.

Based on the analysis performed as of May 31, 2014, we recorded an additional pre-tax, non-cash loss on impairment with respect to four other floaters totaling $991.5 million, of which $288.0 million related to ENSCO DS-2 that was removed from our portfolio of rigs marketed for contract drilling services during the fourth quarter of 2014. The ENSCO DS-2 impairment charge was reclassified to loss from discontinued operations, net, in our consolidated statement of operations for the year ended December 31, 2014. The remaining $703.5 million impairment charge was included in loss on impairment in our consolidated statement of operations for the year ended December 31, 2014. We measured the fair value of these rigs by applying an income approach, using projected discounted cash flows. These valuations were based on unobservable inputs that require significant judgments for which there is limited information, including assumptions regarding future day rates, utilization, operating costs and capital requirements.

During the fourth quarter of 2014, Brent crude oil prices declined from approximately $95 per barrel to near $55 per barrel on December 31, 2014. These declines resulted in further reductions in capital spending by operators, including the cancellation or deferral of planned drilling programs. As a result, day rates and utilization came under further pressure, especially for older, less capable rigs.

In response to the adverse change in business climate, we evaluated our aged rigs and committed to a plan to sell one additional floater and two jackups. ENSCO DS-2, ENSCO 58 and ENSCO 90 were removed from our portfolio of rigs marketed for contract drilling services. These rigs were written down to fair value, less costs to sell. In addition to the asset impairment recorded during the second quarter, we recorded an additional pre-tax, non-cash loss on impairment totaling $407.9 million during the fourth quarter on our held-for-sale rigs. The impairment charge was included in loss from discontinued operations, net, in our consolidated statement of operations for the year ended December 31, 2014.

Also during the fourth quarter of 2014, as a result of the decline in commodity prices and adverse changes in the offshore drilling market, our decision to sell an additional floater and two jackups and the impairment charge incurred on the held-for-sale rigs, we concluded that a triggering event had occurred and performed an asset impairment analysis for all floaters and jackups.

Based on the analysis performed as of December 31, 2014, we recorded an additional pre-tax, non-cash loss on impairment with respect to two older, less capable floaters and ten older, less capable jackups totaling $517.3 million. The impairment charge was included in loss on impairment in our consolidated statement of operations for the year ended December 31, 2014. We measured the fair value of these rigs by applying either an income approach, using projected discounted cash flows, or a market approach. These valuations were based on unobservable inputs that require significant judgments for which there is limited information, including assumptions regarding future day rates, utilization, operating costs and capital requirements.  In instances where we applied a market approach, the fair value was based on unobservable third-party estimated prices that would be received in exchange for the assets in an orderly transaction between market participants. We validated all third-party estimated prices using our forecasts of economic returns for the respective rigs.
Debt
Debt
DEBT

The carrying value of long-term debt as of December 31, 2015 and 2014 consisted of the following (in millions):
 
 
2015
 
2014
4.70% Senior notes due 2021
 
$
1,482.7

 
$
1,479.9

5.75% Senior notes due 2044
 
1,004.2

 
622.3

6.875% Senior notes due 2020
 
990.9

 
1,008.2

5.20% Senior notes due 2025
 
697.6

 

4.50% Senior notes due 2024
 
624.3

 
624.2

8.50% Senior notes due 2019
 
566.4

 
583.8

7.875% Senior notes due 2040
 
379.8

 
381.2

7.20% Debentures due 2027
 
149.2

 
149.2

3.25% Senior notes due 2016
 

 
998.0

4.33% MARAD bonds due 2016
 

 
46.6

4.65% MARAD bonds due 2020
 

 
27.0

Total debt
 
5,895.1

 
5,920.4

Less current maturities
 

 
(34.8
)
Total long-term debt
 
$
5,895.1

 
$
5,885.6



 Senior Notes
 
During the first quarter, we issued $700.0 million aggregate principal amount of unsecured 5.20% senior notes due 2025 (the “2025 Notes”) at a discount of $2.6 million and $400.0 million aggregate principal amount of unsecured 5.75% senior notes due 2044 (the “New 2044 Notes”) at a discount of $18.7 million in a public offering. Interest on the 2025 Notes is payable semiannually on March 15 and September 15 of each year commencing September 15, 2015. Interest on the New 2044 Notes is payable semiannually on April 1 and October 1 of each year commencing on April 1, 2015.

During 2014, we issued $625.0 million aggregate principal amount of unsecured 4.50% senior notes due 2024 (the "2024 Notes") at a discount of $850,000 and $625.0 million aggregate principal amount of unsecured 5.75% senior notes due 2044 (the "Existing 2044 Notes" and together with the New 2044 Notes, the "2044 Notes") at a discount of $2.8 million. Interest on the 2024 Notes and the Existing 2044 Notes is payable semiannually on April 1 and October 1 of each year commencing on April 1, 2015. The Existing 2044 Notes and the New 2044 Notes are treated as a single series of debt securities under the indenture governing the notes (the "2044 Notes").

During 2011, we issued $1.5 billion aggregate principal amount of unsecured 4.70% senior notes due 2021 (the “2021 Notes”) at a discount of $29.6 million in a public offering. Interest on the 2021 Notes is payable semiannually on March 15 and September 15 of each year.

Upon consummation of the Pride acquisition during 2011, we assumed the acquired company's outstanding debt comprised of $900.0 million aggregate principal amount of unsecured 6.875% senior notes due 2020$500.0 million aggregate principal amount of unsecured 8.5% senior notes due 2019 and $300.0 million aggregate principal amount of unsecured 7.875% senior notes due 2040 (collectively, the "Acquired Notes" and together with the 2021 Notes, 2024 Notes, 2025 Notes and 2044 Notes, the "Senior Notes").  Ensco plc has fully and unconditionally guaranteed the performance of all Pride obligations with respect to the Acquired Notes.  See "Note 15 - Guarantee of Registered Securities" for additional information on the guarantee of the Acquired Notes. 
   
We may redeem the 2024 Notes, 2025 Notes and 2044 Notes in whole, at any time or in part from time to time, prior to maturity. If we elect to redeem the 2024 Notes and 2025 Notes before the date that is three months prior to the maturity date or the 2044 Notes before the date that is six months prior to the maturity date, we will pay an amount equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest and a "make-whole" premium. If we elect to redeem the 2024 Notes, 2025 Notes or 2044 Notes on or after the aforementioned dates, we will pay an amount equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest but we are not required to pay a "make-whole" premium.

We may redeem each series of the 2021 Notes and the Acquired Notes, in whole or in part, at any time, at a price equal to 100% of their principal amount, plus accrued and unpaid interest and a "make-whole" premium.

The indentures governing the Senior Notes contain customary events of default, including failure to pay principal or interest on such notes when due, among others. The indentures governing the Senior Notes also contain certain restrictions, including, among others, restrictions on our ability and the ability of our subsidiaries to create or incur secured indebtedness, enter into certain sale/leaseback transactions and enter into certain merger or consolidation transactions.

Debentures Due 2027

During 1997, Ensco Delaware issued $150.0 million of unsecured 7.20% Debentures due November 15, 2027 (the "Debentures") in a public offering. Interest on the Debentures is payable semiannually in May and November. We may redeem the Debentures, in whole or in part, at any time prior to maturity, at a price equal to 100% of their principal amount, plus accrued and unpaid interest and a "make-whole" premium. The Debentures are not subject to any sinking fund requirements. During 2009, in connection with the redomestication, Ensco plc entered into a supplemental indenture to unconditionally guarantee the principal and interest payments on the Debentures.

The Debentures and the indenture pursuant to which the Debentures were issued also contain customary events of default, including failure to pay principal or interest on the Debentures when due, among others. The indenture also contains certain restrictions, including, among others, restrictions on our ability and the ability of our subsidiaries to create or incur secured indebtedness, enter into certain sale/leaseback transactions and enter into certain merger or consolidation transactions.

Redemption of 2016 Senior Notes and MARAD Obligations

During 2011, we issued $1.0 billion of 3.25% senior notes due 2016 (the “2016 Notes”). In March 2015, we commenced a cash tender offer (the “Tender Offer”) for the 2016 Notes. Tendered notes totaling $854.6 million were settled on March 12, 2015 for $878.0 million (excluding accrued interest) using a portion of the net proceeds from the issuance of the 2025 Notes and New 2044 Notes. Under the terms of the Tender Offer, we paid a premium totaling approximately $23.4 million, which approximates the “make-whole” premium that would have been required had we elected to redeem the debt. Additionally, we recorded charges of $1.7 million for unamortized debt discounts and $1.5 million for unamortized debt issuance costs, resulting in a total pre-tax loss on debt extinguishment of $26.6 million included in other, net, in our consolidated statement of operations for the year ended December 31, 2015.

Concurrent with the settlement of the Tender Offer, we exercised our right to redeem the remaining 2016 Notes. In April 2015, we completed the redemption of the remaining $145.4 million of 2016 Notes using a portion of the net proceeds from the 2025 Notes and New 2044 Notes. The redemption payment included a "make-whole" premium of $3.8 million which was recorded as a loss on debt extinguishment and included in other, net, in our consolidated statement of operations for the year ended December 31, 2015.

In April 2015, we used the remaining net proceeds from the 2025 Notes and New 2044 Notes, together with cash on hand, to redeem $51.0 million of our 4.33% MARAD notes due 2016 and 4.65% MARAD bonds due 2020 (the “MARAD Obligations”). We incurred additional losses on debt extinguishment of $3.1 million, which were included in other, net, in our consolidated statement of operations for the year ended December 31, 2015. These losses primarily consisted of a "make-whole" premium.

In July 2015, we redeemed the remaining $14.3 million aggregate principal amount of the MARAD Obligations.

Commercial Paper
 
We participate in a commercial paper program with three commercial paper dealers pursuant to which we may issue, on a private placement basis, unsecured commercial paper notes up to a maximum aggregate amount outstanding at any time of $2.25 billion. Amounts issued under the commercial paper program are supported by the available and unused committed capacity under our credit facility. As a result, amounts issued under the commercial paper program are limited by the amount of our available and unused committed capacity under our credit facility. The proceeds of such financings may be used for capital expenditures and other general corporate purposes. The commercial paper bears interest at rates that vary based on market conditions and the ratings assigned by credit rating agencies at the time of issuance. If we are downgraded below investment grade by one or more credit rating agencies, we may have limited or no access to the commercial paper market. The weighted-average interest rate on our commercial paper borrowings was 0.41% and 0.26% during 2015 and 2014, respectively.  Commercial paper maturities will vary but may not exceed 364 days from the date of issue. The commercial paper is not redeemable or subject to voluntary prepayment by us prior to maturity.  We had no amounts outstanding under our commercial paper program as of December 31, 2015 and 2014.
 
Revolving Credit    

We have a $2.25 billion senior unsecured revolving credit facility with a syndicate of banks to be used for general corporate purposes with a term expiring on September 30, 2019 (the "Credit Facility").

Advances under the Credit Facility bear interest at Base Rate or LIBOR plus an applicable margin rate, depending on our credit ratings. We are required to pay a quarterly commitment fee on the undrawn portion of the $2.25 billion commitment, which is also based on our credit ratings.

During the fourth quarter, Moody's and Standard & Poor's downgraded our senior unsecured rating one notch to Baa2 and BBB, respectively. As a result, the applicable margin rate for advances under our Credit Facility and the quarterly commitment fee percentage increased by 0.125% per annum and 0.025% per annum, respectively, under our Credit Facility. Currently, the applicable margin rates are 0.25% per annum for Base Rate advances and 1.25% per annum for LIBOR advances. Also, our quarterly commitment fee is 0.15% per annum on the undrawn portion of the $2.25 billion commitment. Amounts repaid may be re-borrowed during the term of the Credit Facility. There can be no assurance that ratings agencies will not further downgrade our credit ratings, and any such further downgrade, or the perceived risk of further downgrades, may limit our ability to access debt capital markets, restructure or refinance our debt, result in higher borrowing costs or require more restrictive terms and covenants, which may further restrict our operations.

The Credit Facility requires us to maintain a total debt to total capitalization ratio that is less than or equal to a specified percentage. In March 2015, we amended the Credit Facility to increase the percentage from 50% to 60%. The Credit Facility also contains customary restrictive covenants, including, among others, prohibitions on creating, incurring or assuming certain debt and liens; entering into certain merger arrangements; selling, leasing, transferring or otherwise disposing of all or substantially all of our assets; making a material change in the nature of the business; and entering into certain transactions with affiliates. We have the right, subject to receipt of commitments from lenders, to increase the commitments under the Credit Agreement to an aggregate amount of up to $2.75 billion and to extend the term of the Credit Agreement by one year on up to two occasions.

As of December 31, 2015, we were in compliance in all material respects with our covenants under the Credit Facility. We expect to remain in compliance with our Credit Facility covenants during 2016. We had no amounts outstanding under the Credit Facility as of December 31, 2015 and 2014.

Maturities

The aggregate maturities of our debt, excluding net unamortized premiums of $195.1 million, as of December 31, 2015 were as follows (in millions):
2016
 
$

2017
 

2018
 

2019
 
500.0

2020
 
900.0

Thereafter
 
4,300.0

Total
 
$
5,700.0


    
Interest expense totaled $216.3 million, $161.4 million and $158.8 million for the years ended December 31, 2015, 2014 and 2013, respectively, which was net of interest amounts capitalized of $87.4 million, $78.2 million and $67.7 million in connection with newbuild rig construction and other capital projects.
Derivative Instruments
Derivative Instruments
DERIVATIVE INSTRUMENTS
   
We use derivatives to reduce our exposure to various market risks, primarily foreign currency exchange rate risk. We maintain a foreign currency exchange rate risk management strategy that utilizes derivatives to reduce our exposure to unanticipated fluctuations in earnings and cash flows caused by changes in foreign currency exchange rates. We mitigate our credit risk relating to the counterparties of our derivatives by transacting with multiple, high-quality financial institutions, thereby limiting exposure to individual counterparties, and by entering into International Swaps and Derivatives Association, Inc. (“ISDA”) Master Agreements, which include provisions for a legally enforceable master netting agreement, with our derivative counterparties. See "Note 14 - Supplemental Financial Information" for additional information on the mitigation of credit risk relating to counterparties of our derivatives. We do not enter into derivatives for trading or other speculative purposes.
 
All derivatives were recorded on our consolidated balance sheets at fair value. Derivatives subject to legally enforceable master netting agreements were not offset on our 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. See "Note 1 - Description of the Business and Summary of Significant Accounting Policies" for additional information on our accounting policy for derivatives and "Note 2 - Fair Value Measurements" for additional information on the fair value measurement of our derivatives.
 
As of December 31, 2015 and 2014, our consolidated balance sheets included net foreign currency derivative liabilities of $19.7 million and $26.3 million, respectively.  All of our derivatives mature during the next 18 months.  

Derivatives recorded at fair value on our consolidated balance sheets as of December 31, 2015 and 2014 consisted of the following (in millions):
 
Derivative Assets
 
Derivative Liabilities
 
2015
 
2014
 
2015
 
2014
Derivatives Designated as Hedging Instruments
 

 
 

 
 

 
 

Foreign currency forward contracts - current(1)
$
.6

 
$
.4

 
$
20.7

 
$
17.2

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

 
.1

 
1.5

 
2.9

 
.8

 
.5

 
22.2

 
20.1

Derivatives not Designated as Hedging Instruments
 

 
 

 
 

 
 

Foreign currency forward contracts - current(1)
2.6

 
.2

 
.9

 
6.9

 
2.6

 
.2

 
.9

 
6.9

Total
$
3.4

 
$
.7

 
$
23.1

 
$
27.0


(1) 
Derivative assets and liabilities that have maturity dates equal to or less than 12 months from the respective balance sheet dates were included in other current assets and accrued liabilities and other, respectively, on our consolidated balance sheets. 

(2) 
Derivative assets and liabilities that have maturity dates greater than 12 months from the respective balance sheet dates were included in other assets, net, and other liabilities, respectively, on our 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 December 31, 2015, we had cash flow hedges outstanding to exchange an aggregate $311.6 million for various foreign currencies, including $152.3 million for British pounds, $57.8 million for Brazilian reais, $37.9 million for Australian dollars, $34.1 million for Euros, $13.2 million for Singapore dollars and $16.3 million for other currencies.

Gains and losses, net of tax, on derivatives designated as cash flow hedges included in our consolidated statements of operations and comprehensive income for each of the years in the three-year period ended December 31, 2015 were as follows (in millions):
 
Loss Recognized in Other Comprehensive
Income ("OCI")
on Derivatives
  (Effective Portion)  
 
(Loss) Gain
Reclassified from
 AOCI into Income
(Effective Portion)(1)
 
Loss Recognized
in Income on
Derivatives (Ineffective
Portion and Amount
Excluded from
Effectiveness Testing)(2)
 
2015
 
2014
 
2013
 
2015
 
2014
 
2013
 
2015
 
2014
 
2013
Interest rate lock contracts(3) 
$

 
$

 
$

 
$
(.6
)
 
$
(.4
)
 
$
(.4
)
 
$

 
$

 
$

Foreign currency forward contracts(4)
(23.6
)
 
(11.7
)
 
(5.8
)
 
(21.6
)
 
1.3

 
(1.6
)
 
(.1
)
 
(.7
)
 
(.3
)
Total
$
(23.6
)
 
$
(11.7
)
 
$
(5.8
)
 
$
(22.2
)
 
$
.9

 
$
(2.0
)
 
$
(.1
)
 
$
(.7
)
 
$
(.3
)
 
(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 consolidated statements of operations.

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

(4) 
During the year ended December 31, 2015, $22.5 million of losses were reclassified from AOCI into contract drilling expense and $900,000 of gains were reclassified from AOCI into depreciation expense in our consolidated statement of operations. During the year ended December 31, 2014, $400,000 of gains were reclassified from AOCI into contract drilling expense and $900,000 of gains were reclassified from AOCI into depreciation expense in our consolidated statement of operations. During the year ended December 31, 2013, $2.5 million of losses were reclassified from AOCI into contract drilling and $900,000 of gains were reclassified from AOCI into depreciation expense in our 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 December 31, 2015, we held derivatives not designated as hedging instruments to exchange an aggregate $125.7 million for various foreign currencies, including $73.8 million for Euros, $16.6 million for Swiss francs, $11.1 million for British pounds, $8.7 million for Mexican Pesos, $7.8 million for Australian dollars and $7.7 million for other currencies.

Net losses of $17.3 million and $24.8 million and net gains of $3.6 million associated with our derivatives not designated as hedging instruments were included in other, net, in our consolidated statements of operations for the years ended December 31, 2015, 2014 and 2013, respectively.

As of December 31, 2015, the estimated amount of net losses associated with derivatives, net of tax, that will be reclassified to earnings during the next 12 months was as follows (in millions):

Net unrealized losses to be reclassified to contract drilling expense
 
$
(11.2
)
Net realized gains to be reclassified to depreciation expense
 
.9

Net realized losses to be reclassified to interest expense
 
(.4
)
Net losses to be reclassified to earnings
 
$
(10.7
)
Shareholders' Equity
Shareholders' Equity
SHAREHOLDERS' EQUITY
 
Activity in our various shareholders' equity accounts for each of the years in the three-year period ended December 31, 2015 was as follows (in millions):
 
 Shares 
 
 
Par Value 
 
 
Additional
Paid-in
Capital

 
Retained
Earnings

 
AOCI 
 
 
Treasury
Shares  

 
Noncontrolling
Interest

BALANCE, December 31, 2012
237.7

 
$
23.9

 
$
5,398.7

 
$
6,434.7

 
$
20.1

 
$
(31.0
)
 
$
5.7

Net income

 

 

 
1,418.2

 

 

 
9.7

Dividends paid

 

 

 
(525.6
)
 

 

 

Distributions to noncontrolling interests

 

 

 

 

 

 
(8.1
)
Shares issued under share-based compensation plans, net
1.9

 
.2

 
21.8

 

 

 
(.1
)
 

Tax benefits from share-based compensation

 

 
.1

 

 

 

 

Repurchase of shares

 

 

 

 

 
(14.1
)
 

Share-based compensation cost

 

 
46.6

 

 

 

 

Net other comprehensive loss

 

 

 

 
(1.9
)
 

 

BALANCE, December 31, 2013
239.6

 
24.1

 
5,467.2

 
7,327.3

 
18.2

 
(45.2
)
 
7.3

Net (loss) income

 

 

 
(3,902.6
)
 

 

 
14.1

Dividends paid

 

 

 
(704.3
)
 

 

 

Distributions to noncontrolling interests

 

 

 

 

 

 
(13.5
)
Shares issued in connection with share-based compensation plans, net
1.1

 
.1

 
.4

 

 

 
(.1
)
 

Tax benefit from share-based compensation

 

 
1.2

 

 

 

 

Repurchase of shares

 

 

 

 

 
(13.7
)
 

Share-based compensation cost

 

 
48.7

 

 

 

 

Net other comprehensive loss

 

 

 

 
(6.3
)
 

 

BALANCE, December 31, 2014
240.7

 
24.2

 
5,517.5

 
2,720.4

 
11.9

 
(59.0
)
 
7.9

Net (loss) income

 

 

 
(1,594.8
)
 

 

 
8.9

Dividends paid

 

 

 
(140.3
)
 

 

 

Distributions to noncontrolling interests

 

 

 

 

 

 
(12.5
)
Shares issued in connection with share-based compensation plans, net
2.4

 
.2

 

 

 

 
(.2
)
 

Tax expense from share-based compensation

 

 
(2.4
)
 

 

 

 

Repurchase of shares

 

 

 

 

 
(4.6
)
 

Share-based compensation cost

 

 
39.4

 

 

 

 

Net other comprehensive income

 

 

 

 
.6

 

 

BALANCE, December 31, 2015
243.1

 
$
24.4

 
$
5,554.5

 
$
985.3

 
$
12.5

 
$
(63.8
)
 
$
4.3



During 2013, our shareholders approved a new share repurchase program. Subject to certain provisions under English law, including the requirement of Ensco plc to have sufficient distributable reserves, we may purchase up to a maximum of $2.0 billion in the aggregate under the program, but in no case more than 35.0 million shares. The program terminates during 2018. As of December 31, 2015, there had been no share repurchases under this program.
Benefit Plans
Benefit Plans
BENEFIT PLANS
 
Our shareholders approved the 2012 Long-Term Incentive Plan (the “2012 LTIP”) effective January 1, 2012, to provide for the issuance of non-vested share awards, share option awards and performance awards (collectively "awards"). Under the 2012 LTIP, as amended, 23.0 million shares were reserved for issuance as awards to officers, non-employee directors and key employees who are in a position to contribute materially to our growth, development and long-term success. As of December 31, 2015, there were 12.9 million shares available for issuance as awards under the 2012 LTIP. Awards may be satisfied by newly issued shares, including shares held by a subsidiary or affiliated entity, or by delivery of shares held in an affiliated employee benefit trust at the Company's discretion.

Non-Vested Share Awards and Units
 
Grants of non-vested share awards and non-vested share units generally vest at rates of 20% or 33% per year, as determined by a committee or subcommittee of the Board of Directors at the time of grant. Our non-vested share awards have voting and dividend rights effective on the date of grant, and our non-vested share units have dividend rights effective on the date of grant. Compensation expense is measured using the market value of our shares on the date of grant and is recognized on a straight-line basis over the requisite service period (usually the vesting period).

The following table summarizes non-vested share award related compensation expense recognized during each of the years in the three-year period ended December 31, 2015 (in millions):
 
2015
 
2014
 
2013
Contract drilling
$
19.5

 
$
20.9

 
$
21.3

General and administrative
17.8

 
20.7

 
21.6

Non-vested share award related compensation expense included in operating expenses
37.3

 
41.6

 
42.9

Tax benefit
(4.8
)
 
(5.1
)
 
(5.4
)
Total non-vested share award related compensation expense included in net income
$
32.5

 
$
36.5

 
$
37.5



The following table summarizes the value of non-vested shares granted and vested during each of the years in the three-year period ended December 31, 2015:
 
2015
 
2014
 
2013
Weighted-average grant-date fair value of
  non-vested share awards granted (per share)
$
23.95

 
$
51.22

 
$
59.79

Total fair value of non-vested share awards
  vested during the period (in millions)
$
18.0

 
$
46.2

 
$
49.6


    
The following table summarizes non-vested share activity for the year ended December 31, 2015 (shares in thousands): 
 
Shares
 
Weighted-Average
Grant-Date
Fair Value
Non-vested share awards as of December 31, 2014
2,641

 
$
52.86

Granted
2,116

 
23.95

Vested
(787
)
 
51.42

Forfeited
(827
)
 
41.23

Non-vested share awards as of December 31, 2015
3,143

 
$
36.46



As of December 31, 2015, there was $88.2 million of total unrecognized compensation cost related to non-vested share awards and non-vested share units, which is expected to be recognized over a weighted-average period of 2.0 years.

Share Option Awards

Share option awards ("options") granted to officers and employees generally become exercisable in 25% increments over a four-year period or 33% increments over a three-year period and, to the extent not exercised, expire on the seventh anniversary of the date of grant. Options granted to non-employee directors are immediately exercisable and, to the extent not exercised, expire on the seventh anniversary of the date of grant. The exercise price of options granted under the 2012 LTIP equals the market value of the underlying shares on the date of grant. As of December 31, 2015, options granted to purchase 458,000 shares with a weighted average exercise price of $41.51 were outstanding under the 2012 LTIP and predecessor or acquired plans. No options have been granted since 2011, and there were no unrecognized compensation costs related to options as of December 31, 2015.

Performance Awards

Under the 2012 LTIP, performance awards may be issued to our senior executive officers. Performance awards granted during 2013, 2014 and 2015 are payable in Ensco shares upon attainment of specified performance goals based on relative total shareholder return ("TSR") and relative return on capital employed ("ROCE"). The performance goals are determined by a committee or subcommittee of the Board of Directors.

Performance awards generally vest at the end of a three-year measurement period based on attainment of performance goals. Our performance awards are classified as equity awards with compensation expense recognized on a straight-line basis over the requisite service period. The estimated probable outcome of attainment of the specified performance goals is based on historical experience, and any subsequent changes in this estimate for the relative ROCE performance goal are recognized as a cumulative adjustment to compensation cost in the period in which the change in estimate occurs.

The aggregate grant-date fair value of performance awards granted during 2015, 2014 and 2013 totaled $8.3 million, $7.4 million and $8.2 million, respectively. The aggregate fair value of performance awards vested during 2015, 2014 and 2013 totaled $4.6 million, $6.9 million and $7.4 million, respectively.

During the years ended December 31, 2015, 2014 and 2013, we recognized $2.9 million, $3.4 million and $6.6 million of compensation expense for performance awards, respectively, which was included in general and administrative expense in our consolidated statements of operations.  As of December 31, 2015, there was $6.3 million of total unrecognized compensation cost related to unvested performance awards, which is expected to be recognized over a weighted-average period of 2.0 years.

Savings Plans

We have profit sharing plans (the "Ensco Savings Plan," the "Ensco Multinational Savings Plan" and the "Ensco Limited Retirement Plan"), which cover eligible employees, as defined within each plan.  The Ensco Savings Plan includes a 401(k) savings plan feature which allows eligible employees to make tax-deferred contributions to the plan.  The Ensco Limited Retirement Plan also allows eligible employees to make tax-deferred contributions to the plan. Contributions made to the Ensco Multinational Savings Plan may or may not qualify for tax deferral based on each plan participant's local tax requirements.
 
We generally make matching cash contributions to the plans.  We match 100% of the amount contributed by the employee up to a maximum of 5% of eligible salary. Matching contributions totaled $18.9 million, $20.7 million and $21.1 million for the years ended December 31, 2015, 2014 and 2013, respectively.  Any additional discretionary contributions made into the plans require approval of the Board of Directors and are generally paid in cash.  We recorded additional discretionary contribution provisions of $27.5 million, $30.7 million and $55.3 million for the years ended December 31, 2015, 2014 and 2013, respectively.  Matching contributions and additional discretionary contributions become vested in 33% increments upon completion of each initial year of service with all contributions becoming fully vested subsequent to achievement of three or more years of service.  We have 1.0 million shares reserved for issuance as matching contributions under the Ensco Savings Plan.
Goodwill and Other Intangible Assets and Liabilities
Goodwill and Other Intangible Assets and Liabilities
GOODWILL AND OTHER INTANGIBLE ASSETS AND LIABILITIES

Goodwill

The carrying amount of goodwill as of December 31, 2015 is detailed below by reporting unit (in millions):
 
December 31, 2015
 
December 31, 2014
 
Gross Carrying Amount
 
Accumulated Impairment Losses
 
Net Carrying Amount
 
Gross Carrying Amount
 
Accumulated Impairment Losses
 
Net Carrying Amount
Floaters
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
3,081.4

 
$
(2,997.9
)
 
$
83.5

 
$
3,081.4

 
$

 
$
3,081.4

Loss on impairment

 
(83.5
)
 
(83.5
)
 

 
(2,997.9
)
 
(2,997.9
)
Balance, end of period
$
3,081.4

 
$
(3,081.4
)
 
$

 
$
3,081.4

 
$
(2,997.9
)
 
$
83.5

 
 
 
 
 
 
 
 
 
 
 
 
Jackups
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
192.6

 
$

 
$
192.6

 
$
192.6

 
$

 
$
192.6

Loss on impairment

 
(192.6
)
 
(192.6
)
 

 

 

Balance, end of period
$
192.6

 
$
(192.6
)
 
$

 
$
192.6

 
$

 
$
192.6



Impairment of Goodwill

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, represent our reporting units. We test goodwill for impairment on an annual basis or when events or changes in circumstances indicate that a potential impairment exists. 

Year Ended December 31, 2015 - As part of our annual goodwill impairment test, we considered the decline in Brent crude oil prices to around $35 per barrel as of December 31, 2015. Commodity prices continued to decline further into 2016, and Brent crude oil prices reached a ten-year low of approximately $26 per barrel in January 2016. These prices resulted in significant capital spending reductions by our customers, causing a decline in day rates for the few contracts executed during the fourth quarter. Customers have delayed drilling programs and are exploring subletting opportunities for contracted rigs thereby exacerbating supply pressure. In addition, certain customers are requesting contract concessions or terminating drilling contracts. Customers are expected to continue to operate under reduced budgets in the current commodity price environment. The significant supply and demand imbalance will continue to be adversely impacted by future newbuild deliveries, program delays and lower capital spending by operators. These adverse changes resulted in further deterioration in our forecasted day rates and utilization during the fourth quarter.

Additionally, during the latter half of 2015, our stock price declined significantly, trading between $13.26 and $22.21. Our average stock price was $17.21 and $16.34 during the third and fourth quarters, respectively. Our stock price continued to decline during 2016, reaching a 20-year low closing price of approximately $8.00 in February. During the first half of 2015, our average stock price was $25.31.
    
We considered the deterioration in our forecasted day rates and utilization, the sustained decline in our stock price and the impairment charge on certain rigs during the fourth quarter and concluded it was more-likely-than-not that the fair values of both the Floaters and Jackups reporting units were less than their carrying amounts.

We estimated the fair values of each reporting unit using an income approach. In the current market environment, we concluded the income approach provided a better estimate of fair value compared to other valuation approaches. Based on the valuations performed as of December 31, 2015, both the Floater and Jackup reporting unit estimated fair values were less than their carrying values; therefore, we concluded that the Floater and Jackup goodwill balances were impaired.

We compared the estimated fair value of each reporting unit to the fair values of all assets and liabilities within the respective reporting unit to calculate the implied fair value of goodwill. As a result, we recorded a non-cash loss on impairment of $192.6 million and $83.5 million for the Jackups and Floaters reporting units, respectively, which was included in loss on impairment in our consolidated statement of operations for the year ended December 31, 2015. There is no goodwill on our consolidated balance sheet as of December 31, 2015.

The income approach was based on a discounted cash flow model, which utilized present values of cash flows to estimate fair value and was based on unobservable inputs that require significant judgments for which there is limited information. The future cash flows were projected based on our estimates of future day rates, utilization, operating costs, capital requirements, growth rates and terminal values. Forecasted day rates and utilization take into account current market conditions and our anticipated business outlook, both of which have been impacted by the adverse changes in the business environment observed during the fourth quarter. The day rates reflect contracted rates during the respective contracted periods and our estimate of market day rates in uncontracted periods. The forecasted market day rates were depressed in the near-term but were forecasted to grow in the longer-term and terminal period.

Operating costs were forecasted using a combination of our historical average operating costs and expected future costs, adjusted for an estimated inflation factor. Capital requirements in the discounted cash flow model were based on our estimates of future capital costs, taking into consideration our historical trends. The estimated capital requirements included cash outflows for new rig construction and cash outflows to maintain the current operating condition of our rigs through their remaining marketable lives.
    
A terminal period was used to reflect our estimate of stable, perpetual growth. The terminal period reflects a terminal growth rate of 3.0%, which includes an estimated inflation factor. The future cash flows were discounted using a market-participant risk-adjusted weighted average cost of capital of 11.5%. These assumptions were derived from unobservable inputs and reflect our judgments and assumptions.

We evaluated the estimated fair value of our reporting units compared to our market capitalization as of December 31, 2015. The aggregate fair values of our reporting units exceeded our market capitalization, and we believe the resulting implied control premium was reasonable based on recent market transactions within our industry or other relevant benchmark data.

Year Ended December 31, 2014 - As part of our annual goodwill impairment test as of December 31, 2014, we considered the significant decline in commodity prices during the fourth quarter of 2014. Specifically, Brent crude oil prices declined from approximately $95 per barrel at September 30, 2014 to near $55 per barrel at December 31, 2014. These declines resulted in further reductions in capital spending by operators, including the cancellation or deferral of planned drilling programs, which caused further deterioration in forecasted day rates and utilization.

Our stock price also declined significantly during the latter half of 2014, reaching a five-year low of $25.88 on December 16th. Our stock traded between $25.88 and $41.99 during the fourth quarter of 2014 and averaged $35.23 during this period.

We considered the adverse changes in the floater business climate, the sustained decline in our stock price and the impairment charge on older, less capable floaters during the fourth quarter and concluded it was more-likely-than-not that the fair value of the Floater reporting unit was less than its carrying amount.

We estimated the fair value of the Floater reporting unit using a blended income and market approach. Based on the valuation performed as of December 31, 2014, the reporting unit estimated fair value was less than the carrying value; therefore, we concluded that the Floater goodwill balance was impaired.  We compared the estimated fair value of the reporting unit to the fair value of all assets and liabilities within the reporting unit to calculate the implied fair value of goodwill. As a result, we recorded a non-cash loss on impairment totaling $3.0 billion which was included in loss on impairment in our consolidated statement of operations for the year ended December 31, 2014.

We evaluated the estimated fair value of our reporting units compared to our market capitalization as of December 31, 2014. To perform this assessment, we used a market approach to estimate the fair value of the Jackups reporting unit. The aggregate fair values of our reporting units exceeded our market capitalization, and we believe the resulting implied control premium was reasonable based on recent market transactions within our industry or other relevant benchmark data.

We performed a qualitative assessment for our Jackup reporting unit as of December 31, 2014. Goodwill impairment tests performed during prior years indicated that the fair value of the Jackup reporting unit significantly exceeded its carrying amount. Despite the adverse changes in the offshore drilling business climate, we concluded that the fair value remained substantially in excess of the carrying value of the reporting unit, as evidenced by the estimated fair value of the Jackup reporting unit calculated for the purpose of reconciling the fair value of our reporting units to our market capitalization. Therefore, we concluded that it remained more-likely-than-not that the Jackup reporting unit was not impaired.

Drilling Contract Intangibles

In connection with the Pride acquisition, we recorded intangible assets and liabilities representing the estimated fair values of the acquired company's firm drilling contracts in place at the date of acquisition with favorable or unfavorable contract terms as compared to then-current market day rates for comparable drilling rigs.

The gross carrying amounts of our drilling contract intangibles, which we consider to be definite-lived intangibles assets and intangible liabilities, and accumulated amortization as of December 31, 2015 and 2014 were as follows (in millions):
 
December 31, 2015
 
December 31, 2014
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Drilling contract intangible assets
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
209.0

 
$
(163.3
)
 
$
45.7

 
$
209.0

 
$
(130.6
)
 
$
78.4

Amortization

 
(41.4
)
 
(41.4
)
 

 
(32.7
)
 
(32.7
)
Balance, end of period
$
209.0

 
$
(204.7
)
 
$
4.3

 
$
209.0

 
$
(163.3
)
 
$
45.7

 
 
 
 
 
 
 
 
 
 
 
 
Drilling contract intangible liabilities
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
278.0

 
$
(237.3
)
 
$
40.7

 
$
278.0

 
$
(208.9
)
 
$
69.1

Amortization

 
(28.1
)
 
(28.1
)
 

 
(28.4
)
 
(28.4
)
Balance, end of period
$
278.0

 
$
(265.4
)
 
$
12.6

 
$
278.0

 
$
(237.3
)
 
$
40.7



The various factors considered in the determination of the fair values of our drilling contract intangibles were (1) the day rate of each contract, (2) the remaining term of each contract, (3) the rig class and (4) the market conditions for each respective rig class at the date of acquisition.  The intangible assets and liabilities were calculated based on the present value of the difference in cash inflows over the remaining contract term as compared to a hypothetical contract with the same remaining term at an estimated then-current market day rate using a risk-adjusted discount rate and an estimated effective income tax rate.  

We amortize the drilling contract intangibles to operating revenues over the respective remaining drilling contract terms on a straight-line basis. The estimated net increase to future operating revenues related to the amortization of these intangible assets and liabilities as of December 31, 2015, is as follows (in millions):
2016
 
$
8.3

Total
 
$
8.3

Income Taxes
Income Taxes
INCOME TAXES

We generated losses of $578.2 million and $460.3 million from continuing operations before income taxes in the U.S. and losses of $893.0 million and $2.1 billion from continuing operations before income taxes in non-U.S. countries for the years ended December 31, 2015 and 2014, respectively.

We generated income of $173.4 million from continuing operations before income taxes in the U.S. and income of $1.5 billion from continuing operations before income taxes in non-U.S. countries for the year ended December 31, 2013.

The following table summarizes components of our provision for income taxes from continuing operations for each of the years in the three-year period ended December 31, 2015 (in millions):
 
2015
 
2014
 
2013
Current income tax expense:
 

 
 

 
 

U.S.
$
18.7

 
$
114.8

 
$
94.4

Non-U.S.
125.4

 
149.2

 
98.6

 
144.1

 
264.0

 
193.0

Deferred income tax (benefit) expense:
 

 
 

 
 

U.S.
(180.4
)
 
(86.7
)
 
19.2

Non-U.S.
22.4

 
(36.8
)
 
(9.1
)
 
(158.0
)
 
(123.5
)
 
10.1

Total income tax (benefit) expense
$
(13.9
)
 
$
140.5

 
$
203.1


    
Deferred Taxes

The following table summarizes significant components of deferred income tax assets (liabilities) as of December 31, 2015 and 2014 (in millions):
 
 
2015
 
2014
Deferred tax assets:
 
 
 
 

Net operating loss carryforwards
 
$
228.7

 
$
204.5

Premium on long-term debt
 
86.0

 
99.2

Foreign tax credits
 
84.1

 
98.6

Deferred Revenue
 
77.7

 
103.0

Employee benefits, including share-based compensation
 
40.5

 
39.5

Other
 
20.5

 
16.7

Total deferred tax assets
 
537.5

 
561.5

Valuation allowance
 
(266.4
)
 
(271.3
)
Net deferred tax assets
 
271.1

 
290.2

Deferred tax liabilities:
 
 

 
 

Property and equipment
 
(97.1
)
 
(314.2
)
Intercompany transfers of property
 
(21.2
)
 
(23.0
)
Deferred costs
 
(15.3
)
 
(20.2
)
Other
 
(25.8
)
 
(14.1
)
Total deferred tax liabilities
 
(159.4
)
 
(371.5
)
Net deferred tax asset (liability)
 
$
111.7

 
$
(81.3
)

     
The realization of substantially all of our deferred tax assets is dependent on generating sufficient taxable income during future periods in various jurisdictions in which we operate. Realization of certain of our deferred tax assets is not assured. We recognize a valuation allowance for deferred tax assets when it is more-likely-than-not that the benefit from the deferred tax asset will not be realized. The amount of deferred tax assets considered realizable could increase or decrease in the near-term if our estimates of future taxable income change.

As of December 31, 2015, we had deferred tax assets of $84.1 million for U.S. foreign tax credits (“FTC”) and $228.7 million related to $979.2 million of net operating loss (“NOL”) carryforwards, which can be used to reduce our income taxes payable in future years.  The FTC expire between 2022 and 2023.  NOL carryforwards, which were generated in various jurisdictions worldwide, include $599.0 million that do not expire and $380.2 million that will expire, if not utilized, beginning in 2016 through 2020.  Due to the uncertainty of realization, we have a $259.8 million valuation allowance on FTC and NOL carryforwards, primarily relating to countries where we no longer operate or do not expect to generate future taxable income.
 
Effective Tax Rate

     Ensco 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. 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. Our consolidated effective income tax rate on continuing operations for each of the years in the three-year period ended December 31, 2015, differs from the U.K. statutory income tax rate as follows:
 
2015
 
2014
 
2013
U.K. statutory income tax rate
20.2
 %
 
21.5
 %
 
23.3
 %
Non-U.K. taxes
(12.3
)
 
(1.3
)
 
(13.2
)
Goodwill and asset impairments
(4.0
)