UNIT ED STATES
SECURITIES AND EXCHANGE COMMISSION
      Washington, D.C. 20549     
 
FORM 10-Q
 
(Mark One)	

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2011	

OR	

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from                   to                   	

 
Commission File Number 1-8097

Ensco plc
(E xact name of registrant as specified in its charter)	

 
England and Wales
(State or other jurisdiction of
incorporation or organization)
 
6 Chesterfield Gardens
London, England
(Address of principal executive offices)	 	98-0635229
(I.R.S. Employer
Identification No.)
 
W1J 5BQ
(Zip Code)	

Registrant's telephone number, including area code:   44 (0) 20 7659 4660	

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ý         No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  ý         No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer     ý
Non-accelerated filer     o   (Do not check if a smaller reporting company)	 	Accelerated filer            
Smaller reporting company    	o
o	

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes   o       No   ý
 
As of August 4, 2011, there were 230,493,455 American depositary shares of the registrant issued and outstanding, each representing one Class A ordinary share.	

 

 

 

ENSCO PLC
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2011

PART I       FINANCIAL INFORMATION	 	
 	 	
    ITEM 1.    FINANCIAL STATEMENTS	3	
 	 	
     Report of Independent Registered Public Accounting Firm	3	
 	 	
      Condensed Consolidated Statements of Income
      Three Months Ended June 30, 2011 and 2010	4	
 	 	
     Condensed Consolidated Statements of Income
     Six Months Ended June 30, 2011 and 2010	5	
 	 	
      Condensed Consolidated Balance Sheets
      June 30, 2011 and December 31, 2010	6	
   	 	
      Condensed Con solidated Statements of C ash Flows
      Six Months Ended June 30, 2011 and 2010	7	
 	 	
      Notes to Condensed Consolidated Financial Statements	8	
 	 	
    ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
      AND RESULTS OF OPERATIONS	42	
 	 	
    ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	63	
 	 	
    ITEM 4.      CONTROLS AND PROCEDURES	63	
 	 	
PART II       OTHER INFORMATION	 	
 	 	
    ITEM 1.    LEGAL PROCEEDINGS	64	
 	 	
    ITEM 1A. RISK FACTORS	71	
 	 	
    ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE  OF PROCEEDS	76	
 	 	
    ITEM 6.     EXHIBITS	77	
 	 	
SIGNATURES	82	

 

 
EXPLANATORY NOTE

    On May 31, 2011 (the “Merger Date”), Ensco plc completed a merger transaction (the “Merger”) with Pride International, Inc., a Delaware corporation (“Pride”), ENSCO International Incorporated, a Delaware corporation and a wholly-owned subsidiary and predecessor of Ensco plc (“Ensco Delaware”), and ENSCO Ventures LLC, a Delaware limited liability company and an indirect, wholly-owned subsidiary of Ensco plc (“Merger Sub”). Pursuant to the Agreement and Plan of Merger, dated as of February 6, 2011 (as amended, the “Merger Agreement”), among Ensco plc, Pride, Ensco Delaware and Merger Sub, and subject to the conditions set forth therein, Merger Sub merged with and into Pride, with Pride as the surviving entity and an indirect, wholly-owned subsidiary of Ensco plc.
 
     In connection with the integration of Pride’s operations, we are in the process of changing the names of most of Pride’s fleet in accordance with our naming convention.  For purposes of this quarterly report, we used the new names whether or not the name change had been legally completed.  For a list of the new and old rig names, see the most recent Fleet Status Report posted in the Investor Relations section of our website at www.enscoplc.com .

FO RW AR D -LOOKING STATEMENTS

     Statements contained in this report that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Forward-looking statements include words or phrases such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “could,” “may,” “might,” “should,” “will” and similar words and specifically include statements regarding expected financial performance; expected utilization, day rates, revenues, operating expenses, contract term, contract backlog, capital expenditures, insurance, financing and funding; expected effects, results and synergies from the integration of Pride’s operations; the timing of availability, delivery, mobilization, contract commencement or relocation or other movement of rigs; future rig construction (including construction in progress and completion thereof), enhancement, upgrade or repair and timing thereof; the suitability of rigs for future contracts; general market, business and industry conditions, trends and outlook; future operations; the impact of the Macondo well incident; expected contributions from our rig fleet expansion program and our program to high-grade the rig fleet by investing in new equipment and divesting selected assets and underutilized rigs; expense management; and the likely outcome of litigation, legal proceedings, investigations or insurance or other claims and the timing thereof.

     Such statements are subject to numerous risks, uncertainties and assumptions that may cause actual results to vary materially from those indicated, including:
 
 	•	our ability to successfully integrate the operations of Ensco and Pride as contemplated and to realize the anticipated benefits of the Merger;
 	
 	•	our ability to meet our increased debt service obligations as a result of the Merger and to fund planned expenditures, including construction costs for our remaining newbuild construction projects;
 	
 	•	our ability to realize expected benefits from the December 2009 redomestication as a U.K. public limited company and the related reorganization of Ensco’s corporate structure (the “redomestication”), including changes in laws, rules and regulations, or the interpretation thereof, or in the applicable facts, that could adversely affect our status as a non-U.S. corporation for U.S. tax purposes or otherwise adversely affect our anticipated consolidated effective income tax rate;	
 
 	•	the continued impact of the Macondo well incident on offshore drilling operations, including current and any future actual or de facto drilling permit and operations delays, moratoria or suspensions, new and future regulatory, legislative or permitting requirements (including requirements related to certification and testing of blow-out preventers and other equipment or otherwise impacting operations), future lease sales, changes in laws, rules and regulations that have or may impose increased financial responsibility, additional oil spill abatement contingency plan capability requirements and other governmental actions that may result in claims of force majeure or otherwise adversely affect our existing drilling contracts;
 	
 	•	governmental regulatory, legislative and permitting requirements affecting drilling operations, including limitations on drilling locations, such as the Gulf of Mexico during hurricane season;

 
1

 
 	•	changes in worldwide rig supply and demand, competition or technology, including as a result of delivery of newbuild drilling rigs;	
 
 	•	future levels of drilling activity and expenditures, whether as a result of global capital markets and liquidity, prices of oil and natural gas or otherwise, which may cause us to idle or stack additional rigs;
 	
 	• 	downtime and other risks associated with offshore rig operations or rig relocations, including rig or equipment failure, damage and other unplanned repairs, the limited availability of transport vessels, hazards, self-imposed drilling limitations and other delays due to severe storms and hurricanes and the limited availability or high cost of insurance coverage for certain offshore perils, such as hurricanes in the Gulf of Mexico or associated removal of wreckage or debris;	
 
 	•	possible cancellation or suspension of drilling contracts as a result of mechanical difficulties, performance or other reasons;
 	
 	•	risks inherent to shipyard rig construction, repair or enhancement, including risks associated with concentration of our construction contracts with two shipyards, unexpected delays in equipment delivery and engineering or design issues following shipyard delivery, or changes in the dates our rigs will enter a shipyard, be delivered, return to service or enter service;	
 	 	 	
 	• 	actual contract commencement dates;	
 	 	 	
 	• 	environmental or other liabilities, risks or losses, whether related to storm or hurricane damage, losses or liabilities (including wreckage or debris removal) or otherwise;	

  	• 	our ability to attract and retain skilled personnel on commercially reasonable terms, whether due to labor regulations, unionization or otherwise;	
 	 	 	
 	•	governmental action and political and economic uncertainties, including uncertainty or instability resulting from civil unrest, political demonstrations, mass strikes, or an escalation or additional outbreak of armed hostilities or other crises in oil or natural gas producing areas of the Middle East, North Africa, West Africa or other geographic areas, which may result in expropriation, nationalization, confiscation or deprivation of our assets or result in claims of a force majeure situation;
 	
 	•	terrorism, piracy or military action impacting our operations, assets or financial performance;
 	
 	•	the outcome of litigation, legal proceedings, investigations or other claims or contract disputes, including any inability to collect receivables or resolve significant contractual or day rate disputes, claims related to the Seahawk bankruptcy and related matters, any purported renegotiation, nullification, cancellation or breach of contracts with customers or other parties and any failure to negotiate or complete definitive contracts following announcements of receipt of letters of intent;
 	
 	•	adverse changes in foreign currency exchange rates, including their effect on the fair value measurement of our derivative instruments;	
 
 	•	potential long-lived asset or goodwill impairments; and
 	
 	•	the additional risks, uncertainties and assumptions described in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I and in “Item 1A. Risk Factors” in Part II of this report.	
 	 	 	
     In addition to the numerous risks, uncertainties and assumptions described above, you should also carefully read and consider “Item 1A. Risk Factors” in Part I and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II of our annual report on Form 10-K for the year ended December 31, 2010, as updated in our subsequent quarterly reports on Form 10-Q, which are available on the SEC’s website at www.sec.gov .   Each forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward looking statements, except as required by law.

2

 
PART I - FINANCIAL INFORMATION

Item 1.     Financial Statements
 
REPORT  OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
The Board of Directors and Shareholders
Ensco plc:
 
We have reviewed the condensed consolidated balance sheet of Ensco plc and subsidiaries as of June 30, 2011, the related condensed consolidated statements of income for the three-month and six-month periods ended June 30, 2011 and 2010, and the related condensed consolidated statements of cash flows for the six-month periods ended June 30, 2011 and 2010. These condensed consolidated financial statements are the responsibility of the Company's management.
 
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
 
Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.
 
We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Ensco plc and subsidiaries as of December 31, 2010, and the related consolidated statements of income and cash flows for the year then ended (not presented herein); and in our report dated February 24, 2011, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2010, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

 
 
/s/ KPMG LLP
 
Dallas, Texas
August 9, 2011

 

3

 
ENSCO  PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
(Unaudited)
 
 	   Three Months Ended
                June 30,              	
 		
 	      2011  	    	        2010   	
 	 	 	 	 	 	 	 	
OPERATING REVENUES	     	$564.2	     	 	     	$411.4	    	
 	 	 	 	 	 	 	 	
OPERATING EXPENSES	 	 	 	 	 	 	 	
      Contract drilling (exclusive of depreciation)	 	286.3	 	 	 	206.0	 	
      Depreciation	 	83.5	 	 	 	51.9	 	
      General and administrative	 	 47.4	 	 	 	22.0	 	
 	 	417.2	 	 	 	279.9	 	
OPERATING INCOME	 	147.0	 	 	 	131.5	 	
 	 	 	 	 	 	 	 	
OTHER INCOME (EXPENSE), NET	 	(18.1	)	 	 	12.8	 	
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	 	128.9	 	 	 	144.3	 	
 	 	 	 	 	 	 	 	
PROVISION FOR INCOME TAXES	 	 	 	 	 	 	 	
Current income tax expense	 	27.9	 	 	 	28.7	 	
Deferred income tax benefit	 	(2.6	)	 	 	(6.3	)	
 	 	25.3	 	 	 	22.4	 	
INCOME FROM CONTINUING OPERATIONS 	 	103.6	 	 	 	121.9	 	
 	 	 	 	 	 	 	 	
INCOME FROM DISCONTINUED OPERATIONS, NET 	 	--	 	 	 	6.0	 	
 	 	 	 	 	 	 	 	
NET INCOME	 	103.6	 	 	 	127.9	 	
 	 	 	 	 	 	 	 	
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	 	(1.7	)	 	 	(1.6	)	
 	 	 	 	 	 	 	 	
NET INCOME ATTRIBUTABLE TO ENSCO	 	$101.9	 	 	 	$126.3	 	
 	 	 	 	 	 	 	 	
EARNINGS PER SHARE - BASIC	 	 	 	 	 	 	 	
Continuing operations	 	$   .59	 	 	 	$   .85	 	
Discontinued operations	 	--	 	 	 	.04	 	
 	 	$   .59	 	 	 	$   .89	 	
EARNINGS PER SHARE - DILUTED	 	 	 	 	 	 	 	
      Continuing operations	 	$   .59	 	 	 	$   .85	 	
      Discontinued operations	 	--	 	 	 	.04	 	
 	 	$   .59	 	 	 	$   .89	 	
 	 	 	 	 	 	 	 	
NET INCOME ATTRIBUTABLE TO ENSCO SHARES	 	 	 	 	 	 	 	
Basic	 	$100.9	 	 	 	$124.8	 	
Diluted	 	$100.9	 	 	 	$124.8	 	
WEIGHTED-AVERAGE SHARES OUTSTANDING	 	 	 	 	 	 	 	
Basic	 	169.8	 	 	 	140.9	 	
Diluted	 	170.2	 	 	 	140.9	 	
CASH DIVIDENDS PER SHARE	 	$    .35	 	 	 	$    .35	 	
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

4

 
ENSCO  PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
(Unaudited)
 	       Six Months Ended
                       June 30,               	
 		
 	           2011   	 	            2010 	
 	 	 	 	 	 	 	 	
OPERATING REVENUES	     	$925.7	     	 	     	$860.0	    	
 	 	 	 	 	 	 	 	
OPERATING EXPENSES	 	 	 	 	 	 	 	
      Contract drilling (exclusive of depreciation)	 	477.9	 	 	 	388.4	 	
      Depreciation	 	143.0	 	 	 	103.6	 	
      General and administrative	 	77.5	 	 	 	42.6	 	
     	 	698.4	 	 	 	534.6	 	
OPERATING INCOME	 	227.3	 	 	 	325.4	 	
 	 	 	 	 	 	 	 	
OTHER INCOME (EXPENSE), NET	 	(15.9	)	 	 	15.9	 	
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	 	211.4	 	 	 	341.3	 	
 	 	 	 	 	 	 	 	
PROVISION FOR INCOME TAXES	 	 	 	 	 	 	 	
Current income tax expense	 	54.2	 	 	 	51.9	 	
Deferred income tax (benefit) expense	 	(11.9	)	 	 	5.5	 	
 	 	42.3	 	 	 	57.4	 	
INCOME FROM CONTINUING OPERATIONS 	 	169.1	 	 	 	283.9	 	
 	 	 	 	 	 	 	 	
INCOME FROM DISCONTINUED OPERATIONS, NET 	 	--	 	 	 	35.6	 	
 	 	 	 	 	 	 	 	
NET INCOME	 	169.1	 	 	 	319.5	 	
 	 	 	 	 	 	 	 	
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	 	(2.6	)	 	 	(3.4	)	
 	 	 	 	 	 	 	 	
NET INCOME ATTRIBUTABLE TO ENSCO	 	$166.5	 	 	 	$316.1	 	
 	 	 	 	 	 	 	 	
EARNINGS PER SHARE - BASIC	 	 	 	 	 	 	 	
Continuing operations	 	$  1.06	 	 	 	$  1.97	 	
Discontinued operations	 	--	 	 	 	.25	 	
 	 	$  1.06	 	 	 	$  2.22	 	
EARNINGS PER SHARE - DILUTED	 	 	 	 	 	 	 	
Continuing operations	 	$  1.06	 	 	 	$  1.97	 	
Discontinued operations	 	--	 	 	 	.25	 	
 	 	$  1.06	 	 	 	$  2.22	 	
 
NET INCOME ATTRIBUTABLE TO ENSCO SHARES	 	 	 	 	 	 	 	
Basic	 	$164.5	 	 	 	$312.2	 	
Diluted	 	$164.5	 	 	 	$312.2	 	
WEIGHTED-AVERAGE SHARES OUTSTANDING	 	 	 	 	 	 	 	
Basic	 	155.6	 	 	 	140.8	 	
Diluted	 	155.9	 	 	 	140.9	 	
CASH DIVIDENDS PER SHARE	 	$    .70	 	 	 	$  .375	 	
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

5

ENSCO  PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share and par value amounts)
 
 	June 30,
     2011     	December 31,
       2010       	
 			
 	(Unaudited)	 	
ASSETS	 	 	 	 	 	
 	 	 	 	 	 	
CURRENT ASSETS	 	 	 	 	 	
     Cash and cash equivalents	 	$    554.0	 	$1,050.7	 	
     Accounts receivable, net	 	682.9	 	214.6	 	
     Other	 	329.4	 	171.4	 	
        Total current assets	 	1,566.3	 	1,436.7	 	
 	 	 	 	 	 	
PROPERTY AND EQUIPMENT, AT COST	 	13,901.3	 	6,744.6	 	
     Less accumulated depreciation	 	1,792.5	 	1,694.7	 	
        Property and equipment, net	 	12,108.8	 	5,049.9	 	
 
GOODWILL	 	3,295.0	 	336.2	 	
 	 	 	 	 	 	
OTHER ASSETS, NET	 	541.3	 	228.7	 	
 	 	$17,511.4	 	$7,051.5	 	
 	 	 	 	 	 	
LIABILITIES AND SHAREHOLDERS' EQUITY	 	 	 	 	 	
 	 	 	 	 	 	
CURRENT LIABILITIES	 	 	 	 	 	
       Accounts payable - trade	 	$    553.1	 	$   163.5	 	
       Accrued liabilities and other	 	504.2	 	168.3	 	
       Short-term debt	 	89.9	 	--	 	
       Current maturities of long-term debt	 	47.5	 	17.2	 	
        Total current liabilities	 	1,194.7	 	349.0	 	
 	 	 	 	 	 	
LONG-TERM DEBT	 	4,917.4	 	240.1	 	
 	 	 	 	 	 	
DEFERRED INCOME TAXES	 	364.1	 	358.0	 	
 	 	 	 	 	 	
OTHER LIABILITIES	 	456.9	 	139.4	 	
 	 	 	 	 	 	
COMMITMENTS AND CONTINGENCIES	 	 	 	 	 	
 	 	 	 	 	 	
ENSCO SHAREHOLDERS' EQUITY	 	 	 	 	 	
     Class A ordinary shares, U.S. $.10 par value, 450.0 million shares
         authorized, 235.8 million and 150.0 million shares issued	 	23.6	 	15.0	 	
     Class B ordinary shares, £ 1 par value, 50,000 shares authorized and issued	 	.1	 	.1	 	
     Additional paid-in capital	 	5,209.9	 	637.1	 	
     Retained earnings	 	5,340.8	 	5,305.0	 	
     Accumulated other comprehensive income	 	14.8	 	11.1	 	
     Treasury shares, at cost, 5.7 million shares and 7.1 million shares	 	(17.5	)	(8.8	)	
        Total Ensco shareholders' equity	 	10,571.7	 	5,959.5	 	
 	 	 	 	 	 	
NONCONTROLLING INTERESTS	 	6.6	 	5.5	 	
        Total equity	 	10,578.3	 	5,965.0	 	
 	 	$17,511.4	 	$7,051.5	 	
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

6

 
ENSCO  PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
 	     Six Months Ended
                   June 30,         	
 	      2011    	           2010    	
OPERATING ACTIVITIES	 	 	 	 	 	
Net income	 	$   169.1	 	$   319.5	 	
Adjustments to reconcile net income to net cash provided by operating	 	 	 	 	 	
     activities of continuing operations:	 	 	 	 	 	
     Depreciation expense	 	143.0	 	103.6	 	
     Share-based compensation expense	 	 22.2	 	 22.4	 	
     Deferred income tax (benefit) expense	 	(11.9	)	5.5	 	
     Amortization expense	 	14.9	 	16.0	 	
     Loss on asset impairment	 	--	 	12.2	 	
     Income from discontinued operations, net	 	--	 	(.7	)	
     Gain on disposal of discontinued operations, net	 	--	 	(34.9	)	
     Other	 	(12.9	)	5.4	 	
     Changes in operating assets and liabilities:	 	 	 	 	 	
(Increase) decrease in accounts receivable	 	(102.3	)	23.9	 	
Decrease in other assets	 	31.4	 	.1	 	
Decrease in  liabilities	 	(77.7	)	(97.6	)	
Net cash provided by operating activities of continuing operations	 	175.8	 	375.4	 	
 	 	 	 	 	 	
INVESTING ACTIVITIES	 	 	 	 	 	
   Acquisition of Pride International, Inc., net of cash acquired	 	(2,656.0	) 	--	 	
   Additions to p rop erty and equipment	 	(265.6	)	(336.6	)	
   Proceeds from disposal of discontinued operations	 	--	 	132.4	 	
   Proceeds from disposition of assets	 	44.4	 	.7	 	
   Other 	 	(4.5	) 	--	 	
Net cash used in investing activities	 	(2,881.7	)	(203.5	)	
 	 	 	 	 	 	
FINANCING ACTIVITIES	 	 	 	 	 	
   Proceeds from issuance of senior notes	 	 2,462.8	 	 --	 	
   Reduction of long-term borrowings	 	(189.6	)	(8.6	)	
Cash dividends paid	 	(130.7	)	(53.6	)	
   Commercial paper borrowings, net	 	89.9	 	--	 	
   Debt financing costs        	 	(31.8	)	 (6.2	)	
Other	 	8.5	 	(12.4	)	
Net cash provided by (used in) financing activities	 	2,209.1	 	(80.8	)	
 	 	 	 	 	 	
Effect of exchange rate changes on cash and cash equivalents	 	.1	 	(.7	)	
Net cash provided by operating activities of discontinued operations	 	--	 	5.3	 	
 	 	 	 	 	 	
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	 	(496.7	)	95.7	 	
 	 	 	 	 	 	
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	 	1,050.7	 	1,141.4	 	
 	 	 	 	 	 	
CASH AND CASH EQUIVALENTS, END OF PERIOD	 	$   554.0	 	$1,237.1	 	
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

7

 
ENSCO  PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1 - Unaudited Condensed Consolidated Financial Statements
 
     We prepared the accompanying condensed consolidated financial statements of Ensco plc and subsidiaries (the "Company," "Ensco," "we" or "us") in accordance with accounting principles generally accepted in the United States of America ("GAAP"), pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") included in the instructions to Form 10-Q and Article 10 of Regulation S-X. The financial information included in this report is unaudited but, in our opinion, includes all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented. The December 31, 2010 condensed consolidated balance sheet data were derived from our 2010 audited consolidated financial statements, but do not include all disclosures required by GAAP. Certain previously reported amounts have been reclassified to conform to the current year presentation. The preparation of our condensed consolidated financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the related revenues and expenses and disclosures of gain and loss contingencies as of the date of the financial statements. Actual results could differ from those estimates.
 
     The financial data for the three-month and six-month periods ended June 30, 2011 and 2010 included herein have been subjected to a limited review by KPMG LLP, our independent registered public accounting firm. The accompanying independent registered public accounting firm's review report is not a report within the meaning of Sections 7 and 11 of the Securities Act of 1933, and the independent registered public accounting firm's liability under Section 11 does not extend to it.
 
     Results of operations for the three-month and six-month periods ended June 30, 2011 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2011.  It is recommended that these condensed consolidated financial statements be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2010 included in our Annual Report on Form 10-K filed with the SEC on February 24, 2011.
 
Note 2 - Acquisition of Pride International, Inc.
 
     On May 31, 2011 (the “Merger Date”), Ensco plc completed a merger transaction (the “Merger”) with Pride International, Inc., a Delaware corporation (“Pride”), ENSCO International Incorporated, a Delaware corporation and a wholly-owned subsidiary and predecessor of Ensco ("Ensco Delaware"), and ENSCO Ventures LLC, a Delaware limited liability company and an indirect, wholly-owned subsidiary of Ensco plc (“Merger Sub”). Pursuant to the Agreement and Plan of Merger, dated as of February 6, 2011 (as amended, the "Merger Agreement"), among Ensco plc, Pride, Ensco Delaware and Merger Sub, and subject to the conditions set forth therein, Merger Sub merged with and into Pride, with Pride as the surviving entity and an indirect, wholly-owned subsidiary of Ensco plc.
 
     The Merger expands our deepwater fleet with drillship assets, increases our presence in the floater markets as well as various major offshore drilling provinces and establishes Ensco with the world's second largest offshore drilling rig fleet.   Revenues and net income of Pride from the Merger Date were $151.2 million and $24.3 million, respectively, included in our condensed consolidated statement of income for the three-month and six-month periods ended June 30, 2011.
 
    Consideration
 
     As a result of the Merger, each outstanding share of Pride’s common stock (other than shares of common stock held directly or indirectly by Ensco, Pride or any wholly-owned subsidiary of Ensco or Pride (which were cancelled as a result of the Merger) and those shares held by certain U.K. residents if determined by Ensco) were converted into the right to receive $15.60 in cash and 0.4778 Ensco American depositary shares, each representing one Class A ordinary share ("ADS" or "share").  Under certain circumstances, U.K. residents received all cash consideration as a result of compliance with legal requirements. The total consideration delivered in the Merger was $7.4 billion, consisting of $2.8 billion of cash, 85.8 million Ensco ADSs with an aggregate value of $4.6 billion based on the closing price of Ensco ADSs of $53.32 on the Merger Date and the estimated fair value of $35.4 million of vested Pride employee stock options assumed by Ensco .
 
8

 
    The following table summarizes the components of the merger consideration (dollars in millions, except per share amounts):
 
Share consideration paid:	 	 	 	
179.7 million outstanding shares of Pride common stock converted to 85.8 million of Ensco ADSs
   using the  exchange ratio of 0.4778 and valued at $53.32 per share	 	$4,577.5	 	
 	 	 	 	
Cash and other consideration paid:	 	 	 	
179.7 million outstanding shares of Pride common stock at $15.60 per share	 	2,803.0	 	
Estimated fair value of 2.5 million vested Pride employee stock options assumed by Ensco	 	35.4	 	
Merger consideration	 	$7,415.9	 	
 
     Assets Acquired and Liabilities Assumed
 
     The transaction has been accounted for using the acquisition method of accounting which requires that assets acquired and liabilities assumed be recorded at their estimated fair values as of the Merger Date. The excess of the consideration transferred over the estimated fair values of the net assets acquired was recorded as goodwill. We have not finalized the determination of the fair values of the assets acquired and liabilities assumed and, therefore, the fair value estimates set forth below are subject to adjustment during a one year measurement period subsequent to the acquisition date as permitted under GAAP.  T he estimated fair values of certain assets and liabilities, including inventory, taxes and contingencies require judgments and assumptions that increase the likelihood that adjustments may be made to these estimates during the measurement period.   The provisional amounts recorded for assets acquired and liabilities assumed were based on preliminary estimates of their fair values as of the Merger Date and were as follows:
 
 	Estimated
Fair Value	
Assets:	 	 	
Cash and cash equivalents	  $  147.0	 	
Accounts receivable*	  371.3	 	
Other current assets	    150.9	 	
Property and equipment	    6,758.8	 	
Other assets	    343.7	 	
Liabilities:	   	 	
Accounts payable and accrued liabilities and other	    539.8	 	
Debt 	2,436.0	 	
Deferred income tax liabilities	19.0	 	
Other liabilities	   319.8	 	
Net assets acquired	  $4,457.1	 	
Less merger consideration	 7,415.9	 	
Goodwill	 $2,958.8	 	
 
     *Gross contractual amounts receivable totaled $394.7 million as of the Merger Date.
 
     Property and Equipment
 
     Property and equipment acquired in connection with the Merger consisted primarily of drilling rigs and related equipment , including seven drillships (two of which are under construction), 12 semisubmersible rigs and seven jackup rigs.   We recorded step-up adjustments in the aggregate of $285.5 million to record the estimated fair value of Pride’s drilling rigs and related equipment, which were primarily based on an income approach valuation model.  We estimated remaining useful lives for Pride’s drilling rigs, which ranged from 10 to 35 years based on original estimated useful lives of 30 to 35 years.
 
     In connection with the integration of Pride’s operations, we are in the process of changing the names of most of Pride’s fleet in accordance with our naming convention.  For purposes of the notes to the condensed consolidated financial statements, we used the new names whether or not the name change had been legally completed.
 
     Goodwill
 
     Goodwill recognized as a result of the Merger was calculated as the excess of the consideration transferred over the net assets acquired and represents the future economic benefits arising from other intangible assets acquired that could not be individually identified and separately recognized.  Goodwill specifically includes the expected synergies and other benefits that we believe will result from combining the operations of Pride with the operations of Ensco and other intangible assets that do not qualify for separate recognition, such as assembled workforce in place at the Merger Date.  In addition, goodwill is not expected to be tax deductible.

9

 
    Goodwill recognized as a result of the Merger preliminarily was allocated to our reportable segments as follows (in millions):
 
Deepwater	 	 	 	 	$2,485.1	
Midwater	 	 	 	 	473.7	
Jackup	 	 	 	 	--	
Total	 	 	 	 	$2,958.8	
 
    Other Intangible Assets and Liabilities
 
     We recorded intangible assets and liabilities in the aggregate of $209.0 million and $276.0 million, respectively, representing the estimated fair values of Pride's firm drilling contracts in place at the Merger Date with favorable or unfavorable contract terms as compared to current market day rates for comparable drilling rigs.  The various factors considered in the determination of these fair values were (1) the contracted day rate for 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 Merger Date.  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 current market day rate using a risk-adjusted discount rate and an estimated effective income tax rate.  After amortizing $5.1 million of net contract intangible revenues in June 2011, the remaining balances were $202.5 million of intangible assets included in other current assets and other assets, net, and $264.4 million of intangible liabilities included in accrued liabilities and other and other liabilities on our condensed consolidated balance sheet as of June 30, 2011.  These balances will be amortized to operating revenues over the respective remaining drilling contract terms on a straight-line basis.   Amortization income (expense) for these intangible assets and liabilities  is estimated to be $51.8 million for the remainder of 2011, $23.0 million for 2012, $7.9 million for 2013, ($4.8) million for 2014, ($15.6) million for 2015 and ($400,000) thereafter.
 
     We recorded an intangible liability of $36.0 million for the estimated fair value of an unfavorable drillship construction contract which was determined by comparing the firm obligations for the remaining construction of the ENSCO DS-6 as of May 31, 2011 to current market rates for the construction of a similar design drilling rig. The unfavorable construction contract liability is calculated based on the present value of the difference in cash outflows for the remaining contractual payments as compared to a hypothetical contract with the same remaining contractual payments at current market rates using a risk-adjusted discount rate and estimated effective income tax rate.  This liability will be amortized over the estimated useful life of ENSCO DS-6 as a reduction of depreciation expense beginning on the date the rig is placed into service.
 
    Debt
 
     We assumed Pride's outstanding debt comprised of $900.0 million aggregate principal amount of 6.875% senior notes due 2020, $500.0 million aggregate principal amount of 8.500% senior notes due 2019, $300.0 million aggregate principal amount of 7.875% senior notes due 2040 (collectively the "Pride Notes") and $151.5 million aggregate principal amount of Maritime Administration ("MARAD") bonds due 2016.  Under a supplemental indenture, Ensco plc has fully and unconditionally guaranteed the performance of all obligations of Pride with respect to the Pride Notes.  See "Note 18 - Guarantee of Registered Securities" for additional information on the guarantee of the Pride Notes.  A step-up adjustment of $406.2 million was recorded to adjust the Pride Notes and the MARAD bonds to their aggregate estimated fair value. The adjustment was based on quoted market prices for Pride’s publicly traded debt and an income approach valuation model for Pride’s non-publicly traded debt. In addition, we assumed debt outstanding with respect to Pride's senior unsecured revolving credit facility totaling $181.0 million, which was repaid in full and the facility terminated.
 
     Merger-Related Costs
 
     Merger-related transaction costs consisted of various advisory, legal, accounting, valuation and other professional or consulting fees totaling $17.3 million and $23.8 million for the three-month and six-month periods ended June 30, 2011, respectively, and were expensed as incurred and included in general and administrative expense on our condensed consolidated statements of income.  Debt issuance costs of $27.2 million associated with our senior notes issued in March 2011 and bridge term facility issued in February 2011 were deferred and will be amortized to interest expense over the lives of the respective debt arrangements.  The costs of $70.5 million associated with the Ensco ADSs issued to effect the Merger were recorded as a reduction to additional paid-in capital.
 
     Deferred Taxes
 
     The acquisition of a business through the purchase of its common stock generally is treated as a “nontaxable” transaction.  The acquisition of Pride was executed through the acquisition of its outstanding common stock and, therefore, the historical tax bases of the acquired assets and assumed liabilities, net operating losses and other tax attributes of Pride were assumed as of the acquisition date. However, adjustments were recorded to recognize deferred tax assets and liabilities for the tax effects of differences between acquisition date fair values and tax bases of assets acquired and liabilities assumed. As of the acquisition date, a decrease of $24.2 million to Pride’s net deferred tax liability was recognized.

10

 
     Deferred tax assets and liabilities recognized in connection with the Merger were measured at rates enacted as of the acquisition date. Tax rate changes, or any deferred tax adjustments for new tax legislation, following the acquisition date will be reflected in our operating results in the period in which the change in tax laws or rate is enacted.
 
    Contingencies
 
     In connection with the Merger, we recognized contingent liabilities resulting from certain lawsuits, claims or proceedings existing as of the Merger Date. These matters existed as of the Merger Date as Pride was involved from time to time as party to governmental investigations or proceedings, including matters related to taxation, arising in the ordinary course of business. Although the outcome of such lawsuits or other proceedings cannot be predicted with certainty and the amount of any liability that could arise with respect to such lawsuits or other proceedings cannot be predicted accurately, we do not expect these matters to have a material adverse effect on our financial position, operating results or cash flows. See “Note 15 – Commitments and Contingencies” for additional information on contingencies.
 
    Pro Forma Impact of the Merger
 
     The following unaudited supplemental pro forma results present consolidated information as if the Merger had been completed on January 1, 2010.  The pro forma results include, among others,  (i) the amortization associated with an estimate of the acquired intangible assets and liabilities, (ii) interest expense associated with debt used to fund a portion of the Merger and (iii) the impact of certain fair value adjustments such as additional depreciation expense for adjustments to property and equipment and reduction to interest expense for adjustments to debt.  The pro forma results do not include any potential synergies, non-recurring charges which result directly from the Merger, cost savings or other expected benefits of the Merger.  Accordingly, the pro forma results should not be considered indicative of the results that would have occurred if the Merger and related borrowings had occurred on January 1, 2010, nor are they indicative of future results.
 
(In millions, except per share amounts) 	 	Three Months Ended	 	Six Months Ended	
 	 	               June 30,             	 	             June 30,           	
 	 	2011	 	2010	 	2011	 	2010	
 	
Revenues	 	$880.8	 	 	$773.2	 	 	$1,642.1	 	 	$1,591.1	 	
Net income	 	110.7	 	 	186.5	 	 	183.5	 	 	447.4	 	
Earnings per share - basic	 	0.42	 	 	0.77	 	 	0.74	 	 	1.78	 	
Earnings per share - diluted	 	0.42	 	 	0.76	 	 	0.74	 	 	1.78	 	
 
Note 3 - Fair Value Measurements
 
     The following fair value hierarchy table categorizes information regarding our financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2011 and December 31, 2010 (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 June 30, 2011	 	 	 	 	 	 	 	 	 	 	 	 	
Supplemental executive retirement plan assets	 	$27.0   	 	 	$    --  	 	 	$    --	 	 	$27.0  	 	
Derivatives, net	 	--  	 	 	13.7  	 	 	--	   	 	13.7  	 	
Total financial assets	 	$27.0  	 	 	$13.7  	 	 	$    --	 	 	$40.7  	 	
 
As of December 31, 2010	 	 	 	 	 	 	 	 	 	 	 	 	
Auction rate securities	 	$    --  	 	 	$    --  	 	 	$44.5	 	 	$44.5  	 	
Supplemental executive retirement plan assets	 	23.0  	 	 	    --  	 	 	--	 	 	23.0  	 	
Derivatives, net 	 	    --  	 	 	16.4  	 	 	   --	 	 	16.4  	 	
Total financial assets 	 	$23.0  	 	 	$16.4  	 	 	$44.5	 	 	$83.9  	 	

11

 
    Auction Rate Securities
 
     As of December 31, 2010, we held long-term debt instruments with variable interest rates that periodically reset through an auction process ("auction rate securities") totaling $50.1 million (par value) and were included in other assets, net, on our condensed consolidated balance sheet. During the quarter ended March 31, 2011, $42.0 million (par value) of our auction rate securities were repurchased at par and $8.1 million (par value) were sold at 90% of par. Our auction rate securities were measured at fair value on a recurring basis using significant Level 3 inputs as of December 31, 2010. The following table summarizes the fair value measurements of our auction rate securities using significant Level 3 inputs, and changes therein, for the three-month and six-month periods ended June 30, 2011 and 2010 (in millions):
 
 	 Three Months Ended    
             June 30,               	      Six Months Ended
                 June 30,          	
 	    2011  	   2010  	        2011  	          2010    	
 	 	 	 	 	 	 	 	 	 	
Beginning balance	 	$ --	 	$ 55.4  	 	$ 44.5	 	$ 60.5 	 	
Sales	 	--	 	(10.5) 	 	(49.3	)	(15.9)	 	
Realized losses*	 	--	 	--  	 	(0.1	)	-- 	 	
Unrealized gains*	 	--	 	.3  	 	4.9	 	.6 	 	
Transfers in and/or out of L ev el 3	 	--	 	--  	 	--	 	-- 	 	
Ending balance	 	$ --	 	$ 45.2  	 	$     --	 	$ 45.2 	 	
 
*Realized losses and unr ealiz ed gains were included in other income, net, in our condensed consolidated statements of income.	
 
    Supplemental Executive Retirement Plan Assets
 
     Our Ensco supplemental executive retirement plans (the "SERP") are non-qualified plans that accord eligible employees an opportunity to defer a portion of their compensation for use after retirement. Assets held in the SERP were marketable securities measured at fair value on a recurring basis using Level 1 inputs and were included in other assets, net, on our condensed consolidated balance sheets as of June 30, 2011 and December 31, 2010. The fair value measurement of assets held in the SERP was based on quoted market prices.
 
    Derivatives
 
     Our derivatives were measured at fair value on a recurring basis using Level 2 inputs as of June 30, 2011 and December 31, 2010. See "Note 6 - Derivative Instruments" for additional information on our derivatives, including a description of our foreign currency hedging activities and related methodologies used to manage foreign currency exchange rate risk. The fair value measurement of our derivatives was based on market prices that are generally observable for similar assets or liabilities at commonly-quoted intervals.
 
   Other Financial Instruments
 
     The carrying values and estimated fair values of our long-term debt instruments as of June 30, 2011 and December 31, 2010 were as follows (in millions):
 
 	June 30,
                  2011                   	December 31,
                   2010                  	
 	 
Carrying
  Value  	Estimated
  Fair
    Value  	Carrying
  Value  	Estimated
  Fair
    Value  	

 	 	 	 	 	
4.70% Senior notes due 2021	 	$1,471.2       	 	$1,514.3      	 	$     --        	 	$     --        	 	
6.875% Senior notes due 2020	 	1,063.1       	 	1,048.9      	 	--        	 	--        	 	
3 .25% Senior notes due 2016	 	992.8       	 	1,017.5      	 	 --        	 	 --        	 	
8.50% Senior notes due 2019	 	639.1       	 	634.4      	 	 --        	 	 --        	 	
7.875% Senior notes due 2040	 	385.6       	 	 373.8      	 	 --        	 	 --        	 	
7.20% Debentures due 2027	 	          149.0       	 	167.8      	 	148.9       	 	165.0       	 	
4.33% Bonds, including current maturities, due 2016	 	164.3       	 	164.4      	 	 --        	 	 --        	 	
6.36% Bonds, including current maturities, due 2015	 	57.0       	 	64.4      	 	63.4       	 	71.9       	 	
4.65%  Bonds, including current maturities, due 2020	 	42.8       	 	48.4      	 	45.0       	 	50.6       	 	

12

 
     The estimated fair values of our senior notes and debentures were determined using quoted market prices. The estimated fair values of our bonds were determined using an income approach valuation model. The estimated fair values of our cash and cash equivalents, receivables, trade payables and other liabilities approximated their carrying values as of June 30, 2011 and December 31, 2010.
 
Note 4 - Property and Equipment
 
     Property and equipment as of June 30, 2011 and December 31, 2010 consisted of the following (in millions):
 
 	June 30,	    December 31,  	
 	     2011      	              2010          	
  	 	 	 	 	 	
Drilling rigs and equipment	 	$11,318.2	 	$5,175.2	 	
Other	 	82.4	 	50.4	 	
Work in progress	 	2,500.7	 	1,519.0	 	
 	 	$13,901.3	 	$6,744.6	 	
 
     Drilling rigs and equipment increased $6.1 billion during 2011 primarily due to the Merger.  The fair values recorded for Pride's drilling rigs and equipment as of the Merger Date was $5.5 billion which included five drillships, 12 semisubmersible rigs and seven jackup rigs.
 
     Work in progress increased $981.7 million during 2011 primarily related to the Merger. The fair values recorded for Pride’s work in progress as of the Merger Date was $1.3 billion.  Work in progress as of June 30, 2011 primarily consisted of $1.1 billion related to the construction of our ENSCO 8500 Series® ultra-deepwater semisubmersible rigs, $1.1 billion related to the construction of our ENSCO DS-5, ENSCO DS-6 and ENSCO DS-7 ultra-deepwater drillships, which were acquired in connection with the Merger, and costs associated with various modification and enhancement projects. Work in progress as of December 31, 2010 primarily consisted of $1,401.1 million related to the construction of our ENSCO 8500 Series® ultra-deepwater semisubmersible rigs and costs associated with various modification and enhancement projects.
 
Note 5 - Debt

     Long-term debt as of June 30, 2011 and December 31, 2010 consisted of the following (in millions):
 
 	June 30,	December 31,	
  	      2011    	          2010        	
 	 	 	 	 	 	
4 .70% Senior notes due 2021	 	$1,471.2	 	$     --	 	
6.875% Senior notes due 2020	 	 1,063.1	 	--	 	
3.25% Senior notes due 2016	 	   992.8	 	--	 	
8.50% Senior notes due 2019	 	  639.1	 	--	 	
7.875% Senior notes due 2040	 	  385.6	 	  --	 	
7.20% Debentures due 2027	 	  149.0	 	  --	 	
4.33% Bonds due 2016	 	  164.3	 	148.9	 	
6.36% Bonds due 2015	 	  57.0	 	  63.4	 	
4.65% Bonds due 2020	 	  42.8	 	  45.0	 	
Commercial paper 	 	89.9	 	--	 	
 	 	 	 	 	 	
Less current maturities	 	  (137.4	)	  (17.2	)	
Total long-term debt	 	  $4,917.4	 	  $240.1	 	

13

 
Acquired Debt
 
     In connection with the Merger, we assumed Pride’s outstanding debt comprised of $900.0 million aggregate principal amount of 6.875% senior notes due 2020, $500.0 million 8.500% senior notes due 2019, $300.0 million 7.875% senior notes due 2040 and $151.5 million of MARAD bonds due 2016.  Under a supplemental indenture, Ensco plc has fully and unconditionally guaranteed the performance of all obligations of Pride with respect to the Pride Notes.  See "Note 18 - Guarantee of Registered Securities" for additional information on the guarantee of the Pride Notes.  In addition, we assumed debt  outstanding with respect to Pride’s senior unsecured revolving credit facility totaling $181.0 million, which was repaid in full and the facility terminated.
 
     We may also redeem each series of the Pride 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 Pride Notes also contain customary events of default, including failure to pay principal or interest on the Pride Notes when due, among others. The Pride Notes 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.
 
Senior Notes
 
     On March 17, 2011, we issued $1.0 billion aggregate principal amount of unsecured 3.25% senior notes due 2016 at a discount of $7.6 million and $1.5 billion aggregate principal amount of unsecured 4.70% senior notes due 2021 at a discount of $29.6 million (collectively the “Notes”) in a public offering. Interest on the Notes is payable semiannually in March and September of each year.  The Notes were issued pursuant to an indenture between us and Deutsche Bank Trust Company Americas, as trustee (the “Trustee”), dated March 17, 2011 (the “Indenture”), and a supplemental indenture between us and the Trustee, dated March 17, 2011 (the “Supplemental Indenture”). The proceeds from the sale of the Notes were used to fund a portion of the cash consideration payable in connection with the Merger.
 
     We may also redeem each series of the 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 Notes, the Indenture and the Supplemental Indenture also contain customary events of default, including failure to pay principal or interest on the Notes when due, among others. The Supplemental Indenture 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.
 
    Five-Year Credit Facility
 
On May 12, 2011, we entered into an amended and restated agreement (the "Five-Year Credit Facility") with a syndicate of banks that provided for a $700.0 million unsecured revolving credit facility for general corporate purposes.   On May 31, 2011, upon the consummation of the Merger, and pursuant to the terms of the Five-Year Credit Facility, the commitment under the Five-Year Credit Facility increased from $700.0 million to $1.45 billion. In addition, certain of Ensco’s subsidiaries became borrowers and/or guarantors of the Five-Year Credit Facility. The Five-Year Credit Facility has a five-year term, expiring in May 2016, and replaces our $700.0 million four-year credit agreement which was scheduled to mature in May 2014.  Advances under the Five-Year Credit Facility bear interest at LIBOR plus an applicable margin rate (currently 1.5% per annum), depending on our credit rating. We are required to pay a quarterly undrawn facility fee (currently 0.20% per annum) on the total $1.45 billion commitment, which is also based on our credit rating. We also are required to maintain a debt to total capitalization ratio less than or equal to 50% under the Five-Year Credit Facility. We have the right, subject to lender consent, to increase the commitments under the Five-Year Credit Facility to an aggregate amount of up to $1.7 billion.  We had no amounts outstanding under the Five-Year Credit Facility or our prior credit agreement as of June 30, 2011 and December 31, 2010, respectively.

14

 
      364-Day Credit Facility
 
     On May 12, 2011, we entered into a 364-Day Credit Agreement (the "364-Day Credit Facility") with a syndicate of banks. The 364-Day Credit Facility provided for a $450.0 million unsecured revolving credit facility to be used for general corporate purposes, which would not be available for borrowing until certain conditions at the closing of the Merger were satisfied.  On May 31, 2011, upon the consummation of the Merger, the full commitment of $450.0 million under the 364-Day Credit Facility became available for Ensco to use for general corporate purposes. In addition, certain of Ensco’s subsidiaries became borrowers and/or guarantors of the 364-Day Credit Facility. The 364-Day Credit Facility has a one-year term, expiring in May 2012, or the date of the termination of the lender commitments as set forth in the 364-Day Credit Facility.  Upon our election prior to maturity, amounts outstanding under the 364-Day Credit Facility may be converted into a term loan with a maturity date of May 11, 2013 after payment of a fee equal to 1% of the amounts converted. Advances under the 364-Day Credit Facility bear interest at LIBOR plus an applicable margin rate (currently 1.50% per annum) depending on our credit rating. We are required to pay a quarterly undrawn facility fee (currently 0.10% per annum) on the total $450.0 million commitment, which is also based on our credit rating. We also are required to maintain a debt to total capitalization ratio less than or equal to 50% under the 364-Day Credit Facility. We have the right, subject to lender consent, to increase the commitments under the 364-Day Credit Facility to an aggregate amount of up to $550.0 million.  We had no amounts outstanding under the 364-Day Credit Facility as of June 30, 2011.
 
Commercial Paper
 
     On April 26, 2011, we entered into a commercial paper program with four 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 $700.0 million.   On May 31, 2011, following the consummation of the Merger, Ensco increased the maximum aggregate amount of the commercial paper program to $1.0 billion.  Under the commercial paper program, we may issue commercial paper from time to time, and the proceeds of such financings will be used for capital expenditures and other general corporate purposes.  The commercial paper will bear interest at rates that will vary based on market conditions and the ratings assigned by credit rating agencies at the time of issuance. The maturities of the commercial paper 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 $89.9 million outstanding under our commercial paper program as of June 30, 2011 which was classified as short-term debt on our condensed consolidated balance sheet.
 
Bridge Term Facility
 
     On February 6, 2011, we entered into a bridge commitment letter (the “Commitment Letter”) with Deutsche Bank AG Cayman Islands Branch (“DBCI”), Deutsche Bank Securities Inc. and Citigroup Global Markets Inc. (“Citi”). Pursuant to the Commitment Letter, DBCI and Citi committed to provide a $2.8 billion unsecured bridge term loan facility (the “Bridge Term Facility”) to fund a portion of the cash consideration in the Merger.  Upon receipt of the proceeds from the issuance of the Notes, we determined that we had adequate cash resources to fund the cash component of the consideration payable in connection with the proposed Merger.  Accordingly, the Bridge Term Facility was terminated.
 
    Maturities
 
     The aggregate maturities of our debt, excluding net unamortized premiums of $363.6 million, as of June 30, 2011 were as follows (in millions):
 
2011	 	 	$  113.6	
2012	 	 	47.5	
2013	 	 	47.5	
2014	 	 	47.5	
2015	 	 	47.5	
Thereafter	 	 	4,387.6	
Total	 	 	$4,691.2	

15

 
    Interest expense totaled $19.6 million and $23.7 million for the three-month and six-month periods ended June 30, 2011, respectively, which was net of amounts capitalized of $22.0 million and $36.4 million in connection with our newbuild construction during the same periods, respectively.  All interest expense incurred during each of the three-month and six-month periods ended June 30, 2010 was capitalized in connection with our newbuild construction.
 
Note 6 - Derivative Instruments
   
     Our functional currency is the U.S. dollar. As is customary in the oil and gas industry, a majority of our revenues are denominated in U.S. dollars; however, a portion of the revenues earned and expenses incurred by some 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. We use foreign currency forward contracts ("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. Although no interest rate related derivatives were outstanding as of June 30, 2011 and December 31, 2010, we occasionally employ an interest rate risk management strategy that utilizes derivatives to minimize or eliminate unanticipated fluctuations in earnings and cash flows arising from changes in, and volatility of, interest rates. We minimize 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 monitoring the financial condition of our counterparties. We do not enter into derivatives for trading or other speculative purposes.
 
     All derivatives were recorded on our condensed consolidated balance sheets at fair value. 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.  As of June 30, 2011 and December 31, 2010, our condensed consolidated balance sheets included net foreign currency derivative assets of $13.7 million and $16.4 million, respectively. See "Note 3 - Fair Value Measurements" for additional information on the fair value measurement of our derivatives.
 
     Derivatives recorded at fair value in our condensed consolidated balance sheets as of June 30, 2011 and December 31, 2010 consisted of the following (in millions):
 
 	                      Derivative Assets          	                    Derivative Liabilities     	
 	June 30,
                  2011    	  December 31, 
                2010          	June 30,
                  2011    	December 31,
        2010      	
             	 	         	 	 	
Derivatives Designated as Hedging Instruments	 	 	 	
Foreign currency forward contracts - current (1)	 $13.9     	$16.8       	$0.2   	$0.6      	
Foreign currency forward contracts - non-current (2)	1.5     	0.1       	--   	0.1      	
 	15.4     	16.9       	0.2   	0.7      	
 	 	 	 	 	
Derivatives Not Designated as Hedging Instruments	 	 	 	
Foreign currency forward contracts - current (1)	--     	0.2       	1.5   	--      	
 	--     	0.2       	1.5   	--      	
Total	$15.4     	$17.1       	$1.7   	$0.7      	
 
 	(1)	Derivative assets and liabilities that have maturity dates equal to or less than twelve months from the respective balance sheet date were included in other current assets and accrued liabilities and other, respectively, on our condensed consolidated balance sheets.	
 	 	 	
 	(2)	Derivative assets and liabilities that have maturity dates greater than twelve months from the respective balance sheet date were included in other assets, net, and other liabilities, respectively, on our condensed consolidated balance sheets.	

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     We utilize derivatives designated as hedging instruments to hedge forecasted foreign currency denominated transactions ("cash flow hedges"), primarily to reduce our exposure to foreign currency exchange rate risk associated with the portion of our remaining ENSCO 8500 Series® construction obligations denominated in Singapore dollars and contract drilling expenses denominated in various other currencies. As of June 30, 2011, we had cash flow hedges outstanding to exchange an aggregate $260.0 million for various foreign currencies, including $133.2 million for Singapore dollars, $90.7 million for British pounds, $26.6 million for Australian dollars, $7.4 million for Mexican pesos and $2.1 million for other currencies.
 
     Gains and losses, net of tax, on derivatives designated as cash flow hedges included in our condensed consolidated statements of income for the three-month and six-month periods ended June 30, 2011 and 2010 were as follows (in millions):
 
Three Months Ended June 30, 2011 and 2010
 
Derivatives Designated
   as Cash Flow Hedges   	Gain (Loss)
  Recognized in
Other Comprehensive
Income ("OCI")
   (Effective Portion)   	 (Loss) Gain
 Reclassified  from
Accumulated Other
Comprehensive Income
("AOCI") into Income
        (Effective Portion)     	 	Gain (Loss)
Recognized in Income on
Derivatives (Ineffective
Portion and Amount
Excluded from
Effectiveness Testing) (1)	
 	 	  2011	 	2010	 	 	  2011	 	    2010     	 	 	 	2011   	 	    2010        	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest rate lock contracts (2)	 	$  --	 	$    -- 	 	 	$(.2)	 	$(.2)   	 	 	 	$ --    	 	$ --         	
Foreign currency forward contracts (3)	 	   3.1	 	(1.6)	 	 	    1.7	 	      .4    	 	 	 	  1.1   	 	(.2)       	
Total	 	$3.1	 	$(1.6)	 	 	$1.5	 	$ .2    	 	 	 	$1.1   	   	$(.2)       	

Six Months Ended June 30, 2011 and 2010
 
Derivatives Designated
   as Cash Flow Hedges   	Gain (L oss)
Recognized in  OCI
   (Effective Portion)   	 (Loss) Gain
 Reclassified  from
AOCI into Income
           (Effective Portion)    	 	Gain (Loss)  Recognized
in Income on
Derivatives (Ineffective
Portion and Amount
Excluded from
Effectiveness Testing) (1)	
 	 	      2011	 	     2010	 	 	         2011	 	  2010      	 	 	 	2011   	 	     2010         	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest rate lock contracts (2)	 	$  -- 	 	$    -- 	 	 	$ (.3	)	$ (.3)  	 	 	 	$ --    	 	$  --         	
Foreign currency forward contracts (3)	 	   6.0 	 	(3.0)	 	 	    2.6	 	 1.8   	 	 	 	   .7   	 	(.2)        	
Total	 	$6.0 	 	$(3.0)	 	 	$2.3	 	$1.5   	 	 	 	$ .7   	 	$(.2)        	
 
 	(1)	Gains and losses recognized in income for ineffectiveness and amounts excluded from effectiveness testing were included in other income, net, in our condensed consolidated statements of income.	
 	 	 	
 	(2)	Losses on derivatives reclassified from AOCI into income (effective portion) were included in other income, net, in our condensed consolidated statements of income.	
 	 	 	
 	(3)	Gains and losses on derivatives reclassified from AOCI into income (effective portion) were included in contract drilling expense in our condensed consolidated statements of income.	

17

 
 
     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 June 30, 2011, we had derivatives not designated as hedging instruments outstanding to exchange an aggregate $109.6 million for various foreign currencies, including $76.0 million for British pounds, $9.8 million for Australian dollars, $8.4 million for Swiss francs, $5.7 million for Indonesian rupiahs and $9.7 million for other currencies.
 
     A net gain of $300,000 and a net loss of $1.7 million associated with our derivatives not designated as hedging instruments were included in other income, net, in our condensed consolidated statements of income for the three-month periods ended June 30, 2011 and 2010, respectively.  A net gain of $500,000 and a net loss of $1.1 million associated with our derivatives not designated as hedging instruments were included in other income, net, in our condensed consolidated statements of income for the six-month periods ended June 30, 2011 and 2010, respectively.
 
     As of June 30, 2011, the estimated amount of net gains associated with derivative instruments, net of tax, that will be reclassified to earnings during the next twelve months totaled $700,000.
 
Note 7 - Goodwill
 
     The changes in the carrying amount of goodwill are detailed below by reportable segment.  On May 31, 2011, we completed the acquisition of Pride resulting in the recognition of a preliminary amount of $2.96 billion in goodwill.
 	 
Deepwater   	 
    Midwater	       Jackup	 	 	  Total      	
 	 	 	 	     	 	 	
Balance as of December 31, 2010	$   143.6  	 	$      --   	 	$192.6	 	 	 	$   336.2 	 	
Acquisition of Pride 	2,485.1  	 	473.7   	 	--	 	 	 	2,958.8 	 	
Balance as of June 30, 2011	$2,628.7  	 	$473.7   	 	$192.6	 	 	 	$3,295.0 	 	

 
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Note 8 - Shareholders' Equity
 
     In connection with the Merger, each outstanding share of Pride’s common stock was exchanged for the right to receive $15.60 in cash and 0.4778 Ensco ADSs. The Merger resulted in the issuance of 85.8 million Ensco ADSs each with a par value of $0.10 and a total market value of $4.6 billion based on the closing price of $53.32 on May 31, 2011.  This resulted in increases to additional paid-in capital and Class A ordinary shares of $4.6 billion and $8.6 million, respectively.  As of June 30, 2011 and December 31, 2010, our additional paid-in capital balance totaled $5.2 billion and $637.1 million, respectively, and our Class A ordinary shares balance totaled $23.6 million and $15.0 million, respectively.
 
Note 9 - Share-Based Compensation
 
    During the quarter ended June 30, 2011, we granted 562,000 non-vested share awards to our employees, officers and non-employee directors for annual equity awards and for equity awards granted to new or recently promoted employees, pursuant to our 2005 Long-Term Incentive Plan ("LTIP").  Grants of non-vested share awards generally vest at a rate of 20% per year, as determined by a committee of the Board of Directors.  Non-vested share awards granted to certain officers vest at a rate of 33% per year.  Non-vested share awards generally have voting and dividend rights effective on the date of grant and are measured at fair value using the market value of our shares on the date of grant. The weighted-average grant-date fair value of non-vested share awards granted during the quarter ended June 30, 2011 was $54.33 per share.  All non-vested share award grants were issued out of treasury.
 
Note 10 - Earnings Per Share
 
     We compute basic and diluted earnings per share ("EPS") in accordance with the two-class method. Net income attributable to Ensco used in our computations of basic and diluted EPS is adjusted to exclude net income allocated to non-vested shares granted to our employees and non-employee directors. Weighted-average shares outstanding used in our computation of diluted EPS includes the dilutive effect of share options using the treasury stock method and excludes non-vested shares.
 
     The following table is a reconciliation of net income attributable to Ensco shares used in our basic and diluted EPS computations for the three-month and six-month periods ended June 30, 2011 and 2010 (in millions):
 
 	Three Months Ended 
             June 30,             	     Six Months Ended
                    June 30,           	
 			
 	    2011  	    2010  	      2011  	        2010	
 	 	 	 	 	 	 	 	 	 	
Net income attributable to Ensco	 	$101.9	 	$126.3	 	$166.5	 	$316.1	 	
Net income allocated to non-vested share awards	 	(1.0	)	(1.5	)	(2.0	)	(3.9	)	
Net income attributable to Ensco shares	 	$100.9	 	$124.8	 	$164.5	 	$312.2	 	

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     The following table is a reconciliation of the weighted-average shares used in our basic and diluted EPS computations for the three-month and six-month periods ended June 30, 2011 and 2010 (in millions):
 
 	Three Months Ended
               June 30,              	     Six Months Ended
                   June 30,            	
 			
 	    2011  	     2010  	         2011   	         2010  	
 	 	  	 	 	 	 	 	 	 	
Weighted-average shares - basic	 	169.8	 	140.9	 	155.6	 	140.8	 	
Potentially dilutive share options	 	.4	 	.0	 	.3	 	.1	 	
Weighted-average shares - diluted	 	170.2	 	140.9	 	155.9	 	140.9	 	
 
     Antidilutive share options totaling 431,000 and 1.1 million were excluded from the computation of diluted EPS for the three-month periods ended June 30, 2011 and 2010, respectively.  Antidilutive share options totaling 397,000 and 1.0 million were excluded from the computation of diluted EPS for the six-month periods ended June 30, 2011 and 2010, respectively.
 
Note 11 - Comprehensive Income
 
     Accumulated other comprehensive income as of June 30, 2011 and December 31, 2010 was comprised of gains and losses on derivative instruments, net of tax. The components of other comprehensive income (loss), net of tax, for the three-month and six-month periods ended June 30, 2011 and 2010 were as follows (in millions):
 
 	  Three Months Ended
                 June 30,            	    Six Months Ended
                June 30,          	
 			
 	       2011    	       2010    	       2011  	        2010  	
 	 	 	 	 	 	 	 	 	 	
Net income	 	$103.6	 	$127.9	 	$169.1	 	$319.5	 	
Other comprehensive income (loss):	 	 	 	 	 	 	 	 	 	
Net change in fair value of derivatives	 	3.1	 	(1.6	)	6.0	 	(3.0	)	
Reclassification of gains and losses on derivative	 	 	 	 	 	 	 	 	 	
instruments from other comprehensive (income) loss	 	 	 	 	 	 	 	 	 	
into net income	 	(1.5	)	(.2	)	(2.3	)	(1.5	)	
Net other comprehensive income (loss)	 	1.6	 	(1.8	)	3.7	 	(4.5	)	
Comprehensive income	 	105.2	 	126.1	 	172.8	 	315.0	 	
Comprehensive income attributable to noncontrolling interests	 	(1.7	)	(1.6	)	(2.6	)	(3.4	)	
Comprehensive income attributable to Ensco	 	$103.5	 	$124.5	 	$170.2	 	$311.6	 	

20

 
 
Note 12 - Income Taxes
 
     Our consolidated effective income tax rate for the three-month and six-month periods ended June 30, 2011 of 19.6% and 20.0%, respectively, includes the impact of various discrete tax items, the majority of which is attributable to a gain on disposal of assets in a jurisdiction with a high tax rate during the three-month period ended June 30, 2011 and the recognition of a liability for unrecognized tax benefits associated with a tax position taken in a prior year during the three-month period ended March 31, 2011. Excluding the impact of the aforementioned discrete items, our consolidated effective income tax rate for the three-month and six-month periods ended June 30, 2011 was 14.6% and 14.7%, respectively, compared to a consolidated effective income tax rate of 15.5% and 16.8% for the three-month and six-month periods ended June 30, 2010.  The decrease was primarily attributable to the transfer of ownership of several of our drilling rigs among our subsidiaries in April 2010 and December 2010, which resulted in an increase in the relative components of our earnings generated in tax jurisdictions with lower tax rates.
 
Note 13 - Discontinued Operations
 
     During the six month period ended June 30, 2010, we sold three jackup rigs for an aggregate $141.8 million, of which $9.4 million was received in December 2009.  We recognized an aggregate pre-tax gain of $51.8 million in connection with the disposals, which was included in income from discontinued operations, net, in our condensed consolidated statement of income for the six-month period ended June 30, 2010. Income from discontinued operations, net, included operating losses of $3.3 million and $1.5 million for the three month and six month periods ended June 30, 2010, respectively.  Debt and interest expense are not allocated to our discontinued operations.
 
Note 14 - Noncontrolling Interests
 
     Noncontrolling interests are classified as equity on our consolidated balance sheets, and net income attributable to noncontrolling interests is presented separately on our consolidated statements of income.  Local third parties hold a noncontrolling ownership interest in certain of our subsidiaries.   The following table is a reconciliation of income from continuing operations attributable to Ensco for the three-month and six-month periods ended June 30, 2011 and 2010 (in millions):
 
 	Three Months Ended  
           June 30,              	      Six Months Ended
                June 30,          	
 	  2011  	   2010  	      2011  	        2010  	
 	 	 	 	 	 	 	 	 	 	
Income from continuing operations	 	$103.6	 	$121.9	 	$169.1	 	$283.9	 	
Income from continuing operations attributable to
noncontrolling interests	 	(1.7	)	(1.6	)	(2.6	)	(3.2	)	
Income from continuing operations attributable to Ensco	 	$101.9	 	$120.3	 	$166.5	 	$280.7	 	

 
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     The following table is a reconciliation of income from discontinued operations, net, attributable to Ensco for the three-month and six-month periods ended June 30, 2010 (in millions):
 
 	Three Months Ended
     June 30, 2010      	     Six Months Ended
             June 30,  2010     	
 	 	 	 	 	 	
Income from discontinued operations 	$6.0  	 	 	$35.6      	 	
Income from discontinued operations attributable to
   noncontrolling interests 	--  	 	 	(.2)     	 	
Income from discontinued operations attributable to Ensco	$6.0  	 	 	$35.4      	 	
 
Note 15 - Commitments and Contingencies
 
    Leases

     We are obligated under leases for certain of our offices and equipment. Rental expense relating to operating leases was $11.0 million and $8.4 million for the six-month periods ended June 30, 2011 and 2010, respectively. Future minimum rental payments under our noncancellable operating lease obligations are as follows (in millions):

2011 (1)	 	 	 	 	$12.6	
2012	 	 	 	 	11.3	
2013	 	 	 	 	6.6	
2014	 	 	 	 	4.8	
2015	 	 	 	 	4.6	
Thereafter	 	 	 	 	11.4	
Total	 	 	 	 	$51.3	
 
(1) Represents the six-month period beginning July 1, 2011.
 
    Capital Commitments

     The following table summarizes the aggregate contractual commitments related to our two ENSCO 8500 Series® rigs, our ENSCO DS-6 and ENSCO DS-7 ultra-deepwater drillships and our two ultra-high specification harsh environment jackup rigs currently under construction as of June 30, 2011 (in millions):

2011 (1)	 	 	 	 	$   410.7	
2012	 	 	 	 	670.2	
2013	 	 	 	 	698.7	
Total	 	 	 	 	$1,779.6	
 
(1) Represents the six-month period beginning July 1, 2011.
 
     The actual timing of these expenditures may vary based on the completion of various construction milestones, which are, to a large extent, beyond our control.

22

 
    Demand Letter, Derivative Cases and Shareholder Class Actions
 
     In June 2009, Pride received a demand letter from a purported shareholder that alleged certain of Pride’s then-current and former officers and directors violated their fiduciary duties in regards to certain matters involving Pride’s previously disclosed Foreign Corrupt Practices Act (“FCPA”) investigation. The letter requested that Pride’s board of directors take appropriate action against the individuals in question. In September 2009, Pride’s board of directors formed a special committee, which retained independent legal counsel and commenced an evaluation of the issues raised by the letter in an effort to determine a course of action.
 
     In April 2010, two purported shareholders of Pride filed derivative actions against all of Pride’s then-current directors and against Pride, as nominal defendant. The lawsuits alleged that the individual defendants breached their fiduciary duties in regards to certain matters involving Pride’s previously disclosed FCPA investigation. Among other remedies, the lawsuits seek damages in an unspecified amount and equitable relief against the individual defendants, along with an award of attorney fees and other costs and expenses to the plaintiff.  After the conclusion of Pride's investigation, the plaintiffs filed a consolidated amended petition in January 2011, raising allegations substantially similar to those made in the prior lawsuits.
 
     In December 2010, the special committee completed its evaluation of the issues surrounding Pride's FCPA investigation and again reviewed its conclusion in January 2011 in connection with the amended petition described above.  The committee concluded that it was not in the interest of Pride or its shareholders to pursue litigation related to the matter.
 
     During the first quarter of 2011, a number of putative shareholder class action complaints or petitions were filed against various combinations of Pride, Pride’s directors, Ensco and certain of our subsidiaries. These lawsuits challenged the proposed Merger and generally alleged, among other matters, that the individual members of the Pride board of directors breached their fiduciary duties by approving the proposed Merger, failing to take steps to maximize value to Pride’s shareholders and failing to disclose material information concerning the proposed Merger in the registration statement on Form S-4; that Pride, Ensco and certain of our subsidiaries aided and abetted such breaches of fiduciary duties; and that the Merger Agreement improperly favored Ensco and unduly restricted Pride’s ability to negotiate with other bidders. These lawsuits generally sought, among other remedies, compensatory damages, declaratory and injunctive relief concerning the alleged fiduciary breaches, and injunctive relief prohibiting the defendants from consummating the Merger.  In addition, the plaintiffs in the derivative class action lawsuits related to Pride’s previously disclosed FCPA investigation filed an amendment to their petition adding claims related to the Merger.

23

 
    In May 2011, Ensco and the other named defendants signed a memorandum of understanding with the plaintiffs to settle the previously disclosed shareholder class action lawsuits filed related to the Merger Agreement.  As provided in the memorandum of understanding, the Merger Agreement was amended to reduce the fee payable by Pride in connection with certain terminations of the Merger Agreement to $195.0 million from $260.0 million. The amendment also shortened the “tail period” for certain transactions that could trigger a termination fee from 12 months to nine months after termination and eliminated the “force the vote” provision applicable to Pride such that Pride would not be required to submit the adoption of the Merger Agreement to its shareholders if the Pride board of directors made an adverse change in their recommendation.
 
     The memorandum of understanding also provided, among other matters, that the parties would seek to enter into a stipulation of settlement which provides for the release of certain claims held by such class and the payment of the fees and expenses of the attorneys for the class in an amount to be agreed.  The stipulation of the settlement will be subject to customary conditions, including court approval. There can be no assurance that the parties will ultimately enter into a stipulation of settlement that receives court approval.   In the event the parties are unable to reach agreement on the amount of attorneys' fees, such matter may be submitted to the court for determination.
 
     At this time, we are unable to predict the outcome of these matters or estimate the extent to which we may be exposed to any resulting liability, including the amount of attorneys' fees that may be awarded.  Although the outcome cannot be predicted, we do not expect these matters to have a material adverse effect on our financial position, operating results or cash flows.
 
    Seahawk Tax-Related Credit Support
   
     On August 24, 2009, Pride completed the spin-off of Seahawk Drilling, Inc. ("Seahawk"), which held the assets and liabilities that were associated with Pride's mat-supported jackup rig business.
   
    In 2006, 2007 and 2009, Seahawk received tax assessments from the Mexican government related to their operations.  Pursuant to local statutory requirements, Seahawk has provided and may provide additional surety bonds, letters of credit or other suitable collateral to contest these assessments. Pursuant to a tax support agreement between Pride and Seahawk, Pride agreed, at Seahawk’s request, to guarantee or indemnify the issuer of any such surety bonds, letters of credit or other collateral issued for Seahawk’s account in respect of such Mexican tax assessments made prior to the spin-off date.  In September 2010, Seahawk requested that Pride provide credit support for four letters of credit issued for the appeals of four of Seahawk’s tax assessments. The amount of the request totaled approximately $50.0 million. In October 2010, Pride provided credit support in satisfaction of this request. A liability of $2.0 million related to this matter was recorded as of June 30, 2011 and included in accrued liabilities and other on our condensed consolidated balance sheet. Pursuant to the tax support agreement, Seahawk is required to pay us a fee based on the actual credit support provided. Seahawk’s quarterly fee payment due on December 31, 2010 was not made, which had the effect of terminating Pride’s obligation to provide further credit support under the tax support agreement.
 
     In February 2011, Pride sent a notice to Seahawk requesting that it provide cash-collateral for the credit support that Pride previously provided, as provided under the terms of the agreement. In connection with its bankruptcy filing, Seahawk is seeking to terminate its reimbursement obligations under the tax support agreement, and we have filed a proof of claim in Seahawk’s bankruptcy for all damages arising from or relating to Seahawk’s repudiation of its obligations under the tax support agreement.  For further information regarding Seahawk's bankruptcy, including alleged claims it may have against Pride, see " Seahawk Drilling, Inc. Bankruptcy " in Part II, Item 1, Legal Proceedings of this quarterly report on Form 10-Q.

24

 
    ENSCO 74 Loss
 
    In September 2008, ENSCO 74 was lost as a result of Hurricane Ike in the U.S. Gulf of Mexico.  Portions of its legs remained underwater adjacent to the customer's platform, and the sunken rig hull of ENSCO 74 was located approximately 95 miles from the original drilling location when it was struck by an oil tanker in March 2009.  During the fourth quarter of 2010, wreck removal operations on the sunken rig hull of ENSCO 74 were completed.

    We believe it is probable that we are required to remove the leg sections of ENSCO 74 remaining adjacent to the customer's platform because they may interfere with the customer's future operations, in addition to the removal of related debris.  We estimate the leg and related debris removal costs to range from $21.0 million to $35.0 million. We expect the cost of removal of the legs and related debris to be fully covered by our insurance.

    Physical damage to our rigs caused by a hurricane, the associated "sue and labor" costs to mitigate the insured loss and removal, salvage and recovery costs are all covered by our property insurance policies subject to a $50.0 million per occurrence self-insured retention.  Coverage for ENSCO 74 sue and labor costs and wreckage and debris removal costs under our property insurance policies is limited to $25.0 million and $50.0 million, respectively. Supplemental wreckage and debris removal coverage is provided under our liability insurance policies, subject to an annual aggregate limit of $500.0 million. We also have a customer contractual indemnification that provides for reimbursement of any ENSCO 74 wreckage and debris removal costs that are not recovered under our insurance policies.

    A $21.0 million liability, representing the low end of the range of estimated leg and related debris removal costs, and a corresponding receivable for recovery of those costs was recorded as of June 30, 2011 and included in accrued liabilities and other and other assets, net, on our condensed consolidated balance sheet.

    In March 2009, we received notice from legal counsel representing certain underwriters in a subrogation claim alleging that ENSCO 74 caused a pipeline to rupture during Hurricane Ike.  In September 2009, civil litigation was filed seeking damages for the cost of repairs and business interruption in an amount in excess of $26.0 million. Based on information currently available, primarily the adequacy of available defenses, we have not concluded that it is probable a liability exists with respect to this matter.

    In March 2009, the owner of the oil tanker that struck the hull of ENSCO 74 commenced civil litigation against us seeking monetary damages of $10.0 million for losses incurred when the tanker struck the sunken hull of ENSCO 74. Based on information currently available, primarily the adequacy of available defenses, we have not concluded that it is probable a liability exists with respect to this matter.

25

 
     We filed a petition for exoneration or limitation of liability under U.S. admiralty and maritime law in September 2009. The petition seeks exoneration from or limitation of liability for any and all injury, loss or damage caused, occasioned or occurred in relation to the ENSCO 74 loss in September 2008. The owner of the tanker that struck the hull of ENSCO 74 and the owners of four subsea pipelines have presented claims in the exoneration/limitation proceedings.  The matter is scheduled for trial in March 2012.

     We have liability insurance policies that provide coverage for claims such as the tanker and pipeline claims as well as removal of wreckage and debris in excess of the property insurance policy sublimit, subject to a $10.0 million per occurrence self-insured retention for third-party claims and an annual aggregate limit of $500.0 million. We believe all liabilities associated with the ENSCO 74 loss during Hurricane Ike resulted from a single occurrence under the terms of the applicable insurance policies. However, legal counsel for certain liability underwriters have asserted that the liability claims arise from separate occurrences. In the event of multiple occurrences, the self-insured retention is $15.0 million for two occurrences and $1.0 million for each occurrence thereafter.

     Although we do not expect final disposition of the claims associated with the ENSCO 74 loss to have a material adverse effect upon our financial position, operating results or cash flows, there can be no assurances as to the ultimate outcome.

    ENSCO 69
 
     By letter dated June 4, 2009, we were informed by Petrosucre, a subsidiary of Petr ó leos de Venezuela S.A., the national oil company of Venezuela, of its intention to assume complete custody and control of the ENSCO  69.  We have filed an insurance claim under our package policy, which includes coverage for certain political risks. ENSCO 69 has an insured value of $65.0 million under our package policy, subject to a $10.0 million deductible.

     In September 2009, legal counsel acting for the package policy underwriters denied coverage under the package policy and reserved rights.  In March 2010, we commenced litigation to recover on our political risk package policy claim. Our lawsuit seeks recovery under the policy for the loss of ENSCO 69 and includes claims for wrongful denial of coverage, breach of contract, breach of the Texas insurance code, failure to timely respond to the claim and bad faith. Our lawsuit seeks actual damages in the amount of $55.0 million (insured value of $65.0 million less a $10.0 million deductible), punitive damages and attorneys' fees. In July 2010, we agreed with underwriters to submit the matter to arbitration. We have been able to reach a mutually agreeable settlement with most of the underwriters subscribing to the package policy, which is expected to result in a gain of approximately $10.8 million upon receipt of cash settlements during the third quarter of 2011.  The pending arbitration only will be applicable to those underwriters that do not agree to the settlement.  Until these proceedings are concluded, there can be no assurances as to the ultimate outcome with regard to the underwriter who has not agreed to settle this matter.

26

 
    ENSCO 29 Wreck Removal

     A portion of the ENSCO 29 platform drilling rig was lost over the side of a customer's platform as a result of Hurricane Katrina during 2005. Although beneficial ownership of ENSCO 29 was transferred to our insurance underwriters when the rig was determined to be a total loss, management believes we may be legally required to remove ENSCO 29 wreckage and debris from the seabed and currently estimates the removal cost could range from $5.0 million to $15.0 million. Our property insurance policies include coverage for ENSCO 29 wreckage and debris removal costs up to $3.8 million. We also have liability insurance policies that provide specified coverage for wreckage and debris removal costs in excess of the $3.8 million coverage provided under our property insurance policies.

     Our liability insurance underwriters have issued letters reserving rights and effectively denying coverage by questioning the applicability of coverage for the potential ENSCO 29 wreckage and debris removal costs.  During 2007, we commenced litigation against certain underwriters alleging breach of contract, wrongful denial, bad faith and other claims and seeking a declaration that removal of wreckage and debris is covered under our liability insurance, monetary damages, attorneys' fees and other remedies. The court heard several pretrial motions on May 25, 2011 and on July 31, 2011 issued an order compelling the matter to be submitted to arbitration.

     While we anticipate that any ENSCO 29 wreckage and debris removal costs incurred will be largely or fully covered by insurance, a $1.2 million provision, representing the portion of the $5.0 million low end of the range of estimated removal cost we believe is subject to liability insurance coverage, was recognized in 2006.

    Asbestos Litigation

     During 2004, we and certain current and former subsidiaries were named as defendants, along with numerous other third-party companies as co-defendants, in three multi-party lawsuits filed in Mississippi. The lawsuits sought an unspecified amount of monetary damages on behalf of individuals alleging personal injury or death, primarily under the Jones Act, purportedly resulting from exposure to asbestos on drilling rigs and associated facilities during the period 1965 through 1986.

     In compliance with the Mississippi Rules of Civil Procedure, the individual claimants in the original multi-party lawsuits whose claims were not dismissed were ordered to file either new or amended single plaintiff complaints naming the specific defendant(s) against whom they intended to pursue claims. As a result, out of more than 600 initial multi-party claims, we have been named as a defendant by 65 individual plaintiffs. Of these claims, 62 claims or lawsuits are pending in Mississippi state courts and three are pending in the U.S. District Court as a result of their removal from state court.

     To date, written discovery and plaintiff depositions have taken place in eight cases involving us.  While several cases have been selected for trial during 2011 and 2012, none of the cases pending against us in Mississippi state court are included within those selected cases.

27

 
     We intend to continue to vigorously defend against these claims and have filed responsive pleadings preserving all defenses and challenges to jurisdiction and venue. However, discovery is still ongoing and, therefore, available information regarding the nature of all pending claims is limited. At present, we cannot reasonably determine how many of the claimants may have valid claims under the Jones Act or estimate a range of potential liability exposure, if any.

     In addition to the pending cases in Mississippi, we have other asbestos or lung injury claims pending against us in litigation in other jurisdictions. Although we do not expect the final disposition of the Mississippi and other asbestos or lung injury lawsuits to have a material adverse effect upon our financial position, operating results or cash flows, there can be no assurances as to the ultimate outcome of the lawsuits.

    Working Time Directive

     Legislation known as the U.K. Working Time Directive ("WTD") was introduced during 2003 and may be applicable to our employees and employees of other drilling contractors that work offshore in U.K. territorial waters or in the U.K. sector of the North Sea. Certain trade unions representing offshore employees have claimed that drilling contractors are not in compliance with the WTD in respect of paid time off (vacation time) for employees working offshore on a rotational basis (generally equal time working and off).

     A Labor Tribunal in Aberdeen, Scotland, rendered decisions in claims involving other offshore drilling contractors and offshore service companies in February 2008. The Tribunal decisions effectively held that employers of offshore workers in the U.K. sector employed on an equal time on/time off rotation are obligated to accord such rotating personnel two-weeks annual paid time off from their scheduled offshore work assignment period. Both sides of the matter, employee and employer groups, appealed the Tribunal decision. The appeals were heard by the Employment Appeal Tribunal ("EAT") in December 2008.

     In an opinion rendered in March 2009, the EAT determined that the time off work enjoyed by U.K. offshore oil and gas workers, typically 26 weeks per year, meets the amount of annual leave employers must provide to employees under the WTD. The employer group was successful in all arguments on appeal, as the EAT determined that the statutory entitlement to annual leave under the WTD can be discharged through normal field break arrangements for offshore workers. As a consequence of the EAT decision, an equal time on/time off offshore rotation has been deemed to be fully compliant with the WTD.  The employee group (led by a trade union) was granted leave to appeal to the highest civil court in Scotland (the Court of Session).  A hearing on the appeal occurred in June 2010, and a decision was rendered in October 2010 in favor of the employer group.  The employee group has appealed to the U.K. Supreme Court, and a hearing is scheduled in October 2011.

     Based on information currently available, we do not expect the ultimate resolution of these matters to have a material adverse effect on our financial position, operating results or cash flows.

28

 
     Environmental Matters
 
     We are currently subject to pending notices of assessment issued from 2008 to 2011 pursuant to which governmental authorities in Brazil are seeking fines in an aggregate amount of $3.0 million for the release of drilling fluid from drilling rigs operating offshore Brazil. We are contesting these notices and intend to defend ourselves vigorously.  Although we do not expect the outcome of these assessments to have a material adverse effect on our financial position, operating results or cash flows, there can be no assurance as to the ultimate outcome of these assessments. A $3.0 million liability related to these matters was recorded as of June 30, 2011 and included in accrued liabilities and other on our condensed consolidated balance sheet.
 
     We are currently subject to a pending administrative proceeding initiated in July 2009 by a governmental authority of Spain pursuant to which such governmental authority is seeking payment in an aggregate amount of $4.0 million for an alleged environmental spill originating from the ENSCO 5006   while it was operating offshore Spain. We expect to be indemnified for any payments resulting from this incident by our customer under the terms of the drilling contract. Our customer has posted guarantees with the Spanish government to cover potential penalties. In addition, a criminal investigation of the incident was initiated in July 2010 by a prosecutor in Tarragona, Spain, and the administrative proceedings have been suspended pending the outcome of this investigation. We do not know at this time what, if any, involvement we may have in this investigation.
 
     We intend to defend ourselves vigorously in the administrative proceeding and any criminal investigation. At this time, we are unable to predict the outcome of these matters or estimate the extent to which we may be exposed to any resulting liability. Although we do not expect the outcome of the proceedings to have a material adverse effect on our financial position, operating results or cash flows, there can be no assurance as to the ultimate outcome of the proceedings.
 
    Other Matters
 
     In addition to the foregoing, we are named defendants or parties in certain other lawsuits, claims or proceedings incidental to our business and are involved from time to time as parties to governmental investigations or proceedings, including matters related to taxation, arising in the ordinary course of business. Although the outcome of such lawsuits or other proceedings cannot be predicted with certainty and the amount of any liability that could arise with respect to such lawsuits or other proceedings cannot be predicted accurately, we do not expect these matters to have a material adverse effect on our financial position, operating results or cash flows.
 
Note 16 - Segment Information
 
In connection with the Merger, we evaluated our core assets and operations, consisting of five drillships, 17 semisubmersible rigs, 46 jackup rigs and seven rigs under construction, and organized them into three segments based on water depth operating capabilities. Accordingly, we now consider our business to consist of three reportable segments: (1) Deepwater, which consists of our drillships and semisubmersible rigs capable of drilling in water depths of 4,500 feet or greater, (2) Midwater, which consists of our semisubmersible rigs capable of drilling in water depths of 4,499 feet or less and (3) Jackup, which consists of our jackup rigs capable of operating in water depths up to 400 feet. Each of our three reportable segments provides one service, contract drilling.  We also manage the drilling operations for two deepwater rigs and own one barge rig, which are included in “Other.”
 
     Segment information for the three-month and six-month periods ended June 30, 2011 and 2010 is presented below. General and administrative expense and depreciation expense incurred by our corporate office are not allocated to our operating segments for purposes of measuring segment operating income and were included in "Reconciling Items."  We measure segment assets as property and equipment. Prior year information has been reclassified to conform to the current year presentation.

29

 
Three Months Ended June 30, 2011

Deepwater   	 
 
  Midwater	 
 
  Jackup	    Other	Operating
Segments
       Total      	Reconciling
   Items   	 
Consolidated
     Total      	
 	 	 	 	 	 	 	 	 	
Revenues	$   232.3	 	$  36.1	 	$   289.3	 	$   6.5	 	$     564.2	 	$     --	 	$     564.2	 	
Operating expenses
Contract drilling (exclusive
of depreciation)	111.1	 	22.9	 	145.4	 	 6.9	 	286.3	 	--	 	286.3	 	
Depreciation	33.9	 	5.2	 	43.2	 	 0.5	 	82.8	 	0.7	 	83.5	 	
General and administrative	--	 	--	 	--	 	 --	 	--	 	47.4	 	47.4	 	
Operating income (loss)	$     87.3	 	$    8.0	 	$   100.7	 	$  (0.9	)	$     195.1	 	$(48.1	) 	$     147.0	 	
Property and equipment, net	$8,774.8	 	$910.8	 	$2,386.1	 	 $ 13.9	 	$12,085.6	 	$ 23.2	 	$12,108.8	 	
 
Three Months Ended June 30, 2010
 	Deepwater   	  Midwater	  Jackup	    Other	Operating
Segments
       Total      	Reconciling
   Items   	 
Consolidated
     Total      	
 	 	 	 	 	 	 	 	 	
Revenues	$   120.9	 	$      --	 	$   290.5	 	$     --	 	$     411.4	 	$     --	 	$     411.4	 	
Operating expenses
Contract drilling (exclusive
of depreciation)	46.5	 	--	 	147.0	 	 12.5	 	206.0	 	--	 	206.0	 	
Depreciation	9.7	 	--	 	41.1	 	 0.8	 	51.6	 	0.3	 	51.9	 	
General and administrative	--	 	--	 	--	 	 --	 	--	 	22.0	 	22.0	 	
Operating income (loss)	$     64.7	 	$      --	 	$   102.4	 	 $(13.3	)	$     153.8	 	$(22.3	) 	$      131.5	 	
Property and equipment, net	$2,509.0	 	$      --	 	$2,076.4	 	 $ 15.2	 	$  4,600.6	 	$   4.1	 	$   4,604.7	 	
 
Six Months Ended June 30, 2011

Deepwater   	  Midwater	  Jackup	    Other	Operating
Segments
       Total      	Reconciling
   Items   	Consolidated
     Total      	
 	 	 	 	 	 	 	 	 	
Reve nue s	$   330.4	 	$  36.1	 	$   552.7	 	$   6.5	 	$     925.7	 	$     --	 	$     925.7	 	
Operating expenses
Contract drilling (exclusive
of depreciation)	152.0	 	22.9	 	295.7	 	 7.3	 	477.9	 	--	 	477.9	 	
Depreciation	50.1	 	5.2	 	85.7	 	 0.9	 	141.9	 	1.1	 	143.0	 	
General and administrative	--	 	--	 	--	 	 --	 	--	 	77.5	 	77.5	 	
Operating income (loss)	$   128.3	 	$    8.0	 	$   171.3	 	$  (1.7	)	$     305.9	 	$(78.6	) 	$     227.3	 	
Property and equipment, net	$8,774.8	 	$910.8	 	$2,386.1	 	 $ 13.9	 	$12,085.6	 	$ 23.2	 	$12,108.8	 	
 
Six Months Ended June 30, 2010
 	Deepwater   	  Midwater	 
  Jackup	    Other	Operating
Segments
       Total      	Reconciling
   Items   	 
Consolidated
     Total      	
 	 	 	 	 	 	 	 	 	
Revenues	$    251.3	 	$      --	 	$   608.7	 	$     --	 	$     860.0	 	$     --	 	$     860.0	 	
Operating expenses
Contract drilling (exclusive
of depreciation)	91.5	 	--	 	284.0	 	 12.9	 	388.4	 	--	 	388.4	 	
Depreciation	19.5	 	--	 	82.0	 	 1.5	 	103.0	 	0.6	 	103.6	 	
General and administrative	--	 	--	 	--	 	 --	 	--	 	42.6	 	42.6	 	
Operating income (loss)	$   140.3	 	$      --	 	$   242.7	 	 $(14.4	)	$     368.6	 	$(43.2	) 	$     325.4	 	
Property and equipment, net	$2,509.0	 	$      --	 	$2,076.4	 	 $ 15.2	 	$  4,600.6	 	$   4.1	 	$  4,604.7	 	

30

 
     Information about Geographic Areas
 
     As of June 30, 2011, the geographic distribution of our drilling rigs, by operating segment, was as follows:
 
 	Deepwater	     Midwater	Jackup	Other  	           Total 	 	
 	 	 	 	 	 	 	
U.S.	5     	--     	11   	--   	16  	 	
Mexico	--     	--     	4   	 --   	4  	 	
North America	  5     	--     	15   	--   	20  	 	
South America	7     	5     	--   	--   	12  	 	
Africa	 3     	1     	1   	--   	5  	 	
Middle East	--     	--     	11   	--   	11  	 	
Europe 	1     	--     	9   	--   	10  	 	
Asia 	--     	--     	9   	  1   	10  	 	
Asia - Under Construction	5     	--     	2   	--   	7  	 	
Australia	--     	--     	1   	--   	1  	 	
Total	21     	6     	48   	1   	76  	 	
 
     Certain of our drilling rigs in the U.S. Gulf of Mexico have been or may be further affected by the regulatory developments and other actions that have or may be imposed by the U.S. Department of the Interior, including the regulations issued on September 30, 2010. Utilization and day rates for certain of our drilling rigs have been negatively influenced due to regulatory requirements and delays in our customers’ ability to secure drilling permits. Current or future NTLs or other directives and regulations may further impact our customers' ability to obtain permits and commence or continue deepwater or shallow-water operations in the U.S. Gulf of Mexico.  Additionally, regulatory or customer requirements relating to blowout prevention equipment certification, inspection and testing may adversely impact our revenues.
      
     During the three-month and six-month periods ended June 30, 2011, revenues provided by our drilling operations in the U.S. Gulf of Mexico totaled $156.0 million and $288.0 million, or 28% and 31%, of our consolidated revenues, respectively. Of these amounts, 64% and 63% were provided by our deepwater drilling operations in the U.S. Gulf of Mexico for the three-month and six-month periods ended June 30, 2011, respectively.   Prolonged actual or de facto delays, moratoria or suspensions of drilling activity in the U.S. Gulf of Mexico and associated new regulatory, legislative or permitting requirements in the U.S. or elsewhere could materially adversely affect our financial condition, operating results or cash flows.
 
Note 17 - Supplemental Financial Information

    Consolidated Balance Sheet Information

     Accounts receivable, net, as of June 30, 2011 and December 31, 2010 consisted of the following (in millions):

 	June 30,	December 31,	
 	        2011      	        2010       	
 	    	             	
Trade	 	$648.3 	 	$209.9	 	
Other	 	44.2 	 	7.8	 	
 	 	692.5 	 	217.7	 	
Allowance for doubtful accounts	 	(9.6)	 	(3.1	)	
 	 	$682.9 	 	$214.6	 	

31

 
     Other current assets as of June 30, 2011 and December 31, 2010 consisted of the following (in millions):

 	June 30,    	December 31,	
 	      2011         	           2010       	
 	 	 	
Inventory	 	$171.2	 	$  56.4	 	
Prepaid taxes	 	56.2	 	47.4	 	
Deferred mobilization costs	 	26.6	 	19.7	 	
Prepaid expenses	 	21.5	 	12.9	 	
Derivative assets	 	13.9	 	17.0	 	
Deferred tax assets	 	 12.0	 	 9.5	 	
Other	 	28.0	 	8.5	 	
 	 	$329.4	 	$171.4	 	
 
     Other assets, net, as of June 30, 2011 and December 31, 2010 consisted of the following (in millions):

 	June 30,      	December 31,	
 	     2011          	             2010       	
 	 	 	 	 	 	
Contract intangibles 	 	$217.0	 	  $      --	 	
Unbilled reimbursable receivables	 	 131.0	 	--	 	
Prepaid taxes on intercompany transfers of property	 	75.2	 	 74.6	 	
Deferred mobilization costs	 	32.5	 	31.3	 	
Supplemental executive retirement plan assets	 	27.0	 	23.0	 	
Wreckage and debris removal receivables	 	24.8	 	26.8	 	
Auction rate securities	 	--	 	44.5	 	
Other	 	33.8	 	28.5	 	
 	 	$541.3	 	$228.7	 	

     Accrued liabilities and other as of June 30, 2011 and December 31, 2010 consisted of the following (in millions):

 	June 30,     	December 31,	
 	      2011         	           2010       	
 	 	 	
Personnel costs	 	$144.5	 	$  58.0	 	
Accrued interest	 	68.7	 	2.1	 	
Contract intangibles	 	65.6	 	5.1	 	
Deferred revenue 	 	65.4	 	48.1	 	
Taxes	 	57.7	 	22.1	 	
Wreckage and debris removal	 	21.0	 	21.0	 	
Other	 	81.3	 	11.9	 	
 	 	$504.2	 	$168.3	 	

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     Other liabilities as of June 30, 2011 and December 31, 2010 consisted of the following (in millions):

 	June 30,    	December 31,	
 	     2011          	           2010        	
 	 	 	
Contract intangibles 	 	$234.8	 	$      --	 	
Unrecognized tax benefits (inclusive of interest and penalties)	 	87.6	             	25.7	 	
Deferred revenue	 	64.6	 	68.0	 	
Supplemental executive retirement plan liabilities	 	31.9	 	26.0	 	
Other	 	38.0	 	19.7	 	
 	 	$456.9	 	$139.4	 	
 
Note 18 - Guarantee of Registered Securities
 
     In connection with the Merger, on May 31, 2011, Ensco plc and Pride entered into a supplemental indenture with the indenture trustee providing for, among other items, the full and unconditional guarantee by Ensco plc of Pride’s 8.50% senior notes due 2019, 6.875% senior notes due 2020 and 7.875% senior notes due 2040, which had an aggregate outstanding principal balance as of June 30, 2011 of $1.7 billion.  The Ensco plc guarantee provides for the unconditional and irrevocable guarantee of the prompt payment, when due, of any amount owed to the holders of the Pride senior notes.
 
     Ensco plc is also a full and unconditional guarantor of the 7.20% Debentures due 2027 issued by Ensco Delaware in November 1997, which had an aggregate outstanding principal balance of $151.5 million as of June 30, 2011.
 
     All guarantees are unsecured obligations of Ensco plc ranking equal in right of payment with all of its existing and future unsecured and unsubordinated indebtedness.

 
33

 
    The following tables present the condensed consolidating balance sheets as of June 30, 2011 and December 31, 2010; the condensed consolidating statements of income for the three and six months ended June 30, 2011 and 2010; and the condensed consolidating statements of cash flows for the six months ended June 30, 2011 and 2010, in accordance with Rule 3-10 of Regulation S-X.  The condensed consolidating financial statements for the three and six months ended June 30, 2011 include the results of Pride from the Merger Date.
 
E NSC O PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
Three Months Ended June 30, 2011
(in millions)	

 	 
Ensco Plc	ENSCO
International
       Inc.       	Pride
International
         Inc.       	Other 
Non- Guar antor
Subsidiaries
of Ensco  	Consolidating
Adjustments	      Total	
 	 	 	 	 	 	 	 	 	 	 	 	 	
OPER ATING REVENUES	$     --	 	$    --	 	$    --	 	$564.7	 	$    (0.5	)	  $564.2	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
OPERATING EXPENSES	 	 	 	 	 	 	 	 	 	 	 	 	
  Contract drilling (exclusive of  depreciation)	  0.9	 	    --	 	--	 	   285.9	 	    (0.5	) 	  286.3	 	
  Depreciation	    0.1	 	    0.2	 	--	 	    83.2	 	    --	 	    83.5	 	
  General and administrative	    11.5	 	    --	 	--	 	    35.9	 	    --	 	    47.4	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
OPERATING INCOME (LOSS)	   (12.5	) 	    (0.2	) 	--	 	    159.7	 	--	 	147.0	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
EQUITY EARNINGS IN AFFILIATES,
  NET  OF TAX 	 117.4	 	 54.7	 	 18.4	 	--	 	 (190.5	) 	 
--	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
OTHER INCOME (EXPENSE), NET	    (3.0	) 	    (0.6	) 	(3.6	)	(10.9	) 	    --	 	  (18.1	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
INCOME FROM CONTINUING	 	 	 	 	 	 	 	 	 	 	 	
  OPERATIONS BEFORE INCOME TAXES	101.9	 	53.9	 	14.8	 	148.8	 	(190.5	)	128.9	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
INCOME TAX PRO VISIO N (BENEFIT)	    --	 	    13.7	 	(1.3	) 	    12.9	 	    --	 	25.3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
NET INCOME	$101.9	 	  $40.2	 	$16.1	 	  $135.9	 	  $(190.5	)	$103.6	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
NET INCOME ATTRIBUTABLE TO
  NON CONTROLLING INTERESTS	    --	 	   --	 	--	 	(1.7	 
)	    --	 	   
  (1.7	 
)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
NET INCOME ATTRIBUTABLE  TO ENSCO	$101.9	 	$40.2	 	$16.1	 	$134.2	 	$(190.5	) 	$101.9	 	

34

 
E NSC O PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
Three Months Ended June 30, 2010
(in millions)	
 	 	 	 	 	 	 	 	 	 	 	
 	Ensco plc	ENSCO
International
         Inc.        	Other
Non-guarantor
Subsidiaries
      of Ensco    	Consolidating
Adjustments	  Total  	
 	 	 	 	 	 	 	 	 	 	 	
OPE RATING REVENUES	$     --	 	$     --	 	$411.7	 	$    (0.3	)	  $411.4	 	
 	 	 	 	 	 	 	 	 	 	 	
OPERATING EXPENSES	 	 	 	 	 	 	 	 	 	 	
  Contract drilling (exclusive of  depreciation)	  0.3	 	 --	 	  206.0	 	  (0.3	)	206.0	 	
  Depreciation	  0.1	 	0.2	 	  51.6	 	  --	 	  51.9	 	
  General and administrative	  14.3	 	  --	 	  7.7	 	  --	 	  22.0	 	
 	 	 	 	 	 	 	 	 	 	 	
OPERATING INCOME (LOSS)	  (14.7	)	  (0.2	)	  146.4	 	  --	 	  131.5	 	
 	 	 	 	 	 	 	 	 	 	 	
EQUITY EARNINGS IN AFFILIATES,
   NET OF TAX	 126.6	 	 (20.7	 
)	 --	 	 (105.9	)	--	 	
 	 	 	 	 	 	 	 	 	 	 	
OTHER INCOME (EXPENSE), NET	  14.1	 	  (0.5	)	  (0.8	)	  --	 	  12.8	 	
 	 	 	 	 	 	 	 	 	 	 	
INCOME FROM CONTINUING OPERATIONS 	 	 	 	 	 	 	 	 	 	
    BEFORE INCOME TAXES	  126.0	 	(21.4	)	  145.6	 	  (105.9	)	  144.3	 	
 	 	 	 	 	 	 	 	 	 	 	
INCOME TAX PROVISION (BENEFIT)	  (0.3	) 	11.5	 	  11.2	 	  --	 	  22.4	 	
 	 	 	 	 	 	 	 	 	 	 	
DISCONTINUED OPERATIONS	--	 	(11.1	)	17.1	 	--	 	6.0	 	
 	 	 	 	 	 	 	 	 	 	 	
NET INCOME	  $126.3	 	  $(44.0	)	  $151.5	 	  $(105.9	)	$127.9	 	
 	 	 	 	 	 	 	 	 	 	 	
NET INCOME ATTRIBUTABLE TO
   NONCONTROLLING INTERESTS	  --	 	  --	 	  (1.6	 
)	  --	 	 
(1.6	 
)	
 	 	 	 	 	 	 	 	 	 	 	
NET INCOME ATTRIBUTABLE TO ENSCO	  $126.3	 	  $(44.0	)	  $149.9	 	  $(105.9	)	  $126.3	 	

35

 
E NSC O PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
Six Months Ended June 30, 2011
(in millions)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Ensco plc	  ENSCO
  International
          Inc.       	  Pride
International
        Inc.       	Other
Non-guarantor
Subsidiaries
      of Ensco    	Consolidating
Adjustments	  Total  	
 	 	 	 	 	 	 	 	 	 	 	 	 	
OPERA TIN G REVENUES	$      --	 	$      --	 	$    --	 	$926.5	 	$   (0.8	)	  $925.7	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
OPERATING EXPENSES	 	 	 	 	 	 	 	 	 	 	 	 	
  Contract drilling (exclusive of d epreciation)	  1.6	 	  --	 	--	 	  477.1	 	  (0.8	)	477.9	 	
  Depreciation	  0.2	 	  0.5	 	--	 	  142.3	 	  --	 	  143.0	 	
  General and administrative	  24.8	 	  --	 	--	 	  52.7	 	  --	 	  77.5	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
OPERATING INCOME (LOSS)	  (26.6	)	  (0.5	)	--	 	254.4	 	--	 	227.3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
EQUITY EARNINGS IN AFFILIATES,
   NET OF TAX	192.5	 	120.9	 	18.4	 	--	 	(331.8	)	 
--	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
OTHER INCOME (EXPENSE), NET	  0.6	 	  (0.8	)	(3.6	)	(12.1	)	  --	 	  (15.9	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
INCOME FROM CONTINUING	 	 	 	 	 	 	 	 	 	 	 	
   OPERATIONS BEFORE INCOME  TAXES	  166.5	 	119.6	 	14.8	 	  242.3	 	(331.8	)	  211.4	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
INCOME TAX PROVISION (BENEFIT)	  --	 	  19.3	 	(1.3	)	  24.3	 	  --	 	42.3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
DISCONTINUED OPERATIONS	--	 	--	 	--	 	--	 	--	 	--	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
NET INCOME	$166.5	 	$100.3	 	$16.1	 	$218.0	 	$(331.8	)	$169.1	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
NET INCOME ATTRIBUTABLE TO
   NON CONTROLLING INTERESTS	--	 	--	 	--	 	(2.6	 
)	  --	 	 
(2.6	 
)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
NET INCOME ATTRIBUTABLE TO ENSCO	 $166.5	 	$100.3	 	$16.1	 	  $215.4	 	$(331.8	)	  $166.5	 	

36

 
E NSC O PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
Six Months Ended June 30, 2010
(in millions)	
 	 	 	 	 	 	 	 	 	 	 	
 	Ensco plc	ENSCO
International
         Inc.        	Other
Non-guarantor
Subsidiaries
      of Ensco    	Consolidating
Adjustments	  Total  	
 	 	 	 	 	 	 	 	 	 	 	
OPERATING REVENUES	$      --	 	$      --	 	$860.6	 	$    (0.6	)	  $860.0	 	
 	 	 	 	 	 	 	 	 	 	 	
OPERATING EXPENSES	 	 	 	 	 	 	 	 	 	 	
  Contract drilling (exclusive of depreciation)	0.6	 	--	 	388.4	 	(0.6	)	388.4	 	
  Depreciation	 0.1	 	  0.5	 	  103.0	 	  --	 	  103.6	 	
  General and administrative	  27.1	 	  --	 	  15.5	 	  --	 	  42.6	 	
 	 	 	 	 	 	 	 	 	 	 	
OPERATING INCOME (LOSS)	  (27.8	)	  (0.5	)	  353.7	 	  --	 	  325.4	 	
 	 	 	 	 	 	 	 	 	 	 	
EQUITY EARNINGS IN AFFILIATES,
   NET OF TAX	315.4	 	166.8	 	 --	 	(482.2)	 	 
-- 	 	
 	 	 	 	 	 	 	 	 	 	 	
OTHER INCOME (EXPENSE), NET	 28.4	 	  (2.4	)	  (10.1	)	  --	 	  15.9	 	
 	 	 	 	 	 	 	 	 	 	 	
INCOME FROM CONTINUING	 	 	 	 	 	 	 	 	 	 	
    OPERATIONS BEFORE INCOME TAXES	316.0	 	163.9	 	  343.6	 	(482.2	) 	  341.3	 	
 	 	 	 	 	 	 	 	 	 	 	
INCOME TAX PROVISION (BENEFIT)	  (0.1	) 	21.3	 	  36.2	 	  --	 	  57.4	 	
 	 	 	 	 	 	 	 	 	 	 	
DISCONTINUED OPERATIONS	--	 	(19.8	)	55.4	 	 	 	35.6	 	
 	 	 	 	 	 	 	 	 	 	 	
NET INCOME	  $316.1	 	$122.8	 	  $362.8	 	$(482.2	) 	  $319.5	 	
 	 	 	 	 	 	 	 	 	 	 	
NET INCOME ATTRIBUTABLE TO
   NONCONTROLLING INTERESTS	  --	 	  --	 	  (3.4	 
)	  --	 	 
(3.4	 
)	
 	 	 	 	 	 	 	 	 	 	 	
NET INCOME ATTRIBUTABLE TO ENSCO	  $316.1	 	$122.8	 	  $359.4	 	$(482.2	) 	  $316.1	 	

37

 
 
ENSCO PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
June 30, 2011
(in millions)	
   	 	 	 	 	 	 	 	 	 	 	 	 	
 	Ensco plc	ENSCO
International
         Inc.        	Pride
International
          Inc.        	Other
Non-guarantor
Subsidiaries
      of Ensco    	Consolidating
Adjustments	  Total  	
 	 	 	 	 	 	 	 	 	 	 	 	 	
                          ASSETS
 	 	 	 	 	 	 	 	 	 	 	 	 	
C URR ENT ASSETS	 	 	 	 	 	 	 	 	 	 	 	 	
   Cash and cash equivalents	$     222.5	 	$   104.2	 	$    37.7	 	$     189.6	 	$            --	 	$     554.0	 	
   Accounts receivable 	  --	 	0.6	 	  --	 	  682.3	 	  --	 	  682.9	 	
   Accounts receivable from affiliates	34.7	 	121.1	 	670.3	 	--	 	(826.1	)	--	 	
   Other	  2.8	 	  18.6	 	  6.4	 	301.6	 	  --	 	  329.4	 	
      Total current assets	  260.0	 	  244.5	 	  714.4	 	1,173.5	 	  (826.1	)	  1,566.3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
PROPERTY AND EQUIPMENT,  AT COST	1.8	 	  24.6	 	  --	 	13,874.9	 	--	 	13,901.3	 	
   Less accumulated depreciation	  0.5	 	  22.5	 	  --	 	  1,769.5	 	 --	 	  1,792.5	 	
      Property and equipment, net  	1.3	 	 2.1	 	  --	 	  12,105.4	 	--	 	  12,108.8	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
GOODWILL	--	 	  --	 	  --	 	3,295.0	 	  --	 	  3,295.0	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
DUE FROM  AFFILIATES	4,229.5	 	2,908.4	 	1,278.0	 	--	 	(8,415.9	)	--	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
INVESTMENTS IN AFFILIATES	9,833.5	 	2,806.5	 	  5,212.4	 	--	 	(17,852.4	)	  --	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
OTHER ASSETS, NET 	  15.1	 	91.1	 	  0.6	 	  434.5	 	  --	 	  541.3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	$14,339.4	 	$6,052.6	 	$7,205.4	 	$17,008.4	 	$(27,094.4	)	$17,511.4	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
LIABILITIES AND SHAREHOLDERS' EQUITY
 	 	 	 	 	 	 	 	 	 	
CURRENT LIABILITIES	 	 	 	 	 	 	 	 	 	 	 	 	
   Accounts payable and accrued liabilities	$      30.4	 	   $     14.5	 	   $    31.8	 	   $     980.6	 	$            --	 	$  1,057.3	 	
   Accounts payable to affiliates	52.7	 	36.8	 	405.0	 	331.6	 	(826.1	)	--	 	
   Short-term debt 	89.9	 	 --	 	--	 	--	 	--	 	89.9	 	
   Current maturities of long-term debt	  --	 	  --	 	 --	 	  47.5	 	  --	 	  47.5	 	
      Total current liabilities	 173.0	 	 51.3	 	 436.8	 	1,359.7	 	 (826.1	)	1,194.7	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
DUE TO AFFILIATES 	 1,829.0	 	 2,168.2	 	128.4	 	 4,290.3	 	 (8,415.9	)	 --	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
LONG-TERM DEBT 	2,464.1	 	 148.9	 	 2,087.8	 	216.6	 	 --	 	4,917.4	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
DEFERRED INCOME TAXES	 --	 	338.4	 	 49.3	 	 (13.5	)	 (10.1	)	 364.1	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
OTHER LIABILITIES	 --	 	5.0	 	21.0	 	430.9	 	 --	 	456.9	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
ENSCO SHAREHOLDERS' EQUITY 	9,873.3	 	3,340.8	 	 4,482.1	 	 10,717.8	 	(17,842.3	) 	 10,571.7	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
NONCONTROLLING INTERESTS	 --	 	 --	 	 --	 	6.6	 	 --	 	 6.6	 	
   Total equity	9,873.3	 	3,340.8	 	 4,482.1	 	10,724.4	 	(17,842.3	) 	 10,578.3	 	
      	 $14,339.4	 	  $6,052.6	 	  $7,205.4	 	  $17,008.4	 	  $(27,094.4	) 	  $17,511.4	 	

38

 
ENSCO PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 2010
(in millions)	
 	 	 	 	 	 	 	 	 	 	 	
 	Ensco plc	ENSCO
International
         Inc.        	Other
Non-guarantor
Subsidiaries
      of Ensco    	Consolidating
Adjustments	      Total   	
 	 	 	 	 	 	 	 	 	 	 	
                          ASSETS
 	 	 	 	 	 	 	 	 	 	 	
CURRENT ASSETS	 	 	 	 	 	 	 	 	 	 	
   Cash and cash equivalents	$      3.4	 	$     19.1	 	$1,028.2	 	$           --	 	  $1,050.7	 	
   Accounts receivable 	  --	 	1.8	 	212.8	 	 --	 	  214.6	 	
   Accounts receivable from affiliates	28.5	 	144.2	 	--	 	(172.7	)	--	 	
   Other	  0.5	 	  35.2	 	  135.7	 	  --	 	  171.4	 	
      Total current assets	  32.4	 	 200.3	 	  1,376.7	 	  (172.7	)	  1,436.7	 	
 	 	 	 	 	 	 	 	 	 	 	
PROPERTY AND EQUIPMENT,  AT COST	 1.8	 	 24.5	 	 6,718.3	 	 --	 	6,744.6	 	
   Less accumulated depreciation	 0.3	 	  22.0	 	  1,672.4	 	  --	 	 1,694.7	 	
      Property and equipment, net  	1.5	 	2.5	 	  5,045.9	 	  --	 	  5,049.9	 	
 	 	 	 	 	 	 	 	 	 	 	
GOODWILL	 --	 	 --	 	336.2	 	  --	 	  336.2	 	
 	 	 	 	 	 	 	 	 	 	 	
DUE FROM  AFFILIATES 	1,200.3	 	2,788.2	 	--	 	 (3,988.5	)	--	 	
 	 	 	 	 	 	 	 	 	 	 	
INVESTMENTS IN AFFILIATES	5,063.4	 	  2,687.4	 	  --	 	 (7,750.8	)	  --	 	
 	 	 	 	 	 	 	 	 	 	 	
OTHER ASSETS, NET 	--	 	130.7	 	  98.0	 	  --	 	  228.7	 	
 	 	 	 	 	 	 	 	 	 	 	
 	$6,297.6	 	$5,809.1	 	$6,856.8	 	$(11,912.0	)	$7,051.5	 	
 	 	 	 	 	 	 	 	 	 	 	
LIABILITIES AND SHAREHOLDERS' EQUITY
 	 	 	 	 	 	 	 	
CURRENT LIABILITIES	 	 	 	 	 	 	 	 	 	 	
   Accounts payable and accrued liabilities	   $      2.4	 	   $    12.3	 	   $   317.1	 	   $           --	 	   $   331.8	 	
   Accounts payable to affiliates	33.4	 	90.1	 	49.2	 	(172.7	)	--	 	
   Current maturities of long-term debt	  --	 	  --	 	  17.2	 	  --	 	  17.2	 	
      Total current liabilities	 35.8	 	 102.4	 	 383.5	 	 (172.7	)	349.0	 	
 	 	 	 	 	 	 	 	 	 	 	
DUE TO AFFILIATES 	 922.6	 	 2,006.7	 	1,059.2	 	 (3,988.5	)	 --	 	
 	 	 	 	 	 	 	 	 	 	 	
LONG-TERM DEBT 	--	 	148.9	 	 91.2	 	 --	 	240.1	 	
 	 	 	 	 	 	 	 	 	 	 	
DEFERRED INCOME TAXES	 --	 	346.0	 	 12.0	 	 --	 	358.0	 	
 	 	 	 	 	 	 	 	 	 	 	
OTHER LIABILITIES	 --	 	 5.1	 	134.3	 	--	 	 139.4	 	
 	 	 	 	 	 	 	 	 	 	 	
ENSCO SHAREHOLDERS' EQUITY 	5,339.2	 	 3,200.0	 	5,171.1	 	(7,750.8	) 	 5,959.5	 	
 	 	 	 	 	 	 	 	 	 	 	
NONCONTROLLING INTERESTS	 --	 	 --	 	5.5	 	 --	 	5.5	 	
   Total equity	5,339.2	 	3,200.0	 	 5,176.6	 	(7,750.8	) 	 5,965.0	 	
      	 $6,297.6	 	  $5,809.1	 	  $6,856.8	 	  $(11,912.0	) 	  $7,051.5	 	

39

 
ENSCO PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2011
(in millions)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Ensco plc	ENSCO
International
         Inc.        	Pride
International
          Inc.        	Other
Non-guarantor
Subsidiaries
      of Ensco    	Consolidating
Adjustments	  Total  	
 	 	 	 	 	 	 	 	 	 	 	 	 	
OPERATING ACTIVITIES	 	 	 	 	 	 	 	 	 	 	 	 	
   Net cash (used in) provided by
      operating activities	$    (38.9	 
)	$   5.0	 	$   9.4	 
 	$    200.3	 	$      --	 	 
$    175.8	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
INVEST IN G ACTIVITIES	 	 	 	 	 	 	 	 	 	 	 	 	
   Acquisition of Pride International, Inc.,
      net of cash acquired 	 --	 	 --	 	92.9	 	(2,748.9	 
) 	 --	 	 
(2,656.0	 
)	
   Additions to property and equipment 	 --	 	 (0.1	) 	 (2.5	)	(263.0	) 	 --	 	(265.6	)	
   Proceeds from disposition of assets	--	 	 --	 	--	 	 44.4	 	 --	 	 44.4	 	
   Other	--	 	--	 	--	 	(4.5	)	--	 	(4.5	)	
      Net cash (used in) provided by
         investing activities  	--	 	(0.1	 
) 	90.4	 	(2,972.0	 
) 	--	 	 
(2,881.7	 
) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
FINANCING ACTIVITIES	 	 	 	 	 	 	 	 	 	 	 	 	
   Proceeds from issuance of senior notes	2,462.8	 	--	 	--	 	--	 	 --	 	 2,462.8	 	
   Reduction of long-term borrowings, net	 --	 	--	 	(181.0	)	 (8.6	) 	--	 	(189.6	)	
   Cash dividends paid	(130.7	)	--	 	--	 	--	 	 --	 	 (130.7	) 	
   Commercial paper borrowings, net	89.9	 	 --	 	--	 	--	 	 --	 	 89.9	 	
   Debt financing costs	(31.8	) 	 --	 	--	 	 --	 	 --	 	 (31.8	)	
   Advances (to) from affiliates	(2,131.5	) 	80.2	 	118.9	 	1,932.4	 	  --	 	--	 	
   Other	(0.7	) 	 --	 	 --	 	  9.2	 	--	 	8.5	 	
      Net cash provided by (used in)
         financing  activities 	258.0	 
 	80.2	 	(62.1	 
) 	1,933.0	 	--	 	 
2,209.1	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash
   and cash equivalents	 --	 	 --	 	 --	 	0.1	 	 --	 	 
0.1	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
NET INCREASE (D ECR EASE) IN CASH
   AND CASH EQUIVALENTS 	219.1	 	85.1	 	37.7	 
 	 (838.6	 
)	  --	 	 
(496.7	 
)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
CASH AND CASH EQUIVALENTS,
   BEGINNING OF PERIOD	3.4	 	19.1	 	--	 	1,028.2	 	--	 	 
1,050.7	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
CASH AND CASH EQUIVALENTS,
   END OF PERIOD	$    222.5	 	$104.2	 	$  37.7	 	$    189.6	 	$      --	 	 
$    554.0	 	

40

 
ENSCO PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2010
(in millions)	
 	 	 	 	 	 	 	 	 	 	 	
 	    Ensco plc	    ENSCO
    International
             Inc.        	    Other
    Non-guarantor
    Subsidiaries
          of Ensco    	    Consolidating
     Adjustments	       Total   	
 	 	 	 	 	 	 	 	 	  	 	
OPERATING ACTIVITIES	 	 	 	 	 	 	 	 	 	 	
   Net cash (used in) provided by operating activities	$  (0.1	) 	$  (21.2	)	$ 396.7	 	$   --	 	$   375.4	 	
 	 	 	 	 	 	 	 	 	 	 	
INVESTING ACTIVITIES	 	 	 	 	 	 	 	 	 	 	
   Additions to property and equipment 	 (1.7	) 	--	 	(334.9	)	 --	 	(336.6	)	
   Proceeds from disposal of discontinued  operations	 --	 	--	 	132.4	 	--	 	132.4	 	
   Proceeds from disposition of assets	 --	 	--	 	0.7	 	--	 	0.7	 	
      Net cash used in investing activities  	(1.7	)	--	 	(201.8	)	--	 	(203.5	) 	
 	 	 	 	 	 	 	 	 	 	 	
FINANCING ACTIVITIES	 	 	 	 	 	 	 	 	 	 	
   Cash dividends paid 	 (53.6	)	--	 	--	 	--	 	(53.6	)	
   Reduction of long-term borrowings, net	 --	 	--	 	(8.6	)	--	 	(8.6	)	
   Debt financing costs	 --	 	--	 	(6.2	)	--	 	(6.2	)	
   Advances (to) from affiliates	  45.5	 	(106.3	)	 60.8	 	 --	 	 --	 	
   Other	 (5.1	)	(0.7	)	(6.6	)	--	 	(12.4	)	
       Net cash (used in) provided by f inancing  activities	 (13.2	)	 (107.0	)	39.4	 	--	 	(80.8	)	
 	 	 	 	 	 	 	 	 	 	 	
   Effect of exchange rate changes on cash and
       cash equivalents 	 --	 	 --	 	  (0.7	 
) 	 --	 	 
(0.7	 
) 	
   Net cash provided by operating activities of
      discontinued operations	 --	 	 --	 	 5.3	 	 --	 	 
5.3	 	
 	 	 	 	 	 	 	 	 	 	 	
NET (DECREASE) INCREASE IN CASH
   AND CASH EQUIVALENTS 	(15.0	 
)	  (128.2	 
)	238.9	 	 --	 	 
95.7	 	
 	 	 	 	 	 	 	 	 	 	 	
CASH AND CASH EQUIVALENTS,
   BEGINNING OF PERIOD	24.8	 	277.8	 	838.8	 	--	 	 
1,141.4	 	
 	 	 	 	 	 	 	 	 	 	 	
CASH AND CASH EQUIVALENTS, END
   OF PERIOD	$   9.8	 
 	$149.6	 	$1,077.7	 	$   --	 	 
$1,237.1	 	

41

 
Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations
 
ACQUISITION OF PRIDE INTERNATIONAL, INC.
 
     On May 31, 2011 (the “Merger Date”), Ensco plc completed a merger transaction (the “Merger”) with Pride International, Inc., a Delaware corporation (“Pride”), ENSCO International Incorporated, a Delaware corporation and a wholly-owned subsidiary and predecessor of Ensco plc ("Ensco Delaware"), and ENSCO Ventures LLC, a Delaware limited liability company and an indirect, wholly-owned subsidiary of Ensco plc (“Merger Sub”). Pursuant to the merger agreement and subject to the conditions set forth therein, Merger Sub merged with and into Pride, with Pride as the surviving entity and an indirect, wholly-owned subsidiary of Ensco plc.  The total consideration delivered in the Merger was $7.4 billion, consisting of $2.8 billion of cash, 85.8 million Ensco ADSs with an aggregate value of $4.6 billion based on the closing price of Ensco ADSs of $53.32 on the Merger Date and the estimated fair value of $35.4 million of vested Pride employee stock options assumed by Ensco.
 
     In connection with the Merger, we evaluated our core assets and operations, and organized them into three segments based on water depth operating capabilities. Accordingly, we now consider our business to consist of three reportable segments: (1) Deepwater, which consists of our drillships and semisubmersible rigs capable of drilling in water depths of 4,500 feet or greater, (2) Midwater, which consists of our semisubmersible rigs capable of drilling in water depths of 4,499 feet or less and (3) Jackup, which consists of our jackup rigs capable of operating in water depths up to 400 feet.
 
     The Merger establishes Ensco with the world’s second largest offshore drilling fleet of 76 rigs spanning all of the strategic, high-growth markets around the globe. Our expanded rig fleet is composed of seven ultra-deepwater drillships, 13 dynamically positioned semisubmersible rigs, seven moored semisubmersible rigs, 48 jackup rigs and one barge rig.  Our ultra-deepwater fleet is the newest in the industry and our active premium jackup fleet is the largest of any offshore drilling company.  Several technologically-advanced drillships, semisubmersible rigs and ultra-premium harsh environment jackup rigs are under construction as part of our ongoing strategy to continually expand and high-grade our fleet.
 
     We are among the most geographically diverse offshore drilling companies, with current operations and drilling contracts spanning more than 25 different countries on six continents in nearly every major deepwater and shallow-water basin around the world. Regions include major markets in Southeast Asia and Australia, the North Sea, Mediterranean, U.S. Gulf of Mexico, Mexico, Middle East, as well as the fastest-growing deepwater markets in Brazil and West Africa, where some of the world's most prolific geology resides.   Our customers include most of the leading national and international oil companies, plus many independent operators, and we expect to benefit from enhanced diversification as a result of the Merger.
 
BUSINESS ENVIRONMENT
 
Deepwater

     Demand for drilling rigs in the deepwater segment remained stable during 2010 but came under pressure as a result of delays in operators’ ability to secure permits in the U.S. Gulf of Mexico due to regulatory developments and other actions imposed by the U.S. Department of the Interior. During the first half of 2011, several drilling permits were issued in the U.S. Gulf of Mexico related to deepwater programs that were interrupted by the response to the Macondo well incident as offshore drilling contractors continued to work with operators and government regulators to address new regulatory requirements and secure drilling permits.  The time required for issuance of deepwater drilling permits in the U.S. Gulf of Mexico continues to be protracted.  However, demand for deepwater drilling in the region is expected to increase in the near-term as additional permits are issued. 

     We also are encouraged by an increase in tender activity that has resulted from strengthening demand for work in late 2011 and beyond for deepwater drilling in various other regions. Demand has remained strong in Brazil due to recent tenders issued by Petroleo Brasileiro S.A., the national oil company of Brazil.  In West Africa, demand for deepwater drilling has improved as illustrated by recent contract awards and inquiries from operators, which are expected to provide opportunities for a number of deepwater rigs. Increased tender activity worldwide, coupled with the increase in oil prices over the past year, are expected to have a positive impact on future rig demand in the deepwater segment.

42

 
     Worldwide rig supply in the deepwater segment continues to increase as a result of newbuild construction programs. It has been reported that over 70 newbuild drillships and semisubmersible rigs capable of drilling in water depths of 4,500 feet or greater currently are under construction, 20 of which are scheduled for delivery during the second half of 2011.  Less than half of all deepwater newbuild rigs scheduled for delivery are contracted.  We expect newbuild drillships and semisubmersible rigs will be absorbed into the market without a significant effect on utilization and day rates.
 
     We continue to believe in the long-term positive prospects for deepwater drilling based on the expected growth in oil consumption from developing nations, limited growth in oil supplies and high depletion rates of mature oil fields, as well as geologic successes, improving access to promising offshore areas and new, more efficient technologies. With the tendency for deepwater drilling programs to be more insulated from short-term commodity price fluctuations, we expect that the deepwater segment will outperform the midwater and jackup segments over the long-term. We expect rig utilization and day rates in the deepwater segment will be driven by growing worldwide demand for oil and natural gas as global populations expand and economic growth accelerates, along with an increased focus by operators on deepwater offshore prospects.  We also expect that the Macondo well incident and associated new regulatory, legislative or permitting requirements in the U.S. Gulf of Mexico will continue to affect utilization and day rates in the near-term.

Midwater

     Demand for drilling rigs in the midwater segment declined during the latter half of 2010 and first half of 2011, coupled with uncertainty surrounding the Macondo well incident in the U.S. Gulf of Mexico and the resulting regulatory developments and other actions imposed by the U.S. Department of the Interior. However, the number of midwater rigs located in the U.S. Gulf of Mexico has declined significantly over the last several years, primarily due to the risk of mooring system failures during hurricane season, marginal geologic prospects and more attractive opportunities in other regions, such as Brazil.  This resulted in an increase in the number of midwater rigs that have relocated to other locations.

     Although incremental tender activity was seen in Brazil and West Africa during 2011, competition for midwater drilling has increased.  Softness in the deepwater segment for conventionally moored deepwater rigs has resulted in additional pressure on demand for midwater rigs due to increased competition with the more capable deepwater rigs that were forced to bid reduced day rates on work programs in relatively shallow-water depths in an attempt to remain active.

     Worldwide rig supply in the midwater segment is not expected to increase significantly in the near-term.  It has been reported that five newbuild semisubmersible rigs capable of drilling in water depths of 4,499 feet or less are under construction, only one of which is scheduled for delivery during the second half of 2011.  The majority of all midwater newbuild rigs scheduled for delivery are contracted.   Due to competition with higher specification drilling rigs and the potential oversupply of midwater rigs, we expect utilization and day rates to remain under pressure in the near-term.
 
Jackup

     Demand for drilling rigs in the jackup segment was limited during the latter half of 2010, resulting in continued softness in day rates for standard duty jackup rigs.  We are encouraged by improving tender activity due to an increase in both standard duty and heavy duty jackup rig demand for work in 2011 and beyond across various regions.  In addition, the increase in oil prices over the past year is expected to have a positive effect on future jackup rig demand.  

43

 
     Demand for jackup rigs in the Asia Pacific rim, including Vietnam, Malaysia, Indonesia and Australia, strengthened in 2011, with a number of operators locking in longer term contracts with both standard duty and heavy duty rigs. Tender activity in the Middle East has increased during 2011 primarily as a result of increased requirements from Saudi Aramco, the national oil company of Saudi Arabia. We expect this trend to continue through the end of the year primarily driven by the increase in oil prices and the potential impact of supply interruptions due to civil unrest in the Middle East and North Africa.
 
     Demand for jackup rigs in the North Sea improved in 2011 with new inquires for work beginning in 2011 and 2012 for both standard duty and heavy duty rigs. Although more drilling rigs are expected to enter the North Sea within the next six months, the market is projected to remain in balance through 2012.

     Demand for jackup rigs in the U.S. Gulf of Mexico improved during 2011, but is expected to remain flat for the remainder of the year due to the potential for delays in drilling activity during hurricane season. However, a positive impact on demand may occur if additional rigs depart from the region during the latter half of the year.  Tender activity increased during 2011 in waters offshore Mexico for work beginning in the latter half of the year as Petróleos Mexicanos, the national oil company of Mexico, continues to increase its jackup rig fleet. 

     Worldwide rig supply in the jackup segment continues to increase as a result of newbuild construction programs.  It has been reported that over 70 newbuild jackup rigs are under construction, 15 of which are scheduled for delivery during the second half of 2011.  The majority of all newbuild jackup rigs scheduled for delivery are not contracted.  It is uncertain whether the market in general or any geographic region in particular will be able to fully absorb newbuild jackup rig deliveries in the near-term, especially considering the existing oversupply of standard duty jackup rigs.

     Although the supply of available jackup rigs is expected to further increase from newbuild deliveries, given the aforementioned improvements in demand, utilization and day rates generally are expected to trend upward in the near-term in most regions.

     For additional information concerning the potential impact the aforementioned events and circumstances may have on our business, our industry and global supply, see "Item 1A. Risk Factors" in Part I and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II of our Annual Report on Form 10-K for the year ended December 31, 2010, as updated in this report and in our quarterly report on Form 10-Q for the quarter ended March 31, 2011.
 
Backlog Information

    Our contract drilling backlog reflects firm commitments, typically represented by signed drilling contracts, and was calculated by multiplying the contracted operating day rate by the firm contract period. The contracted operating day rate excludes certain types of non-recurring revenues for rig mobilization, demobilization, contract preparation, other customer reimbursables, bonus opportunities and amortization of drilling contract intangibles as discussed in Note 2 to our condensed consolidated financial statements.
 
     The following table summarizes our contract backlog of business as of June 30, 2011 and February 1, 2011 (in millions):
 
 	June 30,	February 1,	
 	     2011   	    2011 (*)  	
 	 	 	 	 	 	
Deepwater	 	$7,027.7	 	$1,723	.4	
Midwater	 	451.1	 	--	 	
Jackup	 	1,639.0	 	1,345	.3	
Other	 	147.9	 	--	 	
    Total	 	$9,265.7	 	$3,068	.7	
 	 	 	 	 	 	
(*)  Backlog includes revenues realized during January 2011.	

44

 
    Our Deepwater, Midwater and Other backlog increased by $5.3 billion, $451.1 million and $147.9 million, respectively, primarily due to addition of backlog resulting from the Merger, partially offset by revenues realized during 2011 in our Deepwater segment.  Our Jackup backlog increased by $293.7 million primarily due to new contract additions in our Asia Pacific Rim markets and the addition of backlog in connection with the Merger, partially offset by revenues realized during 2011. The following table summarizes our annual backlog by operating segment as of June 30, 2011 (in millions):
 
 	        2011 (1)	       2012   	       2013   	2014
and
Beyond	         Total       	
 	 	 	 	 	 	 	 	 	 	 	 	
Deepwater	 	$1,034	.5	$2,140	.1	$1,658	.1	$2,195	.0	$7,027	.7	
Midwater	 	193	.0	181	.8	76	.3	 	--	451	.1	
Jackup	 	588	.9	582	.4	219	.8	 247	.9	1,639	.0	
Other	 	29	.7	54	.5	27	.6	 36	.1	147	.9	
    Total	 	$1,846	.1	$2,958	.8	$1,981	.8	$2,479	.0	$9,265	.7	
 	
     (1)   Represents the six-month period beginning July 1, 2011.
 
     Our drilling contracts generally contain provisions permitting early termination of the contract (i) if the rig is lost or destroyed or (ii) by the customer if operations are suspended for a specified period of time due to breakdown of major rig equipment, unsatisfactory performance, "force majeure" events beyond the control of either party or other specified conditions.  In addition, some of our drilling contracts permit early termination of the contract by the customer for convenience (without cause), generally exercisable upon advance notice to us and in some cases without making an early termination payment to us.  There can be no assurances that our customers will be able to or willing to fulfill their contractual commitments to us.  Therefore, revenues recorded in future periods could differ materially from the backlog amounts presented in the table above.
 
RESULTS OF OPERATIONS
 
     The following table summarizes our condensed consolidated results of operations for the three-month and six-month periods ended June 30, 2011 and 2010 and includes the results of Pride from the Merger Date (in millions):
 
 	Three Months Ended
         June 30,          	   Six Months Ended
              June 30,        	
 	 2011 	     2010   	       2011   	     2010   	
 	 	 	 	 	 	 	 	 	 	
Revenues	 	$564.2	 	$411.4	 	$925.7	 	$860.0	 	
Operating expenses	 	 	 	 	 	 	 	 	 	
Contract drilling (exclusive of depreciation)	 	286.3	 	206.0	 	477.9	 	388.4	 	
Depreciation	 	83.5	 	51.9	 	143.0	 	103.6	 	
General and administrative	 	47.4	 	22.0	 	77.5	 	42.6	 	
Operating income	 	147.0	 	131.5	 	227.3	 	325.4	 	
Other income (expense), net	 	(18.1	)	12.8	 	(15.9	)	15.9	 	
Provision for income taxes	 	25.3	 	22.4	 	42.3	 	57.4	 	
Income from continuing operations	 	103.6	 	121.9	 	169.1	 	283.9	 	
Income from discontinued operations, net	 	--	 	6.0	 	--	 	35.6	 	
Net income	 	103.6	 	127.9	 	169.1	 	319.5	 	
Net income attributable to noncontrolling interests	 	(1.7	)	(1.6	)	(2.6	)	(3.4	)	
Net income attributable to Ensco	 	$101.9	 	$126.3	 	$166.5	 	$316.1	 	

45

 
     For the quarter ended June 30, 2011, excluding $151.2 million of revenues and $25.9 million of operating income attributable to the impact of the Merger, revenues were comparable and operating income declined by $10.4 million, or 8%, as compared to the prior year quarter. The decline in operating income was primarily due to an increase in general and administrative expense incurred by Ensco to effect the Merger.

     For the six-month period ended June 30, 2011, excluding $151.2 million of revenues and $25.9 million of operating income attributable to the impact of the Merger, revenues declined by $85.5 million, or 10%, and operating income declined by $124.0 million, or 38%, as compared to the prior year period. These declines were primarily due to a decrease in average day rates for our Jackup fleet and downtime on ENSCO 7500 as the rig recently completed an enhancement project in a shipyard in Singapore and began mobilizing to Brazil during the quarter.  The decline in operating income was also attributable to an increase in general and administrative expense incurred by Ensco to effect the Merger.
 
     A significant number of our drilling contracts are of a long-term nature. Accordingly, a decline in demand for contract drilling services typically affects our operating results and cash flows gradually over future quarters as long-term contracts expire. The significant decline in oil and natural gas prices during the latter half of 2008 and the deterioration of the global economy continued to result in a decline in demand for contract drilling services during 2010 and the first half of 2011, which may continue to negatively impact our operating results.
 
     Certain of our drilling rigs in the U.S. Gulf of Mexico have been or may be further affected by the regulatory developments and other actions that have or may be imposed by the U.S. Department of the Interior, including the regulations issued on September 30, 2010. Utilization and day rates for certain of our drilling rigs have been negatively influenced due to regulatory requirements and delays in our customers’ ability to secure permits. Current or future NTLs or other directives and regulations may further impact our customers' ability to obtain permits and commence or continue deepwater or shallow-water operations in the U.S. Gulf of Mexico.  Additionally, regulatory or customer requirements relating to blowout prevention equipment certification, inspection and testing may adversely impact our revenues.
 
     While we have substantial contract backlog for 2011, excluding the impact of the Merger, it is uncertain whether revenue, operating income and cash flow levels achieved during 2010 will be sustained during 2011.
 
Rig Counts, Utilization and Average Day Rates
 
     The following table summarizes our offshore drilling rigs by reportable segment and rigs under construction as of June 30, 2011 and 2010:
 
 	June 30,
  2011 (1)	 	June 30, 
  2010      	
 	 	   	 	 	 	 	 	
Deepwater (2)	 	16	 	 	 	4    	 	
Midwater	 	6	 	 	 	--    	 	
Jackup (4)	 	46	 	 	 	39    	 	
Under construction (2)(3)	 	7	 	 	 	4    	 	
Total (5)	 	75	 	 	 	47    	 	
 
    (1)	 	In connection with the Merger, we acquired 13 deepwater rigs, two of which are currently under construction, six midwater rigs and seven jackup rigs.
 	
    (2)	 	ENSCO 8503 was delivered in September 2010 and commenced drilling operations in French Guiana under a short-term sublet agreement during the first quarter of 2011.  ENSCO 8503 is expected to commence drilling operations in the U.S. Gulf of Mexico under a two-year contract during 2011.
 	
  (3)	 	In February 2011, we entered into agreements with Keppel FELS Limited ("KFELS") to construct two ultra-high specification harsh environment jackup rigs.  These rigs currently are uncontracted and scheduled for delivery during the first and second half of 2013, respectively.
 	
(4)	 	We acquired ENSCO 109 in July 2010 and sold ENSCO 95 in June 2011.
 	
  (5)	 	The total number of rigs for each period excludes rigs reclassified as discontinued operations.  	

46

 
    The following table sum mariz es our rig utilization and average day rates from continuing operations by reportable segment for the three-month and six-month periods ended June 30, 2011 and 2010 and includes the impact of Pride from the Merger Date:
 
 	Three Months Ended
          June 30,           	      Six Months Ended
                  June 30,           	
 	2011   	2010   	2011	2010    	
Rig utilization (1)	 	 	 	 	 	 	 	 	 	
Deepwater  	 	86%	 	91%	 	83%	 	95%	 	
Midwater	 	79%	 	N/A	 	79%	 	N/A	 	
Jackup (3)  	 	75%	 	75%	 	73%	 	77%	 	
Total	 	77%	 	76%	 	75%	 	78%	 	
 	 	 	 	 	 	 	 	 	 	
Average day rates (2)	 	 	 	 	 	 	 	 	 	
Deepwater  	 	$347,024	 	$403,307	 	$333,232	 	$407,334	 	
Midwater	 	237,139	 	N/A	 	237,139	 	N/A	 	
Jackup (3)  	 	 99,024	 	105,124	 	 97,959	 	108,478	 	
Total	 	$147,305	 	$131,231	 	$134,605	 	$135,033	 	
 
     (1)	 	Rig utilization is derived by dividing the number of days under contract by the number of days in the period. Days under contract equals the total number of days that rigs have earned a day rate, including days associated with compensated downtime and mobilizations. For newly constructed or acquired rigs, the number of days in the period begins upon commencement of drilling operations for rigs with a contract or when the rig becomes available for drilling operations for rigs without a contract.
 	
    (2)	 	Average day rates are derived by dividing contract drilling revenues, adjusted to exclude certain types of non-recurring reimbursable revenues, lump sum revenues and revenues attributable to amortization of drilling contract intangibles as discussed in Note 2 to our condensed consolidated financial statements, by the aggregate number of contract days, adjusted to exclude contract days associated with certain mobilizations, demobilizations, shipyard contracts and standby contracts.
 	
(3)	 	ENSCO 69 has been excluded from rig utilization and average day rates for our Jackup segment during the period the rig was controlled and operated by Petrosucre, a subsidiary of Petróleos de Venezuela S.A., the national oil company of Venezuela (January 2009 - August 2010).  For additional information on ENSCO 69, see Note 11 to our audited consolidated financial statements for the year ended December 31, 2010 included in our Annual Report on Form 10-K.	
 
     Detailed explanations of our operating results, including discussions of revenues, contract drilling expense and depreciation expense by segment, are provided below.
 
Operating Income
 
In connection with the Merger, we evaluated our core assets and operations, consisting of five drillships, 17 semisubmersible rigs, 46 jackup rigs and seven rigs under construction, and organized them into three segments based on water depth operating capabilities. Accordingly, we now consider our business to consist of three reportable segments: (1) Deepwater, which consists of our rigs capable of drilling in water depths of 4,500 feet or greater, (2) Midwater, which consists of our semisubmersible rigs capable of drilling in water depths of 4,499 feet or less and (3) Jackup, which consists of our jackup rigs capable of operating in water depths up to 400 feet. Each of our three reportable segments provides one service, contract drilling.  We also manage the drilling operations for two deepwater rigs and own one barge rig, which are included in “Other.”

     Segment information for the three-month and six-month periods ended June 30, 2011 and 2010 is presented below and includes the results of Pride from the Merger Date.  General and administrative expense and depreciation expense incurred by our corporate office are not allocated to our operating segments for purposes of measuring segment operating income and were included in "Reconciling Items."

47

 
Three Months Ended June 30, 2011

Deepwater   	 
 
  Midwater	 
 
  Jackup	    Other	Operating
Segments
       Total      	Reconciling
   Items   	 
Consolidated
     Total      	
 	 	 	 	 	 	 	 	 	
Revenues	$232.3	 	$  36.1	 	$289.3	 	$   6.5	 	$564.2	 	$     --	 	$564.2	 	
Operating expenses
Contract drilling (exclusive
of depreciation)	111.1	 	22.9	 	145.4	 	 6.9	 	286.3	 	--	 	286.3	 	
Depreciation	33.9	 	5.2	 	43.2	 	 0.5	 	82.8	 	0.7	 	83.5	 	
General and administrative	--	 	--	 	--	 	 --	 	--	 	47.4	 	47.4	 	
Operating income (loss)	$  87.3	 	$    8.0	 	$100.7	 	 $  (0.9	)	$195.1	 	$(48.1	) 	$147.0	 	
 
Three Months Ended June 30, 2010
 	Deepwater   	  Midwater	  Jackup	    Other	  Operating
  Segments
          Total      	Reconciling
   Items   	 
Consolidated
     Total      	
 	 	 	 	 	 	 	 	 	
Revenues	$120.9	 	$      --	 	$290.5	 	$     --	 	$411.4	 	$     --	 	$411.4	 	
Operating expenses
Contract drilling (exclusive
of depreciation)	46.5	 	--	 	147.0	 	 12.5	 	206.0	 	--	 	206.0	 	
Depreciation	9.7	 	--	 	41.1	 	 0.8	 	51.6	 	0.3	 	51.9	 	
General and administrative	--	 	--	 	--	 	 --	 	--	 	22.0	 	22.0	 	
Operating income (loss)	$  64.7	 	$      --	 	$102.4	 	 $(13.3	)	$153.8	 	$(22.3	) 	$131.5	 	
 
Six Months Ended June 30, 2011

Deepwater   	  Midwater	  Jackup	    Other	Operating
Segments
       Total      	Reconciling
   Items   	Consolidated
     Total      	
 	 	 	 	 	 	 	 	 	
Revenues	$330.4	 	$  36.1	 	$552.7	 	$   6.5	 	$925.7	 	$     --	 	$925.7	 	
Operating expenses
Contract drilling (exclusive
of depreciation)	152.0	 	22.9	 	295.7	 	 7.3	 	477.9	 	--	 	477.9	 	
Depreciation	50.1	 	5.2	 	85.7	 	 0.9	 	141.9	 	1.1	 	143.0	 	
General and administrative	--	 	--	 	--	 	 --	 	--	 	77.5	 	77.5	 	
Operating income (loss)	$128.3	 	$   8.0	 	$171.3	 	 $  (1.7	)	$305.9	 	$(78.6	) 	$227.3	 	
 
Six Months Ended June 30, 2010
 	Deepwater   	  Midwater	  Jackup	    Other	  Operating
  Segments
          Total      	Reconciling
   Items   	 
Consolidated
     Total      	
 	 	 	 	 	 	 	 	 	
Revenues	$251.3	 	$      --	 	$608.7	 	$     --	 	$860.0	 	$     --	 	$860.0	 	
Operating expenses
Contract drilling (exclusive
of depreciation)	91.5	 	--	 	284.0	 	 12.9	 	388.4	 	--	 	388.4	 	
Depreciation	19.5	 	--	 	82.0	 	 1.5	 	103.0	 	0.6	 	103.6	 	
General and administrative	--	 	--	 	--	 	 --	 	--	 	42.6	 	42.6	 	
Operating income (loss)	$140.3	 	$      --	 	$242.7	 	 $(14.4	)	$368.6	 	$(43.2	) 	$325.4	 	

48

 
    Deepwater
 
     Excluding $101.3 million of revenues attributable to the impact of the Merger, Deepwater revenues for the quarter ended June 30, 2011 increased by $10.1 million, or 8%, as compared to the prior year quarter. The increase in revenues was primarily due to ENSCO 8502 and ENSCO 8503 which were added to our Deepwater fleet and commenced drilling operations during the third quarter of 2010 and first quarter of 2011, respectively, partially offset by a decline in utilization to 83%, excluding the impact of the Merger, from 91% in the prior year quarter. The decline in utilization was due to downtime on ENSCO 7500 as the rig recently completed an enhancement project in a shipyard in Singapore and began mobilizing to Brazil during the quarter. Contract drilling expense increased by $5.0 million, or 11%, excluding $59.6 million of expense attributable to the impact of the Merger. The increase in contract drilling expense was primarily due to the commencement of ENSCO 8502 and ENSCO 8503 drilling operations partially offset by downtime on ENSCO 7500. Depreciation expense increased by $8.3 million, or 86%, excluding $15.9 million of expense attributable to the impact of the Merger. The increase in depreciation expense was due to the addition of ENSCO 8502 and ENSCO 8503 to our Deepwater fleet as previously noted.

     Excluding $101.3 million of revenues attributable to the impact of the Merger, Deepwater revenues for the six-month period ended June 30, 2011 declined by $22.2 million, or 9%, as compared to the prior year period. The decline in revenues was due to a decline in utilization to 80%, excluding the impact of the Merger, from 95% in the prior year period resulting from downtime on ENSCO 7500, partially offset by the commencement of ENSCO 8502 and ENSCO 8503 drilling operations as previously noted. Contract drilling expense was comparable to the prior year period, excluding $59.6 million of expense attributable to the impact of the Merger. Depreciation expense increased by $14.7 million, or 75%, excluding $15.9 million of expense attributable to the impact of the Merger. The increase in depreciation expense was due to the addition of ENSCO 8502 and ENSCO 8503 to our Deepwater fleet as previously noted.
 
    Midwater
 
     Midwater revenues for the three-month and six-month period ended June 30, 2011 were $36.1 million. These revenues were attributable to our Midwater fleet acquired in connection with the Merger, which is comprised of five semisubmersible rigs currently operating in Brazil and one semisubmersible rig located in West Africa. Utilization of our Midwater fleet was 79% and average day rates were $237,000 for the current period.  Utilization was impacted primarily by ENSCO 5003, which was idle during the quarter.
 
    Jackup
 
     Excluding $7.3 million of revenues attributable to the impact of the Merger, Jackup revenues for the quarter ended June 30, 2011 declined by $8.5 million, or 3%, as compared to the prior year quarter. The decline in revenues was primarily due to a 6% decline in average day rates, excluding the impact of the Merger, resulting from lower levels of spending by oil and gas companies coupled with excess rig availability. The decline in average day rates was primarily attributable to the Asia and Pacific Rim and Middle East and Africa markets. The decline in revenues was partially offset by an increase in utilization to 77%, excluding the impact of the Merger, from 75% in the prior year quarter, primarily attributable to the Asia and Pacific Rim and Europe and Mediterranean markets. Contract drilling expense declined $6.4 million, or 4%, excluding $4.8 million of expense attributable to the impact of the Merger. The decline in expense was due to gains associated with the disposal of assets partially offset by increased repair and maintenance expense. Depreciation expense increased 3%, excluding $1.0 million of expense attributable to the impact of the Merger. The increase in depreciation expense was primarily due to the addition of ENSCO 109 to our Asia Pacific fleet during the third quarter of 2010.

49

 
 
     Excluding $7.3 million of revenues attributable to the impact of the Merger, Jackup revenues for the six-month period ended June 30, 2011 declined by $63.3 million, or 10%, as compared to the prior year period. The decline in revenues was primarily due to a 10% decline in average day rates, excluding the impact of the Merger, resulting from lower levels of spending by oil and gas companies coupled with excess rig availability. The decline in average day rates was primarily attributable to the Asia and Pacific Rim and Middle East and Africa markets. Contract drilling expense increased by $6.9 million, or 2%, excluding $4.8 million of expense attributable to the impact of the Merger. The increase in contract drilling expense was primarily due to increased personnel and repair and maintenance expense, partially offset by gains associated with the disposal of assets. Depreciation expense increased by $2.7 million, or 3%, excluding $1.0 million of expense attributable to the impact of the Merger. The increase in depreciation expense was primarily due to the addition of ENSCO 109 to our Asia Pacific fleet during the third quarter of 2010.
 
    Other
 
     Other revenues and contract drilling expense for the three-month and six-month periods ended June 30, 2011 were primarily attributable to the managed drilling rig operations acquired in connection with the Merger. Other contract drilling expense for the three-month and six-month periods ended June 30, 2010 was primarily related to a $12.2 million loss on impairment of ENSCO I, our only barge rig.
 
     Reconciling Items
 
     Excluding general and administrative expense of $11.6 million incurred by Pride from the Merger Date, general and administrative expense for the three-month and six-month periods ended June 30, 2011 increased by $13.8 million, or 63%, and $23.3 million, or 55%, respectively, as compared to the respective prior year periods primarily due to increased advisory, legal, accounting, valuation and other professional or consulting fees incurred by Ensco to effect the Merger.  These increases were partially offset by professional fees incurred during the comparable prior year periods in connection with various reorganization efforts undertaken as a result of our redomestication to the U.K. in December 2009.
 
Other Income (Expense), Net
 
     The following summarizes other income (expense), net, for the three-month and six-month periods ended June 30, 2011 and 2010 and includes the results of Pride from the Merger Date (in millions):
 
 	     Three Months Ended	       Six Months Ended	
 	                  June 30,            	                  June 30,           	
 	      2011  	  2010	      2011  	         2010  	
 	 	 	
Interest income	 	$   2.3	 	$   .2	 	$   2.5	 	$    .3	 	
Interest expense, net:	 	 	 	 	 	 	 	 	 	
   Interest expense	 	(41.6	)	(5.4	)	(60.1	)	(10.4	)	
   Capitalized interest	 	22.0	 	5.4	 	36.4	 	10.4	 	
 	 	(19.6	)	--	 	(23.7	)	--	 	
Other, net	 	(.8	)	12.6	 	5.3	 	15.6	 	
 	 	$(18.1	) 	$12.8	 	$(15.9	)	$ 15.9	 	

 
50

 
     Interest income for the three-month and six-month periods ended June 30, 2011 increased as compared to the respective prior year periods due to interest earned on certain long-term receivables.  Interest expense increased over the same periods primarily due to an increase in outstanding debt resulting from our public offering on March 17, 2011 of $2.5 billion aggregate principal amount of senior notes, in addition to $1.9 billion aggregate principal amount of debt assumed in connection with the Merger.  Interest expense of $22.0 million and $36.4 million was capitalized in connection with our newbuild construction during the three-month and six-month periods ended June 30, 2011, respectively.   All interest expense incurred during the three-month and six-month periods ended June 30, 2010 was capitalized in connection with our newbuild construction.   See Note 5 to our condensed consolidated financial statements for additional information on our senior notes and debt assumed in connection with the Merger.

     Our functional currency is the U.S. dollar, and a portion of the revenues earned and expenses incurred by some 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. Net foreign currency exchange losses of $800,000 and $500,000 were included in other, net, for the three-month and six-month periods ended June 30, 2011, respectively.   Net foreign currency exchange gains of $1.9 million and $4.0 million were included in other, net, for the three-month and six-month periods ended June 30, 2010, respectively.

     A net gain of $4.8 million associated with the repurchase of our auction rate securities was included in other, net,  for the six-month period ended June 30, 2011.  Net gains of $300,000 and $600,000 associated with our auction rate securities were included in other, net,  for the three-month and six-month periods ended June 30, 2010, respectively. See Note 3 to our condensed consolidated financial statements for additional information on our auction rate securities.

     During the quarter ended June 30, 2010, we recognized a gain of $11.4 million, net of related expenses, for a break-up fee resulting from our unsuccessful tender offer for Scorpion Offshore Ltd.  The net gain was included in other, net, for the three-month and six-month periods ended June 30, 2010.
 
Provision for Income Taxes
 
     Income tax rates imposed in the tax jurisdictions in which our subsidiaries conduct operations vary, as does the tax base to which the rates are applied. In some cases, tax rates may be applicable to gross revenues, statutory or negotiated deemed profits or other bases utilized under local tax laws, rather than to net income. Our drilling rigs frequently move from one taxing jurisdiction to another to perform contract drilling services. In some instances, the movement of drilling rigs among taxing jurisdictions will involve the transfer of ownership of the drilling rigs among our subsidiaries. As a result of the frequent changes in taxing jurisdictions in which our drilling rigs are operated and/or owned, our consolidated effective income tax rate may vary substantially from one reporting period to another, depending on the relative components of our earnings generated in tax jurisdictions with higher tax rates or lower tax rates.

     Subsequent to our redomestication to the U.K. in December 2009, we reorganized our worldwide operations, which included, among other things, the transfer of ownership of several of our drilling rigs among our subsidiaries in April 2010 and December 2010.

 
51

 
 
     Income tax expense was $25.3 million and $22.4 million for the quarters ended June 30, 2011 and 2010, respectively. The $2.9 million increase in income tax expense as compared to the prior year quarter was due to various discrete tax items in the quarter ended June 30, 2011, primarily a gain on disposal of assets in a jurisdiction with a high tax rate.

     Income tax expense was $42.3 million and $57.4 million for the six-month periods ended June 30, 2011 and 2010, respectively. The $15.1 million decrease in income tax expense for the six-month period ended June 30, 2011 was primarily due to reduced profitability, partially offset by the impact of various discrete tax items during the six-month period ended June 30, 2011, including the gain on asset disposal discussed above and the recognition of a liability for unrecognized tax benefits associated with a tax position taken in a prior year.  Excluding discrete tax items, our consolidated effective income tax rate declined to 14.7% from 16.8% in the comparable prior year period, which also contributed to the decrease in income tax expense.   The decline in our 2011 consolidated effective income tax rate as compared to the prior year period was primarily due to the aforementioned transfer of drilling rig ownership in connection with the reorganization of our worldwide operations, which resulted in an increase in the relative components of our earnings generated in tax jurisdictions with lower tax rates.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     Although our business historically has been very cyclical, we historically have relied on our cash flow from continuing operations to meet liquidity needs and fund the majority of our cash requirements. We have maintained a strong financial position through the disciplined and conservative use of debt, which has provided us the ability to achieve future growth potential through acquisitions and newbuild construction. A substantial portion of our cash flow has been and will continue to be invested in the expansion and enhancement of our fleet of drilling rigs in general and our newbuild construction in particular.

     On May 31, 2011, we completed the Merger with Pride, which was financed through a combination of existing cash and cash equivalents, including proceeds from our public offering on March 17, 2011 of $1.0 billion aggregate principal amount of 3.25% senior notes due 2016 and $1.5 billion aggregate principal amount of 4.70% senior notes due 2021 and borrowings under our commercial paper program. Total consideration paid to Pride shareholders was $2.8 billion of cash and the delivery of 85.8 million Ensco ADSs.  Furthermore, we assumed $1.9 billion aggregate principal amount of long-term debt in conjunction with the Merger. Given the number of rigs under construction and the amount of debt assumed in the Merger, it is contemplated that our cash flows will primarily be dedicated to finance newbuild construction through 2013, in addition to servicing our long-term debt.
 
     During the first half of 2011, our cash flows from operations were negatively influenced by the Macondo well incident and associated new regulatory, legislative or permitting requirements, which may continue during the remainder of 2011 and beyond. However, based on $554.0 million of cash and cash equivalents on hand as of June 30, 2011 and our current contractual backlog, we believe our future operations and obligations associated with our newbuild construction primarily will be funded from existing cash and cash equivalents, future operating cash flow and borrowings under our commercial paper program and/or credit facilities.

 
52

 
     During the six-month period ended June 30, 2011, our primary source of cash was $2.5 billion in proceeds from the issuance of our senior notes and $175.8 million generated from operating activities of continuing operations.  Our primary use of cash for the same period was $2.8 billion paid for the cash consideration of the Merger; $265.6 million for the construction, enhancement and other improvement of our drilling rigs, including $136.4 million invested in our newbuild construction; $189.6 million for reduction of long-term borrowings; and $130.7 million for the payment of dividends.

     During the six-month period ended June 30, 2010, our primary source of cash was $375.4 million generated from operating activities of continuing operations and $132.4 million of proceeds from the sale of three jackup rigs.  Our primary uses of cash for the same period included $336.6 million for the construction, enhancement and other improvement of our drilling rigs, including $267.2 million invested in the construction of our ENSCO 8500 Series® rigs and $53.6 million for the payment of dividends.
 
Cash Flow and Capital Expenditures
 
     Our cash flow from operating activities of continuing operations and capital expenditures on continuing operations, excluding the $2.8 billion of cash consideration for the Merger, for the six-month periods ended June 30, 2011 and 2010 were as follows and include cash flows of Pride from the Merger Date (in millions):
 
 	       Six Months Ended
                      June 30,             	
 	       2011   	         2010  	
 	 	 	 	 	 	
Cash flow from operating activities of continuing operations	 	$175.8	 	$375.4	 	
Capital expenditures on continuing operations	 	 	 	 	 	
   New rig construction	 	$136.4	 	$267.2	 	
   Rig acquisition	 	--	 	18.6	 	
   Rig enhancements	 	86.3	 	5.1	 	
   Minor upgrades and improvements	 	42.9	 	45.7	 	
 	 	$265.6	 	$336.6	 	
 
     Cash flow from operating activities of continuing operations declined by $199.6 million, or 53%, for the six-month period ended June 30, 2011 as compared to the prior year period. The decline resulted primarily from a $186.5 million increase in cash payments related to contract drilling expenses, a $23.7 million decline in cash receipts from contract drilling services and a $31.7 million increase in cash payments related to general and administrative expense, which was primarily attributable to the Merger. The aforementioned items were partially offset by a $33.4 million increase in cash receipts from repurchases/redemptions of our auction rate securities and a $15.5 million decline in tax payments.
 
     We continue to expand the size and quality of our drilling rig fleet.  In connection with the Merger, we acquired seven drillships (two of which are under construction), 12 semisubmersible rigs and seven jackup rigs. ENSCO DS-3 and ENSCO DS-4 commenced on operating day rate under five-year contracts in June and May 2011, respectively. ENSCO DS-5 recently completed its mobilization to the U.S. Gulf of Mexico and commenced drilling operations under a five-year contract in July 2011.
 
     ENSCO 8503 was delivered in September 2010 and commenced drilling operations in French Guiana under a short-term sublet agreement during the first quarter of 2011.  ENSCO 8503 is expected to commence drilling operations in the U.S. Gulf of Mexico under a two-year contract during the fourth quarter of 2011. We also have two ultra-deepwater drillships and three ENSCO 8500 Series® ultra-deepwater semisubmersible rigs under construction with scheduled delivery dates from the third quarter of 2011 through the second half of 2013. ENSCO 8504 is committed under a drilling contract in Brunei, while the other two ENSCO 8500 Series® rigs and two ultra-deepwater drillships under construction are uncontracted.  Our ENSCO 7500 ultra-deepwater semisubmersible rig recently completed an enhancement project in a shipyard in Singapore and is expected to commence drilling operations in Brazil under a two-and-a-half year contract during the fourth quarter of 2011.

53

 
     In conjunction with our long-established strategy of high-grading our jackup rig fleet by investing in newer equipment, we entered into agreements with KFELS in February 2011 to construct two ultra-high specification harsh environment jackup rigs for estimated total construction costs of approximately $230.0 million per rig.  These rigs currently are uncontracted and scheduled for delivery during the first and second half of 2013, respectively.
 
     Based on our current projections, and excluding the $2.8 billion of cash consideration for the Merger, we expect capital expenditures during 2011 to include approximately $630.0 million for newbuild construction, approximately $235.0 million for rig enhancement projects and approximately $150.0 million for minor upgrades and improvements. Depending on market conditions and opportunities, we may make additional capital expenditures to upgrade rigs for customer requirements and construct or acquire additional rigs.
 
Financing and Capital Resources
 
     Our long-term debt, total capital and long-term debt to total capital ratios as of June 30, 2011 and December 31, 2010 are summarized below (in millions, except percentages):
 
 	June 30,
  2011  	December 31,
        2010       	
 	 	 	 	 	 	
Long-term debt	 	$  4,917.4	 	$   240.1	 	
Total capital*	 	$15,489.1	 	$6,199.6	 	
Long-term debt to total capital	 	31.7	%	3.9	%	
 	
    *Total capital consists of long-term debt and Ensco shareholders' equity.	
 
     Senior Notes
 
     On March 17, 2011, we issued $1.0 billion aggregate principal amount of unsecured 3.25% senior notes due 2016 at a discount of $7.6 million and $1.5 billion aggregate principal amount of unsecured 4.70% senior notes due 2021 at a discount of $29.6 million (collectively the “Notes”) in a public offering. Interest on the Notes is payable semiannually in March and September of each year.  The Notes were issued pursuant to an indenture between us and Deutsche Bank Trust Company Americas, as trustee (the “Trustee”), dated March 17, 2011 (the “Indenture”), and a supplemental indenture between us and the Trustee, dated March 17, 2011 (the “Supplemental Indenture”). The proceeds from the sale of the Notes were used to fund a portion of the cash consideration payable in connection with the Merger.
 
     We may also redeem each series of the 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 Notes, the Indenture and the Supplemental Indenture also contain customary events of default, including failure to pay principal or interest on the Notes when due, among others. The Supplemental Indenture 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.

54

 
     Acquired Debt
 
     In connection with the Merger, we assumed Pride’s outstanding debt comprised of $900.0 million 6.875% senior notes due 2020, $500.0 million 8.500% senior notes due 2019, $300.0 million 7.875% senior notes due 2040 (collectively the “Pride Notes”) and $151.5 million of Maritime Administration (“MARAD”) bonds due 2016.  Under a supplemental indenture dated May 31, 2011 to the original indenture dated July 1, 2004, Ensco plc fully and unconditionally guaranteed performance of all obligations of Pride with respect to the Pride Notes.  The guarantee of the Pride Notes was made to allow us greater operating flexibility and provides for, among other matters, modifications of certain reporting requirements and the ability to transfer assets among Ensco subsidiaries.  See Note 18 to our condensed consolidated financial statements for additional information on the guarantee of the Pride Notes.   In addition, we assumed debt  outstanding with respect to Pride’s senior unsecured revolving credit facility totaling $181.0 million which was repaid in full and the facility terminated.
 
     We may also redeem each series of the Pride 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 Pride Notes also contain customary events of default, including failure to pay principal or interest on the Pride Notes when due, among others. The Pride Notes 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.
 
     Revolving Credit
 
     On May 12, 2011, we entered into an amended and restated agreement (the "Five-Year Credit Facility") with a syndicate of banks that provided for a $700.0 million unsecured revolving credit facility for general corporate purposes.  On May 31, 2011, upon the consummation of the Merger, and pursuant to the terms of the Five-Year Credit Facility, the commitment under the Five-Year Credit Facility increased from $700.0 million to $1.45 billion. In addition, certain of Ensco’s subsidiaries became borrowers and/or guarantors of the Five-Year Credit Facility. The Five-Year Credit Facility has a five-year term, expiring in May 2016, and replaces our $700.0 million four-year credit agreement which was scheduled to mature in May 2014.  Advances under the Five-Year Credit Facility bear interest at LIBOR plus an applicable margin rate (currently 1.5% per annum), depending on our credit rating. We are required to pay a quarterly undrawn facility fee (currently 0.20% per annum) on the total $1.45 billion commitment, which is also based on our credit rating. We also are required to maintain a debt to total capitalization ratio less than or equal to 50% under the Five-Year Credit Facility. We have the right, subject to lender consent, to increase the commitments under the Five-Year Credit Facility to an aggregate amount of up to $1.7 billion.  We had no amounts outstanding under the Five-Year Credit Facility or our prior credit agreement as of June 30, 2011 and December 31, 2010, respectively.
 
     On May 12, 2011, we entered into a 364-Day Credit Agreement (the "364-Day Credit Facility") with a syndicate of banks. The 364-Day Credit Facility provided for a $450.0 million unsecured revolving credit facility to be used for general corporate purposes, which would not be available for borrowing until certain conditions at the closing of the Merger were satisfied. On May 31, 2011, upon the consummation of the Merger, the full commitment of $450.0 million under the 364-Day Credit Facility became available for Ensco to use for general corporate purposes. In addition, certain of Ensco’s subsidiaries became borrowers and/or guarantors of the 364-Day Credit Facility. The 364-Day Credit Facility has a one-year term, expiring in May 2012, or the date of the termination of the lender commitments as set forth in the 364-Day Credit Facility.  Upon our election prior to maturity, amounts outstanding under the 364-Day Credit Facility may be converted into a term loan with a maturity date of May 11, 2013 after payment of a fee equal to 1% of the amounts converted. Advances under the 364-Day Credit Facility bear interest at LIBOR plus an applicable margin rate (currently 1.50% per annum) depending on our credit rating. We are required to pay a quarterly undrawn facility fee (currently 0.10% per annum) on the total $450.0 million commitment, which is also based on our credit rating. We also are required to maintain a debt to total capitalization ratio less than or equal to 50% under the 364-Day Credit Facility. We have the right, subject to lender consent, to increase the commitments under the 364-Day Credit Facility to an aggregate amount of up to $550.0 million.  We had no amounts outstanding under the 364-Day Credit Facility as of June 30, 2011.

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     Commercial Paper
 
     On April 26, 2011, we entered into a commercial paper program with four 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 $700.0 million.  On May 31, 2011, following the consummation of the Merger, Ensco increased the maximum aggregate amount of the commercial paper program to $1.0 billion. Under the commercial paper program, we may issue commercial paper from time to time, and the proceeds of such financings will be used for capital expenditures and other general corporate purposes.  The commercial paper will bear interest at rates that will vary based on market conditions and the ratings assigned by credit rating agencies at the time of issuance. The maturities of the commercial paper will vary, but may not exceed 364 days from the date of issuance.  The commercial paper is not redeemable or subject to voluntary prepayment by us prior to maturity. We had $89.9 million outstanding under our commercial paper program as of June 30, 2011.
 
     Other Financing

     On February 6, 2011, we entered into a bridge commitment letter (the “Commitment Letter”) with Deutsche Bank AG Cayman Islands Branch (“DBCI”), Deutsche Bank Securities Inc. and Citigroup Global Markets Inc. (“Citi”). Pursuant to the Commitment Letter, DBCI and Citi committed to provide a $2.8 billion unsecured bridge term loan facility (the “Bridge Term Facility”) to fund a portion of the cash consideration in the Merger.  Upon receipt of the proceeds from the issuance of the Notes, we determined that we had adequate cash resources to fund the cash component of the consideration payable in connection with the proposed merger with Pride and accordingly, the Bridge Term Facility was terminated.
 
     We filed an immediately effective Form S-3 Registration Statement with the Securities and Exchange Commission ("SEC") in January 2009, which provides us the ability to issue debt and/or equity securities in one or more offerings from time to time.  In May 2011, we filed an immediately effective, post-effective amendment to the registration statement to provide us the ability to also issue guarantees of debt securities and other securities in one or more offerings from time to time.  The registration statement, as amended, expires in January 2012.
 
     In addition to the MARAD bonds assumed in connection with the Merger, we had an aggregate $99.8 million outstanding as of June 30, 2011 under two separate MARAD bond issues that require semiannual principal and interest payments and are due in 2015 and 2020, respectively.  We also make semiannual interest payments on $150.0 million of 7.20% debentures due in 2027.
 
     The Board of Directors of our U.S. subsidiary and predecessor, Ensco Delaware, previously authorized the repurchase of up to $1.5 billion of our ADSs.  In December 2009, the then-Board of Directors of Ensco International Limited, a predecessor of Ensco plc, continued the prior authorization and, subject to shareholder approval, authorized management to repurchase up to $562.4 million of ADSs from time to time pursuant to share repurchase agreements with two investment banks. The then-sole shareholder of Ensco International Limited approved such share repurchase agreements for a five-year term.  From inception of our share repurchase programs during 2006 through December 31, 2008, we repurchased an aggregate 16.5 million shares at a cost of $937.6 million (an average cost of $56.79 per share).  No shares were repurchased under the share repurchase programs during 2009, 2010 or the six-month period ended June 30, 2011.  Although $562.4 million remained available for repurchase as of June 30, 2011, we will not repurchase any shares under our share repurchase program without further consultation with and approval by the Board of Directors of Ensco plc.

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Contractual Obligations
 
     We have various contractual commitments related to our newbuild construction agreements, long-term debt and operating leases. We expect to fund these commitments from our existing cash and cash equivalents, future operating cash flows and, if necessary, funds borrowed under our commercial paper program, credit facilities or other future financing arrangements.  The actual timing of our newbuild construction payments may vary based on the completion of various construction milestones, which are beyond our control. The table below summarizes our significant contractual obligations, inclusive of the significant contractual obligations assumed as a result of the Merger, as of June 30, 2011 and the periods in which such obligations are due (in millions):
 
 	        Payments Due by Period        	 	
 	 	2012        	2014     	 	 	
 	 	and        	and     	After       	 	
 	  2011 (1)      	  2013          	  2015       	2015          	  Total	
 	 	 	 	 	 	 	 	 	 	 	
Newbuild construction agreements	  $410.7	 	$1,368.9	 	$      --	 	$        -- 	 	$1,779.6	 	
Principal payments on long-term debt	 113.6	 	  95.0	 	  95.0	 	  4,387.6	 	  4,691.2	 	
Interest payments on long-term debt	  126.4	 	  502.2	 	  492.8	 	  1,585.6	 	  2,707.0	 	
Operating leases	12.6	 	  17.9	 	  9.4	 	11.4	 	51.3	 	
Total contractual obligations (2)(3)	$663.3	 	$1,984.0	 	$597.2	 	$5,984.6	 	$9,229.1	 	
 
(1)	Represents the six-month period beginning July 1, 2011.	
 	 	
(2)	Contractual obligations do not include $56.7 million of unrecognized tax benefits included on our condensed consolidated balance sheet as of June 30, 2011.  Substantially all of our unrecognized tax benefits relate to uncertain tax positions that were not under review by taxing authorities. Therefore, we are unable to specify the future periods in which we may be obligated to settle such amounts.
 	
(3)	Contractual obligations do not include foreign currency forward contracts ("derivatives"). As of June 30, 2011, we had derivatives outstanding to exchange an aggregate $369.6 million U.S. dollars for various foreign currencies, including $135.6 million for Singapore dollars.  As of June 30, 2011, our condensed consolidated balance sheet included net derivative assets of $13.7 million. All of our outstanding derivatives mature during the next 17 months.	
 
Liquidity
 
     Our liquidity position as of June 30, 2011 and December 31, 2010 is summarized in the table below (in millions, except ratios):
 
 	June 30,
    2011   	December 31,
        2010        	
 	 	 	
Cash and cash equivalents	 	$554.0	$1,050.7      	
Working capital	 	$371.6	$1,087.7      	
Current ratio	 	1.3	4.1      	

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     Upon completion of the Merger, we increased our indebtedness, which included Pride’s debt obligations outstanding on the Merger Date.  In addition, various commitments and contractual obligations in connection with Pride’s normal course of business remained outstanding after the Merger, including obligations associated with Pride’s newbuild program.

     We expect to fund our short-term liquidity needs, including contractual obligations and anticipated capital expenditures, as well as any dividends, stock repurchases or working capital requirements, from our cash and cash equivalents, operating cash flow and funds borrowed under our commercial paper program and/or 364-Day Credit Facility.  We expect to fund our long-term liquidity needs, including contractual obligations, anticipated capital expenditures and dividends, from our cash and cash equivalents, operating cash flow and, if necessary, funds borrowed under our Five-Year Credit Facility or other future financing arrangements. We may decide to access debt markets to raise additional capital or increase liquidity as necessary.
 
Effects of Climate Change and Climate Change Regulation
 
     Greenhouse gas emissions have increasingly become the subject of international, national, regional, state and local attention. Cap and trade initiatives to limit greenhouse gas emissions have been introduced in the European Union. Similarly, numerous bills related to climate change have been introduced in the U.S. Congress, which could adversely impact most industries. In addition, future regulation of greenhouse gas could occur pursuant to future treaty obligations, statutory or regulatory changes or new climate change legislation in the jurisdictions in which we operate. It is uncertain whether any of these initiatives will be implemented. However, based on published media reports, we believe that it is not reasonably likely that the current proposed initiatives in the U.S. will be implemented without substantial modification. If such initiatives are implemented, we do not believe that such initiatives would have a direct, material adverse effect on our operating results.

     Restrictions on greenhouse gas emissions or other related legislative or regulatory enactments could have an indirect effect in those industries that use significant amounts of petroleum products, which could potentially result in a reduction in demand for petroleum products and, consequently, our offshore contract drilling services. We are currently unable to predict the manner or extent of any such effect. Furthermore, one of the long-term physical effects of climate change may be an increase in the severity and frequency of adverse weather conditions, such as hurricanes, which may increase our insurance costs or risk retention, limit insurance availability or reduce the areas in which, or the number of days during which, our customers would contract for our drilling rigs in general and in the Gulf of Mexico in particular. We are currently unable to predict the manner or extent of any such effect.

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MARKET RISK
 
     We use derivatives to reduce our exposure to foreign currency exchange rate risk. Our functional currency is the U.S. dollar. As is customary in the oil and gas industry, a majority of our revenues are denominated in U.S. dollars; however, a portion of the expenses incurred by certain of our subsidiaries are denominated in currencies other than the U.S. dollar.  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 occasionally employ an interest rate risk management strategy that utilizes derivative instruments to minimize or eliminate unanticipated fluctuations in earnings and cash flows arising from changes in, and volatility of, interest rates.
 
     We utilize derivatives to hedge forecasted foreign currency denominated transactions, primarily to reduce our exposure to foreign currency exchange rate risk associated with the portion of our remaining ENSCO 8500 Series® construction obligations denominated in Singapore dollars and contract drilling expenses denominated in various foreign currencies.  As of June 30, 2011, $180.3 million of the aggregate remaining contractual obligations associated with our ENSCO 8500 Series® construction projects was denominated in Singapore dollars, of which $120.9 million was hedged through derivatives.
 
     We have net assets and liabilities denominated in numerous foreign currencies and use various methods to manage our exposure to changes in foreign currency exchange rates. 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 also employ various strategies, including the use of derivatives, to match foreign currency denominated assets with equal or near equal amounts of foreign currency denominated liabilities, thereby minimizing exposure to earnings fluctuations caused by changes in foreign currency exchange rates.
 
     We utilize derivatives and undertake foreign currency exchange rate hedging activities in accordance with our established policies for the management of market risk. We minimize 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 monitoring the financial condition of our counterparties. We do not enter into derivatives for trading or other speculative purposes. We believe that our use of derivatives and related hedging activities reduces our exposure to foreign currency exchange rate risk and interest rate risk and does not expose us to material credit risk or any other material market risk.
 
     As of June 30, 2011, we had derivatives outstanding to exchange an aggregate $369.6 million for various foreign currencies, including $135.6 million for Singapore dollars. If we were to incur a hypothetical 10% adverse change in foreign currency exchange rates, net unrealized losses associated with our foreign currency denominated assets and liabilities and related derivatives as of June 30, 2011 would approximate $26.6 million, including $7.9 million related to our Singapore dollar exposures.  A portion of these unrealized losses generally would be offset by corresponding gains on certain underlying expected future transactions being hedged.  All of our derivatives mature during the next 17 months.  See Note 6 to our condensed consolidated financial statements for additional information on our derivative instruments.

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CRITICAL ACCOUNTING POLICIES
 
     The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates, judgments and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Our significant accounting policies are included in Note 1 to our audited consolidated financial statements for the year ended December 31, 2010 included in our Annual Report on Form 10-K filed with the SEC on February 24, 2011. These policies, along with our underlying judgments and assumptions made in their application, have a significant impact on our consolidated financial statements. We identify our critical accounting policies as those that are the most pervasive and important to the portrayal of our financial position and operating results, and that require the most difficult, subjective and/or complex judgments by management regarding estimates in matters that are inherently uncertain. Our critical accounting policies are those related to property and equipment, impairment of long-lived assets and goodwill and income taxes.

     Property and Equipment

     As of June 30, 2011, the carrying value of our property and equipment totaled $12.1 billion, which represented 69% of total assets.  This carrying value reflects the application of our property and equipment accounting policies, which incorporate management's estimates, judgments and assumptions relative to the capitalized costs, useful lives and salvage values of our rigs.

     We develop and apply property and equipment accounting policies that are designed to appropriately and consistently capitalize those costs incurred to enhance, improve and extend the useful lives of our assets and expense those costs incurred to repair or maintain the existing condition or useful lives of our assets. The development and application of such policies requires estimates, judgments and assumptions by management relative to the nature of, and benefits from, expenditures on our assets. We establish property and equipment accounting policies that are designed to depreciate our assets over their estimated useful lives. The judgments and assumptions used by management in determining the useful lives of our property and equipment reflect both historical experience and expectations regarding future operations, utilization and performance of our assets. The use of different estimates, judgments and assumptions in the establishment of our property and equipment accounting policies, especially those involving the useful lives of our rigs, would likely result in materially different asset carrying values and operating results.

     For additional information on the useful lives of our drilling rigs, including an analysis of the impact of various changes in useful life assumptions, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" in Part II of our Annual Report on Form 10-K for the year ended December 31, 2010.

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    Impairment of Long-Lived Assets and Goodwill
 
     We evaluate the carrying value of our property and equipment, primarily our drilling rigs, when events or changes in circumstances indicate that the carrying value of such rigs may not be recoverable. Generally, extended periods of idle time and/or inability to contract rigs at economical rates are an indication that a rig may be impaired. However, the offshore drilling industry has historically been highly cyclical, and it is not unusual for rigs to be unutilized or underutilized for significant periods of time and subsequently resume full or near full utilization when business cycles change. Likewise, during periods of supply and demand imbalance, rigs are frequently contracted at or near cash break-even rates for extended periods of time until day rates increase when demand comes back into balance with supply. Impairment situations may arise with respect to specific individual rigs, groups of rigs, such as a specific type of drilling rig, or rigs in a certain geographic location. Our rigs are mobile and may generally be moved from markets with excess supply, if economically feasible. Our drilling rigs are suited for, and accessible to, broad and numerous markets throughout the world.

     For property and equipment used in our operations, recoverability is generally 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. The determination of expected undiscounted cash flow amounts requires significant estimates, judgments and assumptions, including utilization, day rates, expense levels and capital requirements, as well as cash flows generated upon disposition, for each of our drilling rigs. Due to the inherent uncertainties associated with these estimates, we perform sensitivity analysis on key assumptions as part of our recoverability test.

     If the global economy deteriorates and/or other events or changes in circumstances indicate that the carrying value of one or more drilling rigs may not be recoverable, we will conclude that a triggering event has occurred and perform a recoverability test. If, at the time of the recoverability test, management's judgments and assumptions regarding future industry conditions and operations have diminished, it is reasonably possible that we could conclude that one or more of our drilling rigs are impaired.

     We test goodwill for impairment on an annual basis or when events or changes in circumstances indicate that a potential impairment exists. The goodwill impairment test requires us to identify reporting units and estimate each unit's fair value as of the testing date. Our three reportable segments represent our reporting units. 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 our drilling rigs, which reflect management's judgments and assumptions regarding the appropriate risk-adjusted discount rate, as well as future industry conditions and operations, including expected utilization, day rates, expense levels, capital requirements and terminal values for each of our rigs. Due to the inherent uncertainties associated with these estimates, we perform sensitivity analysis on key assumptions as part of our goodwill impairment test.

     If the aggregate fair value of our reporting units exceeds our market capitalization, we evaluate the reasonableness of the implied control premium which includes a comparison to implied control premiums from recent market transactions within our industry or other relevant benchmark data. To the extent that the implied control premium based on the aggregate fair value of our reporting units is not reasonable, we adjust the discount rate used in our discounted cash flow model and reduce the estimated fair values of our reporting units.

     If the estimated fair value of a reporting unit exceeds its carrying value, its goodwill is considered not impaired. If the estimated fair value of a reporting unit is less than its carrying value, we estimate the implied fair value of the reporting unit's goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to such excess. In the event we dispose of drilling rig operations that constitute a business, goodwill would be allocated in the determination of gain or loss on disposal. Based on our annual goodwill impairment test performed as of December 31, 2010, there was no impairment of goodwill, and none of our reporting units were determined to be at risk of a goodwill impairment in the near-term under the current circumstances.

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     If the global economy deteriorates and/or our expectations relative to future offshore drilling industry conditions decline, we may conclude that the fair value of one or more of our reporting units has more-likely-than-not declined below its carrying amount and perform an interim period goodwill impairment test. If, at the time of the goodwill impairment test, management's judgments and assumptions regarding future industry conditions and operations have diminished, or if the market value of our shares has declined, we could conclude that the goodwill of one or more of our reporting units has been impaired. It is reasonably possible that the judgments and assumptions inherent in our goodwill impairment test may change in response to future market conditions.

     Asset impairment evaluations are, by nature, highly subjective. In most instances, they involve expectations of future cash flows to be generated by our drilling rigs, which reflect management's judgments and assumptions regarding future industry conditions and operations, as well as management's estimates of expected utilization, day rates, expense levels and capital requirements. The estimates, judgments and assumptions used by management in the application of our asset impairment policies reflect both historical experience and an assessment of current operational, industry, market, economic and political environments. The use of different estimates, judgments, assumptions and expectations regarding future industry conditions and operations would likely result in materially different asset carrying values and operating results.

    Income Taxes

     We conduct operations and earn income in numerous countries and are subject to the laws of numerous tax jurisdictions. As of June 30, 2011, our condensed consolidated balance sheet included a $355.8 million net deferred income tax liability, a $20.1 million liability for income taxes currently payable and a $56.7 million liability for unrecognized tax benefits.

     The carrying values of deferred income tax assets and liabilities reflect the application of our income tax accounting policies and are based on management's estimates, judgments and assumptions regarding future operating results and levels of taxable income. Carryforwards and tax credits are assessed for realization as a reduction of future taxable income by using a more-likely-than-not determination.

     We do not provide deferred taxes on the undistributed earnings of Ensco Delaware because our policy and intention is to reinvest such earnings indefinitely or until such time that they can be distributed in a tax-free manner. We do not provide deferred taxes on the undistributed earnings of Ensco Delaware's non-U.S. subsidiaries because our policy and intention is to reinvest such earnings indefinitely.

     The carrying values of liabilities for income taxes currently payable and unrecognized tax benefits are based on management's interpretation of applicable tax laws and incorporate management's estimates, judgments and assumptions regarding the use of tax planning strategies in various taxing jurisdictions. The use of different estimates, judgments and assumptions in connection with accounting for income taxes, especially those involving the deployment of tax planning strategies, may result in materially different carrying values of income tax assets and liabilities and operating results.
 
     We operate in many jurisdictions where tax laws relating to the offshore drilling industry are not well developed. In jurisdictions where available statutory law and regulations are incomplete or underdeveloped, we obtain professional guidance and consider existing industry practices before utilizing tax planning strategies and meeting our tax obligations.
 
     Tax returns are routinely subject to audit in most jurisdictions and tax liabilities are occasionally finalized through a negotiation process. While we have not historically experienced significant adjustments to previously recognized tax assets and liabilities as a result of finalizing tax returns, there can be no assurance that significant adjustments will not arise in the future. In addition, there are several factors that could cause the future level of uncertainty relating to our tax liabilities to increase, including the following:

 	•	The Internal Revenue Service and/or Her Majesty's Revenue and Customs may disagree with our interpretation of tax laws, treaties, or regulations with respect to our redomestication to the U.K. in December 2009.

 
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 	•	During recent years, the number of  tax jurisdictions in which we conduct operations has increased, and we currently anticipate that this trend will continue.
 	
 	•	In order to utilize tax planning strategies and conduct operations efficiently, our subsidiaries frequently enter into transactions with affiliates that are generally subject to complex tax regulations and are frequently reviewed by tax authorities.
 	
 	•	We may conduct future operations in certain tax jurisdictions where tax laws are not well developed, and it may be difficult to secure adequate professional guidance.
 	
 	•	Tax laws, regulations, agreements and treaties change frequently, requiring us to modify existing tax strategies to conform to such changes.	
 
     Accounting Pronouncements
 
     In May 2011, the FASB issued the Accounting Standard Update 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“Update 2011-04”) which is effective for public entities during interim and annual periods beginning after December 15, 2011.  The amendments in Update 2011-04 are to be applied prospectively and early application by public entities is not permitted. Update 2011-04 provides amendments to Topic 820, “Fair Value Measurement” which apply to all reporting entities that are required or permitted to measure or disclose the fair value of an asset, a liability, or an instrument classified in a reporting entity’s shareholders’ equity in the financial statements. We will adopt Update 2011-04 upon its effective date of January 1, 2012. We do not expect the adoption of Update 2011-04 to have any effect on our consolidated statements of income, balance sheets or statements of cash flows.

     In June 2011, the FASB issued the Accounting Standard Update 2011-05, “Presentation of Comprehensive Income” (“Update 2011-05”) which is effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2011.  Update 2011-05 provides amendments to Topic 220, “Comprehensive Income,” to be applied retrospectively.  Early adoption is permitted, because compliance with the amendments is already permitted. The amendments do not require any transition disclosures. Update 2011-05 requires that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. We will adopt Update 2011-05 upon its effective date of January 1, 2012. We do not expect the adoption of Update 2011-05 to have a material effect on our consolidated statements of income, balance sheets or statements of cash flows.
 
Item 3.     Quantitative and Qualitative Disclosures About Market Risk
 
     Information required under Item 3. has been incorporated into "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Risk."
 
Item 4.     Controls and Procedures
 
     Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures, as defined in Rule 13a-15 under the Securities and Exchange Act of 1934 (the "Exchange Act"), are effective.
 
    On the Merger Date, we completed the Merger as discussed in the Explanatory Note to this quarterly report.  We will exclude Pride from our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2011. Total revenues subject to Pride’s internal control over financial reporting represented 27% of our consolidated revenues during the fiscal quarter ended June 30, 2011. Total assets subject to Pride’s internal control over financial reporting represented 48% of our consolidated total assets as of June 30, 2011.
 
     During the fiscal quarter ended June 30, 2011 there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1.     Legal Proceedings
 
     Demand Letter, Derivative Cases and Shareholder Class Actions
 
     In June 2009, Pride received a demand letter from counsel representing Kyle Arnold. The letter states that Mr. Arnold was one of Pride’s shareholders and that he believes certain of Pride’s then-current and former officers and directors violated their fiduciary duties related to the issues described below under “—FCPA Investigation.” The letter requested that Pride’s board of directors take appropriate action against the individuals in question.  In September 2009, Pride’s board of directors formed a special committee, which retained independent counsel and commenced an evaluation of the issues raised by the letter in an effort to determine a course of action.
 
     On April 14, 2010, Edward Ferguson, a purported shareholder of Pride, filed a derivative action in the state court of Harris County, Texas against all of Pride’s then-current directors and against Pride, as nominal defendant. The lawsuit alleges that the individual defendants breached their fiduciary duties to Pride related to the issues described below under “—FCPA Investigation.” Among other remedies, the lawsuit seeks damages in an unspecified amount and equitable relief against the individual defendants, along with an award of attorney fees and other costs and expenses to the plaintiff. On April 15, 2010, Lawrence Dixon, another purported shareholder, filed a substantially similar lawsuit in the state court of Harris County, Texas against the same defendants. These two lawsuits have been consolidated. After the conclusion of Pride’s investigation (see “—FCPA Investigation”), the plaintiffs filed a consolidated amended petition on January 18, 2011, raising allegations substantially similar to those made in the prior lawsuits.
 
     In December 2010, the special committee completed its evaluation of the issues surrounding Pride's FCPA investigation and again reviewed its conclusion on January 28, 2011 in connection with the amended petition described above. The committee concluded that it was not in the interest of Pride or its shareholders to pursue litigation related to the matter. On February 14, 2011, Pride received the report of the special committee dated December 8, 2010, as well as committee minutes reflecting the conclusions reached in the meeting of January 28, 2011.
 
     Following the announcement of the Merger, a number of putative shareholder class action complaints or petitions were filed against various combinations of Pride, Pride’s directors, Ensco and certain of our subsidiaries in the Delaware Court of Chancery, the U.S. District Court for the Southern District of Texas, and in the state courts of Harris County, Texas. These lawsuits challenged the proposed Merger and generally alleged, among other matters, that the individual members of the Pride board of directors breached their fiduciary duties by approving the proposed Merger, failing to take steps to maximize value to Pride’s stockholders and failing to disclose material information concerning the proposed Merger in the registration statement on Form S-4; that Pride, Ensco and certain of our subsidiaries aided and abetted such breaches of fiduciary duties; and that the Merger Agreement improperly favored Ensco and unduly restricted Pride’s ability to negotiate with other bidders. These lawsuits generally sought, among other remedies, compensatory damages, declaratory and injunctive relief concerning the alleged fiduciary breaches, and injunctive relief prohibiting the defendants from consummating the Merger. In addition, the plaintiffs in the derivative class action lawsuit related to Pride’s previously disclosed FCPA investigation as described below filed an amendment to their petition adding claims related to the Merger.  In the amendment, the plaintiffs contend that the proposed Merger was motivated by a desire to extinguish alleged liability related to the derivative action, as well as other claims similar to those described above relating to the Merger.  The derivative class action lawsuit, as amended, has been consolidated with the other lawsuits in the state courts of Harris County, Texas.
 
On May 19, 2011, Ensco and the other named defendants signed a memorandum of understanding with the plaintiffs to settle the previously disclosed shareholder class action lawsuits filed in the Delaware Court of Chancery related to the Merger Agreement.  As provided in the memorandum of understanding, after approval by Pride and Ensco boards of directors in May, the parties entered into an amendment to the Merger Agreement.  The amendment reduced the fee payable by Pride in connection with certain terminations of the Merger Agreement to $195.0 million from $260.0 million.  The amendment also shortened the “tail period” for certain transactions that could trigger a termination fee from 12 months to nine months after termination. The amendment also eliminated the “force the vote” provision applicable to Pride such that Pride would not be required to submit the adoption of the Merger Agreement to its shareholders if the Pride board of directors made an adverse change in their recommendation.

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    The memorandum of understanding also provided, among other matters, that the parties would seek to enter into a stipulation of settlement which provides for the release of certain claims held by such class and the payment of the fees and expenses of the attorneys for the class in an amount to be agreed.  The stipulation of the settlement will be subject to customary conditions, including court approval. There can be no assurance that the parties will ultimately enter into a stipulation of settlement that receives court approval.  In the event the parties are unable to reach agreement on the amount of attorneys' fees, such matter may be submitted to the court for determination.
 
     At this time, we are unable to predict the outcome of these matters or estimate the extent to which we may be exposed to any resulting liability, including the amount of attorneys' fees that may be awarded.  Although the outcome cannot be predicted, we do not expect these matters to have a material adverse effect on our financial position, operating results or cash flows.
 
    Ensco FCPA Investigation
 
     In May 2011, we received notification from the U.S. Department of Justice (“DOJ”) that it had determined not to pursue any enforcement action against us with respect to our previously disclosed independent investigation of potential FCPA violations arising out of business activities in Nigeria.  As previously disclosed, the SEC Division of Enforcement had advised us in May 2010 that it did not intend to recommend any enforcement action in connection with that investigation.  Thus, this matter is now closed before both U.S. agencies.
 
    Pride FCPA Investigation
 
     In 2010, Pride and its subsidiaries resolved with the DOJ and the SEC its previously disclosed investigations into potential violations of the FCPA.  In connection with the settlements, Pride paid a total of $56.2 million in penalties, disgorgement and interest.
 
     The settlement with the DOJ included a deferred prosecution agreement (“DPA”) between Pride and the DOJ and a guilty plea by Pride Forasol, S.A.S., one of Pride’s subsidiaries, to FCPA-related charges. Under the DPA, the DOJ agreed to defer the prosecution of certain FCPA-related charges and agreed not to bring any further criminal or civil charges against Pride or any of its subsidiaries related to either any of the conduct set forth in the statement of facts attached to the DPA or any other information disclosed to the DOJ prior to the execution of the DPA. Pride agreed, among other things, to continue to cooperate with the DOJ, to continue to review and maintain its anti-bribery compliance program and to submit to the DOJ three annual written reports regarding its progress and experience in maintaining and, as appropriate, enhancing its compliance policies and procedures.  In connection with our acquisition of Pride, we agreed to assume the obligations set forth in the DPA.  If we comply with the terms of the DPA, the deferred charges against Pride will be dismissed with prejudice. If, during the term of the DPA, the DOJ determines that we have committed a felony under federal law, provided deliberately false information or otherwise breached the DPA, we could be subject to prosecution and penalties for any criminal violation of which the DOJ has knowledge, including the deferred charges.
 
     In connection with the plea agreement, Pride Forasol S.A.S. was sentenced to pay a criminal fine of $32.6 million and to serve a three-year term of organizational probation. The SEC investigation was resolved in November 2010. Without admitting or denying the allegations in a civil complaint filed by the SEC, Pride consented to the entry of a final judgment ordering disgorgement plus pre-judgment interest totaling $23.6 million and a permanent injunction against future violations of the FCPA.
 
     Pride has received preliminary inquiries from governmental authorities of certain of the countries referenced in its settlements with the DOJ and SEC. We could face additional fines, sanctions and other penalties from authorities in these and other relevant jurisdictions, including prohibition of our participating in or curtailment of business operations in those jurisdictions and the seizure of rigs or other assets. At this early stage of such inquiries, we are unable to determine what, if any, legal liability may result. Our customers in those jurisdictions could seek to impose penalties or take other actions adverse to our interests. We could also face other third-party claims by directors, officers, employees, affiliates, advisors, attorneys, agents, shareholders, debt holders, or other interest holders or constituents of our company. For additional information regarding a shareholder demand letter and derivative cases with respect to these matters, please see the discussion above under “—Demand Letter, Derivative Cases and Shareholder Class Actions.” In addition, disclosure of the subject matter of the investigations and settlements could adversely affect our reputation and our ability to obtain new business or retain existing business from our current clients and potential clients, to attract and retain employees and to access the capital markets.

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    We cannot currently predict what, if any, actions may be taken by any other applicable government or other authorities or our customers or other third parties or the effect the actions may have on our financial condition, operating results or cash flows.
 
    ENSCO 74 Loss
 
     In September 2008, ENSCO 74 was lost as a result of Hurricane Ike in the U.S. Gulf of Mexico.  Portions of its legs remained underwater adjacent to the customer's platform, and the sunken rig hull of ENSCO 74 was located approximately 95 miles from the original drilling location when it was struck by the oil tanker SKS Satilla in March 2009.
 
     On March 17, 2009, we received notice from legal counsel representing certain underwriters in a subrogation claim alleging that ENSCO 74 caused a pipeline to rupture during Hurricane Ike. On September 4, 2009, High Island Offshore System, LLC, commenced civil litigation against us in the U.S. District Court for the Southern District of Texas seeking damages for the cost of repairs and business interruption in excess of $26.0 million. Based on information currently available, primarily the adequacy of available defenses, we have not concluded that it is probable that a liability exists with respect to this matter.
 
     On March 18, 2009, SKS OBO & Tankers AS and Kristen Gehard Jebsen Skipsrederi AS, the owner and manager of the SKS Satilla, commenced civil litigation against us in the U.S. District Court for the Southern District of Texas seeking monetary damages of $10.0 million for losses incurred when the tanker struck the sunken hull of ENSCO 74. Based on information currently available, primarily the adequacy of available defenses, we have not concluded that it is probable a liability exists with respect to this matter.
 
     On September 18, 2009, Sea Robin Pipeline Company, LLC, commenced civil litigation against us in the Fifteenth Judicial Court for the Parish of Lafayette and in the Nineteenth Judicial Court for the Parish of Baton Rouge, State of Louisiana seeking unspecified damages in relation to the cost of repairing damage to the pipeline, loss of revenues, survey and other damages. Based on information currently available, we have concluded that it is remote that a liability exists with respect to this matter.
 
     The owners of two other subsea pipelines have also presented claims filed on behalf of Stingray Pipeline Company, LLC, and Tennessee Gas Pipeline seeking monetary damages incurred by reason of damage to pipelines allegedly caused by ENSCO 74 during Hurricane Ike. The Stingray claim is in the amount of $14.0 million, and the Tennessee Gas Pipeline claim is for unspecified damages. Based on information currently available, we have concluded that it is remote that liabilities exist with respect to these matters.
 
     We filed a petition for exoneration or limitation of liability under U.S. admiralty and maritime law in the U.S. District Court for the Southern District of Texas on September 2, 2009. The petition seeks exoneration from or limitation of liability for any and all injury, loss or damage caused, occasioned or occurred in relation to the ENSCO 74 loss in September 2008. The exoneration/limitation proceedings currently include the tanker claim and the four pipeline claims described above, which effectively supersedes their prior civil litigation filings.
 
     We have liability insurance policies that provide coverage for claims such as the tanker and pipeline claims as well as removal of wreckage and debris in excess of the property insurance policy sublimit, subject to a $10.0 million per occurrence self-insured retention for third-party claims and an annual aggregate limit of $500.0 million. We believe all liabilities associated with the ENSCO 74 loss during Hurricane Ike resulted from a single occurrence under the terms of the applicable insurance policies. However, legal counsel for certain liability underwriters have asserted that the liability claims arise from separate occurrences. In the event of multiple occurrences, the self-insured retention is $15.0 million for two occurrences and $1.0 million for each occurrence thereafter.

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     Although we do not expect final disposition of the claims associated with the ENSCO 74 loss to have a material adverse effect upon our financial position, operating results or cash flows, there can be no assurances as to the ultimate outcome.
 
     ENSCO 69
 
     By letter dated June 4, 2009, we were informed by Petrosucre of its intention to assume complete custody and control of ENSCO 69.  We have filed an insurance claim under our package policy, which includes coverage for certain political risks. ENSCO 69 has an insured value of $65.0 million under our package policy, subject to a $10.0 million deductible.
 
     By letter dated September 30, 2009, legal counsel acting for the package policy underwriters denied coverage under the package policy and reserved rights. On March 15, 2010, underwriters commenced litigation in the U.K. High Court of Justice, Commercial Court, for purposes of enforcing mediation under the disputes clause of our package policy and precluding us from pursuing litigation in the United States. On that date, we commenced litigation styled ENSCO International Incorporated vs. Certain Underwriters at Lloyds, et al, in the District Court, Dallas County, Texas to recover on our political risk package policy claim. Our lawsuit seeks recovery under the policy for the loss of ENSCO 69 and includes claims for wrongful denial of coverage, breach of contract, breach of the Texas insurance code, failure to timely respond to the claim and bad faith. Our lawsuit seeks actual damages in the amount of $55.0 million (insured value of $65.0 million less a $10.0 million deductible), punitive damages and attorneys' fees.

     On April 26, 2010, we obtained a temporary injunction from the Texas court that effectively prohibits the insurance underwriters from pursuing litigation they filed in the U.K.  On July 27, 2010, we agreed with underwriters to submit the matter to arbitration.  The U.K. litigation has been dismissed and the Dallas District Court litigation has been stayed.  We have been able to reach a mutually agreeable settlement with most of the underwriters subscribing to the package policy, which is expected to result in a gain of approximately $10.8 million upon receipt of cash settlements during the third quarter of 2011.  The pending arbitration only will be applicable to those underwriters that do not agree to the settlement.  Until these proceedings are concluded, there can be no assurances as to the ultimate outcome with regard to the underwriter who has not agreed to settle this matter.
 
   ENSCO 29 Wreck Removal
 
     A portion of the ENSCO 29 platform drilling rig was lost over the side of a customer's platform as a result of Hurricane Katrina during 2005. Although beneficial ownership of ENSCO 29 was transferred to our insurance underwriters when the rig was determined to be a total loss, management believes we may be legally required to remove ENSCO 29 wreckage and debris from the seabed and currently estimates the removal cost to range from $5.0 million to $15.0 million. Our property insurance policies include coverage for ENSCO 29 wreckage and debris removal costs up to $3.8 million. We also have liability insurance policies that provide specified coverage for wreckage and debris removal costs in excess of the $3.8 million coverage provided under our property insurance policies.
 
     Our liability insurance underwriters have issued letters reserving rights and effectively denying coverage by questioning the applicability of coverage for the potential ENSCO 29 wreckage and debris removal costs. During 2007, we commenced litigation in the Texas District Court of Dallas County against certain underwriters at Lloyd's of London and other insurance companies, Bryan Johnson and BC Johnson Associates, LLC (collectively "the Underwriters") alleging breach of contract, wrongful denial, bad faith and other claims and seeking a declaration that removal of wreckage and debris is covered under our liability insurance, monetary damages, attorneys' fees and other remedies.  The court heard several pretrial motions on May 25, 2011 and on July 31, 2011 issued an order compelling the matter to be submitted to arbitration.
 
     While we anticipate that any ENSCO 29 wreckage and debris removal costs incurred will be largely or fully covered by insurance, a $1.2 million provision, representing the portion of the $5.0 million low end of the range of estimated removal cost we believe is subject to liability insurance coverage, was recognized during 2006.

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    Asbestos Litigation
 
     During 2004, we and certain current and former subsidiaries were named as defendants, along with numerous other third-party companies as co-defendants, in three multi-party lawsuits filed in the Circuit Courts of Jones County (Second Judicial District) and Jasper County (First Judicial District), Mississippi. The lawsuits sought an unspecified amount of monetary damages on behalf of individuals alleging personal injury or death, primarily under the Jones Act, purportedly resulting from exposure to asbestos on drilling rigs and associated facilities during the period 1965 through 1986.
 
     In compliance with the Mississippi Rules of Civil Procedure, the individual claimants in the original multi-party lawsuits whose claims were not dismissed were ordered to file either new or amended single plaintiff complaints naming the specific defendant(s) against whom they intended to pursue claims. As a result, out of more than 600 initial multi-party claims, we have been named as a defendant by 65 individual plaintiffs. Of these claims, 62 claims or lawsuits are pending in Mississippi state courts and three are pending in the U.S. District Court as a result of their removal from state court.
 
     To date, written discovery and plaintiff depositions have taken place in eight cases involving us. While several cases have been selected for trial during 2011 and 2012, none of the cases pending against us in Mississippi state court are included within those selected cases.
 
     The three cases removed from state court have been assigned to the Multi-District Litigation 875, which is currently before the U.S. District Court for the Eastern District of Pennsylvania. Although actions were taken by the plaintiffs in these three cases to bring the cases back to Mississippi state court, the U.S. District Court denied the plaintiffs' motion by order dated December 10, 2009.
 
     We were recently notified that the Houston firm representing the plaintiffs in all 65 claims had dissolved effective as of November 30, 2010.  Currently, the plaintiffs are represented by local Mississippi counsel, and we expect that additional counsel will be entering as counsel of record.  The impact, if any, of the substitution of counsel is unknown at this time.
 
     We intend to continue to vigorously defend against these claims and have filed responsive pleadings preserving all defenses and challenges to jurisdiction and venue. However, discovery is still ongoing and, therefore, available information regarding the nature of all pending claims is limited. At present, we cannot reasonably determine how many of the claimants may have valid claims under the Jones Act or estimate a range of potential liability exposure, if any.
 
     In addition to the pending cases in Mississippi, we have other asbestos or lung injury claims pending against us in litigation in other jurisdictions. Although we do not expect the final disposition of the Mississippi and other asbestos or lung injury lawsuits to have a material adverse effect upon our financial position, operating results or cash flows, there can be no assurances as to the ultimate outcome of the lawsuits.
 
    U.S. Gulf of Mexico Drilling Moratorium and Permitting Delays

     On July 9, 2010, ENSCO Offshore Company, a subsidiary of Ensco plc, filed suit in the U.S. District Court for the Eastern District of Louisiana in New Orleans against the U.S. Department of the Interior, the U.S. Bureau of Ocean Energy Management, Regulation and Enforcement ("BOEMRE") and other federal defendants seeking a ruling that the defendants violated the Administrative Procedures Act and the Outer Continental Shelf Lands Act by imposing a six-month deepwater drilling moratorium in the U.S. Gulf of Mexico, by imposing new substantive safety and certification requirements in NTL-05 for both shallow-water and deepwater drilling in the U.S. Gulf of Mexico without following the required notice-and-comment procedures, and by unreasonably delaying the processing of applications for permits to drill in the U.S. Gulf of Mexico.  The complaint was amended on July 20, 2010, to address the actions taken by the U.S. Department of the Interior on July 12, 2010, to impose a second moratorium/suspension that generally applied to deepwater drilling in the U.S. Gulf of Mexico and to challenge defendants’ historical documentary and permitting requirements with respect to both shallow-water and deepwater development and production drilling and related activities in the U.S. Gulf of Mexico on the grounds that they lack proper legislative authorization. 
 
     The lawsuit sought a more well-defined regulatory process for instituting new safety measures and operational and permitting requirements for U.S. Gulf of Mexico shallow-water and deepwater offshore drilling so as to comply with the Administrative Procedures Act and the Outer Continental Shelf Lands Act.  On September 29, 2010, a partial summary judgment motion was heard in the U.S. District Court for the Eastern District of Louisiana in connection with the moratorium and NTL-5 counts.  The court granted Ensco’s motion for summary judgment as to Count III (challenging the validity of NTL-5) and dismissed its claims regarding the first and second moratoria (Counts I and II) on the grounds of mootness due to the U.S. Government’s decision to purportedly terminate the second moratorium on the same day (October 12, 2010) as the final briefs were submitted.

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     On November 30, 2010, Ensco filed a motion for reconsideration of the dismissal of Counts I and II and for a preliminary injunction on Count IV, which would require the BOEMRE to act on five of the seven Ensco-related applications for permits to drill at issue in the case.  Defendants opposed that motion and moved to dismiss Counts IV, V, and VI.  On December 22, 2010, Ensco filed a motion to further amend its complaint (which, inter alia, would add ATP Oil & Gas Corporation as a co-plaintiff).

     Following a hearing held on January 12, 2011, our motion for reconsideration of the dismissal of Counts I and II was denied, both our motion for a preliminary injunction addressing Count IV (unreasonable delay in processing permits) and the government’s motion to dismiss that count and Counts V and VI (relating to documentary and permitting requirements for development and production activities) were denied.  The court granted the motion to file a new amended complaint.  The judge also ordered that the matter be brought to trial expeditiously and moved the trial date from July 25, 2011, to May 16, 2011.

     On February 17, 2011, the court rescinded and vacated its previous order on Count IV and granted Ensco's motion for a preliminary injunction, compelling the BOEMRE to process five pending drilling permit applications related to Ensco rigs within 30 days.  Defendants filed an appeal of that preliminary injunction.  Thereafter, the U.S. Court of Appeal for the Fifth Circuit issued a stay of the injunction at the government's request.   

     Meanwhile, the parties cross-moved for summary judgment on Count IV (unreasonable delay in processing permits).  On May 10, 2011, the U.S. District Court for the Eastern District of Louisiana granted summary judgment in plaintiffs’ favor on Count IV and entered a permanent injunction requiring the government to grant or deny six Ensco-related permit applications by June 9, 2011 (of the seven Ensco-related applications at issue in the case, one had already been approved by the BOEMRE at the time).  On May 20, 2011, the court issued a final judgment on Count IV, which included both declaratory and injunctive relief in Ensco’s favor.  Defendants’ appeal of the preliminary injunction was then dismissed as moot by the U.S. Court of Appeal for the Fifth Circuit.

     On June 8, 2011, Ensco and the defendants entered into a settlement agreement, pursuant to which (1) the BOEMRE is obligated to “take action” on the six unapproved Ensco-related permit applications within a 30 day time frame and (2) Ensco would dismiss its remaining claims.  The BOEMRE may “take action” by approving, denying or returning an application to the operator.  Either of the last two options require the BOEMRE to specifically identify all then-existing deficiencies in the application.  The settlement agreement also requires BOEMRE to “take action” on any resubmitted application within 30 days.  On June 16, 2011, the court approved the settlement agreement and entered a consent decree incorporating its terms.  In accordance with the settlement agreement, the court also dismissed Ensco’s claims, vacated the permanent injunction, and amended the final judgment on Count IV accordingly.  The intervenor-defendants have filed an appeal seeking a vacatur of the district court’s summary judgment decision on Count IV and the declaratory aspects of the final judgment on Count IV.
 
     Environmental Matters
 
     We are currently subject to pending notices of assessment issued from 2008 to 2011 pursuant to which governmental authorities in Brazil are seeking fines in an aggregate amount of approximately $3.0 million for the release of drilling fluid from drilling rigs operating offshore Brazil.  We are contesting these notices and intend to defend ourselves vigorously.  Although we do not expect the outcome of these assessments to have a material adverse effect on our financial position, operating results or cash flows, there can be no assurance as to the ultimate outcome of these assessments.  A $3.0 million liability related to these matters was recorded as of June 30, 2011.
 
     We currently are subject to a pending administrative proceeding initiated in July 2009 by a governmental authority of Spain pursuant to which such governmental authority is seeking payment in an aggregate amount of approximately $4.0 million for an alleged environmental spill originating from the ENSCO 5006 while it was operating offshore Spain. We expect to be indemnified for any payments resulting from this incident by our customer under the terms of the drilling contract.  Our customer has posted guarantees with the Spanish government to cover potential penalties. In addition, a criminal investigation of the incident was initiated in July 2010 by a prosecutor in Tarragona, Spain, and the administrative proceedings have been suspended pending the outcome of this investigation.  We do not know at this time what, if any, involvement we may have in this investigation.
 
     We intend to defend ourselves vigorously in the administrative proceeding and any criminal investigation. At this time, we are unable to predict the outcome of these matters or estimate the extent to which we may be exposed to any resulting liability. Although we do not expect the outcome of the proceedings to have a material adverse effect on our financial position, operating results or cash flows, there can be no assurance as to the ultimate outcome of the proceedings.

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Seahawk Drilling, Inc. Bankruptcy
 
     In Au gust  2009, Pride completed the spin-off of Seahawk Drilling, Inc., which holds the assets and liabilities that were associated with Pride’s mat-supported jack-up rig business. In February 2011, Seahawk and several of its affiliates filed for protection under Chapter 11 of the Bankruptcy Code. In the bankruptcy filings, Pride was listed as Seahawk’s largest unsecured creditor with a contingent, disputed and unliquidated claim in the amount of approximately $16.0 million. The debt was listed as a trade payable, subject to setoff. Pride has filed proofs of claim totaling approximately $70.0 million, including approximately $50.0 million in connection with the credit support discussed below.   The Seahawk debtors sold substantially all of their assets to Hercules Offshore, Inc. and its affiliate SD Drilling LLC, which paid base aggregate consideration consisting of approximately $25.0 million in cash and 22.3 million shares of Hercules common stock.   In accordance with the bankruptcy plan, a portion of the Hercules shares will be set aside in a reserve to satisfy Pride’s claims at 100% of their stated value, plus interest and attorneys’ fees, pending resolution in court of the allowed amount of Pride’s claims.   The resolution of such disputes through the court process may take considerable time.  The bankruptcy court has scheduled a hearing to consider confirmation of Seahawk's plan starting on August 30, 2011.  If the value of the Hercules common stock  is insufficient to  pay or reserve for claims in full at 100% of their stated value, plus interest and attorneys' fees, creditors including Pride may receive pro rata distributions.   The bankruptcy laws permit a debtor in bankruptcy, under certain circumstances, to challenge pre-bankruptcy payments or transfers of the debtor’s assets if the debtor received less than reasonably equivalent value while insolvent, or if the transfers were made with the actual intent to hinder, delay or defraud a creditor, or were made while insolvent on account of a pre-existing debt that has the effect of preferring the transferee over the debtor’s other creditors during the so-called preference period.   In its amended disclosure statement accompanying the amended joint plan of reorganization, Seahawk asserted that it has (i) claims under the insolvency laws against Pride to challenge transfers made in connection with the spin-off of Seahawk and obligations Seahawk incurred with respect thereto and (ii) contractual counter-claims against Pride that Seahawk asserts will offset amounts Seahawk owes Pride and create a net payable owing from Pride to Seahawk.   Pursuant to a scheduling order agreed among Pride, the Seahawk debtors and the equity committee, all such alleged claims against Pride must be asserted by August 13, 2011 and the bankruptcy court will hold a trial starting on December 12, 2011 to determine the allowed amount of Pride's claims against Seahawk and the validity of Seahawk's claims against Pride.   We believe that the potential claims against Pride are without merit, and we intend to defend such actions vigorously.  Based on information currently available, we have concluded that it is remote that a liability exists with respect to this matter.
 
    Seahawk Tax-Related Credit Support
 
     In 2006, 2007 and 2009, Seahawk received tax assessments from the Mexican government related to their operations. Pursuant to local statutory requirements, Seahawk provided and may provide additional surety bonds, letters of credit, or other suitable collateral to contest these assessments. Pursuant to a tax support agreement between Pride and Seahawk, Pride agreed, at Seahawk’s request, to guarantee or indemnify the issuer of any such surety bonds, letters of credit, or other collateral issued for Seahawk’s account in respect of such Mexican tax assessments made prior to the spin-off date. On September 15, 2010, Seahawk requested that Pride provide credit support for four letters of credit issued for the appeals of four of these tax assessments. The amount of the request totaled approximately $50.0 million. On October 28, 2010, Pride provided credit support in satisfaction of this request. A liability of $2.0 million related to this matter was recorded as of June 30, 2011 and included in accrued liabilities and other on our condensed consolidated balance sheet. Pursuant to the tax support agreement, Seahawk is required to pay us a fee based on the actual credit support provided.  Seahawk’s quarterly fee payment due on December 31, 2010 was not made, which had the effect of terminating Pride’s obligation to provide further credit support under the tax support agreement.
 
     On February 9, 2011, Pride sent a notice to Seahawk requesting that it provide cash collateral for the credit support that Pride previously provided, as provided under the terms of the agreement. In connection with its bankruptcy filing, Seahawk is seeking to terminate its reimbursement obligations under the tax support agreement. Pride filed a proof of claim in Seahawk’s bankruptcy for all damages arising from or relating to Seahawk’s repudiation of its obligations under the tax support agreement.
 
    Other Matters
 
     In addition to the foregoing, we are named defendants or parties in certain other lawsuits, claims or proceedings incidental to our business and are involved from time to time as parties to governmental investigations or proceedings, including matters related to taxation, arising in the ordinary course of business. Although the outcome of such lawsuits or other proceedings cannot be predicted with certainty and the amount of any liability that could arise with respect to such lawsuits or other proceedings cannot be predicted accurately, we do not expect these matters to have a material adverse effect on our financial position, operating results or cash flows.

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Item 1A.     Risk Factors
 
     There are numerous factors that affect our business and results of operations, many of which are beyond our control. In addition to information set forth in this Quarterly Report, you should carefully read and consider "Item 1A. Risk Factors" in Part I and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II of our Annual Report on Form 10-K for the year ended December 31, 2010 and in "Item 1A. Risk Factors" in Part II of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, each of which contains descriptions of significant factors that might cause the actual results of operations in future periods to differ materially from those currently anticipated or expected. Except as set forth below, there have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2010 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011. 
 
THE POTENTIAL FOR GULF OF MEXICO HURRICANE RELATED WINDSTORM DAMAGE OR LIABILITIES COULD RESULT IN UNINSURED LOSSES AND MAY CAUSE US TO ALTER OUR OPERATING PROCEDURES DURING HURRICANE SEASON, WHICH COULD ADVERSELY AFFECT OUR BUSINESS.
 
     Certain areas in and near the Gulf of Mexico experience hurricanes and other extreme weather conditions on a relatively frequent basis. Some of our drilling rigs in the Gulf of Mexico are located in areas that could cause them to be susceptible to damage and/or total loss by these storms, and we have a larger concentration of jackup rigs in the Gulf of Mexico than most of our competitors. We currently have 11 jackup rigs, three ultra-deepwater semisubmersible rigs and two ultra-deepwater drillships in the Gulf of Mexico. Damage caused by high winds and turbulent seas could result in rig loss or damage, termination of drilling contracts on lost or severely damaged rigs or curtailment of operations on damaged drilling rigs with reduced or suspended day rates for significant periods of time until the damage can be repaired. Moreover, even if our drilling rigs are not directly damaged by such storms, we may experience disruptions in our operations due to damage to our customers' platforms and other related facilities in the area. Our drilling operations in the Gulf of Mexico have been impacted by hurricanes, including the total loss of one jackup rig during 2004, one platform rig during 2005 and one jackup rig during 2008, with associated loss of contract revenues and potential liabilities.
 
     Insurance companies incurred substantial losses in the offshore drilling, exploration and production industries as a consequence of hurricanes that occurred in the Gulf of Mexico during 2004, 2005 and 2008. Accordingly, insurance companies have substantially reduced the nature and amount of insurance coverage available for losses arising from named tropical storm or hurricane damage in the Gulf of Mexico ("windstorm damage") and have dramatically increased the cost of available windstorm coverage. The tight insurance market not only applies to coverage related to Gulf of Mexico windstorm damage or loss of our drilling rigs, but also impacts coverage for potential liabilities to third parties associated with property damage, personal injury or death and environmental liabilities as well as coverage for removal of wreckage and debris associated with hurricane losses. We have no assurance that the tight insurance market for windstorm damage, liabilities and removal of wreckage and debris will not continue into the foreseeable future.
 
     Upon renewal of our annual insurance policies effective May 31, 2011, we obtained $450.0 million of aggregate coverage for ultra-deepwater semisubmersible hull and machinery losses arising from Gulf of Mexico windstorm damage with a $50.0 million per occurrence self- insured retention (deductible). However, due to the significant premium, high self-insured retention and limited coverage, we decided not to purchase windstorm insurance for our jackup rigs remaining in the Gulf of Mexico. Accordingly, we have retained the risk for loss or damage of our 11 jackup rigs remaining in the Gulf of Mexico arising out of windstorm damage.
 
     With respect to our two ultra-deepwater drillships currently located in the Gulf of Mexico, ENSCO DS-3 and ENSCO DS-5, we have $150.0 million of named windstorm coverage with a $10.0 million per occurrence deductible.  With respect to the ENSCO DS-5, included in the $450.0 million aggregate limit mentioned above, there is $300.0 million of coverage in excess of the $150.0 million aggregate limit for the two drillships.

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    Our current liability insurance policies only provide coverage for Gulf of Mexico windstorm exposures for removal of wreckage and debris in excess of $50.0 million per occurrence as respects our jackup, ultra-deepwater semisubmersible and drillship operations and have an annual aggregate limit of $450.0 million. Our limited windstorm insurance coverage exposes us to a significant level of risk due to jackup rig damage or loss related to severe weather conditions caused by Gulf of Mexico hurricanes.
 
     We have established operational procedures designed to mitigate risk to our jackup rigs in the Gulf of Mexico during hurricane season. In addition to procedures designed to better secure the drilling package on jackup rigs, improve jackup leg stability and increase the air gap to position the hull above waves, our procedures involve analysis of prospective drilling locations, which may include enhanced bottom surveys. These procedures may result in a decision to decline to operate on a customer designated location during hurricane season notwithstanding that the location, water depth and other standard operating conditions are within a rig's normal operating range. Our procedures and the associated regulatory requirements addressing Mobile Offshore Drilling Unit operations in the Gulf of Mexico during hurricane season, coupled with our decision to retain (self-insure) certain windstorm related risks, may result in a significant reduction in the utilization of our jackup rigs in the Gulf of Mexico.
 
     As noted above, we have a $50.0 million per occurrence deductible for windstorm loss or damage to our ultra-deepwater semisubmersible rigs in the Gulf of Mexico, a $10.0 million per occurrence deductible for windstorm loss or damage to our drillships in the Gulf of Mexico, and have elected not to purchase loss or damage insurance coverage for our 11 jackup rigs in the area.  Moreover, we have retained the risk for the first $50.0 million of liability exposure for removal of wreckage and debris resulting from windstorm related exposures associated with our rigs in the Gulf of Mexico. These and other retained exposures for property loss or damage and wreckage and debris removal or other liabilities associated with Gulf of Mexico hurricanes could have a material adverse effect on our financial position, operating results and cash flows if we sustain significant uninsured or underinsured losses or liabilities as a result of Gulf of Mexico hurricanes.
 
LEGAL PROCEEDINGS COULD AFFECT US ADVERSELY.
 
     We are involved in litigation, including various claims, disputes and regulatory proceedings that arise in the ordinary course of business, many of which are uninsured and relate to commercial, employment or regulatory activities. We also have concluded an internal investigation relating to compliance with the anti-bribery, recordkeeping and accounting provisions of the FCPA that focuses on activities related to our former operations in Nigeria and the associated accounting entries and internal accounting controls and have self-reported to the appropriate U.S. government authorities.
 
     Additionally, in 2010, Pride and its subsidiaries resolved with the DOJ and the SEC its previously disclosed investigations into potential violations of the FCPA.  In connection with the settlements, Pride paid a total of $56.2 million in penalties, disgorgement and interest.
 
     The settlement with the DOJ included a DPA between Pride and the DOJ and a guilty plea by Pride Forasol, S.A.S., one of Pride’s subsidiaries, to FCPA-related charges. Under the DPA, the DOJ agreed to defer the prosecution of certain FCPA-related charges and agreed not to bring any further criminal or civil charges against Pride or any of its subsidiaries related to either any of the conduct set forth in the statement of facts attached to the DPA or any other information disclosed to the DOJ prior to the execution of the DPA. Pride agreed, among other things, to continue to cooperate with the DOJ, to continue to review and maintain its anti-bribery compliance program and to submit to the DOJ three annual written reports regarding its progress and experience in maintaining and, as appropriate, enhancing its compliance policies and procedures.  In connection with our acquisition of Pride, we assumed the obligations set forth in the DPA.  If we comply with the terms of the DPA, the deferred charges against Pride will be dismissed with prejudice. If, during the term of the DPA, the DOJ determines that we have committed a felony under federal law, provided deliberately false information or otherwise breached the DPA, we could be subject to prosecution and penalties for any criminal violation of which the DOJ has knowledge, including the deferred charges.

72

 
    In connection with the plea agreement, Pride Forasol S.A.S. was sentenced to pay a criminal fine of $32.6 million and to serve a three-year term of organizational probation.
 
     The SEC investigation was resolved in November 2010. Without admitting or denying the allegations in a civil complaint filed by the SEC, Pride consented to the entry of a final judgment ordering disgorgement plus pre-judgment interest totaling $23.6 million and a permanent injunction against future violations of the FCPA.
 
     Pride has received preliminary inquiries from governmental authorities of certain of the countries referenced in its settlements with the DOJ and SEC. We could face additional fines, sanctions and other penalties from authorities in these and other relevant jurisdictions, including prohibition of our participating in or curtailment of business operations in those jurisdictions and the seizure of rigs or other assets. At this early stage of such inquiries, we are unable to determine what, if any, legal liability may result. Our customers in those jurisdictions could seek to impose penalties or take other actions adverse to our interests. We could also face other third-party claims by directors, officers, employees, affiliates, advisors, attorneys, agents, stockholders, debt holders, or other interest holders or constituents of our company. For additional information regarding a stockholder demand letter and derivative cases with respect to these matters, please see the discussion under “—Demand Letter and Derivative Cases” in Item 1. Legal Proceedings included in Part II of this quarterly report. In addition, disclosure of the subject matter of the investigations and settlements could adversely affect our reputation and our ability to obtain new business or retain existing business from our current clients and potential clients, to attract and retain employees and to access the capital markets.
 
     Although we cannot accurately predict the outcome of our litigation, claims, disputes, regulatory proceedings and investigations or the amount or impact of any associated liability or other sanctions, these matters could adversely affect our financial position, operating results or cash flows.
 
MANY OF OUR CONTRACTS WITH OUR CUSTOMERS FOR OUR OFFSHORE RIGS ARE LONG-TERM DAY RATE CONTRACTS. INCREASES IN OUR COSTS, WHICH ARE UNPREDICTABLE AND FLUCTUATE BASED ON EVENTS OUTSIDE OUR CONTROL, COULD ADVERSELY IMPACT OUR PROFITABILITY.
 
     In periods of rising demand for offshore rigs, a drilling contractor generally would prefer to enter into well-to-well or other shorter term contracts that would allow the contractor to profit from increasing day rates, while customers with reasonably definite drilling programs would typically prefer longer term contracts in order to maintain day rates at a consistent level. Conversely, in periods of decreasing demand for offshore rigs, a drilling contractor generally would prefer longer term contracts to preserve day rates and utilization, while customers generally would prefer well-to-well or other shorter term contracts that would allow the customer to benefit from the decreasing day rates. As a result of the Merger, a significant portion of our backlog as of June 30, 2011 was attributable to long-term day rate contracts. As a result, our inability to fully benefit from increasing day rates in an improving market may limit our profitability.

73

 
    In general, our costs increase as the business environment for drilling services improves and demand for oilfield equipment and skilled labor increases. While many of our contracts include cost adjustment provisions that allow changes to our day rate based on stipulated cost increases or decreases, the timing and amount earned from these day rate adjustments may differ from our actual increase in costs. Additionally, if our rigs incur idle time between contracts, we typically do not remove personnel from those rigs because we will use the crew to prepare the rig for its next contract. During times of reduced activity, reductions in costs may not be immediate as portions of the crew may be required to prepare our rigs for stacking, after which time the crew members are assigned to active rigs or dismissed. Moreover, as our rigs are mobilized from one geographic location to another, the labor and other operating and maintenance costs can vary significantly. In general, labor costs increase primarily due to higher salary levels and inflation. Equipment maintenance expenses fluctuate depending upon the type of activity the unit is performing and the age and condition of the equipment. Contract preparation expenses vary based on the scope and length of contract preparation required and the duration of the firm contractual period over which such expenditures are amortized.
 
UNIONIZATION EFFORTS AND LABOR REGULATIONS IN CERTAIN COUNTRIES IN WHICH WE OPERATE COULD MATERIALLY INCREASE OUR COSTS OR LIMIT OUR FLEXIBILITY.
 
     Certain of our employees in non-U.S. markets are represented by labor unions and work under collective bargaining or similar agreements, which are subject to periodic renegotiation. Efforts have been made from time to time to unionize other portions of our workforce. In addition, we have been subjected to strikes or work stoppages and other labor disruptions in certain countries. Additional unionization efforts, new collective bargaining agreements or work stoppages could materially increase our costs, reduce our revenues or limit our flexibility.
 
     Certain legal obligations require us to contribute certain amounts to retirement funds and pension plans and restrict our ability to dismiss employees. Future regulations or court interpretations established in the countries in which we conduct our operations could increase our costs and materially adversely affect our business, financial condition, operating results or cash flows.
 
OUR DEBT LEVELS AND DEBT AGREEMENT RESTRICTIONS MAY LIMIT OUR LIQUIDITY AND FLEXIBILITY IN OBTAINING ADDITIONAL FINANCING AND IN PURSUING OTHER BUSINESS OPPORTUNITIES.
 
     As of June 30, 2011, we had $4.9 billion in long-term debt, a significantly higher amount than the $240.1 million of long-term debt as of December 31, 2010.  This debt represented approximately 32% of our total capitalization. Our current indebtedness may have several important effects on our future operations, including:
 
 	•	 	a portion of our cash flow from operations will be dedicated to the payment of interest and principal on such debt and will not be available for other purposes;
 	
 	•	 	covenants contained in our debt arrangements require us to meet certain financial tests, which may affect our flexibility in planning for, and reacting to, changes in our business and may limit our ability to dispose of assets or place restrictions on the use of proceeds from such dispositions, withstand current or future economic or industry downturns and compete with others in our industry for strategic opportunities; and
 	
 	•	 	our ability to obtain additional financing for working capital, capital expenditures, acquisitions, general corporate and other purposes may be limited.	

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    Our ability to meet our debt service obligations and to fund planned expenditures, including dividends and construction costs for our two remaining drillship construction projects, will be dependent upon our future performance, which will be subject to general economic conditions, industry cycles and financial, business and other factors affecting our operations, many of which are beyond our control. Our future cash flows may be insufficient to meet all of our debt obligations and contractual commitments, and any insufficiency could negatively impact our business. To the extent we are unable to repay our indebtedness as it becomes due or at maturity with cash on hand or from other sources, we will need to refinance our debt, sell assets or repay the debt with the proceeds from equity offerings.
 
SEAHAWK’S PENDING BANKRUPTCY PROCEEDING MAY RESULT IN CLAIMS AGAINST PRIDE, THE REDUCTION OR ELIMINATION OF AMOUNTS OWED TO PRIDE BY SEAHAWK, AND TERMINATION OF PRIDE’S RIGHTS TO MAKE INDEMNIFICATION CLAIMS AGAINST SEAHAWK.
 
     In August 2009, Pride completed the spin-off of Seahawk Drilling, Inc., which holds the assets and liabilities that were associated with Pride’s mat-supported jackup rig business. In February 2011, Seahawk and several of its affiliates filed for protection under Chapter 11 of the Bankruptcy Code. In the bankruptcy filings, Pride was listed as Seahawk’s largest unsecured creditor with a contingent, disputed, and unliquidated claim in the amount of approximately $16.0 million. The debt was listed as a trade payable, subject to setoff. Pride has filed proofs of claim totaling approximately $70.0 million, including approximately $50.0 million in connection with the credit support discussed below. The Seahawk debtors sold substantially all of their assets to Hercules Offshore, Inc. and its affiliate SD Drilling LLC, which paid base aggregate consideration consisting of approximately $25.0 million in cash and 22.3 million shares of Hercules common stock. In accordance with the bankruptcy plan, a portion of the Hercules shares will be set aside in a reserve to satisfy Pride’s claims at 100% of their stated value, plus interest and attorneys’ fees, pending resolution in court of the allowed amount of Pride’s claims.  The resolution of such disputes through the court process may take considerable time.   If the value of the Hercules common stock is insufficient to pay or reserve for claims in full at 100% of their stated value, plus interest and attorneys' fees, creditors including Pride may receive pro rata distributions.   The bankruptcy laws permit a debtor in bankruptcy, under certain circumstances, to challenge pre-bankruptcy payments or transfers of the debtor’s assets if the debtor received less than reasonably equivalent value while insolvent, or if the transfers were made with the actual intent to hinder, delay or defraud a creditor, or were made while insolvent on account of a pre-existing debt that has the effect of preferring the transferee over the debtor’s other creditors during the so-called preference period. Authorized representatives of the bankruptcy estate could seek to challenge transactions effected in connection with the spin-off under the bankruptcy laws.  In its amended disclosure statement accompanying the amended joint plan of reorganization, Seahawk asserted that it has (i) claims under the insolvency laws against Pride to challenge transfers made in connection with the spin-off of Seahawk and obligations Seahawk incurred with respect thereto and (ii) contractual counter-claims against Pride that Seahawk asserts will offset amounts Seahawk owes Pride and create a net payable owing from Pride to Seahawk.  We disagree and will vigorously defend such claims if and when filed in formal court proceedings.
 
     In 2006, 2007 and 2009, Seahawk received tax assessments from the Mexican government related to their operations. Pursuant to local statutory requirements, Seahawk has provided and may provide additional surety bonds, letters of credit, or other suitable collateral to contest these assessments. Pursuant to a tax support agreement between Pride and Seahawk, Pride agreed, at Seahawk’s request, to guarantee or indemnify the issuer of any such surety bonds, letters of credit, or other collateral issued for Seahawk’s subsidiaries’ account in respect of such Mexican tax assessments made prior to the spin-off date. In September 2010, Seahawk requested that Pride provide credit support for four letters of credit issued for the appeals of four of these tax assessments. The amount of the request totaled approximately $50.0 million.  In October 2010, Pride provided credit support in satisfaction of this request. Pursuant to the tax support agreement, Seahawk is required to pay Pride a fee based on the actual credit support provided. Seahawk’s quarterly fee payment due on December 31, 2010 was not made, which had the effect of terminating Pride’s obligation to provide further credit support under the tax support agreement.  On February 9, 2011, Pride sent a notice to Seahawk requesting that it provide cash collateral for the credit support that Pride previously provided, as provided under the terms of the agreement. In connection with its bankruptcy filing, Seahawk is seeking to terminate its reimbursement obligations under the tax support agreement.

75

 
    If certain of Seahawk’s claims and requests were granted, the adverse effect on us could be material.  We cannot currently predict what actions may be taken by the bankruptcy court or other creditors or stakeholders of Seahawk in connection with the proceeding, or the effect the actions may have on our financial condition, operating results or cash flows.
 
IF PRIDE’S SPIN-OFF OF SEAHAWK OR CERTAIN RELATED INTERNAL RESTRUCTURING TRANSACTIONS WERE DETERMINED TO BE TAXABLE FOR U.S. FEDERAL INCOME TAX PURPOSES, PRIDE AND CERTAIN OF ITS FORMER STOCKHOLDERS COULD INCUR SIGNIFICANT U.S. FEDERAL INCOME TAX LIABILITIES.
 
     Certain internal restructuring transactions were undertaken in preparation for Pride’s spin-off of Seahawk in 2009. These transactions are complex and could cause Pride and certain of its subsidiaries to incur significant tax liabilities. Pride received a ruling from the Internal Revenue Service that these transactions and the spin-off qualified for favorable tax treatment. In addition, Pride obtained an opinion of tax counsel confirming the favorable tax treatment of these transactions and the spin-off. The ruling and the opinion rely on certain facts, assumptions, representations and undertakings from Pride regarding the past and future conduct of its businesses and other matters. If any of these are incorrect or not otherwise satisfied, then Pride and its stockholders at the time of the spin-off may not be able to rely on the ruling or the opinion and could be subject to significant tax liabilities. Notwithstanding the ruling and the opinion, the Internal Revenue Service could determine on audit that the spin-off or the internal restructuring transactions should be treated as taxable transactions if it determines that any of these facts, assumptions, representations or undertakings are not correct or have been violated, or if the spin-off should become taxable for other reasons, including as a result of significant changes in stock ownership of Seahawk after the spin-off or the purchase of Seahawk’s assets in its pending bankruptcy proceeding.
 
Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds
 
     The table below provides a summary of our repurchases of our ADSs during the quarter ended June 30, 2011:
 
Issuer Purchases of Equity Securities	

 

 
 
Period	 

 
Total
Number of
ADSs
Purchased	 

Average
Price
Paid
per
   ADS   	 
Total Number
of ADSs
Purchased as
Part of Publicly
Announced
Plans or
    Programs    	Approximate
Dollar
Value of
ADSs that
May Yet Be
Purchased
Under Plans
or Programs	
 	 	 	 	 	 	 	 	 	 	
April 1 - April 30	23,021    	 	$58.93      	 	--      	 	 	$562,400,000      	 	
May 1 - May 31	2,530    	 	60.09      	 	--      	 	 	562,400,000      	 	
June 1 - June 30 	124,483    	 	54.30      	 	--      	 	 	562,400,000      	 	
Total 	150,034    	 	$55.11      	 	--      	 	 	 	 	
 
     During the quarter ended June 30, 2011, repurchases of our ADSs were primarily made by an affiliated employee benefit trust from employees and non-employee directors in connection with the settlement of income tax withholding obligations arising from the vesting of share awards.  Such ADSs remain available for reissuance in connection with employee and non-employee director share awards.

     The Board of Directors of Ensco Delaware previously authorized the repurchase of up to $1.5 billion of our ADSs. In December 2009, the then-Board of Directors of Ensco International Limited, a predecessor of Ensco plc, continued the prior authorization and, subject to shareholder approval, authorized management to repurchase up to $562.4 million of our ADSs from time to time pursuant to share repurchase agreements with two investment banks. The then-sole shareholder of Ensco International Limited approved such share repurchase agreements for a five-year term.  From inception of our share repurchase programs during 2006 through December 31, 2008, we repurchased an aggregate 16.5 million shares at a cost of $937.6 million (an average cost of $56.79 per share).  No shares were repurchased under the share repurchase programs during 2009, 2010 or the six-month period ended June 30, 2011.  Although $562.4 million remained available for repurchase as of June 30, 2011, we will not repurchase any shares under our share repurchase program without further consultation with and approval by the Board of Directors of Ensco plc.

76

 
Item 6.     Exhibits
 
Exhibit No.
 
2.1	 	Agreement and Plan of Merger by and among Ensco plc, Pride International, Inc., ENSCO International Incorporated, and ENSCO Ventures LLC, dated February 6, 2011 (incorporated by reference to Exhibit 2.1 to Ensco’s Current Report on Form 8-K filed on February 7, 2011).
 	
2.2	 	Amendment No. 1 to Agreement and Plan of Merger by and among Ensco plc, Pride International, Inc., ENSCO International Incorporated and ENSCO Ventures LLC, dated March 1, 2011 (incorporated by reference to Exhibit 2.2 to Ensco’s Registration Statement on Form S-4 filed on March 3, 2011, File No. 333-172587).
 	
2.3	 	Amendment No. 2 to Agreement and Plan of Merger by and among Ensco, Pride International, Inc., ENSCO International Incorporated and ENSCO Ventures LLC, dated May 23, 2011 (incorporated by reference to Exhibit 2.1 to Ensco’s Current Report on Form 8-K filed with the SEC on May, 24 2011, File No.001-08097).
 	
3.1	 	Articles of Association of Ensco International plc (incorporated by reference to Exhibit 99.1 to Ensco's Current Report on Form 8-K filed on December 16, 2009, File No. 1-8097).
 	
3.2	 	Certificate of Incorporation on Change of Name to Ensco plc (incorporated by reference to Exhibit 3.1 to Ensco's Current Report on Form 8-K filed on April 1, 2010, File No. 1-8097).
 	
4.1	 	Deposit Agreement, dated as of September 29, 2009, by and among ENSCO International Limited, Citibank, N.A., as Depositary, and the holders and beneficial owners of American Depositary Shares issued thereunder (incorporated by reference to Exhibit 4.1 to the Registration Statement of ENSCO International Limited on Form S-4 (File No. 333-162975) filed on November 9, 2009).
 	
 4.2	 	Form of American Depositary Receipt for American Depositary Shares representing Deposited Class A Ordinary Shares of Ensco plc (incorporated by reference to Exhibit 4.1 to Ensco's Current Report on Form 8-K filed on April 1, 2010, File No. 1-8097).
 	
4.3	 	Indenture, dated as of July 1, 2004, between Pride International, Inc. and The Bank of New York Mellon, as trustee, including the form of notes issued pursuant thereto (successor to JPMorgan Chase Bank) (incorporated by reference to Exhibit 4.1 to Pride’s Registration Statement on Form S-4 filed on August 10, 2004, File No. 333-118104).
 	
4.4	 	Second Supplemental Indenture, dated as of June 2, 2009, between Pride International, Inc. and The Bank of New York Mellon, as trustee, including the form of notes issued pursuant thereto (incorporated by reference to Exhibit 4.1 to Pride’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, File No. 1-13289).

 
77

 
Exhibit No.
 
4.5	 	Third Supplemental Indenture, dated as of August 6, 2010, between Pride International, Inc. and The Bank of New York Mellon, as trustee, including the form of notes issued pursuant thereto (incorporated by reference to Exhibit 4.1 to Pride’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, File No. 1-13289).
 	
4.6	 	Fourth Supplemental Indenture, dated May 31, 2011, among Ensco plc, Pride International, Inc. and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.4 to Ensco's Current Report on Form 8-K filed on May 31, 2011, File No. 1-8097).
 	
4.7	 	Form of Guarantee by Ensco (incorporated by reference to Exhibit 4.4 to Ensco's Current Report on Form 8-K filed on May 31, 2011, File No. 1-8097).
 	
10.1	 	Third Amended and Restated Credit Agreement, dated as of May 12, 2011, among Ensco plc, ENSCO International Incorporated, ENSCO Universal Limited, and ENSCO Offshore International Company, as Borrowers, Ensco plc, ENSCO Global Limited, ENSCO United Incorporated and ENSCO International Incorporated, as Guarantors, the Banks named therein, as Banks, Citibank, N.A., as Administrative Agent, Deutsche Bank Securities, Inc., as Syndication Agent, and Citibank, N.A., Deutsche Bank AG New York Branch, Wells Fargo Bank, National Association and DnB NOR Bank ASA, each as an Issuing Bank (incorporated by reference to Exhibit 10.1 to Ensco's Current Report on Form 8-K filed on May 18, 2011, File No. 1-8097).

10.2	 	Third Amended and Restated Guaranty, dated as of May 12, 2011, made by Ensco plc, ENSCO Global Limited, ENSCO United Incorporated and ENSCO International Incorporated, as Guarantors, in favor of Citibank, N.A., as Administrative Agent under the Third Amended and Restated Credit Agreement (incorporated by reference to Exhibit 10.2 to Ensco's Current Report on Form 8-K filed on May 18, 2011, File No. 1-8097).
 	
10.3	 	364-Day Credit Agreement, dated as of May 12, 2011, among Ensco plc, ENSCO International Incorporated, ENSCO Universal Limited, and ENSCO Offshore International Company, as Borrowers, Ensco plc, ENSCO Global Limited, ENSCO United Incorporated and ENSCO International Incorporated, as Guarantors, the Banks named therein, as Banks, Citibank, N.A., as Administrative Agent, Deutsche Bank Securities, Inc. as Syndication Agent, and Citigroup Global Markets Inc. and Deutsche Bank Securities Inc. as Joint Lead Arrangers and Joint Book Managers (incorporated by reference to Exhibit 10.3 to Ensco's Current Report on Form 8-K filed on May 18, 2011, File No. 1-8097).
 	
10.4	 	364-Day Guaranty, dated as of May 12, 2011, made by Ensco plc, ENSCO Global Limited, ENSCO United Incorporated and ENSCO International Incorporated, as Guarantors, in favor of Citibank, N.A., as Administrative Agent under the 364-Day Credit Agreement (incorporated by reference to Exhibit 10.4 to Ensco's Current Report on Form 8-K filed on May 18, 2011, File No. 1-8097).

 
78

 
Exhibit No.
 
10.5	 	Pride International, Inc. 1993 Directors’ Stock Option Plan (incorporated by reference to Exhibit 10(j) to Pride’s Annual Report on Form 10-K for the year ended December 31, 1992, File No. 0-16963).
 	
10.6	 	First Amendment to Pride International, Inc. 1993 Directors’ Stock Option Plan (incorporated by reference to Exhibit 4.7 to Pride’s Registration Statement on Form S-8, Registration No. 333-35093).
 	
10.7	 	Second Amendment to Pride International, Inc. 1993 Directors’ Stock Option Plan (incorporated by reference to Exhibit 10.10 to Pride’s Annual Report on Form 10-K for the year ended December 31, 1997, File No. 1-13289).
 	
10.8	 	Third Amendment to Pride International, Inc. 1993 Directors’ Stock Option Plan (incorporated by reference to Exhibit 10.11 of Pride’s Annual Report on Form 10-K for the year ended December 31, 1998, File No. 1-13289).
 	
10.9	 	Fourth Amendment to Pride International, Inc. 1993 Directors’ Stock Option Plan (incorporated by reference to Exhibit 10.12 to Pride’s Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-13289).
 	
10.10	 	Fifth Amendment to Pride International, Inc. 1993 Directors’ Stock Option Plan (incorporated by reference to Exhibit 10.13 to Pride’s Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-13289).
 	
10.11	 	Sixth Amendment to Pride International, Inc. 1993 Directors’ Stock Option Plan (incorporated by reference to Exhibit 10.5 to Pride’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, File No. 1-13289).
 	
10.12	 	Seventh Amendment to Pride International, Inc. 1993 Directors’ Stock Option Plan, effective as of May 31, 2011 (incorporated by reference to Exhibit 4.38 to Ensco’s Registration Statement on Form S-8 filed on May 31, 2011, File No. 333-174611).
 	
10.13	 	Pride International, Inc. 1998 Long-Term Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.21 to Pride’s Annual Report on Form 10-K for the year ended December 31, 2004, File No. 1-13289).
 	
10.14	 	Amendment to Pride International, Inc. 1998 Long-Term Incentive Plan (as amended and restated), effective as of May 31, 2011 (incorporated by reference to Exhibit 4.37 to Ensco’s Registration Statement on Form S-8 filed on May 31, 2011, File No. 333-174611).
 	
10.15	 	Form of 1998 Long-Term Incentive Plan Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.1 to Pride’s Current Report on Form 8-K filed with the SEC on December 29, 2006, File No. 1-13289).
 	
10.16	 	Form of 1998 Long-Term Incentive Plan Non-Qualified Stock Option Agreement (with additional provisions) (incorporated by reference to Exhibit 10.4 to the amendment to Pride’s Current Report on Form 8-K/A filed with the SEC on February 16, 2007, File No. 1-13289).
 	
10.17	 	Pride International, Inc. 2004 Directors’ Stock Incentive Plan (as amended and restated) (incorporated by reference to Appendix B to Pride’s Proxy Statement on Schedule 14A for the 2008 Annual Meeting of Stockholders, File No. 1-13289).	

79

 
Exhibit No.
 
10.18	 	First Amendment to 2004 Directors’ Stock Incentive Plan (as amended and restated) (incorporated by reference to Exhibit 10.2 to Pride’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, File No. 1-13289).
 	
10.19	 	Amendment to Pride International, Inc. 2004 Directors’ Stock Incentive Plan (as amended and restated), effective as of May 31, 2011 (incorporated by reference to Exhibit 4.36 to Ensco’s Registration Statement on Form S-8 filed on May 31, 2011, File No. 333-174611).
 	
10.20	 	Form of 2004 Director’s Stock Incentive Plan Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.3 to Pride’s Current Report on Form 8-K filed with the SEC on January 6, 2005, File No. 1-13289).
 	
10.21	 	Pride International, Inc. 2007 Long-Term Incentive Plan (as amended and restated) (incorporated by reference to Appendix A to Pride’s Proxy Statement on Schedule 14A for the 2010 Annual Meeting of Stockholders, File No. 1-13289).
 	
10.22	 	First Amendment to Pride International, Inc. 2007 Long-Term Incentive Plan (as amended and restated) (incorporated by reference to Exhibit 10.1 to Pride’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, File No. 1-13289).
 	
10.23	 	Amendment to Pride International, Inc. 2007 Long-Term Incentive Plan (as amended and restated), effective as of May 31, 2011 (incorporated by reference to Exhibit 4.35 to Ensco’s Registration Statement on Form S-8 filed on May 31, 2011, File No. 333-174611).
 	
10.24	 	Form of 2007 Long-Term Incentive Plan Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.1 to Pride’s Current Report on Form 8-K filed with the SEC on January 29, 2010, File No. 1-13289).
 	
10.25	 	Form of 2007 Long-Term Incentive Plan Non-Qualified Stock Option Agreement (with additional provisions) (incorporated by reference to Exhibit 10.4 to Pride’s Current Report on Form 8-K filed with the SEC on January 29, 2010, File No. 1-13289).
 	
10.26	 	Deed of Assumption by Ensco plc relating to equity incentive plans of Pride International, Inc., dated May 26, 2011 (incorporated by reference to Exhibit 4.34 to Ensco’s Registration Statement on Form S-8 filed on May 31, 2011, File No. 333-174611).
 	
*10.27	 	Form of Deed of Indemnity for directors and executive officers of Ensco plc.
 	
*15.1	 	Letter regarding unaudited interim financial information.
 	
*31.1	 	Certification of the Chief Executive Officer of Registrant Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 	
*31.2	 	Certification of the Chief Financial Officer of Registrant Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 
80

 
Exhibit No.
 
**32.1	 	Certification of the Chief Executive Officer of Registrant Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 	
**32.2	 	Certification of the Chief Financial Officer of Registrant Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 	
**101.INS	 	XBRL Instance Document
 	
**101.SCH	 	XBRL Taxonomy Extension Schema
 	
**101.CAL	 	XBRL Taxonomy Extension Calculation Linkbase
 	
**101.DEF	 	XBRL Taxonomy Extension Definition Linkbase
 	
**101.LAB	 	XBRL Taxonomy Extension Label Linkbase
 	
**101.PRE	 	XBRL Taxonomy Extension Presentation Linkbase	

*   Filed herewith.
** Furnished herewith.

 
 
81

SIGNATURES 
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 	 	Ensco plc	

 	 	 	
Date:   August 9, 2011	 	/s/ JAMES W. SWENT III         
James W. Swent III
Senior Vice President and
Chief Financial Officer
(principal financial officer)	

 	 	/s/ MICHAEL B. HOWE            
Michael B. Howe
Vice President - Finance (Corporate) 	

 	 	/s/ DOUGLAS J. MANKO         
Douglas J. Manko
Controller
(principal accounting officer )	

 

 

 
 
82

Exhibit 10.27

 
FORM OF
DEED OF INDEMNITY

This Deed of Indemnity (this “ Deed ”) is made as of __________ 2011 by and between Ensco plc, a public limited company incorporated in England (the “ Company ”), and ____________________ (“ Indemnitee ”).
 
PRELIMINARY STATEMENTS
 
A.           Ensco plc, a public limited company incorporated in England (“ the Company ”) desires to attract and retain the services of highly qualified individuals, such as Indemnitee, to serve the Company and provide for the indemnification of, and advancement of expenses to, such persons to the maximum extent permitted by law.
 
B.           The Board of Directors of the Company has authorised Deeds of Indemnity between the Company and certain duly appointed or elected directors and officers of the Company, including the Indemnitee.
 
C.           The articles of association of the Company (the “ Articles ”)   provide for the provision to its directors and officers and certain other persons of the benefit of an indemnity in respect of certain matters and in addition to any rights granted to Indemnitee under any agreement entered into between Indemnitee and the Company, the parties desire to enter into this Deed to provide for the indemnification of, and advancement of expenses to, Indemnitee to the maximum extent permitted by law.
 
D.           Indemnitee has been asked to serve as a director, secretary, officer or executive of the Company and, as partial consideration for agreeing to do so, the Company has agreed to enter into this Deed with Indemnitee.
 
AGREEMENT
 
In consideration of the premises and the covenants contained herein, of Indemnitee serving the Company or another Enterprise directly or at the request of the Company, and for other good and valuable consideration, receipt of which is hereby acknowledged, and intending to be legally bound hereby, the parties do hereby agree as follows:
 
1.   Services to the Company .  Indemnitee has agreed, at the request of the Company to serve as a director, secretary, officer or executive of the Company.  In the event that at any time and for any reason Indemnitee resigns from such position (subject to any other contractual obligation or any obligation imposed by operation of law), the Company shall have no obligation under this Deed to continue Indemnitee in such position.  This Deed is not an employment contract between the Company (or any of its subsidiaries or any Enterprise) and Indemnitee.  The foregoing notwithstanding, this Deed shall continue in force after Indemnitee has ceased to serve in such capacity of the Company, subject to and in accordance with Section 15 .
 
2.   Definitions .  As used in this Deed:
 
(a)   “ Associated Company ” shall be construed in accordance with the Companies Act 2006 (the “ CA 2006 ”).

 

 

(b)   “ Corporate Status ” means in respect of a person who is or was a director, secretary, officer, executive, trustee, partner, managing member, employee, agent or fiduciary of the Company or of any other Enterprise which such person is or was serving at the request of the Company, his status as such director, secretary, officer, executive, trustee, partner, managing member, employee, agent or fiduciary.
 
(c)   “ Enterprise ” shall mean the Company and any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, secretary, officer, executive, trustee, partner, managing member, employee, agent or fiduciary.
 
(d)   “ Expenses ” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts and other professionals, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other disbursements, obligations or expenses of the types customarily incurred in connection with, or as a result of, prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a deponent or witness in, or otherwise participating in, a Proceeding.  Expenses also shall include (i) Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, (ii) Expenses incurred in connection with recovery under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether the Indemnitee is ultimately determined to be entitled to such indemnification, advancement or Expenses or insurance recovery, as the case may be, and (iii) Expenses incurred in connection with matters contemplated by or arising under Section 13(d) .   The parties agree that for the purposes of any advancement of Expenses for which Indemnitee has made written demand to the Company in accordance with this Deed, all Expenses included in such demand that are certified by affidavit of Indemnitee’s counsel as being reasonable shall be presumed conclusively to be reasonable. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments, fines, liabilities, losses or damages against Indemnitee.
 
(e)   “ Independent Counsel ” means a law firm, or a partner (or, if applicable, member) of such a law firm, that is experienced in matters of corporation law and neither at the time of engagement is, nor in the five years prior to such engagement has been, retained to represent: (i) the Company, or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Deed, or of other indemnitees under similar indemnification agreements); or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder.  Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company, or Indemnitee in an action to determine Indemnitee’s rights under this Deed.
 
(f)   The term “ Proceeding ” shall mean any proceeding including any threatened, pending or completed action, suit, claim, counterclaim, cross claim, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative, regulatory, legislative or investigative (formal or informal) nature, including any appeal therefrom, in which Indemnitee was, is or will be involved as a party, potential party, non-party witness or otherwise by reason of the fact that Indemnitee is or was a director, secretary, officer or executive of the Company, by reason of any action or inaction taken by him or of any action or inaction on his part while acting as director, secretary, officer or executive of the Company, or by reason of the fact that he is or was serving as a director, secretary, officer, executive, employee or agent of the Company or another Enterprise, in each case whether or not serving in such capacity at the time any liability or expense is incurred for which indemnification, reimbursement, or advancement of expenses can be provided under this Deed; provided , however , other than with respect to a Proceeding in connection with or arising under this Deed with respect to the matters contemplated by or arising under Section 13(d) , that the term “Proceeding” shall not include any action, suit or arbitration initiated by Indemnitee to enforce Indemnitee’s rights under this Deed.

 
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3.   Indemnity .  The Company shall, to the extent not prohibited by law and subject to Section 8 , indemnify Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, against all Expenses, demands, actions, payments, judgments, fines, liabilities, losses, damages and amounts paid in settlement actually and reasonably incurred by Indemnitee or on his behalf in connection with such Proceeding or any claim, issue or matter therein, arising out of or in connection with:
 
(a)   his appointment or service as a director of the Company or to any other Corporate Status;
 
(b)   an act done, concurred in or omitted to be done (including any inaction) by the Indemnitee in connection with the Indemnitee’s performance of his functions, or service, as a director of the Company or as a holder of any other Corporate Status; or
 
(c)   an investigation, examination or other Proceeding ordered or commissioned in connection with the affairs of the Company, or of any other Enterprise including the same reasonably incurred as a result of defending or settling any Proceeding.
 
4.   Indemnification for Expenses of a Party Who is Wholly or Partly Successful .  Notwithstanding any other provisions of this Deed but subject to Section 8 , to the fullest extent permitted by applicable laws and to the extent that Indemnitee is a party to or a participant in and is successful, on the merits or otherwise, in any Proceeding or in defence of any claim, issue or matter therein, in whole or in part, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.  If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with (a) each successfully resolved claim, issue or matter and (b) any claim, issue or matter related to any such successfully resolved claim, issue or matter to the fullest extent permitted by applicable law.  For purposes of this Section 4 and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.  This provision is in addition to, and not by way of limitation of, any other rights of Indemnitee hereunder.
 
5.   Indemnification For Expenses of a Witness .  Notwithstanding any other provision of this Deed but subject to Section 8 , to the fullest extent permitted by applicable law and to the extent that Indemnitee is, by reason of his Corporate Status, a witness or otherwise asked to participate in any aspect of a Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.
 
6.   Partial Indemnification .  If Indemnitee is entitled under any provision of this Deed to indemnification by the Company for some or a portion of Expenses or other costs or expenses, including attorney’s fees and disbursements, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.
 
7.   Additional Indemnification .
 
(a)   Notwithstanding any limitation in Sections 3 but subject to Section 8 , the Company shall indemnify Indemnitee to the fullest extent permitted by applicable law if Indemnitee is a party to or participant in or is threatened to be made a party to any Proceeding (including a Proceeding by or in the right of the Company or  to procure a judgment in its favor) against all Expenses, demands, actions, payments, judgments, fines, liabilities, losses, damages and amounts paid in settlement actually and reasonably incurred by or on behalf of Indemnitee in connection with the Proceeding.

 
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(b)   For purposes of Section 7(a ), the meaning of the phrase “to the fullest extent permitted by applicable law” shall include, but not be limited to:
 
( i)   to the fullest extent permitted by the provisions of the Articles that authorize, permit or contemplate additional indemnification by agreement, court action or the corresponding provision of any amendment to or replacement of the Articles or such provisions thereof;
 
(ii)   to the fullest extent permitted by the provisions of English law that authorize, permit or contemplate additional indemnification by agreement, court action or the corresponding provision of any amendment to or replacement of English law or such provisions thereof; and
 
(iii)   to the fullest extent authorized or permitted by any amendments to or replacements of English law (or such successor law), the Articles or the agreement or court action adopted, entered into or that are adjudicated after the date of this Deed that increase the extent to which a company may indemnify its directors, secretaries, officers and executives.
 
8.   Exclusions .  Notwithstanding any provision in this Deed to the contrary, the Company does not under this Deed make any indemnity in respect of:
 
(a)           any claim brought against the Indemnitee by the Company or an Associated Company for negligence, default, breach of duty or breach of trust;
 
( b)           any liability of the Indemnitee to pay:
 
 	(i) 	a fine imposed in criminal proceedings; or 	
 	 	 	
 	(ii)	a sum payable to a regulatory authority by way of a penalty in respect of non-compliance with any requirement of a regulatory nature (however arising): 	
 
                              (c)               any liability incurred by the Indemnitee:	
 	 	 	
 	(i)	in defending any criminal proceedings in which he is convicted;	

 	(ii)	in defending any civil proceedings brought by the Company or an Associated Company in which judgment is given against him; or	

 	(iii)	in connection with any application under Section 661(3) or (4) CA 2006 or Section 1157 CA 2006 in which the court refuses to grant the Director relief;	

and references to a conviction, judgment or refusal of relief are to the final decision in the proceedings which shall be determined in accordance with Section 234(5) CA2006;
 
                      (d)           any claim for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision;

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( e)(i) an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the U.S. Securities Exchange Act of 1934, as amended, or any successor provision or similar provisions of state statutory or common law, or (ii) any reimbursement of the Company by the Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement due to the material noncompliance of the Company, as a result of the misconduct of Indemnitee, with any financial reporting requirement under the securities laws pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “ Sarbanes-Oxley Act ”), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act);
 
(f)   any claim for which payment is expressly prohibited by law; or
 
(g)   except as provided in Section 13(d) of this Deed, any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or  or its directors, officers, employees or other indemnitees, unless (i) the board of directors of the Company authorized the Proceeding (or any part of any Proceeding) prior to its initiation, (ii) such payment arises in connection with any mandatory counterclaim or cross-claim or affirmative defense brought or raised by Indemnitee in any Proceeding (or any part of any Proceeding), or (iii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in  under applicable law.
 
These exclusions shall not limit the right to advancement of Expenses under Section 9 or otherwise under this Deed pending the outcome of any Proceeding unless such advancement of Expenses is expressly prohibited by law.  Notwithstanding the foregoing, this provision shall not limit Indemnitee’s obligation to repay Expenses as expressly contemplated elsewhere in this Deed or as otherwise expressly required by law.
 
9.   Advances of Expenses .  The Company shall advance, to the extent not prohibited by law, the Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding (or any part of any Proceeding), and such advancement shall be made within 20 days after the receipt by the Company of a statement or statements requesting such advances (which shall include invoices received by Indemnitee in connection with such Expenses but, in the case of invoices in connection with legal services, any references to legal work performed or to expenditures made that would cause Indemnitee to waive any privilege accorded by law shall not be included with the invoice) from time to time, whether prior to or after final disposition of any Proceeding.  Advances shall be unsecured and interest free.  Advances shall be made without regard to Indemnitee’s ability to repay the expenses and without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Deed.
 
In accordance with Section 13(d) , advances shall include any and all reasonable Expenses incurred pursuing an action to enforce this right of advancement and to enforce Indemnitee’s rights generally under this Deed (including rights to indemnity generally), including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed.  The Indemnitee shall qualify for advances upon the execution and delivery to the Company of this Deed which shall constitute an undertaking providing that the Indemnitee undertakes to repay the advance of Expenses in the circumstances and at the time set out in s205 CA 2006 and otherwise to the extent required by law if and to the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, or other competent authority or arbitrator, that Indemnitee is not entitled to be indemnified by the Company.  This Section 9 shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 8 following the ultimate determination by a court of competent jurisdiction in a final judgment, not subject to appeal, or other competent authority or arbitrator.  The right to advances under this paragraph shall in all events continue until final disposition of any Proceeding, including any appeal therein.  For the avoidance of doubt, the provisions of Section 11 shall not apply to advancement of Expenses as contemplated by this Section 9 .

 
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10.   Procedure for Notification and Defence of Claim .
 
(a)   To obtain indemnification under this Deed or advancement of Expenses or other costs or expenses, including attorney’s fees and disbursements, contemplated hereby, Indemnitee shall submit to the Company a written request therefor.
 
(b)   The Company will be entitled to participate in the Proceeding at its own expense.
 
(c)   The Company shall not settle any Proceeding (in whole or in part) if such settlement would impose any Expenses, demands, actions, payments, judgments, fines, liabilities, losses, damages and amounts paid in settlement on Indemnitee for which Indemnitee is not entitled to be indemnified hereunder without the Indemnitee’s prior written consent.
 
11.   Procedure Upon Application for Indemnification .
 
(a)   The Company shall promptly provide the indemnification rights and undertake related obligations contemplated by this Deed.  If Indemnitee submits a request for indemnification pursuant to Section 10(a) , the Company shall advise Indemnitee in writing within 30 days from the date of such request whether it agrees to provide indemnification or that it objects to such request for indemnification. Within 10 days of receipt of such objection, Indemnitee may submit a request in writing to the Company, at Indemnitee’s election, that the board of directors of the Company or Independent Counsel shall make a determination with respect to Indemnitee’s entitlement to indemnification. If such determination is made by Independent Counsel, it shall be in a written statement to the board of directors of the Company, a copy of which shall be delivered to Indemnitee and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within 10 days after such determination.  Indemnitee shall cooperate with the Independent Counsel making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such counsel upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys’ fees and disbursements) incurred by or on behalf of Indemnitee in so cooperating with the Independent Counsel shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
 
(b)   The Independent Counsel shall be selected by Indemnitee and notified in writing to the Company.  The Company may, within 10 days after written notice of such selection, deliver to the Indemnitee a written objection to such selection; provided , however , that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 2 , and the objection shall set forth with particularity the factual basis of such assertion.  Absent a proper and timely objection, the person so selected shall act as Independent Counsel.  If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit.  If, within 20 days after the later of submission by Indemnitee of a written request for indemnification pursuant to Section 10(a ), and the final disposition of the Proceeding, including any appeal therein, no Independent Counsel shall have been selected and not objected to, the Indemnitee may petition a court of competent jurisdiction for resolution of any objection which shall have been made by the Company to the selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 11(a ).  Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 13(a ), Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

 
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(c)   If the Company disputes a portion of the amounts for which indemnification is requested, the undisputed portion shall be paid and only the disputed portion withheld pending resolution of any such dispute.
 
(d)   The Company shall pay the reasonable fees and expenses of the Independent Counsel referred to above and fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Deed or its engagement pursuant hereto.
 
12.   Presumptions and Effect of Certain Proceedings .
 
(a)   In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall, to the fullest extent not prohibited by law, presume that Indemnitee is entitled to indemnification under this Deed if Indemnitee has submitted a request for indemnification in accordance with Section 10(a ), and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of the Company (or its directors) or of Independent Counsel to have made a determination prior to the commencement of any action pursuant to this Deed that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (or its directors) or by Independent Counsel that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.
 
(b)   The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Deed) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful.
 
(c)   For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action or inaction is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the directors or officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or the board of directors of the Company or counsel selected by any committee of the board of directors of the Company or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser, investment banker or other expert selected with reasonable care by the Company or the board of directors of the Company or any committee of the board of directors of the Company.  The provisions of this Section 12(c ) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Deed.
 
(d)   The knowledge and/or actions, or failure to act, of any director, secretary, officer, executive, trustee, partner, managing member, employee, agent or fiduciary of the Enterprise (not being Indemnitee) shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Deed.

 
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13.   Remedies of Indemnitee .
 
(a)   Subject to Section 13(e ), in the event that (i) a determination is made pursuant to Section 12 that Indemnitee is not entitled to indemnification under this Deed, (ii) advancement of Expenses is not timely made pursuant to Section 9 , (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 11(a ) within 90 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 4 or 5 or the last sentence of Section 11(a ) within 10 days after receipt by the Company of a written request therefor, or (v) payment of indemnification pursuant to Section 3 or 8 is not made within 10 days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to apply to court for an adjudication of his entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 13(a ); provided , however , that the foregoing clause shall not apply in respect of a proceeding brought by Indemnitee to enforce his rights under Section 4 .  The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.
 
(b)   In the event that a determination shall have been made pursuant to Section 11(a) that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 13 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 13 , the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.
 
(c)   If a determination shall have been made pursuant to Section 11(a ) that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 13 , absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) an express prohibition of such indemnification under applicable law.
 
(d)   The Company shall, to the fullest extent not prohibited by law, be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 13 that the procedures and presumptions of this Deed are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Deed. It is the intent of the Company that, to the fullest extent permitted by law, the Indemnitee not be required to incur legal fees or other Expenses associated with the interpretation, enforcement or defense of Indemnitee’s rights under this Deed by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Indemnitee hereunder. The Company shall, to the fullest extent permitted by law, indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within 10 days after receipt by the Company of a written request therefor) advance, to the extent not prohibited by law, such Expenses to Indemnitee, which are incurred by or on behalf of Indemnitee in connection with any action brought by Indemnitee for indemnification or advancement of Expenses from the Company under this Deed or under any directors’ and officers’ liability insurance policies maintained by the Company, if, in the case of indemnification, Indemnitee is wholly successful on the underlying claims; if Indemnitee is not wholly successful on the underlying claims, then such indemnification shall be only to the extent Indemnitee is successful on such underlying claims or otherwise as permitted by law, whichever is greater.

 
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(e)   Notwithstanding anything in this Deed to the contrary, no determination as to entitlement to indemnification under this Deed shall be required to be made prior to the final disposition of the Proceeding, including any appeal therein.
 
(f)   To the extent that the Company is unable to pay any amounts for indemnification or advancement of Expenses hereunder, Indemnitee may pursue any other company in the Ensco group to receive such indemnification or advancement of Expenses.
 
14.   Non-Exclusivity; Survival of Rights; Insurance; Subrogation .
 
(a)   The rights of indemnification and to receive advancement of Expenses as provided by this Deed shall not be exclusive of, a substitute for, or to diminish or abrogate, any other rights to which Indemnitee may at any time be entitled under applicable law, the Articles, any agreement (including any agreement between Indemnitee and any other Enterprise), a vote of stockholders or a resolution of directors, or otherwise, and rights of Indemnitee under this Deed shall supplement and be in furtherance of any other such rights.  More specifically, the parties intend that Indemnitee shall be entitled to (i) indemnification to the maximum extent permitted by, and the fullest benefits allowable under, English law in effect at the date hereof or as the same may be amended to the extent that such indemnification or benefits are increased thereby, and (ii) such other benefits as are or may be otherwise available to Indemnitee pursuant to this Deed, any other agreement or otherwise.  The rights of Indemnitee hereunder shall be a contract right and, as such, shall run to the benefit of Indemnitee.  No amendment, alteration or repeal of this Deed or of any provision hereof shall limit or restrict any right of Indemnitee under this Deed in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in English law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently, including without limitation under the Articles and/or this Deed, it is the intent of the parties hereto that Indemnitee shall enjoy by this Deed the greater benefits so afforded by such change and this Deed shall be automatically amended to provide the Indemnitee with such greater benefits.  No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.
 
(b)   To the extent that the Company (including any affiliates) maintains an insurance policy or policies providing liability insurance for directors, secretaries, officers, executives, employees or agents of the Company or of any other Enterprise, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, secretary, officer, executive, employee or agent under such policy or policies (notwithstanding any limitations regarding indemnification or advancement of Expenses hereunder and whether or not the Company would have the power to indemnify such person against such covered liability under this Deed).  If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has such liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies, including by bringing claims against the insurers.

 
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(c)   In the event of any payment under this Deed, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute at the request of the Company all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.
 
(d)   The Company shall not be liable under this Deed to make any payment of amounts otherwise indemnifiable hereunder or for which advancement of Expenses is provided hereunder if and to the extent that Indemnitee has otherwise actually received (by way of payment to or to the order of the Indemnitee) such payment under any insurance policy, contract, agreement or otherwise.
 
(e)   The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, secretary, officer, executive, trustee, partner, managing member, employee, agent or fiduciary of any other Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of Expenses from such other Enterprise.
 
15.   Duration of Deed .  This Deed shall continue until and terminate upon the later of (a) 10 years after the date that Indemnitee shall have ceased to serve at the request of the Company as a director, secretary, officer or executive of the Company or other Enterprise or (b) one year after the final termination of any Proceeding, including any appeal, then pending in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any proceeding (including any appeal) commenced by Indemnitee pursuant to Section 13 relating thereto.
 
16.   Successors and Assigns .  This Deed shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company ), shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent of the Company or of any other Enterprise, and shall inure to the benefit of Indemnitee and his or her spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.  The Company shall require and shall cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company to, by written agreement in form and substance satisfactory to the Indemnitee, expressly to assume and agree to perform this Deed in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.  Failure to comply with the foregoing shall be a breach of this Deed.
 
17.   Severability .  The parties intend that the rights granted under this Deed and the obligations of the Company hereunder comply in all respects with the applicable English law, including any limitations on indemnity or the ability for Indemnitee to request be excused for negligence, default, breach of duty or breach of trust (however such limitations or rights may exist from time to time under English law).  If any provision or provisions of this Deed shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Deed (including without limitation, each portion of any Section of this Deed containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Deed (including, without limitation, each portion of any Section of this Deed containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

 
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18.   Enforcement .
 
(a)   The Company expressly confirms and agrees that it has entered into this Deed and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director, secretary, officer or executive of the Company, and the Company acknowledges that Indemnitee is relying upon Deed in serving as a director, secretary, officer or executive of the Company.
 
(b)   This Deed is a supplement to and in furtherance of any obligations of the Articles, applicable law, agreements or deeds with the Company or any other Enterprise and any applicable insurance maintained for the benefit of Indemnitee, and shall not supersede, nor diminish or abrogate any rights of Indemnitee under, any indemnification or other agreements previously entered into between Indemnitee and the Company (or any of its subsidiaries or any Enterprise), it being the intention of the Company that Indemnitee shall be entitled to the indemnification provided under any or all agreements to the fullest extent permitted by law. In the event of a conflict between this Deed and any agreement or deed between the Company (or any of its subsidiaries or any Enterprise) and Indemnitee, the agreement or deed (or provision thereof), as applicable, granting Indemnitee the greatest legally enforceable rights shall prevail.
 
19.   Modification and Waiver .  No supplement, modification or amendment, or wavier of any provision, of this Deed shall be binding unless executed in writing by the parties thereto. No waiver of any of the provisions of this Deed shall be deemed or shall constitute a waiver of any other provisions of this Deed nor shall any waiver constitute a continuing waiver.
 
20.   Notice by Indemnitee .  Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to the Indemnitee under this Deed or otherwise.
 
21.   Notices .  All notices, requests, demands and other communications under this Deed shall be in writing and shall be deemed to have been duly given if (a) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, (b) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, (c) mailed by reputable overnight courier and receipted for by the party to whom said notice or other communication shall have been directed or (d) sent by e-mail or facsimile transmission, with receipt of confirmation that such transmission has been received:
 
(a)   if to Indemnitee, at such addresses as Indemnitee shall provide to the Company; or
 
(b)   if to the Company, to:
 
 	Ensco plc	
 	6 Chesterfield Gardens, 3 rd Floor	
 	London W1J 5BQ	
 	United Kingdom	
 
or to any other addresses as may have been furnished to Indemnitee by the Company.

 
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22.   Contribution .  To the fullest extent permissible under applicable law, if the indemnification and/or advancement of Expenses provided for in this Deed is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for Expenses, judgments, fines, liabilities, losses, damages, excise taxes and/or amounts paid or to be paid in settlement, in connection with any claim relating to an indemnifiable event under this Deed, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect: (a) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (b) the relative fault of the Company (and its directors, secretaries, officers, executives, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).
 
23.   Applicable Law and Consent to Jurisdiction .  This Deed and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of England, without regard to its conflict of laws rules.   Except with respect to any arbitration commenced by Indemnitee pursuant to Section 13(a ), the Company and Indemnitee hereby irrevocably and unconditionally (a) agree that any action or proceeding arising out of or in connection with this Deed may only be brought in English courts and not in any other state or federal court in the United States of America, (b) consent to submit to the exclusive jurisdiction of English courts for purposes of any action or proceeding arising out of or in connection with this Deed, (c) appoint, to the extent such party is not otherwise subject to service of process in England, Baker & McKenzie LLP, London, England, for the attention of the Head of Dispute Resolution, as its agent in England, for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within such jurisdiction, and (d) waive any objection to the laying of venue in England and waive, and agree not to plead or make, any claim that any such action or proceeding brought in such places has been brought in an improper or inconvenient forum.
 
24.   Third Party Beneficiaries .  Nothing in this Deed shall be construed for any shareholder or creditor of the Company to be a third party beneficiary or to confer any such persons beneficiary rights or status.
 
25.   Counterparts .  This Deed may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Deed.  Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Deed.
 
26.   Headings .  The headings of the sections of this Deed are inserted for convenience only and shall not be deemed to constitute part of this Deed or to affect the construction thereof.

(Remainder of page intentionally left blank)

 
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The parties have caused this Deed to be signed as of the day and year first above written.
 
EXECUTED as a deed by
 Ensco plc                                             ________________________________          
 Name and title

                                                                        ________________________________
 Name and title

SIGNED as a deed                                                       
 By                                                      ______________________, Indemnitee
            in the presence of:

                ___________________________
 Name of witness:
 Address of witness:

 
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Exhibit 15.1

 
 
August 9, 2011

Ensco plc
Dallas, Texas

Re:	Registration Statements on Form S-4, as amended (No. 333-172587), Form S-3 (No. 333-156705) and Form S-8 (Nos. 333-58625, 33-40282, 333-97757, 333-125048 and 333-156530)	

With respect to the subject registration statements, we acknowledge our awareness of the use therein of our report dated August 9,  2011 related to our review of interim financial statements.

Pursuant to Rule 436 under the Securities Act of 1933 (the Act), such report is not considered part of a registration statement prepared or certified by an independent registered public accounting firm, or a report prepared or certified by an independent registered public accounting firm within the meaning of Sections 7 and 11 of the Act.

/s/ KPMG LLP
Dallas, Texas

 

 

	

Exhibit 31.1
 
CERTIFICATION

I, Daniel W. Rabun, certify that:

1.	I have reviewed this report on Form 10-Q for the fiscal quarter ending June 30, 2011 of Ensco plc;	

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

 	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

 	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

 	c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

 	d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and	

5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):	

 	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and	

 	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.	
 	 	 	
 	 	Dated:  August 9, 2011

/s/ Daniel W. Rabun                                      
Daniel W. Rabun
Chairman, President and
Chief Executive Officer	

Exhibit 31.2
 
 CERTIFICATION

I, James W. Swent III, certify that:

1.	I have reviewed this report on Form 10-Q for the fiscal quarter ending June 30, 2011 of Ensco plc;	

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

 	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

 	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

 	c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

 	d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and	

5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):	

 	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and	

 	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.	
 	 	 	
 	 	Dated:  August 9, 2011

 
/s/ James W. Swent III                              
James W. Swent III
Senior Vice President and
Chief Financial Officer	

 Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Ensco plc (the "Company") on Form 10-Q for the period ending June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Daniel W. Rabun, Chairman, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
 
(1)  	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	

(2)  	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	

/s/ Daniel W. Rabun                                                
Daniel W. Rabun
Chairman, President and
Chief Executive Officer
August 9, 2011

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Ensco plc (the "Company") on Form 10-Q for the period ending June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, James W. Swent III, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	

(2)  	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	

/s/ James W. Swent III                              
James W. Swent III
Senior Vice President and
Chief Financial Officer
August 9, 2011