ENSCO PLC, 10-Q filed on 11/3/2011
Quarterly Report
Document And Entity Information
9 Months Ended
Sep. 30, 2011
Oct. 28, 2011
Document And Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
FALSE 
 
Document Period End Date
Sep. 30, 2011 
 
Entity Registrant Name
Ensco plc 
 
Entity Central Index Key
0000314808 
 
Current Fiscal Year End Date
--12-31 
 
Document Fiscal Year Focus
2011 
 
Document Fiscal Period Focus
Q3 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Shares, Shares Outstanding
 
230,623,519 
Condensed Consolidated Statements Of Income (USD $)
In Millions, except Per Share data
3 Months Ended
Sep. 30,
9 Months Ended
Sep. 30,
2011
2010
2011
2010
Condensed Consolidated Statements Of Income [Abstract]
 
 
 
 
OPERATING REVENUES
$ 915.6 
$ 428.3 
$ 1,841.3 
$ 1,288.3 
OPERATING EXPENSES
 
 
 
 
Contract drilling (exclusive of depreciation)
477.5 
194.1 
955.4 
582.5 
Depreciation
135.8 
55.6 
278.8 
159.2 
General and administrative
40.8 
20.6 
118.3 
63.2 
Total operating expenses
654.1 
270.3 
1,352.5 
804.9 
OPERATING INCOME
261.5 
158.0 
488.8 
483.4 
OTHER INCOME (EXPENSE)
 
 
 
 
Interest income
6.5 
0.2 
9.0 
0.5 
Interest expense, net
(30.8)
 
(54.5)
 
Other, net
10.8 
2.5 
16.1 
18.1 
Other income (expense), net
(13.5)
2.7 
(29.4)
18.6 
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
248.0 
160.7 
459.4 
502.0 
PROVISION FOR INCOME TAXES
 
 
 
 
Current income tax expense
44.2 
25.6 
98.4 
77.5 
Deferred income tax (benefit) expense
(2.3)
1.1 
(14.2)
6.6 
Total provision for income taxes
41.9 
26.7 
84.2 
84.1 
INCOME FROM CONTINUING OPERATIONS
206.1 
134.0 
375.2 
417.9 
LOSS FROM DISCONTINUED OPERATIONS, NET
 
(1.9)
 
33.7 
NET INCOME
206.1 
132.1 
375.2 
451.6 
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
(1.6)
(1.6)
(4.2)
(5.0)
NET INCOME ATTRIBUTABLE TO ENSCO
204.5 
130.5 
371.0 
446.6 
EARNINGS (LOSS) PER SHARE - BASIC
 
 
 
 
Continuing operations
$ 0.89 
$ 0.92 
$ 2.04 
$ 2.89 
Discontinued operations
 
$ (0.01)
 
$ 0.24 
Total earnings per share - basic
$ 0.89 
$ 0.91 
$ 2.04 
$ 3.13 
EARNINGS (LOSS) PER SHARE - DILUTED
 
 
 
 
Continuing operations
$ 0.88 
$ 0.92 
$ 2.03 
$ 2.89 
Discontinued operations
 
$ (0.01)
 
$ 0.24 
Total earnings per share - diluted
$ 0.88 
$ 0.91 
$ 2.03 
$ 3.13 
NET INCOME ATTRIBUTABLE TO ENSCO SHARES
 
 
 
 
Basic
202.2 
128.7 
366.7 
440.9 
Diluted
$ 202.2 
$ 128.7 
$ 366.7 
$ 440.9 
WEIGHTED-AVERAGE SHARES OUTSTANDING
 
 
 
 
Basic
228.1 
141.1 
180.0 
140.9 
Diluted
228.6 
141.2 
180.4 
141.0 
CASH DIVIDENDS PER SHARE
$ 0.35 
$ 0.35 
$ 1.05 
$ 0.725 
Condensed Consolidated Balance Sheets (USD $)
In Millions
Sep. 30, 2011
Dec. 31, 2010
CURRENT ASSETS
 
 
Cash and cash equivalents
$ 479.9 
$ 1,050.7 
Accounts receivable, net
654.9 
214.6 
Other
379.6 
171.4 
Total current assets
1,514.4 
1,436.7 
PROPERTY AND EQUIPMENT, AT COST
14,234.0 
6,744.6 
Less accumulated depreciation
1,922.3 
1,694.7 
Property and equipment, net
12,311.7 
5,049.9 
GOODWILL
3,296.1 
336.2 
OTHER ASSETS, NET
528.0 
228.7 
TOTAL ASSETS
17,650.2 
7,051.5 
CURRENT LIABILITIES
 
 
Accounts payable - trade
551.7 
163.5 
Accrued liabilities and other
481.0 
168.3 
Short-term debt
175.0 
 
Current maturities of long-term debt
47.5 
17.2 
Total current liabilities
1,255.2 
349.0 
LONG-TERM DEBT
4,902.1 
240.1 
DEFERRED INCOME TAXES
355.0 
358.0 
OTHER LIABILITIES
421.8 
139.4 
COMMITMENTS AND CONTINGENCIES
 
 
ENSCO SHAREHOLDERS' EQUITY
 
 
Additional paid-in capital
5,228.6 
637.1 
Retained earnings
5,464.6 
5,305.0 
Accumulated other comprehensive income
12.5 
11.1 
Treasury shares, at cost, 5.3 million shares and 7.1 million shares
(18.3)
(8.8)
Total Ensco shareholders' equity
10,711.1 
5,959.5 
NONCONTROLLING INTERESTS
5.0 
5.5 
Total equity
10,716.1 
5,965.0 
Total liabilities and shareholders' equity
17,650.2 
7,051.5 
Class A ordinary shares, U.S. [Member]
 
 
ENSCO SHAREHOLDERS' EQUITY
 
 
Common shares, value
23.6 
15.0 
Common Class B, Par Value In GBP [Member]
 
 
ENSCO SHAREHOLDERS' EQUITY
 
 
Common shares, value
$ 0.1 
$ 0.1 
Condensed Consolidated Balance Sheets (Parenthetical)
Sep. 30, 2011
Dec. 31, 2010
Sep. 30, 2011
Class A ordinary shares, U.S. [Member]
USD ($)
Dec. 31, 2010
Class A ordinary shares, U.S. [Member]
USD ($)
Sep. 30, 2011
Common Class B, Par Value In GBP [Member]
GBP (£)
Dec. 31, 2010
Common Class B, Par Value In GBP [Member]
GBP (£)
Common shares, par value
 
 
$ 0.1 
$ 0.1 
£ 1 
£ 1 
Common shares, shares authorized
 
 
450,000,000 
450,000,000 
50,000 
50,000 
Common shares, shares issued
 
 
235,800,000 
150,000,000 
50,000 
50,000 
Treasury shares, shares held
5,300,000 
7,100,000 
 
 
 
 
Condensed Consolidated Statements Of Cash Flows (USD $)
In Millions
9 Months Ended
Sep. 30,
2011
2010
OPERATING ACTIVITIES
 
 
Net income
$ 375.2 
$ 451.6 
Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:
 
 
Depreciation expense
278.8 
159.2 
Share-based compensation expense
33.9 
33.5 
Amortization expense
24.3 
24.9 
Deferred income tax (benefit) expense
(14.2)
6.6 
Loss on asset impairment
 
12.2 
Income from discontinued operations, net
 
1.2 
Gain on disposal of discontinued operations, net
 
(34.9)
Other
(15.8)
5.6 
Changes in operating assets and liabilities:
 
 
Increase in accounts receivable
(72.3)
(66.1)
Increase in other assets
(4.2)
(25.4)
Decrease in liabilities
(203.7)
(47.0)
Net cash provided by operating activities of continuing operations
402.0 
521.4 
INVESTING ACTIVITIES
 
 
Acquisition of Pride International, Inc., net of cash acquired
(2,656.0)
 
Additions to property and equipment
(498.4)
(737.5)
Proceeds from disposal of discontinued operations
 
132.4 
Proceeds from disposition of assets
46.1 
1.1 
Other
(4.5)
 
Net cash used in investing activities
(3,112.8)
(604.0)
FINANCING ACTIVITIES
 
 
Proceeds from issuance of senior notes
2,462.8 
 
Cash dividends paid
(211.4)
(103.6)
Reduction of long-term borrowings
(196.7)
(8.6)
Commercial paper borrowings, net
175.0 
 
Equity financing costs
(70.5)
 
Debt financing costs
(31.9)
(6.2)
Other
13.4 
(13.0)
Net cash provided by (used in) financing activities
2,140.7 
(131.4)
Effect of exchange rate changes on cash and cash equivalents
(0.7)
(0.5)
Net cash used in operating activities of discontinued operations
 
(21.7)
DECREASE IN CASH AND CASH EQUIVALENTS
(570.8)
(236.2)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
1,050.7 
1,141.4 
CASH AND CASH EQUIVALENTS, END OF PERIOD
$ 479.9 
$ 905.2 
Unaudited Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Financial Statements
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 nine-month periods ended September 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 nine-month periods ended September 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.
Acquisition Of Pride International, Inc.
Acquisition Of Pride International, Inc.
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 an indirect, 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 markets and establishes Ensco with the world's second largest offshore drilling rig fleet.  Revenues and net income of Pride from the Merger Date included in our condensed consolidated statements of income were $440.1 million and $62.6 million, respectively, for the three-month period ended September 30, 2011 and $591.3 million and $86.9 million, respectively, for the nine-month period ended September 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.
 
    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 measurement period not to exceed one year subsequent to the acquisition date as permitted under GAAP.  The 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 and respective measurement period adjustments 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:
 
 
 
    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.  Goodwill is not expected to be tax deductible.
 
    Goodwill recognized as a result of the Merger preliminarily was allocated to our reportable segments as follows (in millions):
 
Deepwater
       
$2,486.1
Midwater
       
473.8
Jackup
       
--
Total
       
$2,959.9
 
    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 then 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 then current market day rate using a risk-adjusted discount rate and an estimated effective income tax rate.  After amortizing $27.1 million of contract intangible assets and liabilities to operating revenues during the nine-month period ended September 30, 2011, the remaining balances were $186.2 million of intangible assets included in other current assets and other assets, net, and $226.1 million of intangible liabilities included in accrued liabilities and other and other liabilities on our condensed consolidated balance sheet as of September 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 $26.8 million for the remainder of 2011, $26.0 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 then current market rates for the construction of a similar design drilling rig. The unfavorable construction contract liability was 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 then 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 17 - 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 upon completion of the Merger.
 
    Merger-Related Costs
 
    Merger-related transaction costs consisted of various advisory, legal, accounting, valuation and other professional or consulting fees totaling $23.8 million for the nine-month period ended September 30, 2011 and were expensed as incurred and included in general and administrative expense on our condensed consolidated statement 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 are 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 Merger 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 Merger Date, a decrease of $24.2 million to Pride's net deferred tax liability was recognized.
 
    Deferred tax assets and liabilities recognized in connection with the Merger were measured at rates enacted as of the Merger Date.  Tax rate changes, or any deferred tax adjustments for new tax legislation, following the Merger 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 or other 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 14 – 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 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.
 
Fair Value Measurements
Fair Value Measurements
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 September 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 September 30, 2011
                       
Supplemental executive retirement plan assets    $24.2      
$   --   
   
$    --
    $24.2    
Total financial assets
 
$24.2  
   
$   --   
   
$    --
   
$24.2  
 
Derivatives, net   
$    --  
    $ 7.1       
$    --
    $ 7.1    
Total financial liabilities   
$    --  
    $ 7.1       
$    --
    $ 7.1    
 
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  
 
 
 
 
    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 nine-month periods ended September 30, 2011 and 2010 (in millions):
 
    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 September 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 September 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 September 30, 2011 and December 31, 2010 were as follows (in millions):
 
September 30,
                  2011                   
December 31,
                   2010                  
 
 
Carrying
  Value  
Estimated
  Fair
   Value  
Carrying
  Value  
Estimated
  Fair
   Value  
 
 
         
4.70% Senior notes due 2021   $1,471.6          $1,490.3         $     --           $     --          
6.875% Senior notes due 2020   1,059.4          1,045.4         --           --          
3.25% Senior notes due 2016
  993.2          1,021.5          --            --          
8.50% Senior notes due 2019   635.4          612.6          --            --          
7.875% Senior notes due 2040   385.3          372.4          --            --          
7.20% Debentures due 2027           149.0          169.6         148.9          165.0         
4.33% MARAD bonds, including current maturities, due 2016   155.9          156.7          --            --          
6.36% MARAD bonds, including current maturities, due 2015
 
57.0       
 
63.8      
 
63.4       
 
71.9       
 
4.65% MARAD bonds, including current maturities, due 2020
 
42.8       
 
49.1      
 
45.0       
 
50.6       
 
 
 
 
    The estimated fair values of our senior notes and debentures were determined using quoted market prices. The estimated fair values of our MARAD 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 September 30, 2011 and December 31, 2010.
Property And Equipment
Property And Equipment
Note 4 - Property and Equipment
 
    Property and equipment as of September 30, 2011 and December 31, 2010 consisted of the following (in millions):
 
 
September 30,
December 31,   
 
        2011      
        2010       
           
Drilling rigs and equipment
 
$12,572.2
 
$5,175.2
 
Other
 
89.6
 
50.4
 
Work in progress
 
1,572.2
 
1,519.0
 
   
$14,234.0
 
$6,744.6
 
 
    Drilling rigs and equipment increased $7.4 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 $53.2 million during 2011 primarily related to the Merger, mostly offset by ENSCO 8503 and ENSCO 8504, which were placed into service during 2011.  The fair value recorded for Pride's work in progress as of the Merger Date was $1.3 billion.  Work in progress as of September 30, 2011 primarily consisted of $783.1 million related to the construction of our ENSCO 8500 Series® ultra-deepwater semisubmersible rigs, $455.5 million 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, $91.5 million related to the construction of two ultra-high specification harsh environment jackup rigs and costs associated with various modification and enhancement projects. Work in progress as of December 31, 2010 primarily consisted of $1.4 billion related to the construction of our ENSCO 8500 Series® ultra-deepwater semisubmersible rigs and costs associated with various modification and enhancement projects.
Debt
Debt
Note 5 - Debt

    Debt as of September 30, 2011 and December 31, 2010 consisted of the following (in millions):
 
 
September 30,
December 31,
  
         2011        
         2010       
           
4.70% Senior notes due 2021
 
$1,471.6
 
$     --
 
6.875% Senior notes due 2020
   1,059.4  
--
 
3.25% Senior notes due 2016
     993.2  
--
 
8.50% Senior notes due 2019
    635.4  
--
 
7.875% Senior notes due 2040
    385.3     --  
7.20% Debentures due 2027
    149.0   148.9  
4.33% MARAD bonds due 2016
    155.9   --  
6.36% MARAD bonds due 2015
    57.0     63.4  
4.65% MARAD bonds due 2020
    42.8     45.0  
Commercial paper    175.0   --  
Total debt    5,124.6     257.3  
Less current maturities
    (222.5 )   (17.2 )
Total long-term debt
    $4,902.1     $240.1  
 
 
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 of 8.500% senior notes due 2019, $300.0 million of 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 17 - 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 upon completion of the Merger.
 
    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 total 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 September 30, 2011 and December 31, 2010, respectively.
 
    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 total 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 September 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 $175.0 million outstanding under our commercial paper program as of September 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 in March 2011.
 
    Maturities
 
    The aggregate maturities of our debt, excluding net unamortized premiums of $355.8 million, as of September 30, 2011 were as follows (in millions):
 
2011
   
$   191.6
2012
   
47.5
2013
   
47.5
2014
   
47.5
2015
   
47.5
Thereafter
   
4,387.2
Total
   
$4,768.8
 
 
    Interest expense totaled $30.8 million and $54.5 million for the three-month and nine-month periods ended September 30, 2011, respectively, which was net of amounts capitalized of $27.1 million and $63.5 million in connection with our newbuild construction during the same periods, respectively.  All interest expense incurred during each of the three-month and nine-month periods ended September 30, 2010 was capitalized in connection with our newbuild construction.
 
Derivative Instruments
Derivative Instruments
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 September 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.  Net liabilities of $7.1 million and net assets of $16.4 million associated with our foreign currency derivatives were included in our condensed consolidated balance sheets as of September 30, 2011 and December 31, 2010, respectively.  All of our derivatives mature during the next 17 months.  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 September 30, 2011 and December 31, 2010 consisted of the following (in millions):
 
 
    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 September 30, 2011, we had cash flow hedges outstanding to exchange an aggregate $249.1 million for various foreign currencies, including $112.9 million for Singapore dollars, $80.6 million for British pounds, $27.4 million for Australian dollars, $22.0 million for euros and $6.2 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 nine-month periods ended September 30, 2011 and 2010 were as follows (in millions):
 
 
    We have net assets and liabilities denominated in numerous foreign currencies and use various methods to manage our exposure to foreign currency exchange rate risk. We predominantly structure our drilling contracts in U.S. dollars, which significantly reduces the portion of our cash flows and assets denominated in foreign currencies. We occasionally enter into derivatives that hedge the fair value of recognized foreign currency denominated assets or liabilities but do not designate such derivatives as hedging instruments.  In these situations, a natural hedging relationship generally exists whereby changes in the fair value of the derivatives offset changes in the fair value of the underlying hedged items. As of September 30, 2011, we had derivatives not designated as hedging instruments outstanding to exchange an aggregate $38.9 million for various foreign currencies, including $10.3 million for Swiss francs, $9.6 million for Australian dollars, $8.0 million for Indonesian rupiahs, $3.8 million for Singapore dollars and $7.2 million for other currencies.
 
    A net loss of $800,000 and a gain of $3.6 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 September 30, 2011 and 2010, respectively.  A net loss of $300,000 and a gain of $2.5 million associated with our derivatives not designated as hedging instruments were included in other income in our condensed consolidated statements of income for the nine-month periods ended September 30, 2011 and 2010, respectively.
 
    As of September 30, 2011, the estimated amount of net losses associated with derivative instruments, net of tax, that will be reclassified to earnings during the next twelve months totaled $3.3 million.
Goodwill
Goodwill
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.  See "Note 2 - Acquisition of Pride International, Inc." for additional information on the Merger.
 
 
Deepwater  
 
    Midwater
       Jackup
 
 
 Total     
                
Balance as of December 31, 2010
$  143.6  
 
$      --   
 
$192.6
   
 
$   336.2 
 
Acquisition of Pride, including measurement
   period adjustments
2,486.1    
473.8   
 
--
   
 
2,959.9 
 
Balance as of September 30, 2011
$2,629.7  
 
$473.8   
 
$192.6
   
 
$3,296.1 
 
 
Shareholders' Equity
Shareholders' Equity
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 September 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.
Earnings Per Share
Earnings Per Share
Note 9 - 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 nine-month periods ended September 30, 2011 and 2010 (in millions):
 
 
Three Months Ended 
        September 30,        
     Nine Months Ended
            September 30,      
 
 
  2011 
  2010 
    2011 
      2010
                   
Net income attributable to Ensco
 
$204.5
 
$130.5
 
$371.0
 
$446.6
 
Net income allocated to non-vested share awards
 
(2.3
)
(1.8
)
(4.3
)
(5.7
)
Net income attributable to Ensco shares
 
$202.2
 
$128.7
 
$366.7
 
$440.9
 
 
    The following table is a reconciliation of the weighted-average shares used in our basic and diluted EPS computations for the three-month and nine-month periods ended September 30, 2011 and 2010 (in millions):
 
 
Three Months Ended
        September 30,       
     Nine Months Ended
             September 30,       
 
 
  2011 
   2010 
   2011 
        2010 
                    
Weighted-average shares - basic
 
228.1
 
141.1
 
180.0
 
140.9
 
Potentially dilutive share options
 
.5
 
.1
 
.4
 
.1
 
Weighted-average shares - diluted
 
228.6
 
141.2
 
180.4
 
141.0
 
 
    Antidilutive share options totaling 800,000 and 1.1 million were excluded from the computation of diluted EPS for the three-month periods ended September 30, 2011 and 2010, respectively.  Antidilutive share options totaling 400,000 and 1.1 million were excluded from the computation of diluted EPS for the nine-month periods ended September 30, 2011 and 2010, respectively.
Comprehensive Income
Comprehensive Income
Note 10 - Comprehensive Income
 
    Accumulated other comprehensive income as of September 30, 2011 and December 31, 2010 primarily was comprised of gains and losses on derivative instruments, net of tax. The components of other comprehensive income, net of tax, for the three-month and nine-month periods ended September 30, 2011 and 2010 were as follows (in millions):
 
 
  Three Months Ended
         September 30,       
    Nine Months Ended
           September 30,       
 
 
     2011   
     2010   
     2011 
       2010 
                   
Net income
 
$206.1
 
$132.1
 
$375.2
 
$451.6
 
Other comprehensive income (loss):
                 
Net change in fair value of derivatives
 
(7.6
)
8.7
 
(1.6
)
5.7
 
Reclassification of gains and losses on derivative
                 
instruments from other comprehensive (income) loss
                 
into net income
 
(.5
)
.2
 
(2.8
)
(1.3
)
   Other    5.8   --   5.8   --  
         Net other comprehensive income (loss)
 
(2.3
)
8.9
 
1.4
 
4.4
 
Comprehensive income
 
203.8
 
141.0
 
376.6
 
456.0
 
Comprehensive income attributable to noncontrolling interests
 
(1.6
)
(1.6
)
(4.2
)
(5.0
)
Comprehensive income attributable to Ensco
 
$202.2
 
$139.4
 
$372.4
 
$451.0
 
 
Income Taxes
Income Taxes
Note 11 - Income Taxes
 
    Our consolidated effective income tax rate for the three-month and nine-month periods ended September 30, 2011 of 16.9% and 18.3%, 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 and the recognition of a liability for unrecognized tax benefits associated with a tax position taken in a prior year during the six-month period ended June 30, 2011. Excluding the impact of the aforementioned discrete items, our consolidated effective income tax rate for the three-month and nine-month periods ended September 30, 2011 was 16.3% and 15.4%, respectively, compared to a consolidated effective income tax rate, excluding discrete tax items, of 17.7% and 17.1% for the three-month and nine-month periods ended September 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.
 
Discontinued Operations
Discontinued Operations
Note 12 - Discontinued Operations
 
    During the quarter ended September 30, 2010, we executed a Memorandum of Agreement to sell ENSCO 60 for $26.0 million.  After considering the facts and circumstances as of September 30, 2010, we concluded that it was probable the sale of the rig would occur within one year and classified ENSCO 60 as held-for-sale.  ENSCO 60 operating results were reclassified to discontinued operations in our condensed consolidated statements of income for the three-month and nine-month periods ended September 30, 2010.  The rig was sold for a pre-tax gain of $5.7 million during the quarter ended December 31, 2010.
 
    During the nine-month period ended September 30, 2010, we sold three jackup rigs for an aggregate $141.8 million, of which deposits of $9.4 million were 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 nine-month period ended September 30, 2010.  Income from discontinued operations, net, included operating losses of $2.2 million and $3.7 million for the three-month and nine-month periods ended September 30, 2010, respectively.  Debt and interest expense are not allocated to our discontinued operations.
Noncontrolling Interests
Noncontrolling Interests
Note 13 - 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 nine-month periods ended September 30, 2011 and 2010 (in millions):
 
 
Three Months Ended  
      September 30,        
     Nine Months Ended
            September 30,       
 
 2011 
  2010 
    2011 
       2010 
                   
Income from continuing operations
 
$206.1
 
$134.0
 
$375.2
 
$417.9
 
Income from continuing operations attributable to
noncontrolling interests
 
(1.6
)
(1.6
)
(4.2
)
(4.8
)
Income from continuing operations attributable to Ensco
 
$204.5
 
$132.4
 
$371.0
 
$413.1
 
 
 
 
 
   
    The following table is a reconciliation of income from discontinued operations attributable to Ensco for the three-month and nine-month periods ended September 30, 2010 (in millions):
 
 
Three Months Ended
  September 30, 2010  
     Nine Months Ended
         September 30,  2010  
           
(Loss) income from discontinued operations 
$(1.9
 
$33.7      
 
Income from discontinued operations attributable to
   noncontrolling interests 
--
 
 
(.2)     
 
(Loss) income from discontinued operations attributable to Ensco
$(1.9
)  
$33.5      
 
 
Contingencies
Contingencies
Note 14 - Contingencies
 
    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 amended their petition to add claims related to the Merger.
 
 
 
    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, Pride provided additional information to Pride's shareholders regarding the Merger.  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.
 
    On August 29, 2011, the parties to the memorandum of understanding entered into a stipulation of settlement, which provides for, among other matters, the release of certain claims following notice by mailing, certification of a non-opt-out class for settlement purposes, a settlement hearing and final approval of the settlement.  The stipulation of settlement also provides that Pride or its successor has agreed not to oppose any application by attorneys for the class for fees and expenses not exceeding $1.1 million.  The stipulation of settlement is subject to customary conditions, including court approval. There can be no assurance that the stipulation of settlement receives such approval.  The settlement hearing is scheduled for November 23, 2011.
 
    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 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
   
    In August 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 $700,000 related to this matter was recorded as of September 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 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.
 
  In February 2011, Pride sent a notice to Seahawk requesting that it provide cash collateral for the credit support previously provided by Pride, as provided under the terms of the agreement.  Seahawk did not post the cash collateral, thereby further repudiating its 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. In connection with Seahawk's bankruptcy filing, a committee of Seahawk's equity security holders filed a lawsuit against Pride seeking, among others, a determination that Seahawk has no liability to Pride under the tax support agreement or that such liability is offset by Seahawk's asserted claims against Pride.  The trial of Pride's claims against Seahawk and Seahawk's claims against Pride is scheduled to commence on December 12, 2011.  We believe Seahawk's claims are without merit and we intend to vigorously defend our position.  For additional 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.
 
 
    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 September 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.
 
    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 Petróleos de Venezuela S.A., the national oil company of Venezuela, 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.
 
    With the exception of one underwriter who represents approximately 10% of the claim, we have been able to reach a mutually agreeable settlement for our claim under our package policy, which resulted in a gain of $10.8 million upon receipt of cash settlements during the third quarter of 2011.  

    The first phase of the arbitration with the remaining underwriter was held on September 19, 2011.  The arbitration panel has not yet returned a decision.  Until the arbitration 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 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.
 
    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 was held in October 2011.  We expect a decision from the U.K. Supreme Court in the near-term.

    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.
 
 
 
    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 $2.0 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 $2.0 million liability related to these matters was recorded as of September 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.
Segment Information
Segment Information
Note 15 - Segment Information
 
    In connection with the Merger, we evaluated our then current core assets and operations, which consisted of seven drillships, 20 semisubmersible rigs and 48 jackup rigs, including 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 nine-month periods ended September 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.
 
 
 
Three Months Ended September 30, 2011
 
 
 
Deepwater  
 
 
  Midwater
 
 
  Jackup
   Other
Operating
Segments
      Total     
Reconciling
   Items   
 
Consolidated
     Total      
                 
Revenues
$   440.4
 
$121.3
 
$   330.1
  $  23.8  
$     915.6
 
$     --
 
$     915.6
 
Operating expenses
Contract drilling (exclusive
of depreciation)
233.0
 
72.1
 
154.7
  17.7  
477.5
 
--
 
477.5
 
Depreciation
73.5
 
15.7
 
44.2
   0.6  
134.0
 
1.8
 
135.8
 
General and administrative
--
 
--
 
--
   --  
--
 
40.8
 
40.8
 
Operating income (loss)
$   133.9
 
$  33.5
 
$   131.2
  $   5.5  
$     304.1
 
$(42.6
$     261.5
 
Property and equipment, net
$8,981.7
 
$904.1
 
$2,376.7
   $ 26.6  
$12,289.1
 
$ 22.6
 
$12,311.7
 
 
Three Months Ended September 30, 2010
 
Deepwater  
  Midwater
  Jackup
   Other
Operating
Segments
      Total     
Reconciling
   Items   
 
Consolidated
     Total      
                 
Revenues
$   110.5
 
$     --
 
$   317.8
  $     --  
$   428.3
 
$     --
 
$    428.3
 
Operating expenses
Contract drilling (exclusive
of depreciation)
48.0
 
--
 
145.6
   0.5  
194.1
 
--
 
194.1
 
Depreciation
11.7
 
--
 
43.2
   0.4  
55.3
 
.3
 
55.6
 
General and administrative
--
 
--
 
--
   --  
--
 
20.6
 
20.6
 
Operating income (loss)
$     50.8
 
$     --
 
$   129.0
   $  (0.9 )
$   178.9
 
$(20.9
$   158.0
 
Property and equipment, net
$2,769.8
 
$     --
 
$2,197.5
   $ 14.8  
$4,982.1
 
$   4.0
 
$4,986.1
 
 
Nine Months Ended September 30, 2011
 
 
 
Deepwater  
  Midwater
  Jackup
   Other
Operating
Segments
      Total     
Reconciling
   Items   
Consolidated
     Total      
                 
Revenues
$   770.8
 
$157.5
 
$   882.7
  $ 30.3  
$  1,841.3
 
$       --
 
$  1,841.3
 
Operating expenses
Contract drilling (exclusive
of depreciation)
385.0
 
95.0
 
450.4
   25.0  
955.4
 
--
 
955.4
 
Depreciation
123.7
 
20.9
 
129.8
   1.5  
275.9
 
2.9
 
278.8
 
General and administrative
--
 
--
 
--
   --  
--
 
118.3
 
118.3
 
Operating income (loss)
$   262.1
 
$  41.6
 
$   302.5
  $  3.8  
$     610.0
 
$(121.2
$     488.8
 
Property and equipment, net
$8,981.7
 
$904.1
 
$2,376.7
   $26.6  
$12,289.1
 
$   22.6
 
$12,311.7
 
 
Nine Months Ended September 30, 2010
 
Deepwater  
  Midwater
 
  Jackup
   Other
Operating
Segments
      Total     
Reconciling
   Items   
 
Consolidated
     Total      
                 
Revenues
$    361.8
 
$      --
 
$   926.5
  $     --  
$1,288.3
 
$     --
 
$1,288.3
 
Operating expenses
Contract drilling (exclusive
of depreciation)
139.5
 
--
 
429.7
   13.3  
582.5
 
--
 
582.5
 
Depreciation
31.2
 
--
 
125.2
   1.9  
158.3
 
.9
 
159.2
 
General and administrative
--
 
--
 
--
   --  
--
 
63.2
 
63.2
 
Operating income (loss)
$   191.1
 
$      --
 
$   371.6
   $(15.2 )
$   547.5
 
$(64.1
$   483.4
 
Property and equipment, net
$2,769.8
 
$      --
 
$2,197.5
   $ 14.8  
$4,982.1
 
$   4.0
 
$4,986.1
 
 
 
 
 
    Information about Geographic Areas
 
    As of September 30, 2011, the geographic distribution of our drilling rigs by operating segment was as follows:
 
  Deepwater     Midwater Jackup Other             Total *
             
North & South America (excl. Brazil)  6         
--       
15    
--     
21  
 
Brazil
6         
 5       
--    
--     
11  
 
Europe & Mediterranean 1          --        9     --      10    
Middle East & Africa 3           1        12      --      16    
Asia & Pacific Rim 1          --        10      1      12    
Asia & Pacific Rim (under construction) 4          --        2     --      6    
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 notices to lessees 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 nine-month periods ended September 30, 2011, revenues provided by our drilling operations in the U.S. Gulf of Mexico totaled $251.3 million and $539.4 million, or 27% and 29%, of our consolidated revenues, respectively. Of these amounts, 74% and 68% were provided by our deepwater drilling operations in the U.S. Gulf of Mexico for the three-month and nine-month periods ended September 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.
Supplemental Financial Information
Supplemental Financial Information
Note 16 - Supplemental Financial Information

    Consolidated Balance Sheet Information

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

 
September 30,
December 31,
 
         2011       
       2010       
 
    
             
Trade
 
$624.2 
 
$209.9
 
Other
 
42.7 
 
7.8
 
   
666.9 
 
217.7
 
Allowance for doubtful accounts
 
(12.0)
 
(3.1
)
   
$654.9 
 
$214.6
 
 
 
 
 
    Other current assets as of September 30, 2011 and December 31, 2010 consisted of the following (in millions):

 
September 30,    
December 31,
 
        2011            
         2010       
     
Inventory
 
$177.0
 
$  56.4
 
Prepaid taxes
 
75.4
 
47.4
 
Prepaid expenses
 
49.7
 
12.9
 
Deferred mobilization costs
 
39.1
 
19.7
 
Deferred tax assets   12.3   9.5  
Derivative assets
 
 1.3
 
 17.0
 
Other
 
24.8
 
8.5
 
   
$379.6
 
$171.4
 
 
    Other assets, net, as of September 30, 2011 and December 31, 2010 consisted of the following (in millions):

 
September 30,      
December 31,
 
         2011             
           2010       
           
Intangible assets   $203.5     $      --  
Unbilled reimbursable receivables    129.5   20.0  
Prepaid taxes on intercompany transfers of property
 
71.8
 
 74.6
 
Deferred mobilization costs
 
39.7
 
31.3
 
Wreckage and debris removal receivables
 
24.8
 
26.8
 
Supplemental executive retirement plan assets
 
24.2
 
23.0
 
Auction rate securities   --   44.5  
Other
 
34.5
 
8.5
 
   
$528.0
 
$228.7
 

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

 
September 30,     
December 31,
 
         2011            
         2010       
     
Personnel costs
 
$138.5
 
$  58.0
 
Deferred revenue   78.9   48.1  
Contract intangibles
 
57.4
 
5.1
 
Taxes    47.5   22.4  
Accrued interest
 
37.3
 
2.1
 
Wreckage and debris removal   21.0   21.0  
Other
 
100.4
 
11.6
 
   
$481.0
 
$168.3
 
 
 
 
 
 
    Other liabilities as of September 30, 2011 and December 31, 2010 consisted of the following (in millions):

 
September 30,    
December 31,
 
        2011             
         2010        
     
Contract intangibles    $204.6   $      --  
Unrecognized tax benefits (inclusive of interest and penalties)
 
87.8
             
25.7
 
Deferred revenue   66.0   68.0  
Supplemental executive retirement plan liabilities
 
28.4
 
26.0
 
Other
 
35.0
 
19.7
 
   
$421.8
 
$139.4
 
 
Guarantee Of Registered Securities
Guarantee Of Registered Securities
Note 17 - Guarantee of Registered Securities
 
    In connection with the Merger, on May 31, 2011, Ensco plc and Pride entered into a supplemental indenture to the indenture dated as of July 1, 2004 between Pride and the Bank of New York Mellon, as indenture trustee, providing for, among other matters, the full and unconditional guarantee by Ensco 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 September 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 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 $150.0 million as of September 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.
 
    The following tables present the condensed consolidating statements of income for the three-month and nine-month periods ended September 30, 2011 and 2010; the condensed consolidating balance sheets as of September 30, 2011 and December 31, 2010; and the condensed consolidating statements of cash flows for the nine-month periods ended September 30, 2011 and 2010, in accordance with Rule 3-10 of Regulation S-X.  The condensed consolidating financial statements for the three-month and nine-month periods ended September 30, 2011 include the results of Pride from the Merger Date.