Transocean Proxy Statement and 2010 Annual Report

Related Party Transactions
Pacific Drilling Limited—We hold a 50 percent interest in TPDI, a consolidated British Virgin Islands joint venture company
formed by us and Pacific Drilling, a Liberian company, to own and operate Dhirubhai Deepwater KG1 and Dhirubhai Deepwater KG2.
Effective October 18, 2010, Pacific Drilling has the unilateral right to exchange its interest in the joint venture for our shares or cash, at an
amount based on an appraisal of the fair value of the drillships, subject to certain adjustments.
As of February 15, 2011, TPDI had outstanding promissory notes in the aggregate amount of $296 million, of which $148 million
was due to Pacific Drilling and was included in long-term debt on our consolidated balance sheet.
Angco Cayman Limited—We hold a 65 percent interest in ADDCL, a consolidated Cayman Islands joint venture company
formed to own and operate Discoverer Luanda. Angco Cayman Limited, a Cayman Islands company, holds the remaining 35 percent
interest in ADDCL. Beginning January 31, 2016, Angco Cayman Limited will have the right to exchange its interest in the joint venture for
cash at an amount based on the appraisal of the fair value of the drillship, subject to certain adjustments.
Overseas Drilling Limited—We hold a 50 percent interest in Overseas Drilling Limited (“ODL”), an unconsolidated Cayman
Islands joint venture company, which owns and operates Joides Resolution. Siem Offshore Invest AS owns the other 50 percent interest
in ODL. Under a management services agreement with ODL, we provide certain operational and management services. We earned
$2 million for these services in each of the years ended December 31, 2010, 2009 and 2008.
We have a $10 million loan facility with ODL. ODL may demand repayment of the borrowings at any time upon five business
days prior written notice, and any amounts due to us from ODL may be offset against the borrowings at the time of repayment. As of
February 15, 2011, $5 million was outstanding under this loan agreement.
Critical Accounting Policies and Estimates
We have prepared our consolidated financial statements in accordance with accounting principles generally accepted in the U.S.,
which require us to make estimates, judgments and assumptions that affect the amounts reported on the consolidated financial statements
and disclosed in the accompanying notes. We base our estimates on historical experience and on various other assumptions that we
believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
We consider the following to be our critical accounting policies and estimates, and we have discussed the development,
selection and disclosure of these critical accounting policies and estimates with the audit committee of our board of directors. For a
discussion of our significant accounting policies, refer to our Notes to Consolidated Financial Statements—Note 2—Significant Accounting
Policies.
Income taxes—We are a Swiss corporation, operating through our various subsidiaries in a number of countries throughout the
world. We have provided for income taxes based upon the tax laws and rates in the countries in which we operate and earn income.
There is little to no expected relationship between the provision for or benefit from income taxes and income or loss before income taxes
because the countries in which we operate have taxation regimes that vary with respect to the nominal tax rate and the availability of
deductions, credits and other benefits. Variations also arise when income earned and taxed in a particular country or countries fluctuates
from year to year.
Our annual tax provision is based on expected taxable income, statutory rates and tax planning opportunities available to us in
the various jurisdictions in which we operate. The determination of our annual tax provision and evaluation of our tax positions involves
interpretation of tax laws in the various jurisdictions and requires significant judgment and the use of estimates and assumptions regarding
significant future events, such as the amount, timing and character of income, deductions and tax credits. Our tax liability in any given year
could be affected by changes in tax laws, regulations, agreements, and treaties, foreign currency exchange restrictions or our level of
operations or profitability in each jurisdiction. Additionally, we operate in many jurisdictions where the tax laws relating to the offshore
drilling industry are not well developed. Although our annual tax provision is based on the best information available at the time, a number
of years may elapse before the ultimate tax liabilities in the various jurisdictions are determined.
We maintain liabilities for estimated tax exposures in our jurisdictions of operation, and the provisions and benefits resulting from
changes to those liabilities are included in our annual tax provision along with related interest. Tax exposure items include potential
challenges to permanent establishment positions, intercompany pricing, disposition transactions, and withholding tax rates and their
applicability. These exposures are resolved primarily through the settlement of audits within these tax jurisdictions or by judicial means,
but can also be affected by changes in applicable tax law or other factors, which could cause us to revise past estimates.
We are currently undergoing examinations in a number of taxing jurisdictions for various fiscal years. We review our liabilities on
an ongoing basis and, to the extent audits or other events cause us to adjust the liabilities accrued in prior periods, we recognize those
adjustments in the period of the event. We do not believe it is possible to reasonably estimate the future impact of changes to the
assumptions and estimates related to our annual tax provision because changes to our tax liabilities are dependent on numerous factors
that cannot be reasonably projected. These factors include, among others, the amount and nature of additional taxes potentially asserted
by local tax authorities; the willingness of local tax authorities to negotiate a fair settlement through an administrative process; the
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