Transocean Proxy Statement and 2010 Annual Report

TRANSOCEAN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
Note 9—Drilling Fleet
Expansion—Construction work in progress, recorded in property and equipment, was $1.5 billion and $3.7 billion at
December 31, 2010 and 2009, respectively. The following table presents actual capital expenditures and other capital additions, including
capitalized interest, for our remaining major construction projects for the three years ended December 31, 2010 (in millions):
AR-89
Years ended December 31,
2010 2009 2008 2007 - 2006 Total
Deepwater Champion (a) $ 206 $ 263 $ 155 $ 109 $ 733
Discoverer India (b) 203 291 250 — 744
Discoverer Luanda (b) (c) 174 220 208 107 709
Transocean Honor (d) 97 — — — 97
Dhirubhai Deepwater KG2 (b) (e) 36 371 91 179 677
Development Driller III (b) (a) 24 117 133 350 624
Discoverer Inspiration (b) 12 224 205 238 679
High-Specification Jackup TBN1 (f) 9 — — — 9
High-Specification Jackup TBN2 (f) 9 — — — 9
Discoverer Americas (b) 6 148 167 311 632
Discoverer Clear Leader (b) 6 115 107 409 637
Petrobras 10000 (b) (g) 6 735 — — 741
Dhirubhai Deepwater KG1 (b) (e) — 295 105 279 679
Sedco 700-series upgrades (b) — 71 124 396 591
Capitalized interest 89 182 147 93 511
Mobilization costs 89 155 — — 244
Total $ 966 $ 3,187 $ 1,692 $ 2,471 $ 8,316
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(a) These costs include our initial investment in Deepwater Champion of $109 million and our initial investment in Development Driller III of $350 million,
representing the estimated fair value of the rig at the time of our merger with GlobalSantaFe in November 2007.
(b) The accumulated construction costs of these rigs are no longer included in construction work in progress, as their construction projects had been
completed as of December 31, 2010.
(c) The costs for Discoverer Luanda represent 100 percent of expenditures incurred since inception. ADDCL is responsible for all of these costs. We
hold a 65 percent interest in ADDCL, and Angco Cayman Limited holds the remaining 35 percent interest.
(d) In November 2010, we made an initial installment payment of $97 million to purchase a PPL Pacific Class 400 design jackup, to be named
Transocean Honor, for $195 million. The High-Specification Jackup is under construction at PPL Shipyard Pte Ltd. in Singapore and is expected for
delivery in the fourth quarter of 2011.
(e) The costs for Dhirubhai Deepwater KG1 and Dhirubhai Deepwater KG2 represent 100 percent of TPDI’s expenditures, including those incurred prior
to our investment in the joint venture. TPDI is responsible for all of these costs. We hold a 50 percent interest in TPDI, and Pacific Drilling holds the
remaining 50 percent interest.
(f) In December 2010, we made initial installment payments of $9 million each, to purchase two Keppel FELS Super B class design jackups for
$186 million each. The two High-Specification Jackups are under construction at Keppel FELS yard in Singapore and are expected for delivery in
the fourth quarter of 2012.
(g) In June 2008, we reached an agreement with a joint venture formed by subsidiaries of Petrobras and Mitsui to acquire Petrobras 10000 under a
capital lease contract. In connection with the agreement, we agreed to provide assistance and advisory services for the construction of the rig and
operating management services once the rig commenced operations. On August 4, 2009, we accepted delivery of Petrobras 10000 and recorded
non-cash additions of $716 million to property and equipment, net, along with a corresponding increase to long-term debt. Total capital additions
include $716 million in capital costs incurred by Petrobras and Mitsui for the construction of the drillship and $19 million of other capital expenditures.
The capital lease agreement has a 20-year term, after which we will have the right and obligation to acquire the drillship for one dollar. See
Note 11—Debt and Note 14—Commitments and Contingencies.
In March 2010, we acquired GSF Explorer, an asset formerly held under capital lease, in exchange for a cash payment in the
amount of $15 million, terminating the capital lease obligation. See Note 11—Debt.
Dispositions—During the year ended December 31, 2010, we completed the sale of two Midwater Floaters, GSF Arctic II and
GSF Arctic IV. In connection with the sale, we received net cash proceeds of $38 million and non-cash proceeds in the form of two notes
receivable in the aggregate amount of $165 million (see Note 4—Variable Interest Entities and Note 19—Fair Values of Financial
Instruments). We operated GSF Arctic IV under a short-term bareboat charter with the new owner of the vessel, until November 2010. As
a result of the sale, we recognized a loss on disposal of assets in the amount of $15 million ($0.04 per diluted share), which had no tax
effect for the year ended December 31, 2010. For the year ended December 31, 2010, we recognized a gain on disposal of other
unrelated assets in the amount of $5 million. In December 2010, we entered into an agreement to sell our Standard Jackup