Derivative Instruments and Hedging Activities

12 Months Ended

Dec. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

Note 16- Derivative Instruments and Hedging Activities

We periodically enter into derivative instruments to manage our exposure to fluctuations in interest rates and foreign currency exchange rates. We have documented policies and procedures to monitor and control the use of derivative instruments. We do not engage in derivative transactions for speculative or trading purposes, nor are we a party to leveraged derivatives.

For foreign currency forward contracts, hedge effectiveness is evaluated at inception based on the matching of critical terms between derivative contracts and the hedged item. Any change in fair value resulting from ineffectiveness is recognized immediately in earnings.

Cash Flow Hedges

Several of our regional shorebases, including our North Sea and Brazilian operations, have a significant amount of their cash operating expenses payable in local currencies. To limit the potential risk of currency fluctuations, we periodically enter into forward contracts, which settle monthly in the operations’ respective local currencies. All of these contracts have a maturity of less than 12 months. During 2014 and 2013, we entered into forward contracts of approximately $195 million and $128 million, respectively, all of which settled during their respective years. At both December 31, 2014 and 2013, we had no outstanding derivative contracts.

Financial Statement Presentation

To supplement the fair value disclosures in Note 17, the following summarizes the recognized gains and losses of cash flow hedges and non-designated derivatives through AOCL or through “other income” for the years ended December 31, 2014 and 2013:

	Gain/(loss) recognized through AOCL				Gain reclassified from AOCL to “contract drilling services” expense						Gain/(loss) recognized through “contract drililng services” expense
	2014		2013		2014			2013			2014		2013
Cash flow hedges
Foreign currency forward contracts	$	4,286	$	1,200	$	(4,286	)	$	(1,200	)	$	—	$	—