Derivative Instruments and Hedging Activities

3 Months Ended

Mar. 31, 2016

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

Note 10 — Derivative Instruments and Hedging Activities

We periodically enter into derivative instruments to manage our exposure to fluctuations in 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 Australian 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. The forward contract settlements in the remainder of 2016 represent approximately 60 percent of these forecasted local currency requirements. The notional amount of the forward contracts outstanding, expressed in U.S. Dollars, was approximately $36 million at March 31, 2016. Total unrealized gains related to these forward contracts were approximately $1 million as of March 31, 2016 and were recorded as part of “Accumulated other comprehensive loss” (“AOCL”).

Financial Statement Presentation

The following table, together with Note 11, summarizes the financial statement presentation and fair value of our derivative positions as of March 31, 2016 and December 31, 2015:

		Estimated fair value
	Balance sheet classification	March 31, 2016		December 31, 2015
Asset derivatives
Cash flow hedges
Short-term foreign currency forward    contracts	Prepaid expenses and other current assets	$	1,112	$	—
Liability derivatives
Cash flow hedges
Short-term foreign currency forward    contracts	Other current liabilities	$	126	$	—

To supplement the fair value disclosures in Note 11, the following summarizes the recognized gains and losses of cash flow hedges and non-designated derivatives through AOCL or through “contract drilling services” expense for the three months ended March 31, 2016 and 2015:

	Gain/(loss) recognized through AOCL					Gain/(loss) reclassified from AOCL to "contract drilling services" expense					Gain/(loss) recognized through "contract drilling services" expense
	2016		2015			2016		2015			2016		2015
Cash flow hedges
Foreign currency forward contracts	$	894	$	(3,111	)	$	92	$	(34	)	$	—	$	—