Long-Term Contracts

9 Months Ended

Sep. 30, 2011

Long-Term Contracts [Abstract]

Long-Term Contracts

(3) Long-Term Contracts

In 2010, Wild Well acquired 100% ownership of Shell Offshore, Inc.’s Gulf of Mexico Bullwinkle platform and its related assets, and assumed the related decommissioning obligations. In connection with the subsequent conveyance to DOR of an undivided 49% interest in these assets and the related well plugging and abandonment obligation, DOR will pay Wild Well to extinguish its portion of the well plugging and abandonment obligation, limited to the fair value of the obligation at the time of acquisition. As part of the asset purchase agreement with Shell Offshore, Inc., Wild Well was required to obtain a $50.0 million performance bond, as well as fund $50.0 million into an escrow account. Included in intangible and other long-term assets, net is escrowed cash of $50.2 million and $33.0 million at September 30, 2011 and December 31, 2010, respectively. Included in other long-term liabilities is deferred revenue of $24.6 million and $16.2 million at September 30, 2011 and December 31, 2010, respectively (see note 2).

The Company has a contract to perform well abandonment and decommissioning work associated with oil and gas properties owned and operated by SPN Resources, LLC (SPN Resources). This contract consists of numerous, separate billable jobs estimated to be performed through 2022. In March 2011, the Company contributed its equity interest in SPN Resources and DBH, LLC (DBH) in exchange for a 10% limited partnership interest in DOH (see note 7) and modified the terms of this contract.

In December 2007, Wild Well entered into contractual arrangements pursuant to which it decommissioned seven downed oil and gas platforms and related well facilities located offshore in the Gulf of Mexico for a fixed sum of $750 million, which is payable in installments upon the completion of specified portions of work. The contract contains certain covenants primarily related to Wild Well’s performance of the work. As of September 30, 2011, all work was complete, pending certain regulatory approvals. The revenue related to the contract for decommissioning these downed platforms and well facilities was recorded on the percentage-of-completion method utilizing costs incurred as a percentage of total estimated costs. At September 30, 2011 and December 31, 2010, there were $129.7 million and $144.5 million of costs and estimated earnings in excess of billings related to this contract included in other current assets.