Investor Presentation May 2015 Forward-Looking Statements - - PDF document
Investor Presentation May 2015 Forward-Looking Statements - - PDF document
1 Investor Presentation May 2015 Forward-Looking Statements Statements contained in this presentation that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
2
Statements contained in this presentation that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include words or phrases such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “could,” “may,” “might,” “should,” “will” and similar words and specifically include statements involving expected financial performance, effective tax rate, day rates and backlog, estimated rig availability; rig commitments; scheduled delivery dates for rigs; the timing of delivery, mobilization, contract commencement, relocation or other movement of rigs; and general market, business and industry conditions, trends and outlook. Such statements are subject to numerous risks, uncertainties and assumptions that may cause actual results to vary materially from those indicated, including commodity price fluctuations, customer demand, new rig supply, downtime and other risks associated with offshore rig operations, relocations, severe weather or hurricanes; changes in worldwide rig supply and demand, competition and technology; future levels of offshore drilling activity; governmental action, civil unrest and political and economic uncertainties; terrorism, piracy and military action; risks inherent to shipyard rig construction, repair, maintenance or enhancement; possible cancellation, suspension or termination of drilling contracts as a result of mechanical difficulties, performance, customer finances, the decline or the perceived risk of a further decline in oil and/or natural gas prices, or other reasons, including terminations for convenience (without cause); the outcome of litigation, legal proceedings, investigations or other claims or contract disputes; governmental regulatory, legislative and permitting requirements affecting drilling operations; our ability to attract and retain skilled personnel on commercially reasonable terms; environmental or other liabilities, risks or losses; debt restrictions that may limit our liquidity and flexibility; our ability to realize the expected benefits from our redomestication and actual contract commencement dates; cybersecurity risks and threats; and the occurrence or threat of epidemic or pandemic diseases or any governmental response to such occurrence or threat In addition to the numerous factors described above, you should also carefully read and consider “Item 1A. Risk Factors” in Part I and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II of
- ur most recent annual report on Form 10-K, as updated in our subsequent quarterly reports on Form 10-Q, which
are available on the SEC’s website at www.sec.gov or on the Investor Relations section of our website at www.enscoplc.com. Each forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward-looking statements, except as required by law.
Forward-Looking Statements
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Profile
- #1 in customer satisfaction – five consecutive years
- Highest net income margins among major competitors
- Best ever total recordable incident rate in 2014 and 1Q15
- High-quality fleet of floaters and jackups
- Broad diversification: customer, geography, rig type
- Capital management flexibility
– no significant debt maturities until 2Q19 – $1.6 billion of cash and short-term investments – $2.25 billion revolving credit facility – $8.4 billion of contracted revenue backlog – investment-grade credit ratings
- ~2% dividend yield; top half of S&P 500 Companies
Note: Cash and short-term investments, revolving credit facility capacity and contracted revenue backlog as of 31 March 2015
4
Market Environment
- Sharp drop in commodity prices accelerated beginning late fourth quarter
2014
- New lows/increased volatility for oil prices during customers’ budget season;
more recently, oil prices have increased/stabilized
- Capital expenditures declining in 2015 as customers re-evaluate programs in
light of lower commodity prices
- Customers shortening contracts where permitted and requesting concessions
- Uncontracted newbuilds and customer sublets creating additional supply
- Aging of current global fleet has led to accelerated scrapping of floaters and
cold stacking of floaters and jackups
- Some newbuilds being cancelled and others being delayed
- SETE Brasil newbuild program rumored to be cut by more than half
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Sharp Decline in Oil Prices
Source: Thomson One; Brent Crude prices for 31 December 2013 through 12 May 2015
$30 $40 $50 $60 $70 $80 $90 $100 $110 $120 $130
Brent Crude ($/bbl)
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Ensco’s Proactive Fleet Management
2Q14
- Moved five floaters to held for sale to proactively reduce expenses;
- ne later sold for scrap value
3Q14
- Sold four jackups for more than $200 million
4Q14
- Classified additional 4 rigs as discontinued operations
- All held-for-sale rigs cold stacked to quickly reduce expenses
1Q15
- Expedited cold stacking decision for ENSCO 8501 and
ENSCO 8502 plus several jackups to accelerate cost savings
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Proactive Steps to Address Market Downturn
- Reduce offshore discretionary compensation and onshore support costs
– 9% unit labor cost decrease for offshore workers; full run rate beginning 2Q15 – 15% Reduction in Force for onshore personnel including corporate staff
- $27 million annualized savings; full run rate beginning 2Q15
- Highgrade fleet
– delivery of ENSCO DS-9 and ENSCO 110 (both contracted for multi-year terms) – divestitures and held-for-sale rigs
- Negotiate with vendors and suppliers to lower costs
- Successful 1Q15 debt offering to refinance $1.1 billion of near-term debt
maturities and improve liquidity/capital management flexibility
- Reduced quarterly dividend to $0.15 per share to improve capital
management flexibility during downturn
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1Q15 Highlights
- Strong operational, safety and financial performance
– 99.6% jackup operational utilization – record TRIR of 0.34 – revenues and margins increased year over year – disciplined expense management
- #1 in customer satisfaction
– 5th consecutive year
- Investment-grade credit ratings reaffirmed
– highest among major offshore drillers
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Current Market
Newbuilds
Floaters Jackups
Contracted 238 339 Stacked/Other 31 67 Total 269 406 % Contracted 88% 83% Under Construction 59
17 by SETE Brasil
107
61 by Speculators
On Order / Planned 22
12 by SETE Brasil
9
5 by Speculators
Total 81 116 % Contracted 54% 7% % Uncontracted 46% 93%
Active Fleet
Source: IHS-ODS Petrodata as of May 2015; competitive marketed floaters and jackups (independent leg cantilever rigs); ‘contracted’ includes rigs currently under contract or with a future contract
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Newbuild Floater Order Book
Source: IHS-ODS Petrodata as of May 2015; marketed competitive floaters
81 Total
10 Uncontracted, On Order 16 Contracted 32% 15% 17 SETE Brasil, Under Construction 26 Uncontracted, Under Construction 20% 12% 12 SETE Brasil, On Order 21%
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Newbuild Floater Delivery Schedule
Source: IHS-ODS Petrodata as of May 2015; marketed competitive floaters
7 16 2 1 8 1 1 1 6 4 1 1 9 5 2 10 4 2
5 10 15 20 25 30 35 2015 2016 2017 2018 2019 2020
Uncontracted, Under Construction Uncontracted, On Order SETE Brasil, On Order SETE Brasil, Under Construction Contracted
Under SETE Brasil by Shipyard Constr. On Order Total Estaleiro Atlantico Sul 4 3 7 Estaleiro Jurong Aracruz 4 3 7 BrasFELS, Angra dos Reis 5 1 6 Estaleiro Enseada do Paraguacu 2 4 6 Ecovix‐Engevix, Rio Grande do Sul 2 1 3 Total 17 12 29
? ? ? ? ? ?
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151 169 189 206 216 36 34 39 37 33 38 38 39 32 19 44 46 49 59 76 Current 2015 2016 2017 2018
< 15 years old 15-30 years old 30-35 years old > 35 years old
Floater Supply
*SETE Brasil rig counts by year are cumulative Source: IHS-ODS Petrodata as of May 2015; marketed competitive floaters
Assumes all rigs ‘On Order’
- r partially
completed including SETE Brasil rigs are built, delivered and complete customer acceptance testing 1 SETE* 10 SETE*
Cumulative # of rigs rolling off contract > 30 years old: 25 59 73 81
16 SETE* 24 SETE*
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Newbuild Jackup Order Book
Source: IHS-ODS Petrodata as of May 2015; marketed competitive jackups (independent leg cantilever rigs)
116 Total
61 Uncontracted, Speculators 38 Uncontracted, Established Drillers 8 Contracted, Established Drillers
33% 7% 53%
9 On Order, All Uncontracted
7%
Zero rigs being built by Speculators have been contracted.
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18 14 2 2 2
7
1 1 30 22 9 6 2
10 20 30 40 50 60 2015 2016 2017 2018 2019 2020
Uncontracted, Established Drillers On Order, Established Drillers On Order, Speculators Uncontracted, Speculators Contracted
Newbuild Jackup Delivery Schedule
Source: IHS-ODS Petrodata as of May 2015; marketed competitive jackups (independent leg cantilever rigs)
Speculator Newbuilds Under by Shipyard Constr. On Order Total China China Merchants Heavy Industry 15 ‐ 15 Shanghai Waigaoqiao Shipbuilding 7 1 8 Yantai CIMC Raffles 6 ‐ 6 Other 22 2 24 Subtotal 50 3 53 Singapore & Middle East Keppel FELS, Singapore 11 ‐ 11 UAE & Dubai ‐ 2 2 Subtotal 11 2 13 Total 61 5 66
? ? ? ? ?
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*Speculator rig counts by year are cumulative Source: IHS-ODS Petrodata as of May 2015; marketed competitive jackups (independent leg cantilever rigs)
Jackup Supply
199 246 287 303 303 22 21 17 19 20 125 112 79 31 19 60 75 113 163 177 Current 2015 2016 2017 2018
< 15 years old 15-30 years old 30-35 years old > 35 years old
Assumes all rigs ‘On Order’
- r partially
completed including rigs built by Speculators are built, delivered and complete customer acceptance testing
Cumulative # of rigs rolling off contract > 30 years old: 73 116 135 152
30 Speculator 52 Speculator 65 Speculator 66 Speculator 30 Speculator* 52 Speculator* 65 Speculator* 66 Speculator*
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Newbuild Cancellations and Deferrals
Floaters
- Reports suggest more than half of the 29 rigs in SETE Brasil program may
be cancelled
- Atwood delays 2 drillships with 2015 expected deliveries by 18 months
each
- Ocean Rig delays 2 drillships with 2017 expected deliveries by 16 months
each on average Jackups
- 5 jackups ordered by speculators were cancelled since mid-year 2014
- Seadrill delays 8 jackups with 2015/2016 scheduled deliveries by approx.
six months each
- Transocean delays 5 jackups with 2016/2017 expected deliveries by more
than two years each
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Increase in Scrapping and Cold Stacking
18 12 6 2 7 9 2 5 10 15 20 25 30 2Q14 3Q14 4Q14 1Q15 2Q15 Scrapped Cold Stacked
Floaters
1 1 2 4 2 3 3 2 4 6 8 10 12 2Q14 3Q14 4Q14 1Q15 2Q15 Scrapped Cold Stacked
Jackups
Source: IHS-ODS Petrodata as of May 2015; jackups defined as independent leg cantilever rigs; ‘scrapping’ includes scrapped rigs, announced scrapping and rigs converted to non-drilling units
36 scrapped & 20 cold stacked 4 scrapped & 12 cold stacked
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Well Positioned to Manage Through Downturn
- Capital management flexibility
- Highest net income margin among major competitors
- Fleet highgrading
– 5 newbuild rigs under construction with differentiated designs – prior floater upgrade investments benefiting 2015 results – mooring capability to be added to select ENSCO 8500 Series rigs – 19 rigs sold since beginning of 2010; 7 held-for-sale rigs as of 3/31/15
- Global presence and diverse customer base
– operations across six continents – extensive customer relationships: NOCs, Majors, IOCs
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Organic Growth: Newbuild Contracts/Deliveries
2012.75 2013.75 2014.75 2015.75 2016.75 2017.75 2018.75 2019.75
ENSCO DS-7 ENSCO 120 ENSCO 121 ENSCO 122 ENSCO 110 ENSCO DS-9 ENSCO DS-8 ENSCO DS-10 ENSCO 123 ENSCO 140 ENSCO 141 Drillships Premium jackups
2013 2016 2017 2014 2015 2020 2018 2019
5 yrs with Total 5 yrs with Total 3 yrs with ConocoPhillips 3 yrs with ConocoPhillips 2 yrs w/ Wintershall 2 yrs w/ Wintershall 2 yrs with NAM 2 yrs with NAM 2+ yrs with Nexen 2+ yrs with Nexen 3 yrs with Total 3 yrs with Total Delivered & Contracted Under Construction & Uncontracted Under Construction & Contracted 3 yrs with NDC 3 yrs with NDC
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9 11
PREMIUM JACKUPS ULTRA & DEEP WATER DRILLSHIPS MOORED SEMISUBMERSIBLES DYNAMICALLY POSITIONED SEMISUBMERSIBLES
Note: Includes rigs under construction. Excludes managed rigs and rigs in discontinued operations
High Quality Fleet
63 Rig Fleet
3 40
21
U.S. Gulf of Mexico
Ships
3
Semis
6
Jackups
7 Africa
Ships
3
Jackups
1 Europe & Mediterranean
Semi
1
Jackups
11 Middle East
Jackups
11 Asia Pacific
Ships
1
Semi
3
Jackups
7 Brazil
Semis
4 Under Construction
Ships
2
Jackups
3
21
Global Platform
Held for Sale
Ships
1
Semis
4
Jackups
2
22
Contracted Revenue Backlog Diversification
Drillships
42% 29% 29%
North & South America Africa Brazil
29% 13% 21% 15%
Europe & Med Asia Pacific
10%
National Oil Companies Majors Independents
24% 30% 46%
Middle East
12%
Premium Jackups Semis
Note: Contracted revenue backlog as of 31 March 2015
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Uptime = Net Inc. Margin = Customer Satisfaction
Source: Thomson One; sum of trailing eight quarters of net income divided by sum of trailing eight quarters of revenue. Thomson One's data is based on aggregation of information collected from industry equity research analysts, and may not be based on GAAP reported financial data
ESV SDRL DO NE RIG RDC
30.0% 29.6% 19.1% 18.1% 17.7% 15.0%
Net Income Margin
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Rated #1
- Total Satisfaction
- Health, Safety & Environment
- Technology
- Special Applications
- Deepwater Drilling
- Shelf Wells
- Non-Vertical Wells
- Harsh Environment Wells
- North Sea
- Latin America & Mexico
Industry Leader in Customer Satisfaction
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- Record 1Q15 safety
performance as measured by TRIR
- Leading-edge safety
management systems
- Major competitive
advantage; especially versus non-established drillers
Safety, Health & Environment
0.0 0.2 0.4 0.6 0.8 1.0 1.2 2008 2009 2010 2011 2012 2013 2014 YTD 2015
Ensco Industry
Total Recordable Incident Rate
Note: 2015 TRIR for Industry is as of 4Q14
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Capital Management and Financial Position
- Investment-grade credit ratings from Moody’s/S&P; top ratings
among major offshore drillers
- No significant debt maturities until 2Q19
- $1.6 billion of cash and short-term investments
- 31% net debt-to-capital ratio (net of $1.6 billion of cash and
short-term investments)
- $2.25 billion available revolving credit facility
- $8.4 billion of contracted revenue backlog
- Reduced quarterly dividend to improve capital management
flexibility
Note: Cash and short-term investments, net debt-to-capital ratio, revolving credit facility capacity and contracted revenue backlog as of 31 March 2015
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ESV DO NE RDC RIG SDRL BBB+ BBB+ BBB- BBB- BB+ Not Rated
Investment Grade
Credit Ratings
Source: Bloomberg composite credit ratings as of 24 April 2015
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Contracted Revenue Backlog
2Q15 - 4Q15 2016 2017 2018+ $2.8 $2.7 $1.6 $1.3
$ billions
Note: Contracted revenue backlog as of 31 March 2015
$8.4 Billion Total
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Capital Expenditures
2Q15 - 4Q15 2016 2017
1.35 0.40 0.175 TBD TBD 0.175 TBD TBD
Newbuild construction Rig enhancements Sustaining
$ billions
Note: Final rig enhancement and sustaining project capital expenditure budgets for 2016 and 2017 TBD once budgets are completed. Zero capital expenditures for newbuild construction in 2017.
~$1.7B <$1.0B
30 $7 $7 $500 $900 $1,500 $625 $700 $2,250
$0 $300 $600 $900 $1,200 $1,500 $1,800 $2,100 $2,400 $2,700 $3,000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Debt Maturity Profile
2027 2040 $150 $300 2044 Upsized Revolving Credit Facility to $2.25B in Sep. 2014
$ millions
$1,025
Note: As of 16 April 2015. Approximately $200 million of cash as of 31 March 2015 was used to extinguish 3.25% senior notes due 2016 that remained outstanding following first quarter 2015 tender offer and $51 million of aggregate principal amount of MARAD obligations
No significant debt maturities for four years
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- Leader in customer satisfaction – five consecutive years
- Highest net income margin among major competitors
- Best ever total recordable incident rate
- High-quality fleet of floaters and jackups
– 10 year average age for go-forward floater fleet
- 4 year average age for ultra-deepwater fleet
- Technology advantages, e.g. ENSCO 120 Series jackups and Samsung
GF 12,000 drillships
- $8.4 billion of contracted revenue backlog
- Disciplined expense management
- Capital management flexibility
Ensco’s Strengths
Note: Contracted revenue backlog as of 31 March 2015