Jefferies 2016 Energy Conference

Transcription

1 Jefferies 2016 Energy Conference Mark A. Keller, EVP Business Development November 30,

2 Forward-Looking Statements Statements herein that are not historical facts are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements as to the expectations, beliefs and future expected business, financial and operating performance and prospects of the Company. These forward-looking statements are based on our current expectations and are subject to certain risks, assumptions, trends and uncertainties that could cause actual results to differ materially from those indicated by the forward-looking statements. Among the factors that could cause actual results to differ materially include oil and natural gas prices, the level of offshore expenditures by energy companies, variations in energy demand, changes in day rates, cancellation, early termination or renegotiation by our customers of drilling contracts, risks associated with fixed cost drilling operations, cost overruns or delays in transportation of drilling units, cost overruns or delays in maintenance and repairs, cost overruns or delays for conversion or upgrade projects, operating hazards and equipment failure, risks of collision and damage, casualty losses and limitations on insurance coverage, customer credit and risk of customer bankruptcy, conditions in the general economy and energy industry, weather conditions and severe weather in the Company s operating areas, increasing complexity and costs of compliance with environmental and other laws and regulations, changes in tax laws and interpretations by taxing authorities, civil unrest and instability, terrorism, piracy and hostilities in our areas of operations that may result in loss or seizure of assets, the outcome of disputes and legal proceedings, effects of the change in our corporate structure, and other risks disclosed in the Company s filings with the U.S. Securities and Exchange Commission. Each forward-looking statement speaks only as of the date hereof, and the Company expressly disclaims any obligation to update or revise any forward-looking statements, except as required by law. 2

3 Company Overview & Investment Highlights Market Dynamics Delivering Shareholder Value

4 Rowan has evolved into a pure play, high-specification offshore driller 4

5 Rowan is well positioned to navigate the current challenging market and capitalize on investments to dramatically improve our return on capital Rowan is Company well positioned Overview to navigate the current Investment challenging Highlights market and capitalize on investments to dramatically improve our return on capital RDC: NYSE-listed ~3,100 direct employees worldwide (1) 30 offshore drilling units 4 UDW (2) drillships 26 Jack-ups 19 High-Specification (3) 7 Premium Groundbreaking partnership with Saudi Aramco ensures long term growth Competitive differentiation in drilling demanding wells Modern high-specification fleet strategically positioned in global markets Experienced and proven workforce & processes focused on performance Backlog diversified among premium customer base, geographic regions, and asset types Strong & flexible financial position (1) Approximate value as of September 30, 2016 (2) Ultra-deepwater (UDW) refers to floating drilling rigs rated for water depths of 7,500 feet or greater (3) High-specification defined as rigs with a two million pound or greater hookload capacity 5

6 1 COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING SHAREHOLDER VALUE Groundbreaking partnership with Saudi Aramco ensures long-term growth 6

7 1 COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING SHAREHOLDER VALUE Groundbreaking partnership with Saudi Aramco ensures long-term growth The new company benefits from the partners unique contributions Saudi Aramco Rowan Demand Certainty Through a long-term relationship with Saudi Aramco Global drilling experience, best-in-class performance and technical expertise World Class Drilling Expertise 2. Scale & Growth Benefit from economies of scale by providing Saudi Aramco with a significant portion of its rig requirements New Company Acquire Saudi built rigs and support the training and development of a local drilling workforce 4. Partnership in Local Development 7

8 1 COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING SHAREHOLDER VALUE Groundbreaking partnership with Saudi Aramco Key details (1 of 2) Scope Rig Contributions and Matching Contributions Rowan and Saudi Aramco will form a 50/50 joint venture to own and operate jack-up drilling rigs in Saudi Arabia. In 2017, Rowan contributes the Gilbert Rowe, the Bob Keller, and the J.P. Bussell, related inventory and local shorebase operations; Saudi Aramco contributes two rigs, related inventory and additional cash to make up the difference in value of asset contributions between the partners. In late 2018, Rowan contributes the Hank Boswell and the Scooter Yeargain, as they complete their current contracts, and Saudi Aramco will contribute equivalent value. The new company will manage Rowan s existing rigs until current contracts expire, when the new company will lease the rigs from Rowan as needed. Cash Capital Contributions Both partners intend for the new company to be self and externally funded. No additional equity injections are expected (although both Saudi Aramco and Rowan remain fully committed to the success of the new company). Financials and Expected Returns Both partners are committed to progressively implementing efficiencies and optimizing costs to improve profitability over time. Expected returns are commensurate to Rowan s target for similar risk profile opportunities. 8

9 1 COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING SHAREHOLDER VALUE Groundbreaking partnership with Saudi Aramco Key details (2 of 2) Newbuild Strategy The new company plans to order up to 20 rigs to be delivered over ten years beginning as early as 2021 to meet base load offshore drilling demand in the Kingdom. Rig purchases will be supported by contracts from Saudi Aramco as customer, at defined returns commensurate to similar risk profile opportunities. Governance Saudi Aramco and Rowan will each own 50%, with proportional voting rights and Board representation. The new company will operate independently with a separate dedicated management team, ensuring an arm s length relationship. Management Rowan will nominate CEO and head of operations; Saudi Aramco will nominate Chairman and CFO. 9

10 2 Competitive: Rowan is focused on demanding drilling services Our mission is to be recognized by our customers as the most efficient and capable provider of demanding contract drilling services Rowan ranks #1 among offshore drillers for HPHT applications in five out of the last six Energypoint Research Inc. surveys Rowan s Demanding Drilling Achievements: 10

11 3 Global: Rowan s fleet is strategically positioned in key markets North Sea 6 JU Harsh environment HP/HT market Super Gorilla / N-Class well suited US Gulf of Mexico 2 JU; 4 UDW HP/HT Deep Gas Key location for demanding UDW Middle East 13 JU Most active jack-up region in the world Central & South America 3 JU Demanding environmental conditions Featuring: 4 UDW Drillships 19 High-Spec Jack-ups 5 Premium Jack-ups 11 Note: Excludes two cold-stacked older jack-ups

12 3 High-Specification: Rowan has a leading position in high-spec jack-ups 12

13 3 High-Specification: Rowan has a leading position in high-spec jack-ups Number of Delivered High-Specification Jack-ups * 19 Rowan High-Spec Jack-ups Customers Demand Higher-Specification Rigs Drilling challenging wellbore designs Focused on achieving lower wellbore costs Higher regulatory standards Rowan specializes in rigs that have: 2,000,000+ lb hookload capability Rugged and reliable legs and jacking systems Efficient, high pressure drilling systems * Approximately 50 additional high-specification jack-ups are currently on order or under construction. Includes data supplied by IHS-Petrodata, Inc. Copyright 2016 and Rowan Companies as of October 31,

14 3 High-Specification: Rowan s ultra-deepwater drillships are best-in-class 14

15 3 High-Specification: Rowan s ultra-deepwater drillships are best-in-class Few rigs possess the specifications required for today s demanding wells and pending regulations Best-in-Class Specifications: 1,250 ton hook load Dual 7-ram blowout preventers Managed Pressure Drilling capable Advanced Riser Gas Handling 12,000 ft water depth equipped 221 Under 20% of UDW Rigs* IMO Tier III emissions compliance All UDW 750 tons 1,000 tons 1,250 tons Single BOP 1,250 tons Dual BOP * Includes data supplied by IHS-Petrodata, Inc; Copyright 2016; Rowan estimate, includes newbuilds; as of August 16,

16 4 Proven: Rowan has an experienced workforce and established processes 93-year history of operating excellence Culture of continuous improvement Experienced employees with proven industry leadership Strong commitment to performance delivering safe, reliable and efficient operations for our customers 16

17 5 COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING SHAREHOLDER VALUE Backlog Diversified: Rowan has solid backlog with diversity of customers, geographic regions, and asset types Total backlog of $2.2B* that extends to 2024 Contract Backlog by Region & Asset Type 2% 6% 11% Rowan has key competitive advantages in adding new backlog: 31% 50% Solid track record as a capable and efficient driller of demanding wells Modern, high specification fleet Middle East Deepwater Norway Trinidad UK Contract Backlog by Customer Type Deep customer relationships Strong financial counterparty to customers Majors / Independents 50% NOCs 50% Over 80% of backlog is with NOCs or investment grade customers 17 * Backlog as of October 18, 2016

18 6 COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING SHAREHOLDER VALUE Strong Financial Position: In an uncertain near-term market, having long-term liquidity visibility provides Rowan with a clear advantage Rowan has the longest visible runway of the publicly traded offshore drillers Rowan s cash balance of $1.2+ billion exceeds all debt maturities through 2021 Many peer group revolving credit facilities will expire prior to significant debt maturities and capital commitments RDC DO ESV NE RIG ATW PACD SDRL ORIG $12,000 N/A Maturity of Revolving Credit Facilities for Peer Group Total Peer Group Debt Maturities and Newbuild Commitments* Rowan Debt Millions $8,000 $4,000 Peer Group Debt & Newbuild Commitments $ * Source: FactSet, Company Filings as of 2Q2016 except ESV, as of October 4, 2016; includes Newbuild Capex Commitments and Debt Maturities for DO, ATW, NE, PACD, ESV, ORIG, RIG, SDRL 18

19 6 Strong Financial Position: Our robust balance sheet and industryleading liquidity runway assure our financial health through the cycle Strong balance sheet provides the ability to invest counter-cyclically to significantly improve our return on capital Retired $150 million of debt since 4Q 2015, eliminating $10 million/year in interest payments Attractive debt maturity profile with significant untapped borrowing capacity available from $1.5B revolver* Current cash balance combined with our untapped revolver exceeds our total outstanding debt Millions COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING SHAREHOLDER VALUE $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 $358 $ % $60 $150 $1,289 $700 * As of November 1, 2016; availability under the facility is $1.5 billion through January 23, 2019, declining to $1.44 billion through January 23, 2020, and to approximately $1.29 billion through the maturity in % 4.875% $400 $400 $ % 5.400% 5.850% Bond Debt Revolver Due 19

20 Company Overview & Investment Highlights Market Dynamics Delivering Shareholder Value

21 As oil prices recover and long-term service contracts roll off, deflated supply chain costs will make incremental investment more attractive Macro Fundamentals Improving: Significant number of projects deferred in recent years; global oil demand increasing; spare production capacity decreasing 2017 E&P Capital Spending Flat: Indications are that capital spending will be flat with 2016 An increasing amount of spending will be dedicated to incremental investments Direction for next year s E&P spending Relative share of budgets 21 Source: Pareto E&P Survey 2016, dated August 16, 2016

22 Investment break-even levels for deepwater have become competitive with other options Barclays: Statoil recently mentioned a deepwater breakeven of $41/bbl with Shell guiding close to $45/bbl McKinsey: Cost compression will continue to push deepwater costs lower making most deepwater projects economical at an oil price between $50 and $60. Scotia Howard Weil: While some peers are exiting or de-emphasizing Deepwater, RDS has an attractive suite of assets located primarily in two low breakeven basins (Gulf of Mexico & Brazil). Pre-FID projects have a breakeven of around $45/bbl with some pre-salt Brazil trending below $40/bbl. Morgan Stanley: "$60/bbl for 6 months was generally regarded as what was necessary to get deepwater activity to pick up. Break-even reported for major offshore projects Source: Pareto E&P Survey 2016, dated August 16,

23 Floaters: Throughout the market cycles, higher specification drilling units provide higher levels of utilization Worldwide Floater Total Utilization by Water Depth / Hookload 100 % units units 87 units 39 units 40 <5,000' 5,000'-7,499' 7,500'+ / <1,250 tons 7,500'+ / 1,250+ tons Includes data supplied by IHS-Petrodata, Inc; Copyright 2016, as of November 1,

24 Floaters: In 2017, there is a substantial roll off of the current floater contracts; we believe this will force attrition of remaining older rigs Roll-off of Contracted Floater Fleet Contracted Rig Demand (Actual) Contracted Rig Demand (Estimated) Post Existing Contracts Pre Existing Contracts 2017 will bring a dramatic increase in roll-offs of contracts signed in the 2011 to 2014 up cycle Potential Floater Supply Attrition? YE06 YE YE08 Total Current Supply YE09 YE10 YE11 YE12 Stacked Pre 1996 YE13 YE14 Contracted Pre-1996 Cold Stacked Post 1996 Pre-1996 Floaters Post-1996 Floaters Floaters Under Construction Potential Newbuild Cancellations * Includes data supplied by IHS-Petrodata, Inc., Copyright 2016; and Rowan Analysis; as of August 18, 2016 YE15 Today YE 16 YE 17 YE 18 YE 19 YE 20 YE 21 YE 22 YE 23 YE YE 25 Projected Future Supply Range 29% of all floaters are older than 20 years; they currently represent 28% of working floaters New contracts will favor modern rigs; older rigs will be much less competitive, unless they have a niche 24

25 Jack-ups: Throughout the market cycles, newer higher specification drilling units provide higher levels of utilization Worldwide Jack-up Total Utilization by Rig Class 100% units 116 units 147 units 140 units units IS, MS, MC <300'IC 300'IC 350'+ IC High Spec* * Jack-ups with two million pound or greater hookload Includes data supplied by IHS-Petrodata, Inc; Copyright 2016 as of November 1,

26 Jack-ups: In 2017 there is a substantial roll off of the current jack-up contracts; we believe this will force attrition of older rigs Roll-off of Contracted Jack-up Fleet YE06 YE YE08 YE09 Total Current Supply YE10 YE11 YE12 Stacked Pre 1996 YE13 YE14 YE15 Contracted Pre 1996 Today YE 16 YE 17 Cold Stacked Post 1996 Contracted Rig Demand (Actual) Contracted Rig Demand (Estimated) Post 1996 JUs - Existing Contracts Pre 1996 JUs - Existing Contracts YE 18 Pre-1996 JUs Post-1996 Jus JUs Under Construction Potential Newbuild Cancellations Projected Future Supply Range 2017 will bring a dramatic increase in roll-offs of contracts signed in the 2011 to 2014 up cycle 45% of all JUs are older than 20 years; they currently represent 46% of working JUs Fewer niches for older rigs to hide than in floater market Many newbuilds will require a change of ownership before they can be marketed effectively * Includes data supplied by IHS-Petrodata, Inc., Copyright 2016; and Rowan Analysis; as of 18-AUG- 2016, includes only independent leg, cantilevered units. YE 19 YE 20 YE 21 YE 22 YE 23 YE 24 YE 25 26

27 Company Overview & Investment Highlights Market Dynamics Delivering Shareholder Value

28 Rowan has three company priorities to deliver shareholder value Our customers want: Safe, reliable & efficient operations Procedural discipline and management of operational risk Solid counterparties Our employees want: To be part of a winning team Some stability in a rough market A company willing to develop and challenge them Our shareholders want: Thoughtful capital allocation to drive strong returns Exposure to a driller with a sustainable capital structure 28

29 We are focused on improving Rowan s return on invested capital The improvements we are making now will deliver results in the short and long run Control spend and focus on capital allocation Reduce drilling expense by improving procurement effectiveness: centralize and optimize all spend Strong inventory control through rigorous data analytics Implementing a fleet-wide state-of-the-art maintenance system for improved reliability and to optimize maintenance spending Much of our cost is personnel-related Preserve key talent through high-grading of onshore and offshore workforce; use of an aggressive bump back strategy to preserve our talent in this downturn Reduce overhead costs (SG&A and a portion of drilling expense) by improving the efficiency and cost of business support functions Proactively address organizational health to counter negative aspects of the downturn Visible Leadership; lead from the front on cost cutting with pay cuts of executives Continuously assess Organizational Health; continue to develop future leaders Create Targeted Initiatives to improve alignment, execution, and renewal of key business processes. Engage employees in these improvement initiatives. 29

30 Investor Contacts: Chris Pitre VP, Investor Relations and Corporate Development Carrie Prati Manager, Marketing and Investor Relations