Investor Presentation. September 2017

Transcription

1 Investor Presentation September 2017

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 numerous 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 and the impact of the economic climate; changes in the offshore drilling market, including fluctuations in supply and demand; variable levels of drilling activity and expenditures in the energy industry; changes in day rates; ability to secure future drilling contracts; cancellation, early termination or renegotiation by our customers of drilling contracts; customer credit and risk of customer bankruptcy; risks associated with fixed cost drilling operations; unplanned downtime; risks related to our joint venture with Saudi Aramco; cost overruns or delays in transportation of drilling units; cost overruns or delays in maintenance, upgrade, repairs, or other rig projects; operating hazards and equipment failure; risks of collision and damage; casualty losses and limitations on insurance coverage; weather conditions in the Company's operating areas; increasing costs of compliance with regulations; changes in tax laws and interpretations by taxing authorities; hostilities, terrorism, and piracy in our areas of operations that may result in loss or seizure of assets or interruption of operations; impairments; a cyber incident which impairs our ability to conduct operations; the outcome of disputes, including tax disputes and legal proceedings; 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 Rowan is a leading offshore contract driller with a proven operational and safety track record 1923 Was the year the Rowan brothers founded the company as a contract drilling business RDC: Listed on the New York Stock Exchange since Years of experience in offshore drilling, starting in the 1940s Total fleet of four drillships and 23 jack-ups*, 27 deployed across the globe ~3,100 Employees globally Percent of our business dedicated to offshore drilling Six recent first place rankings as leading offshore driller for HPHT applications per Energypoint Research * Includes (5) jack-up rigs to be contributed to ARO Drilling JV, excludes Rowan California (cold stacked) and Cecil Provine (will be scrapped) 3

4 Rowan is well positioned to navigate the current challenging market Visible Growth through ARO Drilling Quality Assets and Focus on Demanding Drilling Sustainable Capital Structure Well Positioned for Market Recovery Groundbreaking partnership with Saudi Aramco Visible earnings growth over the next 15+ years Competitively positioned with the largest global user of jack-up rigs Top-tier, well-maintained ultra-deepwater drillship fleet with strong operational track-record Modern, highspecification jack-up fleet strategically positioned in key global markets Experienced and proven workforce; strong processes focused on performance Robust liquidity profile Cash-on-hand covers all maturities through 2023 Undrawn $1.5 billion revolving credit facility, with industry leading maturity Break even costs coming down creating opportunities for more offshore drilling Jack-up market bottoming 7 th generation UDW drillships expected to return to work earlier in recovery 4

5 Visible Growth Through ARO Drilling

6 ARO Drilling: Key Investment Takeaways Partnering with the largest customer for jack-ups in the world in the largest region for jack-ups in the world High utilization for contributed assets (five from Rowan & two from Saudi Aramco) for the remainder of their useful lives Potential opportunity to contract additional assets to ARO Drilling through agreed leasing structure Strong visible organic growth expect twenty newbuilds against long term contracts. Expected returns are commensurate to Rowan s target for similar risk profile opportunities. Newbuild program projected to be self-funding ARO Drilling expected to generate substantial long term cash flow Full details in Rowan s K, dated February 24,

7 ARO Drilling provides visible earnings growth for Rowan over the next 15+ years Please reference Schedules 4-6 of the Shareholders Agreement attached as Exhibit to Rowan s K (pages 80-93) 7

8 Quality Assets and Focus on Demanding Drilling

9 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 six out of the last seven Energypoint Research Inc. surveys Rowan s Demanding Drilling Achievements: 9

10 Rowan has a leading position in high-specification jack-ups Number of Delivered High-specification jack-ups 1 Rowan Noble 10 Seadrill / NADL / SeaMex 8 Maersk Drilling 7 Aban Offshore 4 COSL 4 Ensco 4 Borr Drilling 2 Drilling Company Int. 2 Paragon Offshore 2 Perforadora Mexico 2 Other 9 19 Customers Demand Higher-Specification Rigs Flexibility to address technical needs across diverse wellbore portfolios Focus on achieving lower wellbore costs Comply with 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 1 Approximately 50 additional high-specification jack-ups are currently on order or under construction. Includes data supplied by IHS-Petrodata, Inc. Copyright 2017 and Rowan Companies as of June 19, High-specification jack-ups are defined as jack-ups having 2,000,000+ lb hookload capability 10

11 Of the 169 rigs in the global UDW fleet, few possess the high specifications required for today s demanding market Total Fleet Total 169 % of Global Fleet % of Rowan Fleet Number of global UDW rigs with each key feature Percent of global UDW with each key feature Percent Rowan UDW with each key feature Key features frequently required by customers 1 1,250 ton Hookload Dual BOPs 7-Ram BOP(s) MPD-Ready Equipped for 12,000 ft Water Depth Active Heave Drawworks & Crown Compensation 2 Active Heave Compensating Subsea Crane % 25% 19% 32% 10% 15% 23% 75% 7 th Generation rigs are clearly differentiated from earlier generation rigs. Rowan s drillships are best-in-class among 7 th Generation rigs; uniquely positioned to offer the key features desired by the market. 1. Includes data supplied by IHS-Petrodata, Inc; Copyright 2017; Rowan estimate, Delivered UDW rigs; as of August 22, Rigs equipped with cylinder rigs are considered compliant with this feature. 11

12 Unlike most of its competitors, Rowan s ultra-deepwater fleet is only 7 th generation rigs Breakdown of 33 floaters with 1,250-ton, dual BOP 20% 12% 23% 31% 17% 15% SDRL 1 RIG RDC ESV + ATW NE DO Other 2 Note: Excludes rigs under construction 1 Includes NADL, Seadrill Partners, and Sevan Drilling 2 Includes Fred Olsen, Maersk Drilling, Ocean Rig, Pacific Drilling, QGOG 12

13 We are systematically driving performance across Rowan Major Areas of Focus in Driving Performance Analyzing variance in performance of drilling crews Drive WASTE out of our operations Adopt LEAN philosophy Performance focused Control spend and focus on capital allocation Increase procurement effectiveness Emerging data analytics program Improved maintenance system Optimize personnel spend Preserve talent Improve efficiency of business support functions 13

14 Sustainable Capital Structure

15 USD Millions Our robust balance sheet and highly visible runway bolster our financial health through the cycle Strong balance allows counter-cyclical investment to improve return on capital At June 30, 2017, ~$773 million of debt retired since 4Q 2015, while issuing $500 million of unsecured debt not due until 2025 Attractive debt maturity profile with significant undrawn borrowing capacity available from $1.5B revolver* Current cash balance combined with our undrawn revolver exceeds our total outstanding debt $3,000 $2,500 $2,000 $2,700 $1,500 Current Bond Debt Current Revolver Undrawn Current Cash Balance $1,500 $1,000 $500 $0 $1,200 $621 $398 $500 $400 $400 $ % 4.875% 4.750% 7.375% 5.400% 5.850% // *As of March 24, 2017; 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 All debt is unsecured. 15

16 Relative to its peers, Rowan is well positioned to thrive in the downturn due to its strong balance sheet In USD Billions Maturities and Newbuild Commitments ( ) Cash on Hand To Meet Commitments (2017 to 2021) 0% 8% 20% 33% 43% 5.5x Maturities ( ) Newbuild Commitments $4.2 $1.3 $0.0 $0.2 $0.8 $1.5 $0.5 $1.0 $2.9 No Maturities Before x 0.6x 0.5x DO 1 RDC NE ESV 2 RIG 3 DO 1 RDC NE ESV 2 RIG 3 Maturities and Newbuild Commitments ( ) Cash on Hand To Meet Commitments (2017 to 2023) 13% 33% 24% 33% 68% 1.4x $6.6 Maturities ( ) Newbuild Commitments $ x 0.6x 0.6x $0.2 $0.8 $1.0 $1.5 $0.5 $1.0 $ x DO 1 RDC NE ESV 2 RIG 3 DO 1 RDC NE ESV 2 RIG 3 Source: Bloomberg, CapIQ, Company Filings, IBES, Wall Street Research; market data as of 15-Aug-2017; balance sheet data as of 30-Jun-2017 pro forma for subsequent events. 1 Diamond pro forma $500mm 2025 Notes offering and redemption of 2019 Notes. ² Ensco pro forma Atwood acquisition. Assumes Atwood 2020 Notes redeemed at 101 of par. ³ Transocean pro forma Songa Offshore acquisition. Assumes Transocean assumes Songa Offshore secured Cat-D debt. Assumes Transocean issues a combination of $660mm convertible bonds, $540mm Transocean equity and $480mm in cash to Songa shareholders and non-cat-d Songa debtholders. 16

17 Rowan has an unrelenting focus on improving long-term return on invested capital Rowan always considers capital allocation options, but remains committed to maintaining an attractive credit profile and financial flexibility. During the current challenging business environment, we favor: Preserving Liquidity Currently have a cash balance of approximately $1.2 billion Preserve Liquidity Debt Reduction At June 30, 2017, ~$773 million of debt retired since 4Q 2015, while issuing $500 million of unsecured debt not due until 2025 Opportunistic Investments We continue to evaluate opportunistic investments in assets Corporate transactions should ideally be strategic, accretive, credit enhancing and should not dilute asset quality Investments at attractive prices in the bottom of the cycle should generate superior returns Available Capital Allocation Options Retire Debt Opportunistic Investments Dividends/ Share Repurchases 17

18 Well Positioned for Market Recovery

19 Jack-ups: Throughout the market cycles, newer higher specification drilling units provide higher levels of utilization Worldwide Jack-up Total Utilization by Rig Class 83% of Rowan s active jack-up fleet is High Spec units units 148 units 135 units units IS, MS, MC <300' Ind. Leg Cantilever (IC) 300'IC 350'+ IC High Spec* * Jack-ups with two million pound or greater hookload Includes data supplied by IHS-Petrodata, Inc; Copyright 2017 as of August 29,

20 Floaters: Throughout the market cycles, higher specification drilling units provide higher levels of utilization Worldwide Floater Total Utilization* by Water Depth / Hookload 90% All of Rowan s floaters are 7 th Generation 80% 70% 60% 50% 40% 60 units 41 units 83 units 20 units 30% <5,000' 5,000'-7,499' 7,500'+ / <1,250 tons 7,500'+ / 1,250+ tons Includes data supplied by IHS-Petrodata, Inc; Copyright 2017, as of September 1, 2017 *Excludes harsh environment 20

21 Market Outlook: Although far from a recovery, we are starting to see some improvement Despite recent weakness in crude oil prices, 2017 has been broadly supportive of an increase in drilling activity; however, more favored to onshore shale drilling in North America We believe jack-up demand is likely to steadily increase throughout the remainder of the year Floater demand expected to lag behind jack-ups and bottom in 2018 Most opportunities for Rowan ships commence in Improvements in dayrates not anticipated until later in the decade. Historically, marketed utilization must return to ~85% for pricing power Attrition is needed to help the supply / demand balance 21

22 Visible Growth Rough ARO Drilling Groundbreaking partnership Earnings growth over next 15+ years Quality Assets and Focus on Demanding Drilling Best drillship fleet High-spec jack-up leader Sustainable Capital Structure Strong balance sheet Opportunity for counter-cyclical investments Well Positioned for Market Recovery High specification assets rebound first

23 Investor Relations Contact: Carrie Prati Director, Investor Relations

24 Appendix 24

25 Worldwide marketed* jack-up utilization is 69% Marketed Supply: 465 units US GOM 43% 21 Rigs Mexico 59% 44 Rigs C&S Am 55% 11 Rigs North Sea 72% 46 Rigs Mediterranean 64% 14 Rigs W. Africa 73% 11 Rigs Middle East 70% 164 Rigs India 79% 39 Rigs SE Asia 74% 57 Rigs Australia 1 Rig * Excludes Cold Stacked / Out of Service units Includes data supplied by IHS-Petrodata, Inc; Copyright 2017 as of August 23,

26 YE06 YE07 YE08 YE09 YE10 YE11 YE12 YE13 YE14 YE15 YE16 YE17 YE18 YE19 YE20 YE21 YE22 Jack-ups: Since the downturn began, modern rigs have consistently won the majority of contracts, forcing continued attrition of older rigs Roll-off of Contracted Jack-up Fleet* Contracted Rig Demand (Actual) Contracted Rig Demand (Estimated) Post 1996 JUs - signed AFTER downturn Pre 1996 JUs - signed AFTER downturn Post 1996 JUs - signed BEFORE downturn Pre 1996 JUs - signed BEFORE downturn From 2006 until the market downturn in 2014 newbuild deliveries steadily displaced older rigs Since the downturn began, few newbuilds have delivered but modern rigs have continued to win the contracting battle Current Jack-up Fleet Composition Cold Stacked Post 1996 JUs Warm/Hot Stacked JUs Under Construction Pre 1996 JUs Under Contract 99 Under Construction 643 Current Total Supply * Includes data supplied by IHS-Petrodata, Inc., Copyright 2017; and Rowan Analysis; as of August 22, Downturn is since September 1, Attrition Progress Total 44% of all JUs are older than 20 years; they represent a waning percent of the contracted rigs, currently 44% As the market recovers we expect additional newbuilds to enter the market, continuing to displace older rigs However, for undelivered newbuilds to enter the market many will require a change of ownership 26

27 Worldwide marketed* UDW** utilization is 74% Marketed Supply: 128 units USA 72% 32 Rigs Mexico 50% 4 Rigs E. Canada 1 Rigs C&S Am 84% 32 Rigs North Sea 89% 9 Rigs Mediterranean 71% 7 Rigs SE Asia 54% W. Africa 75% 24 Rigs 13 Rigs Far East 50% 4 Rigs *Excludes Cold Stacked / Out of Service units **UDW includes semis and drillships with a rated water depth of Includes data supplied by IHS-Petrodata, Inc; Copyright 2017 as of August 23,

28 YE06 YE07 YE08 YE09 YE10 YE11 YE12 YE13 YE14 YE15 YE16 YE17 YE18 YE19 YE20 YE21 YE22 Today Floaters: As modern floaters have entered the market, they have displaced older rigs, forcing significant attrition Roll-off of Contracted Floater Fleet* Contracted Rig Demand (Actual) Contracted Rig Demand (Estimated) Post 1996 floaters - signed AFTER downturn Pre 1996 floaters - signed AFTER downturn Post 1996 floaters - signed BEFORE downturn Pre 1996 floaters - signed BEFORE downturn From 2006 until the market downturn in 2014 newbuild deliveries steadily displaced older rigs Since the downturn began, few newbuilds have delivered but modern rigs have continued to win the contracting battle Current Floater Fleet Composition Cold Stacked Pre 1996 floaters Warm/Hot Stacked Post 1996 floaters Floaters under construction Contracted Under Construction 321 Current Total Supply * Includes data supplied by IHS-Petrodata, Inc., Copyright 2017; and Rowan Analysis; as of August 22, Downturn is since September 1, Attrition Progress Total 25% of all floaters are older than 20 years; they represent a waning percent of the contracted rigs, currently 27% New contracts expected to favor modern rigs; older rigs will be much less competitive, unless they have a niche 28

29 Key features frequently required by customers Few rigs possess the specifications required for today s demanding market requirements Total Fleet Total 169 % of Global Fleet % of RDC Fleet Number of global UDW rigs with each key feature Percent of global UDW with each key feature Percent Rowan UDW with each key feature Key Feature Description 1,250 ton Hookload 49 29% Today s deeper, more highly pressured wells require longer and heavier casing strings. Combined, these driving forces yield casing strings that exceed the capacity of 6 th generation rigs (i.e., greater than 1,000 tons). Further, running BOPs in elevated sea states can also produce hook load requirements exceeding 1,000 tons. Dual BOPs 43 25% Between well maintenance becomes an offline activity with dual BOPs, saving several days of nonproductive time. Further, if there is an unplanned BOP pull, the secondary BOP can be run while repairs are performed on the other in an unrushed manner. This limits downtime to several days, instead of several weeks or, in severe cases, months. 7-Ram BOP(s) 32 19% Having a seventh ram allows the installation of an inverted ram at the bottom of the BOP to pressure up against when testing the other rams. This eliminates the need to run a separate pressure testing apparatus down to the BOP. For exploration wells, this dramatically reduced the nonproductive time spent testing the BOP while it is subsea. Alternatively, the seventh ram can also be configured for optimized changeover from drilling to completion operations. MPD-Ready 54 32% Many wells require very precise pressure control that can only be achieved by the closed loop system that Managed Pressure Drilling provides. Further, this closed loop system also provided dramatically increased safety by providing advanced kick detection, identifying well control issues long before they become a threat to the rig, it s crew or the environment. Rowan rigs were designed for MPD from the beginning, with utilities and handling equipment neatly incorporated, translating into expedient installation and higher reliability than the retrofit solutions in many competitive rigs. Equipped for 12,000 ft Water Depth 17 10% Several of today s frontier drilling locations are in water depths exceeding 12,000 feet. To access these depths in a safe and efficient manner, significant outfitting upgrades are necessary. Many of these upgrades are difficult or prohibitively expensive to incorporate after a rig has been constructed. Rowan s rigs are fully equipped for these extreme depths. Active Heave Drawworks & Crown Compensation 25 15% 75% Active heave drawworks allows very precise high capacity control over suspended loads while the vessel heaves up and down in response to sea conditions. This is especially critical while setting casing in the well or setting the BOP on the well head. Having a secondary crown-mounted compensation system allows enhanced safety during operations where the rig is locked to bottom such as completions, drill stem tests, and coiled tubing operations. Active Heave Compensating Subsea Crane 39 23% High capacity subsea cranes that have active heave compensation allow the offline installation of subsea architecture (e.g., subsea trees) in a very precise manner, preventing damage to critical subsea components. Using a crane to do this frees up the drilling centers to continue progressing the construction of the well and can eliminate the cost of hiring a subsea construction vessel. 29

30 USD millions Considerable improvement in operational performance and EBITDA margins over the last three years -43% 1,145 Operational Performance has improved while costs have been reduced 648 From initial 2015 guidance issued in November 2014 Current*: % % 128 Best safety performance on record in 2015 and 2016 Downtime held essentially flat while delivering our final two drillships Drilling Expense SG&A Non-newbuild Capex Midpoint of Initial Guidance for 2015 Midpoint of Current Guidance for 2017 $ in millions * As of August 2, 2017; some portion of Drilling Expense reduction is due to the formation of the new drilling company with Saudi Aramco 30

31 Rowan Cost & CAPEX Guidance as of August 2, 2017 Key metrics: Jack-up Operational Downtime (unbillable) Drillship Operational Downtime FY 2016 Actual 1Q 2017 Actual 2Q 2017 Actual 3Q 2017 Projected FY 2017 Projected 1.4% 2.6% 1.1% ~2% ~2%.1% 0% 0% ~5% ~5% Contract Drilling Expenses (excluding rebills) $950 MM $166MM $165MM $165MM - $175MM $635 - $660 MM (1)(2) SG&A $102 MM $24MM $22MM Mid-High $20sMM $95 - $100MM (2) Depreciation $403 MM $99MM $102MM Not Guided ~$400MM Interest Expense, Net of Capitalized Interest $156 MM $40MM $39MM Not Guided ~$155MM Effective Tax Rate (normalized) Low single digits Income Tax Expense $30MM Income Tax Expense $21MM Not Guided Income Tax Expense Low $40sMM Capital Expenditures $118 MM $31MM $26MM Not Guided $125 - $130MM (1) Includes management fees that will be paid to ARO Drilling (2) Includes costs associated with transition services 31