Howard Weil Conference Presentation. March 2015

Transcription

1 Howard Weil Conference Presentation March

2 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 of the Securities Exchange Act of 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 regarding expected financial performance and return of capital, effective tax rate, day rates and backlog; 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 or suspension 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; 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 our most recent annual report on Form 10-K, which is available on the SEC s website at or on the Investor Relations section of our website at 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. 2

3 Profile #1 in customer satisfaction five consecutive years Highest net income margins among major competitors Best ever total recordable incident rate in 2014 High-quality fleet of floaters and jackups Broad diversification: customer, geography, rig type Capital management flexibility $1.4 billion of cash and short term investments $2.25 billion revolving credit facility investment grade credit ratings $9.7 billion of contracted revenue backlog no debt maturities through 1Q19 following the expected completion of the redemption of 2016 notes outstanding and MARAD obligations 2%+ dividend yield 3

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 Capital expenditures will decline 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 should lead to more retirements and stacking, especially as rigs approach 30/35 year surveys Some newbuilds being cancelled and others being delayed 4

5 Declining Commodity Prices and Increasing Volatility 20% 10% 0% -10% -20% -30% -40% -50% -60% Brent WTI Source: Thomson One; commodity prices indexed to 31 December 2013 close prices; data through 11 March

6 Ensco s Proactive Fleet Management 2Q14 Moved five floaters to held for sale to proactively reduce expenses; one 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 6

7 $546 million cash flow from operating activities 98% operational utilization for jackups 90% operational utilization for floaters $3.9 billion total non-cash impairments $3.0 billion goodwill $925 million asset Total debt-to-capital ratio increased to 42% 4Q14 Financial Results 7

8 Additional Actions Taken in Response to Market Downturn Reduced quarterly dividend to $0.15 per share to improve capital management flexibility during downturn Decrease operating expenses by cold stacking four rigs in continuing operations three jackups in U.S. Gulf of Mexico and ENSCO 8502 with limited near-term contracting opportunities Reduce offshore discretionary compensation and onshore support costs 9% unit labor cost decrease beginning 2Q15 for offshore compensation 15% Reduction in Force for onshore personnel including corporate staff o $27 million annualized savings beginning in 2Q14 Negotiate with vendors and suppliers to lower costs Use proceeds from 1Q15 debt offering to complete expected redemption of $1.1 billion of debt maturities 8

9 Current Market Floaters Jackups Active Fleet Contracted Uncontracted Stacked Marketed Rigs 9 22 Total % Contracted 84% 81% Newbuilds Under Construction On Order / Planned Total Contracted 55% 7% Uncontracted 45% 93% Source: IHS-ODS Petrodata as of March 2015; competitive marketed floaters and jackups; jackups are independent leg cantilever rigs 9

10 Newbuild Jackup Order Book 7% 8 Contracted, Established Drillers 116 Total 29% 34 Uncontracted, Established Drillers 58 Uncontracted, Non-Established Drillers 50% 16 On Order, All Uncontracted 14% Source: IHS-ODS Petrodata as of March 2015; marketed competitive jackups 10

11 Newbuild Jackup Order Book Uncontracted, Established Drillers On Order, Non-Established Drillers Contracted Non Established Drillers Under by Shipyard Constr. On Order Total China China Merchants Heavy Industry Shanghai Waigaoqiao Shipbuilding Yantai CIMC Raffles 7 7 Other Subtotal Singapore & Middle East Keppel FELS, Singapore UAE & Dubai 3 3 Subtotal Total On Order, Established Drillers Uncontracted, Non-Established Drillers 2 Source: IHS-ODS Petrodata as of March 2015; marketed competitive jackups 11

12 Jackup Supply Mar Mar Mar Mar < 15 years old years old years old >= 35 years old Source: IHS-ODS Petrodata as of March 2015; marketed competitive independent leg cantilever jackups 12

13 Newbuild Floater Order Book 82 Total 21% 17 Contracted 17 SETE Brasil, Under Construction 21% 32% 26 Uncontracted, Under Construction 12 SETE Brasil, On Order 10 Uncontracted, On Order 14% 12% Source: IHS-ODS Petrodata as of March 2015; marketed competitive floaters 13

14 Newbuild Floater Order Book Under SETE Brasil by Shipyard Constr. On Order Total Estaleiro Atlantico Sul Estaleiro Jurong Aracruz BrasFELS, Angra dos Reis Estaleiro Enseada do Paraguacu Ecovix Engevix, Rio Grande do Sul Total Uncontracted, Under Construction SETE Brasil, On Order Contracted Uncontracted, On Order SETE Brasil, Under Construction Source: IHS-ODS Petrodata as of March 2015; marketed competitive floaters 14

15 Floater Supply Mar Mar Mar Mar < 15 years old years old years old >= 35 years old Source: IHS-ODS Petrodata as of March 2015; marketed competitive floaters 15

16 Newbuild Cancellations and Deferrals Jackups 6 jackups ordered by non-established drillers were cancelled in 2H14 Seadrill delayed 8 jackups with 2015/2016 scheduled deliveries by a total of 44 months Transocean delayed 5 jackups with 2016/2017 expected deliveries by ten months on average Floaters Reports suggest up to 12 rigs in SETE Brasil program may be cancelled Atwood delayed 2 drillships with 2015 expected deliveries by six months each 16

17 Increase in Rig Retirements and Cold Stacking Floaters Jackups Q14 2Q14 3Q14 4Q14 YTD Q14 2Q14 3Q14 4Q14 YTD15 Retired Cold Stacked Retired Cold Stacked Source: IHS-ODS Petrodata; includes announced retirements (scrapped rigs and rigs converted to non-drilling units) 17

18 Well Positioned to Manage Through Downturn Capital management flexibility Highest net income margin among major peers + further expense reductions Fleet highgrading 7 newbuild rigs with differentiated designs prior floater upgrade investments expected to benefit 2015 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 12/31/14 Global presence and diverse customer base operations across six continents extensive customer relationships: NOCs, Majors, IOCs 18

19 Organic Growth: Newbuild Contracts/Deliveries ENSCO DS-7 ENSCO 120 ENSCO 121 ENSCO yrs with Total 2+ yrs with Nexen 2 yrs w/ Wintershall 2 yrs with NAM Contracted ENSCO DS-8 ENSCO DS-9 5 yrs with Total 3 yrs with ConocoPhillips ENSCO 110 ENSCO DS-10 ENSCO 123 ENSCO 140 ENSCO 141 Drillships Premium jackups 19

20 High Quality Fleet 63 Rig Fleet ULTRA & DEEP WATER DRILLSHIPS DYNAMICALLY POSITIONED SEMISUBMERSIBLES MOORED SEMISUBMERSIBLES PREMIUM JACKUPS Note: Includes rigs under construction and excludes managed rigs and rigs in discontinued operations 20

21 Global Platform Europe & Mediterranean U.S. Gulf of Mexico Ships 3 Semi 1 Jackups 11 Semis 6 Jackups 7 Middle East Africa Jackups 9 Ships 3 Brazil Semis 4 Jackups 1 Under Construction Ships 3 Jackups 4 Asia Pacific Semi 3 Jackups 8 Held for Sale Ships 1 Semis 4 Jackups 2 21

22 Backlog Diversification 30% 30% Semis Premium Jackups 25% 29% Independents National Oil Companies 40% Drillships 13% Europe & Med 11% Asia Pacific North & South America 24% Majors 46% 27% Africa Middle East Brazil 10% 15% Note: Contract revenue backlog as of 31 December 2014 plus drilling contracts signed and shortened through 23 February

23 Uptime = Net Inc. Margin = Customer Satisfaction Net Income Margin 30% 28% 19% 18% 18% 15% ESV SDRL DO NE RIG RDC Source: Thomson One. 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. For our reported net income and revenue, please see our Annual Report on Form 10-K filed on March 2,

24 Industry Leader in Customer Satisfaction 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 24

25 Safety, Health & Environment Total Recordable Incident Rate Leading-edge safety management systems Major competitive advantage; especially versus non-established drillers Ensco Industry Note: 2014 TRIR for Industry is as of 4Q14 25

26 Capital Management and Financial Position Reduced quarterly dividend to $0.15 from $0.75 Investment-grade credit ratings from Moody s/s&p $9.7 billion of contracted revenue backlog 42% total debt-to-capital ratio $1.4 billion of cash and short-term investments $2.25 billion available revolving credit facility No debt maturities through 1Q19 Raised $1.1 billion of 10-year and 30-year notes and completed tender offer for $855 million of 2016 notes in 1Q15; intend to use remaining proceeds to redeem 2016 notes not tendered and repay MARAD obligations Note: Completed tender offer for $855 million of 2016 notes on 13 March 2015 and issued irrevocable notice of redemption to redeem remaining 2016 notes on 11 April 2015; see prospectus supplement filed 5 March 2015 for additional details on debt offering 26

27 Contracted Revenue Backlog $ billions $3.9 $2.8 $1.7 $ Note: Contract revenue backlog as of 31 December 2014 plus drilling contracts signed and shortened through 23 February

28 Capital Expenditures $ billions ~$2.1B 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 <$1.0B 1.60 TBD TBD 0.40 TBD TBD Newbuild construction Rig enhancements Sustaining 28

29 Proforma Debt Maturity Profile $ millions $3,000 Upsized Revolving Credit Facility Commitments to $2.25B in Sep $2,700 $2,400 $2,100 Raised $1.25B in Sep. 2014; Raised an additional $1.1B in Mar to redeem $1.0B of 2016 notes and repay MARAD obligations (see 2015 through 2020) $1,800 $1,500 $2,250 $1,500 $1,200 $900 $600 $300 $0 $1,020 $900 $700 $625 $500 $35 $5 $5 $5 $ $150 $ $400 $ Note: Completed tender offer for $855 million of 2016 notes on 13 March 2015 and issued irrevocable notice of redemption to redeem remaining 2016 notes on 11 April 2015; see prospectus supplement filed 5 March 2015 for additional details on debt offering 29

30 Leader in customer satisfaction five consecutive years Highest net income margin among major competitors Best ever total recordable incident rate in 2014 High-quality fleet of floaters and jackups 10 year average age for go-forward floater fleet o 4 year average age for ultra-deepwater fleet Technology advantages, e.g. ENSCO 120 Series jackups and Samsung GF 12,000 drillships $9.7 billion of contracted revenue backlog Disciplined expense management Ensco s Strengths Capital management flexibility 30

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