Investor Presentation September 2015

Transcription

1 Investor Presentation September

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 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 or renegotiation by our customers of drilling contracts, letter agreements or letters of intent or the exercise of early termination provisions, risks associated with fixed cost drilling operations, cost overruns or delays on shipyard repair, construction or transportation of drilling units, maintenance and repair costs, costs 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 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 Conclusion

4 Company Overview & Investment Highlights Market Dynamics Delivering Shareholder Value Conclusion

5 Rowan Has Evolved into a Pure Play, High-Spec Offshore Driller COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS 5

6 Rowan Overview & Investment Highlights As a result of our timely strategic decisions and investments, Rowan is well positioned to navigate the current challenging market COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS Investment Highlights Competitive differentiation in drilling demanding wells High-specification (1) fleet well positioned in key industry segments Solid contract backlog diversified among premium customer base, geographic regions and asset types Strong financial position Company Overview RDC: NYSE-listed Investment Grade (BBB- / Baa3) 3,708 direct employees worldwide (2) 32 offshore drilling units 4 UDW drillships 28 Jack-ups (3) 19 High-Spec (1) and 8 Premium 5 Experienced and loyal workforce (1) High-specification defined as rigs with a two million pound or greater hook-load capacity (2) As of August 11, 2015 (3) Includes one cold stacked commodity jack-up 6

7 1 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 COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS Examples of demanding wells drilled by Rowan Ekofisk West Franklin Forties Field Demanding Drilling Requirements achieved by Rowan: Temperatures up to 450 F Drilling depths beyond 30,000 ft. Pressures exceeding 20,000 psi Hookloads exceeding 2,000,000 lbs. Ultra Harsh Environments JU water depths exceeding 400 ft. Wil-K Blackbeard Jackdaw Al-Shaheen Extended Reach Gas North Platte Heidelberg Rowan ranks #1 among offshore drillers for HPHT applications four out of the last five Energypoint Research Inc. surveys 7

8 2 Rowan Has a Leading Position in High-Spec Jack-ups COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS High-Specification Jack-up Fleet Well Positioned to Outperform 2,000,000+ lb hookload capability Rugged and reliable legs and jacking system High pressure drilling systems Backlog extending into 2024 Valued jack-up customers 8

9 2 Rowan Ultra-Deepwater Drillships are Best-in-Class COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS Best-in-class drillships, all on contract Dual, redundant sevenram BOPs 1,250 ton hook load Designed and equipped for 12,000 foot water depth All four contracted into 2017 and beyond Valued UDW customers 9

10 2 Rowan s Fleet Strategically Positioned in Global Markets COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS 10

11 3 Rowan has Solid Backlog with Diversity of Customers, Geographic Regions, and Asset Base Contract Backlog by Region & Asset Type USD Billions 16% 1% 4% 3% 0% 0% 43% COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS Contract Backlog by Customer Type Majors / Independent 67% NOCs 33% Note: Approximately 2/3 of our backlog is with NOCs or investment grade customers 34% Contract Backlog by Year USD Millions Deepwater Norway UK Tunisia Middle East Trinidad Southeast Asia Gulf of Mexico 2,000 1,500 1,000 Total backlog of $4.4B that extends to Current Rowan contract backlog as of 07/20/

12 5.000% 7.875% 4.875% 4.750% 5.400% 5.850% USD Millions 22.5 bps (undrawn) 4 Strong Financial Position Strong balance sheet / Investment grade credit rating (BBB- / Baa3) provides: Access to capital even in challenging markets The ability to grow opportunistically COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS Attractive debt maturity profile with significant untapped borrowing capacity available from $1.5B revolver Projected free cash flow from existing backlog exceeds debt maturities through 2018 $1,600 $1,400 $1,200 $1,000 $800 $600 Outstanding Debt is $2.8 Billion* as of June 30, 2015 Available $1.5B revolver $400 $200 $ *Weighted-average annual interest rate is 5.6%

13 In Millions 4 Strong Financial Position COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS Rowan has $0 in Newbuild Capex Commitments and only $400mm in Debt Maturities through 2017 $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 Total: ~6,300 Total: ~11,000 Debt Maturities Through 2017 Newbuild Commitments Through

14 5 Rowan Has an Experienced and Loyal Workforce 92-year history of operating excellence Culture of continuous improvement COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS Experienced and loyal employees with proven industry leadership Strong commitment to safe and reliable operations supports goal of highest customer satisfaction Rowan is one team built around great equipment, great people, and shared mission and values 14

15 Company Overview & Investment Highlights Market Dynamics Delivering Shareholder Value Conclusion

16 Scheduled Rig Deliveries / Qtr. Uncontracted Newbuild Deliveries Pushing to the Right Jack-ups MARKET DYNAMICS 120 uncontracted jack-ups on order >40% have delayed delivery by 6+ months Build Country Original Delivery Date Current Delivery Date 46 units 74 units China Other Before 3Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 After 4Q16 Majority of uncontracted newbuild jack-ups are at Chinese shipyards, which have agreed to delay deliveries with little resistance thus far 29 Includes data supplied by IHS-Petrodata, Inc; Copyright 2015 and Rowan Companies (as of 27-AUG- 2015) 16

17 Current YE 2015 YE 2016 YE 2017 YE 2018 YE 2019 YE 2020 A Roadmap to Recovery Jack-ups MARKET DYNAMICS Sluggish demand forecast for several years likely results in: Less competitive rigs stacking after current contract Many uncontracted newbuilds struggling to contract Active modern rigs from established drilling contractors winning work Market recovers after supply is reduced and demand rebounds Uncontracted Newbuilds Active Fleet Stacked Rigs 100+ stacked rigs Older stacked rigs unlikely to reactivate Includes data supplied by IHS-Petrodata, Inc; Copyright 2015, Rystad Energy and Rowan Companies (as of 27-AUG- 2015) 17

18 More Capable Rigs Likely to Work Through the Cycle Jack-ups Number of High-Specification Jack-Ups 19 Rowan High-Spec Jack-ups MARKET DYNAMICS Customers Demand Higher-Specification Rigs Drilling challenging wellbore designs Focused on achieving lower wellbore costs Higher regulatory standards Current By YE 2020 Includes data supplied by IHS-Petrodata, Inc. Copyright 2015 (as of 08/18/15) and Rowan Companies 18

19 Scheduled Rig Deliveries / Qtr. Uncontracted Newbuild Deliveries Pushing to the Right Drillships and Semi-Submersibles MARKET DYNAMICS 38 uncontracted floaters >50% have delayed delivery by 6+ months Build Country Original Delivery Date Current Delivery Date Singapore/S. Korea Other Majority of uncontracted newbuild floaters are at Singaporean/S. Korean shipyards, which continue to agree to delivery delays but starting to impose significant financial penalties on buyers 0 Before 3Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 After 4Q16 Recent delivery delays have resulted in cost increases of $50-$100M per rig Includes data supplied by IHS-Petrodata, Inc; Copyright 2015 and Rowan Companies (as of 27-AUG-2015) 19

20 Current YE2015 YE2016 YE2017 YE2018 YE2019 YE2020 A Roadmap to Recovery Drillships & Semi-Submersibles MARKET DYNAMICS Sluggish demand forecast for several years likely results in: Less competitive rigs stack after current contract Many uncontracted newbuilds struggle to contract Active modern rigs from established drilling contractors winning work Market recovery after supply is reduced and demand rebounds 75+ stacked rigs Uncontracted Newbuilds Active Fleet Stacked Older stacked rigs unlikely to reactivate Includes data supplied by IHS-Petrodata, Inc; Copyright 2015, Rystad Energy and Rowan Companies (as of 27-AUG- 2015) 20

21 More Capable Rigs Likely to Work Through the Cycle Drillships & Semi-Submersibles MARKET DYNAMICS 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 IMO Tier III emissions compliance 21

22 Company Overview & Investment Highlights Market Dynamics Delivering Shareholder Value Conclusion

23 Priorities to Deliver Shareholder Value DELIVERING SHAREHOLDER VALUE Highest Customer Satisfaction Customers want: Safe and reliable operations Managed operational risk Procedural discipline Low flat spot time Solid counterparty stability Strong Financial Returns Rowan will improve our return on assets, profit margins, and maximize the earnings power of our fleet Best Place To Work Employees want to be part of a winning high- performing team, a career path with development opportunities, and a healthy work-life balance 23

24 Rowan is Focused on Strong Financial Returns DELIVERING SHAREHOLDER VALUE Execution Strong Financial Returns Cost Control Optimal Capital Allocation 24

25 Executing Operational Efficiency DELIVERING SHAREHOLDER VALUE Rowan is focused on maintaining low levels of operational downtime and reducing out-of-service time to drive higher earnings and improve margins 4% 3% 2% 1% 0% Unbillable Operational Downtime Jack-up Target: 2.5% Drillship Target: ~5% 30% 25% 20% 15% 10% 5% 0% Out-of-Service Time (OOS) (1) FY 2015 Target: 3-6% (excludes idle time) (1) Out-of-Service Time (OOS) are those days when a rig is out of service and is not able to earn revenue. The Company may be compensated for certain out-of-service days, such as for shipyard stays or for rig transit periods preceding a contract; however, recognition of any such compensation is deferred and recognized over the period of drilling operations. 25

26 Cost Control: Rowan is Focused on Cost Efficiency DELIVERING SHAREHOLDER VALUE Cost Structure Review back office and support processes for efficiency and focus on controlling off-rig costs Reducing costs of offshore crews Cost Control Rig Inventories Maintenance Systems Optimize inventories of parts and capital spares Reduce costs by strategically sourcing with key vendors Streamline maintenance systems Optimize preventive maintenance Performance Management Drive performance through strong key performance indicators and clear incentives at regional and rig levels 26

27 Cost Control Focus Has Had Material Impact $ in millions DELIVERING SHAREHOLDER VALUE 2015 Projections Preliminary (Nov.) Year-End (Feb.) May Current Reduction Drilling Expense $1,130 - $1,160 $1,100 - $1,120 $1,015 - $1,030 $1,000 - $1,010 ~12% SG&A $133 - $136 $120 - $130 $115 - $120 $115 - $120 ~13% Nonnewbuild Capex $250 - $310 $190 $190 $190 ~25% - 40% 27

28 Optimal Capital Allocation: Options to Maximize Shareholder Value DELIVERING SHAREHOLDER VALUE As Rowan generates free cash flow, we will consider all capital allocation options while maintaining a strong balance sheet Optimal Capital Allocation Asset Acquisitions and Divestitures Upgrades of Existing Rigs Debt Repayment Consider acquisition of quality assets if pricing and contract opportunities are attractive Consider building assets against contracts with suitable rate and term Continue divesting older assets Invest in older assets only if returns are clear Consider early retirement of debt to maintain solid balance sheet Dividends Enhance shareholder value through a regular quarterly cash dividend Share Repurchases In this uncertain time, we stay the course. However, we will continue to opportunistically consider share repurchases 28

29 Company Overview & Investment Highlights Market Dynamics Delivering Shareholder Value Conclusion

30 Rowan is Positioned to Benefit from its Strategic Actions 1 Competitive differentiation in drilling demanding wells 2 High-specification fleet well positioned in key industry segments 3 Solid contract backlog diversified among premium customer base, geographic regions and asset types 4 Strong financial position 5 Experienced and loyal workforce 30

31 Appendix

32 Worldwide Marketed Jack-up Utilization has dropped to 82% Marketed Supply: 483 units APPENDIX North Sea 88% 50 Rigs Mediterranean US GOM 45% 22 Rigs 63% 16 Rigs Middle East 91% 150 Rigs Mexico 82% 50 Rigs C&S America 92% 12 Rigs Indian Ocean 84% 37 Rigs Southeast Asia 69% 70 Rigs West Africa 74% 27 Rigs Australia 50% 2 Rigs Includes data supplied by IHS-Petrodata, Inc; Copyright

33 Jack-up Market Bifurcation on Utilization Continues Worldwide jack-up total utilization by rig class APPENDIX 100 % units 124 units 141 units units IS, MS, MC <300'IC 300'IC 350'+ IC(including High Spec) Includes data supplied by IHS-Petrodata, Inc; Copyright

34 While High-Spec Jack-ups Still Command Premium Rates; No Rig Class is Immune to the Cycle Earned day rates worldwide by rig class USD APPENDIX $250,000 $200,000 $150,000 $100,000 $50,000 ~$172K ~$108K ~$94K ~$71K $0 IS, MS, MC <300'IC 300'IC 350'+ IC(including High Spec) Includes data supplied by IHS-Petrodata, Inc; Copyright

35 Worldwide Marketed Drillship Utilization has dropped to 86% Marketed Supply: 113 units APPENDIX 0% 1 Rig USA 95% 37 Rigs Mediterranean 66% 3 Rig C&S America 83% 29 Rigs West Africa 88% 26 Rigs Indian Ocean 100% 7 Rigs Australia 100% 1 Rig Southeast Asia 57% 7 Rigs Includes data supplied by IHS-Petrodata, Inc; Copyright

36 10,000 + Utilization Remains Above 85% So Far Worldwide floater total utilization by water depth APPENDIX 100 % units units 44 units 47 units 50 <5,000' 5,000'-7,499' 7,500'-9,999' 10,000'+ *Floater Market includes drillships and semis Includes data supplied by IHS-Petrodata, Inc; Copyright

37 Later Generation Floaters Attain Higher Rates Earned day rates worldwide by water depth APPENDIX $600,000 $500,000 $400,000 $300,000 ~$516K ~$422K ~$380K ~$354K $200,000 $100,000 $0 <5,000' 5,000'-7,499' 7,500'-9,999' 10,000'+ *Floater Market includes drillships and semis Includes data supplied by IHS-Petrodata, Inc; Copyright

38 Current Rowan Avg. Regional Offshore Rig Operating Costs As of August 2015 As of September 2014 Region Jack-ups ($K/day) Jack-ups ($K/day) Gulf of Mexico Mid $40s Mid $50s Low Mid $50s Middle East Low $50s Mid $60s Mid $50s Mid $70s U.K. North Sea Mid High $70s Mid High $80s Norway North Sea Mid $130s - Low $140s Low Mid $160s Southeast Asia Mid $40s Low $50s Mid High $50s Trinidad Mid $60s Mid $70s Mid $60s Low $70s Region Drillships ($K/day) Drillships ($K/day) Gulf of Mexico Low $150s Low $160s High $160s High $170s APPENDIX As of 08/05/2015. Ranges exclude mobilization amortization and rebills. Daily operating costs vary by rig class and region. Higher capable rigs generally earn higher day rates and typically have higher operating costs per day. During shipyard stays, crew and other personnel-related costs are usually capitalized rather than expensed. 38

39 2015 Operating Cost Components Percentage of total operating costs APPENDIX 10% 1% 3% 3% 14% 10% 58% Labor & Fringes Employee-related * R&M Insurance Rig moves Rebillables All other ** * Employee-related costs include training, catering and crew transportation ** Other includes rentals, medics, agent commissions, satellite communications and other misc. drilling costs 39

40 Rowan Guidance as of August 5, 2015 APPENDIX Key metrics: Jack-up Operational Downtime (unbillable) 2Q 2015 Actual 3Q 2015 Projected FY 2015 Projected Slightly over 1% 2.5% 2.5% Drillship Operational Downtime (1) ~13% N/A Slightly higher than 5% Contract Drilling Expenses (excluding rebills) $241 MM $265 - $270 MM $ BN SG&A $31 MM ~$31MM $115 - $120 MM Depreciation $95 MM ~$102MM $385 - $395 MM Interest Expense, Net of Capitalized Interest $31 MM ~$41MM $145 - $150 MM Effective Tax Rate ~8% Slightly higher than 10%-15% range 10-15% Capital Expenditures $102 MM N/A $750 - $775 MM (1) Rowan expects operational downtime for the drillships to be less than 5% after approximately six-months up to one year break in period during which operational downtime is likely to be somewhat higher. 40

41 Investor Contacts: Chris Pitre Director, Investor Relations and Corporate Development Carrie Prati Manager, Marketing and Investor Relations