Investor Presentation September 2016 1
Forward-Looking Statements Statements contained in this press release 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 and contracts; contract duration, status, terms and other contract commitments; letters of intent or letters of award; scheduled delivery dates for rigs; the timing of delivery, mobilization, contract commencement, relocation or other movement of rigs; our intent to sell or scrap 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 cancellation of letters of intent or letters of award or any failure to execute definitive contracts following announcements of letters of intent or letters of award; 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, 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 forwardlooking 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
Market Conditions Decisive actions to persevere through the downturn capital & expense management fleet restructuring investments in engineering and innovation to improve operational & safety performance Outlook for offshore drilling efficiency & cost improvements attrition of older rigs & deferral/cancellation of newbuild deliveries catalyst markets 3
Market Conditions $ billions $250 $200 $150 $100 $50 Major & European IOCs Upstream Capital Spending Outlook $218 $208 $181-45% $126 $120 Substantial reduction in upstream capex among Major & European IOCs since 2013 unprecedented decline in exploration spending 2016 upstream capex for Major & European IOCs expected to decline ~30% year-over-year, but bottoming in 2017 $0 Significant pullback in spending will affect supply in the future Source: IHS Energy Notes: Group of Major & European integrated oil companies includes BP, Chevron, Eni, ExxonMobil, OMV, Repsol, Shell/BG, Statoil and Total; historical years include acquisitions; 2016 and 2017 estimates exclude acquisitions 4
Capital management Expense management Fleet restructuring Investments to improve operational & safety performance engineering & innovation process improvements Decisive Actions To Persevere Through The Downturn 5
Proactive Capital Management Accessed the debt markets twice to bolster liquidity and refinance nearterm debt maturities Increased revolver to $2.25 billion and extended to 2019 Reduced capital expenditures and dividend to preserve cash Delayed delivery of newbuilds, postponing ~$500 million of final milestone payments Repurchased debt in 2Q16 at substantial discounts resulting in ~$500 million of pre-tax cash savings Raised equity to further enhance liquidity position Significantly reduced leverage 6
Benefits of Recent Capital Management Actions Liquidity $ billions Net Debt-to-Capital Ratio $3.55 1.3 $4.05 1.8 41% $1.5 billion reduction in net debt 28% 2.25 2.25 4Q15 Revolver 2Q16 Cash + Short-term investments 4Q15 2Q16 Note: Net debt is a non-gaap financial measure defined as long-term debt less cash and short-term investments. Non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, financial measures prepared in accordance with GAAP. 4Q15 net debt-tocapital is calculated as follows: long-term debt of $5.9 billion, less $1.3 billion of cash and short-term investments, divided by the sum of long-term debt of $5.9 billion plus shareholders equity of $6.5 billion, minus $1.3 billion of cash and short-term investments. 2Q16 net debt-to-capital is calculated as follows: long-term debt of $4.9 billion, less $1.8 billion of cash and short-term investments, divided by the sum of long-term debt of $4.9 billion plus shareholders equity of $7.9 billion, minus $1.8 billion of cash and short-term investments. 7
Debt Maturity Schedule $ millions $2 billion of debt maturities over next eight years $1,025 $760 $778 $623 $669 $454 No debt maturities until 2019 $150 $300 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2027 2040 2044 8
Capital Expenditure Outlook Newbuild Capital Expenditures $ millions Other Capital Expenditures $ millions $375 $225 $100 $0 $100 $65 $75 10 25 50 55 50 50 2H16E 2017E 2018E 2019E 2H16E 2017E 2018E New rig construction Rig enhancements Minor upgrades & improvements Note: Estimates for 2016, 2017, 2018 and 2019; final capex estimates to be determined upon completion of annual budget process and subject to change based on rig contracting; new rig construction represents contractual commitments plus anticipated capex associated with rig construction; 2016 rig enhancements capex is specific to a mooring upgrade for an additional ENSCO 8500 Series rig, while 2017, 2018 and 2019 rig enhancements are estimates and not earmarked for any specific projects at this time; capex for minor upgrades and improvements are based on the currently active fleet. 9
Expense Management Actions 2015 Actions 15% reduction in offshore unit labor cost $60+ million of annual savings from 27% reduction in onshore support headcount consolidated business unit reporting structure from five to three centralized certain functions $100+ million of additional contract drilling and G&A expense savings repair and maintenance rate reductions and lower rig insurance premiums other savings through negotiated discounts with vendors Recent Actions Recently instituted a lower base salary structure for new hire offshore crews Further streamlining organizational structure: shore-based operational support, offshore labor pool and additional corporate staff department centralization 10
Fleet Management Strategy Leverage record uptime/safety performance to negotiate extensions for contracted rigs Maintain warm stacked rig availability in each region in order to bid into new opportunities, examples include: West Africa: ENSCO DS-7 U.S. Gulf of Mexico: ENSCO 8503 & ENSCO 68 Asia: ENSCO DS-9, ENSCO 8504* & ENSCO 106 Middle East: ENSCO 140 North Sea: ENSCO 120/1* Preservation stack excess high-spec rig capacity to prudently reduce expenses, yet maintain high-spec capacity that may be reactivated within 90 120 days Retire older, less capable rigs as they roll off contract as part of continuous high-grading/expense management *Note: Current contract expires in October 2016. 11
Stacking & Reactivation Costs Rig Type Upfront Cost to Preservation Stack Average Estimated Daily Operating Expenses Warm Stack Preservation Stack Estimated Cost to Reactivate Drillship $5 million $40k per day $15k per day $25 - $35 million 8500 Series Semi $5 million $32k per day <$10k per day $25 - $35 million High-Spec Jackup $1 million $20k per day* <$5k per day $5 million *Note: ENSCO 140 daily stacking costs covered by shipyard for up to two years. 12
Fleet Restructuring: Floaters Year-End 2009 Newbuilds (1) Retirements & Sales (2) Current Fleet 17 +13-10 20 16.8 years Lower average fleet age 9.2 years 4 ultra-deepwater capable floaters 7 floaters with 15k psi BOPs Greater drilling capabilities Enhanced well control 15 ultra-deepwater capable floaters 18 floaters with 15k psi BOPs (1) Includes ENSCO DS-10 newbuild currently scheduled for delivery in 1Q17 (2) Includes ENSCO 7500 that is expected to be retired from Ensco s go-forward fleet Note: adjusted for 2011 acquisition of Pride International; ultra-deepwater defined as 7500 ft. or greater 13
Fleet Restructuring: Jackups Year-End 2009 Newbuilds (1) Retirements & Sales (2) Current Fleet 51 +5-24 32 Jackup sales since 2009 have generated ~$600 million in proceeds Under Construction ENSCO 141 Scheduled Delivery: 3Q16 ENSCO 123 Scheduled Delivery: 1Q18 (1) Includes ENSCO 140 newbuild that was delivered in August 2016 (2) Includes ENSCO 56, ENSCO 81, ENSCO 82, ENSCO 86, ENSCO 90 & ENSCO 99 that are expected to be retired from Ensco s go-forward fleet Note: adjusted for 2011 acquisition of Pride International 14
Investment in Engineering: 8500 Series Mooring Upgrade Global Floater Fleet Dynamically Positioned Ultra-deepwater capable 15K+ psi & 6+ ram BOP 8 mooring winches ENSCO 8503 ENSCO 8505 Rig Count 295 193 162 127 9 Low-cost mooring upgrade increases the versatility of our 8500 Series rigs, placing them among a select group of floaters with superior technological capabilities and the ability to operate in a dynamically positioned and/or moored capacity Source: IHS-ODS Petrodata as of August 2016; Ultra deepwater defined as 7500 ft. or greater 15
Investment in Innovation: Operational & Safety Results We continue to invest in three core programs: improving the drilling process asset uptime and efficiency Ensco Asset Management System re-engineering the support structure 16
Improved Operational Utilization Floaters Jackups 99.1% 98.5% 99.0% 99.1% 99.5% 92.0% 92.9% 94.0% 2013 2014 2015 1H16 2013 2014 2015 1H16 17
Excellent Safety Performance 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Total Recordable Incident Rate 2008 2009 2010 2011 2012 2013 2014 2015 YTD 2016 Record 2015 and YTD16 TRIR Leading-edge safety management systems Enhancing process safety to drive further improvements Ensco Industry Note: IADC industry statistics are as of 1Q16. 18
Net Income Margin Largest Offshore Drillers 27% 24% 20% 17% 16% 16% ESV SDRL RDC NE RIG DO Source: FactSet as of August 2016; sum of trailing eight quarters of net income divided by sum of trailing eight quarters of revenue. FactSet's data is based on aggregation of information collected from industry equity research analysts and may not be based on GAAP reported financial data. 19
High Levels of Customer Satisfaction Rated #1 Total Satisfaction Safety & Environment Performance & Reliability Job Quality Special Applications Ultra-Deepwater Wells Deepwater Wells Harsh Environment Wells Horizontal & Directional Wells Shelf Wells North Sea Middle East Asia & Pacific Rim 20
Outlook for Offshore Drilling 21
Offshore Exploration & Production Offshore production is ~33% of global supply Offshore reserves are a critical part of major E&P portfolios and are vital to the economies of several countries Excessive costs/inefficiencies crept into sector during the $100+ oil environment Industry is proactively responding to commodity price pressures and breakeven commodity prices for offshore programs are declining Unprecedented decline in E&P spending will lead to supply side challenges the longer the duration of the pullback, the greater the chance of significant upward movements in commodity prices 22
Path to Recovery Commodity Breakeven Economics Offshore Rig Supply Catalyst Markets Improvement / stabilization in oil prices Re-engineering / standardization / innovation Retirement of older, less capable assets Brazil opens presalt to more players Cost deflation and efficiency gains Deferral and cancellation of newbuild deliveries Mexico offshore lease sales and entrance of international operators 23
Offshore Breakeven Economics Improving Offshore Outlook Customers attention has turned to project re-engineering, efficiency gains and better expense management Cost deflation across supply chain: operators, service companies Break-even economics are improving significantly for offshore projects Statoil Johan Castberg BP Mad Dog Phase 2 Shell Vito Recent Customer Commentary on Deepwater Projects Reduced breakeven cost from >$80/bbl to <$45/bbl through supply chain savings, optimized project design and standardized and simplified solutions Cost estimates reduced to less than $9 billion from prior estimate of $20 billion Project re-engineering through standardization and scope optimization, coupled with industry deflation, resulted in significantly less capital required to develop approximately 90% of resources Lowered estimated breakeven cost from >$60/bbl to $45/bbl through project re-scoping Sources: Statoil 4 February 2016 Capital Markets Day; BP 17 June 2016 Bloomberg interview; Shell Capital Markets Day 7 June 2016 24
Offshore Breakeven Economics Improving Project breakevens for pre-fid deepwater projects have been reduced to $45 per barrel on average Brazilian pre-salt project breakevens under $40 per barrel on average Cost reductions have led to an average project breakeven of $40 to $45 per barrel Average breakeven prices for future projects on Norwegian continental shelf have been reduced from $70 per barrel to approximately $40 per barrel Deepwater single-well breakeven economics between $20 per barrel and $40 per barrel for brownfield developments in U.S. Gulf of Mexico Sources: Shell Capital Markets Day 7 June 2016; Maersk Earnings Release 12 August 2016; Statoil 29 August 2016 Upstream Interview; Chevron 29 April 2016 earnings conference call 25
Strategic Combinations & Alliances Among Offshore Service Companies Integrated FPSO solutions to reduce costs of offshore developments Innovation, efficiencies and cost reductions in deepwater projects Optimize the cost and efficiency of subsea well intervention systems Strategic combinations and alliances drive greater efficiencies and lower the breakeven commodity prices for offshore projects Enhance project delivery, improve recovery and optimize cost/efficiency of subsea developments Develop production solutions to boost output, increase recovery rates and reduce costs for subsea fields Overhaul subsea field operations to drive efficiencies 26
Attrition of Older Rigs FLOATERS 60 more floaters could be retired by year-end 2017 if attrition continues at similar rates observed throughout the downturn Retired to Date 63 floaters retired since 3Q14 Currently Idle ~35 floaters >30 years of age idle without followon work could be retired Expiring Contracts ~25 floaters >30 years of age have contracts expiring before YE17 without followon work could be retired JACKUPS Up to 150 additional jackups could be retired as expiring contracts and survey costs lead to the removal of older rigs from drilling supply Retired to Date 20 competitive jackups retired since 3Q14 Currently Idle 87 competitive jackups >30 years of age idle without followon work could be retired Expiring Contracts 63 jackups >30 years of age have contracts expiring before YE17 without followon work could be retired Source: IHS-ODS Petrodata as of August 2016; competitive jackups are independent leg cantilever rigs, retired includes scrapped rigs, announced scrapping and rigs converted to non-drilling units. Historical attrition ratio of 88% for floaters older than 35 years of age and 67% for floaters between 30 and 35 years of age applied annually to rigs that are currently idle or rolling off contract for each age category. 27
Newbuild Floater Order Book 5% 3 Contracted 45% 28 Uncontracted, Under Construction 8 29 SETE Brasil 47% 2 Uncontracted, On Order 3% Source: IHS-ODS Petrodata as of August 2016; marketed competitive floaters News reports suggest SETE Brasil program could be reduced to 8 newbuilds in total 28
Newbuild Jackup Order Book 7% 7 Contracted, Established Drillers Zero rigs being built in China by speculators have been contracted 35% 37 Uncontracted, Established Drillers? 61 Uncontracted, Speculators 58% Source: IHS-ODS Petrodata as of August 2016; marketed competitive jackups (independent leg cantilever rigs) 29
Jackup Delivery Deferrals 30 25 20 15 10 5 0 May 2014 Delivery Schedule 119 Scheduled Deliveries 26 Scheduled Deliveries 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 Delivered Under Costruction 30 25 20 15 10 5 0 August 2016 Delivery Schedule 42 Actual Deliveries 112 Scheduled Deliveries 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 Delivered Under Costruction Source: IHS-ODS Petrodata as of August 2016 Note: August 2016 delivery schedule includes 20 new orders and excludes 11 orders cancelled since May 2014. 30
Future Catalyst Markets: Brazil In 1Q16, the Brazilian Senate passed a bill that would eliminate requirement for Petrobras to manage all pre-salt operations and hold a minimum 30% stake in pre-salt projects More recently, Statoil conditionally acquired Petrobras 66% operating interest in BM-S-8 offshore Brazil including the Carcará discovery for $2.5 billion Diversification of customer base offshore Brazil is ongoing with outstanding tenders from Premier, Total and Chevron We believe in the strong fundamentals of Brazil and the fundamentals of its geology. We will be looking at a substantial part of our production from Brazil. Ben van Beurden, Shell CEO February 2016 31
Future Catalyst Markets: Mexico During 4Q15, an auction was completed for shallow-water blocks offshore Mexico, awarding licenses to several exploration and production companies Deepwater blocks are scheduled to be auctioned in late 2016 with 26 E&Ps registered for participation including several integrated oil companies Regardless of what happens in the international context, Mexico will move forward with the energy reform implementation. Enrique Peña Nieto, President of Mexico February 2016 32
Recap Proactive steps to: improve capital structure reduce expenses restructure fleet invest in engineering and innovation that improves operational and safety performance Positive steps taken by the offshore sector to reduce breakeven economics are building the foundation for future market recovery Rig attrition improving rig supply dynamics Our actions and investments position Ensco to capitalize as we navigate through the market cycle 33
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