Sanford Bernstein Strategic Decisions Conference. May 2014

Transcription

1 Sanford Bernstein Strategic Decisions Conference May

2 Forward-Looking Statements Statements made today 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 the timing of delivery, mobilization, contract commencement, relocation or other movement of rigs. Such statements are subject to numerous risks, uncertainties and assumptions that may cause actual results to vary materially from those indicated, including governmental regulatory, legislative and permitting requirements affecting drilling; downtime and other risks associated with offshore rig operations, relocations, severe weather or hurricanes; possible cancellation or suspension of drilling contracts as a result of mechanical difficulties, performance or other reasons; risks inherent to shipyard rig construction, repair, maintenance or enhancement; and actual contract commencement dates. 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 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 Dividend Growth $3.00 $2.00 $1.40 $1.50 $0.10 Nov Apr Feb Feb Nov Note: Dividend announcement date 3

4 Strong Financial Position $10 billion of contracted revenue backlog Baa1/BBB+ ratings from Moody s/s&p 65% Leverage Ratios 40% 39% 37% 35% 27% SDRL NE RIG RDC DO ESV Source: Total debt-to-capital ratios from ISI Group Oil Services Data & Valuation Handbook 21 March

5 Payout Ratios 116% 95% 67% 53% 44% 17% SDRL DO RIG ESV NE RDC Source: Thomson Reuters; most recent declared quarterly dividend annualized divided by 2014 earnings per share mean estimate for dividendpaying offshore drillers. RIG and NE reflect dividends of $3.00 and $1.50 per share annually, respectively. 5

6 Net Income Margin 29% 23% 22% 17% 16% 15% ESV SDRL DO NE RIG RDC Source: Thomson One; sum of trailing eight quarters of net income divided by sum of trailing eight quarters of revenue 6

7 Industry Leader in Customer Satisfaction Rated #1 Total Satisfaction Performance and Reliability Deepwater Drilling Shelf Wells Technology Horizontal and Directional Wells Special Applications North Sea 7

8 Vision and Strategy Vision As the offshore driller of choice, we will go beyond what is expected to achieve a safe zero-incident workplace and to be the clear choice among employees, customers and investors Invest in High- Quality Fleet Talented Workforce Trained on Proven Systems Global Platform Operational Excellence Strong Safety Record Leader in Customer Satisfaction Superior Margins/ Return on Capital Increase Shareholder Value 8

9 Eight newbuild rigs to be delivered through 2016 Fleet Highgrading $570 million of budgeted rig enhancements to existing fleet in 2014 ~$200 million of rig enhancements are customer-funded 14 rigs sold since 2009 $90 million pre-tax gain on sales 9

10 New Ultra-Deepwater Fleet ( 7,500 ) Avg. Age of Fleet Years SDRL ESV NE RIG DO Source: IHS-ODS Petrodata as of 28 April 2014 Ultra-deepwater includes competitive semisubmersibles and drillships able to drill in 7,500 and greater water depths including rigs that are cold stacked. Average age excludes rigs under construction or on order. Ensco has three drillships under construction. Average age is not adjusted for upgrades. 10

11 Newbuild Delivery Schedule Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 ENSCO 122 Contracted ENSCO DS-8 ENSCO DS-9 Contracted ENSCO 110 ENSCO DS-10 ENSCO 123 ENSCO 140 ENSCO 141 Drillships Premium jackups 11

12 2014 Floater Upgrades Major upgrades to several rigs ENSCO 5005 ENSCO 5006 ENSCO DS-2 ENSCO 6001 and ENSCO

13 Largest premium jackup fleet $1.7 billion investment in newbuild jackups since beginning of 2011: Four ENSCO 120 Series jackups Two ENSCO 140 Series jackups ENSCO 110 Premium Jackup Fleet Overview 13

14 ENSCO 120 Series Ultra-Premium Jackups Two under construction $1 billion+ investment 40,000 total drilling depth 400 water depth 2.5 million pound quad derrick State-of-the-art cantilever envelope Ultra-deep gas/long-reach wells 14

15 Global Platform Europe & Mediterranean U.S. Gulf of Mexico Ships 3 Semi 1 Jackups 10 Semis 6 Jackups 8 Mexico Jackups 4 Africa Ships 4 Semis 2 Middle East Jackups 10 Brazil Semis 6 Under Construction Ships 3 Jackups 5 Asia Pacific Semi 4 Jackups 9 15

16 Benefits of Standardization ENSCO 8500 Series (7) Samsung DP3 Drillships (8) Premium Jackup KFELS Mod V-A,B + Super A (13) Premium Jackup LeTourneau Super 116E (2) Shipyard Common Equipment Training Repair & Maintenance Spare Parts 16

17 Standardization Repeat Customers See the Benefits ENSCO 8500 ENSCO 8501 ENSCO 8502 ENSCO 8503 ENSCO 8504 ENSCO 8505 ENSCO

18 Success of the ENSCO DS Series BP Has Contracted 3 Drillships ENSCO DS-3: U.S. Gulf of Mexico ENSCO DS-4: Brazil / U.S. GOM ENSCO DS-6: Angola 18

19 Safety, Health & Environment Total Recordable Incident Rate Record TRIR in Zero-incident goal STOP work authority Comprehensive training Quality control and audit Dedicated safety management systems Ensco Industry Note: 2013 TRIR for Industry is as of 4Q13. 19

20 Competency Assurance Program Commitment to Employee Development International Association of Drilling Contractors (IADC) has awarded accreditation to Ensco training programs Focus on safety and efficiency of operations Defined policies and procedures Systems to ensure continuous development, monitoring and compliance around the globe Audited by Core Value Teams to maintain high standards 20

21 Supply Considerations Rigs under construction 22 competitive floaters and 27 competitive jackups to be delivered in uncontracted floaters and 22 uncontracted jackups Aging global fleet Jackups 55% of jackups are older than 30 years 36 jackups with an average age of 30 years retired since 2011 Floaters 37% of floaters are older than 30 years 3 floaters retired since 2011 (36 yrs old on avg); 15 floaters cold stacked (37 yrs old on avg); 11 floaters warm stacked (30 yrs old on avg) Source: IHS-ODS Petrodata as of 28 April

22 Demand Considerations Marketed utilization for global fleet 95% for floaters 95% for jackups New discoveries lead to additional appraisal and developmental drilling 70+ new discoveries per year on average since 2009 Deepwater well programs taking longer to drill Note: April 2014 Marketed Utilization from IHS Petrodata World Rig Forecast; new discoveries include all discoveries in greater than 1,000 water depth since 2009 from IHS GDC Watch-List. 22

23 Demand Considerations Stable commodity prices above the economic breakeven for our customers Brazil to develop pre-salt basins Energy reform in Mexico to expand floater market Customer demand more diversified NOCs driven by domestic economy and politics Independent oil companies growing capex 23

24 Estimated Capital Expenditures $ billions Sustaining Enhancements $200 million of rig enhancement capex to be funded by customers Note: Final rig enhancement and sustaining project capital expenditure budgets for TBD once budgets are completed Newbuild Newbuild Construction Rig Enhancements Sustaining Source: 1Q14 Earnings Call 24

25 Summary Top 5% dividend yield S&P 500 Strong balance sheet and capital management flexibility #1 in customer satisfaction New ultra-deepwater rigs and largest premium jackup fleet Global presence Safety and operational excellence Superior financial results Invest in High- Quality Fleet Talented Workforce Trained on Proven Systems Global Platform Operational Excellence Strong Safety Record Leader in Customer Satisfaction Superior Margins/ Return on Capital Increase Shareholder Value 25

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