Wells Fargo Securities 2 nd Annual West Coast Energy Conference. June 2017

Transcription

1 Wells Fargo Securities 2 nd Annual West Coast Energy Conference June

2 Forward-Looking Statements Statements contained in this investor 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 Forwardlooking 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, expected expense savings, day rates and backlog, estimated rig availability; rig commitments and contracts; contract duration, status, terms and other contract commitments; estimated capital expenditures; 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, letters of award or other expected work commitments; 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; tax matters including our effective tax rate; and cybersecurity risks and threats. 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 Offshore Drilling Cycle The Driller of Choice Capitalizing on Opportunities 3

4 Phases and characteristics of offshore drilling cycles Decline Trough Recovery Commodity Price Declining Stabilizing Increasing Customer Activity Spending is reduced Selective capital allocation New programs sanctioned Utilization Rig utilization decreases Infill activity increases Development & exploration activity resumes Day Rates Day rates decline Pricing power in limited instances Day rates increase 4

5 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Commodity prices have stabilized at levels above some offshore project breakevens Commodity Price Brent Crude $/bbl Avg. Offshore Breakeven Oil Prices $/bbl $110 $20 - $40 < $40 < $40 $40 - $45 $90 $27 $33 $70 $45 $50 $30 ~50% Pre-FID Norwegian Shelf Projects Pre-FID Shallow- Water Project Brownfield US GOM Deepwater Projects Pre-FID Pre-Salt Projects Pre-FID Deepwater Projects Pre-FID Projects Source: FactSet; Statoil 7 February 2017 Capital Markets Day; Repsol 23 February 2017 earnings conference call; Chevron 29 April 2016 earnings conference call; Petrobras CEO Pedro Parente via Bloomberg 10 October 2016; Shell 2 February 2017 earnings conference call; Maersk 8 February 2017 earnings conference call 5

6 Customer activity is increasing Recent increase in customer activity Broad-based pickup in customer tenders and inquiries year over year Number of inquiries and rig years required for these opportunities has doubled compared to a year ago on a trailing six month basis Outstanding multi-year opportunities for jackups in Middle East, Asia & North Sea along with shorter-term work in U.S. GOM Multiple outstanding long-term tenders for floaters in Brazil & West Africa plus shorterterm work around existing infrastructure that match Ensco s diverse rig fleet and capabilities Jackups provide exposure to shorter-cycle, shallow-water projects Floaters positioned to capture activity in deeper water including: Infill programs with shorter duration Plug & abandonment and well intervention Larger, more complex development & exploration projects Underinvestment in recent years will drive a greater need for offshore drilling in the years ahead Offshore production is ~33% of global supply Source: IHS Markit RigPoint; Ensco analysis 6

7 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Utilization appears close to inflection 100% 90% 80% 70% Jackup + Floater Utilization Total Utilization Global utilization has recently flattened since November 2016 Ensco s utilization increased by 10 percentage points through first quarter % 50% 40% +10ppt Customers are awarding more work to major offshore drillers with established safety & operational track records and financial strength Global Ensco Source: IHS Markit RigPoint as of June 2017 for global utilization; Internal calculation for Ensco utilization through 1Q17 7

8 JACKUPS FLOATERS Utilization to benefit from attrition of older rigs ~65 more floaters could be candidates for retirement based on age and contract expirations Retired to Date 78 floaters retired since 3Q14 Currently Idle ~40 floaters >30 years of age idle without followon work Expiring Contracts ~25 floaters >30 years of age have contracts expiring before YE18 without followon work Up to ~155 additional jackups could be retired as expiring contracts and survey costs lead to the removal of older rigs from drilling supply Retired to Date 32 competitive jackups retired since 3Q14 Currently Idle ~90 competitive jackups >30 years of age idle without followon work Expiring Contracts ~65 jackups >30 years of age have contracts expiring before YE18 without followon work Source: IHS Markit RigPoint as of June 2017 Note: Retired includes scrapped rigs, announced scrapping and rigs converted to non-drilling units; Competitive jackups are independent leg cantilever rigs. 8

9 The newbuild order book remains largely uncontracted with many questionable deliveries Floaters 3% 2 Contracted Jackups 2% 2 Contracted, Established Drillers 35% 46% 27 Uncontracted, Under Construction 8 28 SETE Brasil 48% 34 Uncontracted, Established Drillers? 62 Uncontracted, Speculators 63% 2 Uncontracted, On Order 3% News reports suggest SETE Brasil program could be reduced to 8 newbuilds in total Zero rigs built in China by speculators have been contracted Source: IHS Markit RigPoint as of June 2017; marketed competitive floaters and jackups (independent leg cantilever rigs). 9

10 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 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 Jackup delivery deferrals are an example May 2014 Delivery Schedule Scheduled Deliveries 2 Scheduled Deliveries Delivered Under Costruction Actual Deliveries June 2017 Delivery Schedule 100 Scheduled Deliveries 0 Delivered Under Costruction Source: IHS Markit RigPoint as of June 2017 Note: June 2017 delivery schedule includes 20 new orders and excludes 11 orders cancelled since May

11 Offshore Drilling Cycle The Driller of Choice Capitalizing on Opportunities 11

12 The Driller of Choice Safety & Operational Excellence #1 in Customer Satisfaction High- Specification Assets Technology & Innovation Financial Strength 12

13 Excellent safety results Ensco consistently outperforms competitors on safety metrics Total Recordable Incident Rate YTD 2017 Industry Ensco Critical to customers, in particular for complex well programs Safety results differentiate Ensco s rigs in a competitive market Established safety culture and leading-edge safety management systems Enhancing process safety to drive further improvements Note: IADC industry statistics as of 4Q16. 13

14 Improved operational performance has benefitted financial results 1% improvement in operational utilization = >$20 million revenue uplift 1 95% Fleet-Wide Operational Utilization 2 95% 96% 99% 99% Record 99% fleet-wide operational utilization in 2016; continued high levels of performance YTD Significant improvement in subsea equipment-related downtime year over year during Q17 Investments to improve asset uptime and efficiency, e.g. proprietary Ensco Asset Management System 1 Based on 2016 annual revenue 2 Operational utilization is adjusted for uncontracted rigs and planned downtime 14

15 Leveraging data analytics to drive improvements in drilling process 68% improvement in downtime across the fleet year over year in % targeted improvement in pipe connection time for certain operations across the fleet Best in Basin recently awarded to ENSCO DS-6 for completing wells 30% under customer s budget 15

16 Strong performance has driven industry-leading customer satisfaction 7 consecutive years rated #1 in total satisfaction among offshore drillers Rated #1 Total Satisfaction Health, Safety & Environment Performance & Reliability Job Quality Ultra-Deepwater Wells Deepwater Wells Shelf Wells Special Applications Horizontal & Directional Wells Latin America & Mexico Middle East & North Africa Sub-Saharan Africa 16

17 Diverse customer base and global footprint Customer base spans majors, national oil companies and independents Note: Certain customers may not currently have backlog 17

18 High-specification rig fleet Diverse fleet capable of meeting a broad spectrum of customers well program requirements Best-in-Class Ultra-Deepwater Drillships Uniquely Versatile Semisubmersibles Premium Jackups Total Rigs: Note: Includes rigs under construction, excludes managed rigs and rigs announced for retirement 18

19 Best-in-Class Drillships ENSCO DS-9 Rig features create efficiencies for customers Optimized hull design and fully retractable thrusters Improves station keeping and reduces fuel consumption by up to 10% over the life of the vessel Riser storage in hull More usable deck space and higher deck load Heave-compensating crane and drawworks Greater precision in controlling weight on bit and other critical operations Managed pressure drilling Increased drilling efficiency, plus monitoring and response capabilities to mitigate the risk of well-control incidents 19

20 Uniquely Versatile Semisubmersibles ENSCO 8504 Rig features create efficiencies for customers Moored/dynamically-positioned configuration Added flexibility for programs that straddle both shallow- and deep-water Proprietary ENSCO 8500 Series design Flexible deck space well-suited for plug-and-abandon and intervention work Managed pressure drilling ready Increased drilling efficiency, plus monitoring and response capabilities to mitigate the risk of well-control incidents ENSCO 8500 Series rig has drilled the deepest well on record in the US Gulf of Mexico 20

21 Premium Jackups ENSCO 120 Series Rig features create efficiencies for customers Patented Canti-Leverage Advantage SM technology Enhanced hoisting capacity at the farthest reaches of the cantilever leads to fewer rig moves 40,000 total drilling depth & 2.5 million pound quad derrick Increased hoisting capacity allows for drilling of long-reach wells Automated drill floor Greater automation allows offline activities to be completed while continuing to drill 21

22 Differentiating asset efficiency & uptime through technology and innovation Intellectual Property Processes & Systems Canti-Leverage Advantage SM Provides extended drilling reach for multi-well programs requiring fewer rig moves Increased efficiencies reduce project time and costs PinSafe System Optimizes jackup moves & reduces downtime spent waiting on weather Ensco Asset Management System Multi-year investment in proprietary, tablet-based system for asset maintenance Improves equipment reliability & rig uptime Reliability-Based Maintenance Predictive maintenance systems reduce costs while improving rig uptime Additional work ongoing 25 80% patent filings since Includes provisional and non-provisional patent filings completed or in progress since 1Q15 improvement in subsea equipment-related downtime in

23 Strong balance sheet provides financial flexibility Financial Position 31 March 2017 $4.3 billion of liquidity $2.1 billion of cash and short-term investments $2.25 billion revolving credit facility $3.3 billion of contract revenue backlog $2.8 billion of net debt & 26% net debt-to-capital ratio BB/B1 credit ratings Customers want financially strong counter-parties that are able to: Maintain rigs Provide stable operations Fulfill long-term contracts Flexibility to make selective investments in: Technology & innovation Opportunistic asset enhancements & high-grading No secured debt & covenantlight structure Net debt is a non-gaap financial measure and should be considered as a supplement to, and not as a substitute for, or superior to, financial measures prepared in accordance with GAAP. Net debt-to-capital is calculated as follows: long-term debt of $4.9 billion, less $2.1 billion of cash and short-term investments, divided by the sum of long-term debt of $4.9 billion plus shareholders equity of $8.2 billion, minus $2.1 billion of cash and short-term investments. 23

24 Cash & ST Inv. Available Revolver Manageable debt maturities in light of strong liquidity position $ millions $4,289 $1.1B of Maturities to 2024 $2,250 $1,805 $2,039 $850 $1,001 $261 $550 $302 $955 $669 $150 $300 Liquidity Senior Notes Convertible Senior Notes 2044 Note: As of 31 March After giving effect to open market repurchases of approximately $35 million aggregate principal amount of senior notes during April

25 Offshore Drilling Cycle The Driller of Choice Capitalizing on Opportunities 25

26 Winning new work by leveraging our competitive position 1 st in new contracts among major offshore drillers over last 8 months 20% of rig years recently contracted globally won by Ensco 26 rig years of new work spread across several regions Multi-year jackup contracts in the North Sea and offshore Saudi Arabia and Indonesia Contract for ENSCO 8503 offshore Mexico, marking entrance into the country s promising floater market Source: Ensco analysis; IHS Markit RigPoint as of June 2017 for contract fixtures since 1 October 2016 classified as New Mutual by IHS 26

27 Why invest in Ensco? Superior Performance Differentiated Assets Financial Strength Strong operational & safety track record #1 in customer satisfaction High-specification fleet Investments in technology and innovation Ample liquidity Manageable debt maturities Ensco is positioned to meet higher levels of customer demand and capitalize on the recovery 27

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