Astrup Fearnley Shipping & Offshore Conference 0 January 209
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 933 and Section 2E of the Securities Exchange Act of 934. 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 A. 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 0-K, as updated in our subsequent quarterly reports on Form 0-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 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
Key Themes Offshore drilling recovery is underway Offshore production critical to meeting growing oil and gas demand Years of underinvestment in future production has impacted reserve lives for E&P customers E&P customers have greater cash flow to consider investments in future production including offshore projects Offshore project sanctioning is increasing, leading to new contracts and tenders for future work High-specification drilling rigs winning an outsized share of new work Attrition of less capable rigs expected to continue Ensco is well positioned to participate in the recovery Concentrated fleet of high-quality assets capable of meeting customer demand in deep- and shallow-water globally Track record of operational excellence and safety has led to industry-leading customer satisfaction Leader in new contract awards as customer activity has increased Focused investments in innovation and technology help to differentiate performance and reliability Solid financial position bolstered by strong liquidity and manageable debt maturities 3
Offshore Market Recovery Ensco s Leading Position 4
Offshore Production Critical to Meeting Growing Global Oil & Gas Demand mm boe/d 200 60 48 20 80 40 0 Global Oil & Gas Production 65 +9 mm boe/d 84 Oil and gas production will continue to be an important part of meeting global energy demand, with total production forecast to grow by 9 million barrels of oil equivalent per day by 2025 Oil Gas Total Global Oil & Gas Production Offshore & Onshore 30% 29% 28% 70% 7% 72% Onshore Offshore Source: Rystad Energy Despite significant growth in unconventional onshore production, offshore production represents 29% of overall oil and gas production today and expectations are that offshore production will provide more than 5 million barrels of oil equivalent growth by 2025 5
Several Years of Underinvestment by Major E&Ps Has Impacted Reserves $ billions 250 200 50 00 50 - years 4 3 2 0 9 8 24 Capital Expenditures by Major E&Ps 60 87 23 29 200 20 202 203 204 205 206 207 0.9 Average Reserve Life for Major E&Ps 2.0 2.3 2.8 2.9 Source: Rystad Energy, SpareBank Markets Major E&P customers defined as BP, Chevron, ConocoPhillips, Eni, Equinor, Exxon, Repsol, Shell and Total 7 2. -53% 24-7% 200 20 202 203 204 205 206 207. 02 0.7 Major E&Ps reduced capital expenditures by 53% from 204 highs in response to lower commodity prices After three years of significantly lower levels of investment, the average reserve life for the Major E&Ps has gradually declined to its lowest point in the past decade Capital expenditures for Major E&Ps are estimated to have declined further in 208, putting additional pressure on average reserve lives 6
Improving Market Conditions Have Led to Higher Customer Cash Flows $/bbl 80 60 40 20 0 $ billions 40 20 00 80 60 40 20 0-20 Free Cash Flow Breakeven Oil Prices for E&Ps 60 53 5 44 7 58 54 42 36 39 205 206 207 208E 209E Free cash flow breakeven oil price Avg Brent crude price Free Cash Flow of Major Offshore E&Ps 3 7 65 - -3 205 206 207 208E 209E More recently, lower free cash flow breakeven oil prices for E&Ps, coupled with higher oil prices, have created a more conducive environment for new project investments Despite the recent pullback in oil prices, expectations are that free cash flow continues to grow in 209, giving major offshore customers greater flexibility to invest in future production Source: SpareBank Markets, FactSet Free cash flow is calculated as analyst consensus estimates of operating cash flow less capital expenditures; major offshore E&P customers defined as Anadarko, BP, Chevron, ConocoPhillips, Eni, Equinor, Exxon, Petrobras, Repsol, Shell and Total 7
Offshore Projects Economic at Current Oil Prices With More Approvals Expected $/bbl $27 <$30 Average Offshore Breakeven Oil Prices $33 <$40 <$40 <$40 Statoil Total Respol Chevron Petrobras Shell Pre-FID Norwegian Shelf Projects Acquired Maersk portfolio Pre-FID Shallow- Water Projects Brazil Pre-Salt Project Pre-FID Pre-Salt Projects Pre-FID Deepwater Projects Based on commentary from major offshore customers, many offshore projects are economic at breakeven oil prices well below current levels 00 75 50 25 0 Number of New Major Offshore Project Approvals 87 67 50 23 206 207 208 209E New major offshore project approvals in 208 were more than 2.5x 206 cyclical lows, with expectations of further increases in sanctioning activity during 209 New project approvals are a leading indicator of future capital expenditures Source: Equinor 7 February 207 capital markets day; call; Total 25 September 207 investor day; Repsol 23 February 207 earnings conference call; ExxonMobil 27 July 208 earnings conference call, in reference to Carcara project; Petrobras 30 January 208 Latin America investment conference presentation; Shell 26 July 208 earnings conference call; Rystad Energy, major projects defined as projects with >$250 million of associated capital expenditures 8
Offshore Rig Utilization Expected to Benefit From Increased E&P Investments $ billions 350 300 250 E&P Offshore Capital Expenditures 9% CAGR 200 29 233 20 50 83 54 58 00 50-204 205 206 207 208E 209E 2020E 202E 2022E 2023E Offshore Drilling Rig Utilization and E&P Capital Expenditures 00 40 90 30 80 20 70 0 60 0 50-0 40-20 30-30 Global Fleet Utilization (%, left axis) Change in E&P Offshore Capex (2Y rolling avg %, right axis) Source: Rystad Energy, IHS Markit RigPoint Given increased cash flow and attractive new project economics, E&P offshore capital expenditures are expected to increase modestly in 209 and continue growing steadily over the next five years Over the past three decades, offshore drilling rig utilization has moved in line with the rate of change in customer spending, suggesting further utilization increases in 209 and 2020 from higher customer demand 9
Offshore Rig Demand Showing Signs of Steady Improvement 350 280 20 40 70 0 20 90 60 30 0 Avg Brent Crude $/bbl 42 63 Number of New Contracts Awarded 7 27 02 4 206 207 208 $65 Floaters +6% +72% Source: IHS Markit RigPoint as of December 208 Classified as new mutual fixtures in IHS Markit RigPoint Jackups Number of Open Offshore Rig Tenders 32 78 40 46 Dec-7 Floaters Jackups Dec-8 $55 New contract awards in 208 were 6% higher than 206 The number of 208 floater contracts nearly doubled 206 lows, while new jackup contract awards increased by 53% Despite lower year-to-year oil prices, the number of open tenders for offshore rigs has increased 72% since year-end 207, demonstrating customers willingness to look through near-term volatility to longer term oil prices when considering new offshore projects 0
Highest-Specification Drillships Winning More New Floater Contracts Number of New Drillship Contracts Awarded Worldwide 40 30 20 0 0 00% 80% 3 0 3 Drillship Utilization Delivered Rigs 32 7 5 6 206 207 208 Highest-Specification Drillships 2 Other Drillships 35 9 Highest- Specification Drillships 2 The number of new drillship contracts awarded worldwide during 208 was more than 2.5x 206 lows Highest-specification drillships that deliver efficiencies for customers offshore projects are winning an outsized share of new work These assets currently represent 34 out of 0 delivered drillships, or ~30% of total supply, and won ~45% of all new drillship contracts awarded in 207 and 208 60% 40% Jan 6 Jul 6 Jan 7 Jul 7 Jan 8 Jul 8 Source: IHS Markit RigPoint as of December 208 Classified as new mutual fixtures in IHS Markit RigPoint 2 Drillships delivered in 203 or later, equipped with dual BOP and 2.5mm lbs. hookload derricks Utilization for these highestspecification drillships increased by 7 percentage points during 208 and is currently ~82%
Modern Jackups Winning More New Contracts For Shallow-Water Work 200 50 00 Number of New Jackup Contracts Awarded Worldwide 50 0 00% 80% 42 56 86 7 6 0 Jackup Utilization Delivered Rigs 27 37 206 207 208 Modern Jackups 2 Older Jackups 80 Modern Jackups The number of new jackup contracts awarded worldwide has increased by 53% over 206 levels Modern jackups that deliver efficiencies for customers offshore projects are winning an outsized share of new work These assets currently represent 284 out of 520 delivered jackups, or ~55% of total supply, and won ~64% of new jackup contracts awarded in 207 and 208 60% 40% Jan 6 Jul 6 Jan 7 Jul 7 Jan 8 Jul 8 Source: IHS Markit RigPoint as of December 208 Classified as new mutual fixtures in IHS Markit RigPoint 2 Jackups <20 years of age Older Jackups Modern jackups have experienced 8ppt higher utilization than older jackups on average since the beginning of 206 2
Substantial Portion of Current Global Supply are Retirement Candidates Global Rig Fleet Floaters Jackups Delivered Rigs Under Contract 6 33 Future Contract 32 30 Idle / Stacked 50 Marketed Fleet 98 454 Non-Marketed 46 66 Total Fleet 244 520 ~50 floaters could be candidates for retirement based on age and contract expirations ~50+ jackups could be retired as expiring contracts and survey costs lead to the removal of older rigs from drilling supply Marketed Utilization 75% 76% Total Utilization 6% 66% Newbuild Rigs Contracted 3 2 Uncontracted 26 23 Build in Brazil / China 4 54 Total Newbuilds 43 79 Uncontracted newbuilds expected to be delayed further, while several newbuilds in Brazil and China are unlikely to join the global fleet Source: IHS Markit RigPoint as of December 208 Includes rigs >30 years of age that are idle without follow-on work or have contracts expiring before year-end 209 without follow-on work and rigs 5 to 30 years of age that have been idle for more than two years and without follow-on work 3
Retirements Expected to Lead to Future Supply Contraction 244 Current Total Supply 4 Build in Brazil Newbuilds Illustrative Floater Supply 29-26 Other Newbuilds >30yrs idle w/o future contract -2 >30yrs rolling off contract by YE209 9 floaters retired since 3Q4-8 5-30yrs idle for over 2yrs 222 25 Illustrative Total Supply Nonmarketed 97 Illustrative Marketed Supply The global floater count could decline by 22 rigs, or ~9%, if adjusted for likely retirements and newbuild deliveries Excluding another 25 floaters that are not currently marketed, illustrative marketed supply of 97 compares to contracted floater count of 48 520 Current Total Supply 35 Chinese Newbuilds 2 Illustrative Jackup Supply 24-03 Other Newbuilds >30yrs idle w/o future contract -76 >30yrs rolling off contract by YE209 8 jackups retired since 3Q4-4 396 3 5-30yrs idle for over 2yrs Illustrative Total Supply Nonmarketed 383 Illustrative Marketed Supply When adjusting for likely retirements and newbuilds, the jackup count could decline by 24 rigs or ~24% Excluding another 3 jackups that are not currently marketed, illustrative marketed supply of 383 compares to contracted jackup count of 343 Source: IHS Markit RigPoint as of December 208, Ensco analysis Build in Brazil newbuilds exclude 0 rigs that are unlikely to be delivered 2 Assumes 65% of uncontracted Chinese newbuilds enter the global supply 4
Offshore Market Recovery Ensco s Leading Position 5
Fleet Overview Diverse Fleet Capable of Meeting a Broad Spectrum of Customers Well Program Requirements Ultra-Deepwater Drillships Versatile Semisubmersibles Premium Jackups Total Rigs: 2 2 35 Includes two drillships and one jackup under construction, excludes managed rigs and rigs announced for retirement 6
Fleet Renewal Strategy Has Improved Our Ability to Meet Customer Demand 7% 7% 20% Fleet Composition 34% 8 30 Newbuild Deliveries Acquired Assets Divestitures 36% 37% 73% Fleet repositioned to focus on newest, most technically-capable assets while maintaining exposure to both shallow- and deep-water markets 43 rigs are either a 6 th generation or greater floater or a modern highspecification jackup, up significantly from just 24 in 203 46% 203 6G+ Floaters Jackups < 20 years of age 2G-5G Floaters 5% 22% Current Jackups > 20 years of age Current fleet includes two drillships and one jackup under construction, excludes managed rigs and rigs announced for retirement Rebalanced fleet enables us to better meet customer demand for highest-specification assets 7
Ensco Fleet Well Positioned to Meet Deepwater Customer Demand 2 RIG Highest-Specification Drillships Ensco fleet includes seven of 44 highest-specification drillships that are preferred by customers due to the efficiencies they deliver to offshore 7 6 well programs ESV 4 4 4 4 RDC DO NE SDRL 3 PACD All Other Utilization of these assets increased by 7 percentage points during 208, while utilization for other drillships remained flat over the same period Ensco Contract Status Highest-Specification Drillships 209 2020 202 ENSCO DS-7 ENSCO DS-9 ENSCO DS-0 ENSCO DS- ENSCO DS-2 ENSCO DS-3 ENSCO DS-4 Ensco s highest-specification drillships provide leverage to this improving segment of the market Portfolio approach to contracting rigs preserves exposure to improving contracting environment Contracted Options Under Construction Available Source: IHS Markit RigPoint as of December 208 Drillships delivered in 203 or later, equipped with dual BOP and 2.5mm lbs. hookload derricks 8
Ensco Fleet Well Positioned to Meet Mid- & Shallow-Water Customer Demand 6 RIG Modern Moored Semisubmersibles 4 4 3 3 2 2 DO Bluewhale NODL SDRL Maersk ODL ESV 3 All Other Ensco owns four of 28 modern moored semisubmersibles in the global fleet with enhanced well-control capabilities Three of these rigs are equipped with a versatile moored-dp configuration including ENSCO 8503 and ENSCO 8505, which combined have won ~40% of new floater contracts signed in the Gulf of Mexico since mid-204 30 23 22 Modern Jackups 2 8 Ensco maintains one of the largest modern jackup fleets in the industry, providing exposure to the shallowwater recovery 3 9 6 6 Open tenders for jackup rigs have more than doubled since year-end 207 SHLF Northern Aban NE Maersk SDRL 3 ESV RDC/ARO BORR Source: IHS Markit RigPoint as of December 208 Modern moored semisubmersibles classified as < 5 years of age with 5+ ram blowout preventers, 5K psi BOP working pressure and 2 million lbs. hookload; 2 Jackups < 20 years of age; chart not inclusive of all modern jackups in the global supply; 3 Seadrill includes NADL, reflects 50% ownership of SeaMex and excludes newbuilds with no recourse to parent company 9
Safety & Operational Excellence Safety and Operational Performance Provides Competitive Advantage and Benefits Financial Results 0.7 0.6 0.5 0.4 0.3 0.2 0. 0.0 Total Recordable Incident Rate 203 204 205 206 207 YTD'8 Industry Ensco Fleet-Wide Operational Utilization 2 99% 99% 98% Critical to customers, in particular for complex well programs Safety metrics consistently better than industry averages, and high levels of operational utilization % improvement in operational utilization increases annual revenue by approximately $20 million 3 95% 95% 96% Industry leader in customer satisfaction for eight consecutive years 203 204 205 206 207 YTD'8 YTD 8 Ensco statistics as of 3Q8; IADC industry statistics as of 2Q8 2 Operational utilization is adjusted for uncontracted rigs and planned downtime; YTD 8 as of 3Q8 3 Based on 207 annual revenue 20
Global Footprint with Diverse Customer Base Customer Base Spans Majors, National Oil Companies and Independents North Sea Mediterranean Southeast Asia Gulf of Mexico West Africa Middle East South America Australia Note: Certain customers may not have current contracts with Ensco 2
Ensco s High-Quality Fleet and Global Presence Has Led to Contract Awards 2% Percentage of New Contracts Awarded since 207 6% 5% 5% Ensco Company Company 2 Company 3 Company 4 Company 5 Company 6 5% 5% 4% Contracts have added approximately 53 rig years 2 to Ensco s backlog Diverse rig fleet and global footprint have led to floater and jackup contracts across several regions Three recent drillship contract awards including work offshore West Africa and South America Several recent jackup contracts around the world including the Middle East, Asia Pacific & North Sea Source: IHS Markit RigPoint as of January 209; Ensco analysis Note: Independent companies with most new contract awards include Aban Offshore, ARO Drilling, Noble, Rowan, Shelf Drilling and Transocean Calculated by dividing the number of rig years contracted by Ensco for fixtures classified as New Mutual in IHS Markit RigPoint (approximately 6) by the corresponding industry-wide total (approximately 52) 2 Calculated based on date of contract execution; number of rig years awarded differs from totals in industry databases due to timing delay between date of contract execution and public disclosure of new contracts in certain cases. 22
Leveraging Innovation & Technology to Solve Industry Challenges Focused investments in innovation that differentiate Ensco s assets from the competition through better performance and reliability This includes developing proprietary systems, processes and technology that improve the drilling process and productivity of Ensco s operations These efforts have resulted in more than 40 patent filings since 205 Continuous Tripping Technology Drilling Process Efficiency Continuous Tripping Technology is a patented system that fully automates the pipe tripping process without stopping to make or break connections, enabling 3x faster tripping speeds and delivering expected cost savings along with safer, more reliable operations Equipment Maintenance EAMS and EPIC systems increase operational uptime and decrease lifecycle costs by optimizing asset selection and maintenance activities Placing Jackups on Location Proprietary PinSafe technology creates significant cost savings for customers by optimizing jackup moves and reducing downtime spent waiting on weather Includes provisional and non-provisional patent filings completed or in progress since Q5 23
Continuous Tripping Technology Groundbreaking Patented Technology Fully Automates Pipe Tripping Process At Constant Controlled Speed Without Stopping To Make Or Break Connections Fully automated system implements unique rotary table that moves vertically using a secondary hoisting system Continuous Tripping Technology Illustration While Moving Into A Well Rotary table moves in synchrony with the top drive enabling pipe connections to be made up and broken out while the drill string is moving in or out of the well Conventional stand-by-stand method requires drill string to stop when pipe is being connected or broken Applicable across all water depths and can be retrofitted to existing rigs, i.e. would not require a newbuild rig Recently installed on ENSCO 23 and system commissioning is underway Rotary table elevates above rig floor to make pipe connections with the top drive and moving back to the rig floor at a constant controlled speed to begin the process again 24
Continuous Tripping Technology Helps to Lower Customers Offshore Project Costs 3x Faster than conventional standby-stand tripping methods $ millions 90 Illustrative One-Year Deepwater Program 6 wells / 60 days per well using conventional tripping >30,000 ft per well on average $500k/day spread cost including rig rate 0% Reduction in total time on average for all wells, and up to 5% for drill wells > 30,000 feet 80 70 ~5% or $27M 60 50 80 $ For multi-well projects, savings could equate to tens of millions of dollars for the customer 40 30 20 Conventional Tripping 53 Continuous Tripping Source: Ensco analysis based on data collected from offshore activities performed by Ensco over the past 0 years, including more than 4,500 wells Assumes average tripping speed of 9,000 ft per hour 25
Solid Financial Position Balance Sheet & Liquidity Provide Financial Flexibility 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 Financial Position 30 September 208 $2.6 billion of liquidity $0.6 billion of cash and short-term investments $2.0 billion revolving credit facility $2. billion of contracted revenue backlog $4.4 billion of net debt & 35% net debt-to-capital ratio Source: Company Filings 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 $5.0 billion, less $0.6 billion of cash and short-term investments, divided by the sum of long-term debt of $5.0 billion plus shareholders equity of $8.3 billion, minus $0.6 billion of cash and short-term investments. 26
Manageable Debt Maturities in Light of Balance Sheet & Liquidity $ millions Available Revolver Cash & ST Inv. $2,633 $2,003 ~$236 million of Maturities Before 2024 $,805 $850 Other Considerations Undrawn revolver extends beyond all nearterm debt maturities Fully unencumbered fleet with no secured debt in the capital structure and a secured debt basket of $750 million Generated ~$330 million of net proceeds from asset sales since year-end 203 $,000 $,00 $630 $23 $4 $955 $669 $50 $300 Liquidity 208 209 2020 202 2022 2023 2024 2025 2026 2027 2040 Cash & Short-Term Investments Revolving Credit Facility Senior Notes Convertible Senior Notes 2044 Source: Company Filings Borrowing capacity under revolving credit facility is $2.0B through September 209, $.3B from October 209 through September 2020 and $.2B from October 2020 through September 2022 27
$25K Jackup Dayrates $00K $75K High-Quality Fleet Provides Meaningful Cash Flow in Market Recovery $K/day 500 400 Historical Average Day Rates $450K/day Illustrative Annual EBITDA Contribution from Modern High-Specification Assets Only EBITDA in $ millions Floater Dayrates $250K $350K $450K 300 $250K/day 75,405 2,095 200 00 0 2002 2004 2006 2008 200 202 204 206 208 Floaters Jackups $25K/day $75K/day Based on historical build costs, an average day rate of ~$490K for floaters and ~$60K for jackups would be needed to meet a 5% unlevered internal rate of return 2 Since 2000, the average build costs for floaters was ~$665 million, while jackups averaged ~$200 million 896,586 2,276,077,767 2,456 Ensco s modern high-specification assets can generate meaningful cash flow for debt service and capital commitments in normalized day rate environment Source: IHS Markit RigPoint Fleet includes 2 6G+ floaters and 22 jackups < 20 years of age. EBITDA calculated using illustrative dayrates and a 90% utilization assumption less average opex of $50K/day for a floater and $50K/day for a jackup over 365 days. 2 Simplified discounted cash-flow analysis assumes 35-year useful life, average opex of $50K/day, $5 million of annual maintenance costs, $0 million of survey costs every five years for floaters; and 30-year useful life, average opex of $50K/day, $2.5 million of annual maintenance costs, $7 million of survey costs every five years for jackups; and 90% operational utilization. Analysis excludes debt service costs, shore-based support costs, taxes, and assumes no residual value at the end of the asset life. 28
29