Investor Presentation...4 Offshore Drilling is a Cyclical Industry Global Fleet Utilization 50% 60%...
Transcript of Investor Presentation...4 Offshore Drilling is a Cyclical Industry Global Fleet Utilization 50% 60%...
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Investor Presentation
July 2018
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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 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, 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 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.
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Why Invest in Ensco?
Perspectives on Offshore Drilling
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Offshore Drilling is a Cyclical Industry
Global Fleet Utilization
50%
60%
70%
80%
90%
100%
• Offshore drilling is highly cyclical
with six significant upcycles1 since
1985
– Average length of upcycle: 26 months
– Average increase in contracted rig
count: 24%
• During the same period there has
been six major downcycles
– Average decrease in contracted rig
count: 21%
– Most recent downcycle was
particularly severe, with contracted
rig count declining 38%
• Expect offshore recovery to be
protracted and phased
– Current contracted rig count ~6%
higher than Jan. 2017 lows
Source: IHS Markit RigPoint as of July 20181 Significant upcycle defined as a 10%+ increase in the number of contracted rigs
+103 rigs
17 months
+53 rigs
17 months
+70 rigs
34 months
+118 rigs
22 months
+82 rigs
28 months
+195 rigs
40 months
5
Utilization of Offshore Drilling Rigs
Driven by Customer Spending
• Customers’ offshore project
expenditures significantly
impact global rig utilization
• Global rig utilization has
generally moved in line with
the rate of change in customer
spending over time
• While nominal offshore capital
expenditures are expected to
bottom in 2018, aggregate
offshore capital expenditures
are forecast to grow at ~10%
compound annual rate through
2027
Source: IHS Markit RigPoint, Rystad Energy
Offshore Drilling Rig Utilization & E&P Capex
-30
-20
-10
0
10
20
30
40
30
40
50
60
70
80
90
100
Global Fleet Utilization (%, left axis) Change in E&P Offshore Capex (2Y rolling avg %, right axis)
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Offshore Production Critical to
Meeting Future Global Energy Demand
22
24
26
28
30
32
34
36
mm bbl/day
Offshore Oil Production1
Source: Rystad Energy, IHS Markit Strategic Horizons1 Offshore oil production defined as oil, NGL & other liquids production
~5.5 million
bbl/day
• Offshore production represents
~30% of global production
• Current production levels
driven by historical investment
with increased spending
needed to meet future oil
demand and replace
production depletion
– Average annual depletion rates
of ~11% and ~5% for deep- and
shallow-water production,
respectively
– Average time from FID to first
production of ~50 months for
deepwater projects and ~20
months for shallow-water
projects
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Higher Oil Prices Support Increased
Offshore Project Sanctioning
• Brent crude oil prices have
recently risen above $70/bbl
and have now remained above
$60/bbl for nine consecutive
months
• 2017 offshore project
sanctioning as measured by
FID approval more than
doubled 2016 levels
– 2018 offshore project
sanctioning to date slightly
ahead of 2017’s pace of project
approvals
• Many offshore projects are
economic at breakeven oil
prices well below current levels
-
25
50
75
100
125
0
20
40
60
80
100
Offshore FIDs (#, left axis) Brent Crude Oil Avg Price ($/bbl, right axis)
Average Offshore Breakeven Oil Prices
$27$33
$20 - $40 < $40 < $40 < $40
Statoil Respol Chevron Petrobras Shell Maersk
$/bbl
Pre-FID
Norwegian
Shelf
Projects
Brownfield
US GOM
Deepwater
Projects
Pre-FID
Deepwater
Projects
Pre-FID
Shallow-
Water
Projects
Pre-FID
Pre-Salt
Projects
Acquired
Maersk
portfolio
Source: AllianceBernstein, FactSet, Rystad Energy, IHS Strategic Horizons; Equinor 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
Offshore Project Approvals & Oil Prices
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Fixtures and Contracted Rig Years For
Floaters and Jackups Have Increased
Source: IHS Markit RigPoint as of July 20181 High-spec jackup defined as jackups with water depth rating of 350 ft. or greater; *2018 annualized based on fixtures signed year-to-date
Floaters High–Spec Jackups1
0
40
80
120
160
200
0
30
60
90
120
150
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
YT
D'1
8*
Fixtures (#, left axis) Rig Years (#, right axis)
0
100
200
300
400
500
0
30
60
90
120
150
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
YT
D'1
8*
Fixtures (#, left axis) Rig Years (#, right axis)
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Increasing Customer Activity has
Led to Improved Utilization
• After nearly three years of
declines, utilization of
offshore drilling rigs reached
a bottom in late 2016 and has
increased steadily over the
past 18 months
• Recent improvements in both
total and marketed utilization
are due in part to a higher
number of contracted rigs
Source: IHS Markit RigPoint as of July 2018
Global Fleet Utilization
50%
60%
70%
80%
90%
100%
Jan-1
4
Apr-
14
Jul-1
4
Oct-
14
Jan-1
5
Apr-
15
Jul-1
5
Oct-
15
Jan-1
6
Apr-
16
Jul-1
6
Oct-
16
Jan-1
7
Apr-
17
Jul-1
7
Oct-
17
Jan-1
8
Apr-
18
Jul-1
8
Total Marketed
10
Substantial Portion of Current Global
Supply are Retirement Candidates
• ~50 floaters1 could be
candidates for retirement
based on age and contract
expirations
• ~170 jackups2 could be retired
as expiring contracts and
survey costs lead to the
removal of older rigs from
drilling supply
• Uncontracted newbuilds
expected to be delayed further,
while several newbuilds in
Brazil and China are unlikely to
join the global fleet
Global Rig Fleet
Source: IHS Markit RigPoint as of July 20181 Includes floaters >30 years of age that are idle without follow-on work or have contracts expiring before year-end 2018 without follow-on work and floaters 15 to 30 years of age that have
been idle for more than two years and without follow-on work2 Includes jackups >30 years of age that are idle without follow-on work or have contracts expiring before year-end 2018 without follow-on work and jackups 15 to 30 years of age that have
been idle for more than two years and without follow-on work
Floaters Jackups
Delivered Rigs
Under Contract 135 308
Future Contract 19 23
Idle / Stacked 45 116
Marketed Fleet 199 447
Non-Marketed 54 69
Total Fleet 253 516
Marketed Utilization 77% 74%
Total Utilization 61% 64%
Newbuild Rigs
Contracted 0 0
Uncontracted 28 29
Build in Brazil / China 14 62
Total Newbuilds 42 91
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Retirements Expected to Lead to
Future Supply Contraction
• The global floater count could
decline by 20 rigs, or ~8%, if
adjusted for likely retirements
and newbuild deliveries
– Excluding another 27 floaters
that are not currently
marketed, illustrative marketed
supply of 206 compares to
contracted floater count of 154
• When adjusting for likely
retirements and newbuilds, the
jackup count could decline by
100 rigs or ~19%
– Excluding another 15 jackups
that are not currently marketed,
illustrative marketed supply of
401 compares to contracted
jackup count of 331
Source: IHS Markit RigPoint as of July 2018, Ensco analysis1 Build in Brazil newbuilds exclude 10 rigs that are unlikely to be delivered2 Assumes 65% of Chinese newbuilds enter the global supply
CurrentTotal
Supply
IllustrativeTotal
Supply
IllustrativeMarketed
Supply
Illustrative Floater Supply
4253
28 -24
-16
-12233Build in Brazil
Newbuilds1
Other
Newbuilds
>30yrs idle
w/o future
contract>30yrs
rolling off
contract by
YE2018
15-30yrs
idle for
over 2yrs
CurrentTotal
Supply
IllustrativeTotal
Supply
IllustrativeMarketed
Supply
Illustrative Jackup Supply
40
516
29 -108
-59
-2 416
Chinese
Newbuilds2
Uncontracted
Newbuilds
>30yrs idle
w/o future
contract >30yrs
rolling off
contract by
YE2018
15-30yrs
idle for
over 2yrs
27
206
Non-
marketed
15 401
Non-
marketed
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Why Invest in Ensco?
Perspectives on Offshore Drilling
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consecutive years rated #1 in total satisfaction among offshore drillers4
- Significant improvement in
subsea equipment related
downtime since 2015
- 35 recent patent filings3
- Safety metrics consistently
better than industry average¹- 99% fleet-wide operational
utilization in YTD 2018²
- $2.7 billion of liquidity
- $236 million of debt
maturities to 2024
The Offshore Driller of Choice
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1 IADC industry statistics as of 1Q182 Operational utilization is adjusted for uncontracted rigs and planned downtime3 Includes provisional and non-provisional patent filings completed or in progress since 1Q154 Independent industry survey by EnergyPoint Research
Safety & Operational
Excellence
- Largest fleet in the sector
- Diversified fleet with
exposure to shallow- and
deep-water segments
High-Quality
Rig Fleet
Solid Financial
Position
Systems, Processes &
Intellectual Property
Broad Global Footprint &
Customer Base
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High-Quality Rig Fleet
Diverse Fleet Capable of Meeting a Broad Spectrum of
Customers’ Well Program Requirements
Ultra-Deepwater
Drillships
Versatile
Semisubmersibles
Premium
Jackups
Includes two drillships and one jackup under construction, excludes managed rigs and rigs announced for retirement
Total Rigs: 1212 35
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Fleet Renewal Strategy Has Improved
Our Ability to Meet Customer Demand
50%
20%
13%
17%
2013
• Fleet repositioned to
focus on newest, most
technically-capable
assets while
maintaining exposure to
both shallow- and
deepwater markets
– 40 rigs are either a 6th
generation or greater
floater or a modern high-
specification jackup, up
significantly from just 21
in 2013
• Rebalanced fleet
enables us to better
meet customer demand
for highest-specification
assets
27%
5%
32%
36%
Current
30%
68%
Fleet Composition
Newbuild
Deliveries8
Acquired
Assets11
Divestitures30
Pre-2002 Jackups2G-5G Floaters6G+ Floaters Post-2002 Jackups
Current fleet includes two drillships and one jackup under construction, excludes managed rigs and rigs announced for retirement
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Total Rigs:
Highlights of Select Premium Assets
Technical Specifications Importance to Customers
• 12,000’ water depth & 40,000’
total drilling depth rating
• Water depth rating and total drilling depth enable rig to operate in the most
challenging ultra-deepwater environments
• Dual 7-Ram BOPs • Second BOP reduces flat time between wells, and 7th Ram optimizes well
control, safety and redundancy as well as saving time during testing
• Dual 2.5 million lb. derricks • Dual derricks allow the rig to conduct simultaneous activities, reducing
customers’ project time and costs, while higher hookload capacity increases a
rigs’ ability to drill/complete deeper, more complex wells
Technical Specifications Importance to 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 for complex wells, plus monitoring and response
capabilities to mitigate the risk of well-control incidents
Technical Specifications Importance to Customers
• 40,000’ total drilling depth &
2.5 million pound quad derrick
• Top-tier hoisting capacity allows for drilling of long-reach wells
• Patented Canti-Leverage
AdvantageSM technology
• Enhanced hoisting capacity at the farthest reaches of the cantilever leads to
fewer rig moves
• Automated drill floor • Greater automation allows offline activities to be completed while continuing
to drill
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Proprietary Solutions to
Industry Challenges
Industry Challenges Proprietary Solutions
Going on Location
• Going-on-location conditions
have traditionally been
determined using estimates of
wave movements, which is
commonly conservative and can
cause unnecessary downtime
while waiting-on-weather
• Proprietary technology collects and analyzes real-time motions
data of a floating jackup to determine if conditions are suitable for
lowering legs to seabed
• Significant cost savings by optimizing jackup moves and reducing
downtime spent waiting on weather
• Improves safety by removing the need for human interpretation,
ensuring consistent adherence to accepted level of risk when
going-on-location
PinSAFE System
Equipment Maintenance
• Equipment maintenance can be
intrusive and untimely, requiring
disassembly and downtime
• Time-based maintenance can
lead to extra costs when parts
are replaced before the end of
their useful life
• Ensco is transitioning to a reliability-based maintenance model
through in-house development of systems that apply real-time
monitoring, machine learning and predictive analysis to drilling
equipment
• The Ensco Predictive Intelligence Center increases operational
uptime and decreases lifecycle costs by optimizing asset
selection and maintenance activities
• The Ensco Asset Management System has contributed to a 70%
improvement in subsea equipment-related downtime1
Reliability-Based Maintenance
1Reduction in subsea equipment-related downtime over total operating hours for floaters during 2016 & 2017 as compared to 2015
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Safety & Operational Excellence
• Critical to customers, in
particular for complex well
programs
• Safety metrics consistently
better than industry averages
• Improved safety and
operational results each
successive year during
industry downturn
• 1% improvement in
operational utilization
increases annual revenue by
approximately $20 million3
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2013 2014 2015 2016 2017 YTD'18
Total Recordable Incident Rate1
Industry Ensco
1 IADC industry statistics as of 1Q182 Operational utilization is adjusted for uncontracted rigs and planned downtime3 Based on 2017 annual revenue
Safety and Operational Performance Provides
Competitive Advantage and Benefits Financial Results
95%95%
96%
99% 99% 99%
2013 2014 2015 2016 2017 YTD'18
Fleet-Wide Operational Utilization2
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Solid Financial Position
Financial Position 30 June 2018
• $2.7 billion of liquidity
– $0.7 billion of cash and short-term
investments
– $2.0 billion revolving credit facility
• $2.3 billion of contracted revenue
backlog
• $4.3 billion of net debt & 34% net
debt-to-capital ratio1
• 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
Strong Balance Sheet Provides Financial Flexibility
Source: Company Filings1 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 $0.7 billion of cash and short-term investments, divided by the sum of long-term debt of $5.0
billion plus shareholders’ equity of $8.4 billion, minus $0.7 billion of cash and short-term investments.
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2044
Manageable Debt Maturities in Light of
Strong Balance Sheet & Liquidity
$123 $114$955
$669
$1,000
$150
$850
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2040
$300
$ millions
$1,001
$1,805
Liquidity
$741
Ava
ilab
le R
evo
lve
r1C
ash
&
ST
In
v.
$2,744
Convertible Senior NotesSenior Notes
~$236 million of Maturities Before 2024
$2,003
Cash & Short-Term Investments Revolving Credit Facility
Other Considerations
• Undrawn revolver extends beyond all near-
term debt maturities
• No secured debt in capital structure
• Generated ~$330M of net proceeds from
asset sales since year-end 2013
• ~$250M of newbuild commitments remaining
Source: Company Filings1 Borrowing capacity under revolving credit facility is $2.0B through September 2019, $1.3B from October 2019 through September 2020 and $1.2B from October 2020 through
September 2022
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North Sea
Global Footprint with
Diverse Customer Base
Mediterranean
Note: Certain customers may not currently have backlog
Customer Base Spans Majors, National Oil Companies and Independents
West AfricaMiddle East
Southeast
Asia
Gulf of Mexico
Brazil Australia
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Higher Levels of Customer Activity Have
Led to Increased Contract Awards
• New contracts have added
about 39 rig years2 to
Ensco’s backlog
– Diverse rig fleet and global
footprint have led to floater
and jackup contracts across
several regions
– Won approximately 18% of
all ultra-deepwater contracts
in 2017
– Three multi-year jackup
contracts awarded recently
13%
6% 6%5%
5%4%
4%
Ensco Company 1 Company 2 Company 3 Company 4 Company 5 Company 6
Percentage of New ContractsAwarded since 20171
Source: IHS Markit RigPoint; Ensco analysis
Note: Independent companies with most new contract awards include Advanced Energy Systems, Maersk Drilling, Noble, Rowan, Shelf Drilling and Transocean1 Calculated by dividing the number of rig years contracted by Ensco for fixtures classified as New Mutual in IHS Markit RigPoint (approximately 49) by the
corresponding industry-wide total (approximately 370)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.
As Customer Activity Increases, Ensco Has Won
More New Contracts1 Than Any Offshore Driller
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• Ensco’s modern high-specification
assets can generate meaningful
cash flow for debt service and
capital commitments in normalized
day rate environment
High-Quality Fleet Provides Meaningful
Cash Flow in Market Recovery Scenario
Illustrative Annual EBITDA1 Contribution from
Modern High-Specification Assets ($ millions)
Source: IHS Markit RigPoint1 Fleet includes 21 6G+ floaters and 19 jackups delivered in 2002 or later. EBITDA calculated using illustrative dayrates and a 95% utilization assumption less average opex of $150K/day
for a floater and $50K/day for a jackup over 365 days.2Simplified discounted cash-flow analysis assumes 35-year useful life, average opex of $150K/day, $5 million of annual maintenance costs, $10 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 95% operational
utilization. Analysis excludes debt service costs, shore-based support costs, taxes, and assumes no residual value at the end of the asset life.
0
100
200
300
400
500
2002 2004 2006 2008 2010 2012 2014 2016
$K/day
Floaters Jackups
Historical Average Day Rates
$450K/day
$250K/day
$125K/day
$75K/day
• Based on historical build costs, an average day
rate of $465K for floaters and $150K for
jackups would be needed to meet a 15%
unlevered internal rate of return2
– Since 2000, the average build costs for floaters was
~$665 million, while jackups averaged ~$200 million
Floater Dayrates
$250K $350K $450K
Ja
cku
pD
ayra
tes $7
5K
818 1,546 2,274
$1
00
K
983 1,711 2,439
$1
25
K
1,147 1,876 2,604
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• Brent crude prices have increased significantly from cyclical
lows
• Stabilized oil prices have led to higher levels of offshore project
sanctioning with the expectation that this trend continues
• Offshore rig utilization to benefit from increasing customer
demand and attrition of older, less capable assets from the
global fleet
Summary
Offshore sector has
entered a different
point in the cycle
Ensco’s strengths
provide competitive
advantage during
market recovery
• High-quality rig fleet and track record of safety and operational
performance ahead of industry averages
• Technology and innovation improve operational results and
augment service offering
• Solid financial position bolstered by strong liquidity position
• Global footprint and diverse customer base
• Leader in new contract awards as customer activity has
increased
• Fleet provides meaningful cash generation in market recovery
scenario
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