Investor Presentation July 2015 Forward-Looking Statements - - PDF document

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Investor Presentation July 2015 Forward-Looking Statements - - PDF document

1 Investor Presentation July 2015 Forward-Looking Statements Statements contained in this 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


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Investor Presentation

July 2015

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Statements contained in this 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, day rates and backlog, estimated rig availability; rig commitments; contract duration, status, terms and other contract commitments; new rig commitments and construction; scheduled delivery dates for rigs; the timing of delivery, mobilization, contract commencement, relocation or other movement of 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 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

  • ur 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.

Forward-Looking Statements

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Profile

  • #1 in customer satisfaction – five consecutive years
  • Highest net income margins among major competitors
  • Best ever total recordable incident rate in 2014 and YTD
  • High-quality fleet of floaters and jackups
  • Broad diversification: customer, geography, rig type
  • Capital management flexibility

– no significant debt maturities until 2Q19 – $1.3 billion of cash and short-term investments – $2.25 billion revolving credit facility – $7.4 billion of contracted revenue backlog – investment-grade credit ratings

  • ~3% dividend yield; top half of S&P 500 Companies

Note: Cash and short-term investments, revolving credit facility capacity and contracted revenue backlog as of 30 June 2015

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Market Environment

  • Sharp drop in commodity prices accelerated beginning late fourth quarter

2014

  • New lows/increased volatility for oil prices during customers’ budget season;

more recently, oil prices have been under pressure

  • Capital expenditures declining in 2015 as customers re-evaluate programs in

light of lower commodity prices

  • Customers shortening contracts where permitted and requesting concessions
  • Uncontracted newbuilds and customer sublets creating additional supply
  • Aging of current global fleet has led to accelerated scrapping of floaters and

cold stacking of floaters and jackups

  • Some newbuilds being cancelled and others being delayed
  • SETE Brasil newbuild program reportedly to be cut by approximately half
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Sharp Decline in Oil Prices

Source: Thomson One; Brent Crude prices for 31 December 2013 through 21 July 2015

$30 $40 $50 $60 $70 $80 $90 $100 $110 $120 $130

Brent Crude ($/bbl)

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Ensco’s Proactive Fleet Management

2Q14

  • Moved five floaters to held for sale to proactively reduce expenses; two later

sold for scrap value 3Q14

  • Sold four jackups for more than $200 million

4Q14

  • Classified additional 4 rigs as discontinued operations
  • All held-for-sale rigs cold stacked to quickly reduce expenses

1Q15

  • Expedited cold stacking decision for ENSCO 8501 and ENSCO 8502 plus

four jackups to accelerate cost savings 2Q15

  • Cold stacking additional rigs to reduce expenses
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Proactive Steps to Address Market Downturn

  • Reduce offshore discretionary compensation and onshore support costs

February 2015 – 9% unit labor cost decrease for offshore workers – 15% reduction in force for onshore personnel including corporate staff July 2015 – plan to consolidate five geographic business units into three, centralize certain functions and rationalize office space

  • Highgrade fleet

– delivery of ENSCO 110, ENSCO DS-8 and ENSCO DS-9; all three rigs expected to contribute to earnings by year-end 2015 – sold six rigs since 2Q14; placed another six rigs into held for sale

  • Deferred ENSCO DS-10 delivery to 1Q17, delaying approx. $300 million in capex
  • Successful 1Q15 debt offering to refinance $1.1 billion of near-term debt maturities and

improve liquidity/capital management flexibility

  • Reduced quarterly dividend to $0.15 per share to improve capital management flexibility

during downturn

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2Q15 Highlights

  • Good operational, safety and financial performance

– 98% jackup operational utilization – TRIR on track to set another record in 2015 for safety performance – disciplined expense management

  • ENSCO 110 and ENSCO 104 each contracted for three-year terms

in the Middle East

  • Delivered newbuilds ENSCO 110 and ENSCO DS-9; each will

contribute to 2015 earnings

  • Contract term for ENSCO DS-7 extended by one year to 4Q17
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Current Market

Newbuilds

Floaters Jackups

Contracted 226 321 Stacked/Other 44 75 Total 270 396 % Contracted 84% 81% Under Construction 55

17 by SETE Brasil

106

59 by Speculators

On Order / Planned 17

12 by SETE Brasil

11

7 by Speculators

Total 72 117 % Contracted 54% 7% % Uncontracted 46% 93%

Active Fleet

Source: IHS-ODS Petrodata as of July 2015; competitive marketed floaters and jackups (independent leg cantilever rigs); ‘contracted’ includes rigs currently under contract or with a future contract

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Newbuild Floater Order Book

Source: IHS-ODS Petrodata as of July 2015; marketed competitive floaters

72 Total

5 Uncontracted, On Order 11 Contracted 37% 17% 17 SETE Brasil, Under Construction 27 Uncontracted, Under Construction 15% 7% 12 SETE Brasil, On Order 24%

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Newbuild Floater Delivery Schedule

Source: IHS-ODS Petrodata as of July 2015; marketed competitive floaters

5 17 3 1 1 3 1 1 1 6 4 1 9 5 2 1 5 4 2

5 10 15 20 25 30 35 2015 2016 2017 2018 2019 2020

Uncontracted, Under Construction Uncontracted, On Order SETE Brasil, On Order SETE Brasil, Under Construction Contracted

Under SETE Brasil by Shipyard Constr. On Order Total Estaleiro Atlantico Sul 4 3 7 Estaleiro Jurong Aracruz 4 3 7 BrasFELS, Angra dos Reis 5 1 6 Estaleiro Enseada do Paraguacu 2 4 6 Ecovix‐Engevix, Rio Grande do Sul 2 1 3 Total 17 12 29

? ? ? ? ?

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156 166 187 200 209 32 32 37 35 31 39 37 39 32 19 43 45 47 57 74 Current 2015 2016 2017 2018

< 15 years old 15-29 years old 30-35 years old > 35 years old

Floater Supply

*SETE Brasil rig counts by year are cumulative Source: IHS-ODS Petrodata as of July 2015; marketed competitive floaters

Assumes all rigs ‘On Order’

  • r partially

completed including SETE Brasil rigs are built, delivered and complete customer acceptance testing 9 SETE*

Cumulative # of rigs rolling off contract > 30 years old: 21 56 70 77

15 SETE* 23 SETE*

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Newbuild Jackup Order Book

Source: IHS-ODS Petrodata as of July 2015; marketed competitive jackups (independent leg cantilever rigs)

117 Total

59 Uncontracted, Speculators 39 Uncontracted, Established Drillers 8 Contracted, Established Drillers

33% 7% 51%

11 On Order, All Uncontracted

9%

Zero rigs being built by Speculators have been contracted.

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15 18 2 2 2 3 5 2 1 27 21 10 1 6 2

5 10 15 20 25 30 35 40 45 50 2015 2016 2017 2018 2019 2020

Uncontracted, Established Drillers On Order, Established Drillers On Order, Speculators Uncontracted, Speculators Contracted

Newbuild Jackup Delivery Schedule

Source: IHS-ODS Petrodata as of July 2015; marketed competitive jackups (independent leg cantilever rigs)

? ? ? ? ?

Speculator Newbuilds Under by Shipyard Constr. On Order Total China China Merchants Heavy Industry 15 ‐ 15 Shanghai Waigaoqiao Shipbuilding 7 1 8 Yantai CIMC Raffles 5 ‐ 5 Other 25 4 29 Subtotal 52 5 57 Singapore & Middle East Keppel FELS, Singapore 7 ‐ 7 UAE & Dubai ‐ 2 2 Subtotal 7 2 9 Total 59 7 66

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*Speculator rig counts by year are cumulative Source: IHS-ODS Petrodata as of July 2015; marketed competitive jackups (independent leg cantilever rigs)

Jackup Supply

199 241 285 303 305 22 20 17 19 20 118 108 75 29 17 57 69 106 154 168 Current 2015 2016 2017 2018

< 15 years old 15-29 years old 30-35 years old > 35 years old

Assumes all rigs ‘On Order’

  • r partially

completed including rigs built by Speculators are built, delivered and complete customer acceptance testing

Cumulative # of rigs rolling off contract > 30 years old: 48 90 115 137

30 Speculator 52 Speculator 65 Speculator 66 Speculator 27 Speculator* 48 Speculator* 63 Speculator* 66 Speculator*

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Newbuild Cancellations and Deferrals

Floaters

  • Reports suggest more than half of the 29 rigs in SETE Brasil program may be

cancelled; 4 other newbuilds ‘on order’ cancelled

  • Atwood delays 2 drillships with 2015 expected deliveries by 18 months each
  • Ocean Rig delays 2 drillships with 2017 expected deliveries by 16 months each
  • n average
  • Transocean delays 2 drillships with 2017/2018 expected deliveries by 24

months each Jackups

  • 5 jackups ordered by speculators were cancelled since mid-year 2014
  • Seadrill delays 8 jackups with 2015/2016 scheduled deliveries by approx. six

months each

  • Transocean delays 5 jackups with 2016/2017 expected deliveries by more than

two years each

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Increase in Scrapping and Cold Stacking

18 12 8 1 1 7 9 4 1 5 10 15 20 25 30 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 Scrapped Cold Stacked

Floaters

1 1 2 1 4 2 3 6 8 2 4 6 8 10 12 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 Scrapped Cold Stacked

Jackups

Source: IHS-ODS Petrodata as of July 2015; jackups defined as independent leg cantilever rigs; ‘scrapping’ includes scrapped rigs, announced scrapping and rigs converted to non-drilling units

39 scrapped & 22 cold stacked 5 scrapped & 23 cold stacked

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Well Positioned to Manage Through Downturn

  • Capital management flexibility
  • Highest net income margin among major competitors
  • Fleet highgrading

– 4 newbuild rigs under construction with differentiated designs – prior floater upgrade investments benefiting 2015 results – mooring capability to be added to ENSCO 8500 Series rig – 20 rigs sold since beginning of 2010; 6 held-for-sale rigs as of 6/30/15

  • Global presence and diverse customer base

– operations across six continents – extensive customer relationships: NOCs, Majors, IOCs

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Organic Growth: Newbuild Contracts/Deliveries

2012.75 2013.75 2014.75 2015.75 2016.75 2017.75 2018.75 2019.75

ENSCO DS-7 ENSCO 120 ENSCO 121 ENSCO 122 ENSCO 110 ENSCO DS-8 ENSCO DS-9 ENSCO 123 ENSCO 140 ENSCO 141 ENSCO DS-10 Drillships Premium jackups

2013 2016 2017 2014 2015 2020 2018 2019

5 yrs with Total 5 yrs with Total 2 yrs on operating rate* 2 yrs on operating rate* 2 yrs w/ Wintershall 2 yrs w/ Wintershall 2 yrs with NAM 2 yrs with NAM 2+ yrs with Nexen 2+ yrs with Nexen 3 yrs with Total 3 yrs with Total Delivered & Contracted Under Construction & Uncontracted Delivered, ‘On Operating Rate’ & Marketed 3 yrs with NDC 3 yrs with NDC

*Note: Customer has terminated contract for its convenience. Per terms of contract for early termination, customer is required to make monthly payments for two years equal to the operating day rate of approximately $550,000, which may be partially defrayed should Ensco re-contract the rig within the next two years and/or mitigate certain costs during this time period while the rig is idle and without a contract.

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9 11

PREMIUM JACKUPS ULTRA & DEEP WATER DRILLSHIPS MOORED SEMISUBMERSIBLES DYNAMICALLY POSITIONED SEMISUBMERSIBLES

Note: Includes rigs under construction. Excludes managed rigs and rigs in discontinued operations

High Quality Fleet

63 Rig Fleet

3 40

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U.S. Gulf of Mexico

Ships

3

Semis

6

Jackups

7 Africa

Ships

4

Jackups

1 Europe & Mediterranean

Semi

1

Jackups

11 Middle East

Jackups

11 Asia Pacific

Ships

1

Semi

3

Jackups

7 Brazil

Semis

4 Under Construction

Ships

1

Jackups

3

21

Global Platform

Held for Sale

Ships

1

Semis

4

Jackups

2

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Contracted Revenue Backlog Diversification

Drillships

41% 28% 31%

North & South America Africa Brazil

29% 12% 18% 15%

Europe & Med Asia Pacific

11%

National Oil Companies Majors Independents

25% 30% 45%

Middle East

15%

Premium Jackups Semis

Note: Contracted revenue backlog as of 30 June 2015

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Uptime = Net Inc. Margin = Customer Satisfaction

Source: Thomson One; sum of trailing eight quarters of net income divided by sum of trailing eight quarters of revenue. Thomson One's data is based on aggregation of information collected from industry equity research analysts, and may not be based on GAAP reported financial data

ESV SDRL NE RIG DO RDC

30% 29% 19% 18% 18% 16%

Net Income Margin

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Rated #1

  • Total Satisfaction
  • Health, Safety & Environment
  • Technology
  • Special Applications
  • Deepwater Drilling
  • Shelf Wells
  • Non-Vertical Wells
  • Harsh Environment Wells
  • North Sea
  • Latin America & Mexico

Industry Leader in Customer Satisfaction

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  • Record YTD safety

performance as measured by TRIR

  • Leading-edge safety

management systems

  • Major competitive

advantage; especially versus non-established drillers

Safety, Health & Environment

0.0 0.2 0.4 0.6 0.8 1.0 1.2 2008 2009 2010 2011 2012 2013 2014 YTD 2015

Ensco Industry

Total Recordable Incident Rate

Note: 2015 TRIR for Industry is as of 1Q15

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Capital Management and Financial Position

  • Investment-grade credit ratings from Moody’s/S&P; top ratings

among major offshore drillers

  • No significant debt maturities until 2Q19
  • $1.3 billion of cash and short-term investments
  • 32% net debt-to-capital ratio (net of $1.3 billion of cash and

short-term investments)

  • $2.25 billion available revolving credit facility
  • $7.4 billion of contracted revenue backlog
  • Reduced quarterly dividend to improve capital management

flexibility

Note: Cash and short-term investments, net debt-to-capital ratio, revolving credit facility capacity and contracted revenue backlog as of 30 June 2015

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ESV DO NE RDC RIG SDRL BBB+ BBB+ BBB- BBB- BB+ Not Rated

Investment Grade

Credit Ratings

Source: Bloomberg composite credit ratings as of 22 July 2015

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Contracted Revenue Backlog

3Q15 - 4Q15 2016 2017 2018+ $1.7 $2.7 $1.8 $1.2

$ billions

Note: Contracted revenue backlog as of 30 June 2015

$7.4 Billion Total

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Capital Expenditures

3Q15 - 4Q15 2016 2017

600 450 350 100 TBD TBD 100 TBD TBD

Newbuild construction Rig enhancements Sustaining

$ millions

Note: Final rig enhancement and sustaining project capital expenditure budgets for 2016 and 2017 TBD once budgets are completed.

~$800 <$750 <$750

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30 $500 $900 $1,500 $625 $700 $2,250

$0 $300 $600 $900 $1,200 $1,500 $1,800 $2,100 $2,400 $2,700 $3,000

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Debt Maturity Profile

2027 2040 $150 $300 2044 Upsized Revolving Credit Facility to $2.25B in Sep. 2014

$ millions

$1,025

Note: As of 16 July 2015. Approximately $14 million of cash as of 30 June 2015 was used to extinguish $14 million of aggregate principal amount

  • f MARAD obligations

No debt maturities for four years

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  • Leader in customer satisfaction – five consecutive years
  • Highest net income margin among major competitors
  • Best ever total recordable incident rate
  • High-quality fleet of floaters and jackups

– 10 year average age for go-forward floater fleet

  • 4 year average age for ultra-deepwater fleet
  • Technology advantages, e.g. ENSCO 120 Series jackups and Samsung

GF 12,000 drillships

  • $7.4 billion of contracted revenue backlog
  • Disciplined expense management
  • Capital management flexibility

Ensco’s Strengths

Note: Contracted revenue backlog as of 30 June 2015

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