020310 Credit Suisse Energy Summit


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020310 Credit Suisse Energy Summit

  1. 1. Credit Suisse Energy Summit February 3, 2010 Carey Lowe Senior Vice President
  2. 2. Forward-Looking Statements & Non-GAAP Reconciliations This presentation may contain statements regarding the Company's or management's intentions, hopes, beliefs, expectations or predictions of the future that are forward-looking statements, including statements regarding estimated rig delivery schedules, revenue potential and future competitive advantages. The forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. It is important to note that the Company's actual results could differ materially from those projected in such forward-looking statements. The factors that could cause actual results to differ materially from those in the forward-looking statements include but are not limited to, industry conditions and competition, including changes in rig supply and demand or new technology, risks associated with the global economy and its impact on capital markets and liquidity, prices of oil and natural gas, and their impact upon future levels of drilling activity and expenditures, further declines in rig activity, which may cause us to idle or stack additional rigs, excess rig availability or supply resulting from delivery of new drilling rigs, heavy concentration of our rig fleet in premium jackups, cyclical nature of the industry, worldwide expenditures for oil and natural gas drilling, the ultimate resolution of the ENSCO 69 situation in general and the potential return of the rig or package policy political risk insurance recovery in particular, changes in the timing of revenue recognition resulting from the deferral of certain revenues for mobilization of our drilling rigs, time waiting on weather or time in shipyards, which are recognized over the contract term upon commencement of drilling operations, operational risks, including excessive unplanned downtime and hazards created by severe storms and hurricanes, risks associated with offshore rig operations or rig relocations in general, and in foreign jurisdictions in particular, renegotiation, nullification, cancellation or breach of contracts or letters of intent with customers or other parties, including failure to negotiate definitive contracts following announcements or receipt of letters of intent, inability to collect receivables, changes in the dates new contracts actually commence, changes in the dates our rigs will enter a shipyard, be delivered, return to service or enter service, risks inherent to domestic and foreign shipyard rig construction, repair or enhancement, including risks associated with concentration of our ENSCO 8500 Series® rig construction contracts in a single foreign shipyard, unexpected delays in equipment delivery and engineering or design issues following shipyard delivery, availability of transport vessels to relocate rigs, environmental or other liabilities, risks or losses, whether related to hurricane damage, losses or liabilities (including wreckage or debris removal) in the Gulf of Mexico or otherwise, that may arise in the future which are not covered by insurance or indemnity in whole or in part, limited availability or high cost of insurance coverage for certain perils such as hurricanes in the Gulf of Mexico or associated removal of wreckage or debris, self-imposed or regulatory limitations on drilling locations in the Gulf of Mexico during hurricane season, impact of current and future government laws and regulations, and interpretations thereof, affecting the oil and gas industry in general and our operations and the expected benefits from our redomestication in particular, including taxation, as well as repeal or modification of same, our ability to attract and retain skilled personnel, governmental action and political and economic uncertainties, including expropriation, nationalization, confiscation or deprivation of our assets, terrorism or military action impacting our operations, assets or financial performance, outcome of litigation, legal proceedings, investigations or insurance or other claims, adverse changes in foreign currency exchange rates, including their impact on the fair value measurement of our derivative financial instruments, potential long-lived asset or goodwill impairments, and potential reduction in fair value of our auction rate securities and the risks described from time to time in the Company's SEC and proxy statement filings in general, and the risk factors section of the Company‟s latest annual report on Form 10-K, and quarterly report on Form 10-Q in particular. To the extent not provided in this presentation, reconciliations of any non-GAAP measures discussed in this presentation will be available in the Investors section of Ensco‟s website. To access this information online, go to 2 www.enscointernational.com and click on the “Investors” / “Presentation” links.
  3. 3. A Record of Growth and Disciplined Risk Management 3
  4. 4. Record of Growth Fortune Magazine’s Fastest Growing Companies Earnings Per Share Ensco’s Stockholders' Equity ($ in Bn) $8.11 $4.7 $6.73 $3.8 $5.04 $3.2 $2.5 $2.2 $1.87 $0.62 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 4
  5. 5. Strategy Sole Focus on Offshore Drilling › Disciplined investments in high-quality fleet to achieve favorable return on capital › Maintain leading premium jackup position › Grow deepwater fleet › Operational excellence & reputation for reliability › Commitment to safety › Prudent risk profile 5
  6. 6. Global Markets Europe 8 Jackups North & South America Mediterranean 7 U.S. GOM Jackups 2 Jackups 3 Deepwater Semis Middle East & India 10 Jackups 5 Mexico Jackups 1 Venezuela Jackup Asia Pacific 9 Jackups 1 Deepwater Semi + Under Construction 1 Barge Rig 4 Deepwater Semis
  7. 7. High-Quality Fleet Right Mix of Rigs to Maximize Profitability 18 10 10 7 4 1 250' 300' 350' 400' 7,500' 8,500' Jackups Deepwater 7 Note: Four North Sea rated rigs included under the 250‟ category. Includes deepwater rigs under construction.
  8. 8. ENSCO 8500 June 6, 2009 Contract Commenced in Gulf of Mexico 8
  9. 9. ENSCO 8501 October 8, 2009 Contract Commenced in Gulf of Mexico 9
  10. 10. ENSCO 8502 Delivered January 18, 2010 – First rig delivered in 2010 10
  11. 11. Uniform Design Benefits of 8500 Series ENSCO Rig 8500 8501 8502 8503 8504 8505 8506 Shipyard Common Equipment Training Repair & Maintenance Spare Parts 11
  12. 12. Ultra-Deepwater Semi Fleet $3 Billion+ Investment in 7 ENSCO 8500 Series® Rigs Transocean Ensco 12% 12% Seadrill 12% Noble 9% Diamond 7% Maersk Other 5% 43% Source: ODS-Petrodata, Inc. – Includes 7500‟ and greater semis (including under construction). 12
  13. 13. ENSCO 8500 Series® Less Than One Half of CAPEX Remaining Rig Construction Status Cost ENSCO 8500 $312 M Gulf of CAPEX Remaining Mexico ENSCO 8501 $338 M Gulf of Mexico $1.4 Billion ENSCO 8502 $385M Delivered Over 3 ½ Years Under ENSCO 8503 $427M Construction 3Q09 4Q12 & Contracted ENSCO 8504 $512 M Under ENSCO 8505 $537 M Construction & Available ENSCO 8506 $560 M Total $3.1 Billion 13 *Based on original construction cost estimate.
  14. 14. ENSCO 7500 $550,000 Day Rate in Australia 14
  15. 15. Deepwater Revenue $1.2 Billion Revenue Potential in 2013* › ENSCO 8503: 2-year contract to ~ $250 commence early 2011 at $520,000/day › ENSCO 8504: Delivered 2H11 $84 › ENSCO 8505: Delivered 1H12 › ENSCO 8506: Delivered 2H12 2008 2009 Estimates as of 3Q09 Earnings Conference Call on October 22, 2009 *Assumes 8 rigs at $450,000/day with 90% utilization 15
  16. 16. Announced Deepwater Discoveries 2008-09 Canada 90 Discoveries Caspian Sea 1 1 Mexico Asia/Australia 2 U.S. Gulf of 9 Mexico Indian Ocean 23 4 West Africa 21 Brazil 15 Mediterranean Northwest /Black Sea Europe 8 6 16 Note: Number of discoveries in >1,500 ft. of water.
  17. 17. Premium Jackup Fleet Ensco 12% Noble Others 10% 43% Rowan 8% Maersk 3% Diamond Seadrill 3% Transocean 3% 18% Source: ODS-Petrodata, Inc. – Premium Jackup includes 250‟ and larger independent leg rigs and rigs capable of working in North Sea 17 (including rigs under construction).
  18. 18. Fleet Enhancement Program Drives Superior Margins › Extends life › Increases capabilities to address new customer requirements › Lowers repair and maintenance expense › Reduces downtime › Improves safety 18
  19. 19. 2008 Operating Margins Highest Operating Margin 65% 65% 63% 56% 45% 40% 38% ESV NE DO RIG PDE SDRL RDC *Operating income plus depreciation and amortization as a percentage of revenue 19
  20. 20. Expense Management Culture Focused on Rigorous Expense Management › Workforce management › Repairs and maintenance › General and administrative › Regular investments in fleet controls expenses › 8500 Series uniform design has „built in‟ cost containment 20
  21. 21. Leverage Ratios* Disciplined Balance Sheet Management 30% 27% 26% 23% 20% 19% 16% 9% 7% 6% 2004 2005 2006 2007 2008 Peer Average Ensco 21 *Long-term Debt /Capitalization - Peers include: DO, RDC, PDE, NE & RIG
  22. 22. Safe Operations 1.2 Ensco 1.0 Industry 0.8 TRIR 0.6 0.4 0.2 0.0 2005 2006 2007 2008 2009 YTD 22 Total recordable incident rate (TRIR). YTD is as of November 16, 2009
  23. 23. Competency Assurance Program (CAP) Commitment to Employee Development › International Association of Drilling Contractors (IADC) awards accreditation to Ensco training programs › 31 positions worldwide – more than any competitor › 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 23
  24. 24. Risk Profile Prudent Risk Management › Diversification: geography, customers and fleet › Fund ENSCO 8500 Series® through internally generated cash flows › Liquidity/leverage › High-quality vendors › Avoid highly-specialized equipment › Safety and training 24
  25. 25. U.K. Redomestication Key Advantages › Executive management oversight › Proximity to customers › Greater access to European investors › Enhanced reputation as a truly global contract driller › Potential tax benefits › Lower effective tax rate › No U.K. tax on distributions to parent from subsidiaries › HMRC conditional exemption through 2012 on CFC regime 25
  26. 26. Accomplishments Moving Forward from a Position of Strength › Strongest balance sheet in sector › Highest operating margins › Lowest cost structure › Strategic diversification of fleet › Proven management team › Improved tax position 26
  27. 27. Future Opportunities › Capitalize on strong financial position to invest in: › Newbuild ultra-deepwater semis › Asset acquisitions › Upgrades to existing fleet › Opportunities to return capital to shareholders › Leverage low cost structure to win bids › Market ultra-deepwater newbuilds › Position premium jackup fleet for market upturn 27