Scotia Howard Weil 2016 Energy Conference 22 March 2016 1
Agenda Current Market Conditions Proactive Steps to Address Downturn Outlook for Offshore Drilling attrition of older rigs efficiency & cost improvements Maintain and Widen Leadership Position 1 in customer satisfaction…
Current Market Conditions Total Corporate Capex of Substantial reduction in billions Majors & Large IOCs E&Ps total capex since 350 2013 300 292 Expect E&Ps total capex 262 for 2016 to be 30% lower 250 212 year over year 200 149…
Market Response Customers reducing capex deferring projects early terminations/concessions for existing rig contracts re-engineering to increase efficiencies/reduce costs testing economics for future programs based on lower costs…
Capital Management Taking Decisive Fleet Restructuring Steps To Expense Management Persevere Through The Operational Excellence & Safety innovation Downturn process improvements 6
Proactive Capital Management Accessed the debt markets 1.25 billion offering in 3Q14 1.10 billion offering in 1Q15 to refinance 2016 maturities Increased revolver to 2.25 billion and extended to 2019 Reduced dividend twice to…
Debt Maturity Profile millions 3,000 Tender Process Ongoing 2,700 2,400 Increased Revolving Credit Facility to 2.25B; extended to 2019 2,100 1,800 2,250 1,500 1,500 1,200 1,025 900 900 700 625 600 No debt 500…
S&P Credit Ratings BBB+ BBB BBB Investment Grade BBB- BB+ BB B- CCC+ Not Rated DO ESV NE RDC RIG ATW PACD ORIG SDRL Source: Standard & Poors Ratings Services credit ratings as of March 2016 9
Capital Expenditure Outlook millions 450 450 325 50 150 50 25 50 50 350 275 225 2016E 2017E 2018E New rig construction Rig enhancements Minor upgrades and improvements Note: Estimates for 2016, 2017 and 2018; final…
Fleet Restructuring: Newbuild Deliveries 16 newbuild rigs delivered since 2010; four more under construction 2012.75 2013.75 2013 2014 2014.75 2015 2015.75 2016 2016.75 2017 2017.75 2018 2018.75 2019 2020 2019.75 ENSCO…
Fleet Restructuring: Divestitures & Scrapping 21 rigs sold since 2010 generating 675 million in proceeds 7 rigs sold since September 2014 4 jackups sold for more than 200 million in proceeds during 3Q14, reducing exposure to…
Expense Management Actions 15% reduction in offshore unit labor costs + 60+ million annual savings in onshore support costs February 2015 9% unit labor cost decrease for offshore workers 15% reduction of onshore positions 27…
Improved Expense Outlook Contract Drilling Expense 2Q15A 3Q15A 4Q15A 1Q16E 503 million 434 million 398 million 385 390 million Excl. 17 million provision for doubtful accounts related to ENSCO DS-5 drilling services contract…
Investments in Innovation We continue to invest in three core programs: 1. improving the drilling process 2. asset uptime and efficiency Ensco Asset Management System 3. re-engineering the support structure 16
Excellent Safety Performance Total Recordable Record 2015 TRIR Incident Rate Leading-edge safety management systems 1.2 1.0 Enhancing process 0.8 safety to drive further 0.6 improvements 0.4 0.2 0.0 2008 2009 2010 2011 2012…
Net Income Margin Largest Offshore Drillers 28% 27% 21% 19% 18% 16% ESV SDRL NE RIG RDC DO Source: FactSet; sum of trailing eight quarters of net income divided by sum of trailing eight quarters of revenue. FactSet's data…
High Levels of Customer Satisfaction Rated 1 Total Satisfaction Safety & Environment Performance & Reliability Job Quality Special Applications Ultra-Deepwater Wells Deepwater Wells Harsh Environment Wells Horizontal &…
Global Marketed Rig Fleet Floaters Jackups Contracted 184 282 Active Idle/Other 69 105 Fleet Total 253 387 % Contracted 73% 73% Under Construction 47 29 / 43% 111 70 / 62% by SETE by On Order / Planned 17 Brasil(1) 2…
Attrition of Older Floaters 70 more floaters could be retired by year-end 2017 if attrition continues at similar rates observed over the past 15 months Scrapped to Date Currently Idle Expiring Contracts 50 floaters scrapped 35…
Newbuild Floater Order Book 8% 64 Total 5 26% Contracted Recent news reports suggest SETE Brasil 17 program could be SETE Brasil, reduced to 10 Under newbuilds in total Construction 25 Uncontracted, Under Construction 12…
Attrition of Older Jackups More than 100 additional jackups could be retired as expiring contracts and survey costs lead to the removal of older rigs from drilling supply Retired to Date Currently Idle Expiring Contracts 15…
Newbuild Jackup Order Book 8% 113 Total 9 Contracted, Established Zero rigs being built in China by Drillers speculators have been contracted 34 30% Uncontracted, 68 Established Uncontracted, Drillers Speculators 60%…
Outlook for Offshore E&P Key Points to Remember 1. Deepwater production is 8% of global supply 2. Offshore reserves are a critical part of major E&P portfolios 3. Excessive costs/inefficiencies crept into sector during the 100+ oil…
Importance of Deepwater Shell has stated that deepwater is a key driver of growth Integrated gas and deepwater, which have been growth priorities for Shell in recent years and will reach significant scale with BG's positions…
Importance of Deepwater Other major E&Ps have made similar comments regarding the importance of deepwater projects to future growth BP: We don't think that the deepwater is played out there's a wide spectrum of quality in any resource…
Customers Re-Engineering Projects BP Mad Dog: Phase 2 Cost estimates reduced to less than 10 billion from previous estimate of 22 billion Project re-engineering through standardization and scope optimization, coupled with industry…
Service Sector Response Recent strategic combinations/alliances among service companies to drive greater efficiencies and lower the breakeven commodity prices for projects: Schlumberger/Cameron strategic innovation, efficiencies and…
Jackup Market Dynamics Shallow water well programs have lower breakeven commodity price points on average than deepwater projects less complex drilling requirements, shallower water depths and greater access to existing…
Summary We have taken proactive capital management, fleet restructuring and expense management decisions We believe our liquidity and balance In a very challenged sheet position gives us options market we believe We have…
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