Investor Presentation May 2016 1
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, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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, contract drilling expenses and backlog; estimated rig availability; rig commitments; contract duration, status, terms and other contract commitments; new rig commitments and construction; rig upgrades; scheduled delivery dates for rigs; the timing of delivery, mobilization, contract commencement, relocation or other movement of rigs; benefits derived from expense management actions; estimated capital expenditures; rig retirements; rig stacking costs; 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 our annual report on Form 10-K for the year ended December 31, 2015, 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 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
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 – innovation – efficient/cost-effective driller 3
Current Market Conditions Total Corporate Capex of • Substantial reduction in Majors & Large IOCs E&Ps total capex since $ billions 2013 $350 $292 $300 • Expect E&Ps total capex $262 for 2016 to be ~30% lower $250 year over year $212 $200 • Unprecedented decline in $149 $150 exploration spending $100 • Lower rig utilization & day rates $50 $0 • The significant pullback in spending will affect supply in the future Source: IHS Upstream Competition Service Notes: Majors and Large IOCs peer group includes 15 international oil companies; 2015 and 2016 based on estimates and initial guidance, 4 respectively.
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 and streamlined project management • Drillers – cutting costs & stacking/retiring rigs – deferring rig deliveries – speculators canceling rig orders • Service companies – strategic combinations to invest in technological innovations and process improvements that increase efficiencies and drive out costs 5
• Capital Management Taking Decisive • Fleet Restructuring Actions To Persevere • Expense Management Through The • Operational Excellence & Safety Downturn – innovation – 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 improve liquidity and capital management flexibility • Deferred delivery of ENSCO DS-10 to 1Q17 postponing ~$300 million in capex, and ENSCO 123 to 1Q18 postponing ~$200 million in capex • Tender offer for certain debt maturities at a discount • Equity offering to bolster liquidity position 7
Final Results of Tender Offer • $861 million aggregate principal amount of senior notes repurchased for a 28% average discount – $622 million of cash on hand used to repurchase notes • 15% pre-tax internal rate of return on total cash savings of $460 million inclusive of principal and interest – annual cash interest expense reduced by $45 million • Net interest expense expected to decline – 2Q16 net interest expense of $57 million – 3Q16 net interest expense of $58 million 8
Final Results of Equity Offering • $586 million of net proceeds raised through 65.6 million share offering – increases cash and short-term investments to $1.3 billion • 301.3 million shares outstanding following equity offering – weighted-average shares outstanding for 2Q16 expected to be approximately 284 million shares – weighted-average shares outstanding for 3Q16 expected to be approximately 298 million shares Net debt-to-capital ratio declines to 33% 1 • • $2.25 billion revolving credit facility remains fully available 1 Net debt-to-capital is a non-GAAP measure. As of March 31, 2016, pro forma for tender and equity offers net debt-to-capital is calculated as follows: total debt of $4,991 million, less $1,336 million of cash and short-term investments, divided by the sum of total debt of $4,991 million plus 9 shareholders’ equity of $7,519 million, minus $1,336 million of cash and short-term investments.
Pro Forma Balance Sheet Information $ millions • 33% net debt-to-capital ratio 1 $1,500 • $1.3 billion of cash and short-term investments as of March 31, 2016, pro forma for tender and equity offers • $2.25 billion fully available revolving credit facility expires in 2019 $1,250 $1,025 $1,000 $858 $760 $750 $669 $623 $454 $500 $300 No debt $250 maturities $150 until 2019 $0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2027 2044 2040 Note: Reflects principal amount outstanding as of March 31, 2016, as adjusted to give effect to the tender offers settlement on 5 April 2016. 1 Net debt-to-capital is a non-GAAP measure. As of March 31, 2016, pro forma for tender and equity offers net debt-to-capital is calculated as 10 follows: total debt of $4,991 million, less $1,336 million of cash and short-term investments, divided by the sum of total debt of $4,991 million plus shareholders’ equity of $7,519 million, minus $1,336 million of cash and short-term investments.
Capital Expenditure Outlook $ millions $450 $325 50 25 $240 50 50 75 375 15 225 150 2Q16E - 4Q16E 2017E 2018E New rig construction Rig enhancements Minor upgrades and improvements Note: Estimates for 2016, 2017 and 2018; final capex estimates to be determined upon completion of annual budget process and subject to change based on rig contracting; new rig construction represents contractual commitments plus anticipated capex associated with rig construction; 2016 rig enhancements capex is specific to a mooring upgrade for an additional ENSCO 8500 Series rig, while 2017 and 2018 rig enhancements are estimates and not earmarked for any specific projects at this time; capex for minor upgrades and improvements are based on the currently active fleet. 11
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