Record Operational and Safety Performance
Significant Improvements to Liquidity and
Capital Structure
Repurchased $940 Million Aggregate Principal
Amount of Senior Notes
Raised $586 Million of Net Proceeds Through
Equity Offering
Expense Management Plans On Track
Ensco plc (NYSE: ESV) today reported earnings per share of $2.04
for second quarter 2016 compared to $1.11 a year ago. Results from
discontinued operations were zero cents per share in second quarter
2016 and a loss of $0.04 per share last year. Earnings per share
from continuing operations in second quarter 2016 were $2.04
compared to $1.15 a year ago.
Several items in continuing operations influenced these
comparisons:
- $261 million or $0.83 per share gain
included in second quarter 2016 other income related to the
repurchase of $940 million aggregate principal amount of senior
notes
- $205 million or $0.70 per share of
early contract termination settlements included in second quarter
2016 revenue:
- $185 million for ENSCO DS-9 effective
May 2016
- $20 million for ENSCO 8503 effective
June 2016
- $7 million or $0.03 per share loss
included in second quarter 2015 other expense related to a
previously reported debt retirement
Chief Executive Officer and President Carl Trowell said, “We
took further proactive steps to improve our capital structure and
liquidity during the second quarter. We repurchased $861 million of
senior notes at a 28% discount through a tender and another $79
million of senior notes at a 21% discount on the open market.
Additionally, we raised $586 million of net proceeds through a 65.6
million share offering. As a result, we increased liquidity to more
than $4 billion at quarter end, composed of $1.8 billion of cash
and short-term investments and a fully available $2.25 billion
revolving credit facility, which provides us with enhanced capital
management flexibility as we navigate through the market downturn.
Our leverage ratio also improved significantly due to these
actions.”
Mr. Trowell added, "We achieved record operational utilization
of 99% for the fleet during the quarter and set a new safety record
for the first half of the year. Our expense management plans remain
on track to achieve our cost savings targets."
Second Quarter Results
Continuing OperationsRevenues were
$910 million in second quarter 2016 compared to $1.059 billion a
year ago primarily due to a decline in reported utilization to 61%
from 76% in second quarter 2015. Revenues benefited from $205
million of early contract termination settlements in second quarter
2016 as noted above. The average day rate for the fleet declined to
$195,000 in second quarter 2016 from $237,000 a year ago.
Contract drilling expense declined 30% to $350 million from $503
million last year due to fewer rig operating days and disciplined
expense management.
Depreciation expense declined to $112 million from $141 million
in second quarter 2015 due to non-cash asset impairments recorded
in fourth quarter 2015, partially offset by newbuilds joining the
active fleet. General and administrative expense declined to $27
million in second quarter 2016 from $30 million last year, mostly
due to reduced compensation costs.
Other income was $210 million compared to other expense of $55
million a year ago. The year-to-year comparison was influenced by a
$261 million gain from the purchase of $940 million aggregate
principal amount of senior notes at a discount during second
quarter 2016 and a $7 million loss to complete a previously
reported debt retirement in second quarter 2015. Interest expense
in second quarter 2016 was $54 million, net of $13 million of
interest that was capitalized, compared to interest expense of $51
million in second quarter 2015, net of $27 million of interest that
was capitalized.
The effective tax rate was 5.8% in second quarter 2016 compared
to 17.5% a year ago. Excluding discrete items such as debt
repurchases and early contract termination settlements in second
quarter 2016 noted above, the effective tax rate was 19.9% compared
to 17.5% a year ago. The year-to-year comparison was influenced by
the mix of earnings from various tax jurisdictions.
Discontinued OperationsDiscontinued
operations include one floater and one jackup held for sale, as
well as rigs and other assets no longer on the Company’s balance
sheet. The net loss from discontinued operations was $0.2 million
for second quarter 2016 compared to $10 million a year ago. Second
quarter 2015 results included a pre-tax loss on impairment of $7
million.
Segment Highlights for Continuing Operations
FloatersFloater revenues were $636
million in second quarter 2016 compared to $634 million last year.
Excluding $205 million related to early contract termination
settlements previously noted, revenues declined 32%. This
year-to-year decline in revenues was mostly due to lower
utilization in the U.S. Gulf of Mexico and a decline in the average
day rate to $360,000 from $417,000 a year ago. Reported utilization
was 57% compared to 76% a year ago. Adjusted for uncontracted rigs
and planned downtime, operational utilization was a record 99%
compared to 92% last year.
Floater contract drilling expense declined 25% to $209 million
in second quarter 2016 from $278 million a year ago. Rig operating
days declined year-to-year along with lower unit labor and repair
and maintenance costs.
JackupsJackup revenues were $251
million compared to $384 million a year ago, mostly due to fewer
rig operating days and a decline in average day rates to $112,000
from $140,000 a year ago. Reported utilization was 63% compared to
77% in second quarter 2015. Adjusted for uncontracted rigs and
planned downtime, operational utilization in second quarter 2016
was 99% compared to 98% a year ago.
Contract drilling expense declined 37% to $122 million from $193
million last year. This decline in contract drilling expense was
mostly due to fewer rig operating days as well as lower unit labor
and repair and maintenance costs.
OtherOther is composed of managed
drilling rigs. Revenues declined to $22 million from $41 million in
second quarter 2015. Contract drilling expense declined to $19
million from $32 million a year ago. The completion of three
managed jackup contracts in Mexico drove these revenue and contract
drilling expense declines.
Second Quarter
(in millions of $,
Floaters Jackups
Other Reconciling Items Consolidated Total
except %)
2016 2015 Chg
2016 2015 Chg 2016
2015 Chg 2016
2015 2016 2015 Chg
Revenues
636.4 634.3 — %
251.3 384.1 (35 )%
21.9 40.6 (46 )%
— —
909.6 1,059.0 (14 )%
Operating expenses Contract drilling
208.6 277.7 (25 )%
122.3 192.7 (37 )%
19.3 32.2 (40 )%
— —
350.2 502.6 (30 )% Depreciation
77.8 94.4 (18 )%
30.1 43.6 (31 )%
— — —
4.5 2.5
112.4
140.5 (20 )% General and admin.
—
— —
—
— —
— —
—
27.4 29.7
27.4 29.7 (8 )% Operating
income
350.0 262.2 34 %
98.9 147.8 (33 )%
2.6 8.4 (69 )%
(31.9 ) (32.2 )
419.6
386.2 9 %
Financial Position — 30 June 2016
- $4.1 billion of contracted revenue
backlog excluding bonus opportunities
- $4.05 billion of liquidity
- $1.8 billion of cash and short-term
investments
- $2.25 billion available revolving
credit facility
- No debt maturities until second quarter
2019
- $4.9 billion of long-term debt — down
from $5.9 billion at 31 December 2015
- 28% net debt-to-capital ratio (net of
$1.8 billion of cash and short-term investments)
Ensco will conduct a conference call at 10:00 a.m. Central Time
(4:00 p.m. London time) on Thursday, 28 July 2016, to discuss
second quarter 2016 results. The call will be webcast live at
www.enscoplc.com. Alternatively,
callers may dial 1-855-239-3215 from within the United States and
+1-412-542-4130 from outside the U.S. Please ask for the Ensco
conference call. It is recommended that participants call 20
minutes before the scheduled start time. Callers may avoid delays
by pre-registering to receive a dial-in number and PIN at
http://dpregister.com/10082983.
A webcast replay and transcript of the call will be available at
www.enscoplc.com. A replay will also
be available through 28 August 2016 by dialing 1-877-344-7529
within the United States or +1-412-317-0088 from outside the U.S.
(conference ID 10082983).
Ensco plc (NYSE: ESV) brings energy to the world as a global
provider of offshore drilling services to the petroleum industry.
For more than 28 years, the company has focused on operating safely
and going beyond customer expectations. Ensco is ranked first in
total customer satisfaction in the latest independent survey by
EnergyPoint Research - the sixth consecutive year that Ensco has
earned this distinction. Operating one of the newest
ultra-deepwater rig fleets and a leading premium jackup fleet,
Ensco has a major presence in the most strategic offshore basins
across six continents. Ensco plc is an English limited company
(England No. 7023598) with its registered office and corporate
headquarters located at 6 Chesterfield Gardens, London W1J 5BQ. To
learn more, visit our website at www.enscoplc.com.
Statements contained in this press release 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, day rates and backlog, estimated rig availability; rig
commitments and contracts; contract duration, status, terms and
other contract commitments; 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 or letters of award; 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 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.
ENSCO PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(in millions, except per share
amounts)
(Unaudited)
Three Months EndedJune
30,
Six Months EndedJune 30,
2016
2015
2016
2015
OPERATING REVENUES $ 909.6 $ 1,059.0 $ 1,723.6 $ 2,222.9 OPERATING
EXPENSES Contract drilling (exclusive of depreciation) 350.2 502.6
713.9 1,020.9 Depreciation 112.4 140.5 225.7 277.6 General and
administrative 27.4 29.7 50.8
59.8 490.0 672.8
990.4 1,358.3 OPERATING INCOME
419.6 386.2 733.2 864.6 OTHER INCOME (EXPENSE) Interest income 2.5
3.4 4.8 5.8 Interest expense, net (54.0 ) (51.2 ) (119.1 )
(103.6
)
Other, net 261.4 (7.6 ) 259.6
(30.2
)
209.9 (55.4 ) 145.3
(128.0
)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 629.5 330.8
878.5 736.6
PROVISION FOR INCOME TAXES 36.7 58.0
108.1 135.7 INCOME FROM
CONTINUING OPERATIONS 592.8 272.8 770.4 600.9 LOSS FROM
DISCONTINUED OPERATIONS, NET (.2 ) (10.1 )
(1.1 )
(10.3
)
NET INCOME 592.6 262.7 769.3 590.6 NET INCOME
ATTRIBUTABLE TO NONCONTROLLING INTERESTS (2.0 ) (2.4
) (3.4 )
(5.6
)
NET INCOME ATTRIBUTABLE TO ENSCO $ 590.6
$ 260.3 $ 765.9 $ 585.0
EARNINGS (LOSS) PER SHARE - BASIC AND DILUTED Continuing
Operations $ 2.04 $ 1.15 $ 2.92 $ 2.53 Discontinued Operations
— (0.04 ) —
(0.04
)
$ 2.04 $ 1.11 $ 2.92
$ 2.49 NET INCOME ATTRIBUTABLE TO ENSCO
SHARES - BASIC AND DILUTED $ 580.8 $ 256.7 $ 753.9 $ 577.7
WEIGHTED-AVERAGE SHARES OUTSTANDING Basic 284.6 232.1 258.5 232.0
Diluted 284.6 232.2 258.5 232.1
ENSCO PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in millions)
June 30, 2016
December 31,2015
(Unaudited) ASSETS CURRENT ASSETS Cash and
cash equivalents $ 790.3 $ 121.3 Short-term investments 1,010.0
1,180.0 Accounts receivable, net 408.0 582.0 Other 346.4
401.8 Total current assets 2,554.7
2,285.1 PROPERTY AND EQUIPMENT, NET 11,021.2 11,087.8
OTHER ASSETS, NET 189.1 237.6
$ 13,765.0 $ 13,610.5
LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT
LIABILITIES Accounts payable $ 152.3 $ 224.6 Accrued liabilities
and other 458.5 550.9 Total current
liabilities 610.8 775.5 LONG-TERM DEBT
4,905.6 5,868.6 OTHER LIABILITIES 361.7 449.2 TOTAL
EQUITY 7,886.9 6,517.2 $
13,765.0 $ 13,610.5
ENSCO PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(in millions)
(Unaudited)
Six Months Ended June 30,
2016
2015
OPERATING ACTIVITIES Net income $ 769.3 $ 590.6 Adjustments
to reconcile net income to net cash provided by operating
activities of continuing operations: (Gain) loss on debt
extinguishment (260.8 ) 33.5 Depreciation expense 225.7 277.6
Discontinued operations, net 1.1 10.3 Other 23.3 29.2 Changes in
operating assets and liabilities 41.6 (50.2 )
Net cash provided by operating activities of continuing operations
800.2 891.0 INVESTING ACTIVITIES
Maturities of short-term investments 1,032.0 757.3 Purchases of
short-term investments (862.0 ) (650.0 ) Additions to property and
equipment (209.4 ) (913.9 ) Other 7.6 1.1
Net cash used in investing activities of continuing
operations (31.8 ) (805.5 ) FINANCING
ACTIVITIES Reduction of long-term borrowings (684.8 ) (1,058.0 )
Proceeds from equity issuance 585.5 — Cash dividends paid (5.5 )
(70.5 ) Proceeds from issuance of senior notes — 1,078.7 Premium
paid on redemption of debt — (30.3 ) Debt financing costs — (10.5 )
Other (1.9 ) (6.8 ) Net cash used in financing
activities (106.7 ) (97.4 ) DISCONTINUED
OPERATIONS Operating activities 1.4 (4.2 ) Investing activities
6.3 (0.6 ) Net cash provided by (used in)
discontinued operations 7.7 (4.8 )
Effect of exchange rate changes on cash and cash equivalents (.4 )
.2 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 669.0
(16.5 ) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
121.3 664.8 CASH AND CASH
EQUIVALENTS, END OF PERIOD $ 790.3 $ 648.3
ENSCO PLC AND SUBSIDIARIES
OPERATING STATISTICS
(Unaudited)
Second Quarter First Quarter
2016
2015
2016
Rig Utilization(1) Floaters 57 % 76 %
64 % Jackups 63 % 77 % 66 %
Total 61 % 76 % 65 %
Average Day Rates(2) Floaters $ 359,575 $
417,463 $ 364,771 Jackups 111,791 139,797 118,138
Total $ 194,754
$ 237,263 $ 208,117 (1) Rig
utilization is derived by dividing the number of days under
contract by the number of days in the period. Days under contract
equals the total number of days that rigs have earned and
recognized day rate revenue, including days associated with early
contract terminations, compensated downtime and mobilizations. When
revenue is earned but is deferred and amortized over a future
period, for example when a rig earns revenue while mobilizing to
commence a new contract or while being upgraded in a shipyard, the
related days are excluded from days under contract. For
newly-constructed or acquired rigs, the number of days in the
period begins upon commencement of drilling operations for rigs
with a contract or when the rig becomes available for drilling
operations for rigs without a contract. (2) Average day
rates are derived by dividing contract drilling revenues, adjusted
to exclude certain types of non-recurring reimbursable revenues,
lump sum revenues and revenues attributable to amortization of
drilling contract intangibles, by the aggregate number of contract
days, adjusted to exclude contract days associated with certain
mobilizations, demobilizations, shipyard contracts and standby
contracts.
Non-GAAP Financial Measures (Unaudited)
To supplement our condensed consolidated financial statements
presented on a GAAP basis, this press release provides investors
with a net debt-to-capital ratio. Net debt is a non-GAAP financial
measure defined as long-term debt less cash and short-term
investments. We review net debt as part of our overall liquidity,
financial flexibility, capital structure and leverage, and believe
that this measure is useful to investors as part of their
assessment of our business. Non-GAAP financial measures should be
considered as a supplement to, and not as a substitute for, or
superior to, financial measures prepared in accordance with
GAAP.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160727006572/en/
Ensco plcInvestor & Media Contacts:Sean O’Neill,
713-430-4607Vice President - Investor Relations and
CommunicationsNick Georgas, 713-430-4490Senior Manager - Investor
Relations
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