Record Operational and Safety Performance#1 in
Total Customer Satisfaction for Seventh Consecutive YearSignificant
Improvements to Capital Structure and LiquidityIssued $850 Million
Aggregate Principal Amount of Convertible Senior NotesCompleted
Exchange Offer for $650 Million Aggregate Principal Amount of
Senior Notes
Ensco plc (NYSE: ESV) today reported earnings per share of $0.13
for fourth quarter 2016 compared to a loss of $10.64 per share a
year ago. Earnings from discontinued operations were $0.03 per
share in fourth quarter 2016 compared to a loss of $0.41 per share
in fourth quarter 2015. Earnings per share from continuing
operations were $0.10 for fourth quarter 2016 compared to a loss of
$10.23 per share a year ago.
Several items in continuing operations influenced these
comparisons:
- $9 million or $0.03 per share gain
included in fourth quarter 2016 other income related to a
previously announced exchange of debt for equity
- $7 million or $0.02 per share of
discrete tax expense in fourth quarter 2016 tax provision
- $2.744 billion or $10.97 per share loss
on impairment in fourth quarter 2015
- $17 million or $0.06 per share
provision for doubtful accounts that increased contract drilling
expense in fourth quarter 2015 related to a customer dispute for
ENSCO DS-5
- $11 million or $0.04 per share of
discrete tax benefit in fourth quarter 2015 tax provision
Chief Executive Officer and President Carl Trowell said,
"Despite arguably the most challenging market conditions the
offshore drilling sector has ever faced, our offshore crews and
onshore employees achieved the best operational and safety
performance in Ensco's history with operational utilization of 99%
and a total recordable incident rate of 0.26 across our fleet
during 2016. This strong performance led to top scores for total
customer satisfaction in the annual EnergyPoint survey — the
seventh consecutive year we have been honored with this distinction
— which sets Ensco apart as the offshore driller of choice among
customers as we compete for new contracts."
Mr. Trowell added, "We also took several actions to further
improve our capital structure and liquidity. Recently, we completed
two transactions — an $850 million convertible senior notes
offering in December and a debt exchange of $650 million of our
nearest-term maturities for cash and new 2024 senior notes in
January — that raised $476 million of net proceeds. As a
consequence of these transactions and other capital management
actions taken during 2016, we have lowered our net debt by $1.9
billion and increased liquidity by $1.0 billion since the end of
2015. Additionally, we have reduced our debt maturities over the
next seven years to $1.15 billion from $2.90 billion a year ago,
providing us with enhanced capital management flexibility."
Mr. Trowell concluded, "As we navigate through the downturn, we
remain focused on what we can control — delivering safe and
efficient operations to our customers, proactively managing our
capital structure and ensuring that we are well positioned for the
eventual market upturn."
Fourth Quarter Results
Continuing OperationsRevenues were
$505 million in fourth quarter 2016 compared to $828 million a year
ago, primarily due to a decline in reported utilization to 51% from
63% in fourth quarter 2015. The average day rate for the fleet
declined to $177,000 in fourth quarter 2016 from $216,000 a year
ago.
Contract drilling expense declined to $289 million in fourth
quarter 2016 from $415 million a year ago. Excluding a $17 million
provision for doubtful accounts in the year-ago period, contract
drilling expense declined 27% due to fewer rig operating days and
disciplined expense management.
There was no loss on impairment in fourth quarter 2016. Fourth
quarter 2015 results included a loss on impairment of $2.744
billion.
Depreciation expense declined to $110 million from $150 million
a year ago mostly due to asset impairments recorded in fourth
quarter 2015. General and administrative expense declined to $25
million in fourth quarter 2016 from $30 million a year ago,
primarily due to reduced compensation costs from staff
reductions.
Interest expense in fourth quarter 2016 was $56 million, net of
$9 million of interest that was capitalized, compared to interest
expense of $57 million in fourth quarter 2015, net of $20 million
of interest that was capitalized. Lower interest expense due to
debt repurchases was largely offset by reduced capitalized interest
and the issuance of convertible notes. As noted above, fourth
quarter 2016 other income included a $9 million gain on the
exchange of $25 million aggregate principal amount of senior notes
for 1.8 million shares, which was partially offset by a loss on
foreign currency.
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. Net income from discontinued operations was $10 million for
fourth quarter 2016 compared to a net loss of $95 million a year
ago. Excluding impairments and other discrete tax items, the net
loss from discontinued operations was $0.3 million for fourth
quarter 2016 compared to net income of $1 million a year ago.
Segment Highlights for Continuing Operations
FloatersFloater revenues were $303
million in fourth quarter 2016 compared to $490 million a year ago.
This year-to-year decline in revenues was mostly due to fewer rig
operating days and a decline in the average day rate to $358,000
from $397,000 a year ago. Reported utilization was 44% compared to
57% a year ago. Adjusted for uncontracted rigs and planned
downtime, operational utilization was 98% compared to 96% in fourth
quarter 2015.
Floater contract drilling expense declined to $151 million in
fourth quarter 2016 from $239 million a year ago. Excluding a $17
million provision for doubtful accounts in fourth quarter 2015,
contract drilling expense declined 32% as rig operating days
declined year-to-year and unit labor and repair and maintenance
costs were reduced. Fourth quarter 2015 floater segment results
included impairments totaling $1.778 billion.
JackupsJackup revenues were $187
million compared to $307 million a year ago, mostly due to fewer
rig operating days and a decline in average day rates to $101,000
from $126,000 a year ago. Reported utilization was 54% compared to
66% in fourth quarter 2015. Adjusted for uncontracted rigs and
planned downtime, operational utilization in fourth quarter 2016
was 96% compared to 99% a year ago.
Contract drilling expense declined to $127 million from $149
million a year ago. This decline in contract drilling expense was
mostly due to fewer rig operating days as well as reduced unit
labor and repair and maintenance costs. Fourth quarter 2015 jackup
segment results included impairments totaling $966 million.
OtherOther is composed of managed
drilling rigs. Revenues declined to $15 million from $31 million in
fourth quarter 2015. Contract drilling expense declined to $11
million from $27 million a year ago. The completion of three
managed jackup contracts drove these revenue and contract drilling
expense declines.
Fourth Quarter
(in
millions of $,
Floaters Jackups Other
ReconcilingItems
Consolidated Total except %)
2016 2015
Chg 2016 2015
Chg 2016 2015 Chg
2016 2015 2016
2015 Chg Revenues
302.8 490.3
(38 )%
186.5 307.4 (39 )%
15.3 30.6 (50 )%
-
-
504.6 828.3 (39 )% Operating expenses Contract drilling
151.4 239.2 37 %
126.8 149.3 15 %
10.8 26.7 60
%
-
-
289.0 415.2 30 % Loss on impairment
-
1,778.4
-
-
965.6
-
-
-
-
-
-
-
2,744.0
-
Depreciation
73.1 99.3 26 %
32.9 45.8 28 %
-
-
-
4.2 4.6
110.2 149.7 26 % General and admin.
-
-
-
-
-
-
-
-
-
24.7 30.2
24.7 30.2 18 % Operating income
(loss)
78.3 (1,626.6 ) nm
26.8 (853.3 ) nm
4.5
3.9 15 %
(28.9 )
(34.8 )
80.7 (2,510.8 )
nm
Financial Position — 31 December 2016
- $3.6 billion of contracted revenue
backlog excluding bonus opportunities
- $4.9 billion of liquidity
- $2.60 billion of cash and short-term
investments
- $2.25 billion available revolving
credit facility
- $5.3 billion of total debt
Pro Forma Financial Position — 31 December 2016
Following the January 2017 completion of the Company’s debt
exchange for $650 million aggregate principal amount of senior
notes that were repurchased for $333 million of cash consideration
and $332 million aggregate principal amount of new senior notes,
the Company’s pro forma balance sheet as of 31 December 2016
reflected:
- $4.5 billion of liquidity
- $2.26 billion of cash and short-term
investments
- $2.25 billion available revolving
credit facility
- No debt maturities until second quarter
2019 and $1.15 billion of debt maturing before 2024
- $4.9 billion of long-term debt — down
from $5.9 billion at 31 December 2015
- $8.2 billion of Ensco shareholder's
equity
- 25% net debt-to-capital ratio (net of
$2.3 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 Tuesday, 28 February 2017, to discuss
fourth 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/10082967.
A webcast replay and transcript of the call will be available at
www.enscoplc.com. A replay will also
be available through 28 March 2017 by dialing 1-877-344-7529 within
the United States or +1-412-317-0088 from outside the U.S.
(conference ID 10082967).
Ensco plc (NYSE: ESV) brings energy to the world as a global
provider of offshore drilling services to the petroleum industry.
For more than 29 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 seventh 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 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; 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 any failure to execute definitive contracts following
announcements of letters of intent; 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; and
cybersecurity risks and threats. 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 EndedDecember
31,
Twelve Months EndedDecember
31,
2016
2015 2016
2015 OPERATING REVENUES $ 504.6 $ 828.3
$ 2,776.4 $ 4,063.4 OPERATING EXPENSES Contract drilling
(exclusive of depreciation) 289.0 415.2 1,301.0 1,869.6 Loss on
impairment
-
2,744.0
-
2,746.4 Depreciation 110.2 149.7 445.3 572.5 General and
administrative 24.7 30.2
100.8 118.4 423.9
3,339.1 1,847.1
5,306.9 OPERATING INCOME (LOSS) 80.7 (2,510.8 ) 929.3
(1,243.5 ) OTHER INCOME (EXPENSE) Interest income 5.2 3.1
13.8 9.9 Interest expense, net (56.3 ) (57.4 ) (228.8 ) (216.3 )
Other, net 4.9 7.0
283.2 (21.3 ) (46.2 )
(47.3 ) 68.2 (227.7 ) INCOME
(LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 34.5 (2,558.1
) 997.5 (1,471.2 ) PROVISION FOR INCOME TAXES
3.9 (182.8 ) 108.5 (13.9
) INCOME (LOSS) FROM CONTINUING OPERATIONS 30.6 (2,375.3 )
889.0 (1,457.3 ) INCOME (LOSS) FROM DISCONTINUED OPERATIONS,
NET 9.9 (95.0 ) 8.1
(128.6 ) NET INCOME (LOSS) 40.5 (2,470.3 )
897.1 (1,585.9 ) NET INCOME ATTRIBUTABLE TO NONCONTROLLING
INTERESTS (1.5 ) (1.5 ) (6.9 )
(8.9 ) NET INCOME (LOSS) ATTRIBUTABLE TO ENSCO
$ 39.0 $ (2,471.8 ) $ 890.2
$ (1,594.8 ) EARNINGS (LOSS) PER SHARE - BASIC
AND DILUTED Continuing operations $ 0.10 $ (10.23 ) $ 3.10 $ (6.33
) Discontinued operations 0.03 (0.41 )
0.03 (0.55 ) $
0.13 $ (10.64 ) $ 3.13 $
(6.88 ) NET INCOME (LOSS) ATTRIBUTABLE TO ENSCO SHARES -
BASIC AND DILUTED $ 38.2 $ (2,472.3 ) $ 873.6 $ (1,596.8 )
WEIGHTED-AVERAGE SHARES OUTSTANDING Basic 300.4 232.5 279.1 232.2
Diluted 300.6 232.5 279.1 232.2
ENSCO PLC AND
SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions) (Unaudited)
December 31,2016
December 31,2015
ASSETS CURRENT ASSETS Cash and cash
equivalents $ 1,159.7 $ 121.3 Short-term investments 1,442.6
1,180.0 Accounts receivable, net 361.0 582.0 Other
316.0 401.8 Total current assets
3,279.3 2,285.1 PROPERTY AND EQUIPMENT,
NET 10,919.3 11,087.8 OTHER ASSETS, NET 175.9
237.6 $ 14,374.5
$ 13,610.5
LIABILITIES AND
SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts
payable and accrued liabilities and other $ 522.5 $ 775.5 Current
maturities of long-term debt 331.9
-
Total current liabilities 854.4
775.5 LONG-TERM DEBT 4,942.6 5,868.6 OTHER
LIABILITIES 322.5 449.2 TOTAL EQUITY 8,255.0
6,517.2 $ 14,374.5
$ 13,610.5
ENSCO PLC AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (in millions) (Unaudited)
Twelve Months EndedDecember
31,
2016
2015
OPERATING ACTIVITIES Net income (loss) $ 897.1 $ (1,585.9 )
Adjustments to reconcile net income (loss) to net cash provided by
operating activities of continuing operations: Depreciation expense
445.3 572.5 (Gain) loss on debt extinguishment (287.8 ) 33.5
Deferred income tax expense (benefit) 28.7 (158.0 ) (Income) loss
from discontinued operations, net (8.1 ) 128.6 Bad debt provision
(5.7 ) 24.1 Loss on impairment
-
2,746.4 Other 16.1 20.7 Changes in operating assets and liabilities
(8.2 ) (84.0 ) Net cash provided by
operating activities of continuing operations 1,077.4
1,697.9 INVESTING ACTIVITIES
Purchases of short-term investments (2,474.6 ) (1,780.0 )
Maturities of short-term investments 2,212.0 1,357.3 Additions to
property and equipment (322.2 ) (1,619.5 ) Net proceeds from
disposition of assets 9.8 1.6
Net cash used in investing activities of continuing
operations (575.0 ) (2,040.6 )
FINANCING ACTIVITIES Reduction of long-term borrowings (863.9 )
(1,072.5 ) Proceeds from issuance of senior notes 849.5 1,078.7
Proceeds from equity issuance 585.5
-
Debt financing costs (23.4 ) (10.5 ) Cash dividends paid (11.6 )
(141.2 ) Premium paid on redemption of debt
-
(30.3 ) Other (7.1 ) (16.0 ) Net cash
provided by (used in) financing activities 529.0
(191.8 ) DISCONTINUED OPERATIONS
Operating activities 2.1 (10.9 ) Investing activities
6.3 2.2 Net cash provided by (used in)
discontinued operations 8.4 (8.7
) Effect of exchange rate changes on cash and cash equivalents (1.4
) (0.3 ) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,038.4
(543.5 ) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
121.3 664.8 CASH AND CASH EQUIVALENTS,
END OF YEAR 1,159.7 121.3
ENSCO PLC AND SUBSIDIARIES OPERATING
STATISTICS (Unaudited) Fourth
Quarter
ThirdQuarter
2016
2015
2016
Rig Utilization(1) Floaters 44 % 57 %
48 % Jackups 54 % 66 % 55 %
Total 51 % 63 % 53
%
Average Day Rates(2) Floaters $
358,405 $ 397,146 $ 353,187 Jackups 101,252 125,785 109,379
Total
$ 176,709 $ 216,372 $ 183,537
(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 Ensco’s condensed consolidated financial
statements presented on a GAAP basis, this press release provides
investors with net debt, which is a non-GAAP financial measure. Net
debt is 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.
Pro-Forma Financial Data
The table below represents total debt, cash and cash
equivalents, short-term investments, net debt, total capital and
net debt-to-capital ratio after giving effect to the January 2017
debt exchange described above (in millions, except
percentages):
Pro-Forma2016(1)(2)
2016 Total debt(1) $ 4,941.5 $ 5,274.5 Cash and cash
equivalents(2) 812.6 1,159.7 Short-term investments
1,442.6 1,442.6 Net debt(3) $ 2,686.3 $
2,672.2 Total capital(1)(4) $ 10,923.9 $ 10,922.8 Net
debt-to-capital 24.6 % 24.5 %
(1)
In January 2017, total debt was reduced by
$333.0 million as a result of debt tendered from our 8.5% senior
notes due 2019, 6.875% senior notes due 2020 and 4.70% senior notes
due 2021 totaling $663.4 million, net of discounts, premiums and
issuance costs, partially offset by the issuance of $332.0 million
of 8.0% senior notes due 2024 issued net of debt issuance costs of
$1.6 million. Total capital was adjusted by the aforementioned
amount and the estimated net of tax loss on the January 2017 debt
exchange of $13.0 million.
(2)
In January 2017, cash and cash equivalents
was reduced by $347.1 million, due to payment of cash consideration
of $332.5 million, accrued interest on the tendered debt of $10.0
million and transaction costs of $4.6 million.
(3)
Net debt consists of total debt, net of
cash and short-term investments.
(4)
Total capital consists of net debt and
Ensco shareholders' equity.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170227006657/en/
Ensco plcInvestor & Media Contacts:Nick Georgas,
713-430-4607Director - Investor Relations and CommunicationsorTim
Richardson, 713-430-4490Manager - Investor Relations
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