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:
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
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.
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.
Financial Position — 31 December 2016
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:
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
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.
Three Months EndedDecember 31,
Twelve Months EndedDecember 31,
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.
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):
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.
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.
Net debt consists of total debt, net of cash and short-term
Total capital consists of net debt and Ensco shareholders' equity.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170227006657/en/
Source: Ensco plc
Ensco plcInvestor & Media Contacts:Nick Georgas,
713-430-4607Director - Investor Relations and CommunicationsorTim
Richardson, 713-430-4490Manager - Investor Relations