Strong Operational and Safety
PerformanceContracted 12 Rig YearsExtended Revolving Credit
FacilityRepurchased $189 Million Aggregate Principal Amount of
Senior Notes at a DiscountAdditional Expense Management Savings
Ensco plc (NYSE: ESV) today reported earnings per share of $0.28
for third quarter 2016 compared to $1.24 a year ago. Results from
discontinued operations were zero cents per share in third quarter
2016 and a loss of $0.10 per share in the year-ago period. Earnings
per share from continuing operations were $0.28 for third quarter
2016 compared to $1.34 a year ago.
Several items in continuing operations influenced these
comparisons:
- $18 million or $0.06 per share gain
included in third quarter 2016 other income related to the
repurchase of $189 million aggregate principal amount of senior
notes at a discount
- $6 million or $0.02 per share of other
discrete tax items that reduced the third quarter 2016 tax
provision compared to $2 million or $0.01 per share of other
discrete tax items that increased the third quarter 2015 tax
provision
- $4 million or $0.01 per share of
severance and other restructuring costs in third quarter 2016
contract drilling expense versus $5 million or $0.02 per share of
restructuring costs in third quarter 2015 contract drilling
expense
- $129 million or $0.55 per share from
early contract terminations for customer convenience included in
third quarter 2015 revenue
- $2 million or $0.01 per share loss on
impairment in third quarter 2015
Chief Executive Officer and President Carl Trowell said, “Market
conditions remain challenging for the offshore drilling sector due
to declining rig demand as customers restrict capital spending. Our
focus is on areas we can control — namely operational excellence,
capital discipline and expense management. We have made progress on
all three fronts with record operational utilization and safety
performance, a one-year extension of a portion of our revolving
credit facility, incremental debt repurchases to further reduce
balance sheet leverage and additional expense savings.”
Through 30 September 2016, Ensco has achieved its best-ever
safety performance with a total recordable incident rate of 0.22
and record fleetwide operational utilization of 99%. Effective 4
October 2016, Ensco extended the maturity date for a portion of its
revolving credit facility by one year into 2020. Through 30
September 2019, total commitments under the revolving credit
facility are $2.25 billion, then $1.13 billion through 30 September
2020. Debt was further reduced through the repurchase of $189
million aggregate principal balance of senior notes at a discount
in third quarter 2016.
Additional steps have been taken since mid-year 2016 to reduce
the Company's expense base by reducing onshore support personnel
and suspending a discretionary compensation plan. In aggregate,
these actions are expected to reduce expenses by approximately $50
million on an annualized basis from second quarter 2016 levels: $15
million is reflected in third quarter 2016 results and was
incorporated in the Company's prior projections for third quarter
2016, an incremental $15 million is anticipated in fourth quarter
2016 and another $20 million is expected beginning January 2017.
This supplements significant expense savings achieved through fleet
restructuring during the market downturn.
Third Quarter Results
Continuing OperationsRevenues were
$548 million in third quarter 2016 compared to $1.012 billion a
year ago, primarily due to a decline in reported utilization to 53%
from 62% last year. As noted above, third quarter 2015 revenues
included $129 million from early contract terminations. The average
day rate for the fleet declined to $184,000 in third quarter 2016
from $232,000 a year ago.
Contract drilling expense declined 31% to $298 million from $434
million last year due to fewer rig operating days and disciplined
expense management. Third quarter 2016 contract drilling expense
included $4 million of severance and other restructuring costs
related to a reduction in onshore support personnel compared to $5
million of restructuring costs a year ago.
Depreciation expense declined to $109 million from $145 million
a year ago mostly due to non-cash asset impairments recorded in
fourth quarter 2015, partially offset by ENSCO DS-8 joining the
active fleet. General and administrative expense declined to $25
million in third quarter 2016 from $28 million last year, due in
part to reduced compensation costs, including staff reductions.
Other expense declined to $31 million from $52 million a year
ago. The year-to-year comparison was influenced by an $18 million
gain on the repurchase of $189 million aggregate principal amount
of senior notes at a discount during third quarter 2016. Interest
expense in third quarter 2016 was $53 million, net of $12 million
of interest that was capitalized, compared to interest expense of
$55 million in third quarter 2015, net of $22 million of interest
that was capitalized. Excluding discrete tax items, the effective
tax rate was 6.0% compared to 12.6% a year ago.
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 $1 million for
third quarter 2016 compared to $23 million a year ago. Third
quarter 2015 results included a $17 million net loss on
impairment.
Segment Highlights for Continuing Operations
FloatersFloater revenues were $319
million in third quarter 2016 compared to $646 million last year.
Excluding $129 million from early contract terminations in the
year-ago period noted above, revenues declined 38%. 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 $353,000 from $422,000 a year ago. Reported utilization
was 48% compared to 59% a year ago. Adjusted for uncontracted rigs
and planned downtime, operational utilization was 99% compared to
95% last year.
Floater contract drilling expense declined 37% to $154 million
in third quarter 2016 from $242 million a year ago. Rig operating
days declined year-to-year and unit labor and repair and
maintenance costs were reduced.
JackupsJackup revenues were $214
million compared to $326 million a year ago, mostly due to fewer
rig operating days and a decline in average day rates to $109,000
from $134,000 a year ago. Reported utilization was 55% compared to
64% in third quarter 2015. Adjusted for uncontracted rigs and
planned downtime, operational utilization in third quarter 2016 was
98.9% compared to 99.8% a year ago.
Contract drilling expense declined to $133 million from $160
million last year. 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.
OtherOther is composed of managed
drilling rigs. Revenues declined to $15 million from $40 million in
third quarter 2015. Contract drilling expense declined to $11
million from $31 million a year ago. The completion of three
managed jackup contracts drove these revenue and contract drilling
expense declines.
Third 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 319.3 646.4 (51 )% 213.8 325.8 (34 )%
15.1 40.0 (62 )%
-
-
548.2 1,012.2 (46 )% Operating expenses Contract drilling 153.7
242.4 (37 )% 133.2 160.0 (17 )% 11.2 31.1 (64 )%
-
-
298.1 433.5 (31 )% Loss on impairment
-
-
-
-
2.4 nm
-
-
-
-
-
-
2.4 nm Depreciation 72.9 95.7 (24 )% 32.1 44.8 (28 )%
-
-
-
4.4 4.7 109.4 145.2 (25 )% General and admin.
-
-
-
-
-
-
-
-
-
25.3 28.4 25.3
28.4 (11 )% Operating income
92.7
308.3 (70 )%
48.5 118.6 (59 )%
3.9 8.9 (56 )%
(29.7 ) (33.1 )
115.4 402.7 (71 )%
Financial Position — 30 September 2016
- $3.8 billion of contracted revenue
backlog excluding bonus opportunities
- $4.0 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
- $4.7 billion of long-term debt — down
from $5.9 billion at 31 December 2015
- 27% 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, 27 October 2016, to discuss
third 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/10082957.
A webcast replay and transcript of the call will be available at
www.enscoplc.com. A replay will also
be available through 27 November 2016 by dialing 1-877-344-7529
within the United States or +1-412-317-0088 from outside the U.S.
(conference ID 10082957).
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, expected expense savings, 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; tax matters, including our
effective tax rate; 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 EndedSeptember
30,
Nine Months EndedSeptember
30,
2016
2015 2016
2015 OPERATING REVENUES $ 548.2 $
1,012.2 $ 2,271.8 $ 3,235.1 OPERATING EXPENSES Contract drilling
(exclusive of depreciation) 298.1 433.5 1,012.0 1,454.4 Loss on
impairment
-
2.4
-
2.4 Depreciation 109.4 145.2 335.1 422.8 General and administrative
25.3 28.4 76.1
88.2 432.8
609.5 1,423.2 1,967.8
OPERATING INCOME 115.4 402.7 848.6 1,267.3 OTHER INCOME (EXPENSE)
Interest income 3.8 1.0 8.6 6.8 Interest expense, net (53.4 ) (55.3
) (172.5 ) (158.9 ) Other, net 18.7 1.9
278.3 (28.3 )
(30.9 ) (52.4 ) 114.4
(180.4 ) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 84.5
350.3 963.0 1,086.9 PROVISION FOR INCOME TAXES (3.5 )
33.2 104.6 168.9
INCOME FROM CONTINUING OPERATIONS 88.0 317.1 858.4 918.0
LOSS FROM DISCONTINUED OPERATIONS, NET (.7 )
(23.3 ) (1.8 ) (33.6 ) NET
INCOME 87.3 293.8 856.6 884.4 NET INCOME ATTRIBUTABLE TO
NONCONTROLLING INTERESTS (2.0 ) (1.8 )
(5.4 ) (7.4 ) NET INCOME ATTRIBUTABLE TO ENSCO
$ 85.3 $ 292.0 $
851.2 $ 877.0 EARNINGS (LOSS) PER SHARE -
BASIC AND DILUTED Continuing operations $ 0.28 $ 1.34 $ 3.07 $ 3.87
Discontinued operations
-
(0.10 )
-
(0.14 ) $ 0.28 $
1.24 $ 3.07 $ 3.73
NET INCOME ATTRIBUTABLE TO ENSCO SHARES - BASIC AND DILUTED $ 83.5
$ 287.5 $ 836.1 $ 865.2 WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic 298.6 232.4 272.0 232.2 Diluted 298.6 232.5 272.0 232.2
ENSCO PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in millions)
September 30,2016
December 31,2015
(Unaudited) ASSETS CURRENT ASSETS Cash and
cash equivalents $ 465.4 $ 121.3 Short-term investments 1,302.0
1,180.0 Accounts receivable, net 352.1 582.0 Other 346.2
401.8 Total current assets 2,465.7
2,285.1 PROPERTY AND EQUIPMENT, NET
10,959.7 11,087.8 OTHER ASSETS, NET 176.9
237.6 $ 13,602.3
$ 13,610.5
LIABILITIES AND SHAREHOLDERS'
EQUITY CURRENT LIABILITIES Accounts payable and accrued
liabilities and other $ 564.6 $ 775.5 Current maturities of
long-term debt 25.6
-
Total current liabilities 590.2 775.5
LONG-TERM DEBT 4,677.0 5,868.6 OTHER LIABILITIES
354.1 449.2 TOTAL EQUITY 7,981.0
6,517.2 $ 13,602.3 $
13,610.5
ENSCO PLC AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions)
(Unaudited)
Nine Months Ended September
30,
2016
2015
OPERATING ACTIVITIES Net income $ 856.6 $ 884.4 Adjustments
to reconcile net income to net cash provided by operating
activities of continuing operations: Depreciation expense 335.1
422.8 (Gain) loss on debt extinguishment (279.0 ) 33.5 Deferred
income tax expense 23.6 55.4 Discontinued operations, net 1.8 33.6
Other 7.8 24.1 Changes in operating assets and liabilities
48.9 (179.2 ) Net cash provided by
operating activities of continuing operations 994.8
1,274.6 INVESTING ACTIVITIES
Purchases of short-term investments (1,704.0 ) (850.0 ) Maturities
of short-term investments 1,582.0 757.3 Additions to property and
equipment (255.5 ) (1,445.8 ) Other 7.7
1.4 Net cash used in investing activities of
continuing operations (369.8 ) (1,537.1
) FINANCING ACTIVITIES Reduction of long-term borrowings
(862.4 ) (1,072.5 ) Proceeds from equity issuance 585.5
-
Cash dividends paid (8.5 ) (105.9 ) Proceeds from issuance of
senior notes
-
1,078.7 Premium paid on redemption of debt
-
(30.3 ) Debt financing costs
-
(10.5 ) Other (2.3 ) (8.4 ) Net cash
used in financing activities (287.7 )
(148.9 ) DISCONTINUED OPERATIONS Operating activities 1.2
(12.7 ) Investing activities 6.2
(0.3 ) Net cash provided by (used in) discontinued operations
7.4 (13.0 ) Effect of
exchange rate changes on cash and cash equivalents (.6 )
-
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 344.1
(424.4 ) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
121.3 664.8 CASH
AND CASH EQUIVALENTS, END OF PERIOD $ 465.4
$ 240.4
ENSCO PLC AND
SUBSIDIARIESOPERATING STATISTICS(Unaudited)
Third Quarter Second Quarter
2016
2015
2016
Rig Utilization(1) Floaters 48 % 59 % 57 %
Jackups 55 % 64 % 63 %
Total 53 % 62 % 61
%
Average Day Rates(2) Floaters $ 353,187 $
421,903 $ 359,575 Jackups 109,379 133,619 111,791
Total $ 183,537
$ 232,008 $ 194,754 (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/20161026006999/en/
Ensco plcInvestor & Media Contacts:Sean O’Neill,
713-430-4607Vice President - Investor Relations and
CommunicationsorKevin Smith, 713-430-4490Director - Investor
Relations
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