Ensco plc (ESV)

Q4 2010 Earnings Call

February 24, 2011 11:00 am ET


Daniel Rabun - Chairman, Chief Executive Officer and President

James Swent - Chief Financial Officer and Senior Vice President

William Chadwick - Chief Operating Officer and Executive Vice President

Patrick Lowe - Senior Vice President

Sean O'Neill - Vice President of Investor Relations


Philip Dodge - Stanford Group Company

Max Barrett - Tudor, Pickering, Holt & Co. Securities, Inc.

Robert MacKenzie - FBR Capital Markets & Co.

Collin Gerry - Raymond James

Scott Gruber - Bernstein Asset Management

Judson Bailey - Jefferies & Company, Inc.

Arun Jayaram - Crédit Suisse AG



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Greetings, and welcome to the Ensco plc Fourth Quarter and Year End 2010 Earnings Conference Call. [Operator Instructions] It is now my pleasure to introduce your host, Mr. Sean O'Neill, Vice President of Investor Relations for Ensco. Thank you, Mr. O'Neill, you may begin.

Sean O'Neill

Thank you, operator, and welcome, everyone, to Ensco's Fourth Quarter 2010 Conference Call. With me today are Dan Rabun, CEO; Bill Chadwick, our COO; James Swent, our Chief Financial Officer; as well as other members of our executive management team.

We issued our earnings release, which is available on our website at enscoplc.com. Later today, we plan to file our SEC Form 10-K. As usual, we will keep our call to one hour.

Any comments we make about expectations are forward-looking statements and are subject to risks and uncertainties. Many factors could cause actual results to differ materially. Please refer to our earnings release and SEC filings on our website that define forward-looking statements and list of risk factors and other events that could impact future results and disclose important additional information regarding the transaction that will be filed with the SEC. Also, please note that the company undertakes no duty to update forward-looking statements.

As a reminder, our most recent fleet status report was issued on February 15. Now let me turn the call over to Dan Rabun, Chairman and CEO.

Daniel Rabun

Thanks, Sean, and good morning, everyone. Before Jay takes us to the financial results, I will discuss 2010 highlights, our recent announcement to acquire Pride and the state of our markets.

2010 was a challenging year for our industry, and I'm extremely proud of our employees for their performance in facing these challenges. We started the year transitioning our global headquarters from Dallas to London, and a year later, I can tell you the relocation went very smoothly. The advantages of moving to London are even greater than we expected in terms of customer contact, management oversight and the benefits of the more competitive tax position, including greater flexibility in terms of completing M&A transactions.

In April of last year, we announced a major increase to our regular quarterly cash dividend, given our strong financial position and favorable outlook for offshore drilling. The dividend increase was extremely well received by investors, and our board intends to maintain the $0.35 per share quarterly dividend on an ongoing basis following the close of the Pride acquisition. Our industry then faced the Macondo incident, and we have been confronting the fallout ever since.

For Ensco, I believe the challenges for Macondo have highlighted the strength of our organization. We were the first to receive re-certification of our deepwater rigs by regulators. The strength of our deepwater drilling contracts became evident. Our jackups were the first to drill a new gas well and a new oil well after the moratorium was lifted. And we gained new Deepwater customers for our rigs to sublets, including work for Telo and French Guiana. Our rig personnel, sure base marketing teams, other employees as well as our legal department and many others pulled together to make the best of a very difficult situation, and we are proud of their accomplishments.

In July, we underscored our commitment to high grading or premium jackup fleet through our purchase of ENSCO 109. it was a precursor to new rigs being ordered months later by competitors. Ensco recently ordered two ultra-premium, harsh environment jackups, with options for two more. We also sold four jackups last year as part of our high-grading strategy.

In August, ENSCO 8502 completed acceptance testing after having been delivered earlier in the year, and ENSCO 8503 was also delivered in 2010, bringing our active ultra-deepwater fleet to five rigs. The fleet is now the youngest in the industry. Recently, our first deepwater rig, ENSCO 7500, was awarded a multi-year contract in Brazil with Petrobras, a major new customer for our company.

2010 was also a good year in terms of safety. Previously, I've underscored the importance of safety and its strong ties to operational excellence, reliability and customer satisfaction. I'm extremely pleased that our rig crews and the entire workforce achieved an extremely low incident rate in 2010, consistent with our strong performance in 2009, and significantly better than the industry average. These are all major accomplishments that put us in an excellent position to announce our planned acquisition of Pride.

Since we made the announcement just two weeks ago, I won't add much other than to say, our subsequent meetings with Pride confirm that we expect to achieve all the contemplated benefits from the proposed combination. Our two organizations stood together better extremely well in terms of geographic scope, customers and fleet composition. And the combined company will be able to take advantage of many new opportunities.

In terms of cost savings, we mentioned that we anticipate at least $50 million of cost savings. And let me remind everyone, that estimate is solely for the consolidation of the corporate staff departments. We have already announced that our Dallas office will be closed and transitioned to Houston.

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