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Ensco plc (ESV)

Q4 2011 Earnings Call

February 23, 2012 11:00 am ET


Sean P. O'Neill - Vice President of Investor Relations and Communications

Daniel W. Rabun - Chairman, Chief Executive Officer and President

James W. Swent - Chief Financial Officer and Senior Vice President

Kevin C. Robert - Senior Vice President of Marketing

John Mark Burns - Senior Vice President of Western Hemisphere

Patrick Carey Lowe - Senior Vice President of Eastern Hemisphere


Robin E. Shoemaker - Citigroup Inc, Research Division

David Wilson - Howard Weil Incorporated, Research Division

Ian Macpherson - Simmons & Company International, Research Division

David C. Smith - Johnson Rice & Company, L.L.C., Research Division

Scott Gruber - Sanford C. Bernstein & Co., LLC., Research Division

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Good day, everyone, and welcome to Ensco plc's Fourth Quarter 2011 and Full Year Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I will now turn this conference over to Mr. Sean O'Neill, Vice President of Investor Relations, who will moderate the call. Please go ahead, sir.

Sean P. O'Neill

Thank you, operator, and welcome everyone to Ensco's Fourth Quarter 2011 Conference Call. With me today are Dan Rabun, CEO; Bill Chadwick, our Chief Operating Officer; Jay Swent, CFO; as well as other members of our executive management team. We issued our earnings release, which is available on our website at

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 risk factors and other events that could impact future results and disclose important additional information regarding our recent acquisition.

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 16.

Now let me turn the call over to Dan Rabun, Chairman and CEO.

Daniel W. Rabun

Thanks, Sean. Good morning, everyone. Before Jay takes us to the financial results, I will discuss the benefits we are seeing from recent acquisition, fourth quarter and full year highlights and the state of our markets.

Last February, we announced a major acquisition. Looking back a year later, we are realizing the benefits that we discussed with our shareholders. Our larger customer base, expanded geographic presence and wider range of enhanced rig capabilities are giving us a distinct advantage. We have the world's youngest ultra-deepwater fleet, the largest number of active premium jackups and a major presence in the most strategic offshore basins across 6 continents.

In addition, we are realizing benefits from standardization within our fleet, especially the ENSCO 8500 Series semisubmersibles, Samsung DP3 drillships and Keppel FELS premium jackups. We believe these advantages will differentiate Ensco from other drillers in terms of uptime, which, in turn, will lead to more business and the highest scores in our industry for overall customer satisfaction. The integration of operations and systems is proceeding well, and we are on track to achieve our targeted synergies for 2012 and beyond.

Turning now to the highlights since last quarter. ENSCO 120, our first ultra-premium jackup that will be delivered next year, was contracted for $230,000 per day, plus mobilization for initial 500-day term in the Central North Sea. ENSCO 8505, which was recently delivered, was contracted to Anadarko, Apache and Noble Energy for at least 2 years and will commence its term contract next quarter. ENSCO 8506, the last rig in the ENSCO 8500 Series, was contracted to Anadarko at $530,000 per day for 2.5 years and will commence its term contract in the fourth quarter. Both of these 8500 Series contracts are for work in the U.S. Gulf, which is another positive sign that customers are confident in our ability to manage the permitting process.

We are also very gratified that these 2 contracts are with repeat customers. These rigs and their crews have proven the benefits of standardization across the 8500 Series, which had 97% utilization in 2011. Performance like this continues to enhance Ensco's reputation for exceeding customers' expectations.

As I mentioned last quarter, some of our newbuild drillships have experienced downtime on their initial wells that is outside our acceptable range, mostly due to OEM equipment issues that we are working to resolve with suppliers. We are systematically sharing lessons learned with the rest of the fleet to ensure that we do not experience repeat occurrences. Given the measures we have taken and the benefits of standardization I mentioned earlier, we expect higher utilization for our deepwater segment in 2012.

Since there has been a great deal of discussion in our sector about downtime, let me be clear. All of Ensco's active rigs, including their BOPs are certified to work in the markets where they are currently working. None of the current or upcoming shipyard stays noted on our most recent fleet status report involve any recertification work and none of the OEM equipment issues we experienced on our newbuild rigs involve recertification work, but rather were entirely related to a new equipment being delivered to us that did not meet commissioning standards.

Finally, in our most recent fleet status report, we provided an update on the status of ENSCO DS-6 that was recently delivered in South Korea. The rig is now in Singapore to load equipment, and per the terms of our interim agreement is undergoing customer-requested and funded enhancements. The interim agreement with our customer states our intention to sign a 5-year contract by April 1, and we will provide an update in our next fleet status report.

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