Q4 2012 Earnings Call
February 21, 2013 11:00 am ET
Sean P. O'Neill - Vice President of Investor Relations & Communications
Daniel W. Rabun - Chairman, Chief Executive Officer and President
Kevin C. Robert - Senior Vice President of Marketing
James W. Swent - Chief Financial Officer and Executive Vice President
John Mark Burns - Chief Operating Officer and Executive Vice President
Patrick Carey Lowe - Senior Vice President of Eastern Hemisphere
David Wilson - Howard Weil Incorporated, Research Division
Douglas L. Becker - BofA Merrill Lynch, Research Division
Judson E. Bailey - ISI Group Inc., Research Division
Robin E. Shoemaker - Citigroup Inc, Research Division
Robert MacKenzie - FBR Capital Markets & Co., Research Division
Ian Macpherson - Simmons & Company International, Research Division
Gregory Lewis - Crédit Suisse AG, Research Division
Darren Gacicia - Guggenheim Securities, LLC, Research Division
Andreas Stubsrud - Pareto Securities AS, Research Division
Good day, everyone, and welcome to Ensco plc's Fourth quarter and Full Year 2012 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now turn the call 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 2012 Conference Call. With me today are Dan Rabun, CEO; Mark Burns, our Chief Operating Officer; Jay Swent, CFO; Kevin Robert, our Senior Vice President of Marketing, as well as other members of our management team.
We issued our earnings release, which is available on our website at enscoplc.com.
As usual, we will keep our call to 1 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 the risk factors and other events that could impact future results.
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 earlier this week.
Now let me turn the call over to Dan Rabun, Chairman and CEO.
Daniel W. Rabun
Thanks, Sean, and good morning, everyone. I will start by covering highlights for the year and fourth quarter, as well as a preview of what we see in 2013. Kevin will then comment on the state of our markets, and Jay will review our financial results and provide a detailed outlook for the year ahead.
First though, as we look back on 2012, it was a remarkable year for Ensco. We achieved record revenues and earnings and reinvested $1.8 billion back into our fleet, an all-time high. 3 new ultra-deepwater rigs were delivered, and I congratulate our capital projects team for successfully delivering them on time and on budget.
ENSCO 8505 commenced its initial term contract with a repeat customer. And ENSCO 8506, the final rig in the series, was delivered and is now working in the U.S. Gulf of Mexico.
In the most recent quarter, our 8500 series fleet achieved 99% utilization for rigs working at least 6 months, highlighting the many benefits of standardization.
ENSCO DS-6, our newest ultra-deepwater drillship recently commenced drilling operations in Angola, beginning a 5-year contract for BP.
ENSCO DS-7, our fifth Samsung DP drillship, was recently awarded a contract by Total, also for work in Angola. The initial rate at $615,000 per day, predetermined rate increases will make the average day rate approximately $648,000 per day over the life of the contract, plus mobilization. We expect drilling operations to commence in the fourth quarter after the rig is delivered later this year and mobilization, sea trials and acceptance testing have been completed. ENSCO DS-7 is the third drillship contracted by Total.
We are also excited about the delivery of 2 ultra-premium jackups later this year: ENSCO 120, which has been contracted with Nexen and is expected to commence operations in the fourth quarter; and ENSCO 121.
These 3 2013 deliveries and the 3 additional rigs scheduled for delivery in 2014 will continue to provide long-term revenue and earnings growth well into the future.
Investments that we have made in our fleet are a key element of Ensco's continuous high-grading strategy and so were sales of less capable rigs. We sold 3 jackups, 1 floater and a barge rig during 2012, and the proceeds have been reinvested into our newer rigs.
All of our actively marketed jackups are contracted and marketed utilization was 92% in the fourth quarter. As utilization remain strong, we have benefited from rising average day rates for our jackup segment. Ensco has the largest number of active premium jackups as the leading provider of these rigs worldwide.
Last year has also seen the successful integration of our acquisition, solidifying Ensco's global presence. The acquisition has continued to yield benefits beyond our expectations. Economies of scale have helped with purchasing, rig construction, shore-based operations and vendor relationships, including responsiveness when downtime issues occur. As a result of these benefits, we exceeded our targeted expense synergies of $100 million in 2012.
In addition, our expanded geographic scope gives us greater advantages in terms of contracting our rigs since we can be even more selective in choosing the highest margin opportunities.
Scale also gives us benefits in terms of hiring and training personnel. We can recruit from more talent pools and provide career opportunities in more places around the world.
2012 was a truly remarkable year for Ensco, and we want to carry this momentum forward into 2013. As a result, we recently launched our go beyond campaign. We are rededicating ourselves to our vision and values, in particular, safety, operational excellence and success for employees, customers and shareholders. The campaign focuses on exceptional actions by employees who go beyond their job responsibilities to achieve an even higher level of safety and operating performance, which, in turn, lead to even higher levels of customer satisfaction. The campaign has generated a lot of enthusiasm among our employees, and we look forward to delivering results to both customers and investors.
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