VAL - Earnings call transcript Q2 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, everyone, and welcome to Ensco Plc's Second Quarter 2018 Financial Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I now turn the call over to Nick Georgas, Director of Investor Relations, who will moderate the call. sir. ahead, go Please

Nick Georgas

members actual Ensco's on Carl XXXX filings to forward-looking and results our Trowell, Baksht, comments expectations. forward-looking release about risks Many as Officer; to We make that website factors management uncertainties. events could company risk from me our we our website issued could cause Chief and no that Call. list and at today statements differ Jon to forward-looking earnings other well as our note are that CEO; is to CFO; are the undertakes our subject Second impact Please everyone, earnings update factors are materially release on define executive Conference team. to statements. results. available refer Quarter which With future Operating of our Welcome, and please duty expectations Carey other Any and statements Lowe, SEC our enscoplc.com. Also,

During will refer our and the information. Please GAAP this call, measures. earnings on additional for website we non-GAAP see release financial to

reminder, we on on investor website. Fleet available Status is our XX. An As a updated most July presentation our also issued recent Report

Trowell, turn Now, over let CEO the and to me Carl President. call

Carl Trowell

financial of the an morning, of outlook. today's results our will conclude market Atwood quarter commenting conditions. on acquisition, and results recent Jon Thanks, fleet everyone. our current I'll contract Nick, integration discuss call our our and and overview second on and Carey update before good start by with overview an the awards briefly will providing then restructuring, of an

operational benefited prior strong that our as These operating we to of million. guidance results, conference convert call for number and quarter operational successfully continue performance by higher a revenue. second $XX XX% all our rigs revenues of several backlog approximately days nearly from contracted utilization of led into exceeded terms to In results

the with in the these financial significant higher that anticipated drilling closed positive acquisition with the XXXX. fourth prior levels and and than G&A quarter across we We of of with line disciplined contract results, management cost Along demonstrated integration utilization Atwood made guidance our operating also expenses despite fleet. in on progress rig

and from which now $XX run expected substantially rate completed the on our finalized transaction an synergies million now integration We efforts basis. total have annual

selective and these newbuild of efforts third the dynamics, rigs. through it rig capable have our core retired we from several demand. can include be we higher years clear customer integration ENSCO made held specification will market achievement to that Our preference efficiencies less value our with execution success focused we remain of fleet planning With rigs ENSCO recently synergies older, a and will expect global fleet In well a sale classified our during remain assets for and program programs disposal high recognition update that future we and And added our the over fleet also personnel. and ongoing continue past of the onshore the as expectation credit anticipated jackups. sold for for of fleet of the of to on is the Customers than demonstrate for scrap the to have positioning capitalize both XXXX XX and quarter. on levels we floaters offshore this our restructuring, and Atwood to high case for acquisition that respect and investments These to higher the deliver assets. the specification to increased their few

demand the for technically the together, prepared capable actions future help Taken to is as recovers. most that assets ensure to meet our these streamlined market fleet newest, customer

led to improving to towards of the as the of sector crude outages offshore as Brent optimism fundamentals combination sense a renewed recent as has prices broader barrel. conditions, market Moving $XX and we've high seen per production

important customers prices. can last more nine I levels higher our having consecutive generate is production. pricing cash mentioned continue conference spot on deployed barrel $XX to excess sustained in months, And than call, customers be remained towards with that for above at investments to per As Brent crude future

Given the take of these nature longer projects for offshore time, investments in production, deeper water. cycle particularly

the As work pace when of anticipated year second on a (XX:XX:XX) pushing that into XXXX. XXXX our begin we have slower was the floats than we mentioned expected last began with we seen call, conference we to to contracting in half

our view offshore of the this However, change does not fundamental recovery.

factors, have given offshore processes fact, has tenders the their meeting the significantly for and up several open investments on improved customers many options reserve year. jackup in end visible recognition importance dramatic same number XX% take made critical of over over decade. XX% budgets that the and added regarding open in project investment as compelling for next and floater XXXX period. In customers energy they XXXX These more in increased than will since global have the are Perhaps past in tenders higher underinvestment be the beyond years next nearly commodity of projects replacement demand breakeven these begin budgeting visible make decisions the the prices indicated of by and economics will early annual time

in expect these discussions extensions all recently, come. will of a uptick projects customers We our of in new years in towards a inquiries we customers' seen of work, have we with and regarding provide healthy and an current noticeable tenders also result work which have to additional contracts. in attitudes shift will but offshore seen pipeline Not contracts direct the

as will difficult oversupply in conditions of of persists. this the market term trajectory to the rigs predict, While offshore the short competitive structural remain we expect is improvement exact

leading term, to However, we to in most for preserve rates given our our today's for are in medium longer capable at rates indicators exposure and inclined contract terms extended the to less the positive higher rigs technically order future.

from additional a supply expected back. rig available each on of and potential with first our term securing of jackups. And the carefully contract additional the also impact priority financial preservations evaluate weighing our will for our assets, market We marketed reactivation of segment is bringing benefit floaters the the

disciplined its gains we will we footing, recovery dynamic offshore through the these approach conditions. manage maintain our As market as

We our impact them winning broader near-term costs our will utilization that and are better conditions on can preserving to remembering to we work rates to positioned contracting market financially decisions proactively for rigs pricing that day benefit recovery, bridge improve. managing high market's whilst the by focus as specification liquidity and so well

the call to turn Carey. I'll Now over

P. Carey Lowe

you, Thank Carl.

me acknowledging for years the Let customers. while maintain provide also to our to two have onshore operational offshore employees and of safety allowed Their levels services of the another past increasing of utilization the performance. us quarter crews efforts by on and strong operational efficiency our start we near-perfect

industry than performance, to better operating ENSCO Additionally, our incident from year-to-date levels we rate focus we contracts. of on rigs the differentiate average for achieving X.XX market is our each reflects and total recordable competition our help high day. as of By safely significantly the these consistently new

jackups contracting limited short-term In the region. in XX terms secured contracts repeat the of XXXX Gulf, with now and success, recent ENSCO have awarded XXXX of ENSCO and multiple a jackups XX Also scheduled in a the contract four beginning Mexico, in in were September customer XXX-day Gulf to for is XXXX. our our availability we start that

through recent where sizable utilization in a time rigs a to a of hurricane in expect positive season, of result at gaps market all our success, of generally experience we year. As contracting sign work this our jackups

Gulf the the mostly requirements well few that Mexican over past of operators to new the side we inquiring has about opportunities of term Mexico will While have to Gulf seen on the expect lead well awards. begun years, contract longer

extension specific technical one that its warm Sea, each which a In of customers And is the rigs the North is current fleet for rig and to global late we extensions. the highest as received following standby Moving offshore operations XX-day attractive make received September. south, capable for XXX expected contract of well well specification the most period, it ENSCO drillships one DS-XX believe XXX, status and programs. ENSCO region, are into its among jackups in evaluate work a the DS-XX their capabilities our and to in Suriname. they

in As steadily improved call, to these have assets customer for on high seen utilization for we we North and specification increased XXXX. during has the alluded our jackups last demand Sea

days four this North with shallow-water year, Sea are our that programs continue specification jackups discussions over jackups have well number have remainder of the to for high uncontracted premium meaningful we we and customers of While on for. suited a

three-year XXXX's this rig XXX to a which contract Singapore its recently three-year there to rig three-year XXX is the contract ENSCO commenced now ENSCO July. in its contract Moving September ENSCO Mediterranean, quarter. quarter. contract East, in the scheduled the And term. is current is ENSCO its for Middle from into region mobilized XXX to start expected extend In interest firm to the fourth in customer and begin jackup the beyond third is in expected Sister

to jackups XX expect working we during the result have a in XXXX. As region

Looking the ongoing most completion be more that jackup East anticipate tenders. supply shallow-water has strength is over continue be the absorbed offshore Middle broadly, by the and additional market the globally years. following resilient We East to past and jackup the this well-publicized proven several market of largest region Middle will will

Pacific of high utilization securing Asia one contract XXXX. market, jackups majority for ENSCO a the for in our won Thailand, the offshore XXX Finally, of specification XX-month

activity multiple Securing with continues seen market. a availability added while and new we our most inquiries in to years the track And engaged marketed contracts and potential for of we the has function of opportunities potential XX beginning can in our In active limited have these in discussions days backlog terms, has of priority. region. for jackups contracting highest either suited XXXX are mode most rig This floaters. rig been rigs steadily improving have an or record making customers Sea year. in since for of and dynamically both includes our are rigs well for recent jackup be strategic semisubmersible in excellent for of have the of for contracting ENSCO now uncontracted terms in across incremental fleet XXXX, the active region, steady for number shorter our this operational the work moor which North positioned availability and We

conditions for and certain overall we seen competitive, differentiation have remain While market a asset certain geographies. clear types

has months entered roughly supply fleet XX% global in increased the the from even XX for as drillships utilization specification example, highest nine has the For XX% market. new just ago to

where the XX dynamics see that is than rigs similar as the older only while For for the years on Sea of that offshore North their that side XX XX%, specification us of utilization for North at even global the approximately to the efficiencies provides difference business is four is points global than older higher offer points highest offshore younger customers' We they younger beginning XX%, programs. than already XX% utilization rigs preference in We for six younger units. to years, Sea jackups jackups XX XX of percentage utilization which lower where the than XX%. utilization the is for includes years XX is more segments demonstrating fleet, supply, the certain diversified well improve. that pronounced shallow-water and in drillships in market of with remaining age geographies drillships field, like percentage the greatest exposure execute XX are rigs of This believe our

to Our high quality world. highly service ENSCO crews, the provider and customers safety operational a around offshore enhanced assets systems and confident key make

plays these that recovery help out. us innovation the investments and are ongoing new contracts as with continue technology to confident We win will market in strengths coupled

Now, I'll over to Jon. turn it

Jonathan Baksht

cover for and a I'll our quarter, results, quarter capital position. Today, financial expenditures, and Carey. of XXXX Thanks, third summary outlook second our the financial

due from website our case quarter completion a standby point was was uncontracted As spending increase returned from compared $XXX $XX $X.XX the or quarter. can operations from Atwood $XXX,XXX Revenue in rate quarter quarter. second to the much the an quarter A quarter the detailed filed Floater second XX% due press prior sequential on XX% sequential The Jackup of of in Floater earlier the $XXX first Operational the increased more in increase rate. revenue million. million the the $XXX compared adjusts quarter. to of DS-X's In share to the found quarter to the prior per loss offset than for rate a loss segment morning. an of $X.XX to than $XX and share day prior in day to In sequential average will of million quarter to this $XXX planned decline in $XX,XXX quarter. increase million days million million guidance call rigs quarter ENSCO The decline in comparison on due XXXX the first utilization during during which prior financial versus our We second million the XX% prior quarter the which and is results ENSCO an improved was $XX,XXX. XXXX, day quarter's million downtime for on first in utilization our the XXXX in fleet XXX day day ENSCO conference primarily of $XXX to reported days was for was contract in XX% to posted per after in quarter, Operational or the my earnings first million basis and during conference a rate XX% which increase for sequential second continuing and average XX-Q rate the operations nine the as reported $XX was Total increased from on Jackup year-ago from the in lower and to Form first compared second quarter the release approximately XXXX. to utilization the in by quarter to MS-X ENSCO prior million with $XXX on due better $XXX revenue DPS-X. in to quarter continuing segment utilization the percentage consistent consecutive $XXX from from operating call, average million rate $XXX,XXX commentary period was to the average XX%, the for XX%, first focus our the quarter. last to comparisons to past be a with revenue compared acquired in segment operating a

expense contracting quarter for full X% $XXX its total operations costs, prior maiden a to including Nigeria fleet commenced in in higher offshore due line DS-XX,which with million increased second to of transaction drillship March. integration-related guidance, sequentially quarter Excluding contract ENSCO utilization, our XXXX, late

$XXX to of fleet. to increased active expense million from to due ENSCO depreciation $XXX million the quarter Second DS-XX the addition

the prior Excluding transaction due in $XX second million fees. quarter. prior transaction quarter costs, from general compared costs million to and million $X the in quarter $X million were to declined in administrative XXXX expense primarily lower professional $XX Integration-related to

prior $XX $X quarter during $XX $XX compared integration enactment from increased lower in was $XX and in XXXX loss benefit to compared As as Other prior legislation adjusted second in primarily release. EBITDA the during million in million starting U.S. our our was in run Adjusted EBITDA reconciliation acquisition of A is mentioned first on the in $XX repurchases million second earnings an on net of XXXX $XX the The the annual an a to quarter quarter gain of expense of of its now our XXXX of $X in of at from million sequential press million. adjustment by to tax loss second discrete at The benefit $X purchase maiden compared million arising the compared last to earnings gain bargain purchase the the XXXX comparison related impacted will the quarter quarter. due foreign with begin of Atwood quarter expense million, million XXXX. end million result provision $X year. with Atwood million the contract the rate in million recognized to first to a to of to tax million Tax EBITDA DS-XX million in presented $X $XX Interest the XXXX expense loss million currency quarter $XX million quarter. acquisition tax the of $X bargain to in press quarter. a and loss the complete in discrete quarter the adjusted release debt included associated first synergies a expense by substantially interest second end prior is in quarter second increased compared tax first due ENSCO was XXXX of loss $XX reform quarter. capitalized first quarter for a

period periods. $XXX XXXX, we to be idle for commencing a for completion we to approximately prior in the quarter cost well ENSCO XXXX due proactively quarter anticipate during customer. DS-XX third for will moving third contracts a an contract well will for our sequential as decline approximately the drilling as quarter revenue expect decline XXXX ENSCO quarter primarily uncontracted with and rigs ENSCO MS-X outlook Now, to to another third million as We continue million to expense for $XXX lower of

benefit of amortization quarter partially to net For purposes third million by reconciling amortized expected of the provide to a EBITDA offset revenue is as million during income expenses. statement, is million of $XX $X our amortized $XX

XXXX, the total half will ENSCO by We $X $XXX consistent will to recognized Interest approximately second excluding and expected million quarter, to quarter approximately from following approximately expense. is the the be $XX majority third lower expect expense lower interest are Remaining approximately vast expense with $X in decline startup depreciation in the expense the drilling of expense. mostly XXX be costs to transaction million during G&A quarter capitalized million, contract of due will increase transaction million expected costs personnel second of and $XX to due second XXXX which XXX. to million in

will Finally be we approximately anticipate the quarter third $XX provision tax million.

expected Moving rig $XX $XXX half capitalized and costs, second approximately expenditures and capital of million be expenditure to upgrades, construction outlook, consisting our are XXXX minor capital of newbuild million the to for of enhancements interest.

for commitments DS-XX interest DS-XX, ENSCO remaining holding Beyond million excluding significant and which are $XXX approximately and total only newbuilds XXXX, our capital costs.

can we Form be rigs options found on XX-Q the for earlier today. information two filed in these Additional financing the

$X Under have investments XXXX. approximately $X.X and before maturing borrowing revolving September earlier following refinancing capacity our a to billion cash including available XXXX, debt $X.X $XXX million XXXX credit credit of of position, and XXXX transactions September liquidity September fully facility. year, we of billion million XXXX short-term billion financial from At and our opportunistic we from to October have XXXX, this now end $XXX to billion of XXXX. $X billion a facility now through summary quarter October totaled the of second just Turning $X.X our

basket covenants flows of and raise the Importantly, flexibility cash has sales on revolver debt a operating the to based through $XXX and maintain million. secured we additional capital no asset

this to In contracted billion addition liquidity have backlog. revenue we $X.X of

debt we closing, ahead net billion the XX%. cycle of to debt in of as net and have sector capital Jackup rebounding with segment is drilling $X.X play market. Our to expected, ratio offshore a the out we approximately Floater shorter utilization in In the recovery largely continues

anticipate will by deepwater phase we attrition. classes including our geographic across While that positive sooner recovery asset continue rig markets managing certain improve shallow evaluating the actively the we pricing signs geographies, fleet for and further the see see We'll and supply assets, base recovery new as actions position of in making so well our opportunities financial unfolds. and to help us managing cost These non-core targeted retiring on liabilities contracts the technology capitalize rigs. will offshore and we investments while positioned our are win

turn Nick. I'll Now to call back over the

Nick Georgas

Thanks, Jon. time questions. for line the open Keith, please at this

Operator

Jaffray. MacPherson And today's Simmons, first Ian question with comes from Piper

Ian Macpherson

consider what prepared tighter fleet we some think than curious selective describe mentioned Hi, us? specific hear remarks but little for maybe if availability maybe about see thanks. the early given in types you me the Carl, that And a I reactivations. as you you more look that strikes to rig across there's I'm could It the that. might that

Carl Trowell

what away. in Ian. that what that's was question Good for thanks that's taken because intended the Yeah. if asking message not morning, was actually No,

So chance it's good a it. clarify to

have reactivate should any read you point what plans is at think actually don't rigs. this major to I we

can see holding beginning a off we're recovery. rigs bit pricing as were towards say back, what to tighten bit that a and areas little balanced to a even trying think we be do going to actually is I of mindful to certain market we what hold little that more market

point again we U.S. the see us at stacked to take think have more floater utilization those stacked Gulf, So if bringing fleet, I at we classes. look inclined floater fleet, have pricing on we our preservation move DS-X back until XXXXs any clearly see rigs relative beginning I very rig we stacked I DS-X, from that good really In we're rigs reactivation this if unless the back see in – you contracts. of to don't the in hold so the and the

Although the acquisition. if we what from the stacked preservation ones to about. the earlier somewhat what look the Atwood acquired is you fleet those we the stacked particularly But you we're most indicating at likely will out, back stacked of jackups actually bring opposite of our us be some asked are

stage. inclined hold So back at we're to this actually more

Ian Macpherson

Thanks for on straightening Good. that. out me

minimal on The But for cost the is contracting company. Atwood rigs bought the since confusion. on has great. Sorry synergy you capture those tracking there been

you do more unfolding next out both working with prior Atwood on progress to see side? you Floater likely that rigs the think how So quarters, the over we several that see and the Jackup do and are getting the regard

Carl Trowell

Yes.

as the push XXXX we time, we the some prepared XX to months in They're stronger have I last first and looking there projects than think, next earlier, actually still and over remarks XXXX. bit both thought. seen time a this out is and said into we X

we bottom our back those for that of The of although from soon, XX at would would is Especially assets opportunities gain some our that kind attention you reality the coming of beginning the go rigs just out. start from downturn. the from we and world-class removed reason for pricing cycle rigs was some the for XX jackups of fleet we to things fact that I and end fleet see of position said some our we like given But to doing Atwood to acquisition draw clearly the that the that some that Now floaters ourselves XXXX the your primary tenders outlined. see were of might those thought future. the to of work

I perspective, bit of you about the for improving from we as So we indication, give gradually conditions good acquisition a Awtood that XX the XX very maybe this about world given the And we see. an the out see rigs take I think years an feel that that acquisition. rig, If that market rig the contracts use more can primary was specification to of driver now to or come rig years open over example tenders kind to XX out. drillships and currently or in of XX for the the so close top if with

– We tendered type ongoing also to alluded also also as several direct comments, that we conversations, we see have – our we contract. in not negotiations that for are of

without going particular or it, think rigs months be I quarter XX putting through back to would on the go be to we a we work. see I think those So as next so, expecting

to spot referring what long-term low lock day current in we're rigs comments, at again said rates the rushing not to pre-prepared Now, away on I contracts.

to bit So the are we recovery. our point do will market to upside a balanced want of preserve pricing at little what because we contract pursue about type we this what at

back we the XXX, ENSCO which – exception stage. deliberately the with announced we and going of contract bit single a Atwood the at that got that's now it and nuanced, there, we means we chase be. what the its depending So every term And is little pricing out won't next a it's that contract point the aggressively put then we've year, most jackups and are are holding this last to for – of the haven't we the is is think fact on

Ian Macpherson

color. Carl. Great Thanks, Okay.

Carl Trowell

Ian. Thanks,

Operator

with Thank Jim you. Suisse. question comes from Wicklund And Credit next the

Unknown Speaker

on for It's Jim. (XX:XX:XX) actually Hey. Rodney Thanks, guys.

expectations it half one of stand guidance back that range still QX I had on where first on you year? to X.XX given back your full X.X think the the today guys revenue gave The was I the was call of expectation the is billion, we the year and for billion

Jonathan Baksht

Yeah, hey, guidance. the provided QX We Rodney. just (XX:XX:XX)

is more seeing QX you that's moving guidance note guiding today, that XXXX relates current provided year. and we're into his which not those remarks some of prepared So then updating only to the are QX revenue the to even bridge guidance back when we reiterated Carl up. we XXX, softness guidance in XXXX to and The though since would the that in are floaters, thing additional full We're gave firming the our so guidance. as we half it to

constructive we are XXXX event have softer we're did actual majeure that yeah, environment. And bit by $XX would have on than a that expected. (sic) only XXXX a we on and would one I revenue. probably year [ENSCO force the other impacted So XXXX] the contracts for our mention us But the (XX:XX:XX), million is full

Unknown Speaker

Okay. little Thanks. direct one guys you up I the had a the follow earlier. then was mentioned I negotiation had other on And bit conversations want to

sort conversations regions on? are types So are what you having those And of what with? of customers those

Carl Trowell

I'd Well, I there's clearly points draw a couple on not a information maybe actually away give going that from But of we're to public forum. think it.

years that since conversations new this. is first The four we've almost started having this is a like relatively environment and been it's

negotiations. with not doing or of ourselves. either even, cycle, the of a tender open People maybe from work, of about of contractors and from work environment closed form peak came disappeared. were XXXX the direct and to of not doing XXXX not between back some a around couple beginning negotiation our customer XX% negotiation extensions, a go you direct came If it That

And so, that this years to is we've started almost really four the first in see time that.

sort feel think our as very forward our we years to one I customers are attention point early conversations. And been stage would ago mean, different of six XX around months awards. for So these we look reason the attention have this I other we radar last are draw a is of of slightly are or give we a months is few that the that But into and of in the color a environment, than on it different are as draw more or so. all bit months three of environment little wasn't to lot to ago. to turn work not other said, a That's we them that we're going I about talking some the to. where

subject boards. investment them are, the of to final of approval customers' Some by course,

and environment treating of it pinch with our it's the more So but of going into where we XXXX. salt, are a customers are indicative

Unknown Speaker

guys. Okay. Thank Very you, helpful.

Operator

Thank you. with Zurcher And Taylor from Holt. & next Pickering Tudor, question comes the

Taylor Zurcher

and – the morning. to for down several ultra lot and that of drillship XX said Good as but when that's over guys. where, Encouraging I'm last to Thanks, going tenders demand pin the you not months – high-spec in that hear And sort I suspect you suspect to Brazil a I I materialized. of think, has Mexico.

curious the of process Brazil going new end has – year. just now. a an towards political Mexico, So clearly on regime election the

have on will all, markets, geo the So, of not shift specific really to next those been market come have had far? the uncertainty the so political the tenders effect to out at months two market much XX seen to the you any or has or right that of that an over

Carl Trowell

uncertainty of seen effect much we've The political that had yet. hasn't

I is operators be a in bids planned. we the today probably lot tenders seeing are or are And going to for quite But of a the I lot ones are particularly come think table reason particularly renege it It's out. to the see to we to blocks Mexico, give way those as go to that at ahead. pretty ahead already the much particularly on the story, fair to look back go looking think any be review but haven't announced goes they've delay of and made scrutinized. some want today expecting E&P they we government be want ones their assume of to this their that are out, commitments that don't Mexico, probably way pull that were They particular to on has at seen process. there ahead that as I the the will form that some there come the in award of the that think to on that

to be seems get committing ahead seems sure would. investing to shown to companies the a counter which we and thing countries actually be – be let's few into happening is, that in so the we make said we've that And the and

some industry maybe we've time quite taken in Brazil, years just which utilization, basically and current that all tenders the the the in political permits and to be as to years some to so, have It's pull have that including And as many that XXXX, that been pulling Brazil partner reawaken lot are due more three we we things seen Mexico net-net for are authorities to taking progressing an going increasing helping both It's and the offshore it's three we to we be a get therefore XXXX years. to to have going or permissions be of cases to net several the an the would the to a fact go process. political stasis been for environmental countries demand contributor rigs even and alluded with But in are just really right. after in see some in both are going expected utilization rigs of expect. to there going to and uncertainty, beginning next the lower moving time. not has of into is and to so place, I actually through would the are think out are due falling projects – two

Taylor Zurcher

off a agreement you And That's had end come new know in the signed just of Maybe Okay. to cost-competitive bargaining encouraging. there M&A the Atwood Australia, MS-X made process had shifting enterprise them fairly that towards the market. I that contract.

curious, availability viewing Australia to for that you half forward? back MS-X, then, six-plus opportunity rig, spot one, next likely call the it the market that months? probably that so seeing is assume the the you set it And you're the for two, rig? year Is moving landing that to opportunities most how fair do or And see over how any And rig? specific the that over for developing of work are

P. Carey Lowe

The compared program early warm in a Carey Taylor, just couple jackup uptick opportunities bid world, of Australia. It's for stacked. the being and work is in Singapore, for currently in not Australia inquiries we're and Australia general, floater to it's around it's MS-X, an time of the think its into prior in finished this Lowe. some seeing I work period.

opportunities know that still spec be and moored high MS-X, that very now I of it's right we So floater. into sixth-generation a it's think but it's currently to bidding got going two for active we're an we've market

Carl Trowell

maybe to more a add bit little I'll Yeah, that.

double seeing forward. it while low floaters. down Australia We're it a up to quite be activity. wake of think market for to again seems what We're for and rigs positive going I after on said, Carey both seeing jackup a

as it that into sits think it worldwide. bidding I but we're we're MS-X today projects doing there

Australia DPS-X very if it problem it, remaining and the if an in look up awarded out. it a no spec have open come with it's area probably locations also I in we that of a the question. first long is are we MS-X high see got elsewhere. for see out a so that other quite tenders move relocating And be things because time. might Australia bit we But and see we we think does like outside rig, we'd mod it in opportunities market right the several of

Taylor Zurcher

turn Okay. That's back. Thanks. I'll helpful. it

Operator

next the And Davies Bernstein. you. comes from question Colin with Thank

Colin Davies

Hello. XXXX, a quarter got those morning. thinking Maybe available be finding just just generally the little then bit where Encouraged rigs of which XXXX I just which third one-year to pushing XXXX. some probability back newbuild, it And your strategy then maybe of would those of of probability for the scheduled the highest and the – the – around XXXX. more Good by one And you've which overview helpful and on the getting around the get for from comments X,X,XX, thoughts think maybe XX of work? your finally exercised. options is sense of cover

Carl Trowell

points. maybe full you, general Well, detailed can strategy a for Okay. few out laying without the make fleet I

different said, more cycle And a course do that as just the a up contracts. the where we've XXXX contracts floater face pricing starts. a we balanced still near we want competitive on of me a price message the that us the the add point we're that and It's year. challenged to very for in price and And of of a as it's we tenders we're step get bit beginning have based market tenders out the Let come little A lot level for around make that kind first we because are very is over. in-house I back position also to and inquiries XXXX but for a to seeing I'll a coming. down go very market think going decision in environment term That of new near we through going older pricing replace a is of maybe from to in view. But marginally EBITDA term, which margins difficult as second. rest makes utilization still is remain sure

So years three on you of the it's flat look or forward suddenly when have different after conditions. worsening not and that we're either do saw in we that to what a But four you come world. see lights

a leg look concerned the markets, we around amount right? it period, improving As XX, do one Bar of it – localized that And oil we're the X, forward the now, now lot broader when we a in XX increasing we happens on spend we on of able thing push month to an exactly pricing, price market. happen and a major to in down time begins see when work that that it when begins is a when few scale. – see

an pretty that at quarter and in now last since for global we the through up I reported level of utilization think getting go that aggregate think not we coming of our drastically the market is legs, remainder quarter as recovery quarter levels on it's broad-based we is the changed view has year. the some jackup

pricing broadly, see in seen XXXX still few pricing trend look start into move it markets different. continues we've and we seen recovery. a would to the In but market, begin move haven't broad-based this floater a more localize We it's if to

global XXXX have we that utilization off year. can And contracts quarters start we this look need come pricing. this to the use of lot as we year, means bottoming. utilization in up through tenders declining that the last a if quarters still before of of not in ending is coming we still two to a two lot last As to said, And we go of

not is trying the out, mark make make getting that term X, upside spot XX looks with we contracts what upside away we're we floater one stage sure our a environment some are that pricing there. capacity to means pricing that And in environment, no question still at preserving we sure that lock this at the inclined is in highest particularly big do are long want today's which on to XX, over assets that rates to better market. it's – So the months to a

nuanced little and primary really this We X we contracts means rig intend to stacked are we we and I XX out bringing markets running if or not match to DS-X, and into X, already of lay or term the we very XXXX you to a moment, should bridge that marketing at we based and and DS-X the So call. contract. feel it the do is from the X are it which the intend is of thereafter I've quite the strategy a which probably contract is out like X. rigs rigs are don't do difficult at put not that And said. get what bringing one point around which but as a market-facing exactly bit ones on public out looking But the

colleagues does to I with And a had those but the yet. some good DS-XX acceptance of there's a my just the here today immediately very its you see And – think DS-XX DS-XX. by chance that have would we on dialogues we operator as date. the and asked as based we haven't advanced them think nominal one much take there's extensions see what not been reasonable I get there reminded on about I that has chance can contract today we delivery

aware rigs those As have flexibility you to yard. the are the we keep in

through flexibility look at we XXXX. for get to adopt those And will We yard-based final the financing payment. the as further we have

different have time. calls the environment and could no so mid-XXXX for there that this fundamentally to any will and reason a be at think us hard lot information more we I make there's

Colin Davies

for. in the well kind then was extensive dead just is course maybe was just one you're then the well? the helpful. or totally ultra exploration deepwater the cycle in That important exploration at starting the was ultra Yeah. you And looking are the if for very around activity in That's string count. strategic so overview for to back perhaps of and market of the having conversations series rig customers still together of longer-term, In programs deepwater exploration previous I XXXX, more look

Carl Trowell

pick means, is seeing together No, we're for to environment. are one exploration rig the it or around cycle. well customers a are so. ships lot four months We're or the three, five seen not we've you strings any it's the not put exploration what that tenders to cycle a drill are in and is or that put end What XX last is two together. programs It's known at not but sort single a bit programs wells. dead alluded in going exploration up out later development little doing clearly be exploration the for But by appraisal are to saw or high of not there – taking or here not programs is six a wells year there I �� over are discoveries. the on of what where and several of of life people end But

Colin Davies

it you. turn I'll you. Thank helpful. very It's sense. Thank makes That back.

Carl Trowell

add thing, just Actually think. I other I'll one

the blocks just that ahead. have be – – nearly gone the rounds nature and that because that Let's were clear Mexico the taken all of the up two public but one are those really kind all And around well are exploration one is those of in that of market programs. picking is or

Colin Davies

helpful. you. That's Thank very

Operator

Royes Eduardo with from comes question next the And you. Jefferies. Thank

Eduardo Royes

good guys. afternoon Hey, morning or

to therefore a I do know from a really backdrop, perspective tenders market. checks a the lot still on end bit that much of were gets I know that or XX that guys enough tenders, struggle to – of the seeing, think there rig guys Or on see we that is a can rig see keep out in we you our it do there's we're that necessarily we've point suggest utilization at the pickup obviously fill term, count little so? is? stuff start not in in in question, guess some lot bit you of but not quite up get I ultra-deep our that Petrobras tenders Mexico. to to off more some the leads but – this months, of about. actually see ultra-deep I XXXX, maybe guys brewing. start where of don't we maybe behind lots closed next touched the than doors or that the Gulf has XX done that With think ticking channel range is you going XX% roll-offs to count the that out First real just kind do the of and activity. you there talking a see

Carl Trowell

Right.

it me little break bit. down a let So

roll-offs to the would And not that to in utilization like up made because especially we to come to as are we we've the more completely So first agree several were see start and second offset difficult we've and are new start that look very the upon going The lot in already in meaningfully awards With would market. into relevant the half is touched XXXX it's utilization they're indicate tend that floater there second half is that. rig market comments projects the there to of different also activity we in reiterate the you've said floaters, have jackup increase year, half said, means bottom market, when the of just now seeing of continues. coming start are in that that seen XXXX. the all, floater That And to up we're trajectory second push picking enough as think, that potentially of in are probably expect I utilization XXXX year. see the to and going up. this to of to

be think other this the that position. during an alluded drive timing also in and lot unreasonable seem the general a than I to as is expect element at XXXX so stacked come point consequence people marketed fleet tough to cycle, But are a back expect fact of that the that to this which out to the Given think here. unlikely that further that's I most currently we a attrition lower rigs normally you've recovery are going doesn't of help looking we're

to think that fair challenge look, because come your haven't we well, is point, and other you get I a but see saying lot seen would see to of a the the of think might from contracts but Now awards ourselves, statement a get I just And how we it's the land. a to a a the see that for think more globally, in few we're see of true on credence those, which I the quite wider – say, it's more way few partly is that describe getting add we to coming that are back half the industry are out contract outside you contracts A slightly necessarily to the to coming, opening don't and to second lot awarded would expect bit, what's is to it waiting these we're we not dragged and a we've seen the pregnant in-house. year. environment coming about more to bit lot the I maybe back the of inquiries what seeing And when table it little there outside. is tenders industry

Eduardo Royes

Yeah. That makes sense.

or and from for a that want rig I think nine think that of is the to of floater instances probably during one My from and downtime second maybe this extension like the we would different the else six little thing now customer limited been I the getting nothing some some guess same these oftentimes months jobs angle. on bit we're wouldn't starting lower I jackup of or an that cost But quite see I ability a gap an have you months during the that both extensions are for auction crew. obviously guys feel because is now. some question, incumbent to side. or watching with time.

So to one, for hot you don't and it hey, And it customer to want OpEx? I hot, all? this rig, something think is same customer, is go inconvenience, keep the and the to to tell you ENSCO can that How the you need a huge I that, I you if just so, you XXX that price is I full Jan up to that's have example think we work about that. nine my six is think on two, to nearly go in should months, have factor you to between. is unemployed like in And XXX but continue question in it finishing of of can X something, the my have will at a or months from two am these That gaps. with right? or that therefore Number keep if Thanks. part-related good you back six to and programs to to extent now kind something got but one choppy

P. Carey Lowe

cases so Hey. mean, is Eduardo, projects between there's variety then down some the the to Yeah. do that period And what a bit. use the many be cost is conditions and two idle we is choose able Carey. in well. client idle during what people the quite where to how has to the scenarios depending anyway. a time long are, where on actually other on can a on, may bring you rig maintenance other there period for cases, happen of we're where of and some this going to are, as rigs I In some those we that cases

other there's down-man, very to ramp with cases really we one answer you for efficient In and too enough think of again there So use just people one not sweet you and spot down-man. to any a don't all where that it's it's kind try then just and places. time But scenario up can you have question? that Does then come where long to those in I can you, fits particular for short size your is cost.

Eduardo Royes

what quick speaking? I to is or guess is roughly Yeah. long not I guess a where enough That's good. down-man that it's just follow-up cutoff

P. Carey Lowe

depending can different are. up you your fairly you people you on pick quickly. it's very Again, can Maybe where down-man that quickly and again

one time So I can't say period. particular any that there's

Carl Trowell

Yeah, add, Eduardo, is I the norm. had these them I we've slightly a is not of think that have it's this And we in different would circumstances. but couple what that

follow-on jackup mean, can the to I is XXX. very to do a good. because that is manage And that decision good that and very mentioned it's after our well because easier that the quite program do program during to going with we a the is the think we time you ENSCO idle and it's jackup. there, it's cost So prospects

some that took in For the that and the we a to back we with were working XXX, more allowed a end. standby us keep during contracts was maintenance the we period client ENSCO but before and pause on Africa the the on XXX, it back rate gained and warm crew the time

that this one the is each but unique, is in So I much now norm. new read somewhat wouldn't too

P. Carey Lowe

me ones where specific this me fairly just Eduardo, the let that the to period. are is we – of just significantly of let Yeah, reduce add ones, XXX, one during one ENSCO cost able

Eduardo Royes

Got it it. Thank turn over. you so guys. No, I you. thank much, will

Operator

Thank from Sean comes Meakim question you. next with And the JPMorgan.

Sean C. Meakim

morning. Good hey. Thanks,

Carl Trowell

Sean. morning, Good

Sean C. Meakim

some something you rigs on side, of work Just floater DS-X. a maybe win second curious, particularly the any on on perhaps the to some considering like upcoming are incremental upgrades the BOP

work opportunities those perhaps viability if you on capital of receive types the requires that bid about the call of decisions? contracts, make thinking some then can those upgrades types Just I'm the you of after curious and and

Carl Trowell

the we you've second core added we a DS-X rig. investments have on them made that high-grade is our BOP of through good first selective all, Well, some existing where gone cycle. we've seen A as as to the of to example assets

something we would to of for it able best very enough I level do. we in and something do, upgrades the tenders to rigs out having to match when the that prepared to this or it high-grade there, our without that to So us is at I stage. have specific would comes where some that broad we do is bid to think world at current proactively do be work investments to think we fleet think do be making And the in can a we

is and decisions I And any in think We're on to to said by way. also What draw nothing We've the there's the mooring that it pleased have would so to. – your very as judicial adaption that today. done table XXXX are when mooring that can prepared taken given attention it the one about there's don't we the careful out been future, that I things brought some cost these thing But we when most we've been do upgrades we've out XXXX, we've consider of a but likely with we additional are likely very very manageable an do upgrade. would it's liquidity and come most of our we and and it.

Sean C. Meakim

I the questions. I in a fill may sense. of And M&A makes guess for you lot as That well Understood. Thank requisite that.

we're contrasting with in just accomplish? corporate corporate is the of moving to to difficult. always those are side, Given company assets. willing more M&A noting that asset say a the or were And opportunities some sentiments cycle, for this as in seller picking bid/asks out widen amenable. up, at a of they European more this Would I potential point does again, make the point highlighted Maybe that are the sellers difficult worth becoming buyer? it's cycle, harder as mean, service transactions types then you getting that decent easier a As

Carl Trowell

the continue. likely I the still are exactly for market capable recovering survive that's that cycle sense to Older, can't sure almost pretty capacity a be has assets but don't are the up the down them a prices, completely sell going year for in On and high diverging to any you less been price. people asset high not now going pricing competitive, asset in believe I necessarily or ones, in not if consistently assets, the I'm follow going prices that are think grade,

with that's it and earnings what prices type prices high you're example So up think on has usually prices I shipyards think talking asset capacity before and latest gone recently for before asset depends transactions and of the clearly on pretty consistent of I move improving The based very do. in rigs sentiment much share market an about.

further get I coming On question some it's disaggregated act cycle good and would It And some market some we you're business a businesses think attrition. when allows in skids make would decisions still broad a are the out that the drive as And of bit greases complex driven downturn other consolidations. think more beginning see often level, of projects you we that be think the a M&A, there shown whole. But the to in making actually and a rigs. corporate our M&A, help have tunnel stacked a sector very on for done. often be end you at sector consolidation it of out and you're would of some help help by we've I the think the – because at little I market drive the Atwood look as acquisition significant – industries at if entire discipline would to a the around to of light the it synergies

the see every consolidation it's has worth. at part – we're high it's a see are are will the and of do their relative that And you be can good. own further relative it, if get ever themselves if think that that targets. view it. of what it and is I of the valuations. of worth any if targets we difficulties assets biggest one are between without And happening, companies indicating be think not the going issues to And issues their of largely happening valuation there own lot because ones what But, and company of happens that level, in second-order So way

Sean C. Meakim

fair. Carl. all I a lot. it, Sure. appreciate That's Thanks

Operator

from And FBR. Ryan Thank Riley next with the you. question B. Pfingst comes

Ryan Pfingst

Hey, here. in for me guys, sneaking thanks

broadly, pricing. to back rate classes? but improve all We've is come it function utilization meaningful or utilization across of XX% a see improvement just to day to Just so, needing certain seen we maybe a level, before hit

Carl Trowell

quarter quarter if more It's the depending utilization Again, segments Ryan, we or over has judge But next see turn to to look pickup the in the see And The two. point. it see how up come then utilization movement is would before X% you out would I not a a the need We two, to or to last broad-based can this the bottom least of situations could market. start we've go. to still you the about the – segment, the points I around pricing be and between at seven utilization point confident before six, jackup pricing reach and got think X% floater and we at point need up it different on over we can that we're jackup another on utilization jackups. we around where the getting up to point see it floater at way or at area. I went further it XX% think points think feel pricing where start where comes we

picking at it's said, to are the we in we pricing back current can how question long moment. in is market of and really up going what levels to turn activity, when a seeing key pricing the open does that issue, signs I environment it So work where continue at

Ryan Pfingst

follow-up. That's jackups spec be earning they are previous it quick the recently high were safe contracted than on just helpful, and rate to as Would day assume a most contracts? a that their higher now

Carl Trowell

Yeah, There where the incremental on flat were that's where I it. geography. are months step seeing XX is which marketplaces leave they we around where Depends ups of ago. are world they are and pricing, X, on where pretty think are probably in now I'll the seeing a much others couple we're

broadly picking in would little I a market and is prices what I jackup like have the few a markets. say in look it think that up bottomed, does

a jackups cash we The this, at color add is cash the moment. from it more where little different our market floater contracts the and around about base the other has based as pricing bottomed to that on still just is breakeven spot on point, rates for point where bit see out which cost largely generative are most

Ryan Pfingst

I Great. the Thanks, guys. color. appreciate

Operator

questions, call further back Nick. There hand so I'll you. are no the to Thank

Nick Georgas

results. to Thank you forward with We call. for everyone, report day. of participation a you, rest and look speaking thank Have on your you, great Keith, quarter when your today's XXXX we again third

Operator

The you concluded. attending for now presentation. you. has Thank today's Thank conference

your You may lines. now disconnect

Valaris Limited (VAL) 26 Jul 182018 Q2 Earnings call transcript