VAL - Earnings call transcript Q1 2019

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Operator

Good day, everyone, and welcome to EnscoRowan PLC's First Quarter 2019 Financial Results Conference Call. [Operator Instructions]. Please note, today's event is being recorded. I will now like to turn the call over to Mr. Nick Georgas, Senior Director of Investor Relations, who will moderate the call. sir. ahead, go Please

Nick Georgas

our EnscoRowan's results website President uncertainties. XXXX update statements Senior release and John factors make subject forward-looking is expectations members materially factors the on and Many to to to impact a about We undertakes actual refer me release, today enscorowan.com. press press Vice Call. differ are Any list today and and CFO, duty our which cause our of our other and statements. and could that are CEO, that on and company no future Bakst; Please forward-looking management First expectations. everyone, team. risk forward-looking Conference risks events statements issued our Quarter available With President and executive at Welcome, define from Also, could results. are Tom note filings we Burke; to other website to that SEC please comments

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

we also reminder, website. which April across An Fleet on Status presentation rig our details our on a As contracts most provides our investor updated XX. available fleet issued on is recent Report,

Now and over let me to turn the President CEO. call Tom Burke,

Thomas Burke

John drilling of with which will commentary results months, I you my then Since an of after some the Thanks, call. most our is and coming outlook. this financial a everyone. you like I'd overview offshore will the merged good profile call company, to Nick, our first will priorities morning, and the speak company the remarks in to begin conference focus and newly EnscoRowan's welcoming as prepared by on on provide market,

to the day began we announced X first about integration like planning November combined so to and We X merged. weeks month a the detailed the beginning last X integration. execute company acknowledge who As XX, year. ago and and the was you later day take merger on thank our months, a in of our operation October a the plan last companies of I'd the at April worked over successful employees, moment hard know,

well, disruption a the we our by Our first merged detailed offshore testament the gone the operation. past in to weeks experienced operation a efforts major given to no three This several detail since to been I'm have we across combination driller larger complexity is EnscoRowan's consider large progress a such be and diversified attention team in we is and pleased is from day to extremely There over integration merger our about planning milestone a the company. our months. We'll geographies. work lower clear industry. more an offshore the created have and that done I'm industry-leading It with the standpoint, position is and closed. as integration depths more future has made And excited the not in since inherent

a footprint, global for fleet across scale key for offshore EnscoRowan and will believe a assets these that provider of years maintaining harvesting a service have major to a a versatile spectrum modern giving ultra-Deepwater virtually drilling fleet all semi- with customers and high-quality along jackups, requirements. have floating many We and rigs of offshore the basins come. to by the be wide us drillships, jackup subs presence offshore We of rig both in ability customers

customer consistently companies as top-rated raise year distinction. earned delivering as to efficient independent and satisfaction offshore have we in have diverse industry. industry. most well In and service were the base years of national of These over relationships oil a latest international sight honored the customer in include in has current customers is why That relationships, the have and we many leading we're bar the to and largest survey consecutive total this Xth customer by excellence customers, terms EnergyPoint many the operators. for Research, now eager been the EnscoRowan's most to been formed EnscoRowan services the drilling independent the contractor, by

proud continue so to must technologies future. position operational achievements, leading offshore to important the While of and part will well the our we and project remain offshore services recognize new of we industry that provider are lower that innovative further Developing our to we differentiate services. their we cost, site partnering EnscoRowan's with performance at we efficiencies be leader. solutions By help the improve as an the of customers our will EnscoRowan's enhance drive

patented systems, processes of on portfolio pipe safer and operational optimize overall ownership. relating minimize a spent that weather and help time technologies of provides asset Our more system maintenance and include to that increase jackup to uptime technologies proprietary system that reliability-based common cost the lower tripping, efficient and moves

investments scale, with able company's are these future As the greater we now innovation across rig a larger spread a combined company fleet. and to efforts and streamline legacy

a and position solid by benefit manageable strong from We debt liquidity financial maturities. also bolstered

agreement credit While provide on like we company more financial seen attention able under that job to diversified in with conjunction the because highlight team get our group we've our a of with I to banking immediate under our moment, closing merger, a that that extension group to priorities. closed capacity larger working has in finance were we great facility. the I'd banking of our turned note more our the John to X already execute will the did Jon's advantage increase this direction with transaction, details to position the being an our revolving a Now

to work to first of our unable these management competitive But the are are the existing closing fleet. we which on priorities of for reasons. prior of Some

will will or a immediate rig this jackup Rowan differ soon now and we've by larger very rig fleet, front XX of the standalone operating from taken approach global this sale Given leave our we much supply. the on that action held-for-sale announcing jackup We've are of also Ensco the that either ENSCO at expect Romans. classified drilling

provide for to coming This expect fleet the our management quarters. evaluate contracting to updates and also candidate fleet focus strategy. continue encompasses in will We our

across contracting worth main For marketed our the to is will currently expected and begin noting jackup contract jackups, our our fleet, days or of that focus remain it's shortly. one available contract marketed either under every the on

As a this X modern to jackups meet selectively or X may reactivating increasing later we result, demand. year customer

Further, reactivate any portfolio we idle the available approach judicious preservation rigs. we as However, fleet, return as our asset towards and our pursuing of be reactivations. and not our fleet evaluate of disciplined reactivation of decisions Within expect contract we successful record floater larger dependent, we availability, with funds our will we a would based will our in stacked rigs, approach to any do up be XXXX. combined starting given track contract deployment

joint venture Saudi The delivering second Aramco. drilling of value will priority with XX-XX be

this backlog provide For are those through for drilling leasing ARO familiar operate with to organic jackups not structure I'm our be newbuild jackup first of in with X progressing customer of Later are Aramco, earnings order growth Because jackups. jackups build. largest a first our Drilling X and Drilling in important pleased secure and the expectations. will the a from by the will groundbreaking partnership that ARO drilling, portion company who fleet as milestone on with XX these Saudi will of exceeded our is well joint of this report program. strong our drilling the our long-term and the stake call, operations own newbuild will an to rigs comfortably rigs the we EnscoRowan also ARO that to have our world, benefit in growth you venture. new Drilling the ownership a this contracts visible which quarter, This quarter results expect for in venture will these are joint

contracts in to Drilling's that revenue rigs. that the fee, recognized a earnings net And quarter. buildout lease EnscoRowan, but of received lease X EnscoRowan. the quarter, reminder, XX% all the lease interest Drilling contracts best will is will remain have for work third jackups assets I third the drilling. note include contracts ARO a a Drilling leased note X also contract benefit rigs to rigs owned earnings. meaningful to also Saudi the during As jackups rigs the working by Aramco. will X-year ARO outside brands be and X And There Drilling expected X own X rigs ARO ARO from Saudi commence for Aramco continue currently and from X-year the of opportunities under to in under X These end the additional EnscoRowan important that the would that the It's by are we as current future. and our with by ENSCO X legacy lease to

their the The debt and legacy liquidity Both maturities past of years. third several companies extended run sheet balance management. will priority liquidity opportunistically near-term manage be and

deliver market to continue take manage will a our long-term value best company, stakeholders. for EnscoRowan the steps As and to through position we combined proactive that cycles

$XXX to annual of from continue focus and we Finally, on synergies delivering the million merger. a integration targeted

We dedicated success have help merger in customers be place our project a ensure a that for team to investors. this and proved to employees,

our conference We reaching our in our targets and integration will calls. efforts progress towards on provide updates subsequent synergy

the to moving Now broader market.

see offshore We in industry. continue the improvement to drilling

new of barrel. these next conducive expenditures these While front by since new month in over slightly have year-over-year number first been Brent prices dated to have relatively coupled higher continue project trends. the and to have customers' per companies short-term more intermediates the our approximately an by XXXX, capital strongly interest project the exploration levels of growing increased rebounded increase oil during And XX% and and $XX the new have supported support are stable at economics contract awards oil increasing importantly attractive XXXX XX% quarter, with beginning prices. environment more longer early increase year, Indicators and in the production expected pricing offshore offshore of modestly steadily prices years. part crude several oil investments. The about of created Future

particularly has the is the open tenders activity been over for offshore contracting longer cycle investments. relatively While Deepwater past for the up months, flat which programs of number few reflects substantially, floaters, of

beginning neutralization for that early including current rates. the a spot where for projects. we capable less Not This more beyond be low relatively of Deepwater higher recovery while these contracts older more rigs as competitive, assets. rates in As assets, of short-term still with of XXXX stages than in quickly capable see these substantially pricing continue technically and a of especially is is for levels result, surprisingly than day modern the utilization, stock to XXXX improve most is that despite are its encouraging commencing true contracts in much

expected backloads. many In the assets and fact, the large recently of X.X pound features of tenders in million contracts market were tubular specification bearable preventers, X higher with such today awarded require a We the drillship as an new in specification awarded with was an plus Deepwater region of is duration drillships a for nearly DS-X the X-year our of X-well This contract ENSCO highest important important X offshore contract option. reasons. The activity. Brazil

had it's an has contract customer. a IOC with the in that one First, major historically region

IOC expect to become more region, more this leading a to diverse customer in active base. We

Second, work lead to growth to in offshore presell will economics believe the requiring the contract the offshore number rigs meaningful leading attractive evidence project provides Brazil further the service that targets. demand Brazil, We working to to come. particularly conditions and in these years additional of increasing in region, and of

with future we comprised these For were this a DS-X growing such to region The high awarded company a local ENSCO for than to customer the for additional a also to benefit percentage and drillships. most and that between specification of which local where more expect Egypt win of community of establish Egyptian one this are our the ENSCO a Further, key reasons, XX-month the X-month of the see oil lead be joint as national as in offshore where with contract We partnered DS-X could operating us work. better nationals, capable important we basin. for position workforce high is demand view we we options and is assets gas will IOC that a and will the venture the company. opportunities contract

Drilling. marketed to improvement particularly in shallow jackup the the of leased ARO environment the currently we in XXXX the we in East, under significant a to are contract, expect certain including XX rigs all most market, of our in signs where Middle see continue XXXX. and terms regions, during in for improvement markets saw This of jackups X In includes contracting

XX% For in market, most assets the utilization we're increased X modern and units. for specification utilization highest lead of approaching increases about of level current environment for with could seeing utilization some harsh floating regions. jackup modern the to XX% for pricing This

have potential to I different call Before merger, about Jon, hand created of Through my driving market the we excitement our to I a cycles. stronger the for capable over want EnscoRowan. reiterate company

serve value on scale, long-term will our for increased to recovers. stakeholders. customers significant highly the and deliver the I'm offshore look as advances better opportunities for Our our the market future financial optimistic and forward significant executing provide strength and to diversification growth

the call turn I'll over Now Jon. to

Jonathan Baksht

and lenders good conference and drive this to first overwhelming support. for morning, for forma our you process our merger well our everyone. Tom, to start successful efficiencies EnscoRowan, to returns I'm a excited start thanking as on I'd integration shareholders. Thanks, company for their like pro employees increased call to positions and our shareholders and the off speak by to the as

commentary our will a longer for usual Given prepared that review our this first addition a XX, XXXX high-level Full results pro second as of financial our provide I'll conference finally our quarter and and on is Drilling. merger forma the be costs. of on synergies and some somewhat provide CapEx remarks of also first quarter, summary ARO year call our March as providing update an guidance, to EnscoRowan, transaction outlook XXXX than position I'll in financial

we the legal results press our closed release on reflected merger required in since reminder, quarter was the Therefore, a operations Ensco's entity first April only, the the Ensco XXXX XX. legacy merger. As

results coming for results financial be Legacy quarter the weeks prior quarter quarter. First the pro of first for line XXXX company's for as with in filed in forma XXXX filings were Rowan the Detailed in will Rowan EnscoRowan. part Legacy broadly results

Ensco commentary my such, specific results. Legacy today As XXXX quarter is to first

XXXX. the $XXX across of prior the million which a contract quarter plan conference a XX quarter. in the the adjusted ENSCO primarily largely first is DS-XX, during million revenue This was utilization floater adjust fourth slightly the well revenue increased million guidance quarter. by with XX% segment, of utilization in million sequential partially due $XXX the from and the XXXX the by XX% This segment, fleet for fleet to for to prior which DS-XX, decline In offset was beat First the point million the contracts average million utilization fleet. uncontracted to jackup completed average in with the rate XX% the DS-X from $XXX prior due and ENSCO in as revenue lower total market to revenue versus call day $XX quarter, fourth was for the fourth was by financial Operational increased $XX for In results XX%, to first prior XXXX ENSCO approximately Floater quarter. for quarter the increase $XXX Operational XX% million in compared from the Floater for the percentage quarter. compared downtime decline Jackup in $XXX EBITDA jackup quarter the On with startups $XXX ENSCO quarter offset in quarter, day days the in a in quarter. rate. and as segment, million basis, for

Moving costs. now to

$XXX than rigs guidance, This that cost, increased million is to contract call conference due Due commencement expense the in and expected repair the X certain expenses. prior contracts and not sequentially for later to drilling costs for part $XX maintenance lower the preparation million removal million. do transaction contract work materialize. of of $XX by Excluding of plant primarily

ENSCO of active related DS-X $XXX in expense recognized partially First impairment the by million, an quarter. fleet, lower offset depreciation to the to quarter due to addition prior depreciation increased charge primarily expense the to

quarter. fourth matter XXXX first costs general and the expense ongoing recovery during costs administrative $XX million compared legal of million to $XX in XXXX, transaction Excluding certain in related prior the with quarter the the quarter was and an

incurred active DS-X from interest were costs, quarter, expense the joining interest quarter. of first which fleet. million ENSCO $XX excluded adjusted increased increase transaction presented $X The loss of adjusted million net from merger-related the expense, per share $XX the was including due prior lower Other and release. primarily in as million we result in EBITDA press During the the sequential a to to capitalized

expense million Finally, first tax $X the of prior to quarter. increased due discrete in to the $XX $X in million tax XXXX benefit million expense EBITDA adjusted the reconciliation of an quarter loss million, for $XX presented million. quarter first of in the to net in $XX from tax fourth to $XX discrete EBITDA EBITDA to million compared is quarter in release. Adjusted XXXX A mostly compared XXXX of the was adjusted press

April that our my comments XX from Before second XX I discuss note for expectations the plus of to Ensco forward I'd Legacy quarter. operations EnscoRowan outlook, first days XXXX for like the reflect quarter

as from million $XXX U.S. segment quarter, This revenue. of from million Other $XX we will million down and ARO $XXX $XXX rigs our million second Floater to from the the $XX expect million. related $XX total Gulf segment, to revenue lease $XXX of revenues million Drilling, million approximately $XX be reimbursable X million approximately our breaks includes million to $XXX Other from managed segment. Drilling ARO revenue For the in and Jackup

transaction expense second million will includes are preparation in the which expected cost, the $XX and mostly $XXX be contract third quarter. ARO approximately to X-year we of contract with costs, This Drilling to related Excluding in the anticipate agreement quarter drilling commence million. approximately best

We cost G&A to and approximately expense, transaction $XXX will second $XX million is quarter depreciation excluding expect million. be be expected expense approximately

an acquired purchase contract first the quarter expense tax has Legacy approximately provision estimate assumed liabilities G&A the and we accounting $XX insignificant be drilling on million. the from discussed. Finally, on impact revenue, will the assets The in effective Rowan outlook

I'll begin may venture finalize venture comments to operates preliminary now as unconsolidated between Drilling rigs the I'd owns to Aramco. by the materially during on we like Aramco, overview period. Saudi measurement providing listening some the for new X-year to some Drilling. which the given estimates value EnscoRowan XX-XX offshore drilling and fair joint be change of joint our JV and to those call. the Saudi will ARO estimates state However, and move ARO remain

As these on XX, X interest at that assets has and $XXX of backlog. hand a of million notes cash to X March X plus EnscoRowan contracted revenue in pick shareholder ARO substantial LIBOR assets, cash Drilling ARO for and XX-year of more owned than Drilling exchange contributed X%.

XX, This these $XXX was March X for balance approximately reasons. of of million. the note shareholder is to important notes As

assets to these and community the often First, are the hold consideration from they the are for venture joint the unique EnscoRowan contributed this shareholder overlooked are by Drilling EnscoRowan. rig ARO nodes we industry, which nodes receive in evaluate when that investment

or drilling and by rates day rigs fee. agreed level contribution year that between to pricing from is and Each mechanism. XX% by be EnscoRowan contract term has of with contracts has to Drilling XX% from ARO future net ARO contracted Aramco's net will Second, of share provided on X-owned light opportunity the backlog. benefits operational they owned received a fleet Drilling and EnscoRowan ARO EBITDA assets rig with no ARO three rigs' Saudi benefits requirements. initial XX-year debt, percentage based Saudi ARO with financing There Aramco present fill repricing the rigs' EnscoRowan from Drilling EnscoRowan that are external years, leased nine of reach contracted that earnings X as every to which these to of and an initial these high for rig charter Drilling's technical company's renewal Aramco. in ARO our contribution meet Drilling's significant are earnings. share Drilling Saudi rig our to

will payback the with Each an by day rates ARO set X-year provides mechanism. jackups by have newbuild followed to with over market X-year guaranteed up pricing day contract its to initial decade. rates further contract a EBITDA by XX model, expected long-term is program, an Drilling visible rig deliver set growth which Additionally, next a through

approximately for contracts way would years. Thereafter, be from build, By in they Drilling the to if are EBITDA year the need kingdom of receive preference ARO rigs to $XX example, costs contribution expect rig Aramco's the provided we we assume rig will this new annual for $XXX that million Saudi the first newbuild X million each requirements. technical illustratively

be flows expected is and ARO the external to by ARO-generated cash newbuild program financing. Drilling financed fully Importantly, through

Drilling its later cash that X I will more ARO As currently rigs we earlier, $XXX of will and expect million has be on payments mentioned this the ordered than balance first month. sheet down fund on the

fees, which functions, services Finally, EnscoRowan the EnscoRowan support also Drilling. cost to receives provide representing transition of services ARO

replacing as $XXX expect and the expected we expected overtime, venture its joint the functions transition term. Drilling's $XXX million, a And services services are provided total, consistent near Although year will provided previously currently be between full In build by EBITDA to fees XXXX support own in is the ARO with result, EnscoRowan. million guidance. the decline to

Moving EnscoRowan. capital the for now to expenditure outlook

expenditures X months capital for costs, influenced by be XXXX of transaction X will the remaining Excluding items.

$XXX required fees are $XX portion rig First, for million under of Rowan's million costs $XX reimbursable. of the upgrade G we including Schedule and upgrades brands anticipate for these best on million and from enhancements customer A upgrades,

to commissioning note We're ENSCO technology. from this shipyard and to tripping delivered in Second, that complete related majority we later newbuild of from startup are the expect XXX including the an costs the required of continuous additional $XX contract costs and million expected year. of mobilization these Most jackups. North week the of XXX, last commence CapEx, ENSCO delivered and to of to Sea is was pleased recently primarily the the

payment the take ENSCO Finally, delivery of shipyard which excluding a of in approximately and the we final interest. to result scheduled DS-XX milestone are accrued third $XX contractually million, the quarter, to

expenditures with However, at for the shipyard year with the bear note for rig. through to to finance maturity in note we promissory interest promissory X% use not were option interest at accrued XXXX. expect XXXX. we the opt to incur financing, have The payment a milestone rig we and the year-end shipyard do capital the If this will per

pro the of transactional a of the I'll an financial start our position. to of now providing merger. summary impact by forma Turning overview

banking resulting change First, control in by their of to facilities, Rowan commitments Legacy for revolving credit a groups. of the termination event these trigger of

changing trigger both provision S&P event and reaffirmed holders Moody's in of and Moody's the the contain senior with mechanism Second, credit XXXX a granting double of and control closed, the of credit issuance agreement conjunction Legacy this bonds. executed revolving and the the In Rowan we other rating, with put revolving by Rowan an our upgraded the within to the the both in or rating merger control days facilities, S&P change Since has does level the of banking capacity a with credit prior notes closing. the increase Ensco XX in bond downgrade of trigger under change which option not we of neutral any closing facility. group due their the termination

As our now XXXX September capacity of through have a and our the approximately approximately a position combined positive development $X.X and their of and we recognition from result, strength as billion borrowing XXXX our banking was company. under September XXXX. revolver of demonstrates billion and through the upsizing or support group $X.X revolver October a The

no revolver and covenants flows. on based the Importantly, remain operating has unsecured cash

billion. and While are liquidity, the Adjusted additional forma an of we and revolving flexibility billion, $X the increased maintain our pro XX, $X.X to also debt credit to capital for investments cash March secured billion approximately of revolving credit $X.X facility. and billion including as available short-term raise amendment asset an fully basket of $X.X facility, totaled sales through

manageable our debt term our position, before $X.X maturing billion revenue strong contracted Considering of backlog, net of approximately in our remain XX% maturities we Drilling's contract interest $X.X XXXX. nearest ARO debt billion Additionally, excluding backlog. with have liquidity

runway, capital our debt. key with long-term focus of our managing our priorities As a sheet earlier, and reducing maturity one cost be debt on Tom mentioned will minimizing balance of liquidity, management

Finally, I'll on provide and costs. update an synergies transaction

cash realize transaction. creating More synergies one expected to the this approximately professional costs, anticipate year-end with significant employee to reach by will synergies annual inform transaction to shareholders. cost related Legacy XXXX. million, these other of merger synergies conviction target certain and XXXX. in lease of flow the as to And XX% to we the $XXX also synergies we million captured in accretive majority $X.X to and charges. cash noncash our are result of legal of which expect includes than prior In as and share within integration-related run of costs. total are Rowan for of total, charges We $XXX expect be approximately achieving since capitalized closing, We We expected has in associated full transaction various approximately closed make expense This by $XXX increased costs will to result per incurred such the a these of value, billion million value level may severance the rate fees closing. year

In terms we anticipate closing, be towards transaction and timing, conference subsequent these company. costs will XX% will the stronger provide achieving of XXXX. targeted approximately progress cash as We'll be to of completed very calls. our we moving merger in in synergies that In on updates incurred are pleased one forward have

on strength diversification we the recovers. opportunities increased will industry with Our provide advantages, financial and scale, us significant to capitalize and we believe are as positioned well

back over to call Now turn the Nick I'll

Nick Georgas

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

Operator

question ISI. West James [Operator first Instructions]. from Evercore Today's with comes

James West

transaction. closing Congrats on the

So clearly we Deepwater. Tom, shallow and on right if we're market think both in now, the recovery about mode

point, of Deepwater on you spot logged are market? higher rigs, given both term know the I versus the you parts of offshore are how shorter You've you got the both thinking this just some rates, segments at of thinking short-term longer day versus about trend about term market. -- but in market staying How

Thomas Burke

good James, a question. that's

lot I contract how a is, upside. assets merger certainly where But really we're the the attractive available at just and our of now. what's obviously keeping we right X the spending exposure that strategy weeks approach time portfolio look think to is clear the our as on we ago, completed fleet

also working we assets working. too So long, don't want to keeping but look many too our assets for into

contracts. against really total assets our a kind So the of portfolio available of

James West

And Drilling, that? do What How enough. cadence Fair about XX should every shortly. orders as forward? Okay. of then guys months, you here X think ARO it we so X respect months? going with expect to Is the jackups

Thomas Burke

on the I'm certainly there. up obviously and says Drilling every another we're to ARO Board That's the the putting months of But Yes. Rowan XX ARO. plan basically at business

out and in I order to So come expect X very months. soon, XX would every

made is a shipyard. those December the they X of to portion IMI, come the out in months, certainly land other jackups running, which first from a and had to an rig be stating certainly order But up the getting -- press is at James. basically will I rigs the shipyard would So expect first release guess that every the built XX be While I

Operator

next Ian And Simmons. comes today question MacPherson of from

Ian MacPherson

close options, low XXXX. to and total spot on day started day XXXX, everyone rising improving of and from the the Congrats see improvements behind wanted opposed ask more the wins environment recent have illustrates pad that day for question up on you relatively contract to contract about understanding or rate, wanted to the price it's My in with put day about the I rate the to the spot to I other color options one of you any getting spot? is in rate slope any behind on the could options first recent Deepwater. the slope the that to as regard if sort here. is of Brazil rate also that But rising

Thomas Burke

process, it's time. it's a To that what comment period of the contracting was contract DS-X, but the over happen I it about from actually I understand obviously, not here, on a So wasn't contract,

is going So shortly that's time right, really some on quite ago. which us

option So comment versus on have But Carey, different when strategies tell we hand will that.. on far comment of I'll I be you, is over across the there nonpriced. typically number don't a priced would as as to a fleet, there

Patrick Lowe

are options The rate. increased

Thomas Burke

DS-X. the On

Patrick Lowe

because add of in the said, options On as Those especially you speaking ones options, price thing then options I'd have of at across really cycle. not the just look are contract such DS-X DS-X in have the some fleet, that environment that just And assets -- but prized we we as now, Tom market the I'm cases as the earlier could of the options the around there in several the specifically be our options do these DS-X. some some contracted one just rates. and

market where those based the So floating at just is are on time. the

Ian MacPherson

burden at my the your wanted question do guidance check energized I of optimized cost your my to current on OpEx to to and I on understood. end year. because check roadmap next fully follow-up my notes ask from just

XXX, going if higher. and be QX So for your should QX a drilling basis year plus that your because it on it? plus end constant for be essentially is below right activity the the by would to won't way of be guidance below activity next constant be is contract $XX million true, then expense the about OpEx assuming then that were activity just G&S, quarter think G&A But you to

Jonathan Baksht

math. doing Roughly mental so, Just the right.

together the you the we think, not plan beyond QX to are full a moment. and by more the of the still you're it were a synergies $XX way that on G&A is than to until the on and putting will quarter million once numbers, XXXX kind rate, year just out of end get one. hit you XX% and won't attributable the roughly bit we're that guiding of run We're at of the but XXX if We synergies. of come the that run to each rates guiding working Ian, I to take

run by XX% get and now about from it. that way we'll will So on a path quarter don't year million time you run want that It a some probably rate to anticipate the think next to rate I year it start just take should of that better right get to away. starting those. $XX is to the full about end We of applying to that

Operator

from And Connor today of Morgan our next Stanley. question comes Lynagh

Connor Lynagh

marketing about the on made the the talk the at preservation contracting Wondering working not planning you're the in on XXXX? you this if not reactivating that fleet? -- can that obviously, moment? strategy it into year you versus the you're bidding you moment. you is work just reactivating Or clear not of not any on broadly at them year? help this Are planning just not And Can clarify

Thomas Burke

working That's and a warm reacting focused as good question. the on assets. then We're marketing our the still followed middle do warm in strategy stacked obviously come. and -- they of assets We definitely planning the by assets

mentioned the in keep mind our assets, down focus everything a either contract. as prepared the stacked We that certainly is that working floating preservation have remarks, has we on So now. in assets. contract what always obviously, Jackups, real or right a my I on they

not did reactivation. at of would And be a Connor, look may to certainly but sure. are where and lot some around capital so allocation of with help reactivate year, X And at returns carefully I we opportunities, this or your jackup a certainly X the you we question? scrutiny looking

Connor Lynagh

Yes.

jackup And a do I pretty new art there go is discuss about think to need at think how you the How and obviously that? much point? you for runway the this assets side the point? market this tight think at Is to on how can things, could you so. about on acquire the potential more you asset reactivate

Thomas Burke

now have under We the modern and sort of assets, we what have which an understanding really sort hood of the month. excellent on

so has has about some And modern of Ensco either that or acquired. excited built jackups the

modern So we some excellent got assets.

and keeping we focus understanding understanding that them. assets utilize in shipyard the have an shipyard. assets and on and what so But the current is And have always warm the eye better that than we would that. are fleet And modern the certainly what's fleet our how we on stacked that certainly there, going our we frankly, in the be warm are in

Operator

question our UBS. of Sasha today from next Sanwal And comes

Sasha Sanwal

for forma some a strategy, for been Thanks kind all on the waiting pro of commentary something bidding time. we've

should then, gating sense update well? So just Connor's as get on us to maybe factors give in maybe how the an about the in rig? about up reactivating jackups, are Can your returns on the question. discipline follow what of And of you cost, you preservation stacked Tom, your commentary think reactivation terms we mentioned wanted reactivation to on

Thomas Burke

I'll moment. the comment And one on Carey for stacked let assets about strategy. comment. contracting one Well, just the a the talk of reactivation preservation

strategy, of rig say a it's lot overview So the than this that. do around an let like really should rig. and and contracting about not that really we're more It's talk we a It's a me fire spending building and look that sitting management the new team, supply of dynamics the and at the to lot to what contracting time lens the reactivation we going of demand think about amongst using then as shared happen of understanding is the market, strategy.

historically, the It's and in good process good we're So has a it's of it's process. process. a that, Ensco middle and very that a

and working certainly thorough. So very we're on that it's

of assets, on comment the the that. Carey, As far reactivation as

Patrick Lowe

Yes.

floaters which a $XX the preservation rig So we million stacked range that actual of of between and reactivate and number it $XX our on to have million, depends cost is.

at the rigs end the higher. scale, are process. some at lower of the are of This Some the is a XXX-day

condition under ENSCO handle the under preservation from starting Nigeria performed work rigs, out and it budget have We with coming update of the record good has preservation a and continually stacked we very went for to of track cost. it We up of reactivation time well and DS-X got a these and in stacked. very

handle the and So of have time cost we confident this, to on reactivate. we're good and a

Thomas Burke

And will supply think so question, happen when What the about last your want to are asset model. towards fully money think confidence the have and well apply to and answer this think good capital. have a we to allocation a overtime, will be it we and about what reactivation, we return. basically we back We will spent, is looking we -- when demand of capital part at the

last the willing and conversations we capital a we won't it contract, -- put you get contract we contract. the in opportunity. on actually, -- first have to reactivation about this second maybe got And we then we're contract. So have confidence of the justify lot weeks, high on to the X on do but but had here this this Yes, an is this, call those potentially

making pretty are it's a the thinking reactivation So getting return that rigorous about on capital. sure a good we approach

Sasha Sanwal

color. that regional like how And the get kind essentially Very as some for you mix. follow-up, a may about just to guys you helpful. context be on of think I'd Thank just

of I cost. of sometimes spend miss kind unless day lot a think and And of you you on so time rates in terms

contract ago, like Brazil, cost example, regional of about think in spend kind quite DS-X you some right areas example. referenced And so for for time

think terms cost per up in scale last input into cost I the gone right. of kind cycle, versus also the base things And obviously share like mix. has rig coming of

be margin have of could for floaters terms rates, a of guys? think beyond day regions a about at looking you high in be bigger you may think kind which level for focus at when the So at opportunities might rate about

Thomas Burke

the footprint has And question. in I basin. as a think Well, combined been, the you it's think of thing mentioned one as good in know is is about that comment and every almost I I major the my company

another And is line time -- which set become with cost, a to has cost a so is long into on or new getting regional but whole which is yes, compliant go the requirements, there in customer actually there up is region, a potentially countries. those cost the rig typically also

a those rig Rowan, in Brazil, thinking assets the it have much region a modification actually at expose Australia, the more in you we such it regional ability Legacy the of we in And -- Nigeria, the from did risk. cost about when the worked more entering having move the in up Angola, so another allows highest didn't And weren't to have was thing to It that getting to footprint Nigeria way last list. we in -- or ourselves were I countries set Brazil, the one and on to efficiently. tell in entry

that very are that basin, we a that's the on. ones a footprint we that have think geographic position very offshore in have been, So I but we certainly good not focused

mix assets. going, between as West the the of contracts Deepwater I we in floating and clearly as And think it's the Brazil assets we're would assets I guess, far X/X for Golden in the And so today, see Africa. the where Triangle of

also clearly Asia. of in seeing good but We activity the some also -- Southeast side, activity signs the a Middle of jackup East, in we're lot in

does regional you bit a that mix. hope I color of that on So give

Operator

Taylor from comes question Zurcher of Pickering Next Holt.

Taylor Zurcher

of years, rig out contracts there is in your in it just Brazil then. placed sorts but response to these Deepwater of made just all last you wealth to out of coming things My clearly like that right. Tom, question coming where reference the feels feels count numbers like always you of Brazil and is, are is there shift go in could there a kind it DS-X

forward? could months? moving in trend And so wondering could demand particular Brazil you the maybe if us Deepwater XX to, take don't next we I give Where as over in to your see rig know, XX

Thomas Burke

peak think the with we obviously activity. but where notes significant to from where perhaps Brazilian it's lot as a looking there I'm there market now, been of about just think potential. a I has is market, So is it it for

I it's into but positive, market, going ILC a that assets. I bit. as assets, very up because the up also the comments, in think only my think And will alluded to you As pick it pick changes not will is dynamic

the said there -- that rig high-end different a we combination floaters fairly is Brazil are the needs not of substantial. be are to There floaters, low-end both. built and are in you We in if cost there and seeing clearly the are market. can modify have

far not we're to it's a So not hard is our proprietary there. and it's have But do market. the to we sharing are and infrastructure It's a I that overnight, really we why model market. I going is about as to not as say very that what own we're that what going Brazilian would recover on that. good kept we that It's say, think a market positive and --

Taylor Zurcher

follow-up ARO. just helpful. a on That's And Okay. housekeeing

those how I You there orders? noted within bunch debt know us couple you and new first of soon thinking the the could about probably remind at likely first of that is flexibility are is build there... least for there financing you're two, to orders come

Thomas Burke

Absolutely.

payment. So -- as financing as there far of ARO, issue down new the build we an are is

hand, given of will with we opportunities able have to yet major be total cash than the placing think And the -- cash I that announce and out the contract obviously at percentage cover come from are price, will a as We or that, disclosed lot of the the return initial initial hand down profile. from at through financing. we'll payment on that, of the haven't milestone ARO. but after the then take operations cash the we financing from length more look will a think on award the certainly order of We what status the it but will

Operator

with today next question our And Sean from comes Meakim JPMorgan.

Sean Meakim

calculus So part a of on noted restructuring, balance terms was to reactivation cash for as priority key in well sheet DS-XX management the out be obviously. deployed as of upgrades capital

maturities how with the coming cash $X.X and to free flow cash of do impact versus about ability billion in think next them years flow your you Just terming that of out? couple

Jonathan Baksht

laid think high do the I we right prepared as that position have now. luxury do in cash we're of position Sure. take a that a very that we the I I'll one. Sean, bit on have with remarks,

credit very next have and years facility the revolving We maturity that of we've flexible X over a $X.X billion. the got

short-term to fit to what one free into to debt liquidity, think going out priorities, think cash of cost of capital. ultimately, months your balance We're sources be on flow flow on So I I very if and where we we what as are And have we're in. earlier the our we been might But had the X that uses I our to point done focused that does today And does or the and mean, it's proactive about depending so. the evolve. the how lowering laid the flexibility. cycle. and free do managing that continue to mix, the how cash due the capital maturity think of as And talking or from balance those might sheet versus long-term to going on runway, of where fit manage do on reducing projections look sheet, now, lot a come going historically, really at we've about we you how we're longer-term

at based it those monitor and to And so to we'll proactive be we'll continue continue on priorities. looking

Sean Meakim

out you upside enough. parameters, concern? would to you being longer And versus of could more elaborate you good where points Where and bit? think be Fair -- areas see you able thing plan Or synergies the of Okay. on will you procure? that for lot biggest a a laid the one

Thomas Burke

downside. not I'll and I we can feel on about anything worried I confident comment isn't too -- you on I'd cover of XXX miss when about say But that, and I'm very the anything on the Jon the synergies, so there

because two chain had that have certainly get is could supply pricing as upside, reasons, big vendors, but for with we areas not competitive the On couldn't into one we set we area, obviously the share around much, it's we separate companies.

work even hard the little spend was a out what was. what it's to opportunity So the

time spent I conservative, there. supply there we we that and side think were And conservative side. in supply around opportunities on on And is the fact, chain some quite -- very so now,

not of The for -- can something we offshore clean we the other competitive is paying again rigs, area share is operating something in though the cost the could we're even offshore, paying did as we available certainly we're labor, Again what -- the the only deal. what little for a rigs mining be bit of are for room services it's costs. reasons, of

conservative a and that And Jon, that's on add? big So we in frankly to were area. anything very synergies opportunity

Jonathan Baksht

the I word thing a comes One back clarify is XXX that as of just office from, when earlier, laid synergies. lot to out

coming out and just expenses. of G&A And so based

will that line. So offices run field through type kind of of that thing

so And base, -- aspect. rig it's at you look that really is not from much for there the really accounted when

that is areas So to in scrutinize. we that will continue

Thomas Burke

really point. a Yes. That's good

So of our onshore. is certainly our our expense, and planned onshore the and XXX and OpEx that contract is now right synergies broken synergies into majority offshore from is

we've taken a conservative really offshore, the So

Operator

from question our next And Beale. comes Howard

Unidentified Analyst

Congratulations on closing the deal.

day Just want you seeing to now? market what of jackup right rate the about speak improvement in kind are

Thomas Burke

by by depends class and the depends It assets. really of market, it

be can also So obviously and ultra age those assets categorized harsh we have benign around of the and frankly and them harsh, capability.

North to getting we're about trying getting because those. but and certain markets to because excited also not other one would markets we North there ourselves. about talk keep that in are talk the So about we're markets what's happening other really that But tighter I about certainly we Sea, be sizable Sea talking also is it because think of we're that that

we by the how many competitive seeing and lot So how and and thinks contracting but a their an competitors customer are about strategy. the who improvement -- it varies is

go varies, would so seeing down I not generally, say, we're in And any market. but it pricing

it's in it's up going markets, a all fact, places. but just In relatively different

Unidentified Analyst

just question. piggybacking Sean's on And

to of refinancing think you're you that yours maturities call and now that just you can now what $X thinking XXXX? help how between like the and about calling So of are any it, between in Or XXXX, me guys Is a debt about, maturities refinancing of the about you bonds one have billion peer strategies thinking? and

Thomas Burke

you Could out question cut ask You slightly there. just just again. the

Unidentified Analyst

Sorry about that.

-- maturities? should like we think XXXX? Just the was now how think calling debt I just those those between about do we maturities you about wondering and how guys bonds? Or you Can think about

Thomas Burke

I'll Sean. might may We're to that just that or not confront going what it. give on got any give I'm to about. I we not not given guidance we talk people actions take similar you may -- specific transaction answer on

proactive, our back the it's things of do point we've on in just manage less those were of more -- things. So strategy. appropriate utilize can will the peers and we some We've we our some not XXXX, specific maturities sorry, we have things moving we if historically that our done reducing something moving we'll for that me provide maturities Those I'm to and And are are past of in guidance. I financial and now say, done look But what called back the of to we've our repurchases. we some -- you or I and be that how evaluate and at the all some focused will that I'll tenders. the should peers, over terms be it's that. but might toolkit things done market in in tools past, think, would of our overall reduce of the between in also and point

Unidentified Analyst

how of it? we secured you about much Can financing can think say Is have? you that like capacity

Thomas Burke

debt our lot clearly one I specific. do in the the the be filings. now this a all can We but point, revolver. is significant which is have I at right go, different It's of want to most

capacity is billion, That from revolver, So have on million. the $X revolver, we is $XXX debt an which legacy increase the and secured scale which not our is utilized.

part of that go conjunction as process in So did the upsizing merger. with the up we did

Unidentified Analyst

question last maybe from ARO And me jackups. on

XX build be jackups? would think strategy? next And -- should the Saudi, was for mentioned there how change understanding about XX the be Saudi. any soon? in be anytime in You jackups timing my So we all should those would the in that Is plus ARO

Thomas Burke

jackups Saudi, but right to the build Certainly, is for they're building those the now. in plan shipyard

with to majority that has the press orders to contracting a that December up also order is jackups and shipyard being if so given it's will and directing in build release, will received is the from another company Saudi And which is Saudi. X basically in which And Saudi. or first a think, built in IMI, partner. shipyard, for the XX that you may I an shipyard website to building a or of IMI they And those -- them IMI got for be is

and have made. I So IMI public a think it's statement that

Now be -- in to the with first -- few like but first going order X the first the might that first be or assets build an seen. those be built will IMI that few, the subcontract remain is was few to it beyond out IMI, would be and will giving only and certainly to it

Operator

question-and-answer gentlemen, Georgas to over concludes Nick session. any and conference remarks. ladies the turn I'd And to closing for like this back our

Nick Georgas

the We'll forward Thanks, quarter interest we are your your XXXX those look rest in day. and second and call for speaking with great report Have of you today, queue on today, following question up a to results. you, to be thank the who with again EnscoRowan. still you when everyone in later we of

Operator

Today's thank Thank concluded, conference you you. we now attending today's for and presentation. has

and may a disconnect now wonderful your You lines, day. have

Valaris Limited (VAL) 2 May 192019 Q1 Earnings call transcript