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Ensco plc Reports First Quarter 2016 Results

Record Operational and Safety Performance Two Contracts Awarded for ENSCO 8504 in Indonesia Two Five-Year Contracts Awarded for Drilling Management Services in U.S. Gulf of Mexico #1 in Total Customer Satisfaction for Sixth Consecutive Year Repurchased $861 Million of Senior Notes at an Average Discount of 28% in April 2016 Raised $586 Million of Net Proceeds Through Equity Offering in April 2016

LONDON, Apr 27, 2016 (BUSINESS WIRE) -- Ensco plc ESV, -2.60% today reported earnings of $0.74 per share for first quarter 2016 compared to $1.38 per share a year ago. Results from discontinued operations were zero cents per share in both first quarter 2016 and first quarter 2015. Adjusted for $27 million, or $0.11 per share, of other expense to retire debt ahead of maturity during first quarter 2015, earnings per share from continuing operations were $0.74 compared to $1.49 a year ago.

Chief Executive Officer and President Carl Trowell said, “Notwithstanding very challenging market conditions, we continued to set new company records by achieving operational utilization of 99% for our rig fleet and a total recordable incident rate of 0.23 reflecting excellent safety performance. These accomplishments are key differentiators during the market downturn, and they led to Ensco winning two new contracts for ENSCO 8504 and two five-year contracts for drilling management services, as well as the #1 rating in total customer satisfaction for the sixth consecutive year in the independent EnergyPoint Research survey.”

Mr. Trowell added, “In April, we took further steps to improve our financial position by completing a tender offer, repurchasing $861 million of senior notes at an average discount of 28% and raising $586 million of net proceeds through a 65.6 million share offering. As a result, on a pro-forma basis as of the end of the first quarter, we had $1.3 billion of cash and short-term investments, a fully available $2.25 billion revolving credit facility and a net debt-to-capital ratio of 33%. We also had $5.2 billion of contracted revenue backlog, and are well positioned to navigate through the current downcycle and capitalize on a future upturn in the market.”

First Quarter Results

Continuing Operations

Revenues were $814 million in first quarter 2016 compared to $1.164 billion a year ago primarily due to a decline in reported utilization to 65% from 86% in first quarter 2015. The average day rate for the fleet declined to $208,000 in first quarter 2016 from $244,000 a year ago.

Contract drilling expense declined 30% to $364 million from $518 million last year, as lower compensation and repair and maintenance expenses, partially related to fewer rig operating days, more than offset newbuilds commencing contracts and the reactivation of a semisubmersible following shipyard upgrades.

Depreciation expense declined to $113 million from $137 million in first quarter 2015 due to non-cash asset impairments recorded in fourth quarter 2015, partially offset by the addition of several rigs to the operating fleet. General and administrative expense declined to $23 million from $30 million last year, mostly due to reduced compensation costs.

Other expense declined to $65 million from $73 million last year, mostly due to a $27 million loss to retire senior notes before maturity in the year ago period, partially offset by higher interest expense from a $1.1 billion debt refinancing in first quarter 2015. Interest expense in first quarter 2016 was $65 million, net of $12 million of interest that was capitalized, compared to interest expense of $52 million in first quarter 2015, net of $20 million of interest that was capitalized.

The effective tax rate was 28.7% in first quarter 2016 compared to 19.1% a year ago. The year-to-year comparison was influenced by the mix of earnings from various tax jurisdictions.

Discontinued Operations

First quarter 2016 results from discontinued operations include three floaters and two jackups held for sale. The net loss from discontinued operations was $0.9 million for first quarter 2016 compared to a net loss of $0.2 million a year ago. A $13 million discrete tax benefit in first quarter 2015 influenced this comparison. Excluding this item, the net loss from discontinued operations improved to $0.9 million in first quarter 2016 from $13 million last year mostly due to expedited stacking and reduced stacking costs for uncontracted rigs. On 1 April 2016, ENSCO 6000 was sold for scrap value, which will be reflected in second quarter 2016 results.

Segment Highlights for Continuing Operations

Floaters

Floater revenues were $513 million in first quarter 2016 compared to $695 million last year primarily due to several floaters in the U.S. Gulf of Mexico completing contracts with above average day rates, which contributed to a decline in the average day rate to $365,000 from $425,000 a year ago for the Floaters segment. Reported utilization was 64% compared to 86% last year. Adjusted for uncontracted rigs and planned downtime, operational utilization was a record 99% compared to 93% a year ago.

Floater contract drilling expense declined 28% to $211 million in first quarter 2016 from $294 million in first quarter 2015. Compensation and repair and maintenance expense reductions, partially due to fewer rig operating days, more than offset an increase in contract drilling expense related to new drillships ENSCO DS-8 and ENSCO DS-9 as well as the reactivation of ENSCO 5006.

Jackups

Jackup revenues were $278 million compared to $428 million a year ago mostly due to a decline in average day rates to $118,000 from $144,000 last year and fewer operating days for several jackups, partially offset by the addition of newbuild jackup ENSCO 110 to the active fleet. Reported utilization was 66% compared to 87% in first quarter 2015. Adjusted for uncontracted rigs and planned downtime, operational utilization in first quarter 2016 was a record 99.8% compared to 99.6% a year ago.

Contract drilling expense decreased 30% to $135 million in first quarter 2016. The decline was due in part to lower...


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