Valaris Limited · NYSE:VAL
Valaris — Ensco — Merger or Acquisition (September 2017)
30 slides from Valaris's merger presentation, Sep 25, 2017
Slide 1: Forward-Looking Statements
Forward-Looking Statements Statements included in this presentation regarding the proposed transaction, benefits, expected synergies and other expense savings and operational and administrative efficiencies, opportunities, timing, expense and effects of the transaction, financial performance, accret
Slide 2: Participants in the Solicitation
Participants in the Solicitation Ensco and Atwood and their respective directors, executive officers and certain other members of management may be deemed to be participants in the solicitation of proxies from their respective security holders with respect to the transaction. Information about these
Slide 3: Evolution of the Market; Positioning for the Recovery; Atwood Acquisition
• Evolution of the Market • Positioning for the Recovery • Atwood Acquisition Compelling Strategic Rationale Significant Value to Shareholders Strong Liquidity & Financial Flexibility 4
Slide 4: Agenda: Evolution of the Market, Positioning, Atwood Acquisition
ENSCO <—S ¢ Evolution of the Market * Positioning for the Recovery ¢ Atwood Acquisition v¥ Compelling Strategic Rationale v Significant Value to Shareholders ¥ Strong Liquidity & Financial Flexibility
Slide 5: Offshore Drilling Landscape is Changing as a Result of the Industry Downturn
Offshore Drilling Landscape is Changing as a Result of the Industry Downturn – Adjusted for rigs that are not currently marketed for Source: IHS Markit RigPoint as of 24 August 2017 Current Competitive Landscape • Fragmented market with 50% of global supply held by 18 offshore drillers – Ensco has a
Slide 6: Bifurcation Amongst Offshore Drillers
Bifurcation Amongst Offshore Drillers Ensco’s Strategy is to Enhance its Position as a Tier 1 Offshore Driller customers’ drilling programs 7 Tier 1 Offshore Drillers • Scale, diversification and global footprint • Well capitalized companies with strong, flexible balance sheets • Highest-specificati
Slide 7: Increasing Customer Activity has Led to Improved Utilization
Increasing Customer Activity has Led to Improved Utilization • Customer activity for offshore rigs has improved with utilization bottoming in late 2016 and increasing modestly during 2017 after nearly three years of declines • Recent improvements in both total and marketed utilization are due in par
Slide 8: High-Spec Assets and Well-Capitalized Drillers Winning Higher Percentage of New Work
High-Spec Assets and Established Well-Capitalized Drillers Winning Higher Percentage of New Work • High-specification rigs are winning a significantly higher percentage of new contracts as customer demand is increasing • Approximately 22% of global supply is owned by established well-capitalized dri
Slide 9: Major Oil Companies Increasingly Positive on Offshore Projects
Major Oil Companies Increasingly Positive on Offshore Projects • “We’re sanctioning projects in the deep-water with breakeven prices on a go-forward basis of less than $40 a barrel … competing very much with the other marginal barrel opportunities.” • “This transaction delivers an exceptional opport
Slide 10: Competitor Commentary Supports Signs of a Market Inflection
Competitor Commentary Supports Signs of a Market Inflection • “It is beginning to feel a lot like we are moving off bottom.” • “We are pleased to see a recent uptick in fixtures throughout the industry, supporting the premise of a transition from trough to recovery. Although we are cognizant that th
Slide 11: Positioning for the Recovery
Positioning for the Recovery 12
Slide 12: Prudent Financial Management
Prudent Financial Management Liquidity $ billions $4.10 2Q14 2Q17 Revolver Cash & Short-Term Investments 2016 – 2023 Debt Maturities ash $ billions 2Q14 2Q17 13 Global Fleet Utilization Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Se
Slide 13: Ensco's Progression as a Tier 1 Offshore Driller
Ensco’s Progression as a Tier 1 Offshore Driller Completed & In Progress Future • Secured two drillship contracts offshore Nigeria – a new deepwater market for Ensco Moved rigs to the Middle East, West Africa & U.S. Gulf of Mexico for new contracts Took several actions to increase liquidity and impr
Slide 14: Ensco's Progression as a Tier 1 Offshore Driller
Ensco’s Progression as a > | Tier 1 Offshore Driller While Better Positioned for the Recovery, Additional Action Necessary to Enhance and Refresh Rig Fleet While Gaining Exposure to Key Strategic Markets Completed & In Progress Future Secured two drillship contracts offshore Nigeria Increase exposur
Slide 15: Ensco's Capital Management Strategy Based on Driving Shareholder Value
Ensco’s Capital Management Strategy Based on Driving Shareholder Value • Ensco’s Board of Directors is actively focused on creating shareholder value and regularly engages with Executive Management in decisions regarding corporate strategy • Ensco’s Executive Management has thoroughly evaluated the
Slide 16: Purchasing Atwood's Assets Enhances Ensco's Position as a Tier 1 Offshore Driller
Purchasing Atwood’s Assets Enhances Ensco’s Position as a Tier 1 Offshore Driller Atwood Asset Specifications Enhancement to Ensco • All four drillships are latest generation assets with the highest-specifications that ultra-deepwater customers prefer, including: – Two blowout preventers – 7 RAMS –
Slide 17: Purchase Price Reflects Attractive Implied Per-Floater Valuation
Purchase Price Reflects Attractive Implied Per-Floater Valuation semisubmersibles) estimated to significantly enhancing ultra-drillships globally – pro forma fleet Source: Company Filings, Morgan Stanley Equity Research, Capital IQ 1 “At offer” data as of May 26, 2017, ATW Offer Equity Value of $897
Slide 18: Compelling Purchase Price Compared to Other Asset Opportunities
Compelling Purchase Price Compared to Other Asset Opportunities • Distressed Companies - Each distressed offshore driller has a wide range of capabilities among their ultra-deepwater drillship fleets and additional costs to upgrade earlier 6th generation drillships to Atwood’s specifications were co
Slide 19: Synergies Create Meaningful Value
Synergies Create Meaningful Value • $80MM of annual run-rate expense synergies expected beginning in 2019 - ~$70MM from shore-based headcount - ~$10MM from insurance and other costs ATW Shore-Based Expenses ($MM) $85 • 2018 cost synergies are projected to exceed $60MM Operations Support • Total syne
Slide 20: Accretive to Shareholder Value
Accretive to Shareholder Value1 Accretion to ESV Shareholders2 Illustrative Market Conditions • Jackup utilization recovery beginning in 2018 & day rate recovery in 2019 Expected synergies have increased by more than 20% since S-4 filing, increasing accretion to Ensco shareholders in all scenarios ~
Slide 21: Purchase Price Reflects Ensco's Disciplined Approach to Acquisitions
Purchase Price Reflects Ensco’s Disciplined Approach to Acquisitions • • Ensco participated in a competitive process Premium at time of offer was less than 10% higher than the market value of prior competing bid, representing a difference of only ~$10 million per rig April 25 May 30 $1,783 $1,760 ~1
Slide 22: Manageable Debt Maturities in Light of Strong Balance Sheet & Liquidity
Manageable Debt Maturities in Light of Strong Balance Sheet & Liquidity $ millions $3,271 $1,805 $1,001 $300 $270 $150 Liquidity 20172018201920202021 2022 20232024 ESV Senior Notes 2025 2040 2027 2044 ESV Cash ESV Revolver ESV Convertible Senior Notes Source: Company Filings 1 ESV contracted revenue
Slide 23: Pro Forma Liquidity Provides Financial Flexibility by End of 2019
Pro Forma Liquidity Provides Financial Flexibility by End of 2019 (1) $ billions $4.1 $4.1 2014 – 2Q17 Average = $3.6B 2Q14 2Q15 2Q16 2Q17 PF ESV Cash & Short-Term Investments Revolver Source: 2Q17 Company Filings; Ratio calculated as the sum of cash & short-term investments net of restricted cash a
Slide 24: Wall Street Analysts Have Supported Acquisition Rationale and Timing
Wall Street Analysts Have Supported Acquisition Rationale and Timing • J.P. Morgan: “Ensco’s merger with Atwood begins a consolidation wave we’ve long argued was essential to clear acute overcapacity in offshore drilling and further reduce costs in an industry that has already cut meaningfully.” • S
Slide 25: Proxy Advisory Firms Recognize Compelling Strategic & Financial Merits
Proxy Advisory Firms Recognize Compelling Strategic & Financial Merits • “…we find that the proposed transaction appears strategically reasonable and, on balance, financially acceptable from the perspective of Ensco and its shareholders.” • “We recognize that the offshore drilling industry would lik
Slide 26: Reviewing the Atwood Transaction
Reviewing the Atwood Transaction Atwood’s fleet indisputably enhances Ensco’s fleet and augments Tier 1 status Ensco’s Board and management are better positioned to judge the fleet quality and advantages that Atwood brings than outside generalist observers of the market who lack experience in these
Slide 27: Atwood Acquisition is a Compelling Transaction for Ensco Shareholders
Atwood Acquisition is a Compelling Transaction for Ensco Shareholders Strong strategic rationale - Secures position in high-specification ultra-deepwater market and refreshes semisubmersible and jackup fleets Acquisition expected to generate double-digit accretion for Ensco shareholders - Implied pe
Slide 28: Atwood Acquisition is a Compelling Transaction for Ensco Shareholders
Atwood Acquisition is a Compelling Transaction for Ensco Shareholders Pro forma company maintains financial flexibility and sufficient liquidity to cover debt maturities through 2024 - $1.0B of cash & short-term investments + fully available revolving credit facility ($2.25B through Sept. 2019 & $1.
Slide 29: Atwood Acquisition is a Compelling Transaction for Ensco Shareholders
ENSCO Atwood Acquisition is a Compelling | Transaction for Ensco Shareholders vPro forma company maintains financial flexibility and sufficient liquidity to cover debt maturities through 2024 — $1.0B of cash & short-term investments + fully available revolving credit facility ($2.25B through Sept. 2
Slide 30: Ensco: Go Beyond
ENSCO ~w Go Beyond