Atwood Oceanics — Merger or Acquisition (September 2017)
51 slides from Atwood Oceanics's merger presentation, Sep 18, 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: Agenda
Introduction Industry Dynamics Market Conditions Positioning for the Recovery Strategic Considerations Atwood Transaction Conclusion Appendix Agenda
Slide 4: Ensco Positioned to Capitalize on the Market Recovery
Ensco Positioned to Capitalize on the Market Recovery Offshore drilling sector undergoing transformational change Consolidation will reduce the number of offshore drillers in the market Bifurcation amongst Tier 1 and Tier 2 offshore drillers Ensco’s strategy is to enhance its position as a Tier 1 of
Slide 5: 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 per-ri
Slide 6: Atwood Acquisition: Disciplined approach to acquisition
Atwood Acquisition is a Compelling Transaction for Ensco Shareholders Disciplined approach to acquisition Ensco participated in a competitive process Premium at time of offer was less than 10% higher than market value of prior competing bid Ensco’s Independent Board of Directors has extensive experi
Slide 7: Atwood Acquisition is a Compelling Transaction for Ensco Shareholders
ENSCO Atwood Acquisition is a Compelling —~ EF Transaction for Ensco Shareholders v_ Disciplined approach to acquisition ~ Ensco participated in a competitive process ~ Premium at time of offer was less than 10% higher than market value of prior competing bid ~ Ensco's Independent Board of Directors
Slide 8: Overview of Offshore Drilling
Overview of Offshore Drilling Shallow Water Water Depth Mid & Deepwater Characteristics Middle East North Sea Southeast Asia Mexico Brazil West Africa Gulf of Mexico North Sea Southeast Asia Rig Types & Global Fleet Sizes Jackups Current Supply: 543 Under Construction: 99 Semisubmersibles Current Su
Slide 9: Offshore Drilling Landscape is Changing as a Result of the Industry Downturn
Fewer offshore drillers due to consolidation Bifurcation amongst offshore drillers that remain based on scope of service offerings Larger customers contract rigs with service providers that can help to continue improving breakeven economics for offshore projects through technology, innovation and ne
Slide 10: Bifurcation Amongst Offshore Drillers
Bifurcation Amongst Offshore Drillers Tier 2 Offshore Drillers Smaller contractors focused on specific market segments and/or geographies High- and low-specification assets Lack organizational capabilities to partner with customers to drive efficiencies across offshore projects beyond pricing i.e. c
Slide 11: Recent Transactions Support the Case for Consolidation
Recent Transactions Support the Case for Consolidation in the Offshore Drilling Sector Borr Drilling Discloses ~9.7% Ownership in Atwood On August 29, 2017, Borr Drilling disclosed it had acquired 7.8 million shares in Atwood through forward contracts, equal to 9.7% of the outstanding shares This in
Slide 12: Transocean Announces Acquisition of Songa Offshore
Transocean Announces Acquisition of Songa Offshore + On August 15, 2017, Transocean announced it had reached an agreement to acquire Songa Offshore in a deal worth $3.4 billion + The transaction underscores the recent interest from established, well-capitalized offshore drillers to acquire high-spec
Slide 13: Commodity Prices Have Recovered to Levels Above Some Offshore Project Breakevens
Commodity Prices Have Recovered to Levels Above Some Offshore Project Breakevens Commodity Price Source: FactSet; Statoil 7 February 2017 Capital Markets Day; Repsol 23 February 2017 earnings conference call; Chevron 29 April 2016 earnings conference call; Petrobras CEO Pedro Parente via Bloomberg 1
Slide 14: 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.” Source: Companies 2Q17 earnings conference calls and T
Slide 15: 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.” Source: Companies 2Q17 earnings conference calls “ although we are not calling a bottom, we do think that signs of a market inflection are close. We are witnessing an uptick in
Slide 16: 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 part to
Slide 17: Utilization to Benefit from Attrition of Older Rigs
Utilization to Benefit from Attrition of Older Rigs ~55 more floaters could be candidates for retirement based on age and contract expirations Retired to Date 86 floaters retired since 3Q14 Currently Idle ~30 floaters >30 years of age idle without follow-on work Expiring Contracts ~25 floaters >30 y
Slide 18: 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 driller
Slide 19: Higher Levels of Customer Activity Have Led to Increased Contract Awards
Higher Levels of Customer Activity Have Led to Increased Contract Awards New contracts have added more than 20 rig years2 to Ensco’s backlog Diverse rig fleet and global footprint have led to floater and jackup contracts across several regions Won nearly 20% of all deepwater contracts year to date F
Slide 20: Positioning for the Recovery
Positioning for the Recovery
Slide 21: Prudent Financial Management
Prudent Financial Management Liquidity $2.15 $ billions $4.10 2016 – 2023 Debt Maturities $ billions Debt Refinancing $1.1B of debt maturing in 2016 refinanced with new 5.20% and 5.75% senior notes due in 2025 and 2044 Equity Offering 65.55M shares issued, Increasing liquidity by $586M Revolver Exte
Slide 22: Investments in Systems, Processes & Technology
Investments in Systems, Processes & Technology 1 IADC industry statistics as of 1Q17 2 Operational utilization is adjusted for uncontracted rigs and planned downtime Ensco Asset Management System $40+ million investment over several years helped to reduce subsea equipment-related downtime by 80% in
Slide 23: Ensco's Progression as a Tier 1 Offshore Driller
Ensco’s Progression as a Tier 1 Offshore Driller Scale, Diversification, Global Footprint & Financial Strength Highest-Specification Assets Technology & Innovation New Contracting Models Secured two drillship contracts offshore Nigeria – a new deepwater market for Ensco Moved rigs to the Middle East
Slide 24: 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 Secured two drillship contracts offshore Nigeria — anew deepwater market
Slide 25: Board Focused on Creating Shareholder Value; M&A Evaluation Criteria
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 Company’s position and presented a range of potential growth opportunities
Slide 26: Asset Specifications Are Critical When Evaluating Growth Opportunities
Other Characteristics Asset Specifications Are Critical When Evaluating Potential Growth Opportunities Subsea Well Control Two blowout preventers (BOPs) Seventh RAM on BOPs Asset Specification Second BOP can be deployed while required maintenance is performed on first BOP, significantly reducing fla
Slide 27: Commentary From Competitors Supports Customer Preference for High-Spec Rigs
Commentary From Competitors Supports Customer Preference for High-Spec Rigs “ As we went and talked to our ultra-deepwater customers if our customers had their pick, it’s [a] dual activity rig [that has] two BOPs with seven ram stacks, a hook load of 2.5 million pounds, [and] younger is better than
Slide 28: Commentary From Competitors Supports Customer Preference for High-Spec Rigs
Commentary From Competitors Supports alg Customer Preference for High-Spec Rigs -“...As we went and talked to our ultra-deepwater customers ... if our customers had their pick, it’s [a] dual activity rig [that has] two BOPs with seven ram stacks, a hook load of 2.5 million pounds, [and] younger is b
Slide 29: 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 Drillships All four drillships are latest generation assets with the highest-specifications that ultra-deepwater customers prefer, including: Two blowout preventers 7 RAMS Dual derricks 2.5 million lb hookload 23,000 t
Slide 30: Atwood Acquisition Refreshes Ensco's Fleet & Improves Age Profile
Atwood Acquisition Refreshes Ensco’s Fleet & Improves Age Profile Drillships: 8 Avg age: 5 yrs Semis: 12 Avg age: 14 yrs Jackups: 31 Avg age: 22 yrs Drillships: 12 Avg age: 5 yrs Semis: 14 Avg age: 13 yrs Jackups: 36 Avg age: 20 yrs Drillships: 12 Avg age: 5 yrs Semis: 12 Avg age: 9 yrs Jackups: 30
Slide 31: Purchase Price Reflects Attractive Implied Per-Floater Valuation
Purchase Price Reflects Attractive Implied Per-Floater Valuation Unique Opportunity To Acquire Multiple Offshore Assets At Significant Discount To Market Values Source: Company Filings, Morgan Stanley Equity Research, Capital IQ 1 “At offer” data as of May 26, 2017, ATW Offer Equity Value of $897MM
Slide 32: Distressed Companies
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 considered, e.g. illustrative costs to upgrade a drillship to two 7 RA
Slide 33: Synergies Create Meaningful Value
Synergies Create Meaningful Value Source: Company Analysis $70MM of annual run-rate expense synergies expected beginning in 2019 2018 cost synergies are projected to exceed $50MM Total synergies estimated to create more than $500MM of present value at a 10% discount rate ~$350MM will accrue to ESV s
Slide 34: Accretive to Shareholder Value
Accretive to Shareholder Value1 Illustrative Market Conditions Accretion to ESV Shareholders2 Jackup utilization recovery beginning in 2018 & day rate recovery in 2019 Floater utilization recovery beginning in 2019 & day rate recovery in 2020 ~10% Source: Company Filings 1 Based on discounted cash f
Slide 35: Atwood Assets Provide Substantial Upside For Ensco Shareholders in Market Recovery
Atwood Assets Provide Substantial Upside For Ensco Shareholders in Market Recovery Under Recovery Scenarios, Significant Future EBITDA Generation is Expected from Atwood’s Floaters Per-Share Value for Ensco Shareholders ($)2 1 EBITDA calculated as (illustrative dayrates ($k/d) – average opex of $150
Slide 36: Manageable Debt Maturities in Light of Strong Balance Sheet & Liquidity
Manageable Debt Maturities in Light of Strong Balance Sheet & Liquidity $300 $ millions $1,001 $150 $1,805 $2,250 Available Revolver 1 2 Cash & ST Inv. $3,271 ESV Convertible Senior Notes ESV Senior Notes <$1.0B of Maturities3 to 2024 1 Pro Forma balance sheet highlights as of June 30, 2017, after g
Slide 37: Pro Forma Liquidity Provides Financial Flexibility
Pro Forma Liquidity Provides Financial Flexibility Pro Forma Liquidity vs. Recent Standalone 1 Offshore drilling competitors include: DO, NE, RDC and RIG Pro Forma Liquidity / Debt Maturing by End of 2019 (1) Source: 2Q17 Company Filings; Ratio calculated as the sum of cash & short-term investments
Slide 38: Transaction Summary
Transaction Summary Terms All-stock transaction in which Ensco acquires control of Atwood 1.60 newly issued Ensco shares per Atwood share Implies $10.72 total value per share of Atwood as of 26 May 2017 Implied pro forma ownership of ~69% to Ensco shareholders and ~31% to Atwood shareholders Combine
Slide 39: Evolution of the Atwood Transaction
Evolution of the Atwood Transaction Date Event Aug 22, 2016 The Ensco Board reviewed potential growth opportunities encompassing a range of strategies, including improving Ensco’s existing fleet, expanding into new markets, asset acquisitions and larger scale business combinations As part of this re
Slide 40: Evolution of the Atwood Transaction
Evolution of the Atwood Transaction Date Event May 12, 2017 Mr. Trowell and Paul Rowsey (Ensco Independent Chairman) sent a non-binding indication of interest to Atwood proposing that Ensco acquire Atwood in an all-stock transaction Atwood shareholders would receive 1.278 Ensco shares for each Atwoo
Slide 41: Determination of Final Purchase Price and 1.600x Offer Exchange Ratio
Determination of Final Purchase Price and 1.600x Offer Exchange Ratio Useful Life Discounted Cash Flow Analysis Provides an implied value of a company by calculating the present value of the estimated future cash flows and terminal value of that company A discounted cash flow analysis was performed
Slide 42: Purchase Price Reflects Ensco's Disciplined Approach to Acquisitions
Market Value of Competing Bid (Low) 3 April 25 Purchase Price Reflects Ensco’s Disciplined Approach to Acquisitions Source: Company Filings 1 Based on Background of the Merger section in Registration Statement on Form S-4 initially filed by Ensco with the Securities and Exchange Commission on June 1
Slide 43: 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.” Simmo
Slide 44: Wall Street Analysts Have Supported Acquisition Rationale and Timing
Market Consolidation Quality of Atwood Assets Value to ESV Shareholders Wall Street Analysts Have Supported Acquisition Rationale and Timing 9: Ensco's merger with Atwood begins a consolidation wave we've long argued was essential to clear acute ‘overcapacity in offshore driling and further reduce c
Slide 45: 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 per-ri
Slide 46: Atwood Acquisition is a Compelling Transaction for Ensco Shareholders
Atwood Acquisition is a Compelling Transaction for Ensco Shareholders Disciplined approach to acquisition Ensco participated in a competitive process Premium at time of offer was less than 10% higher than market value of prior competing bid Ensco’s Independent Board of Directors has extensive experi
Slide 47: Atwood Acquisition is a Compelling Transaction for Ensco Shareholders
ENSCO Atwood Acquisition is a Compelling —~ EF Transaction for Ensco Shareholders v_ Disciplined approach to acquisition ~ Ensco participated in a competitive process ~ Premium at time of offer was less than 10% higher than market value of prior competing bid ~ Ensco's Independent Board of Directors
Slide 48: Ensco Board of Directors
Name Position Current/Previous Experience Paul E. Rowsey, III Independent Chairman President & CEO of Compatriot Capital, Inc., a real estate investment and operating company Previously Founder and Managing Partner of E2M Partners, LLC, a sponsor and manager of private real estate equity funds Carl
Slide 49: Ensco Board of Directors
Name Position Current/Previous Experience Keith O. Rattie Independent Director Previously President & CEO of Questar Corporation, a natural gas focused energy company Previously Vice President and Senior Vice President of Coastal Corporation, a diversified energy company Mary E. Francis CBE Independ
Slide 50: Board of Directors
ENSCO —~~P Board of Directors Keith O. Rattie Independent Director + Previously President & CEO of Questar Corporation, a natural gas focused energy company + Previously Vice President and Senior Vice President of Coastal Corporation, a diversified eneray company Mary E. Francis CBE Independent Dire
Slide 51: Go Beyond
ENSCO > | Go Beyond
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