Post on 08-Apr-2017
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Forward-Looking Statements
Statements herein that are not historical facts are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements as to the expectations, beliefs and future expected business, financial and operating performance and prospects of the Company. These forward-looking statements are based on our current expectations and are subject to numerous risks, assumptions, trends and uncertainties that could cause actual results to differ materially from those indicated by the forward-looking statements.
Among the factors that could cause actual results to differ materially include oil and natural gas prices and impact of the economic climate; changes in the offshore drilling market, including fluctuations in supply and demand; variable levels of drilling activity and expenditures in the energy industry; changes in day rates; ability to secure future drilling contracts; cancellation, early termination or renegotiation by our customers of drilling contracts; customer credit and risk of customer bankruptcy; risks associated with fixed cost drilling operations; unplanned downtime; risks related to our joint venture with Saudi Aramco; cost overruns or delays in transportation of drilling units; cost overruns or delays in maintenance, repairs, or other rig projects; operating hazards and equipment failure; risks of collision and damage; casualty losses and limitations on insurance coverage; weather conditions in the Company’s operating areas; increasing costs of compliance with regulations; changes in tax laws and interpretations by taxing authorities; hostilities, terrorism, and piracy in our areas of operations that may result in loss or seizure of assets or interruption of operations; impairments; the outcome of disputes, including tax disputes and legal proceedings; and other risks disclosed in the Company’s filings with the U.S. Securities and Exchange Commission.
Each forward-looking statement speaks only as of the date hereof, and the Company expressly disclaims any obligation to update or revise any forward-looking statements, except as required by law.
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Rowan has evolved into a pure play, high-specification offshore driller
COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING VALUE
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Rowan is well positioned to navigate the current challenging market and capitalize on investments to improve our return on capital
Rowan is well positioned to navigate the current challenging market and capitalize on investments to dramatically improve our return on capital
(1) Estimate as of 1Q 2017(2) Ultra-deepwater (UDW) refers to floating drilling rigs rated for water depths of 7,500 feet or greater(3) High-specification defined as rigs with a two million pound or greater hookload capacity
Company Overview
• RDC: NYSE-listed
• ~2,800 direct employees worldwide(1)
• 29 offshore drilling units
• 4 UDW(2) drillships
• 25 Jack-ups
• 19 High-Specification(3)
• 6 Premium
Investment Highlights
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2
3
4
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Groundbreaking partnership with Saudi Aramco creates long-term growth
Competitive differentiation in drilling demanding wells
Modern high-specification fleet strategically positioned in global markets
Experienced and proven workforce & processes focused on performance
Backlog diversified among premium customer base, geographic regions, and asset types
Strong & flexible financial position6
COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING VALUE
Groundbreaking partnership with Saudi Aramco creates long-term growth
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COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING VALUE
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Groundbreaking partnership with Saudi Aramco creates long-term growth
Key Investment Takeaways:• Partnering with the largest customer for jack-ups in the world in largest
market for jack-ups in the world• High utilization for contributed assets (five from Rowan & two from Saudi
Aramco) for the remainder of their useful lives• Opportunity to contract additional assets to new company through
agreed leasing structure• Strong visible organic growth – twenty newbuilds against long term
contracts. Expected returns are commensurate to Rowan’s target for similar risk profile opportunities
• Expect to generate substantial long term cash flow
COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING VALUE
Groundbreaking partnership with Saudi Aramco creates long-term growth
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Rowan and Saudi Aramco will form a 50/50 joint venture to own and operate jack-up drilling rigs in Saudi Arabia. The new company will operate independently with a separate dedicated management team, ensuring an arm’s length relationship.
Rowan named Kelly McHenry as CEO and head of operations; Saudi Aramco has named Chairman and CFO.
In 2017, Rowan contributes the Gilbert Rowe, the Bob Keller, the J.P. Bussell, related inventory and local shorebase operations; Saudi Aramco contributes their two rigs, SAR-201 and SAR-202, related inventory and additional cash to make up the difference in value of asset contributions between the partners.
In late 2018, Rowan contributes the Hank Boswell and the Scooter Yeargain as they complete their current contracts, and Saudi Aramco will contribute equivalent value.
The new company will also manage Rowan’s other (non-contributed) rigs in Saudi Arabia until their current contracts expire, when the new company may lease the rigs from Rowan as needed.
The new company plans to order up to 20 rigs to be delivered over ten years, beginning as early as 2021, to meet offshore drilling demand in the Kingdom.
Rig orders will be supported by contracts from Saudi Aramco as the customer, at defined returns commensurate to similar risk profile opportunities.
Both partners intend for the new company to be self and externally funded. No additional equity injections are expected (although both Saudi Aramco and Rowan remain fully committed to the success of the new company).
Scope: 50/50 JV
Contributions:Five Rigs from Rowan & Two Rigs From Saudi Aramco
Newbuild Growth
COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING VALUE
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Competitive: Rowan is focused on demanding drilling services
“Our mission is to be recognized by our customers as the most efficient and capable provider of demanding contract drilling services”
Rowan ranks #1 among offshore drillers for HPHT applications in six out of
the last seven Energypoint Research Inc. surveys
Rowan’s Demanding Drilling Achievements:
COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING VALUE
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High-Specification: Rowan has a leading position in high-spec jack-ups
COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING VALUE
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RowanNoble
Sead
rill/ N
ADL / Se
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Maersk
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Aban Offshore
COSLEn
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Borr Drill
ing
Drilling C
ompany In
t.
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n Offshore
Perforad
ora Mexic
oOther
0
2
4
6
8
10
12
14
16
18
20
19Rowan High-Spec
Jack-ups
Customers Demand Higher-Specification Rigs
• Flexibility to address technical needs across diverse wellbore portfolios
• Focus on achieving lower wellbore costs
• Comply with higher regulatory standards
• Rowan specializes in rigs that have:• 2,000,000+ lb hookload
capability• Rugged and reliable legs and
jacking systems• Efficient, high pressure drilling
systems
Number of Delivered High-Specification Jack-ups *
* Approximately 50 additional high-specification jack-ups are currently on order or under construction. Includes data supplied by IHS-Petrodata, Inc. Copyright 2017 and Rowan Companies as of March 24, 2017.
High-Specification: Rowan has a leading position in high-spec jack-ups
COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING VALUE
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High-Specification: Rowan’s ultra-deepwater drillships are best-in-class 3
COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING VALUE
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Best-in-Class Specifications:
• 1,250 ton hookload
• Dual 7-ram blowout preventers
•Managed Pressure Drilling capable
• Advanced Riser Gas Handling
• 12,000 ft water depth equipped
• IMO Tier III emissions compliant
Few rigs possess the specifications required for today’s demanding wells and tightening regulations
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105
16 32
166
1,250 tons Dual BOP
1,250 tons Single BOP
1,000 tons750 tonsAll UDW
Under 20% of UDW Rigs*
High-Specification: Rowan’s ultra-deepwater drillships are best-in-class
* Includes data supplied by IHS-Petrodata, Inc; Copyright 2017; Rowan estimate, excludes eighteen 1,000-ton and twenty-two 1,250-ton newbuilds; as of 1Q 2017
COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING VALUE
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2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2042 2043 2044$0
$250,000,000
$500,000,000
$750,000,000
$1,000,000,000
$1,250,000,000
$1,500,000,000
$0
$209,409,000
$656,599,000
$398,305,300$500,000,000
$400,000,000 $400,000,000
600000001500000001289000000
Current Bond Debt
Revolver Due
Series4
Purchased in Open Market
USD
Mill
ions
Strong Financial Position: Our robust balance sheet and highly visible runway bolster our financial health through the cycle• Strong balance sheet provides the ability to invest counter-cyclically to
significantly improve our return on capital• Retired ~$740 million of debt since 4Q 2015, while issuing $500 million of
unsecured debt not due until 2025• Attractive debt maturity profile with significant untapped borrowing capacity
available from $1.5B revolver*• Current cash balance combined with our untapped revolver exceeds our total
outstanding debt
*As of March 24, 2017; availability under the facility is $1.5 billion through January 23, 2019, declining to $1.44 billion through January 23, 2020, and to approximately $1.29 billion through the maturity in 2021. All debt is unsecured.**Following the tender offer, the remaining ~$92 million of the 2017 bonds were retired on February 8, 2017 .
7.875% 4.875% 4.750% 7.375% 5.400% 5.850%
COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING VALUE
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Outlook: In 2017, although far from a recovery, we are starting to see some “green shoots”
COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING VALUE
• Current forecast for crude oil prices are expected to be broadly supportive for an increase in drilling activity; however, 2017 is likely to favor onshore shale drilling in North America
• Overall, we expect jack-up demand to bottom in late 2017 and floater demand to bottom in 2018. We are seeing more tenders for jack-up work in 2017 and 2018, with floater discussion primarily focused on 2018
• For both jack-ups and floaters there is a large roll-off of existing contracts in 2017 & 2018; a significant number of new contracts are required to meet even modest demand forecasts, although lower day rates are expected
• We expect these new contracts to be dominated by newer, higher specification drilling rigs operated by established drilling contractors with a more certain future
• Pricing recovery is some time in the future; more rig attrition is needed• Rowan is well positioned with a modern fleet & established track record; however,
we know we are in a highly competitive landscape!
* Includes data supplied by IHS-Petrodata, Inc., Copyright 2017; and Rowan Analysis; utilization graph as of March 24, 2017.
Roll-off of Contracted Floater Fleet
0
50
100
150
200
250
YE’2
5
YE’1
7
YE08
YE07
YE13
YE’1
6
YE’1
8
YE’1
9
YE06
YE09
YE’2
2
YE’2
0
YE14
YE10
YE12
YE15
YE’2
3
YE11
YE’2
4
YE’2
1
• 2017 brings a dramatic increase in roll-offs of contracts signed in the 2011 to 2014 up cycle
• 28% of all floaters are older than 20 years; they currently represent 24% of working floaters
• New contracts expected to favor modern rigs; older rigs will be much less competitive, unless they have a “niche”
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Fleet Pre 1996 - Existing Contracts
Fleet Post 1996 - Existing Contracts
Contracted Rig Demand (Estimated)
Contracted Rig Demand (Actual)
Floaters: In 2017, there is a substantial roll off of the current floater contracts; we believe this will force attrition of remaining older rigs
Jan 20
07
Jan 20
08
Jan 20
09
Jan 20
10
Jan 20
11
Jan 20
12
Jan 20
13
Jan 20
14
Jan 20
15
Jan 20
16
Jan 20
1740
60
80
100
<5,000'5,000'-7,499'7,500'+ / <1,250 tons7,500'+ / 1,250+ tons
Worldwide Floater Total Utilization by Water Depth / Hookload (%)
62 units
103 units80 units
35 units
COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING VALUE
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Jack-ups: In 2017 there is a substantial roll off of the current jack-up contracts; we believe this will force attrition of older rigs
• 2017 brings a dramatic increase in roll-offs of contracts signed in the 2011 to 2014 up cycle
• 39% of all JUs are older than 20 years; they currently represent 45% of working JUs
• Less technical obsolescence than in floater market
• Many newbuilds will require a change of ownership before they can be marketed effectively
Roll-off of Contracted Jack-up Fleet
050
100150200250300350400
YE’2
5
YE’1
9
YE’1
8
YE15
YE14
YE’2
4
YE’2
3
YE13
YE12
YE11
YE10
YE09
YE08
YE07
YE06
YE’2
2
YE’2
1
YE’2
0
YE’1
7
YE’1
6
Post 1996 JUs - Existing Contracts
Pre 1996 JUs - Existing Contracts
Contracted Rig Demand (Estimated)
Contracted Rig Demand (Actual)
** Jack-ups with two million pound or greater hookload *Includes data supplied by IHS-Petrodata, Inc., Copyright 2017; and Rowan Analysis; utilization graph as of March 24, 2017.
Worldwide Jack-up Total Utilization by Rig Class (%)
Jan 20
07
Jan 20
08
Jan 20
09
Jan 20
10
Jan 20
11
Jan 20
12
Jan 20
13
Jan 20
14
Jan 20
15
Jan 20
16
Jan 20
1720
40
60
80
100
IS, MS, MC <300'IC 300'IC 350'+ ICHigh Spec*
64 units117 units147 units136 units
55 units
COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING VALUE
Repeatable excellence: We are systematically driving performance across the company
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COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING VALUE
Major Areas of Focus in Driving Performance
Drive WASTE out of our operations• Applying LEAN philosophy to identify & eliminate waste
in our onshore and offshore operations• Advancing a performance program to improve drilling
efficiency & using analytics to harvest data to drive performance and lower costs
Control spend and focus on capital allocation• Reduce drilling expense by improving procurement
effectiveness: centralize and optimize all spend• Strong inventory control through rigorous data analytics• Implementing a fleet-wide state-of-the-art maintenance
system for improved reliability and to optimize maintenance spending
Much of our cost is personnel-related• Preserve key talent through high-grading of onshore and
offshore workforce; use of an aggressive bump back strategy to preserve our talent in this downturn
• Reduce overhead costs (SG&A and a portion of drilling expense) by improving the efficiency and cost of business support functions
Analyzing variance in performance of drilling crews
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Optimized capital allocation: Rowan has an unrelenting focus on improving long-term return on invested capital
Rowan will consider all capital allocation options, but remains committed to maintaining an attractive credit profile and financial flexibility.
During the current challenging business environment, we favor:Strong Liquidity
3Q2016 – Generated $276 million of cash during the quarter and currently have a balance in excess of $1.1 billion
Debt Reduction Retired ~$740 million of debt since 4Q 2015,
while issuing $500 million of unsecured debt not due until 2025
Opportunistic Asset Investments We continue to evaluate opportunistic
investments in assets Investments at attractive prices in the bottom
of the cycle should generate superior returns
Available Capital
Allocation Options
Preserve Liquidity
Dividends/Share Repurchases
Asset Investments
Retire Debt
COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING VALUE
Supported by higher oil prices, global drilling & completions spending is forecast to be up slightly in 2017, but favors onshore in the near term
Independents and national oil companies (majority of land & jack-up demand) are forecast to increase their spending in 2017, with majors (significant source of floater demand) expected to delay incremental offshore spending until cash flows accumulate above their dividend expense
NAM Onshore Offshore & Int’l OnshoreGlobal Overall
Drilling & Completion Budget Forecasts*
* Source: Wells Fargo Securities, January 11, 2017
2017 est. +7% 2017 est. +55% 2017 est. -9%
APPENDIX
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Worldwide marketed* jack-up utilization is 70%
* Excludes Cold Stacked / Out of Service unitsIncludes data supplied by IHS-Petrodata, Inc; Copyright 2017 as of March 24, 2017
Marketed Supply: 450 units
US GOM60%
10 RigsMexico59%
44 Rigs C&S Am64%
11 RigsW. Africa
67% 12 Rigs
North Sea65%
46 RigsMiddle East
72% 162 Rigs
India88%
41 Rigs
SE Asia58%
55 Rigs
Australia100% 1 Rig
Mediterranean80%
15 Rigs
APPENDIX
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0%1 Rig
Worldwide marketed* UDW** utilization is 74%Marketed Supply: 127 units
*Excludes Cold Stacked / Out of Service units
**UDW includes semis and drillships with a rated water depth of 7500’+
Includes data supplied by IHS-Petrodata, Inc; Copyright 2017 as of March 24, 2017
Far East50% 4 Rigs
W. Africa68%
28 Rigs
C&S Am88%
33 Rigs
Mexico75% 4 Rigs
USA70%
33 Rigs
E. Canada100% 1 Rigs
North Sea86% 7 Rigs
Mediterranean80% 5 Rigs SE Asia
55% 11 Rigs
APPENDIX
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Considerable improvement in operational performance and EBITDA margins over the last three years
$ in millions
Operational Performance has improved while costs have been reduced
From initial 2015 guidance issued in November 2014 – Current*:
• Best safety performance on record in 2015 and 2016
• Downtime held essentially flat while delivering our final two drillships
280
135
1,145
98
650
-61%
-28%
-43%
Non-newbuild Capex
110
SG&ADrilling Expense
Midpoint of Current Guidance for 2017Midpoint of Initial Guidance for 2015
USD
mill
ions
* As of February 24, 2017; some portion of Drilling Expense reduction is due to the formation of the new drilling company with Saudi Aramco
APPENDIX
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APPENDIX
Rowan guidance as of February 24, 2017
Key metrics:
FY 2016
Actual
4Q 2016
Actual
1Q 2017 Projecte
dFY 2017
ProjectedJack-up Operational Downtime (unbillable)
1.4% 1.5% ~2% ~2%
Drillship Operational Downtime (1) .1% 0% ~5% ~5%
Contract Drilling Expenses (excluding rebills) $950 MM $174 MM ~$170 MM $625 - $675
MM(2)
SG&A $102 MM $26 MM ~$26 MM $95 - $100 MM
Depreciation $403 MM $102 MM Not Guided $385 - $395MM
Interest Expense, Net of Capitalized Interest $156 MM $39 MM Not Guided $155 - $160MM
Effective Tax Rate (normalized)
Low single digits --
Income Tax Expense
~$10 - $15MM
Income Tax Expense ~$50MM
Capital Expenditures $118 MM $29 MM Not Guided $105 - $115MM(2)
(1) Rowan expects operational downtime for the drillships to be approximately 5%.(2) Rowan expects to incur full-year 2017 drilling expense of between $625MM and $675 MM, depending upon whether certain idle rigs secure
additional work.(3) Rowan expects 2017 maintenance capital expenditures to range from $105 - $115 MM , excluding any contractual modifications that may arise
due to securing additional work, none of which is currently planned.