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Offshore drilling update
October 2017
Ingolf Gillesdal Director, Market Analysis Rigs
+47 920 45 320
Our shipbroking services are unrivalled – in terms of the number and caliber of our
brokers, our breadth of market coverage, geographical spread
and depth of intelligence resources
2
Clarksons Platou - The world’s leading provider of insight and execution in the industry
163 49 1,448 20years offices employees countries
Leading investment bank within the shipping and oil services markets globally,
following issuers and investors in all major markets. Derivative
products that have been pioneered at Clarksons as well
as project finance
Our port services team provides the highest levels of support with 24/7 attendance
to vessel owners, operators and charterers at a wide range of strategically located ports in
the UK and Egypt
Our research is respected worldwide as the most
authoritative provider of intelligence on global shipping
Broking Financial Support Research
Globally coordinated execution of maritime, energy & natural resources services
3
Clarksons Platou’s global footprintAberdeenAccraAthensBrisbaneBristolCairoDubaiGenevaGenoaGreat YarmouthHamburgHong KongHoustonHullIpswichJohannesburgLedburyLiverpoolLondonMelbourneNew DelhiNew YorkOsloPerthRio de JaneiroShanghaiSingaporeSouthamptonSydneyTilbury
Clarksons Platou – A Global Leader
• 160+ years maritime experience
• 49 offices worldwide
• 1,400+ employees speaking 40+ languages
Executive summary, offshore drilling fundamentals
4
Source: IHS Petrodata; Clarksons Platou Offshore
• A stable oil price in the USD 50 – 60 price range should allow E&Ps togenerate required returns from offshore oil production
• Total demand for jack-up rigs is on the rise, in particular driven by increaseddemand from South-East Asia, India, and most important a continued strongdemand from the Middle East.
• In Norway and the UK, we count a large increase in semi-submersible rigscontract opportunities, likely bringing the region in to a balance by mid-2018(excluding cold stack rigs). Moreover, UK is the only reporting of increasedrevenue backlog (YoY growth)
• International E&Ps expected to be aggressive in Brazilian licensing rounds,lucrative pre-salt acreage. This will lead to contract awards from early 2019
• Massive rig retirements within the floater segment make a material impacton rig utilization as ~30% of the total rig supply has been retired since 2014
• Longer term we are more optimistic for a balanced market for floatersversus jack-up rigs
Summary, supply and demand forecast
5
Source: IHS Petrodata; Clarksons Platou Offshore
Total rig demand forecast 2018-2020:
• Jack-up rigs: contracted demand of 380-400 rigs, up from 315 (Oct 2017)• 2018: 330-340 rigs• 2019: 350-380 rigs• 2020: 380-400 rigs
• Floaters: contracted demand of 180-200 rigs, up from 150 (Oct 2017)• 2018: 150 rigs• 2019: 170-190 rigs• 2020: +200 rigs
Rig fixing activity: Improvement in particular from the jack-up segment
Jackup fixing activity (2006-2017e) Floater fixing activity (2006-2017e)
7
Note: 2017 estimates are annualized based on actual fixing activity as of Q32017Source: IHS-Petrodata; Clarksons Platou Offshore and Securities
321
235252
204
239
364
285
366
258
186
111
202
0
50
100
150
200
250
300
350
400
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
e
Rig
year
s fix
ed
289
256
354
59
134
253
301
149
110
39 4760
0
50
100
150
200
250
300
350
400
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
e
Rig
year
s fix
ed
2015 & 16 saw net negative demand adj.
for cancellations. This is not the case for 2017
Offshore drilling – rig status by sub segments
Commentary
• Modern jack-up fleet - 70% contracted
• Despite growing demand for jack-up rigs the segment carry high risk due to lack of rig retirements
• Massive retirement of floaters recent three years, representing ~30% of total floater fleet
• UDW demand likely to remain soft, until 2020 - however supply of marketable rigs reduced with non-performing rigs requiring extensive investments prior to returning to service
Rig status split by segment
Source: IHS-Petrodata; Clarksons Platou Offshore
8
0 20 40 60 80 100 120 140 160 180 200 220 240 260 280 300 320 340
MW
DW
UDW
JU <2000
JU >2000
Contracted Warm stacked Cold stacked Retired
Floaters – rig retirement analysis
Commentary
• Transocean and Diamond have combined retired ~60% of all floaters
• Expect increased retirement of rigs due to ongoing industry consolidation
• Small size companies are not retiring its fair share
Floater rig retirement 2014-2017
Source: IHS-Petrodata; Clarksons Platou Offshore
9
0
5
10
15
20
25
30
35
40
45
Existing Retired
Jack-up rig segment – regional supply and demand analysis
11
Source: Clarksons Platou Offshore
0.00
20.00
40.00
60.00
80.00
Mar-04 Dec-10 Sep-17
South East AsiaSupply Contracted
0.00
10.00
20.00
30.00
40.00
50.00
Mar-04 Dec-10 Sep-17
Indian OceanSupply Contracted
0
50
100
150
200
Mar-04 Dec-10 Sep-17
Middle EastSupply Contracted
0
10
20
30
40
Mar-04 Dec-10 Sep-17
West AfricaSupply Contracted
0
5
10
15
20
25
Mar-04 Dec-10 Sep-17
Mediterranean/Black SeaSupply Contracted
0
20
40
60
Mar-04 Dec-10 Sep-17
North SeaSupply Contracted
0
20
40
60
80
Mar-04 Dec-10 Sep-17
MexicoSupply Contracted
0
50
100
150
Mar-04 Dec-10 Sep-17
US GulfSupply Contracted
Floater segment – regional supply and demand analysis
13
Source: Clarksons Platou Offshore
0
5
10
15
Mar-04 Dec-10 Sep-17
Central AmericaSupply Contracted
0.00
20.00
40.00
60.00
Mar-04 Dec-10 Sep-17
Canada/North SeaSupply Contracted
0
20
40
60
80
Mar-04 Dec-10 Sep-17
US GulfSupply Contracted
0
20
40
60
80
100
Mar-04 Dec-10 Sep-17
BrazilSupply Contracted
0.00
20.00
40.00
60.00
Mar-04 Dec-10 Sep-17
West AfricaSupply Contracted
0.00
5.00
10.00
15.00
Mar-04 Dec-10 Sep-17
Australia/NZSupply Contracted
0.00
10.00
20.00
30.00
40.00
50.00
Mar-04 Dec-10 Sep-17
South East AsiaSupply Contracted
0.00
5.00
10.00
15.00
20.00
Mar-04 Dec-10 Sep-17
Indian OceanSupply Contracted
0
5
10
15
20
Mar-04 Dec-10 Sep-17
Mediterranean/CaspianSupply Contracted
325
33
5611
43
90
57
23
39
188160
0
50
100
150
200
250
300
350
400
450
500
# Fl
oate
r rig
s
Limited deliveries until market balance improves +80%
14
Floater rigs – fleet analysis
Source: Clarksons Platou Offshore
Likley retirement candidates
www.clarksons.com
QGOG
Odebrecht
Seadrill
Transocean
Ocean Rig
Ensco
Diamond
PetroservEtesco
0
5
10
15
20
25
30Oil production:
So far Petrobras has been the dominant operator
Petrobras with success in pre-salt, switching to UDW rigs
Drilling contractors: Larger US drillers
being replaced by locals and their standard rigs have been forced to leave the region
Brazil – a challenge but still a long term offshore attractive region
Brazilian companies dominate
Brazil – historic dayrates
17
Source: Clarksons Research
High spec modern rigs Standard rigs
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
Oct 2002 Apr 2005 Oct 2007 Apr 2010 Oct 2012 Apr 2015 Oct 2017
S America - Semi 3001-5000 - Average (US$)
S America - Semi <=3000 - Average (US$)
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
Oct 2002 Apr 2005 Oct 2007 Apr 2010 Oct 2012 Apr 2015 Oct 201
S America - Drillship >5000 - Average (US$)
S America - Semi >5000 - Average (US$)
Newbuild floater capex – 1997 to 2016
19
Source: Clarksons Research; Clarksons Platou Offshore
100
120
140
160
180
200
220
240
260
280
300
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Cape
x in
USD
mill
Newbuild floater capex Contracted floaters
Top 5 drillers – leverage, liquidity and backlog
Considerations
Capitalisation(USDbn)
Solidity(Multiple)
Contract backlog (Q3-17)
Liquidity(Available USDbn)
Total EBITDA backlog of USD 1.3bn
Total EBITDA backlog of USD 2.1bn
Total EBITDA backlog of USD 1.1bn
Total EBITDA backlog of USD 6.0bn
Source: Company filings
Total EBITDA backlog of USD 1.1bn
3.9
2.11.8
Market value
NIBD5.8
3.5
2.3 0.9
4.4
3.5 1.43.1
1.7
11.4
6.8
4.6
2.8xNIBD/EBITDA 2018E
6.3x 8.4x
4.4x 4.9x
Board and Senior Management
0.21.5Liquid assets
RCF capacity
2.21.82.4
0.61.51.2
2.2 3.0
James S. Tisch(Chairman, elected in 1995)
Marc Edwards(CEO, elected in 2014)
Paul E. Rowsey(Chairman, elected in 2015)
Carl Trowell(CEO, elected in 2014)
Leading deepwater and HE contractor
Sector lead revenue backlog
RCF matures in 2019
Leading jack-up position Strong cash liquidity
position RCF matures in 2021
Strong market position in US GoM
Strong revenue backlog RCF matures in 2020
Strong cash liquidity position
Relative low leverage (for now)
RCF matures in 2022
Strong market position in US GoM
Relative strong revenue backlog
RCF matures in 2020
David W. Williams(Chairman, elected in 2008)
David W. Williams(CEO, elected in 2008)
Graham James Kearne(Chairman, elected in 2016)
Thomas P. Burke III(CEO, elected in 2014)
Merrill A. Miller Jr. “Pete”(Chairman, elected in 2015)
Jeremy D. Thigpen(CEO, elected in 2015)
Page 20
Offshore drilling rig landscape
(HE jack-ups)
(deepwater)
(Strong liquidity position, mixed fleet and no lead
segment position)
Different challenges and threats associated with each drilling contractor
Ongoing industry consolidation
Current theme seem to prioritize sub-segments
prioritization vs global full service provider
NOC clients – getting increased market share
Renewed investor interest 2H 2017
Client relationships, how to gain competitive advantage
Runway lengthsecured
Companies involved /likely withbankruptcys
M&A targets / recently
restructured Strong segment position / industry
leadership
Global players with unsecure future
Source: Clarksons Offshore Platou
Page 21
www.clarksons.com 23
Contract overview – South America
Source: Clarksons Research
2017 2018 2019 2020Name Manager Rig Type 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2West Freedom Seadril l Jackup Ecopetrol ColombiaPetroSaudi Saturn PetroSaudi Dril lship PDVSA VenezuelaStena Carron Stena Dril lship ExxonMobil GuyanaDhirubhai Deepwater KG1Transocean Dril lship Petrobras BrazilGold Star QGOG Constellation Semisubmersible Petrobras BrazilOcean Rig Mykonos Ocean Rig Dril lship Petrobras BrazilLone Star QGOG Constellation Semisubmersible Petrobras BrazilOcean Rig Corcovado Ocean Rig Dril lship Petrobras BrazilWest Carina Seadril l Dril lship Petrobras BrazilENSCO 6001 Ensco Semisubmersible Petrobras BrazilWest Saturn Seadril l Dril lship Standby Ca Yard Canar En ro Statoil BrazilAtlantic Star QGOG Constellation Semisubmersible Petrobras BrazilSevan Brasil Seadril l Semisubmersible Petrobras BrazilBrava Star QGOG Constellation Dril lship Petrobras BrazilAmaralina Star QGOG Constellation Dril lship Petrobras BrazilTransocean 706 Transocean Semisubmersible Petrobras BrazilOcean Valor Diamond Offshore Semisubmersible Petrobras BrazilLaguna Star QGOG Constellation Dril lship Petrobras BrazilSSV Victoria Petroserv Semisubmersible Petrobras BrazilNorbe VI Odebrecht Semisubmersible Petrobras BrazilODN Delba III Odebrecht Semisubmersible Petrobras BrazilPetrobras 10000 Transocean Dril lship Petrobras USA Petrobras BrazilWest Tellus Seadril l Dril lship Petrobras BrazilENSCO 6002 Ensco Semisubmersible Petrobras BrazilVitoria 10000 Schahin Dril lship Petrobras BrazilOcean Courage Diamond Offshore Semisubmersible Petrobras BrazilGP-20 PDVSA Jackup PDVSA VenezuelaGP-19 PDVSA Jackup PDVSA VenezuelaNoble Bob Douglas Noble Dril lship Tullow Hot stacked Suriname ExxonMobil GuyanaNorbe VIII Odebrecht Dril lship Petrobras BrazilCarolina Petroserv Dril lship Petrobras BrazilNorbe IX Odebrecht Dril lship Petrobras BrazilNoble Bully II Noble Dril lship Shell BrazilEtesco Takatsugu J Etesco Dril lship Petrobras BrazilODN II Odebrecht Dril lship Petrobras BrazilODN I Odebrecht Dril lship Petrobras BrazilGrumari Petrobras Dril lship Under construction Br Acce Petrobras BrazilIpanema Petrobras Dril lship Under construction Brazil Acceptance testing BPetrobras BrazilOndina Odebrecht Dril lship Standby Japan En route Br Under construction Acceptanc Petrobras BrazilUrca Queiroz Galvao Semisubmersible Standby Brazil Unde Accep Petrobras BrazilDeepsea Guarapari Odfjell Galvao Dril lship Under construction Singapore En ro Under con Accep Petrobras BrazilFrade Petroserv Semisubmersible Standby Brazil Under construction BrazilAccep Petrobras BrazilPituba Odebrecht Dril lship Standby Japan En ro Under construction Brazil Accep Petrobras BrazilBracuhy Queiroz Galvao Semisubmersible Standby Br Under construction Brazil Acce Petrobras BrazilDeepsea Itaoca Odfjell Galvao Dril lship Under construction Singapore En ro Under construction Brazil Accep Petrobras BrazilCamburi Seadril l Dril lship Standby Singapore Under construction SingapEn ro Under construction Brazil Acceptance tes Petrobras BPortogalo Petroserv Semisubmersible Standby Brazil Under construction BrazilCassino Etesco / OAS Dril lship Standby China En ro Under construction BrazilArpoador Petrobras Dril lship Under construct Accep Petrobras BrazilCopacabana Petrobras Dril lship Standby Japan En ro Under con Accep Petrobras BrazilPetrobras XXIII Petrobras Semisubmersible Warm stacked BrazilPetrobras XVII Petrobras Semisubmersible Warm stacked BrazilPetrobras XVI Petrobras Semisubmersible Warm stacked BrazilP-60 Petrobras Jackup Warm stacked BrazilP-59 Petrobras Jackup Warm stacked BrazilAlpha Star QGOG Constellation Semisubmersible Warm stacked Brazil