Rowan Strong: Safe. Reliable. Efficient.s2.q4cdn.com/240362030/files/doc_presentations/... · 11/28/2016 · Rowan and Saudi Aramco will form a 50/50 joint venture to own and operate

Rowan Strong: Safe. Reliable. Efficient.

November 28, 2016

1

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

certain 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, the

level of offshore expenditures by energy companies, variations in energy demand, changes in day rates,

cancellation, early termination or renegotiation by our customers of drilling contracts, risks associated

with fixed cost drilling operations, cost overruns or delays in transportation of drilling units, cost overruns

or delays in maintenance and repairs, cost overruns or delays for conversion or upgrade projects,

operating hazards and equipment failure, risks of collision and damage, casualty losses and limitations on

insurance coverage, customer credit and risk of customer bankruptcy, conditions in the general economy

a d e e g i dust , eathe co ditio s a d se e e eathe i the Co pa ’s ope ati g a eas, i c easi g complexity and costs of compliance with environmental and other laws and regulations, changes in tax

laws and interpretations by taxing authorities, civil unrest and instability, terrorism, piracy and hostilities in

our areas of operations that may result in loss or seizure of assets, the outcome of disputes and legal

p oceedi gs, effects of the cha ge i ou co po ate st uctu e, a d othe isks disclosed i the Co pa ’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.

2

Company Overview & Investment Highlights

Market Dynamics

Delivering Shareholder Value

Conclusion

Rowan has evolved into a pure play, high-specification offshore driller

COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING SHAREHOLDER VALUE CONCLUSION

4

Rowan is well positioned to navigate the current challenging market and

capitalize on investments to dramatically 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) Approximate value as of September 30, 2016

(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

• ~3,100 direct employees worldwide(1)

• 30 offshore drilling units

• 4 UDW(2) drillships

• 26 Jack-ups

• 19 High-Specification(3)

• 7 Premium

Investment Highlights

1

2

3

4

5

Groundbreaking partnership with Saudi

Aramco ensures 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 position


6

5

Groundbreaking partnership with Saudi Aramco ensures long-term growth

1


6

Groundbreaking partnership with Saudi Aramco ensures long-term growth

Global drilling experience,

best-in-class performance

and technical expertise

World Class

Drilling

Expertise

Acquire Saudi built rigs and

support the training and

development of a local

drilling workforce

Partnership

in Local

Development

Demand

Certainty

Through a long-term

relationship with Saudi Aramco

Scale &

Growth

Benefit from economies of

scale by providing Saudi

Aramco with a significant

portion of its rig requirements

Rowan Saudi Aramco

New Company

1.

4. 2.

3.

The new company benefits from the partners’ u i ue contributions

1


7

Groundbreaking partnership with Saudi Aramco Key details (1 of 2)

Scope Rowan and Saudi Aramco will form a 50/50 joint venture to own and operate jack-up

drilling rigs in Saudi Arabia.

In 2017, Rowan contributes the Gilbert Rowe, the Bob Keller, and the J.P. Bussell, related

inventory and local shorebase operations; Saudi Aramco contributes two rigs, 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 e co pa ill a age Ro a ’s e isti g igs u til cu e t co t acts e pi e, when the new company will lease the rigs from Rowan as needed.

Rig

Contributions

and Matching

Contributions

Cash Capital

Contributions

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).

Financials and

Expected

Returns

Both partners are committed to progressively implementing efficiencies and optimizing

costs to improve profitability over time.

Expected etu s a e co e su ate to Ro a ’s ta get for similar risk profile

opportunities.

1


8

Newbuild

Strategy

Management Rowan will nominate CEO and head of operations; Saudi Aramco will nominate

Chairman and CFO.

Governance

Saudi Aramco and Rowan will each own 50%, with proportional voting rights and Board

representation.

The new company will operate independently with a separate dedicated management

tea , e su i g a a ’s le gth elatio ship.

The new company plans to order up to 20 rigs to be delivered over ten years beginning

as early as 2021 to meet base load offshore drilling demand in the Kingdom.

Rig purchases will be supported by contracts from Saudi Aramco as customer, at defined

returns commensurate to similar risk profile opportunities.

Groundbreaking partnership with Saudi Aramco Key details (2 of 2) 1


9

Competitive: Rowan is focused on demanding drilling services

Our issio is to e re og ized y our usto ers as the ost efficient and capable provider of demanding contract drilling services

Rowan ranks #1 among

offshore drillers for HPHT

applications in five out of

the last six Energypoint

Research Inc. surveys

Ro a ’s De a di g D illi g Achie e e ts:


2

10

Global: Ro a ’s fleet is strategically positioned in key markets

• HP/HT Deep Gas

• Key location for demanding UDW

US Gulf of Mexico 2 JU; 4 UDW

• Demanding environmental

conditions

Central & South America 3 JU

• Harsh environment HP/HT market

• Super Gorilla / N-Class well suited

North Sea 6 JU

• Most active jack-up region

in the world

Middle East 13 JU

Featuring:

4 UDW

Drillships

19 High-Spec

Jack-ups

5 Premium

Jack-ups

Note: Excludes two cold-stacked older jack-ups


3

11

High-Specification: Rowan has a leading position in high-spec jack-ups


3

12

0

2

4

6

8

10

12

14

16

18

20

19 Rowan High-Spec

Jack-ups

Customers Demand Higher-Specification Rigs

• Drilling challenging wellbore designs

• Focused on achieving lower wellbore costs

• 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 2016 and Rowan Companies as of October 31, 2016

High-Specification: Rowan has a leading position in high-spec jack-ups


3

13

High-Specification: Ro a ’s ult a-deepwater drillships are best-in-class


3

14

* Includes data supplied by IHS-Petrodata, Inc; Copyright 2016; Rowan estimate, includes newbuilds; as of August 16, 2016.

Best-in-Class Specifications:

• 1,250 ton hook load

• Dual 7-ram blowout preventers

•Managed Pressure Drilling capable

• Advanced Riser Gas Handling

• 12,000 ft water depth equipped

• IMO Tier III emissions compliance

Fe igs possess the specificatio s e ui ed fo toda ’s demanding wells and pending regulations

13

140

23 45

221

1,250 tons

Dual BOP

1,250 tons

Single BOP

1,000 tons 750 tons All UDW

Under 20% of UDW Rigs*

High-Specification: Ro a ’s ultra-deepwater drillships are best-in-class


3

15

93-year history of operating excellence

Culture of continuous improvement

Experienced employees with proven industry leadership

Strong commitment to performance delivering safe, reliable and

efficient operations for our customers

4 Proven: Rowan has an experienced workforce and established processes


16

Backlog Diversified: Rowan has solid backlog with diversity of customers, geographic regions, and asset types 5

Total backlog of $2.2B* that

extends to 2024

* Backlog as of October 18, 2016

50%

31%

11% 6%

2%

Middle East Deepwater Norway Trinidad UK

Majors /

Independents

50%

NOCs

50%

Over 80% of backlog is with NOCs or

investment grade customers

Contract Backlog by Region & Asset Type

Contract Backlog by Customer Type

Rowan has key competitive

advantages in adding new backlog:

• Solid track record as a capable and

efficient driller of demanding wells

• Modern, high specification fleet

• Deep customer relationships

• Strong financial counterparty to

customers


17

0 12 24 36 48 60 72

ORIG

SDRL

PACD

ATW

RIG

NE

ESV

DO

RDC

2016 2017 2018 2019 2020 2021

Maturity of Revolving Credit Facilities for Peer Group

6

$0

$4,000

$8,000

$12,000

2016 2017 2018 2019 2020 2021

Total Peer Group Debt Maturities and Newbuild Commitments*

Rowan Debt

Peer Group Debt & Newbuild Commitments

* Source: FactSet, Company Filings as of 2Q2016 except ESV, as of October 4, 2016; includes Newbuild Capex Commitments and Debt Maturities for DO, ATW, NE,

PACD, ESV, ORIG, RIG, SDRL

• Rowan has the longest visible runway of the publicly traded offshore drillers

• Ro a ’s cash balance of $1.2+ billion exceeds all debt maturities through 2021

• Many peer group revolving credit facilities will expire prior to significant

debt maturities and capital commitments

Mill

ion

s

Strong Financial Position: In an uncertain near-term market, having long-term liquidity visibility provides Rowan with a clear advantage

N/A


18

6 Strong Financial Position: Our robust balance sheet and industry-leading liquidity runway assure our financial health through the cycle

• Strong balance sheet provides the ability to invest counter-cyclically to

significantly improve our return on capital

• Retired $150 million of debt since 4Q 2015, eliminating $10 million/year in

interest payments

• 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 November 1, 2016; 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.

$358 $397

$700

$400 $400 $400

$60 $150 $1,289

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

2016 2017 2018 2019 2020 2021 2022 2023 2024 2042 2043 2044

Mill

ion

en

Bond Debt

Revolver Due

5.0

00

%

7.7

85

%

4.8

75

%

4.7

50

%

5.4

00

%

5.8

50

%


19


Market Dynamics


Conclusion

As oil prices recover and long-term service contracts roll off, deflated supply chain costs will make incremental investment more attractive

Macro Fundamentals Improving:

• Significant number of projects deferred in recent years; global oil demand increasing; spare production capacity decreasing

2017 E&P Capital Spending Flat:

• Indications are that capital spending will be flat with 2016

• An increasing amount of spending will be dedicated to incremental investments

Di ectio fo e t ea ’s E&P spe di g Relative share of budgets

Source: Pareto E&P Survey 2016, dated August 16, 2016


21

Barclays: “tatoil recently mentioned a deepwater breakeven of $41/bbl with Shell guiding close to $45/bbl

McKinsey: Cost compression will continue to push deepwater costs lower…making most deepwater projects economical at an oil price between $50 and $60.

Scotia Howard Weil: While some peers are exiting or de-emphasizing Deepwater, RDS has an attractive suite of assets located primarily in two low breakeven basins (Gulf of Mexico & Brazil). Pre-FID projects have a breakeven of around $45/bbl with some pre-salt Brazil trending below $40/bbl.

Morgan Stanley: "$60/bbl for 6 months was generally regarded as what was necessary to get deepwater activity to pick up.

Investment break-even levels for deepwater have become competitive with other options

Break-even reported for major offshore projects

Source: Pareto E&P Survey 2016, dated August 16, 2016


22

Floaters: Throughout the market cycles, higher specification drilling units provide higher levels of utilization

40

60

80

100

<5,000' 5,000'-7,499' 7,500'+ / <1,250 tons 7,500'+ / 1,250+ tons

%

Includes data supplied by IHS-Petrodata, Inc; Copyright 2016, as of November 1, 2016

Worldwide Floater Total Utilization by Water Depth / Hookload

61 units

103 units 87 units 39 units


23

Floaters: In 2017, there is a substantial roll off of the current floater contracts; we believe this will force attrition of remaining older rigs

* Includes data supplied by IHS-Petrodata, Inc., Copyright 2016; and Rowan Analysis; as of August 18, 2016

64

193

101

0

50

100

150

200

250

300

350

400

Projected

Future

Supply Range

190 - 240

Potential

Newbuild

Cancellations

Cold Stacked

Post 1996

Contracted

Pre-1996

Stacked

Pre 1996

Total Current

Supply

358

Potential Floater Supply Attrition ?

Roll-off of Contracted Floater Fleet

Floaters Under Construction

Post-1996 Floaters

Pre-1996 Floaters

0

50

100

150

200

250

YE’

YE’

YE’

YE’

YE

13

YE’

YE’

YE

08

YE’

YE

15

YE

14

YE’

To

da

y

YE

10

YE

09

YE

11

YE

12

YE

07

YE

06

YE’

YE’

• 2017 will bring a dramatic

increase in roll-offs of

contracts signed in the 2011

to 2014 up cycle

• 29% of all floaters are older

than 20 years; they

currently represent 28% of

working floaters

• New contracts will favor

modern rigs; older rigs will

be much less competitive,

u less the ha e a iche


24

Pre 1996 - Existing Contracts

Contracted Rig Demand (Actual)

Post 1996 - Existing Contracts

Contracted Rig Demand (Estimated)

Jack-ups: Throughout the market cycles, newer higher specification drilling units provide higher levels of utilization

* Jack-ups with two million pound or greater hookload

Includes data supplied by IHS-Petrodata, Inc; Copyright 2016 as of November 1, 2016

63 units 116 units

147 units 140 units

20

40

60

80

100

IS, MS, MC <300'IC 300'IC 350'+ IC High Spec*

%

Worldwide Jack-up Total Utilization by Rig Class

55 units


25

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

* Includes data supplied by IHS-Petrodata, Inc., Copyright 2016; and Rowan Analysis; as of 18-AUG- 2016, includes only independent leg, cantilevered units.

111

247

235

0

100

200

300

400

500

600

Projected

Future

Supply Range

325 - 375

Potential

Newbuild

Cancellations

Cold Stacked

Post 1996

Contracted

Pre 1996

Stacked

Pre 1996

Total Current

Supply

593

Roll-off of Contracted Jack-up Fleet

JUs Under Construction

Post-1996 Jus

Pre-1996 JUs

• 2017 will bring a dramatic

increase in roll-offs of

contracts signed in the

2011 to 2014 up cycle

• 45% of all JUs are older

than 20 years; they

currently represent 46% of

working JUs

• Fewer niches for older rigs

to hide tha i floate market

• Many newbuilds will

require a change of

ownership before they can

be marketed effectively

0

50

100

150

200

250

300

350

400

YE’

YE’

YE

13

YE

12

YE

11

YE

10

YE’

YE’

To

da

y

YE

15

YE

14

YE’

YE’

YE’

YE’

YE

09

YE

08

YE

07

YE

06

YE’

YE’


26

Post 1996 JUs - Existing Contracts

Contracted Rig Demand (Estimated)

Pre 1996 JUs - Existing Contracts

Contracted Rig Demand (Actual)


Market Dynamics


Conclusion

Rowan has three company priorities to deliver shareholder value

Our customers want: • Safe, reliable & efficient

operations

• Procedural discipline and

management of operational risk

• Solid counterparties

Our shareholders want: • Thoughtful capital allocation to

drive strong returns

• Exposure to a driller with a

sustainable capital structure

Our employees want: • To be part of a winning team

• Some stability in a rough market

• A company willing to develop and

challenge them


28

We a e focused o i p o i g Ro a ’s etu o i ested capital

The improvements we are making now will deliver results in the short and long run

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

Proactively address organizational health to counter negative aspects of the downturn • Visible Leadership; lead from the front on cost cutting with pay cuts of executives

• Continuously assess Organizational Health; continue to develop future leaders

• Create Targeted Initiatives to improve alignment, execution, and renewal of key business

processes. Engage employees in these improvement initiatives.


29

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:

Increased Liquidity 3Q2016 – Generated $276 million of cash

during the quarter and currently have a balance

in excess of $1.2 billion

Debt Reduction 4Q2015/ YTD2016 - Retired nearly $150 million

of debt that was due to mature over the next

four years

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


30

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*:

• 38 % reduction of TRIR

(Total Recordable Incident Rate)

• Downtime held essentially flat

while delivering our final two

drillships

280

135

1,145

95

650

-64%

-29%

-43%

Non-newbuild

Capex

<100

SG&A Drilling Expense

Midpoint of Current Guidance for 2017

Midpoint of Initial Guidance for 2015

USD

mill

ion

s COMPANY OVERVIEW & INVESTMENT HIGHLIGHTS MARKET DYNAMICS DELIVERING SHAREHOLDER VALUE CONCLUSION

* As of November 28, 2016; some portion of Drilling Expense reduction is due to the formation of the new drilling company with Saudi Aramco

31

Rowan is taking advantage of this downturn to make a step change in operational performance

Continuously Improving Performance The way forward is a step change

• Advancing a performance program to

improve drilling efficiency

• Applying LEAN philosophy to identify &

eliminate waste in our onshore and

offshore operations

• A dedicated analytics team to harvest

data to drive performance and lower costs

Crew A Crew B Crew C Crew D

Example: Analyzing variance in performance of drilling crews in slip to slip connection time while tripping


32


Market Dynamics


Conclusion

Rowan is positioned to endure this challenging market and emerge a stronger company


Investment Highlights

1

2

3

4

5

Groundbreaking partnership with Saudi

Aramco ensures 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 position 6

34

Appendix

Worldwide marketed* jack-up utilization down to 69%

* Excludes Cold Stacked / Out of Service units

Includes data supplied by IHS-Petrodata, Inc; Copyright 2016 as of October 13, 2016

Marketed Supply: 456 units

0

200

400

600

Total Fleet Cold

Stacked /

OOS

Warm / Hot

Stacked /

Other

Contracted

541 85

141

315

Current Supply / Demand

US GOM 27%

11 Rigs Mexico

60% 42 Rigs C&S Am

55% 11 Rigs

W. Africa 35%

20 Rigs

North Sea 70%

46 Rigs Middle East

76% 159 Rigs

India 95%

39 Rigs

SE Asia 47%

59 Rigs

Australia 100% 2 Rig

Mediterranean 86%

14 Rigs

36

0% 1 Rig

Worldwide marketed* UDW** utilization has slipped to 75%

Marketed Supply: 130 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 2016 as of October 13, 2016

Far East 25%

4 Rigs

Australia 100% 1 Rigs

India 100% 2 Rig

W. Africa 66%

29 Rigs

C&S Am 87%

30 Rigs

Mexico 75%

4 Rigs

USA 84%

37 Rigs

E. Canada 25%

4 Rigs

North Sea 63%

8 Rigs

Mediterranean 80%

5 Rigs SE Asia 50%

8 Rigs

37

APPENDIX

Rowan guidance as of November 28, 2016

Key metrics: FY 2015

Actual

3Q 2016

Actual

4Q 2016

Projected

FY 2016

Projected

FY 2017

Projected

Jack-up Operational Downtime (unbillable)

~1% Less than 2% ~2.5% <2% ~2.5%

Drillship Operational Downtime (1) ~7% 0% ~5% < or ~1% ~5%

Contract Drilling Expenses (excluding rebills)

$950 MM $182 MM ~$190 MM ~$775 $600 - $700

MM(2)

SG&A $116 MM $24 MM ~$26 MM Slightly below

$105MM $90 - $100 MM

Depreciation $391 MM $102 MM Not Guided Slightly above

$400 MM $385 - $395MM

Interest Expense, Net of Capitalized Interest

$145 MM $39 MM Not Guided ~$155 MM $145 - $150MM

Effective Tax Rate (normalized)

~11%

Normalized 9.5% Not Guided

Low to Mid

Single Digits Not Guided

Capital Expenditures $723 MM $24 MM Not Guided $125 - $130

MM(2) <$100 MM(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 $600 MM and $700 MM, depending upon whether certain idle rigs secure additional work. (3) Rowan expects 2016 maintenance capital expenditures to range from $125 - $130MM and 2017 to be less than $100 MM, excluding any contractual modifications that

may arise due to securing additional work, none of which is currently planned. 38

Investor Contacts:

Chris Pitre

VP, Investor Relations and Corporate Development

[email protected]

+1 713 968 6642

Carrie Prati

Manager, Marketing and Investor Relations

[email protected]

+1 713 960 7581

39

Documents

Rowan Strong: Safe. Reliable. Efficient.s2.q4cdn.com/240362030/files/doc_presentations/... · 11/28/2016 · Rowan and Saudi Aramco will form a 50/50 joint venture to own and operate