Good day, everyone and welcome to the ENSCO International Third Quarter of 2008 Earnings Conference Call. As a reminder, this call is being recorded, and your participation constitutes consent to its taping. I will now turn this conference over to Mr. Richard LeBlanc, Vice President of Investor Relations, who will moderate the call. Please go ahead, sir.

Thank you, Diana. We'd like to welcome everyone to our third quarter conference call. With me in Dallas are Dan Rabun, our Chief Executive Officer; Bill Chadwick, our Chief Operating Officer; Jay Swent, our Chief Financial Officer, as well as other members of our executive management team. This morning we released our earnings announcement and we filed our 8-K with the SEC. We also expect to file our 10-Q later today. The earnings release is available on our website, www.enscointernational.com. As usual, we'll keep our call to about an hour. Jay will first provide a financial overview. Then Dan will discuss our markets and operations. I'd like to remind everyone that any comments we make today about our expectations of future events are forward-looking statements pursuant to the Private Securities Litigation Reform Act of 1995. All such statements are subject to risks and uncertainties and many factors could cause actual results to differ materially. We refer you to our earnings release and SEC filings available on our website, which defines such forward-looking statements, states that the company undertakes no duty to update any such statement and lists risk factors which could cause actual results to differ materially from our expectations. I'd also like to remind everyone that with regard to our rig status, a detailed listing is provided on our website, and it's updated the middle of each month when we file our 8-K with the SEC. The last update was as of mid-October. At the end of our prepared remarks, we will have some time for questions. At this time, let me turn it over to Jay.

Thank you, Richard. Good morning and thank you all for joining us. Today's call is a bit unusual for us because I will be describing a business as usual third quarter and what we believe will be largely a business as usual fourth quarter, while at the same time recognizing that we're in a period of unprecedented economic uncertainty. I'll review the current business details and conclude with some comments about how we are financially positioned for 2009. Dan will then review his thoughts about the current and future business climate. So, let's get started. We're pleased to report another solid quarter despite some weather related and non-operating issues that adversely impacted results. I'll talk more about these items in just a moment. Income from continuing operations increased 16% from prior year levels to $301.2 million and earnings per share from continuing operations were up 20% to $2.13. Our year-over-year operating improvement reflects higher average day rates for our jackups across all regions and for the ENSCO 7500 semisubmersible rig as well as higher utilization from our North and South America and Europe jackup fleets. We reported a $0.13 per share loss from discontinued operations during the quarter. This relates to the loss of ENSCO 74 as a result of hurricane Ike in September. The rig has not been located and has been assumed to be a total loss for insurance purposes. We recorded a $23.5 million net loss on disposal of the rig offset in part by a $4.6 million net income that the rig earned during the quarter prior to its loss. In connection with the loss, we expect to receive insurance proceeds of $50 million sometime during the fourth quarter. This matter is detailed more fully in our SEC Form 10-Q that is being filed today. The…

Thank you Jay, and good morning everyone. I'm going to depart from my normal earnings call format and begin by addressing matters we believe that are top of everyone's minds. We believe ENSCO is well positioned to maneuver through the many challenges facing all global businesses. ENSCO historically has been physically conservative in good times and in bad. We have always believed that a strong balance sheet is especially critical in a cyclical industry such as ours. As Jay highlighted in his remarks, we have more cash than debt and our cash generation from our existing backlog remains strong. We believe our financial position allows us to manage the current capital market situation and to take advantage of any opportunity that may arise as a result of existing and future market conditions. We have been using internally generated funds to grow our deepwater fleet, while at the same time maintaining one of the industry's least levered balanced sheets. We have been discussing drilling programs with our customers. Much of the discussion about changes to the drilling program centered on reductions in U.S. insured gas related activities. As of today, we have not seen much impact on the offshore market and customers and international markets continue to discuss increases in spending for 2009. Much of the incremental demand is from national oil companies that have a strategic imperative to drill. The mega majors are challenged to grow productions and they've continued to pursue major multi-year projects that are predicated on lower commodity prices than we are experiencing today. We would expect that some of the small independents, however, make defer programs and then they tend to more dependent on cash flow and or leverage. But that is likely to impact mostly short-term programs. While we are encouraged by the dialog with…

Yes, Diana, we're happy to take questions at this time. Question And Answer

Thank you sir. [Operator Instructions]. And we'll take our first question from Dan Boyd with Goldman Sachs.

Hi thanks. Dan, throughout your comments you did mention the challenges that you see out there for the market globally. But then when we went around each market, everyone... every single market for every single asset type seems actually very bullish. So can you help me reconcile where you are actually seeing the challenges or where you might expect the market to weaken. Should oil prices hold, these levels are lower.

Yes. Dan, that's the... I think Jay said it when he started his remarks. When you look at our business and we've talked to our customers, and we got back from a two-week trip around the world talking to our customer, build goodwill [ph] with out customers. There just seems to be a complete disconnect between the health of the business and what's going on the marketplace. So our market reports are pretty bullish because quite frankly that's where our customers continue to be bullish on their program. So its kind of --

I guess, with that outlook and given the dislocation that really I guess you are implying is really in the stock price. Do you think this is a point where you will get more aggressive than at buying back shares unless this is the only reason why you're really stopping the share repurchases so that you can be opportunistic and potentially making acquisitions down the road.

Dan, there's two points. One, there were probably several people in our last conference call that aren't on this conference call today's because the financial institutions they work for don't exist any longer. That was the cost of carrying different business cards than we were last quarter. So we are dealing with some fairly unprecedented financial times. So I think it is an opportunity to be a little conservative. That having been said, there are a lot of opportunities. So we are going to try be opportunistic as well.

Could you help us understand some of the opportunities that might make more sense for ENSCO for me to understand JVs might not make the most sense as well as it doesn't seem like drill ships really fit in your portfolio. So is there something where you would want to go in and take and go overlay existing rigs been built or do you prefer to hopefully see those actually cancel then you've take over the shipyard slot.

Dan, we've said that we were going to be well aggressive in building out our deepwater rig. I think any of those... any opportunities that come up in that area, we'd take a look at.

Okay. Thanks. I appreciate that.

And we'll move on to Ian MacPherson with Simmons & Co. Ian MacPherson - Simmons & Co: All right, Dan, just to follow-up on that question regarding opportunities for using your cash. If you're, I guess more cautious with buying back your own stock down here, it's a below half of the average prices of what you bought in the third quarter. Are there external investments that would compete with that opportunity to buy your stock at 33 for example?

There are a number of opportunities to reinvest in the business right now that didn't exist a month ago. Ian MacPherson - Simmons & Co: Okay.

That are very attractive. Ian MacPherson - Simmons & Co: Okay. I guess changing over to PEMEX, I just want to clarify, did you say which rigs was announced a little better on the recent award.

87... 89, things we did were a little bit better.

All right. And it's worth 160

A little north of 160 and 155. Ian MacPherson - Simmons & Co: And both of those rigs will be going to Mexico?

Correct. Ian MacPherson - Simmons & Co: Okay.

The awards -- Ian MacPherson - Simmons & Co: Okay. And then you said that you expect the recently retract tender to reemerge in the weeks to come as well as further incremental rigs beyond that later this year. Is that correct?

Yeah. And that's what PEMEX has advised us. They have countered technical division without tender retracting at the same days. Its kind of a internal technical process. Ian MacPherson - Simmons & Co: Okay. Do you know how many rigs you're talking about in the second one?

Are you talking about the one that they just pulled? Ian MacPherson - Simmons & Co: The one that you expect to follow after that.

Four. We think it's going to be four additional jackups. 300 players.

300 players. Ian MacPherson - Simmons & Co: Okay. To replace that rigs or incremental to their aggregate fleet, do you know?

Well, the 300 rigs would not replace the net rates because there aren't any 300 foot mat down rigs that maybe possibly won, I'm not sure. It would be incremental. Ian MacPherson - Simmons & Co: Okay. All right. Thank you very much.

And we'll move on to Arun Jayaram with Credit Suisse.

Good morning, guys. Jay, I want to ask you, on the ENSCO 8500, you have the $20 million lumpsum payment. I wanted to understand what the timing of that was and how you will counter for that $20 million payment.

Well, they can't really be down against deferred over the life of the contract like any other deferrals. The timing on the payment is sometime during the fourth quarter.

Okay.

So even though we'll get the cash early, the recognition will be over a long period of time.

Okay. Second question guys, in the most recent ODS offshore rig monthly, they've put out some commentary looking at each individual market and they sited the 15 rig jackup excess in the Asia Pacific market. So obviously, I want to get you're comments on that because that's a pretty big market for you guys?

You're talking about including the newbuilds coming in?

They don't specify, but I think that would be inclusive of those newbuilds.

We've said, Arun, for some time that the one market that has some exposure would be the Southeast Asia market, while those rigs are being built. You are seeing those rigs marketed elsewhere in the Middle East and Africa and other markets. So I think that trend will continue. And I don't think that ODS is really.... I don't know that that has changed that much from our prior forecast. I think they always have expected maybe some surplus in that market.

Have you seen any negative pricing points in that market or some of your competitors getting a little bit more aggressive on pricing given the change in the marketplace?

What we've seen, we've seen some of newbuilds discounting some more to be able to get work because they still have to do to get the work. It really unaffected us. I'd say its clearly not going north and certainly flattened out, if you will. But we have a lot of opportunities out there. When you look at the opportunities that we have, there is quite a few projects that we're tendering our rigs into.

Where would you put, Dan, for a 300 foot premium jackup, something like the ENSCO 56. What is the range of opportunities in terms of day rates that you're seeing in that market?

That's always difficult because the tax rate is out there because rates could really vary pretty widely. So I think, fairly consistent with where... whereas shooting out of New Zealand right now. That's a pretty high rate. And Bill, what would you say?

Well, excluding the premium for Australia and New Zealand, I think rates are somewhere in the 165-185 range.

Okay. So you obviously haven't seen any decline, if that's the rates that you are seeing?

No, the ODF that you're looking at, I haven't looked that real close. I don't know, maybe it will go rigs, three of those are starting to go up in China which is... I don't know if that was contemplated in that data.

Okay. I'll say that we talk perhaps offline. Thanks a lot.

And we'll move on to Tom Curran with Wachovia Capital Markets.

Good morning fellows.

Good morning Tom.

Dan, you had just mentioned that there are number of attractive opportunities to reinvestment in the business that didn't exist just a short time ago. I was hoping you could share some color on what's leading those opportunities to emerge in terms of how much of it to the extent that you can discern it seems to be arising from issues arising with regards to the construction project and the shipyard, perhaps rookie or inexperienced owners will startup yards getting it over their heads. How much of it is related to the global credit crisis? And then how much perhaps to the owners becoming concerned about the outlook for the market?

I would say its 100% related to the credit crisis.

100% financing related?

Yeah.

Do you still see the potential for some engineering or construction related mishaps to potential lead to some blood in the water that you could opportunistically jump on as well?

Yeah. The answer of the question here its all related to the credit crises, newer projects.

Okay.

There are projects that are midstream that are having financing problems and I don't know where... I don't if any shipyards are having any issues, but clearly while the newbuild guys are having and grows.

Okay.

Yeah, a lot of these companies appeared to be I don't know that much but all. They were accessing the credit markets or capital markets as the payments came due and payments are coming due, there is no credit market or capital market. And they are finding it difficult.

Great. Turning to the North Sea, could you tell us what percentage of your rigs there are currently drilling natural gas prospects versus oil. And then if I were to look at the fleet status report and go down the line of expected early survivalability by rig, for which rigs might there be conditions that can lead it to becoming available earlier and why?

I've got the rig status report here. Everything drilling in the southern gas basin in the... that's oil gas. Most of the rigs that is drilling for oil and early survivalability, just out at rig status where you can figure it out.

Okay. But in terms of your early survivalability, are any of the rigs working on programs where the operator has some sort of early cancellation provision or it's well to well in terms of the results or the economics and therefore the incident of releasing it earlier than the availability indicates.

All these markets have different dynamics. The North Sea markets, the contracting dynamics have always been in the North Sea. They have some sort of termination provision with overall period of time. Those periods... 120 days, 180 days. So they're all over the map in that market. But that's a fairly common contracting strategy, just like in the some of the LOCs in their 30 days cancellation provisions.

Okay. And last question here, Jay. And I'm sorry if I missed this, with the two jackups that were waiting on whether in New Zealand and had the revenues deferred, were the operating cost associated with those rigs also differed in terms of recognition.

Yes.

Great. Thanks guys. I'll turn it back.

And we'll move on to Robin Shoemaker with Citigroup.

Thanks. Good morning. I wanted to ask you about the North Sea specifically. Some of the major service companies that have held conference calls here in the last few days have said that one of the international markets that's slowing or likely to slow is the North Sea as it has in past periods of weaker oil prices. Of course, your perspective is would be that the jackup market seems to be quite different. But your fleet status report shows you are working for some of the U.K. independence or the North Sea independence who are the ones more likely to cut back. Are you seeing any signs at all that beyond '08 on renewal that some of the U.K. independence maybe slowing down?

No. Quite the contrary. That's probably, I would say the strongest market we've got right now.

Okay. I guess it's just a different perspective from what we've heard from others. I wanted you ask you that secondarily about the investment in the newbuilds. This year you mentioned that your investment is 670 on the six new rigs. So as we go into 2009, I believe that number comes down and probably comes down a little more 2010 as you finish up the program. But roughly could you give us some idea of what those outlays on the newbuilds are next year?

Let me try to give it to you in a different form rather than... the total program for all the rigs is about 3.1 billion. By the end of the year, we will spend about 1.3 billion. So that will leave us about $1.8 billion to go over the life of the project. And that probably, it breaks out between 2009-2012 and its pretty evenly distributed over those years.

Okay.

We're filing the Q here in just an hour or so. It's all in there.

Okay, fine. Sure. All right. Well, I guess that's all for me. Thank you

And we'll move on to Pierre Conner with Capital One.

Good morning gentlemen

Good morning

Dan, relative to the fleet in the Middle East and what type of prospects they're working on, and it's pretty obviously... your Roche gas rigs, for Roche gas for LNG gas. But tell us the rigs drilling for Saudi at 84, there is oil drilling or does internal gas consumption. What are those rigs working on? Do you know?

Three, oil. One, gas.

What is your perspective on that, given the commentary in Saudi and potential OPEC cuts, you've got some options on those rigs, potentially just net with them. How do you feel about those, Dan?

Well, the options are still price available at the current markets. So, everything Saudi [ph] has told us has been fairly consistent. They are increasing their onshore production and moving rigs from their onshore programs to their offshore program.

Okay

And they continue to make the same indication. So we do have, I think we got a couple coming off contracts late in the year

Right

October timeframe. So we still have options on their price well below current markets.

Current assumptions they execute those given where the rates are.

Yeah, I would think so.

Yeah. Next question going back to the deepwater construction program and either for you or somebody. But given that you might have some of the shipyards having projects cancelled, things should be loosening somewhat, what if any of the current contracted price for construction might have some variable cost in it, maybe we should have Pete this on his call earlier. But is there any opportunity there or we should we think about these outlays as fixed.

Well, there are full priced and we're committed to have contracts on. So there is no real variable cost in there.

Yeah, I mean, I think obviously Pierre that cuts both ways. I mean there are fixed price contracts, the shipyard contract is fixed price, virtually all of the third party equipment is fixed price. So it doesn't go upward or down in this kind of time period.

Right. Okay. So then when you contracted. And then thanks. Actually a follow-up Jay. Just a clarification. The quantification of your customers, was that calculation based on numbers of customers or percentage of revenues possibly.

We're talking about the same...

Got it.

And when you... we are looking at backlog but if you just go down list I mean it's amazing, as Dan said, we've done it top to bottom look at both vendors and customers to make sure we feel comfortable in what the situation going forward, and even I was quite surprised by just the line, just look at the line item by line item, virtually all of our customers other than some of the independents in the North Sea and Gulf of Mexico are very strong investment grade. And a lot of our customers that are in those other markets if not investment grade are still very strong companies. So, I think we feel pretty good about their wherewithal. And I think we're pretty conservative so to extent that we're ever dealing with customers are smaller a question. But we're usually getting a fair amount of securities, so that we're comfortable, we're going to get paid. But that's different in getting the contract. But we're using pretty good shape on receivable.

Okay. And then Jay, if you think about sort of cash flow generation of the fleet in the future and trying to reconcile that with the current equity evaluation and try to think about what's the maintenance CapEx required to keep. You've got 110 million in sustaining projects this year, next year. Given the renewal you've gone to with the fleet, is this what the number we should think of relative to what maintenance CapEx would be?

Well, I think you have to look at the maintenance plus the others. So it's probably 150 and that's in a world that's just looking at our jackup fleet. I don't think we have any basis yet to tell what the maintenance CapEx will be on the semis once you're up and going.

I understand. Very good. Thanks gentlemen.

Thank you.

We'll move on to David Smith with JP Morgan.

Hi, good morning.

Good morning.

Could you tell us which, if any, are the deepwater newbuilds and your program having cut still yet?

Dave, 5 [ph] and 8506.

Okay. And I'm asking this as a big fan of the newbuild program but are there any cancellation clauses for those rigs that haven't begun construction?

No, I mean in all of those rigs there is a pretty substantial upfront payment and those are non-cancelable contracts.

Okay. And a follow-up question is you mentioned the contract cancellation provisions with your clients from the North Sea. Does that include some level of a make whole provision?

Specifically they've got to give us I think 120 to 180 days notice or pay in lieu of that.

Okay. So if you had a contract going through the end of '09, they could give you a notice tomorrow and 120 days we should be looking at if that is maybe kind of the firm fixed backlog.

I think it's the right way probably to look at.

Okay, I appreciate it. Thank you.

Certainly.

And we'll move on to Geoff Kieburtz with Weeden.

Thanks. I just had a background question on the opportunities comment that you made, Dan. I'm assuming what you're talking about here is projects, newbuild projects are in some stage of not being complete and there is some financial difficulty. Who is responsible for making the decision to sell? Is it the shipyard or is it the owner or is it some combination?

No, it's the drilling contractor.

I guess at some point, it's conceivable, that its the shipyard, but that's after they haven't been paid and they're foreclosed on the asset and then so, I think that weighs out. I think the conversations right now and the conversations for the foreseeable future will be with the contractors himself, the drilling contractors themselves.

Okay. All right. That's it. Thanks.

And we'll move on to Mike Urban with Deutsche Bank.

Thanks, good morning. You'd mentioned a couple of times that some of the spec newbuilds have come into the market but those guys have had to discount pricing to get in and hasn't really had a spillover effects to you guys as an incumbent. Does it at some point though have an impact on any kind of rates or contracts that are indexed to the market for you or some of the other incumbents and that has a potential downward effect over time.

Its not that. Other than the PEMEX contracts, we really don't have any index contracts. I mean, it's not really a contracts of index [ph].

Right. But some of your competitors don't expect you to know what those are or not. But if you've... some of the incumbents have index contracts and that starts to come down. I was just wondering if that could potentially have an impact.

The way that most of these indexings work out. They are global indexes. And it's usually keyed off the highest rate, not the lowest rate. So, let me answer your question. I mean its not going to have any effect on us.

Okay. That's great. Thank you.

Moving on to Jeff Siddle [ph] with Majestics White Sugar [ph].

Hey, good morning guys. Touching on the foreign exchange market, I know you've talked a little bit about the currency hedging on the manufacturing program for the newbuilds. Can you quantify if anything what the foreign exchange impact is you are seeing in terms of cash operating cost right now?

We've put in place forward hedges for a large portion of our non-U.S. dollar denominated costs and typically we're hedged fully one quarter out and then it steps down from that as you go over time. So in the near term, I mean for example we have hedges in place against Sterling, there are close to $2 and obviously Sterling is down on the 160 range now. So we will get some minor benefit of that in the current quarter. But for the most part our cost, they are fixed at the $2 rate. Obviously, as the currency have moved and we are doing hedging transactions further out, we are averaging down.

It will take a couple of quarter to work through the system.

Okay, understood. And then I guess the 85, 05, and 06 have you started to implement any forward hedges in terms of currency exposure there?

The same dollar exposure I was talking about is really against that whole program.

Correct.

Most of how we've hedged that is just by holding Sing dollars. We do have some forward contracts as well. They tend to be pretty inefficient way to hedge that just going forward points on the Sing dollar. So we have a small portion of our total Sing dollar exposure that is un-hedged right now but it's a... I have to get the number but its probably less than 20% of the total amount that's due over the whole life of all of the rigs.

Okay. Thank you.

You're welcome.

[Operator Instructions]. And we will move on to Brian Uhlmer with Pritchard Capital.

Good morning guys.

Hey Brian.

I had a question on what your strategy going forward would be if you have a market downturn. Could you talk about what your strategy is versus the stacking rigs and cutting rates and how you make those decisions?

How we make a decision to stack a rig?

Yeah. If market turns down or your contracts, your customers are asking you to cut rates, substantially at one point do you make a decision versus taking a cut rate and not stand discipline with your rate versus stacking your rig and lowering the supply out there.

Brian, fortunately we haven't had to confront that here recently. Historically, you go back to some of the other cycles, there's a point in time when you have to make a decision that you're not leading the deterioration of rate, but that you're going to have to participate in it in order to keep the equipment working. The ultimate decision comes to cash flow breakeven. We haven't had to make those kind of decisions for a lot of years. We don't see them coming in the future but ultimately that's what it comes down to.

Okay. Unfortunately, I'm receiving that question, I don't see it happening either. But I think some people are hearing that question. Thanks.

Sure.

We'll move on to Mike Drickamer with Morgan Keegan.

Good morning, guys. Dan, it seems to me that the market has kind of historically drove your preference for building out the deepwater rigs to being more of a build versus buy scenario. Has that changed? Has your preference now perhaps more buy versus build?

We'd say its changed. We really feel like we have a competitive advantage with our 8500 Series and cost effective to builds and cost effective to operate. So, that clearly has been our preference and where we've invested heavily. And with respect to the uncommitted rigs, the marketing business continue at nearly fairly brisk pace. The alternatives in terms of buying are really being driven more by opportunities that are arising as a result of the credit market not for us out seeking those alternatives. So we are pressing ahead with our program and... but we're taking a look at these alternatives that continues to evolve.

I think one thing I'd add to that too is that there is a huge efficiency that comes from having one rig and fleet in terms of spars and training and support and everything else. So while we wouldn't rule it out or certainly we're pretty happy with the one class approach that we have to this right now.

All right guys. Thanks a lot.

And moving to Robert Mackenzie with FBR Capital Markets.

Thank you. My question has been answered.

And we'll move on to William Mansfield with Millennium [ph].

Hi gentlemen, I just wanted to follow-up on this issue of the opportunities that you kind of discussed, there might be appearing in the market given the credit crisis here. One issue I was curious about is there a timing element to that. Do you guys think from your own perspective, you need to see there is stability in the financial markets or in the oil market before you'd move forward or is it actually possible, you'd put out an announcement next month or the month after, hey we've just bought a rig in near bankruptcy type of thing?

I think there is a lot to do with pieces to this and it's moving at pretty fast pace. So after this it is really easy to answer to that question and the opportunities that tends to... seems the multiplying by the day here. I would say generally speaking, we're going to be real conservative looking at these alternatives. So I would expect that it's going to take a while for it to walk through the system.

And presumably the conservatism would also play through on your pricing dynamics you'd want material discounts to weather construction cost or fair value or whatever?

We think we have a competitive advantage with un-levered balance sheet and we intend to use that advantage.

Okay. But... okay. Thank you very much.

Diana, we have time for probably one more question.

Thank you sir. [Operator Instructions]. And it appears there are no further questions, sir.

Okay. We'd like to thank everyone for joining us today and we certainly look forward to talking with you again. Our fourth quarter and full year 2008 earnings conference call is scheduled for Thursday, February 26. Thanks.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and have a wonderful day. .