Good day, everyone, and welcome to Ensco Plc Third Quarter 2013 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I will now turn the call over to Mr. Sean O'Neill, Vice President of Investor Relations, who will moderate the call. Please go ahead, sir.

Thank you, operator, and welcome everyone, to Ensco's third quarter 2013 conference call. With me today are Dan Rabun, CEO; Mark Burns, our Chief Operating Officer; Jay Swent, CFO; Kevin Robert, our Senior Vice President of Marketing; as well as other members of our senior management team. We issued our earnings release, which is available on our website at enscoplc.com. As usual, we will keep our call to 1 hour. Any comments we make about expectations are forward-looking statements and are subject to risks and uncertainties. Many factors could cause actual results to differ materially. Please refer to our earnings release and SEC filings on our website that define forward-looking statements and list risk factors and other events that could impact future results. Also, please note that the company undertakes no duty to update forward-looking statements. As a reminder, our most recent Fleet Status Report was issued on October 17. Now, let me turn the call over to Dan Rabun, Chairman and CEO.

Thanks, Shawn, and good morning, everyone. I will start by covering highlights from the third quarter. Kevin will then comment on the state of our markets and Jay will discuss our financial results, balance sheet position and fourth quarter outlook. Our positive momentum from the first half of the year carried into the third quarter. We achieved record revenues and earnings, grew earnings per share by 9% and delivered 2 more rigs. ENSCO DS-7 our newest ultra-deepwater drillship that will commence its initial 3-year later this year at an average day rate of $648,000. And ENSCO 120, the first in our ultra-premium harsh environment jackup series, that will also commence its initial contract later this year at a day rate of $230,000 a day with Nexen. These rigs follow in the footsteps of ENSCO 8506 and ENSCO DS-6, they commence their initial contracts in the first quarter of this year. On our last call, I highlighted the excellent uptime performance of these 2 newbuild rigs which is extended into the third quarter. Utilization year-to-date for both ENSCO 8506 and ENSCO DS-6 has been 95%. Again, highlighting the advantages of standardization as we apply lessons learned to each subsequent rig in a series. In fact, year-to-date utilization for our 7 combined 8500 series rigs was 95%. We have 6 more rigs under construction which will drive future revenue and earnings growth and margin expansion. Upgrades to existing rigs will also support earnings growth and margin expansion. Last quarter, I highlighted several floater upgrade projects that will generate higher day rates when they leave the shipyard. More recently, we have seen several jackup rigs complete shipyard work, driving up reported utilization by 7 percentage points from 83% in the second quarter to 90% in the third quarter. Our entire marketed jackup fleet…

Thanks, Dan. This morning, I will discuss our outlook for floater and jackup activity, highlight some of our contract signings and discuss regional jackup and floater activity. During the third quarter, we completed our annual review of our business with emphasis on expected supply and demand activity over the next several years. Our study indicates that the floater and jackup markets will continue to experience solid demand growth beyond the end of this decade. All of the economic indicators that affect our business are expected to be positive as demand for energy and attractive commodity prices should continue to support investment by our clients, in oil and gas exploration and development. Our study method forecasts drilling activity by water depth and equipment requirements in every offshore region and calculates rigs supply and demand with sensitivities for commodity prices, rig attrition and rig additions. I want to briefly summarize our observations to remind everyone that these are forecasts and subject to various assumptions. In the floater markets, we expect the demand growth that started at late 2010 to continue strongly for the next couple of years. Drawing demand in water depths of less than 5,000 feet will have a significant amount of activity but the strongest demand growth should be for ultra-deepwater floaters as a result of rig preference. Regionally, we expect Brazil to continue to represent about 1/3 of floater demand as the development of pre-salt Brazil continues to be a significant growth area. Sub-Saharan Africa, the Gulf of Mexico and the Asia-Pacific region will also contribute to this growth. We expect demand in the jackup markets to remain very strong over the next several years. Our forecasts indicate a lot of demand for drilling in mature traditional areas like the Gulf of Mexico, Mexico and the North sea. Middle…

Thanks, Kevin. Today I will cover highlights of the third quarter results, our outlook for fourth quarter 2013 and our financial position. So let's start with third quarter results versus prior year. Earnings per diluted share from continuing operations were $1.62 compared to $1.55 last year. As noted in our earnings release, certain items implements third quarter 2013 results, specifically a $31 million settlement with the Mexican tax authorities increased earnings by $0.10 per share and OGX's deteriorating financial conditions negatively impacted our third quarter results as follows. We reported less revenue for third quarter 2013, since ENSCO 5002 and ENSCO 5004 drilling services totaled -- totaling $27 million were not recognized as revenues, thereby reducing earnings by $0.12 per share. And contract drilling expenses included an $11 million provision for doubtful accounts related to previously recognized revenues for ENSCO 5002 and 5004, reducing earnings by an additional $0.05 per share. Adjusted for these items, diluted earnings per share from continuing operations was $1.69 compared to $1.55 last year. Revenue grew 13% to a record of $1.27 billion and net income was a record $379 million as we grew our fleet and contracted rigs at higher average day rates. Floater revenues increased 9% to $788 million mostly due to adding ENSCO 8506 and ENSCO DS-6 to our active fleet. The floater average day rate increased 15% to $416,000. As I mentioned earlier, floater revenues were negatively impacted by $27 million of ENSCO 5002 and ENSCO 5004 contracted backlog that was not recognized as revenue during third quarter 2013. Floater utilization was 79% for third quarter 2013 compared to 90% a year ago as several rigs that operated last year underwent planned upgrades or inspections. ENSCO 5005 is undergoing a shipyard upgrade that will improve its capabilities and contracting opportunities. We…

Before we open the line for questions, I just want to add that we expect some very good news soon regarding ENSCO 122. We're in the process of finalizing a multiyear contract with the customer at a day rate similar to our other 120 newbuild rigs. ENSCO 122 is being built in Singapore and is scheduled for delivery in the third quarter of next year. The initial contract will commence the following quarter. As you may recall, the first 2 120 series rigs were also contracted well ahead of their delivery dates. Customer reaction to our new design has been remarkably strong because the rig has proprietary, patented technology that significantly increases the operational efficiencies in harsh environments. This is particularly true for multiwell platform programs, ultra-deep gas and ultra-long reach wells. The ENSCO 120 Series can work throughout the world, but all 3 will be starting their initial contracts in the North Sea. Customers not only value the technical capabilities of the rigs, but also our extensive experience and track record in the region. For example, all but one of our rigs operating in the North Sea had 100% utilization during the third quarter. And earlier this year, we are in first place in the annual IADC North Sea safety competition. Operational performance like this is critically important to customers, and interestingly enough, we have already begun discussions to recontract our 120 Series rigs after they complete their initial terms. With that, I will now turn the call over to Sean.

Thanks very much, Dan. And operator, if you could please open up the line for questions.

[Operator Instructions] Our first question is from Ian Macpherson from Simmons. Ian Macpherson - Simmons & Company International, Research Division: You've talked to us recently about your buyback authorization, the stock has underperformed, the valuation by most accounts would appear to be discounted. Can you just update us on your thoughts on the buyback, and also if you can provide us any -- maybe not specifies, but broad stroke color with regards to your distributable reserves? And what that amount might look like vis-à-vis your $2 million authorization of buyback of stock.

This is Jay, Ian, I guess a couple of comments I would make. One, is over the last quarter we've had a really good opportunity to meet with most of our major shareholders and large number of shareholders in general. Overall, I'd say our investors are still very much in favor of us continuing to invest and grow the business, particularly, where we can identify differentiated kinds of opportunities, like Dan was just mentioning with the ENSCO 120 Series rigs, where we have a real significant performance and cost competitive advantage. But, I guess, having said all of that, at the same time, what we have also heard from a lot of shareholders is an expressed concern about industry overbuilding and bifurcation and where all of this may go in the long-term. A lot of people have asked us to start considering returning capital at a higher rate than we have in the past. And there is various views on whether that should be through dividends or share repurchases or combinations thereof and a wide variety of views in that regard. So I'd say, as a management team, we listen very closely to our shareholders. We take on Board what's been discussed over the last couple of months and we will be sharing this feedback with our Board here before the end of the year. As you know, this is ultimately a Board decision as to what we do around return of capital and I'm not, obviously, in any position to give you any projected outcome of those discussions. But I will tell you there will be discussion before the end of the year on the matter. With respect to distributable reserves, I guess, I give you just in very general guidance, right now. We have a little bit less than $0.5 billion of distributable reserves and we expect that to be more than $1 billion by the end of the fourth quarter. And the issue, I think, people have not completely come to grips with is that U.K. companies do have to have distributable reserves in order to pay dividends and execute share repurchase programs. So that is -- you're right to ask the question, it's an important element of how much can you pay in dividends and how much stock can you repurchase. And I'd say, we feel like we're in good shape, your distributable reserves basically get created by dividending up earnings from subsidiaries to the holding company which can be a challenging process for a U.K. company. But it gets done in the course of time, and I think we feel like we've got enough flexibility to do whatever we think makes sense going forward. Ian Macpherson - Simmons & Company International, Research Division: That's helpful. And you say, maybe, over $1 billion by year end. Would that be after the scheduled dividend distribution in Q4 or before?

That's correct. Yes. That would include third quarter and fourth quarter distributions. Ian Macpherson - Simmons & Company International, Research Division: That's very helpful. Follow-up question, this might be a shot in the dark, but, Kevin, since you do have letters of award in hand for a couple of these extensions. I think, you said the 8501 and 8502 as we saw in your fleet status last week, can you give us any color on current pricing of that asset class? Is it similar to recent fixtures? Has it moved materially?

We're in advance discussions on finalizing the contract. So let's just wait for the contracts to get signed. Ian Macpherson - Simmons & Company International, Research Division: Okay. Are you still anticipating mobilizing up to a couple of those rigs out of the Gulf next year? Or you said, seamless utilization for the whole fleet next year, would that entail possibly mobilizations, including paid mob.

Yes. There is multiple opportunities for these rigs in the Gulf of Mexico and outside the Gulf of Mexico. So we're trying to optimize and put them in the best place. My comments were to 8502 and 8503, I believe, but there is lots of opportunity, both where they are now and other markets. So I have a very good outlook on these rigs.

Our next question is Byron Pope, Tudor, Pickering, Holt. Byron K. Pope - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: I'm trying to think through opportunities for margin improvement over the next couple of years, absent changes in swap market day rates. So could you just speak to those opportunities for Ensco, I mean, I know on the jackup side, a considerable number of jackups have been in shipyards for service and upgrades over the past couple of years. But could you just frame that over the next couple of years versus maybe the past 2 in terms of opportunities for margin improvement, again, absent day rate movements for both your jackups and floaters?

Well, I think, certainly, we've signaled that the jackup utilization in the -- this year has been impacted by a large number of shipyard visits that were routine and required, but out of the ordinary and not going to be repeating. So we see a major improvement in jackup utilization going forward, that we expect will help margins and revenue and top line revenue as well. I think we continue to manage our contract drilling expenses tightly as we can. The one issue that works against everybody in the industry, really, is labor inflation and there continues to be very strong demand for labor and a willingness by some of our competitors to bid up right labor costs quite significantly. And our strategy is not to lead that crusade but to be a follower, and try to hold the line on labor as best as we can. But we, obviously, have to react to market pressures as well. I think we still have a fair amount of work to do on the supply chain side. Working with vendors, we have a number of standardization initiatives underway to basically standardize on one part all over the world and get better procurement leverage than we're getting today. And we're starting to see those programs yield some benefit. And I think that's an area where we still have a lot of work to do in the future that will generate good results. Byron K. Pope - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Okay. And then just 1 additional question from me. Kevin, when you gave your outlook of the market and the opportunities that you guys are seeing on the floaters side, it seems as though, I heard you say 1/2 of those are for opportunities in water depths less than 5,000 feet. Could you just give a little more color on some of the offshore theaters where you think the demand for those water depth capable floaters is most to keep?

The nice thing, Byron, is we're seeing demand in every arena. Obviously, the Gulf of Mexico tends to focus more on the ultra-deepwater side as well as Brazil. But in West Africa, the Mediterranean we're seeing a combination of requirements for DP rigs as well as moored rigs in water depths from 1,000 to 5,000 feet of water. The North Sea we believe has some moored rig opportunities for hash environment rigs. And you get a good mix out in Asia-Pacific everything from 1000 feet up to -- like I mentioned, Chevron coming out for an ultra-deepwater rig. So the nice thing about the market right now is it's a good combination, it's a good spread. It really fits well into a diversified company like Ensco, because we can evaluate opportunities all over the world for most of our rigs.

Just 2 other -- this is Dan, just 2 other comments on margin expansion. As Jay mentioned, we are going to have substantially increased utilization on the jackup fleet in next year. In addition to that, and probably even more importantly, there is revenue expansion on all -- almost, virtually all of these contracts are rolling over to higher day rates next year, which will result in higher margin expansion. In addition, all our DS Series rigs and the 120 Series rigs that we're taking delivery of and putting to work all are very significant margin contributors, and will have an overall uplifting effect on margins next year.

Our next question is from Robert Shoemaker from Citi.

So, I wanted to ask Kevin just a clarification on your comment on market absorbing all the new rigs. I was assuming, you meant, but I wanted to clarify this that the rigs would be observed roughly at current levels of day rates for high-end jackups and ultra-deepwater floaters for -- taking into account various regional differences and lengths of contract. But roughly, where the market is today?

Robert, the thing about the market is the overall dynamics are very positive, commodity prices are good, supply is known. What varies due to lots and lots of different factors is when the demand appears. But as we've said in our comments, we see strength and growing demand in both floaters and jackups. Every rig has an optimum place to work at an optimum rate. So the one thing I think about the markets that have today that you can't do maybe that you could in the past. You can't really generalize about certain specifications, certain classes and say they're going to get this. And we've got lots of opportunities -- lots of examples where rigs gets a lot higher day rate and maybe the market analyst thinks it's going to get. So I, really, comment on the day rate side other than to tell you, the demand looks very positive and against that demand I would expect all these rigs to find a contract.

One of the comment I'd make to that as well and Kevin talked about a minute ago. With our global reach, there's always this focus on day rates and people don't focus on tax rates and operating costs. It's very substantial differences in profitability of contracts that affect the overall profitability other than day rates. So with our global reach and what we look at is where we can take a rig anywhere in the world and make the most money on it, not necessarily getting the highest day rate, but getting the maximum income from the rig.

Right. So, Kevin, you also mentioned, some tendering in brazil. Some for work over units in the Campos and Santos and then other interest in Petrobras, and a tender for new ultra-deepwater rig which would be bit submitted by the end of this month. So are you looking at both of those opportunities you mentioned, you are bidding for the ultra-deepwater tender. And how about the Campos, Santos, because, I think, you've got the ENSCO 502 coming available, right?

Yes, but the work over business required DP rigs, because what they want to be able to move around. So that's a DP only. The new incremental rig requirement for Petrobras is a very typical tender. Petrobras has 1 or more rigs. They want these rigs in operation by the end of '14. So it's a recognition, I believe, by Petrobras that they've got some gaps in their drilling schedule based on what they expect it to have. And they entered the market really by surprise, and I think it's very positive.

Our next question is Gregory Lewis, Crédit Suisse. Gregory Lewis - Crédit Suisse AG, Research Division: Kevin, you talked about maximizing optimization for rig. When we think about the final ENSCO 120, the 122 that I guess is -- I guess, there's potentially contract for it. Should we think about that rig following the other 120 rigs into the North Sea? Or is there potential other opportunities elsewhere for that type of a rig?

The answer to your question is, yes, in both the accounts. You should think of the 122 as following the other 2 rigs into the North Sea. I think that's what Dan basically said. There are however, opportunities for these rigs outside of the North Sea. And we've actually even put bids in on some opportunities. So it’s been a very positive design, it's got a lot of capability that you can't get from other rigs for the price that we can afford to work at. And I think we will continue to evaluate outside opportunities in other markets. But so far the North sea has been the first to commit to these rigs and clients have without tenders actually come to us and ask to have these rigs. Gregory Lewis - Crédit Suisse AG, Research Division: And then just one final one for me. On the overall jackup market, I mean, clearly, you guys have a pretty good viewpoint across the globe and in terms of the whole jackup market given your footprint. What's your base in these things still has -- I mean, clearly day rates have gone up across the board. Is there any basin where you still think there's some decent strong uplift where we would see day rates continue to really move higher, in any specific basin or is it sort of -- should we just expected to continuation of what we have been seeing?

It sounds kind of contrite, but obviously, when demand exceeds supply, it gives us opportunities to push day rates. I think the Gulf of Mexico has been a good example of that. We have seen day rate rise also in Mexico, where Pemex has come in. Middle East, so I mean, my generic answer to your question, would be, again, we don't like to speculate on day rates. We prefer to talk about supply and demand, and in market like the North sea, Gulf of Mexico, Middle East, right now, West Africa where there is more demand than supply. I think you can expect the market and the operators in that market to try to push rates up.

Our next question is from Scott Gruber from Bernstein. Scott Gruber - Sanford C. Bernstein & Co., LLC., Research Division: In your offshore rig demand for cash, how do you account for customer cash constraints. We're hearing a lot from the majors, in addition to, Petrobras, they're all generally forecasting flat CapEx from here as they just don't have a lot of excess cash to spend. So how do you think about reconciling that commentary was a forecast for multiple years of deepwater demand growth.

If you look at the basic breakeven economics on the oil price driven basis on each basin, each water depth, each type of prospect, there is a big field database that actually forecast production rates on a well by well basis. We break that into a drilling demand. And that drilling demand is broken out by water depth, rig type et cetera, et cetera. So it's very, very granular. And you can apply sensitivities to it. CapEx is not the only story. You got to look at the total spend of the operators and recognize that a significant portion of the money that they spend is for their own operating costs in the field and other areas. So, I understand, what you're saying about CapEx, I'm not saying I agree with it, but I understand it. But there is a large portion of the spent by our clients based on maintaining production and that activity as we look at decline rate across the world is growing. So what's very difficult to see by looking just at CapEx is the true drilling activity. Because you -- what you don’t see is the sustained level of activity they need to maintain to keep production up. Scott Gruber - Sanford C. Bernstein & Co., LLC., Research Division: Got it. But just thinking about their ability to increase spending from here, is there a concern that they just target the highest return projects and not necessarily go after everything that's economic at 100 or 110 or whatever your -- the crude price assumption is?

Yes. Everybody has got limitations on the their ability to spend capital, spend OpEx, engineer the solutions. So that's also a sensitivity in our database. We look at fields that could be delayed because of that and we've seen that. And over time, you got fields that are delayed, but you have other fields that accelerated. So it tends to balance out. Scott Gruber - Sanford C. Bernstein & Co., LLC., Research Division: Got it. Thinking about the bifurcation, which is seems to be emerging a bit in the floater market, and you mentioned all the newbuilds getting absorbed. But is the assumption that the bifurcation intensifies from here and make room for the newbuilds. Or do you think the -- some of the downtime that's...

I don't like to word bifurcation. We've always in our business had specification changes in our fleets, driven by a number of factors, sometimes on board technology on the rigs, sometimes drilling demand. You see a combination of all of that right now. We've got some building going on with age [ph]. There are plenty of prospects for the older rigs in the fleet. We're a great example of that, all of older rigs have multiple prospects for drilling because they are in good shape and are efficient. We also have lots of prosperous out there, that you need the newbuilds. So the market price is accordingly to the economics and the need for the rig and it's not -- it's kind of common sense. A lot of the older rigs, they're fully depreciated, they're drilling prospects that are shallower with less hydraulics and they can't drill the more difficult prospects. So what you see going on in the market, in my opinion, is a natural evolution of the market that we've experienced for as long as I've been in the business. So I don't worry about it.

Our next question is Roland Morris from Cowen.

I was just wondering if you could expand on the contracting environment in, particularly, the ultra-deepwater segment. I don't want to beat a dead horse on the rate side, but more so just to get an idea of the difference to what you're seeing in the short-term versus the long-term contracts out there? I'd say specifically on the 8502 and 8503, are you guys looking to sign a couple of shorter term extensions in order to just get up, because you see demand on a longer-term basis out into 2015? Or what are you guys seeing across the board?.

Yes. The current LOA [ph] as I mentioned in my comments are generally for shorter term contracts that will get us into 1.5 years down the road. The things we're bidding outside the Gulf of Mexico are all longer term. So like Dan said, we're looking at all of this as what optimum for the fleet, what produces the highest level of earnings and sometimes we do have to be bridge some short-term gaps, which is what we're going through right now with 8502 and 8503.

Do you guys think that you will can continue to see that going forward or do you think you'll start to see a little bit more increased demand for the longer term contracts out there?

The 8500 Series rigs is still the market niche that has been vacated by, really, what I would call deepwater moored floaters. They are for the benefits of DP. They're still highly efficient rigs and there's a large client base that doesn't really use the ultra modern 6th generation drillships. So it's a different market niche. And it's a whole separate set of supply and demand on to its own self. So you really cannot try to compare the 2 different markets that you serve with ultra-deepwater drillships versus the 8500 Series semis.

Having no further question, this concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Thank you, operator, and thank you, everyone, for your questions and your interest in Ensco. Have a great day.