Valaris Limited (VAL) Q4 2013 Earnings Report, Transcript and Summary

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

Welcome everyone to Ensco's fourth quarter 2013 conference call. With me today are Dan Rabun, CEO; Mark Burns, our Chief Operating Officer; Jay Swent, CFO; David Hensel, our Senior Vice President of Marketing; as well as other members of our executive 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 earlier this week. Now let me turn the call over to Dan Rabun, Chairman and CEO.

Thanks, Sean, and good morning, everyone. Let me start by welcoming David Hensel, our new Senior Vice President of Marketing, to our conference call. David joined in 2003 and he has held several important positions, including marketing our first ENSCO 8500 Series rigs, comanaging our deepwater business unit and leading our Europe and Africa business unit, and most recently, our North and South America business unit. David's broad range of experience in both marketing and operations will serve him well as he leads our global marketing team. Now I will cover the highlights for the year and fourth quarter, as well as provide a preview of what we will see in 2014. David will then comment on the state of our market and Jay will review our financial results and provide a detailed outlook for the year ahead. Starting with 2013 highlights. Our safety performance, as measured by our total recordable incident rate, was a new record, exceeding our previous record set in 2012 and significantly better than the industry average. This industry statistic measures the number of injuries per 100 people working full time for a year. Safety is critical to our success and something that we focus on every day. We are proud of this achievement and applaud the efforts of our offshore crews and onshore employees for these record results. Due to their commitment to safety, we are off to a strong start in 2014 as well. We achieved record revenues and earnings in 2013 of $4.9 billion and $1.4 billion, respectively. These strong financial results, coupled with $11 billion of revenue backlog, allowed us to raise our dividend twice in 2013, doubling it from $1.50 to $3 per share on an annual basis. In addition, we invested $1.8 billion in our fleet, with the majority dedicated to newbuild rigs, showing once again our ability to invest in future growth while also returning additional capital to shareholders. Our capital projects teams were busy throughout the year. In South Korea, we accepted delivery of ENSCO DS-7, a new ultra-deepwater drillship that commenced operations in Angola ahead of schedule. The crew on ENSCO DS-7 has benefited from lessons learned on our other drillships, like ENSCO DS-6, which had 96% utilization in 2013. In Singapore, our capital projects team delivered the first 2 of our ENSCO 120 Series jackups. As I've mentioned before, these ultra-premium harsh environment rigs have a patented cantilever system that provides our customers with significant operational efficiencies when drilling large multi-well programs. As a result, they've all been contracted through direct negotiations with customers. These investments are a key element of Ensco's continuous high-grading strategy and so are sales of less capable rigs. We sold 3 additional jackups over the past year and have reinvested the proceeds in new rigs. Our high-grading strategy is critical in achieving highest levels of customer satisfaction and I'm happy to report that customers rated us #1 in total customer satisfaction for the fourth year in a row in a recent independent survey conducted by EnergyPoint. We achieved top scores in 8 of 14 separate categories, including performance and reliability. We earned the #1 ranking in this category by having excellent uptime performance as measured by operational utilization which adjusts for planned downtime and uncontracted rigs. Ensco has the largest number of premium jackups worldwide and our shallow water fleet posted 98% operational utilization in 2013. We've had similar success with our ENSCO 8500 Series rigs, with operational utilization of 95% during 2013 for the 7 rigs in this series. While day rates have come down a notch recently, these rigs are still generating excellent returns because they were built for a much lower cost than comparable sixth generation rigs. At the other end of the spectrum, 5 of our floaters accounted for 2/3 of this segment's operational downtime in 2013. We are focused on reducing downtime by working more closely with our equipment vendors to improve quality assurance and quality control through more rigorous evaluation of quality metrics and performance. In addition, we continue to standardize and simplify fleet operations, which we believe will help to reduce downtime. In terms of market conditions, Dave will go through this in detail. But let me make 3 high-level comments. First, Ensco has $11 billion of contract revenue backlog and most of this is front-end loaded. In a moment, Jay will provide our revenue outlook for 2014 and I want to underscore that approximately 90% of our revenue outlook for the year is covered by contracts that are in place, so we have a very strong bridge into 2015. For example, all of our active drillships are fully contracted in 2014. So while the capital market have expressed concerns recently about softening day rates, we believe Ensco is extremely well positioned with limited recontracting risk in 2014. Second, customer demand has remained healthy because the fundamental factors driving demand for drilling rigs are unchanged in terms of commodity prices, global GDP and offshore discoveries. The supply side is causing some contracting gaps, as David will discuss, but I don't sense we will see a long-term supply-demand imbalance. And third, I think Ensco will see more than its fair share of contracting opportunities this year, given the advantages we have in terms of fleet quality, operating track record, safety performance and #1 customer satisfaction scores. Before I hand it over to David, we announced in November that I will be retiring after serving 8 years as Ensco's CEO. My proudest accomplishment is our safety record and the consistent improvement we have made over time. Our offshore crews and onshore employees have excelled at taking our safety performance to even a higher level. In addition, I believe the team we have built is the best in our industry. Ensco is extremely well positioned to capitalize on future opportunities in terms of fleet quality, global presence, customer base, balance sheet strength and systems and processes. Succession planning has been a major focus of mine and the Board of Directors and I believe the transition to the new CEO will be seamless. Now I'll turn it over to David to discuss the state of our markets.

Thanks, Dan. This morning I will recap some of our contract signing that occurred during the quarter and present our outlook for the floater and jackup markets. During the fourth quarter, we received approximately 50 inquiries for our jackups and floaters. This level of activity is in line with third quarter 2013. The number of floater inquiries was down slightly. However, the number of rig years represented by those inquiries was on par with prior quarters. While we have seen some floaters go idle recently, this appeared to have more to do with the supply of new rigs coming into the market, as well as customers letting rigs go early due to lack of success, OGX's bankruptcy in Brazil and delays in receiving regulatory approvals. We believe customer demand going forward will be positively influenced by several factors. One, stable commodity prices, well above breakeven levels for our customers to continue drilling. Two, global economy growth. Three, healthy E&P spending based on current estimates that is focused on deepwater plays that support customers achieving their production targets. Four, new discoveries over the past few years that will require appraisal and development drilling. Five, favorable activity in terms of new offshore lease sales. And finally, a stable base of drilling demand from developed wells, as 2/3 of the wells being drilled globally are for development. It is important to remember that 55% of the global jackup fleet and 37% of the floater fleet is more than 30 years old and we expect the pace of retirement to accelerate. As we look at specific markets, we saw a strong customer demand for our jackups in the U.S. Gulf of Mexico. We signed a 1-year contract and an 11-month contract with Chevron for ENSCO 68 and ENSCO 81, respectively. We also contracted ENSCO 87 with Fieldwood for 1 year. Each contract was at a higher rate and longer term than the preceding contract. The jackup market in the U.S. Gulf was a point of strength during 2013. We expect this market to remain in balance. With respect to floater activity in the Gulf, earlier this year, we signed a 3-year deal with ConocoPhillips for ENSCO DS-9 at $550,000 per day. Our contract includes a cost escalation provision plus the mobilization fee from the shipyard. ConocoPhillips is a new floater customer for Ensco and they have been increasing their lease holdings in important deepwater basins, especially in the U.S. Gulf of Mexico and Angola. We view ConocoPhillips as an important strategic customer and are excited to build upon our longstanding North Sea jackup relationship in the future. Most recently, we agreed to a 3-well contract with another new customer, Talos, for ENSCO 8502 at $530,000 per day. Discussions are ongoing with customers for our other 8500 Series rig with 2014 expirations for workload in the U.S. Gulf as well as in the regions, such as West Africa, the Mediterranean and Southeast Asia. In Mexico, Pemex continues to add jackups to their shallow water fleet, recently agreeing to add 5 additional jackups, including 2 newbuild units. We expect Pemex to continue to grow their fleet. We continue to monitor the ongoing energy reform in Mexico, which may open the market to more floaters in the coming years. Moving to Brazil. Petrobras remains focused on their higher priority pre-salt developments. We understand they are working to renew rigs with contracts expiring in 2015. In addition, Petrobras has 2 outstanding opportunities, a formal tender and a market inquiry, each for one or more rigs that we believe serve as both a market check against the current extension negotiations, as well as recognition that they will require more rigs to fill gaps in their forward drilling program. We have bid into both of these opportunities. While Petrobras looks to increase pre-salt drilling, they continue to focus on maintaining production in the Campos and Santos basins, requiring workover units. We believe that investment in recent bid rounds by Petrobras and foreign operators, many of whom are already major customers, is a positive development for the future prospects of the Brazilian floater market. Moving to West Africa. This area remains a source of incremental demand. Since our last earnings call, we have seen incremental tenders for 2 or more floaters. Outstanding tenders now require at least 8 rigs and we have bid ultra-deepwater drillships and semisubmersibles and expect to have a drilling presence in the region. We also see demand for jackups in West Africa as well, including multi-year terms. Turning to the North Sea. The jackup market remains tight as demand exceeds available supply. And we see strong customer demand for our limited availability in 2014. During the fourth quarter 2013, we signed a 2-year contract with NAM in low $230,000 per day rate for ENSCO 122. We expect this rig to begin its initial contract later this year. Customers have contracted each of our 3 ENSCO 120 Series rigs well in advance of their delivery date due to the superior technical characteristics of these rigs. Given the strong customer demand, we ordered our fourth rig in the series, ENSCO 123, and are already having meaningful conversations for the rig with potential customers. In the U.K. floater market, supply and demand continue to remain balanced and we believe there will be opportunities for incremental harsh environment floaters. ENSCO 5004 is now in the Mediterranean undergoing a shipyard project as it prepares for its multi-year contract that will commence in the third quarter of this year. We believe that there are opportunities for additional floaters in this market. In the Middle East, we executed a 2-year contract for ENSCO 53 with NDC. We expect Saudi Aramco to remain active in 2014 and we are optimistic that they will renew all of their jackups rolling over, including 5 of our rigs with contracts expiring in 2014. We see open tenders for 8 rigs from other operators in the region for standard and high-spec rigs for terms of 1 year or more. Additionally, ONGC has tendered for up to 11 jackups. While we expect most or all of these requirements are against incumbent units, this tender may absorb 1 or 2 incremental rigs. The Asia Pacific jackup market remains balanced. We added backlog on ENSCO 109 and are moving the rig to Vietnam for its new contract. We expect the Asia Pacific region to be a competitive jackup market during 2014, as uncontracted newbuilds may impact the contracting environment in the region. We continue to see new contracting opportunities for floater rigs in Asia Pacific, though project delays and additional rigs entering the region have increased the competitiveness of this market. We are in advanced discussions with a customer for ENSCO 5005. We also see floater demand in Australia, Indonesia, Myanmar and Vietnam. Regarding the worldwide order book for floating rigs, we count 27 competitive new rigs to be delivered before the end of 2014, of which 13 are uncontracted. We believe that approximately 5 of these rigs are in discussions with operators and could be committed at this time. As mentioned previously, we recently contracted ENSCO DS-9 and we feel confident that we will receive final contract approval for ENSCO DS-8, our remaining 2014 floater delivery. The newbuild order book for competitive jackups shows 32 to be delivered into the market by year end 2014, of which 24 are uncontracted. As Dan mentioned, customer demand remains healthy and the pressure on current market conditions is more supply related, which we believe will be more of a short-term issue, especially as we see a pickup in the number of older jackups and floaters being retired. Now let me turn the call over to Jay.

Thanks, David. Today, I'm going to cover highlights of our fourth quarter results, our outlook for the first quarter and full year 2014, our financial position and a recap of 2013, as well as some comments for the year ahead. Now let's start with fourth quarter results versus prior year. As noted in our press release, certain tax items from last year influenced the comparisons. Adjusted for these items, our earnings per share growth year-to-year was driven by the expansion of our fleet and the benefit of higher day rates. Total revenue for the quarter was $1.26 billion, up 16% from a year ago. Floater revenues increased 16% to $779 million from the prior year due to the addition of ENSCO 8506, ENSCO DS-6 and ENSCO DS-7 to the active fleet and increasing day rates for several other floaters. Year-over-year, the average day rate for the floater segment grew 19% to $438,000. Recorded floater utilization was 73% compared to 83% a year ago. As noted in our press release, ENSCO 5002 and ENSCO 5004, which were previously contracted with OGX, did not recognize revenue in the fourth quarter as anticipated in the outlook we gave you on last quarter's earnings call. ENSCO 5000 was stacked during the fourth quarter. Operational utilization for our floater segment, which adjust for planned downtime and uncontracted rigs was 89% compared to 90% a year ago. Jackup segment revenues grew 17%, primarily due to a 14% increase in the average day rate to $127,000. Reported utilization for the jackup fleet in the fourth quarter was 89% compared to 87% last year. Operating margins for the jackup segment jumped to 54% in fourth quarter 2013 from 50% last year. Contracted backlog for our jackups reached a record $2.8 billion at quarter end or nearly 1.5 years of backlog per rig on average. Total fourth quarter contract drilling expense, as noted in our press release, increased year-to-year, mostly due to 3 factors: about half the increase was due to adding newbuild rigs to the fleet; approximately 1/3 of the increase is due to higher unit labor cost; and the balance was due to favorable items that were included in last year's fourth quarter. Depreciation expense increased $13 million to $157 million, due to the adding of 3 ultra-deepwater floaters to the active fleet that I just mentioned. General and administrative expense for the quarter was $35 million, unchanged from last year. The effective tax rate was 12% for fourth quarter 2013 compared to prior conference call guidance of approximately 13%. Now let's turn to the first quarter outlook. Revenues are expected to decline about 5% compared to fourth quarter 2013. We will have a full quarter of operations for DS-7 and a partial quarter for ENSCO 120. But ENSCO 5006, which has a multi-year contract with Inpex in Australia, is deferring revenues as it mobilizes to Singapore and undergoes shipyard upgrades. In addition, ENSCO 8503 ended its contract with our customer earlier than expected in January and begins its new contract with Marathon in April. ENSCO 7500 is currently idle as we market the rig and 3 jackups, ENSCO 70, 96 and 97, will undergo planned shipyard upgrades during most of the first quarter, as noted in our Fleet Status Report. On the expense side, we anticipate first quarter 2014 total contract drilling expense will be in line with the fourth quarter. Depreciation expense should increase by approximately $4 million due to the addition of ENSCO DS-7 and ENSCO 120 to the active fleet. G&A should increase slightly from fourth quarter, which was $35 million. And other expense is anticipated to be approximately $31 million, comprised of $36 million of interest expense, partially offset by interest income. We expect an effective tax rate of approximately 14%. This is a bit higher than usual because we recently sold ENSCO 69 and the Wisconsin, resulting in higher taxes for the quarter. Our estimated effective tax rate excluding the sale is approximately 12% for the first quarter. Including the elevated tax rate in the first quarter, we anticipate full year 2014 effective tax rate of approximately 12.5%. Excluding the impact of the gain from the jackup sale, the projected effective tax rate for the year would be 12%. Now let's move to outlook for full year 2014. Revenues are estimated to increase in the range of 5% to 6% as we benefit from our newbuild deliveries, including a full year of operations from ENSCO DS-7 and a partial year of operations from 3 of our ENSCO 120 Series rigs. As Dan mentioned earlier, we have a very strong bridge to 2015, given that approximately 90% of our 2014 revenue outlook for the balance of the year is comprised of contracts already in place. We are fully contracted in 2014 for our active drillships. Approximately 75% of our 8500 Series rig time is committed and about 2/3 of our jackup rig time is committed. For our remaining 5 rigs with water depth capabilities of less than 3,500 feet, we have a higher percentage of available rig days. But as a reminder, these 5 rigs represent a very small portion of our fleet. Our outlook for revenue growth is influence by planned shipyard upgrades to several of our rig, including projects that are being funded by our customers, as noted in our Fleet Status Report, such as ENSCO 5006, which will spend the majority of the year undergoing upgrades prior to starting a multi-year contract in Australia, and 2 of our jackups, ENSCO 54 and ENSCO 70, that will spend part of the year in a shipyard for customer-funded upgrades ahead of multi-year contract. As a reminder, even though we are receiving cash payments while in the shipyard for many of our upgrade projects, we don't include these days in our reported utilization. We estimate reported floater segment utilization to be in the low to mid-70% range compared to 80% in 2013. For the jackup segment, reported utilization is projected to increase to the low 90% range from 88% in 2013. Total contract drilling expense is expected to increase approximately 5% in 2014, due mostly to the addition of the newbuild rigs that I mentioned earlier, as well as an increase in unit labor cost for offshore personnel to meet market conditions. These items will be partially offset by $70 million in cost savings from stacked or idle rig, plus lower expense business costs associated with shipyard projects are capitalized and $24 million of pretax gains from the sale of the 2 jackups, ENSCO 69 and the Wisconsin, earlier in this year that will reduce contract drilling expense. Depreciation is expected to increase $60 million to approximately $670 million, primarily due to the addition of the newbuild rigs that I mentioned earlier. G&A expense is anticipated to be down slightly from last year to approximately $145 million. Interest expense is estimated to improve to about $145 million from $159 million last year. This improvement is attributable to approximately $80 million of interest that will be capitalized in 2014 compared to $68 million of interest that was capitalized in 2013. We expect interest income for the year of about $13 million due to interest earned on certain long-term contracts for reimbursement of mobilization and capital upgrade costs. 2014 capital spending, which is subject to change throughout the year, is currently forecast to be $2.3 billion. This breaks out as follows: $1.4 billion in newbuild CapEx, which includes the final payments for ENSCO 122 and ENSCO DS-8 and DS-9, as well as a milestone payment for Ensco DS-10; plus $570 million for rig enhancement project; and $300 million for sustaining projects. More than 1/3 or approximately $200 million of our upgrade CapEx will be funded by our customers. For example, in the case of ENSCO 5006, the customer is paying for the rig mobilization to Singapore and a day rate while we are in the shipyard, in addition to funding upgrades. These payments are being deferred until drilling commences and will add approximately $200,000 per day to the nearly $500,000 average day rate over the 40-month contract that we expect to begin in the fourth quarter. In Brazil, ENSCO 6001 and 6002 will begin upgrade projects later this year. And in addition to funding more than $40 million in upgrades, Petrobras will pay the majority of the operating day rate for these rigs while they're in the shipyard. We anticipate receiving more than $50 million in customer payments for upgrades and mobilization for the 2 jackups I mentioned earlier, ENSCO 54 and ENSCO 70, prior to starting multi-year contracts. We project newbuild CapEx beyond 2014 of $825 million, $600 million in 2015 and the remaining $225 million in 2016, as we deliver our final rig under construction. So I'll wrap up by reiterating Dan's comments that we are very pleased with the progress we made last year and we expect this to continue in 2014. Our growing fleet produced record revenues and 2014 should be another record year. Strong financial results and a positive outlook prompted us to increase our dividend twice in 2013, doubling it to $3 per share annually and we are committed to maintaining this level. All 6 of our rigs under construction are on track for their delivery dates and are on budget. We have divested several older rigs and reinvested the proceeds back into our fleet as part of our continuous high-grading strategy. Over the past 4 years, we've sold 13 rigs for a total gain of $80 million. In total, we invested $1.8 billion in our fleet last year, funding these investments out of operating cash flows and available cash and showed once again our ability to invest in our fleet while returning additional capital to our shareholders. We plan to invest another $2.3 billion in our fleet this year and we believe our fleet growth and high-grading strategy position us for continued success. This strategy has been a key component of earning the #1 customer satisfaction rating for the fourth year in a row. And finally, we ended the year with a strong financial position, including $11 billion in contracted revenue backlog, which provides significant visibility into our revenue outlook for 2014 and 2015; a 27% leverage ratio; $216 million of cash and short-term investments; and $2 billion of fully available revolving credit facilities. In 2014, we plan to take our past achievements to the next level. We remain committed to improving on our record safety performance. We will add several new rigs to our fleet and commence operations in new areas around the world. We're focused on improving our uptime performance in contracting our available rigs during the year and we will continue to go beyond customer expectations to maintain our #1 ranking in customer satisfaction. Ensco is the strongest it's ever been and we plan to be an even stronger company a year from now. Now I'll turn the call back over to Sean.

Thanks, Jay. Now operator, please open up the line for questions.

[Operator Instructions] And our first question comes from Dave Wilson of Howard Weil.

I know you guys are somewhat agnostic between building new rigs, increasing dividends or share repurchases when it comes to whatever is going to increase returns for shareholders and have listened to shareholders' desires in the past when it comes to the dividend. But looking at the accolades, they're listed on the top of the press release, and Dan, some of the ones you mentioned in your prepared remarks, 1 of those 3 is noticeably absent. So just curious given where we are in the cycle, does one of those, as far as capital allocation, seem to be a front runner right now?

I think, Dave, we're pretty happy with the balance we have. As you noted, we doubled the dividend this year. I think right now, we feel like we have the right balance between newbuild CapEx, it's in the plan this year. As I said, we've got $1.8 billion last year, $2.3 billion this year. So I think we've got the right balance for the moment. I think looking at the returns on newbuild rigs right now and the cost of the shipyards, the returns don't look that great. They don't look terrible, but they don't look that great. And so I think we're comfortable with where we're at right now.

Okay. And then just as my second question, previously you guys have discussed opportunities for the 8500 Series rigs outside the Gulf of Mexico, and David mentioned that again today. Just curious to what extent, if any, the synergies could be lost by moving these rigs into various markets? I guess in terms of spare parts, labor or anything like that, where the benefits of the uniformity of their design would be diminished by breaking up the concentration in the Gulf of Mexico?

Well, I think there is some minor aspect of that. But there's lots of places we would move those rigs where -- or could move those rigs, where we have large shore base facilities and lots of synergies already. So I don't think that there would be a major dilution or diminishment of our margins by moving them. I think we do feel like, as a result of client wishes over the years, we ended up with more of those rigs in the Gulf of Mexico than we would have anticipated. So over time, it will make sense that we reallocate those rigs a little bit.

Our next question will come from Robin Shoemaker of Citi.

I wanted to ask about, in terms of this, quite a bit going on in terms of these 5000 Series rigs. You have a new contract on one of them. But just in terms of this mid-water market, should we take this contract, the ENSCO 5004, as kind of where you think the market is now in terms of rates? And additionally, I know some of the upgrades of this type of asset are customer funded. But what would be your position in terms of investing in some of these older either mid-water or more conventional deepwater rigs without customer funding?

Well, I'll talk to the last part of your question and then maybe let Dave talk to the first part, Robin. I think it really is very much a rig-by-rig situation. We're making a big investment in 5006, because we have a strong customer demand for that rig and it has some unique attributes. Some of those rigs are younger than other rigs and so some of them make sense to make investments in and some don't. You see right now, the 5000 is cold stacked or is stacked at the moment. So I think it really varies by rig. The ones that we have decided to make investments in, I think we feel very good about those investments in terms of what customers are looking for in terms of a rig and what we can economically accomplish. And the rigs where we don't think we can accomplish something that makes sense, we're obviously not making any further investment in them.

So with respect to the rates for that class of rig, as a practice, we don't generally project rates. And what again, I would reiterate is that each fixture is a function of the unique aspect of that particular opportunity, so rig proximity, rig spec, customer demand, et cetera. So I'll leave it at that.

Okay. And then if I could ask a question on Brazil. I know, of course, you've got the 7500 where you're seeking an opportunity there and there was a recent tender, ultra-deepwater rig tender, and at least for the bids that were publicly disclosed, I didn't see Ensco's having made a bid within the context of that tender? Maybe you did, I'm not sure. But what -- do you -- can you just give us an update there on the ultra-deepwater tender, plus the 7500?

So Robin, this is Dan. We did participate in that tender and we were significantly higher than the winner in that tender. And David just returned from Brazil about 2 hours ago so he can probably give you an update on what else is going on down there.

Yes. Yes, we are actively seeking opportunities for the ENSCO 7500. And there are opportunities both in Brazil as well as some other geographies around the world.

Okay. So for the time being, it's -- would you say it's warm stacked or what's the..

I would say she's ready to go back to work.

[Operator Instructions] And we have a question from Gregory Lewis of Credit Suisse. Gregory Lewis - Crédit Suisse AG, Research Division: I guess I just had a question regarding the existing buyback. I mean clearly, it's a big number that you guys filed, I guess, last year. And I mean, as I guess the market has softened, at a certain point, what would -- I guess my question is, what would make you guys more aggressive at buying back stock? I mean you mentioned that the deepwater and the newbuilds economics are attractive, but maybe not as attractive as they were, say, 6, 12, 18 months ago. So I'm just trying to get a gauge for what would drive the buyback?

Well, I guess, Greg, you know us well enough by now to know we're not probably going to answer that question directly. I would say, as we always say, all options are on the table. If you think about what we've done this year with doubling the dividend, we're returning $700 million of money back to shareholders and we're making a big investment in growth CapEx this year. We're also making a pretty good investment in enhancements and upgrades to existing rigs as well. So we have pretty much accounted for all the free cash flow for this year. In fact, we'll probably be drawing a little bit under our revolver by year end. So I don't think right now is the time for us to be talking very much about share buybacks. Obviously, we're watching the share price and that could always influence our decisions. But at the moment, I think we feel like for 2014, all of our capital is pretty well accounted for at this point. Gregory Lewis - Crédit Suisse AG, Research Division: Okay, that's fair. And then I guess another question just related to a couple of the 5000s in Southeast Asia. It seems like we're seeing Ensco, as well as some of your competitors, mobilize rigs to Southeast Asia looking for work. But when we think about trying to adequately adjust for idle time, what's sort of the turnaround time between a company if you -- I mean, and I realize it's a moving target, but if we were to say that, we see a mid-water rig in Southeast Asia get fixed sort of in, say, the May time frame. What's a rational or reasonable way to think about that rig actually getting up and starting to generate revenue?

I think it probably really, once again, is a rig-by-rig scenario. Some of them are fully crewed and ready to go immediately and others, maybe slightly down-manned, but when we're in warm-stacked status, we're pretty much ready to go on short notice unless the customer wants us to do particular upgrades before we start contract. Gregory Lewis - Crédit Suisse AG, Research Division: I guess what I was wondering is more so is it -- I guess I was wondering more so in the turnaround time from the customer. I mean clearly, I would imagine that if the customer is looking to contract the rig and the contract comes -- the tender is announced, and won in, we'll call it, May 1, for example. I mean is it reasonable to think that the rig starts up like a week or 2 later, is there more just sort of like a lag? Maybe that's a better way to ask it.

Yes, this is Dan. The way to think about it in Southeast Asia is that contracting cycle is much, much shorter there than probably anywhere else in the world and that's because of less structured regulatory environment. And you're not dealing with state-owned oil companies. So I know I'm not directly answering your question, but it is a very short-term contracting market. Now I'll give you an example, ENSCO 5005, which is one of the rigs that we decided to make an investment in. We've -- we're pretty close to being finished with the project. And we have numerous contract opportunities today that didn't exist a month ago just because now the rig is just about ready to go. And so it's much, much shorter. So it's not like some of these places where it takes 6 to 12 months to get regulatory approvals.

Our next question will come from Roland Morris of Cowen and Company.

I apologize if you guys already addressed this, but I just wanted to go over the DS-4 and it moving to the GOM. Can you just talk about what's going on there? Is it on a full rate during the move? Is it -- is there anything special in there?

No. There's nothing -- this is Dan. There's nothing special. What people don't remember is that rig was contracted and actually delivered to a customer in the Gulf of Mexico. The assignment down to Brazil was kind of Macondo-related, so it's just returning to work where it was originally contracted. There's nothing magical about it and we're getting full rate.

Our next question will come from Ed Muztafago of Societe Generale.

Wondering if maybe we can sort of take a step back a little bit kind of 10,000 foot, and one of the problems that I think has plagued the floater market has been the perplexingly slow pace of legacy rig retirement, certainly Ensco has been a little bit more proactive on that front. But can you talk to what you sort of view as the outlook for legacy retirement here? I mean, are we on the cusp of a material uptick or have you not seen enough pushback from the operators yet to really start forcing some of the older legacy rigs to go into the cold-stacked mode?

Yes, this is Mark Burns. Ed, I'll just comment on that. I think as we continue to see a number of newbuild rigs enter the market, we're going to continue to see pressure on the older legacy units. Normally, they will -- some of the older ones will be the first ones to go warm-stacked and then potentially cold-stacked, so I think it's a product of the market conditions. And I think it's not -- it's a cyclical aspect of the market. As these newer rigs come on, you'll see the older rigs come under pressure.

And again, as we've mentioned before, it's really a rig-by-rig decision. I mean there's -- some of these older rigs, if they've been maintained properly, have a lot of life left to them and some of the older rigs that people have made an investment decision not to put money back into them, the -- rig owners got to make a decision whether to make CapEx or call it a day. So I think the pace will pick up just as it has in the jackup business.

Okay. And then just given the fact that we have so many jackups coming into the market, do you view there as being any material risk that the jackup market retirement don't really kind of keep pace and we see a little bit of the same pattern emerge in the jackup market as we go through 2014?

Not really. I mean I think, again, it's going to be market-by-market specific. And I think, you will see the pace of jackup retirements continue. And so I think, what you will see though, there's a lot of very technically capable jackups that are coming out of the market and it's a question of whether the market needs technical capabilities. And that may mute day rates for the specific jackups coming out, but I think they'll all find work.

Our next question will come from Monroe Helm of Barrow, Hanley. H. Monroe Helm - Barrow, Hanley, Mewhinney & Strauss, Inc.: Just kind of going back, David, to the most recent tender in Brazil and the fact that the low bid was significantly below everyone else. Do you think this is a function of just that particular market? Or as some of the sell side's implying here, we taking a huge step down in day rates for, say, new ultra-deepwater equipment going in the market?

Well, I can't speak to our competitor's bidding strategies, as Dan mentioned, we weren't there. H. Monroe Helm - Barrow, Hanley, Mewhinney & Strauss, Inc.: Well, do you have any thoughts as to whether or not that lower rate is going to set the norm for new rates going forward in the Gulf of Mexico or West Africa?

Well, again, we generally, as a practice, don't make rate projections, so...

Our next question will come from Robert Pinkard of RBC Capital Markets.

My question is a follow-up on the jackup question. How do you see jackup retirement as it relates to Ensco's fleet? And which markets do you think would be most at risk to see some rigs get laid up of your jackups?

The first thing I'd remind you is over the years, we sold 13 jackups and we've done very well at it. And those rigs we viewed as being from our perspective at retirement age. And people were happy to buy them at pretty good prices. And we actually generated a profit versus the book value on all of those rigs. So we've been pretty aggressive at looking at the fleet and rigs that we think need to be retired or come out our fleet, anyway, taking action on them. And you'll see us continue to do that in the coming years. As Dan alluded to, I mean we have spent a lot of money on those rigs and they're in a very high state of repair and ready to work and very efficient assets for a lot of our customer base. So in terms of our view of it, I think you'll see us continue to sell a rig here and there over time, but we're pretty happy with our fleet overall. I think sort of the macro answer to your question is, people are going to work these rigs as long as they can generate positive margins operating them. And what I think is going to cause people to stop operating them is when they realize that they've now got a 5-year annual inspection or they've got a point in time where they've got to make some capital investments in the rig and people that have not invested in these rigs historically over time are going to be looking at huge investments that aren't going to make sense to make. And that's when you're going to start seeing these rigs come out of the rig fleet.

Okay, operator, it appears we have no more questions. So I just want to thank everyone for their participation on our call today. Have a great day.

Ladies and gentlemen, the conference has now concluded. We thank you for attending today's presentation. You may now disconnect your line.