Ensco plc (ESV)
April 11, 2012 8:30 am ET
Sean P. O'Neill - Vice President of Investor Relations and Communications
James W. Swent - Chief Financial Officer and Senior Vice President
John Mark Burns - Senior Vice President of Western Hemisphere
David Hensel -
John Karish -
Richard Roper -
John Stokes Knowlton - Senior Vice President of Technical
Kevin C. Robert - Senior Vice President of Marketing
Unknown Executive -
Waqar Syed - Goldman Sachs Group Inc., Research Division
Stephen Ellis - Morningstar Inc., Research Division
Sean P. O'Neill
Well, good morning, and welcome to Ensco's 2012 Investor Day, including everyone who's listening in today live via our webcast. For those of you who don't know me, I'm Sean O'Neill, Vice President of Investor Relations and Communications at Ensco, and on behalf of the entire senior management team, we thank you for joining us here today.
We have put together what I hope you agree is an educational day that highlight Ensco's strategy and our strengths in the marketplace. Before I walk through the agenda, I'd like to show you a video that we put together for day one a year ago on May 31 as our 2 companies were joining together. We sent this video out to every rig and every office to show to all of our employees, and we posted it on our website to describe the full range of capabilities of our newly combined company.
I hope you all enjoyed the video. And now, we're going to have a quick safety briefing from hotel security.
Good morning, everyone. My name is David. I'm with hotel security here at the Omni Hotel. I just want to briefly explain what we would do in the event of an emergency here at the Omni, okay?
To start with, if there was an alarm for any reason going off in the hotel, it would start by these lights up here. Do you see? They're flashing up here in the ceiling. We have 6 of them in this room. Any time there's any type of an alarm, the lights would automatically flash, okay? There's a 2-minute delay on all alarms in the hotel before an evacuation begins. That gives the Omni Hotel security and engineering department a chance to investigate what's going on and determine whether we need to evacuate or not. Okay?
If the lights do turn off within just a few seconds or a minute, that means that we've determined that there's no emergency and no need to evacuate. Should we have to, it will start with a manual announcement then a -- someone will come over the intercom and explain to you that we do need to evacuate the hotel.
If we do need to evacuate for any reason, obviously, we have the doors at the front. And we'd prefer that everyone exit the building through the front of the hotel so that when we do get across the street, we can account for everyone, and make sure everyone is safe. If, for some reason, those doors are not an option to evacuate, behind the screens, we have exits as well, and there are stairwells in both directions to exit the building. So there's many ways to get out of the hotel should there be any need to.
Any questions? These are the simplest ways. And again, everyone would evacuate across the street, and we would like for everyone to be accounted for before anybody starts to dissipate. Okay? Does anybody have any questions at this time? All right. Thank you very much.
Sean P. O'Neill
Thank you very much. Now let me walk through the agenda, okay, which is also included in your folders, and we also have bios for each of the speakers today in your folders. Jay Swent, our CFO, will start us off with a discussion of Ensco's strategy, vision and core values. Mark Burns, Senior Vice President of Western Hemisphere; and David Hensel, VP of North and South America, will discuss the success of our Ensco 8500 Series rigs. John Karish, Director of Safety, Health and Environment, will cover safety at Ensco and in the post-Macondo environment. Richard Roper, Senior Director, will discuss ENSCO 120 series jackup strategy; followed by John Knowlton, our Senior Vice President - Technical, discussing our drillship strategy, including our recently announced order for DS-8, which I think you saw in the last couple of weeks, our press release. Last but certainly not least, Kevin Robert, Senior Vice President of Marketing, will cover customer satisfaction, including our recent EnergyPoint #1 ratings and a discussion of supply and demand dynamics in our global markets. We will then have a rig and shipyard safety briefing, and finally, we will have a Q&A session over lunch.
Hard hats and gloves will be distributed at the buses when we leave today. Please make sure to bring your safety glasses that we distributed to you this morning. They will be necessary in order to get on the rig. For those of you with flights leaving later today, you should have brought your luggage with you this morning. We have it tagged, and it will be on the bus you were assigned to. If you do not have your luggage with you and you plan to go straight to the airport after the rig tour, please use the break at 9:15 to bring your luggage down and check it with Sue McMullen [ph] at the registration table.
At 12:30 sharp, we will leave this room and go straight to the buses, which will depart promptly at 12:45. Everyone has been assigned to a specific bus and tour group, and everyone should have a colored wristband to show which bus you're going to be on. Obviously, please make sure to board the correct bus since your luggage will be on it with you. When we get off the buses at the shipyard, your tour guides will be holding up signs so you can join the appropriate group. Those of you with flights departing this evening have been prioritized based on the flight information that you provided us. Finally, here is our Safe Harbor statement, which can also be found on our website.
And now that I've covered logistics, let me turn it over to Jay Swent, our Senior Vice President and Chief Financial Officer.
James W. Swent
Thank you, Sean, and good morning, everyone. Sean asked me to welcome everybody and to thank you for traveling as far as many of you have come. Corpus Christi is not the easiest place in the world to get to, so we appreciate it, but it occurred to me I really ought to thank everybody for getting up at this hour of the morning. So thank you for your commitment.
I feel a little bit -- I was saying to somebody earlier, I feel a little bit like this is taking you to a trip to a winery. Everybody wants to get on to the tasting room, but you got to listen to the winemaker tell you the story. So we're going to tell you the story for about half the day, but I think you're going to enjoy what we have to say.
It was -- interestingly, it was almost exactly 5 years ago when we hosted our last, which was also our first, Analyst Day in Singapore. And our objective at that meeting was to convince everybody that we actually had a right to enter the deepwater business and that we actually had a good solid plan to do that and that the 8500 Series rig was a capable rig that was going to be very successful and deliver great financial returns. There was a certain amount of pushback at that point in time. And so I think it's pretty interesting that we roll forward 5 years, and what a different world we find ourselves in.
Today, or this year in particular, we're celebrating our 25th anniversary. We were rated #1 in customer satisfaction 2 years in a row, last year and this year. The 8500 Series rigs are clearly a financial and a technical success by anybody's standards. We've taken delivery and crewed up successfully 11 rigs since that last meeting that we had with folks. We re-domesticated the company to the U.S., and last year, we acquired Pride and fulfilled just about all of our strategic objectives.
So today, we're not here to talk so much about the past but really talk a lot about the future. We're going to share with you a lot about several new designs that we have with proprietary technology that we believe is going to keep us the driller of choice for the foreseeable future. So I hope you finish the day as excited as we are about our current prospects and our opportunities for growth as we go forward.
Okay. We're not working up. We're working down -- okay, thank you. Okay. So Ensco's vision has always been to exceed expectations, particularly regarding safe operations and protection of the environment and to be the clear choice among employees, customers and investors. Our strategy as a company is very straightforward. We invest in high-quality rigs and continuously evaluate less capable rigs as part of a disciplined ongoing high-grading of the fleet. We recruit and train the best talent on proven systems that are applied consistently across all of our rigs around the globe, and we operate a global platform that leverages our scale for the benefit of our customers.
Rigorous application of this strategy leads to operational excellence and a superior safety record, which today, we believe, is the most critical criteria that our customers use to evaluate who they want to work with as their offshore driller. Operational excellence, in turn, produces leading customer satisfaction scores, allowing us to earn a high rate of return on capital and to increase shareholder value.
Today, as a result of the successful long-term implementation of our strategy, we have the newest ultra-deepwater fleet in the industry, the largest number of active premium jackups amongst the major offshore drillers and a wide range of capabilities, including ultra-deepwater drillships, semis and high-specification jackups. We have critical mass in all of the strategic growth markets. We have engineering talent that we believe gives us a competitive advantage in addressing our customers' drilling requirements, which you will see in greater detail when John Knowlton and Richard Roper present later this morning. And we serve a diverse client base, including super majors, national oil companies and independents. This client base, once again, voted Ensco #1 in terms of customer satisfaction in the most recent EnergyPoint customer satisfaction survey that was just recently issued.
This slide shows a wide range of advanced drilling technologies that we operate today to provide drilling services to customers in virtually any shallow or deepwater basin around the world. This diverse product offering of high-spec, well-maintained equipment enables our customers to achieve the lowest delivered cost for construction of their wells and generate significant repeat business.
Now let's look at each rig type. We have the newest fleet of ultra-deepwater rigs amongst our peers, capable of drilling in 7,500 feet of water or greater. This will continue to be true for the foreseeable future given our scheduled deliveries of newbuild rigs that I'll discuss in a moment. Some of our competitors have recently noted significant downtime for their deepwater fleets. We believe our downtime will be less than our peers over time given our mature and cost-effective maintenance philosophy and the fact that the average age of our ultra-deepwater fleet is just 2 years, as shown here.
We have 21 deepwater rigs that can drill in 4,500 feet of water or greater. It is the second youngest fleet of its kind, as shown on the left, with an average age of just 7 years, and this is less than half the average age of the next youngest fleet. We also have the largest fleet of active premium jackups with a total of 40 rigs. The numbers shown here are for active rigs, which excludes rigs that are cold stacked or under construction. And today, Ensco only has 6 cold-stacked jackups remaining in our fleet. And I think, as most of you know, we've sold 5 jackups over the last 2 years, so we feel we're well ahead of the curve in this regard.
Including acquisitions, new construction and enhancement to existing rigs, we've reinvested more than $1 billion in our jackup fleet since the beginning of 2005. In addition, we are building new ultra-premium, harsh-environment jackups. In total, the 3 newbuild rigs represent an incremental commitment of over $700 million to further high-grade our fleet. We have more 400-foot jackups than any of our competitors, and even our older jackups are experiencing strong utilization today, as evidenced by our multiyear contracts signed recently for several jackups with Saudi Aramco in the Middle East. Utilization has increased significantly to the 90% level for Ensco's jackup fleet, as noted here, and this will help drive increasing day rates as we go forward.
All together, as I mentioned earlier, we are now the owner of the second-largest offshore drilling fleet, with a total of 77 rigs, as shown on this chart. Our global operations span 6 continents, and we work in virtually every deep and shallow water basin around the world.
Given our broad geographic reach, with operations on 6 continents, we're able to identify the most attractive opportunities to contract our rigs at the best possible terms. Having scale and mature, well-established operations in virtually all of the major markets around the globe gives us a distinct advantage when bidding for new contracts. This allows us to maximize the earnings we achieve on each contract.
Now day rates always command the headlines, but a more strategic approach is to consider each contract's overall return, which is what we do. With our global reach, we're able to select jobs that require the least amount of incremental capital and in jurisdictions with low tax rates and lower cost of doing business to achieve superior financial returns.
The advantages of our fleet, though, go well beyond size, average age and geographic reach. We have realized significant benefits from the uniform design and standardization across our ENSCO 8500 Series rigs, as well as our Samsung DP3 drillships and Megathyst deepwater semis. We've also benefited from standardization across our premium jackup fleet for rigs that have similar equipment, particularly those rigs that were built by Keppel FELS.
And I should point out here, when I talk about standardization, I'm talking about standardization of design, drilling equipment and shipyard construction. When we talked to people back in Singapore many years ago about the 8500 Series strategy, we made the point that we were built -- taking a common design, building it cookie-cutter style, one after another in the same shipyard and that that was going to lead to tremendous financial benefits. That was a theory then. Today, it's a reality, and we have become absolute devotees to standardization. We see it in every aspect of our business. It has tremendous benefits. And one of the key things that I think people don't realize about our fleet is that we have the most highly standardized fleet in the industry today, and that's going to be a competitive advantage for us for a long, long time to come.
I talked a little bit about our Ensco 8500 Series rigs. They had exceptional utilization in 2011 with 97%. These rigs have had great success with customers as noted on this slide. We drilled the major Lucius discovery for Anadarko, and Telo had a major discovery in French Guiana. That was the deepest well ever drilled in French Guiana and probably the first well drilled in about 30 years. So it was a major accomplishment.
We're really gratified that we have a number of repeat customers who've contracted more than one 8500 Series rigs, including Anadarko, Nexen and Noble Energy. And I think everyone here would agree that these companies know something about drilling, and I think it says a lot when they are repeat customers, and they contract multiple rigs from us.
Our Samsung drillships have also benefited from standardization and repeat customers as the ENSCO DS-3, DS-4 and DS-6 are all contracted by BP. The DS-4 spudded BP's first deepwater well in Brazil, and the ENSCO DS-3 is drilling one of the first deepwater wells for Petrobras in Angola. Last week, we announced a 5-year term contract with BP for DS-6, and we're very gratified that BP had decided that Ensco's drillships are now their rig of choice for new deepwater well programs.
So in terms of newbuild construction to support our high-grading strategy, we've been very active in terms of new rig deliveries over the past several years, as shown on this chart. You see we've delivered over -- or 16 rigs since 2004, and we have continually built our shallow water business and our deepwater business. And today, we now have 6 rigs under construction, 4 of which will be delivered by next year. All of this is being accomplished with disciplined capital investment approach based on achieving superior returns.
The delivery schedule for these newbuild drillships, semis and jackup rigs underscores the significant organic growth that we have in place. As you can see, we've already contracted many of these newbuild rigs, and we feel very good about our contracting opportunities for our remaining rigs under construction.
Just last week, we announced our decision to order DS -- our ENSCO DS-8, which is an enhanced version of our Samsung DP3 drillships, which John Knowlton will cover in greater detail in his presentation. This rig will be delivered in the second half of 2014, and we also have options for 2 additional drillships. The ultra-premium, harsh-environment jackups we are building have received significant interest from customers, and the first ENSCO 120, which won't be delivered until next year, is already contracted.
The unique design of ENSCO 120 Series includes several things: 2.5 million pound hoisting capacity; the ability to drill to 40,000 feet; ability to handle high-pressure, high-temperature and ultra-deep gas wells; the ability to work in harsh environments year-round; and to efficiently drill large, multi-well programs for our customers.
Earlier, I mentioned our competitive engineering talent. The design of this rig is the result of a rigorous engineering design process, and it's not an off-the-shelf design from a shipyard. We've incorporated proprietary Ensco technology into this rig that resulted in Ensco winning the first competitive bidding round for new jackups of similar designs. We just met with the customer, and a point they shared with us was that that job was won on the basis of technology, not on price, and it was contracted well in advance of the scheduled delivery next year.
Richard Roper will discuss the process we went through to design and contract these rigs, but let me tell you, at the end of the day, the product is an amazing piece of work developed through collaboration amongst our engineers, capital project teams, marketing and finance groups. This series of rigs differentiates Ensco and will generate outsized returns for our shareholders.
Another key element of our strategy is a strong safety record. Across our global fleet, we have consistently outperformed the industry average in terms of our safety record. We're committed to achieving a 0-incident workplace, and we've invested heavily in training programs and systems to support our personnel at every level. And we have proven quality control and audit programs to ensure that we remain best in class.
Safety performance is our clients' primary selection criteria for choosing their offshore driller, and this bodes well for Ensco. John Karish is going to give us a more in-depth look into Ensco's safety culture and describe why we believe the industry is now stronger, following Macondo, from a safety standpoint.
Part of our commitment to operational excellence is investing in well-trained and highly committed workforces. Our training programs for all of our offshore positions are IADC-accredited and are designed to enhance both the safety and efficiency of our operations. We have systems in place for continuous development and monitoring to maintain our high standards. John Karish is also going to touch on our training programs, and he's led most of our training efforts for our safety leaders and supervisor. He and his team have done a terrific job educating new employees on the safety management systems of Ensco.
Well, once again, customers have rated Ensco #1 in terms of customer satisfaction, and that reflects the quality of our fleet and our people and our strong safety and operating track record. EnergyPoint is a leading independent research firm, and they recently completed the latest customer survey that ranked us #1, not only overall but in 12 of 16 additional categories, including safety, job quality, performance and reliability, deepwater drilling and technology. We're really proud of this recognition, and we're gratified that customers value the investments that we've made, our strong safety record and our passion for operational excellence.
These scores that we received from EnergyPoint, they're the result of an incredible amount of work -- of hard work by our people, and I'm happy that we repeated our top scores even during a year when we were integrating a major acquisition. As many of you know, sometimes acquisitions create disruptions, and employees take their eye off the ball. Well, our employees did not. On top of completing their day-to-day responsibilities, we created 17 teams last year to complete the acquisition and the integration of the 2 companies. Each team created detailed work plans, and they've all been well-executed and have resulted in successful integration of our activities.
The acquisition was overwhelmingly approved by our shareholders. A new organization structure was quickly put in place, and employees transitioned to their new roles, often in new locations. And for example, we closed our Dallas office, and we relocated all of the employees from Dallas down to Houston. We centralized marketing. We re-branded the newly acquired company. We integrated our ERP system, and we are training thousands of employees to ensure that they are fully versed on our safety management and operating systems.
Finally, the synergies that we promised to shareholders are also on track. You can see from the earlier slides how the acquisition has positioned us extremely well for revenue growth. But in addition to that, to the revenue synergies, we will also achieve meaningful cost synergies.
Our synergy estimate for 2012 is $100 million, and for 2013 and beyond, it's estimated at $150 million per year. And that's made up of $120 million of expense synergies and $30 million on capital expenditures. And this is going to be achieved mostly from reducing corporate overhead and from purchasing efficiencies that are related to our increased size.
We have a strong financial position. We have $9.7 billion of contracted backlog as of year end. We have investment-grade credit ratings and significant liquidity. We feel very comfortable today with our 32% leverage ratio, and this is especially true given the level of visibility that we have for future cash flows and our customers, our geographic and our asset class diversification.
We've got significant flexibility from a capital management perspective, with plenty of capacity to complete our newbuild program while maintaining our dividend at $1.50 per share on an annual basis. We recently increased the dividend by 7%, given our visibility of future cash flows and our positive outlook for the offshore market. Being domiciled in the U.K. not only gives us benefits in terms of a lower effective tax rate, which we anticipate will be about 12.5%, but also gives us added flexibility to distribute funds up to the parent company in order to pay dividends or to buy back stock.
So in summary, we have the newest ultra-deepwater fleet with the largest number of active premium jackups. We have a talented workforce trained under accredited competency programs and a presence in the most strategic high-growth markets working for a broad customer base. This has led to a strong safety and operating track record and our ranking as the industry leader in customer satisfaction, which we believe will lead to superior margins and enhanced shareholder value.
We believe Ensco is the company to own in this space, and I hope you're going to agree with us by the end of the day. Ours is a great story, and we've achieved all of our major strategic objectives, and we're ideally positioned to continue to grow in coming years with 6 rigs in the pipeline and the financial flexibility to add more rigs as we see fit. As I often say when we're meeting with investors, what's not to like about this story?
Now I'm going to hand the mic over to Mark Burns and David Hensel, who's going to discuss the ENSCO 8500 Series success stories. It was a big step for us back in 2005 to embark on this multibillion-dollar program, and I'm sure many of you will remember, there was a healthy dose of skepticism at that point in time. But as I said earlier in my remarks, I think the program's definitely proven itself as a financial and a technical success.
So Mark will take you through all of that, and I turn it over to you, sir.
John Mark Burns
Thanks, Jay, appreciate it. Good morning. On behalf of Ensco, I want to also welcome you to Corpus. We're excited you're here. We appreciate you taking the opportunity to be here. And any time you can get offshore, whether the rig is docked quayside, as we will be on today or if you're 100 miles offshore, it's an exciting time. Today, you're going to see the latest technology relative to deepwater drilling operations. The ENSCO 8505 is the sixth in the series of 8500 Series rigs delivered, and we are very proud of it. We want you to enjoy the day, ask a lot of questions.
But I do want to remind everyone, John Karish is here, our Corporate Health, Safety and Environment Director, and he will be doing a comprehensive safety briefing. Working safe is the most important thing we do at Ensco. We focus on it every day. We're very proud of our record. As Jay just mentioned, we have integrated a major acquisition, but we have kept our eye on working safe, and we're very proud of our performance in that area.
Remember, today, you'll have escorts with you. This is a fully-operating, deepwater semisubmersible. In about 10 to 12 days, we're going to be going offshore, 100 miles offshore, conducting final sea trials and acceptance testing before we commence our contract with Anadarko. So just keep that in mind, keep a hand on the handrail, watch where you step, look ahead and have a good day.
Personal accountability for safety is something that's very important, very important to us. The ENSCO 8505 is the sixth of 7 rigs in the series that have been delivered. The rig was designed to address the heart of the deepwater market. We'll talk about that in a minute. It was based on the ENSCO 7500 semisubmersible that was built in 2000. That unit is operated successfully in the U.S. Gulf of Mexico, in Brazil or in Australia, excuse me, and is now operating for Petrobras in Brazil. We're very, very proud of that unit, and the 8500 Series was based on that design.
For those of you who did not know, the 8500 title, that represents the water depth capability of the rig. The ENSCO 8500 Series are capable of working in water depths up to 8,500 feet. They are upgradable. They can work in depths up to 10,000 feet with a few technical modifications. But as you're out -- as you're onboard the rig this afternoon, think about 8,500 feet. There's 5,280 feet in 1 mile, and think about 1 mile of geography and then think about another 0.5 mile on top of it. You're in 1.5 mile of water depth before you even start your well construction operation. You deal with currents, waves, winds. So just think about that today as you're walking around this unit and the technological challenges we have, that we're faced with.
The KFELS shipyard in Singapore constructed the unit. It -- we have a very long relationship, very successful relationship with KFELS, and the 8506 is being constructed there as well.
Owner-specified equipment. We told a lot of shipyards we'll give you a package, and they will tell you what drilling equipment they will put on, what marine equipment. We specify the equipment packages we want on the Ensco 8505, in our previous units. We make the shipyard responsible for procuring it, doing the engineering, installing it. We oversee this, but we put responsibility on the shipyard to deliver this. So it's been a very important piece of our strategy.
When we commenced, Jay talked about, a few years ago and the start-up of the first 8500 Series rigs, we were able to leverage our employee base. Our significant number of jackup employees came over and trained and learned and assisted us in the start-up of these rigs. And now, today, we have a very experienced employee base, but the heart of our employees, many you will meet today, come from Ensco's jackup operations. Obviously, we're pleased with -- as Jay mentioned as well, we're pleased with the financial return on the program, and it's been a very successful program for our customers, for our shareholders and our employees.
I mentioned the heart of the deepwater market. If you look at the past 5 years, the number of wells that have been drilled in the 3,000-foot to 7,500-foot water depth range, this unit is ideally suited for that water depth.
Value proposition. Again, the ENSCO 8500 Series, today, this unit is ideally suited for exploration work. It can be multi-well development work. You'll see it's a very effective, efficient design. Everything is right in front of you. Your accommodations, your rig floor, your moon pool area, everything is accessible. It's compact, but it's very, very efficient. We've had great results with the unit.
We are pleased with our engineering group and project management group. We have delivered these units on time, on schedule, on budget. Working with KFELS in Singapore, it's been a great partnership, and we appreciate their efforts as well.
Equipment with value-added features. We have -- some of our customers have -- all oil companies, I have learned, have their own ideas how to operate and construct a well, some have some unique ideas in this area. We work with some of our companies that may want the remote operating vehicle unit on one side of the rig and may want a cement unit placed a little differently. So we've been able -- this design of the rig has given us some flexibility to work with our customers, and you'll see more of that today.
Finally, Jay also talked about this. This is very, very important. We're very pleased. We're going to, for many years, receive benefits from this equipment standardization. Equipment standardization is all your personnel, whether you're on an 8500, which is working for Anadarko this morning, or you're on the 8505, you're able to transfer people between units. Drilling floor -- drill floor looks the same. The layout of the rig looks the same, all your station keeping, emergency readiness. You're able to move personnel between units. You would be amazed at the different -- if you look at offshore drilling rigs today, at some of the different designs and complexity of these offshore units.
Shipyard. Obviously, by working with KFELS, we've been able to gain efficiencies, share lessons learned, that type of thing. Critical spares, sharing of critical spares. If you have -- all have the same type of equipment, you're able to rationalize and share equipment, as necessary, between rigs.
Training and competency of your offshore personnel is obviously critical, and we are able to, again, share training and competency and competent personnel, share them between the rigs. Repair and maintenance, spare parts, we talked about.
So before I turn it over to Dave, we're very, again, very excited you're here today. We appreciate, again, appreciate your attendance. It's going to be a very exciting day. You're going to learn a lot, many of you. I have been on offshore rig visits in the past, and it's good to see a lot of supporters of the company here today.
David Hensel is Vice President of our North and South America business unit. Dave is responsible for our jackup operations in the U.S. Gulf of Mexico, for our deepwater operations in the U.S. Gulf of Mexico, as well as our operations in Mexico with PEMEX. So with that, I will turn it over to Dave. Dave's going to talk a little more in detail about the 8500 Series rigs. Thank you.
Thank you, Mark, and thank you for joining us today at our Investor Day. You guys, are really going to enjoy the afternoon. And what really excites me about it is it's really where the rubber meets the road. This is what Ensco's all about, and I can assure you our rig crews are really excited to show you the ENSCO 8505. You'll get more details, as you have already, about the capabilities of the 8500 Series, but you'll get more throughout the day. But let me start by just giving you a high-level summary of the -- of our rigs.
As Mark mentioned, the 8500 Series gets its name by its water depth rating, 8,500 feet, but they can be upgraded to 10,000 feet. Standard outfitting is for 8,500 feet, and this serves the heart of the market, as we've talked about. However, to date, no customers have actually shown serious interest in upgrading the 8500 Series.
The rigs deployed in the Gulf of Mexico, 4 of which are already operating, are currently working in water depths ranging from 3,600 to 7,000 feet. The rated drilling depth of the rigs, of the 8500s, is 35,000 feet, depending on the well profile, and we also already have an approved well permit, excuse me, for an upcoming well at 37,500 feet. So to put that a little bit in perspective, a 37,500-foot well is over 7 miles. It's pretty impressive.
Main deck is an open plan, and it's well suited for flexible placement of operator equipment, as Mark was just mentioning. The 8500s are classed as DP2 vessels. What does this mean? We've got 3 DP consoles and 2 DGPS monitors, which provide robust redundancy. We're also capable of offline activity.
In the moon pool, our subsea tree elevator and cart handling system supports preparing trees offline, and our offline pipe handling on the drill floor supports multi-joint drill pipe and casing stand building. We generally start by picking up enough pipe to commence the drilling operation, and then we spud the well and pick up pipe, gearing our drilling operations.
So for those of you that are not familiar with the Ensco, as we already mentioned -- with Ensco, the 8500 Series is an enhanced and beefed-up version of its predecessor, the 7500, the ENSCO 7500. The increased 46-foot substructure height provides room to accommodate the latest generation of subsea trees and again, the open-deck concept is well suited to accommodate flexible placement of operator equipment onboard. The 97-foot main deck height allows for a deck profile that sits low in the water, and this improves environmental loading.
Our 150-man quarters provide comfortable and modern living space, and you'll see this, this afternoon. And we've utilized lessons learned from the ENSCO 7500. We've rounded the corners of the columns to also improve environmental loading. And the hull or pontoons provide considerable storage capacity for up to 16,000 pounds of 16-pound mud -- 16,000 barrels of 16-pound mud for the reserve mud system.
I'm sure many of you are also interested in our subsea equipment. Our 6-ram BOP functional profile configuration is the latest generation, and it includes a test ram. Our 3 double-compact design is a shorter profile that reduces weight and overall height that makes it easier to handle. Blind shear and casing shear rams are capable of auto shearing all of our operator-specified drill pipe.
The 8500 Series also includes many design efficiencies. I previously outlined our ability to work offline on the drill floor and in the moon pool. With our design operator send out casing and doubles already made up, this reduces crane lifts and improves efficiencies.
Our versatile multi-manipulator arm handles tubulars from the smallest diameter drill pipe to the largest diameter casing and riser required for the 8500 Series. The dual mud system provides a split system that allows us to manage and handle drilling fluids and completion fluids simultaneously. Our tree handling layout allows us to handle up to 150 metric tons state-of-the-art trees. We're also equipped to accommodate iwalk [ph] systems that operators use to deploy these trees. Our BOP configuration, including a test ram, saves having to trip test plugs -- trip for test plugs, which also improves efficiencies. And our BOP hang off/transit system allows us to make infield moves without pulling the BOPs. It's a driller's rig.
So even though the 8500 Series has been deployed for a relatively short time, we've already delivered some considerable successes on several fronts. To date, our deepest operating water depth in drilling mode has been 7,200 feet, but we've been approved to operate in currently -- as the rigs are currently configured in up to 9,200 feet of water for a completion. It's also worth noting that we've performed workover operations in 8,000 feet of water. We've drilled wells to 33,800 feet measured depth, so we are part of the esteemed 6-mile club. And as I mentioned, we have current approval for a well planned at 37,500 feet, which will put us into the 7-mile club.
We've run casing strings weighing up to 1.8 million pounds, which is typical for a casing well profile here in the Gulf of Mexico for the sub-salt wells. The 8503 operated in French Guiana in currents of up to 5.8 knots. To put that in perspective, typical operating currents here in the U.S. Gulf range around 2 knots.
We've improved our deepwater acceptance testing and sea trials to 49 days for the ENSCO 8503. That represents a 10-day improvement over the 8502. We expect to deliver the 8505 in 49 days or less, and we just completed mobilizing the 8505 from Singapore here to the U.S. Gulf in 39 days.
We've also had success on the regulatory front. As we mentioned before, the ENSCO 8500 and 01 were the first rigs post-Macondo to get their BOPs recertified. The 8500 worked at full day rate with the only standby time being required to recertify the BOP. The 8501 received the first new drill drilling permit post-Macondo and would have been the first to commence a new drill well had it not been on standby due to the rig share nature of her contract. We've hosted several Department of Interior rig visits, one of which included the Secretary of Interior, Mr. Ken Salazar himself, to help highlight the resumption of drilling here in the Gulf.
Jay stole a little bit of my thunder, but without being overly repetitious, our customers are also realizing the benefits of employing these rigs. Some of the customer successes include drilling of Anadarko's major Lucius discovery and Telo's recent discovery in French Guiana. We also drilled the significant Knotty Head appraisal well for Nexen with the ENSCO 8501. This demonstrates very clearly that our ENSCO 8500 series is very suitable for exploration drilling and for development drilling.
The next few slides are an excerpt from a recent Telo presentation to a deepwater group out in California, and they highlight the exceptional performance of the ENSCO 8503 on her maiden well after construction and sea trials. We mobilized her in 25 days from the U.S. Gulf, and we spudded the well only 5 days after she arrived on location in French Guiana.
Of particular note is the safe and efficient performance during the 8503 well maiden well, where she worked more than 0.5 million man hours without a lost time incident, and she incurred no environmental incidents while incurring only 3.8% downtime. For those of you that aren't familiar, this is truly exceptional performance for a newbuild operating in a remote location that hadn't seen offshore drilling activity in some 30 years or more. The end result, a major success for Telo and their Zaedyus discovery.
Again, as Jay mentioned, we've got repeat customers with the 8500 Series. All of our ENSCO 8500 Series rigs were contracted prior to delivery from the shipyard, and they are with substantial deepwater operators, evidence of the confidence our customers have in the design and operational performance of the rigs. Anadarko has contract interest in 3 of the rigs. Nexen and Noble have contract interest in 2.
These comments highlight the performance and satisfaction of Nexen with the ENSCO 8501 that drilled their Knotty Head appraisal well. Performance like this, along with strong working relationships with our customers, has enabled Ensco to firmly establish our presence in ultra-deepwater drilling.
Not only have we delivered strong operating performance on initial wells after deployment, but we operated ENSCO 8500 Series for all of 2011 with only 3% nonproductive downtime or 97% utilization. We've built a considerable $1.9 billion revenue backlog, and the internal rate of return for the series exceeds our stated 15% hurdle rate even in the wake of the Macondo moratorium. And we've delivered all the rigs on time and on budget, a hallmark of Ensco project management. This scorecard places Ensco at the top of the class with respect to our ability to manage newbuild construction, with an overall grade of A and an A+ on returns, something that I would expect certainly should be of interest to this group.
As some of you will recall, as shown on the left-hand side of this slide, Ensco built its first 3 8500 Series 6th generation ultra-deepwater rigs for less than $400 million each, a considerable achievement. Although construction costs have increased for the later rigs in the series, so did day rates, as shown by the orange line. The net result of the build cost, day rates and operating cost, that we believe are below industry averages, is an internal rate of return that exceeds our 15% hurdle rate.
We also have very strong contracts as well. We have robust cost-adjustment provisions in our contracts that help us to maintain our economics even in an escalating operating cost environment. Even though they aren't listed here yet because the contracts haven't commenced, the 8505 and 6 contracts are structured the same and will provide similar protection.
So to summarize, our strategy has indeed proven to be successful, and our customer acceptance has exceeded even our high internal expectations. We are delivering and will continue to deliver excellent financial returns as a result of our strong operating performance, and as we continue to realize the benefits of standardization, is a long-standing Ensco tradition.
Again, thanks for joining us, and I look forward to hosting you this afternoon.
Sean P. O'Neill
Thanks, David. And I should mention the Telo slides that David just presented, we found those in their presentation. It's an IR guy's dream when your customers start doing your slide deck for you. That was basically a cut and paste. So we actually got that from one of our senior marketing people based out of London. He saw their presentation.
Now what we're going to do is I'm going to introduce you to some of our employees and their family members. Late last year at one of our safety training sessions, where we invite members of senior management, employees and their families, we videotaped interviews that were focused on the importance of safety. As you'll see from the video, safety gets very personal if you work on an offshore drilling rig.
Thanks. I hope you enjoyed the video, and I can assure you, Derek Kent did get some heat for saying joie de vivre. I can't even pronounce it. He's our Head of Security.
Now let me introduce John Karish, our Director of Health, Safety and the Environment.
Thanks, Sean. Good morning. As Sean said, I'm going to talk a little bit about safety in Ensco. But before I start that, I'm going to talk about safety in our industry in general today.
It's best to focus on post-Macondo safety. As I think all of you are aware, in just about 2 years ago now, the Macondo tragedy resulted in the loss of life of 11 of our industry peers; 17 other crew members were injured. A spill resulted of national significance, and certainly, there was damage to our industry and the industry's reputation among the general public. Following the tragic incident, there were a number of investigations and reports that were issued, and I think a common theme in all of the reports, and what you see there are quotes from one of the more important investigations.
The reports focused on the importance of a robust safety culture, and that safety culture should include leadership, responsibility, personal accountability and an emphasis on systems and process safety in addition to personal safety. So that's -- that was taken on board by industry in general, and there were a number of initiatives that resulted from the actual incident and the investigations that occurred afterwards.
I just want to highlight, I'm not going to go into all of them, but I just want to give you a highlight of some of the more important ones. There were 4 joint industry task force teams that were formed, as you can see on the slide, and they covered operating procedures, equipment, subsea intervention and oil spill response. Also created an updated industry safety and operating guidelines, which were certainly needed, and there were major improvements made in well containment technologies.
Another key feature, another key action, as a result, was the establishment of the Center for Offshore Safety or COS, and that's an industry-sponsored organization focused exclusively on offshore safety. Another response was the establishment of the Safety and Environmental Management System or SEMS in the U.S. Gulf of Mexico, and that basically requires that all operators have a robust safety management system and that they demonstrate that they have that through a number of assurance processes.
We at Ensco completed our first third-party SEMS audit in October of last year by a consortium of the 8500 Series operators. As I think you saw on an earlier slide, a group of the operators got together to conduct the SEMS audit on our 8500 Series rigs, and the audit was extremely successful.
So that's kind of an overview of what's happened in the industry post-Macondo with respect to safety, and certainly, I think a lot of good things have resulted in the follow-up from that incident. I'd now like to talk about safety in Ensco, not just post-Macondo, but what we've been doing over the past 6 or 7 years to impact our safety performance.
But first, I'll start with what we in Ensco have done as a result -- directly as a result of the Macondo incident. We formed an internal multidisciplinary team to develop a comprehensive action plan, which focused -- was meant to focus on sustainable and verifiable results, and this team reported on a regular basis to our Board of Directors. So it was certainly seen as a high-profile initiative within our company. It covered a wide range of topics that included all aspects of operational safety and integrity, as you can see from the list there. The team identified 7 major categories with 81 discrete action items that were assigned and tracked to closure. We have completed most of those action items. Some, with some long lead items, are still left to complete, but by and large, we've pretty much completed all of the action -- or closed all of the action items that were identified by this team. And the photo that you see there, or the diagram, is basically one of the action items around equipment, around the capability to close our subsea blowout preventers.
Now let's get into our journey with respect to safety over the last 5 or 6 years. We measure our safety performance in something called a total recordable incident rate, which is, basically, it's a term that is -- it's a frequency. It's based on the number of incidents per so many man hours of people that have worked. So it is a -- it's a frequency. It's normalized to cover man hours. It's not something that I personally like. It's looking -- it's like looking in a rearview mirror. All it tells you is how you've performed in the past. It doesn't say anything about what you're doing in the future.
We decided several years ago that we wanted to be proactive. We wanted to do things that would help us improve our safety performance going forward, not just looking at what happened in the past. We wanted to create our own future, if you will, consistent with our vision of achieving a 0-incident workplace. We felt that we -- if we took a more strategic approach and look forward, that we would help us -- it would help us achieve our vision of a 0-incident workplace.
Our -- what you see there are our goals and principles at the highest level. This is an excerpt from our corporate SHE Policy, which is one of our highest-level documents in the company. As you can see, that we do focus on a 0-incident workplace. I just want to focus on a couple of the major principles that you see there. The first one is that we do believe a 0-incident workplace is achievable. If you start out with the premise that you can't do it, you'll never get there. We recognize it's a journey. It will take time, but we do believe it's achievable. I think that's very important, to believe that upfront.
And the second principle I want to highlight is that no business objective is so important that it will be pursued at the compromise of safety, health or damage to the environment. Our belief is that safety is equal to everything else. It's equal to cost, to schedule, but if safety ever comes in conflict with any of the other objectives, then safety takes priority. But you hear some people say that, "Well, safety is our top priority." Safety really, really should be equal unless it comes in conflict with our other priorities.
What I'm going to describe now is the journey that we've taken, the strategic approach, if you will, to addressing and identifying our improvement in safety and to help us achieve our vision of a 0-incident workplace. First and foremost in any safety program is executive management's commitment. If you don't have that, you will never, never achieve excellence in safety, and our executive management is very active and visible in their demonstration and commitment in this area. I think that you saw from the video that in all of these programs that I'm going to describe, our executive management is there. They come and speak at dinner. They interact with our people, and they really do walk the talk, if you will. They take the time out of their busy schedule to attend these sessions.
We also have a proven safety management system. This system has been developed over the last several years. It was developed in consultation with our operations. It wasn't just a safety management system that was designed in the corporate office by some corporate staff. We involved our operations people from all of our business units as we developed it, and we use a commonsense approach as we developed it. We -- we're not overly prescriptive in what we say. If some organizations produce a safety manual that's several inches thick, we felt that by applying common sense and good judgment, giving our people the framework, that that would be a much more effective way of making our safety management system usable to our workforce.
We also provide training at various levels. Our approach has been to establish a line-of-sight approach in our training. We start with the most senior people and work our way down through the organization. And our whole approach has been so everyone in the organization, whether it's the CEO or the roughneck or roustabout on the rig, knows that what they do on a day-to-day basis contributes to achieving our vision of a 0-incident workplace.
We also have a very strong auditing and assurance process. We developed a corporate SHE audit team, if you will, that reports into corporate, and I'll describe that in a bit more detail. And this audit team addresses both processes, equipment and also culture, and they do more than just auditing, as I'll go into in a minute.
I'd now like to spend a few minutes on each one of these initiatives that I've talked about, and the first one is a -- is what we call our SHE leadership development program. It's -- as you can see there, I'm not going to say that these programs specifically helped improve the step change in our safety performance that you see on the screen. But let me just say before I go any further that the industry data that you see there, the light blue bars that represent industry, we're just focusing on the offshore industry. We backed out U.S. land and Canadian land. So basically, we're comparing ourselves to our peers. The Ensco data is direct comparison with offshore areas in the world that we operate. So it's basically -- it's an apples-to-apples comparison of our safety data. It's not diluted with any irrelevant data.
So the first program, as I said, is our SHE leadership development program. We wanted to start at the top. We identified -- we wanted to cover our top 150 leaders in the organization which, for us, was our OIMs and above. OIMs are offshore installation managers. They're the most senior person on our offshore rigs. It was OIMs and then all of the rig managers, operations managers, all of the upper management in the organization. It's -- it was a 5-day program. All the programs I'm going to discuss have been co-developed and co-delivered by both Ensco and an external consultant. We didn't just hire an external consultant to run these programs. We were involved in development and delivery of these programs.
This program really, and the SSTP, but more so the leadership development program, is really more of a business meeting. It's really an opportunity for our senior leaders from across the globe to get together to discuss common issues. There's some material that's presented around leadership and around change, but really, it's about our senior leaders understanding what their role is in delivering our vision of a 0-incident workplace. These are key leaders. If they understand what their role is in delivering the vision, it's much easier for them then to take it back to the rig and basically model the way with their subordinates.
And they also do a real piece of work in this 5-day program. At the end of the day -- at the end of the week, each of the table groups has a topic that they have to research and present information back to our executive management on a real issue facing Ensco. So this is -- our executive management gets input from its key leaders instead of hiring an external consultant to come in and say, "What are the issues? What do we need to deal with?" And by executive management, I'm talking about -- normally, at this management review panel, we have our CEO, our CFO, our COO and all of our Senior Vice Presidents. So it's taken very seriously by our executive management.
The second approach that we've taken, as I said, is we've established a corporate SHE audit team, and we call that the CVT or core value team, and that's been our approach to developing an assurance process in -- within Ensco. We call it the core value team because we believe that when we live and demonstrate our core values, we are operating safely and efficiently. The core value team obviously conducts formal audits. They have protocols that they work to, but they also do coaching and mentoring, where they'll sit down with the people. If, say, our people don't understand one of our processes or one of our procedures, they'll sit down and work with them offline after the -- after our folks get off tower and basically coach and mentor them. Their main purpose is to ensure that we're successful and that each of our rigs and people in our rigs are successful.
To -- this is no -- we don't take staffing these core value teams lightly. We put very senior people on these teams. We second them from senior positions in the line. We want people that are on this core value team to command respect and have a strong reputation whenever they do step on a rig, and we've been able to achieve that. There's certainly a bit of tension, I guess, with our business units, because these are the sort of people that our business units want in key line positions, but we are able to negotiate and get extremely talented and qualified people on these teams. It's meant to be secondment. Normally, people spend 2 to 3 years on this core value team. They work a 28 in 28 [ph] schedule.
We take a no-surprises approach, debrief throughout the process both on the rig and in our business units with our business unit management. And also, to emphasize the importance of this and also to demonstrate our executive management active and visible commitment to safety, every other month, on their month off, the 2 team leaders -- right now, we have 2 3-man teams. The 2 team leaders go to London, and they present the results of their previous month's audits. Normally, each team will audit 2 to 3 rigs in a one-month period. So they'll go to London and sit down for half a day with our executive management and walk through each of these presentations, go through their findings and also discuss some of the softer issues that aren't in the report, things like the culture on the rig, how's the leadership. And as I said, this is attended by our executive management, even people like our CFO sitting in on these presentations. So it -- again, it just demonstrates how important safety is among our senior executive management.
A couple of other things that we've done. As we move forward into 2008, our SSTP, Supervisor Safety Training Program, you've seen the video that was shot at one of these programs last summer. This basically takes the training a level down. As I said, the leadership development program was for our senior leaders. This program, basically, is meant to be for our offshore supervisors, our rig manager and OIM and then all of the -- anyone on our rigs who supervises people attends this training program. It's also a 5-day program. We realize it is a lot to ask of our people on their days off, but it -- we feel it's important.
When this program first started in 2008, we had just rolled out a new Safe Systems of Work, and we conducted this program to help our supervisors better understand the Safe Systems of Work. And just so you know, that Safe System of Work basically comprises 4 main procedures around planning and executing a job, and that's our permit to work, our work instruction, energy isolation and our job safety analysis. Those 4 procedures make up our Safe Systems of Work. We also touch briefly on our STOP -- our behavioral-based training program called STOP, which I'll talk a little bit about.
This SSTP has really helped embed SSoW in the legacy Ensco rigs. And another thing that occurs at this program is these supervisors develop an action plan at the end of this program with some specific actions that they're going to take back to the rig to help implement among their crews on how they can better implement and achieve complete compliance with our Safe Systems of Work procedures.
Another initiative, I think, that has helped improve our safety performance has been the re-branding initiative. This happened in 2008. You might not think of it as a safety initiative, but -- that wasn't its main purpose, but it did have an impact on safety. We adopted a forward-looking -- a new logo and colors. Our senior management team and investor relations team conducted extensive 2-way communications around this change in branding. And as a result, we saw an increase in employee pride and engagement, which we do believe plays a role in safety behavior. And the new orange uniforms, we're seeing as an improvement over the drab gray coveralls that we had prior to that.
Last is the -- is our STOP implementation, which occurred in 2010. STOP is a DuPont process. It's a behavioral-based modification process. DuPont has been using this process for over 50 years, and they've been marketing it for a little over 30 years. We initially adopted STOP in Ensco back in 1998, but we re-cascaded it in 2010 to refresh and renew the process. We felt that it needed a bit of refreshment and renewal. DuPont had also improved the process in the last 10 years or so, so we wanted to ensure that we had the best and the most current process in place.
Any sort of behavioral-based safety program's purpose really is to get people at any level on any facility, if they see somebody working unsafely, to stop and have a conversation with them and through this conversation, try to get them to understand the risk of their unsafe behavior and get an agreement with them that they will work safely in the future and that they will not practice that particular unsafe behavior in the future. So it's really all about having a conversation, showing genuine care and concern for your fellow employees and to get to what DuPont calls an interdependent culture, where everyone looks out for each other in any facility, whether it be a drilling rig or a plant or anything. But that's the whole purpose of the -- of any sort of behavioral modification program, and we believe that using the DuPont process is certainly world class.
Again, as I said, it focuses on interventions and conversations. We -- this time, we've also agreed that we will implement STOP the way DuPont says it should be implemented. And as such, there's a -- on any facility, there's a -- meant to be kind of a train-the-trainer session for 1 or 2 key leaders before you start this cascade process. And it's a 2-day workshop that we conduct for some of our senior leaders, and then it takes about 6 months to go through the entire cascade process. There are 5 different units that you work through in order to become fully competent in practicing the STOP program. So that pretty much explains our journey in our desire to get to a 0-incident workplace and some of the initiatives that we put in place.
Then last year, with the acquisition of Pride, we basically felt that -- we look back on what we've done the last 5 or 6 years, and we felt that there were a number of things that led to our continued improvement in safety performance. And we felt that we wanted to apply the same approach to the legacy company and to the -- to our -- to the supervisors in that legacy company. And we decided to accelerate this process to aid in the overall integration and to get everyone to operate in the same safety management system, which is the Ensco safety management system.
So we -- we're in the process now of conducting a number of these programs in a more -- pretty condensed fashion. You can see from the schedule there it's -- we plan on conducting 8 leadership development programs this year. We've already conducted 3. We're looking at somewhere over 40 supervisor safety training programs this year. We're also going to cascade the STOP for supervision on all the legacy Pride rigs, and our core value team, our corporate SHE audit team, will be spending a lot of time on the legacy Pride rigs to coach and mentor and get them up to speed with our safety management system and our -- specifically, our policies and procedures around Safe Systems of Work.
So we believe that if we continue to execute these programs, we will see the same step change in safety performance improvement that we've seen over the past 4 or 5 years. And again, the ultimate goal of all this is to -- as the video said, to ensure that all of our employees go home in as good a shape or if not better shape than when they arrived on the rig.
Thank you for your time.
Sean P. O'Neill
Okay. Thanks very much, John. We're running about 15 minutes ahead of schedule. So what I'm going to do is ask Jay and Mark to come up. We'll do about 15 minutes of Q&A ahead of the break on the morning presentations, and John will join us as well. Do we have mics, Michelle, for folks? Okay.
Sean P. O'Neill
Who'd like to be first? We've got a question up front with Matt.
Are we on? Okay. Okay, well, the question is, how much would it cost, CapEx, to advance one of the 8500 Series to 10,000-foot water depth?
James W. Swent
Well -- we on? Can you hear me okay, Matt?
James W. Swent
I -- it's been a long time since we looked at it, I think, originally. When we designed the rig, it was a $10 million kind of expenditure. It's probably gone up since then. I'd say the interesting thing is we've offered the opportunity to every customer to upgrade the rig. We said, the only thing is, you probably have to pay for it yourself if you want to do it. And not a single customer has ever asked to do that. And it's not because it's technologically infeasible or anything, they just really have not had the need to do it, so far.
So I mean, what has to be involved in it? Is it just riser?
John Mark Burns
Yes, Matt, it is not a technical, complex job. Obviously, you need an additional amount of riser and buoyancy material with the riser. The riser tensioning system, which keeps the riser in tension, is capable of going to 10,000 feet. Other than that, and some additional extension of perhaps some service lines on the rig, that type of thing, it's not a technologically complex project. As I think I believe David mentioned, we had -- we worked in over 8,500 feet of water on workover programs previously.
Sean P. O'Neill
Another question over here.
John, you mentioned you were the first people to recertify the BOP post-Macondo. What sort of formal engineering processes did you go to, to actually -- oh, sorry, go through to actually achieve that, things like failure mode and effects analysis, of established-type processes?
John Mark Burns
Do you want me to...
Yes. Do you mind?
John Mark Burns
Yes. I guess, obviously, the industry was in a state of confusion post-Macondo immediately thereafter. Obviously, the well control systems and BOPs, subsea BOP stacks were a major area of concern. The BOEM, the -- previously, the MMS were involved. We worked with the industry. One of the first things we were required to do was get a third-party service company that would look at the engineering, look at the certification of our stacks and ensure that what we said we had we did have. And so that was -- the first thing was the recertification of a third-party service company. Since that time, the -- under the auspices of API and other industry groups, we are developing further standards for subsea equipment mainly under API Recommended Practice #53. Companies operating will be required to meet those standards, going forward. Ensco, we were very proactive. Fortunately, our 8500 Series stacks all were the same design. Our well control systems were consistent with each other. So once we worked through the recertification of our first stack, our second, third and fourth stacks followed in suit. So we were able to capture synergies from our consistent equipment there.
James W. Swent
And this is an interesting point. For those of you that are betting people in the room, most people would've bet we would've been the last people recertified in the Gulf of Mexico on the basis that we were a relatively new entrant into that business and with that asset class. And one of the incredible benefits of standardization that was -- would never be obvious was that, when you have all-brand-new equipment and it's all consistent, it's pretty easy to get through a process like this. If you have a variety of equipment that are all different, there's no standardization, each single piece or each rig has to get recertified, and that's just an incredibly complicated task. So we were extremely fortunate to have the level of standardization that we did. And as I said, when we originally talked about what are the benefits of standardization, nobody ever said, "Well, if there's a Macondo incident, we'll be the first back to work."
Sean P. O'Neill
All right. And as you probably all know it, now you have to -- in order to get a permit to drill in the U.S. Gulf of Mexico, you have to identify the rig you're going to be using for that well program. So it's also now become a marketing advantage, as you saw with recent announcements with ENSCO 8505 and 8506. Those are with repeat customers. They know those rigs will be certified to work in the U.S. Gulf of Mexico. A question over here. Waqar?
Waqar Syed - Goldman Sachs Group Inc., Research Division
Many of the new rigs today have DP3 -- done acquisition systems. Why didn't you consider for these 8500 Series rigs? And what kind of returns can you get on that kind of incremental investment? And secondly, dual activity, is that something that you miss on the rigs? And again, could returns be had on that incremental investment? And if -- is this rig capable of getting that kind of capability?
James W. Swent
I'm sorry, Waqar, I missed the second part of your...
Waqar Syed - Goldman Sachs Group Inc., Research Division
The dual activity that you hear about, some of the Sedco Express kind of rigs.
James W. Swent
All right. Why don't I talk about...
DP3, on dual activity?
James W. Swent
Yes, we will -- yes. On DP3, that was not the demanded technology at the time we were building the 8500 Series. There were lots of things that were nice to have. And if you remember what we did with that rig, we sat down with customers and we said, "You can have most anything you want. And the only thing is, you're going to have to pay for what you want." And back at the time that we developed those rigs, the average customer said, "I'm only prepared to spend $250,000 a day. And if I don't have to pay for it, I'd like it kitted out in a fashion that will cost about $650 million to build." And so as we looked at this business, we said we can't build rigs for $650,000 if we're going to get $250,000 a day on. That makes absolutely no sense. So we engaged very carefully with a variety of customers and we said, "What things do you absolutely have to have? And what things can we do to take costs out of the system so that, one, it's less costly to build initially and, more importantly, that it's less expensive to operate over the life of the rig." Now DP3 is a little more interesting to people than it was back in 2005, but we're not having any difficulty marketing the 8500 Series rigs. People look at it and say, "Gee, I wish you had 2 engine rooms and I wish you had DP3. And I wish you had a bunch of other things, but I also wish I could get a really first-class rig and get my well down as quickly as possible." And that's what we've been able to do for people. Do you want to talk about the second part?
John Mark Burns
Just your question on dual activity and benefits. It's good you're here today because you're going to go offshore and we're going to -- you're going to walk up on the rig floor and you're going to see simultaneous high-paneling capabilities. We can drill in our primarily wellbore. We can make up tubulars offline. We can make up strings of casing offline. So you'll see the benefits of simultaneous handling of equipment. Dual activity is still being developed. A lot of the ideas that are discussed are not fully -- have not reached their full evolution, but I can assure you, the unit that you will see today is very efficient in pipe handling and simultaneous operations.
Just wanted to ask on the safety side, how much of the new -- oh sorry. Yes, that you just institutionalized, if you will, procedures that you already had in place informally. And my second question is, to what extent this kind of formal safety program has impacted your insurance cost?
As I -- I think, as I said earlier, when we first developed these programs, certainly, the supervisor training program for our rig-based supervisors, the -- we had just significantly modified our permit-to-work procedures. And the program was developed to help, as you say, institutionalize and get people to better understand it. Of course, we're running it now. The decision was taken at the time of the acquisition that we weren't going to spend a year or 2 to look at Pride's safety management system, look at ours and see which is the best because that's apparently what's happened in some previous acquisitions. We decided that -- hence we had a robust safety management system, and our safety management system would be the system that would be in play in the new Ensco. And as such then, we wanted to institutionalize or educate the legacy Pride supervisors into our processes and procedures. So to that extent, it's serving an excellent purpose. The more senior program, again, as I said, when we first started the leadership development program back in 2006, 2007, it was to -- we had decided to take a step change in how we were approaching safety. We had modified our vision, and this was meant to help our senior leaders understand what their role is. And it serves the same purpose now as we've integrated the Pride legacy senior leaders. We want them to understand what their role is in better understanding our vision and core value. So it's served us well several years ago and it's -- we've modified it a bit. And we're using it to help, I guess, expedite the integration process with legacy Pride. As far as the insurance cost, I'll let Jay talk to that.
James W. Swent
I think, Barbara, I should introduce you to our insurance underwriters. They're in the back of the room. And I'm sure, after listening to this presentation today, we will see a major reduction on insurance premiums going forward. We actually -- we spend a lot of time with the insurance community, discussing exactly the kind of matters we're talking about today, and I think they're very well understood. And I think, one, just being able to get insurance at all is a pretty good thing today. We're -- in some ways, we're more heavily insured than maybe some of our other competitors are with respect to windstorm coverage and things like that, which some other people don't even carry or can't get. I think our premiums are very competitive as a result of the way we operate. We have -- over several years ago, we had a number of losses in the Gulf of Mexico, in particular. And so that's not helped our premiums, but things are kind of normalized now. And we were able, through the acquisition, to actually get some real efficiencies on the insurance front. But most of that really came as a result of increasing deductibles and taking a little bit higher retention levels than we had before. But I'd say, ours -- while sometimes I feel like the financial community and even maybe the banking community doesn't take safety as seriously as we do, the underwriters really do. And as I say, we -- every year, we make a pilgrimage to London and wherever we need to go with our technical people and make sure they understand what we're doing. And in the back of the room, can I get a reduction in insurance premiums this year?
Sean P. O'Neill
Okay, time for one more quick question over here. Yes?
Yes, just quickly. Obviously, the company's made enormous strides in institutionalizing a very comprehensive pro-safety regime and created a culture and a set of values around that whole discipline. But as I read the Macondo narrative, it seemed to me that perhaps the ultimate incident and the calamity was a product of a series of interactions between suppliers and company men and all the other actors on the rig floor and may even go back to well design issues and concerns. And so my question is, what has changed about the protocols on the rig around the processes? And what checks and balances have been implemented to give the rig owner and operator a degree of control, if you will, around those critical path construction activities?
John Mark Burns
Yes, I'll just make a couple of comments and then John can add to what I say. When you're in an offshore operating environment, you must have -- one, you've got to have one boss. And in our regime, our OIM, our offshore installation manager, is the senior supervisor on the rig. He takes command and control situations once there is a situation. Obviously, in reading the reports, there was some confusion, and you can read those reports and make your own conclusions there. This is something that must command and control and senior supervision and authority, the person in charge. It's something that's very core to operating offshore. It's something, at Ensco, is very clearly understood. And we work on it every day. We reemphasize it, refocus it. So obviously, in what has changed, I guess companies have gone back and relooked at their emergency response procedures, how they respond to offshore emergencies. I think there's been a deep, deep awareness in the industry of what is expected of us in this regard should another situation like this develop. So I think, just -- there's just been a greater focus on procedures, on roles and responsibilities, and a greater focus by offshore drilling contractors, obviously, operators. We've got the Safety and Environmental Management System regime in place since April 2010. So just along those lines, there's been a number of -- a strengthening of improvements in that area.
James W. Swent
And Rob, we -- our third core value is can-do attitude. And we spend a lot of time, and particularly in the meetings that John was talking about, making sure people understand the can-do attitude is about doing things creatively, innovatively for customers to delight them and all of that. But at the end of the day, it is only a can-do attitude up to the point of following our own internal procedures. And everybody understands that we never violate any of our own safety protocols to make a customer happy. I think, when you read the Macondo report, you can see some people did some things that they probably knew they shouldn't have. I'd like to believe, on every single rig that we have, 24 hours a day, 365 days a year, people understand that they are expected to follow the safety protocols, more importantly, that they have support. And this happens, it comes all the way up to Mark's office from time to time, but they have executive support that they can make command decisions on the rig. They will be backed up back onshore. And if they get in a fistfight with a company man about how something ought to be done, they know that the executive management of Ensco is going to back them up 100%. And that's probably the most fundamental thing we have as our front line for worrying about this.
Just to add real quickly, about the only other thing to say is that what's changed as a result, post-Macondo -- in the past, I think a lot of drilling contractors would just accept what the operator wanted to do in the well construction activity. And let's face it, they have more experience in that area than we do, but I think what's happened now throughout, I would say, pretty much all the drilling contractors, is the ability now to question. If they're not sure, if a procedure that an operator wants to embark on doesn't perhaps maybe seem right or we were not too sure about it, we question more so than we have in the past. And I think that's -- it plays into -- again to our core values. But I think you're seeing more of that now, that people are questioning. And we're asking for more detailed procedures, the 24-hour lookahead. Where, in the past, not all of our operators provided that, and we're now basically demanding that from our folks. And if we are not sure about something, we challenge them.
Sean P. O'Neill
Okay, thank you very much for your questions. We're now going to take a 15-minute break, so we will resume here promptly at 9:30. Remember, if you don't have your -- didn't bring your luggage down, if you could use this break to go get it and bring it with you, appreciate it.
Sean P. O'Neill
Okay, if everyone could please take your seat, we're going to resume our presentations. Gentlemen?
Okay, just one final logistics note: We are -- we'll be loading the luggage onto the buses between now and our lunch break, so anybody that does have things like backpacks, briefcases, if you want to just have that packed up, you'll be able to throw those items underneath the bus when we go out for the rig tour. For your own personal safety and the safety of others, we won't be able to carry any of those items onto the rig later today.
Now it's my privilege to introduce Richard Roper, our Senior Director who -- of Capital Projects, who will talk about our ENSCO 120 jackup strategy.
All right, thanks, Sean. Good morning, everyone. Thanks for joining us today for our Investor Day events. I'm looking forward to touring our most recent delivery with you here in a bit. I'm overseeing all of our newbuild capital projects of our newbuild rigs, but I'm here today to talk to you about our jackup strategy and our new jackup designs.
We're all familiar with the drilling unit construction boom that happened in the late 70s and early 80s, followed by a very long hiatus. And this slide shows those jackup orders by year, which peaked during the boom at over 100 orders per year. Building resumed in earnest in early 2000s and was in full swing by 2005. Ensco was an early participant, delivering Mod V-As, ENSCO 101 and ENSCO 102 in 2000 and 2002 and then the Bigfoot series, the Mod V-Bs, 106, 107, 108 from 2005 to 2007. These jackups preceded our ENSCO 8500 Series program, first delivery in 2008. And the rest of my talk will address our very focused and strategic re-entry into the jackup build cycle.
The strategy for the newbuild jackups could be summarized by reading the emboldened text as a sentence: Designed for maximum prospectivity with step changes at maximum value for money to clients and return on investment to Ensco while retaining competitive edges long term.
So we had to evaluate all the many designs available out there. And to do that, we chose a metric, which was going to be North Sea area of operability. We had done very, very well with our ENSCO 102 but recognize that there were a few opportunities that were just a bit out of reach of that rig. And so we thought this would be a good way to evaluate the designs that are available.
So the results of this study were summarized in the area in square kilometers that a given design could be expected to be operable in the North Sea, given that the symmetry of the North Sea, the prevailing design environments and, of course, the rig designs all thrown against the strict system requirements there in that regime.
So the resulting design selection, along with Ensco modifications and the ensuing rig orders and the contracting process, greatly extends our historic North Sea operating footprint. The step changes we've realized in the design are, of course, first, environmental resistance but also drilling capacities, handling and ergonomics. A primary goal of the effort was to compete head-to-head with far more expensive equipment. And as a result, we will bring greater value for money to our clients and can expect an excellent return on our investments. We have a cantilever patent we have pending, which is incorporated into the new jackup orders, and that will see us retaining competitive edges for the long term. As for the exclusive new design, I will conclude the talk with a bit on that.
In 2011, we ordered 3 ENSCO 120 Series jackups, following the very scientific selection process I alluded to in the previous slide. And here is a rendering of the design having a quad derrick, 540-foot legs and cantilever envelope of 80-foot by 32-foot wide. The hoisting capacity is 2.5 million pounds, and that's our first jackup with that rating, and it has very comfortable accommodations for 150 persons onboard and meets all the requirements for U.K., Dutch and Danish sectors of the North Sea.
This slide summarizes the North Sea operability study results. There are a pair of columns for each design study: one for area of operability given a hard foundation, and other for area of operability given a soft foundation. And foundation is very critical to the jackup's ability to withstand storm environments. And the jackup has a large part in developing the foundation's strength by the pre-load that applies to that foundation, and these new designs are excellent in that regard.
The designs are separated into 3 groups. There's non-harsh, harsh and ultra-harsh environment categories. The Y axis shows expected area of operability in square kilometers. The ENSCO 102 is shown to the right at the harsh environment category there and the 120 series is shown to the left side of the harsh environment category. And as I said, the 102 was and is a mighty and capable vessel and we've done very well with it, but you can see that the 120 series is going to go well beyond that in terms of where it can operate in the North Sea. Note that the ENSCO 120 Series actually approaches the ultra-harsh environment category status with a much lower cross -- cost structure and will certainly be able to compete head-to-head with some of those ultra-harsh rigs in certain territories.
This is a map of the North Sea. The light blue color is showing the area of operability on soft soils for the ENSCO 120 Series, and that's analogous to the orange column in the previous slide. The medium-blue color is showing the additional area of operability, given a hard soil foundation for the ENSCO 120 Series rigs, and that is analogous to the blue column in the previous slide. And also shown on this map, a bit difficult to make out, but -- are the oil, gas and condensate fields to give an indication of the prospects that accompany those associated areas of operability. I should make the point that, although the main area of focus for the 120 Series was the North Sea, and again that was part of the selection criteria, but the rigs are worldwide rigs. For instance, the air-conditioning system is just as happy to function on the equator than it is in the North Sea. So they truly are worldwide. One of the outfalls of designing a rig for maximized service in a harsh environment in the North Sea, though, is that the inherent strength of such a design will translate to other benefits that relates to environmental resistance.
Here, we're showing that the ENSCO 120 will be capable of surviving a 300-year storm at a real and specific location in the U.S. Gulf of Mexico, and that storm has an associated 138-knot wind and 91-foot waves. That's contrasted with 2 other designs from around year 2000 with 15-year and 50-year return periods of survivability.
Just to a highlight a few of the items which are listed here as step change improvements. We've covered the hoisting capacity, and that -- which is greater than many deepwater and even ultra-deepwater rigs. We have a quad derrick, which allows racking of drill pipe 4 lengths high. We have a doubly offset rotary, which is essential to the drill floor layout with the 2 iron roughnecks and the column racker system we've got. It's a superior load chart, which I'll cover in a bit.
We have a forklift BOP bridge crane servicing 2 BOP or tree carts. The handling of the drill pipe is via a knuckleboom crane to the catwalk shuttle machine, an elevating system which is powerful enough to jack with almost 100% of the pre-load onboard. And 7,500 barrels of liquid mud and 150 POB and a Davit launch fast rescue craft.
The charts here are known as cantilever load charts. They tell you the available live load of the cantilever system. The upper ENSCO 120 load chart includes the effective -- Ensco's IP and shows that, an 80-foot reach and 17-foot to starboard offset of the drill floor, there is an allowable live load of 2.4 million pounds. That is nearly the entire rating of the hoisting system in the very corner of the load chart, and it's double the value seen in a similar chart without the use of the IP.
In layman's terms, this helps the units to drill deeper or further in extended-reach situations. And furthermore, in the North Sea where rig moving can be challenging due to the high seas and where existing infrastructure may only allow a jackup to approach from one side of a platform due to pipelines in the area, this increases the chance that this rig can set out once in location, do all the works that's required of it without having to re-enter the water and reposition to go get in the far corner of a well pattern or something like that. So it will help us to work more efficiently.
Have some animations here. This is an ENSCO 120 fly-around. And we see a cutaway of the cantilever, showing the 2 work baskets there in yellow, 2 BOP or tree carts in yellow. And the BOP forklift crane is holding the BOP. And we see the knuckleboom crane there coming into view and the catwalk shuttle machine for passing the drill pipe to the drill floor, which has 2 iron roughnecks, in red. And around the back of the drill floor, you'll see an elevator, there it is. That stops at every elevation of the derrick. We have in yellow there in the center of the derrick a PRS-6i column racker. And we have an elevated driller's cabin, as you can see. That TDX-1250 top drive there, which is doubly offset, you can notice that as we view 2 faces of the derrick. And we'll see the benefits of that offset layout in some animations to follow, which get into the functionality of the drill floor equipment. And now we're proceeding to the top of the quad derrick, which give you a perspective just how tall it is.
Next, we're going to cover offline stand building. This one's been sped up a bit. But we begin by loading pipe with a knuckleboom crane onto the catwalk shuttle main. It gets scaled into the PRS-6i. And using our pair of foxholes and auxiliary workstation with a second ST-160 iron roughneck, we will build a stand drill pipe 4 lengths high and rack it back in the setback while we're drilling ahead. First, the double is built in the aft foxhole, then the second double is built in the forward foxhole, which is then transferred to the aft foxhole to be joined to the double waiting there. And then, the 4-high assembly is now racked back in the setback as drilling continues. So very good at simultaneous operations.
Now I'm going to show the tripping-in sequence. As the top drive finishes lowering the segment of drill pipe into the well, the column racker grabs another segment to present to well center, which is connected to the drill string by the main iron roughneck. The top drive lowers the drill pipe and the process is repeated. You can see that elevated driller's cabin gives an excellent view of both work centers.
Okay, now getting into the exclusive new design I mentioned in the beginning. We have under development a new jackup design, which we aim to be a very costly -- cost-effective, excuse me. A bit more costly than we're used to but I think we're willing to maybe go for it, be an entry into the ultra-harsh category. And we're currently calling it the ENSCO 130 Series and it's targeted to compete with the very largest jackups with a much-reduced cost structure.
Here it is. It's 160 feet between the fore and aft legs and 185 feet transverse space in between the aft legs. That's compared to 156 feet between the aft legs of the 120 Series. It has 600-foot legs and a 90 by 40-foot cantilever envelope. It's capable of 430-foot water depth service in harsh environments and 560-foot water depth service in mild environments. And we would have to add a bit of leg to do that, but that is very deepwater for a jackup.
It has a similar equipment layout to the ENSCO 120 Series that we just covered, albeit with a larger derrick footprint and drill floor, which would allow a second PRS system if so desired. And it has 150 single-person cabins. And its base configuration is also for operations in the U.K., Dutch and Danish sectors. Very much standardized with the equipment and features of the 120 Series. Most of that will look familiar but some notable differences. Again, the larger derrick footprint, second PRS-6i possibility for added redundancy, 90-foot reach also with excellent load capacity on the load chart. Again, targeting the area of operation for the 130. It's capable of working up to 60 degrees north, which includes Block 9, which is certainly a challenging environment to design to.
Here's the associated anticipated area of operability for the ENSCO 130, which puts it squarely in that ultra-harsh environment category. And here's an animation of the ENSCO 130. So say it's a good bit bigger than the ENSCO 120, but it's also considerably smaller than some of the designs in that ultra-harsh category. And that's why we are confident that it will be cost-effective in comparison. It would be a lot less steel than some of these very large ones, incorporates all the same drill floor equipment we've just gone through with the 90-foot cantilever, pretty similar layout. You can see across the back of the bow leg, we have this quarters bridge, which will include all of the offices, which have very good view of the cantilever and drill floor.
So we're always evaluating our next steps and new technology, and we're excited about the potential of this design to be a cost-effective and strategic entry into that ultra-harsh category.
In sum, all of the objectives of our jackup strategy have been or are being achieved. We've designed for maximum prospectivity, made some technical step changes. We've retained some of those competitive edges for the long term, and that's going to maximize the value of money to the clients and maximize our return. The 120 Series that we are building 3 of currently, it's a big change in our harsh-environment area of operability, also hurricane survivability, oil drilling capacities, handling, ergonomics, very nice places to live and work. And the ENSCO 130 is potentially a strategic leverage of that successful jackup strategy resulting in the ENSCO 120 series.
And with that, I will thank you for your attention and turn it over to Mr. John Knowlton, our Senior Vice President - Technical, who is going to talk about our drillship program and our newest order.
John Stokes Knowlton
Thank you very much. I'm very happy to be here today to do this -- for this presentation. Richard, great job on that. I think everybody must be extremely impressed with these latest jackup series of rigs that we're building.
As I was sitting here thinking about it, though, we really are in fantastic exciting times in our business right now. Just looking at the newbuilds that we have under construction today, I can assure you that we have never in our history been building rigs like we're doing right now. It's exciting. We're building jackups. We're building ultra-deepwater semisubmersibles and we're also building ultra-deepwater drillships. And all of these are under the responsibility of Richard Roper over there, so he's got his hands full. We've given him quite the challenge.
Okay, so my presentation will focus on the ultra-deepwater drillships. And specifically, I'm talking about the very latest drillships that we have on order, which are the Samsung drillships. And that's DS-3 through DS-8. So as you know, we have 4 of these that have already been delivered, 3 of them already working. And I'll be doing -- so this is our first presentation on drillships, so it's not as mature as some of our other presentations, but I think Jay has teed it up very well. I think Mark has teed it up very well. And not to undermine anything, I -- we're extremely excited about making this trip to the ENSCO 8500.
So anyway, on this presentation, I'm going to be talking a lot about some extremely large capacities, talking about horsepower, talking about tons, talking about million of pounds. And just to put everything in perspective, I'll try to put some things in perspective as we go, but everything is huge, okay? We've got to think of everything in a different scale here when we talk about these drillships. They're truly fantastic, remarkable machines.
Now moving on to our first slide, this is going back to what Jay said earlier. We do have the newest fleet of ultra-deepwater rigs among our peers, and this are the rigs that are greater than the 7,500-foot water depth. And like the 8500 Series deepwater semisubmersibles, our DP3 series drillships are all built at one shipyard and they're basically of the same design. And this does give us great advantages, it really does, we see it every day in our people, training our people, our spares, our management of spares, our management of our competency of our people and, ultimately, in our operating performance. So we have a huge benefit on standardization, and we believe at long term that this will benefit us. We will exceed the performance -- we'll exceed the expectations, number one, but we will have competitive edges over our competition.
So moving on to the -- first, I'd like to talk a little about drillships and just what -- why drillships versus semisubmersibles and why drillships, in principle. Firstly, drillships -- to give a little bit of history on drillships. The earlier drillships, they've been around a long time. They've been around not long after semisubmersibles. And the earlier drillships were mostly moored. They weren't dynamic position. They were small, and they were smaller. And they naturally have not as good as motions as the semisubmersible. Their motion characteristics are just not as good. And if you can imagine a moored-up ship and a change of current or a change of wind, and you can't change the direction of a ship, so the earlier drillships had -- were plagued with downtime, roll motions that were just exceeded motion that you could operate. So they were not very favorable pieces of equipment.
And then as we move forward into the more recent years, the drillships have evolved, like everything else, but history dictated that we continue to do what we were successful with. And all of the semisubmersibles were originally built for harsh environments, very low motions. They have advantages, the semisubmersibles have clear advantages. But with the very latest iterations of the drillships, these -- we call them 6th generation drillships. These are ships of a different size, different scale. These are huge ships. They have very powerful dynamic positioning systems. They can weathervane into the weather most of the time. So they -- and they have some inherent advantages that I'll talk about now.
First of all, they are only meant for mild environments. They really are. They're still not, they're still not ideal for harsh environments, but in extremely deep waters and in mild environments, in remote areas, they have some advantages. And turns out the majority of the deepwater basins are in relatively mild environments, West Africa, Gulf of Mexico and Brazil. And of recent, you probably see a big trend that most of the new orders of recent are drillships. Well, there's another reason for that. The big 3 crane shipyards have geared up to build these drillships utilizing their preferred ship-shaped hull designs, and they have a highly automated construction process. It's amazing to see these. It's like mass-producing ships there. They're able to build these 6th generation drillships at a very competitive price and terms today, especially post the financial crisis. And just in principle, the drillships offer best-in-class capabilities in several key areas. First off is the deck space and variable loads. These variable loads and deck space is typically 3x out of a very large semisubmersible. This can be a tremendous advantage due to the logistic challenges of supplying an ultra-deepwater operation. As you can imagine, deepwater is not just deepwater, but it's a long way from shore. And a lot of times, it's in remote areas, sometimes 200 miles offshore. So you can imagine, the more deck space you have, the more deck load you can carry, the more stuff, the more equipment you can keep on the rig and not have to resupply.
Ultra-deepwater wells require extremely large drilling fluid systems, bulk materials, numerous strings of casing to construct the well to total depth. And the deeper the water, the greater the demand on all of these things, okay? So the deeper the water, the more it favors very large drillships.
Deepwater wells can be extremely complex, require numerous third-party services, large crews to perform this offline simultaneous activities. And this requires large quarters capacities, up to 200 people or more. In West Africa, the living quarters are often utilized to house third-party personnel for field operations in the area versus sending them to shore. So you're actually using these things as a hotel sometimes as well.
Transiting over long distances is, of course, a natural for a ship versus any other sort of vessel. All these rigs are fully self-propelled. They can travel 12 knots. So you can imagine customers that have programs over multiple countries or even multiple continents, so that drillships certainly makes a lot of sense for them.
Heavy-duty drilling systems. The deeper the water, the deeper the wells, everything gets heavier and bigger. Heavy duty drilling systems, dual derricks, large hoisting, pumping, rotating equipment, offline casing and drillstrings, all of these things are more easily accommodated on these very, very large drillships, these 6th generation drillships. And lastly, with us partnering with Samsung Heavy Industries, we are building with the largest drillship builder in the world, okay? And with the second-largest shipyard in the world, and the quality of construction and the delivery are almost guaranteed. So we have little risk of delay or cost overruns. So it's a perfect fit for us.
Now this next slide shows some of the general particulars of primarily the first 5 of our drillships, the DS-3, 4, 5, 6 and 7. Some of the main dimensions and capacities. And again, we're just talking in feet, tons, things like that. Anyway, the hull is 748 feet long. So you can imagine, the first time you walk up to one of these things, you will just be at awe. I mean, it's 2.5 football fields long. So these are very, very large ships.
The width, the breadth is 138 feet. It's got a 62-foot hole, sort of hole to keel to the top of the main deck, and then a whopping 392 feet from the keel all the way to the top of the crown on these vessels. The total displacement at drilling draft for this design is 96,000 metric tons. So it's a huge, huge displacement when it's sitting here at drilling draft.
We have a total installed horsepower of 54,000-horsepower, and it's powered by 6 engine generator sets. And this is for station keeping and propulsion. We have 6 fixed pitch variable speed azimuthing thrusters with 5.5 megawatts each, or 7,400 horsepower each, or a total power of 44,250-horsepower. 54,000-horsepower generating power is probably enough to power a pretty -- a medium-sized city of about 100,000. So you can imagine Lafayette, Louisiana, we could just power the whole town of Lafayette, Louisiana with this rig here.
And we're able to carry 15,000 barrels of liquid mud easily and 7,000 barrels of brine, 10,000 sacks of bulk material, pretty well standard with the 4 2,200 horsepower mud pumps. This is what's required in these deepwater wells. The heliport is built against the strictest standards, CAP 437, for the largest helicopters used today, the EH101, which weighs 14.6 metric tons. The quarters are sized for 200 people.
And then there's a few things that maybe separate ours from the just the standard -- the big drillships out there. They're based on -- again, they are based on the Samsung 96K design. This is an extremely proven design. When we first started looking at these just a year ago, that is the, after the acquisition. There was about 27 of these on order. And as of today, we know that there's actually 45 of these either on order or delivered. So this is by far, the most prevalent drillship in the world is this 96K Samsung design.
Again, the 96K stands for 96,000 metric tons of displacement. And again, just to put that in perspective, that's about twice the displacement of the 8500 or 8505 that we're going to see today, when it's at drilling draft. All of our rigs are equipped with 2 million pound hoisting equipment and derricks, with exception of the last one. The DS-7 will have 2.5 million pounds of hoisting equipment. They are equipped with 2,200 horsepower, 4 mud pumps.
The derricks are really another sort of quantum leap in ultra-deepwater drilling. The size of the derricks on these rigs. They are 60 by 80-foot. So they're much, much, much larger than what you'll see on the 8500 today. They're called dynamic dual derricks. They're quad height, like the 8500. That means you can make up stands of 120 to 135-foot and stand all these tubulars back in the derrick versus a conventional 90-foot stand. We have ability to rack at least 40,000 foot of drill pipe and 10,000 foot of landing string. These vessels are all built and outfitted for 10,000 feet of water now, and they're upgradable to 12,000 feet.
So as you can see, we're talking about the 8500. You could upgrade it to 10,000. Now these are sort of 10,000, you can upgrade them to 12,000 very easily.
And you can also rack back up to 8,600 foot of 14-inch casing, which is just a huge amount of setback. That's all I can tell you. It's about 4.65 million pounds total setback and on the rotary. So these are amazing capacities.
We also have the large 75.5-inch diameter rotary. It's the largest rotary you can install on a rig. And that allows for being able to run riser in high current situation, when it's pushing the riser over. We have these exceptional fluid systems we talked about earlier. The power generation systems on our rigs are upgraded. We have larger engines, and then we have larger thrusters than most of the rigs of the same class out there. We have 5.5 megawatt thrusters, most of our competition has 4.5 megawatt thrusters. So what does that do for us? It gives us basically a more powerful system. It has more redundancy, more reserve power. We can stay on location when they're not staying on location.
BOP stacks. We have a state-of-the-art 6 ram, 15,000-psi, 18 3/4 stacks, dual annulars. We have all the backup, acoustic controls, the auto shear, the EDS. We meet all of the regulations today, and we believe we meet all of the future regulations that we know of. So we're in very good shape there. And all of our rigs, from the first one to the last one, they're all the same.
We have large deck space and accommodations, it's very useful for our clients' highly demanding field development programs. We have placed heavy emphasis on third-party spaces and POB well test facilities. We have dual ROVs. So we're pretty well set up for our customers, and we've gone to long lengths to set these rigs up, so they have to do very little to them when they take them under contract straight out of the shipyard.
Anyway, the next slide is an animation that is more exciting than me talking, number one. And it -- a lot of these things I was talking about, it will show these. All this equipment in operation and give you a good idea on how all this stuff works. And it's not quite as fast as Richard's. His was running at very high speed. So we'll just -- we'll show this.
We're having a little technical difficulty here.
Well, maybe we're not going to have an animation. I might have to talk my way through it here. We'll get it working. It definitely worked last night. You could just show it. Yes, here we go.
In this view here, you can see using the -- this is actually the auxiliary rotary table. So we're using the auxiliary rotary table here to make up using offline. So this gives you kind of enhanced offline capability, having a second rotary table and a second hoist. We also have 2 column rackers in here. So you have a lot redundancy built in, so you can rack them back while you're tripping or rack them back while you're drilling. This is a drill pipe being presented to the well center. Made up with the arm roughneck. One thing, one pointed out by Richard and not pointed out here, is all this stuff's hands-free. So the roughneck doesn't have to really make up any of this pipe on these new modern rigs.
This is a view of the riser stored above deck.
Okay, back to the slide show. Well anyway, I think you could see that these things are just quite amazing, just absolutely amazing pieces of equipment here. These slides that we just showed you there, and particularly that last one, it would have been nice to be able to stop right here. That last activity you saw is truly game changing for a lot of these customers. Having that active heave compensated crane installed on the rig. As you can see, we were actually doing 3 operations at once. They were short of making up a drillstring offline, they were drilling through the BOP, and at the same time, they were landing a subsea manifold.
And if you can imagine, when you're drilling a lot these big subsea developments, they're not just drilling one well. They're drilling wells, but they're also bringing manifolds in. They put the timing and jumpers from manifolds to pipelines. They're putting all kinds of infrastructure down there. And having this crane, if you can reach it with this crane, you can do all this from the rig versus having to bring in another heavy lift barge or heavy -- and these things cost just as much as the rigs. So these are extremely beneficial to customers that have these big development programs. And most of the development programs are developed around clusters, subsea clusters and especially in this is ultra-deepwater.
So we've made this piece of equipment, this active heave, 165 ton active heave crane, standard on our rigs going forward. 4 of our 6 rigs that have been ordered have this feature.
But anyway, moving on. As impressive as all that was, the DP3 series drillships are based on the Samsung 96K design. We're actually proud to announce that our latest drillship ordered last week designated the DS-8, will be the first ultra-deepwater drillship based an Samsung's new GF12000 design. The DS-8 will be delivered in Q3 2014, and we have options for 2 additional units.
SHI or Samsung has done extensive design and model testing on this new design over the past 2 years. Ensco, we've been working with them for almost 8 months now on this. And quite frankly, we've extended our option for DS-8 for several times, probably I think we extended it about 5 times. And part of the reason we extended it, there's a lot of reasons, but one of the reasons why, we were pretty convinced we wanted this new design, the GF12000, and we needed some more time to do due diligence and make sure that it included all the specifications that we really wanted. So it took a little longer. But we conclude that we believe that this new generation drillship offers significant advantages with numerous improvements over the 96K design. And therefore, we have chosen this design for our future, ultra-deepwater newbuild program.
The new SHI design is called the GF12000. And what that means is green future 12,000 foot. So it's 12,000-foot rated. The hull is the same length. It's 748-feet overall length. It's completely new, new design or new hull form, if you will. But it's sort of based on the original 96K design. The beam has been reduced by 13-feet from 128-feet to 125-feet. And the riser storage has been moved into the hull. This is sort of the main things they've done. It also features retractable thrusters, which we'll talk about later.
This displacement -- the displacement -- overall displacement has been reduced from 96,000 metric tons to 77,000 metric tons. So it's significant reduction in displacement. The lightship is still pretty close to the same. It's reduced from 37,000 metric tons. This is just the weight of the rig with all the equipment on it, with not, no water, not ballasted down to 35,000 metric tons. These are still absolutely huge ships, about -- just to compare to the 8500, the 8500 is 20,000 tons lightship. So these things are about twice as much steel in these ships as they are in our semisubmersible designs.
The reduced displacement and optimized hull form improves the station keeping performance and reduces station keeping demand, as you can imagine. And actually, over the life of the rig, it's predicted it will have 10% less fuel consumption. So it's a much more efficient design. And we, by maintaining our 5.5, our large -- our larger thrusters, as same as the 96K drillships and in the retractable configuration, we're improving on our already exceptional station keeping performance. So we'll be industry-leading as far as station keeping capabilities.
The variable deck load is increased to a minimum of 22,000 metric tons. It's already moving from 20,000 to 22,000. It's just a huge deck load. Mud volumes increased to 16,000 [ph] barrels. The derrick is configured and outfitted with the largest hoisting equipment available today, 2.5 million pounds, and it's outfitted with 4 mud pumps, but we have space for 2 additional mud pumps. We have the top of the line top drive, the TDX-1250. This is the same top drive we're putting on our 120 Series. They have dual motors, which redundancy. Redundancy is built all into this design. And we have an animation I'll be showing in a minute that shows -- it's not quite ready for prime time. But it's sort of a canned Samsung animation, but it shows most of the new features on this rig.
And again, we have 200 POB quarters. There's some unique aspects of this design that primarily for Ensco that we've included. And include features that generally are of the highest specifications in the world today or they exceed anything that's out there today. Again, we talked about the main hoist being 2.5 million pounds. We have the largest drawworks, largest hoisting capacity available. And why is that? Why are we going to 2.5 million pounds? Well, I know David was showing you earlier some of the records we've already done with the 8500 Series. We've already run casing that weighs 1.8 million pounds.
The deeper the water you get -- and some, and the well that he is getting ready to drill, this 37,000-foot well, that will be one of the deepest wells ever drilled in history. So this Lower Tertiary formation in the Gulf of Mexico is extremely, extremely deep in the ground. Some of the deepest, the deepest drilling ever done. So we're getting down where we're drilling and we're landing casing loads that will either bump up against 2 million pounds or exceed it. So certainly, in the future, we're going to exceed 2 million pounds.
The deeper the water, the heavier your BOP, the mass, the total mass of your BOP and your riser. And as you can imagine, ships do, they still heave, they still move up and down. And so that dynamic load can exceed 2 million pounds as well. So 2.5 million pounds is certainly where we need to be going on these future rigs, and which we're doing on the last 2 rigs.
The fingerboard and setback area. The fingerboard setback area is very similar. It's using the same equipment, but it's laid out a little different. It's a little better. We have a little bit more -- we have more setback and we're able to setback larger strings of casing up to 16-inch, up to 4,800-foot of 16-inch casing. We're still able to rack back 40,000 to 45,000-foot of standard drill pipe and 10,000-foot of our landing string. And at the same time, do this all at the same time, the racking system is set up that both column rackers can reach every finger. So there's full redundancy in the drill for us. So you should virtually eliminate any chance of any downtime due to a pipe racker being down.
Anyway, we're able to rack back over 6 million pounds. And again, I'm talking in terms that are -- they're just absolutely enormous. I think if you remember Richard talking about having 2.5 or 2 million pounds in the corner on that jackup, which was amazing. We're talking about racking back 6 million pounds in these big drillships here.
One new feature of this drillship is active heave compensated drawworks. What that does? This is the first time we've gone with an active heave compensated drawworks. It's not new technology. It's been around about 15 years, but this is the first time we've used it. And what it does is it eliminates the crown-mounted compensator. The crown mounted-compensator is a large piece of equipment that goes in the very top of the derrick. So that's 300, over 300-feet up in the air. It eliminates that piece of equipment. And so all the maintenance you have to do in the future is very difficult on that equipment, as you can imagine. And it puts the compensation actually in the drawworks itself or the hoist. So the hoist does dynamic compensation, and it's also much more precise compensation. Instead of being a passive compensation, it just senses the rig heaving up and down. This is actually dynamically moving the drill line in and out because as it knows the rig is heaving up and down. And the consequence of that is, that you have much more sensitive, less fluctuation on sensitive activities.
If you can imagine, when you're landing a BOP stack out or landing a subsea tree out that weighs 600,000 pounds, and you're going to land it on a wellhead -- on a well that you've already spent $100 million on, right? So you're getting ready to land the stack, and the rig is moving up and down, 3, 4 or 5-feet. And you're trying to land this thing that weighs this kind of mass. Well, with this active heave compensated drawworks, you will literally will stop -- instead of the BOP moving up and down, it just stops moving. And you just set it on down. Same thing with this active heave compensated cranes that we're talking about. These ones that hang over the side. The same concept of the active heave compensated crane, we have it built into our drawworks.
The other big feature is, the riser moved into the hull. And again, this will be shown a little bit on the animation. With the riser moved into the hull, it frees up more deck space, okay? It also moves the center of gravity down significantly. So even though we've reduced the displacement a little bit, we've made the beam a little smaller, the rig actually has more deck space. It has more areas for the well test area. It has more area for really everything, and it has actually better roll motions. So the motions are improved, the station keeping ability is improved, and the deck load's improved. So just everything about it is good.
The BOP stack, we've already talked about our BOP stacks. They're state-of-the-art 6 ram BOP stacks. They meet all of today's regulations, all future regulations. Standardized with our other -- all of our rigs in our fleet. But these rigs are also set up for 2 BOP stacks. They're built and designed for 2 BOP stacks now, and they also are built for 7 ram stacks. So if we decide to go to a 7 ram stack, if some customers decide they want 7 rams, we can easily upgrade to that. It's already built into the design. No changes to the rig at all.
All thrusters are retractable. This is a big benefit. And some of the competition does have retractable thrusters. And if you can imagine, you'll be able to retract the thrusters all the way up into the hull and do maintenance on it out of the water. You can get it out of the water. You can pull the propellers off. You can get to all the seals. You can get to all of the components in the thruster and do maintenance on it. And you can do -- this is either unscheduled maintenance -- now say a thruster breaks down, or scheduled maintenance that needs to be done every 5 years or every 10 years. This can be done while you're operating. So you can imagine this is a huge advantage on long-term uptime of these vessels. So this rig includes these retractable thrusters. Another feature of retractable thrusters is huge improvement on fuel consumption in transit by retracting the forward 3 thrusters, we're able to reduce the fuel consumption in transit by 40% to 50%. And just looking at one mobilization, for example, going from Korea, say, to the Gulf of Mexico, that's over $5 million of fuel savings. So you have this huge savings there. But the biggest things that we're looking out there is being able to have long-term fuel savings and being able to do our maintenance on these thrusters while we're operating and offline.
The ergonomics are improved on this new vessel. It has low noise and vibration standards meeting Danish standards which are almost the highest standards in the world, step change better than anything we've done before. The quarters are also much more ergonomic. They have all the -- the bunks in the quarters or all the rooms in the quarters have 1-man or 2-man rooms only, and all the bunks are down. So there's no bunk beds at all. So it's sort of a step improvement there.
So this next animation, again, it's not quite ready for prime time. It hasn't been modified for Ensco, and it's not specific to Ensco. This was sort of Samsung's canned presentation for the GF12000. Again, nobody -- there's none in existence today, and this will be the first GF12000. Ensco will be the first one to own this rig.
Richard, you're going to put our presentation together next time, okay? Okay, so here we go, this is a view from the rig from below. And you can see what it looks like with the 6 thrusters running, kind of rolling around the side. It looks very much like the others. But you'll notice the riser's not sticking up above the deck, it's down below. The riser was -- is here on the 96K, is down below in here on this design.
You'll notice we have a burner boom already -- the burner boom installed back here. We have a lattice, one lattice normal -- lattice boom crane and that can give us some extra reach to reach the burner boom and to be able to handle the riser slip joint in case the -- anything is down on the riser handling system. These are just some of the views of the quarters. This is what a single-man cabin would look like. Imagine a 2-man cabin similar with both bunks down. Enhanced conference room and spaces in the quarters. Cinemas, cinema's stadium seating cinema. Nice beautiful rec rooms. Very live away standards. I mean very, very quiet in these quarters. The golf zone. Some of these are options that we may or may not have, okay?
We may not have it here. We don't have this tunnel thruster, but we do have the larger thruster. So this is not exactly ours. This is how the retractable canister thruster works through a rack and pinion system. It just basically pulls the whole thruster up out of the water, above the water level and then you're able to have access it. This probably gives you an idea of how large they are when they show the person here. These things are pretty huge.
But you have to do maintenance on these things periodically and sometimes you have to do repairs on them. Ultimately, you can pull the whole thing if you want, but mostly we don't anticipate having to do that in the life of the rig, actually. We also have a escape ways into the hull that are completely protected. The engine rooms are separated into 3 separate engine rooms. They have completely separate intake and exhaust, so very little chance that gas intake could possibly get into all 3 engine rooms.
Part of DP3 criteria means that you have separate spaces. We're also set up for the future, Tier III emission standards, which are coming for vessels built, I think after 2015 keeling. So it gives you an idea what the 3 engine rooms would look like. This is sort of a side view. Open -- lots and lots of deck area. The bulk mud system and liquid mud system down in the hull. These are sort of the reserve mud tanks there in this room. There's plenty of mud capacity, but there's additional capacity available.
This is the main pump room and main tanks, mud tanks, so your active mud tanks. There's room for 2 additional mud pumps. Open flat deck design. Get access from bow to stern with a forklift. So you can move things around from one end of the rig to the other. And believe me, it's a long way. So that makes it nice, don't have to use the cranes. All of this automated pipe racking system similar to what you saw on the 120, knuckleboom cranes, massive amounts of storage for tubulars back here. You could probably drill in some cases, more than one well in remote locations with all the tubulars you can take on. This shows you're building a stand on the auxiliary rotary. Notice it's smaller. It's 60-inches versus the 75.5 main rotary. Again, this just gives you more space for a riser when you run a riser through here.
As you can see, you make up -- similar to what we saw on the jackup, but at more normal speed. That one we were showing you on the jackup, it was running at 3x normal speed. So it was really flying. But it's sort of the same equipment, same concept, all hands-free operation, no roughnecks having to make up the pipe, the PRS or the hydro rack or column racker, there's 2 of these column rackers. They can reach all the setback area on both sides. So again, if one of these is down, the other one can still reach every piece of pipe in the derrick. Lots of redundancy built into these rigs. Even the top drives have dual motors. So theoretically, you can have one motor down and still be operating the top drive.
Moving to the riser storage in the hull. As you can see, it's in the hull instead of on top of the hull, and that's a massive weight, over 3,000 tons right there. So 6 million pounds of riser here. You can see we have dual gantry cranes. We also have dual lifting devices here. So again, if this one's down, this other one can reach over here and get the riser. It's all automated. It pushes the riser up above the main deck level. Then you have a gantry crane -- the same kind of gantry crane mounted above that hoist the riser up onto the riser cart machine. And if this machine is broken down, you can use one of these knuckleboom cranes to handle the riser. So we have redundancy all through the process there. And this last view shows you what it looks like running the stack. Your stack is on the bottom and all your riser joints are connected one at a time as you run the stack and see the thrusters running. The retractable -- this is just showing that when you transit, you retract the forward 2 thrusters -- 3 thrusters, and with this hull form, we just have fantastic fuel consumption, about 50% -- 40% to 50% reduction on long transits.
So putting back up the slide show there. Okay, in conclusion, Ensco's 6th generation DP3 drillships are really magnificent vessels, no question. They're truly world-class in every aspect. We benefit from a common ship design and commonality of equipment, thrusters, power, drilling equipment, BOPs and riser. And this series of drillships extends our business partnership with Samsung Heavy Industries, the largest drillship builder in the world and which offers world-class quality, delivery assurance at very competitive price and payment terms. We have excellent payment terms and price on these units.
We have technical competitive edges over our competition, we think, with our enhanced specifications and standardization on our 96K drillships and our next-generation GF12000 drillships.
Our -- as I spoke to before, our ships have upgraded power plants. We have upgraded thrusters that gives greater redundancy and greater reserve power. Most of our units have this active heave compensated knuckleboom crane, which gives us the ability to do triple activity, which is a huge advantage for our customers that have development drilling programs. In addition, our next-generation unit, the DS-8, includes numerous extras that customers may want for their large development programs, and we've already got it built into the rigs. So what we're aiming for there is when we're out marketing our rig, it already has many of the things that our customers -- or our competition doesn't have. And when you basically leave the shipyard, the rig is virtually ready for their program. Some of these things, we have designated spaces for, really all -- we've considered all of the third-party services, and we've provided spaces for it, and we've also provided all the power and services to it. So service is already pooled, they're already there.
And these are the kind of things that we know they need for their subsea completions there and their development programs. I think we're probably the first ones to ever put a triple fluid system. We have a triple isolated fluid system. So we're able to easily switch between oil-based muds, water-based muds and then brines for their completions. The enhanced tree handling capability, which wasn't really pointed out in the animation there allows for the tallest trees in existence today, 13-meter clear height. We have best-in-class fuel consumption, deck space, motions and deck load capacity. We have upgraded retractable thrusters for long-term cost of ownership and long-term uptime for these vessels. We have improved ergonomics. And we believe that combine this with our word-class SHE and operational performance discipline, we are pretty confident that we will be able to exceed expectations with our ultra-deepwater drillship fleet like we are doing now with our 8500 Series. So thank you.
Sean P. O'Neill
John, before you step down. Can you just take 2 minutes and elaborate on your second bowl of benefits to standardization similar to the ENSCO 8500 Series, just so everybody's clear with the DS-8 and how it's going to fit in with the other DP3 series drillships.
John Stokes Knowlton
Yes. So yes, I probably didn't do an adequate job there. We believe there's some new technology in here, but there's only 2 really new technologies that we're using on this rig. And that's the active heave compensated drawworks. So we're changing our drawworks and getting rid of a complicated piece of equipment, the crown-mounted compensator. These are proven pieces of equipment. There've been around for 15 years, active heave drawworks. So we think we're taking little risk in going with new drawworks design, okay? And then we have the retractable thrusters. So that's a really -- if you want to put all the new, truly new technology, retractable thrusters, they're not new either. That's a proven technology. Samsung is very capable of doing this. And we believe that's going to -- clearly, these are enhanced features that we believe are well worth doing. Otherwise, everything on the rigs, all the equipment is from the same manufacturer, it's from the same -- same power plant, it has the same thrusters, it has the same -- all that equipment on the drill floor, virtually all of the equipment is the same. They're laid out very similar. So we believe we have the same sort of synergy, if you will, of having consistency across our fleet.
Sean P. O'Neill
So training, repair and maintenance, spare parts, all of those...
John Stokes Knowlton
Training, repair, maintenance, spare parts, all of these things, same rods or same BOPs. These are your huge spares that you have to carry to keep these rigs operating.
Sean P. O'Neill
Perfect. Thank you very much. I appreciate it.
John Stokes Knowlton
Okay, with that, I'll be handing it over to Kevin Robert. I think all of you probably know Kevin. And I think he's going to give us a good presentation on the market in general and probably cover most of the deepwater market as well.
Kevin C. Robert
Did you need to say something?
Sean P. O'Neill
No, I'm good. Thanks.
Kevin C. Robert
Okay, a couple more presentations, then lunch, and then the rig tour. So if you need to stand up or stretch, go ahead. My name is Kevin Robert, I'm the Senior Vice President of Marketing. I hope you can appreciate, as you've seen the description of what we do. In a single product business, the complexity and the moving parts and the numerous things that we have to manage as a company is just almost beyond imagination. I like pictures. And for a quick safety moment, I want you to raise your hand if you're aware that if you have a car, you're supposed to check the air pressure in the tires on a regular basis. Raise your hand if you're aware of that. Okay, there's only a couple of hands not up. So now you're aware that if you have a car, you're supposed to check the air in the tires. Now regularly checking the air in the tires, how many of you believe that's once every 6 months? raise your hand. No hands went up.
How about once every 90 days? Okay, a couple of hands. How about once every 30 days? A few more hands. Now let me ask you the question, but you don't have to admit to, how often do you check the tires, the air pressure in your tires? Okay. So you heard an awful lot of work and effort and commitment to training and repetitive training and standardization and discipline and accountability of -- we are an operating company and without the accountability, we don't perform, we don't exceed expectations. And just when we talk about safety training and you wonder why do you remind people to wear your glasses and your hard hat, it's -- and then some people don't do it, well it's the same as you not checking the air in your tires. So if you're not checking the air in your tires, but you're aware of it, I would say that you do not have discipline in exercising your commitment to safety. Now you heard that over and over, and it's a big challenge, just like we've talked a lot about the equipment. It's unbelievable. I've got the best job in the company because I get to communicate to clients what all these guys in front of us represent that they do. I feel sorry, frankly, for clients that don't understand why they need to be working for Ensco. Ensco, without a doubt, has a 25-year culture that is delivering operational excellence, and that is really the key. And that's what I want to kind of talk about a little bit this morning. Customer satisfaction and how customer satisfaction translates into the kind of financial performance that you expect and the kind of loyalty that you expect. It's not only going to deliver near-term results but also position us well for the future.
So let me get into that for a second. Jay already covered our vision and strategy. And I'm going to emphasize here the customer satisfaction part of it and how it kind of leads us to be able to maximize the return of our shareholders' investment in both the people and the plant. Very quickly, I'm not going to go into this, but you know today the world consumes about 88 million, 87 million barrels of oil per day. On top of that, we have wind power, nuclear power, natural gas. The world lives on energy. So in spite of what we hear from some people who don't want to acknowledge that, our business going forward is closely tied to energy consumption. Therefore, economic reality, around the world, it's a global business, is an important thing to understand, to understand the opportunity that we have. So as we look at applying all the resources that you had described in front of us, keep in mind that we're in energy business. Now we've talked a lot about how to measure things. You've heard that a lot today, how do we measure customer satisfaction? And we're fortunate that EnergyPoint Research, an independent company, chose in 2003, to spend a significant amount of resource on measuring this. And how does it work? They have an online portal that is accessible to all our clients. Clients can go online and fill out a survey after every well, after every day. And EnergyPoint takes those surveys, they make sure that the population of the surveys doesn't mislead the results. They also generally tend to use about a 2-year timeframe for all of the information so that the results are not skewed by one really good or really bad experience. So to be awarded the #1 overall offshore driller for the second year in a row is really over about a 4-year period. And to be able to claim top performance in 12, 13 out of 16 categories is a real testament to the people that work for Ensco. It's great to have new equipment. But as you all are aware, there's a lot of excellent older equipment also in this industry, and I think from John and Richard's presentations on jackups, semis, from what David Hensel and Mark Burns talked about with the operations in the Gulf and around the world and our drillships, you see that it takes the kind of global presence and the global footprint that Jay talked about to be successful in delivering to our clients the results that they're looking for.
Let me talk a little bit about something that a few of you have heard me talk about for the last few years, and this is a complex-looking slide, but I'm going to try to speak a little bit to you on how we take the equipment and the people we have and properly place it into the market to maximize the value. We have a model that we developed in 2005 with a company called PFC Energy. We were a little bit frustrated about the perception that our industry just guesses on what we ought to do next with our rigs. And even though we have a lot of discussion on day rate, I hope you will understand that it's really the product margin or the relative margin of what we're doing, which is really more important than the absolute day rate. And I hope by now you'll understand that delivering exceptional financial returns doesn't happen without the safety, the preventive maintenance and things like that.
This model is a big Monte Carlo simulation that actually uses about 5 different algorithms, and you can see in the left side of this, the one on the left is really delivering regional demand by drilling rigs. You can see in the bottom middle of that slide a yellow output. It takes global oil and gas demand, it takes economic data from around the world, client spending and goes through a number of factors that -- including even the assessment of the actual reservoir on a field-by-field basis, to kind of challenge the production profile on the reserve replacement ratios and basically drops in -- drops out of it a regional demand for drilling. The topside is the supply side. And the supply side takes into account shipyard capacity, FPSO construction, commitments on subsea trees and surf and things that are going on in our business that are not just all about drilling, and it turns into a picture of what the supply looks like. Those 2 come together, and in the pink box there, there's an arbitrage algorithm. We have a worldwide business, so if we have a need for rigs in Brazil but a surplus in West Africa, the arbitrage algorithm shows us, kind of gives us some leading indications on how many rigs need to move, when they need to move. And of course, the magic that spits out to the right, which is just indicative, because this is not a single output type of thing. This is, are always a range of outcomes because there's probably 15 or 16 factors that go into -- to going through this is a regional and a global drilling rig market, both in terms of utilization and day rate. Five years out, actually, it runs out to 2020. So it gets pretty theoretical too far out, but we basically get out of this, by water depth, utilization and day rate.
Then what we do in marketing and with our operations and our executive management, we're always calibrating this. We're always talking to clients. We're always talking to guys like yourself that are studying the industry and asking ourselves, "Does this make sense?" And I can go back to '08 and '09, we had the financial crisis that really hit the rig demand quite heavily. But we didn't see in some sectors day rates and utilization dropping because at that period of time, the industry was so short of supply of rigs and people that there was enough work to carry it through. This particular algorithm predicted that in '05, and it led us to put a lot of our equipment and long-term contract in this '07, '08 level, so that as things dropped off, we were working through. So this is an indicative model. It gives you a lot of data, and I'm going to show you some of that data just to give you a flavor for how it works. We're doing this in deepwater, midwater and shallow water. But all the data that I'm going to show you today is just targeted towards the deepwater. But everything you're going to see here in deepwater, we also have for midwater and shallow water.
First of all, you got to start with the opportunity set. And this is the quantity of proven offshore reserves in the world. This data is end of year 2010, okay? The 2011 data is not out yet. And if you look at this, there's about 800 billion barrels of oil equivalent offshore. And if you look at the pie on the right, you can see the split between shallow water, which is defined as under 1,000 feet, and then deepwater, which is over 1,000 feet for the purposes of this data. And then on the left side, you can see where it is. So you can see that generally, a large portion of our business is still shallow water, and it's controlled in the Middle East, OPEC countries, okay? So it's interesting to look at, even though we've seen a tremendous growth in the deeper water, there is still a substantial amount of business now and into the future in the shallow water.
The next chart gives you the same information but broken up by region. And of course, the lighter colors, look at the Middle East, the big pie. The relative size of the pies give you the size of the reserves. And if you look at the Middle East, the lightest blue color on there is 0 to 300 feet of water. So clearly, jackup drilling; and the darker blue is 300 to 400 feet of water. So it's also jackup. So as you look at the different pieces of the pie, the darkest blue, which you see, most of that in Brazil, Gulf of Mexico and sub-Saharan Africa, is 7,500 feet and better. So you can kind of look at this and say, gee, if I'm going to have a global footprint, I better have critical operating mass in all of these areas. And that was a big piece of Ensco's strategy that was developed 5 years ago, when it said, let's get into ultra-deepwater, let's make sure that we have critical mass. Let's make sure we can operate and we have the presence that we need to. So we're strategically positioned in all of these markets. And it's by no mistake that the ones we're not in really don't have the opportunity set for us yet to take advantage of it.
Let's further look at the proven reserves and when they're turned into production, what it's going to look like. So you can see the black line, that's about where we are right now and everything to the left -- to the right of that black line is the production that's expected to come out of the proven reserves. And then what really jumps out at you here is look at the Asia Pacific, Middle East, sub-Saharan Africa and Brazil areas. You can see all of those are increasing. Northwest Europe is actually decreasing, which is not a surprise given that it's a mature operating basin, and the Gulf of Mexico is kind of flat. We have the decline from the shallow water offset by the increase from the deeper water.
The interesting thing to me on this, is this, when I look at this chart, I see lots and lots of drilling rigs that have to keep working to deliver this value. And all of our clients' value that they have in the market are dependent upon delivering this value.
So let's talk about something that John talked about an awful lot, Mark talked about it, David Hensel, nonproductive time. Nonproductive time is the time over a wellhead that our clients define as we're not making holes. So we are not progressing the well toward achieving the target depth and diameter. Now think of our business, I think it was David Hensel said the ENSCO 8505 is certified to 32,000 feet drilling depth, but we're going to 37,000 feet. When you're flying from Houston to New York, you're cruising at somewhere between 30,000 and 33,000 feet. Imagine what you're going to do now is drop a 6-inch piece of pipe down the chimney of your house without knocking the chimney over. That's effectively what we're doing from the platform of these rigs. Think about the skill set of the people that you've got to have to operate the equipment that John's team is designing for us. That's the kind of complexity, and we do it all the time. Now our industry has seismic reflections down to 60,000 feet below the mud line. They see oil and gas potential that deep. So we have an industry, which has a tremendous direction to go, way to go. And this is just looking at what we know today, okay? So to deliver that, when I look at it, I see lots and lots of drilling demand.
Let's do a little history lesson here. In 1995, this was where deepwater success was in the world. Water depth in the Gulf of Mexico in 1995 was generally deepwater, was considered to be 3,000 feet of water. The April 1995 lease sale was the first lease sale that sold tracks out in the 5,000 to 6,000-foot water depth in the Gulf of Mexico, and there was a geological play called mini basins that was being targeted by the industry that turned out to be a total fluke, by the way. There were no mini basins. Instead, they found a lower tertiary. In Brazil, deepest water was also about 3000 feet. No pre-salt yet. And in 1995, the Shell Bongo discovery well in Nigeria was the first deepwater well off the coast of Africa at about 3,500 feet of water. General drilling rig technology in those days kind of maxed out at about 3,500 feet of water. There was some deeper rigs, but they generally were drilling shallow wells with not real heavy mud weights. So at about this time, the industry started recognizing they needed units capable of drilling very deep wells in the 5,000 to 6,000-foot water depth, and that drove the development of the fifth generation build cycle that John and Richard talked about.
The other thing that was discovered at this time was we thought there were no additional reserves in the Gulf of Mexico, because we couldn't see through the salt layer. And we've now found out as an industry, there's salt all over the world. In some cases, 800 to 1,000 feet thick and our general 2D and 3D seismic could not see through the salt. So it'd be pretty difficult to hit that chimney from that airplane if you couldn't see where to put the drill pipe. And that was the situation we were in.
Now today, through the development of technology, here is where all the proven deepwater plays are. And to give you an idea, there was about 2.5 million barrels of reserves in the Gulf of Mexico in 1995. Since '95, our industry has added, primarily from deepwater discoveries, about 3 million barrels of reserves. And we've added about 2 million barrels of reserves from existing production, from being able to step out and recover more of the oil that was already in the ground. So in the Gulf of Mexico alone, there's been about 5 billion barrels of reserves that have been discovered through technology. Brazil in 1995, total proven reserves in the country was about 6 billion barrels. And today, at the end of '10, it was 14.2 billion barrels. I emphasize at the end of '10 because all the discoveries we've heard about in '11 and '12 are not yet added to the reserve base in Brazil, okay? So as you look at each one of these red dots on here, these are not single discovery wells. These are proven basins where our clients have said there is economic recoverable reserves and that's one of the things that's driving the building boom. And if you look at the statistical output of that, this is from 1978 to 2011, and in about the middle of this chart is 1995, the point that I referenced in the earlier graph. Look at the reserve additions by area of the world since 1995 and I emphasize this is a proven reserve. So these are SEC reported reserves, okay? I mean, the growth is tremendous. Our clients' success is just too hard for me to believe, frankly. I mean, being in the business a little while, this is just kind of hard to fathom. But this is the picture of opportunity that we're positioning ourselves for, for the long term.
Now let's quickly look at some spending trends. And this is a 10-year chart, over 10 years, from 2011 to 2020. Our industry will spend about $6.6 trillion in the E&P business, of which about 34% of that is going to be offshore; 66%, onshore. Of course, we're mostly concerned about the offshore portion. And when we take who's doing this, here's the top 40 companies, the top 20 international oil companies and the top 20 national oil companies, doing this spending. Out of the -- on the left side of this are the independent oil companies, there's roughly 13 independent oil companies who are offshore-focused and 6 onshore-focused. Today, we have active rig contracts working for 10 of those 13 companies. On the right-hand side, of the 19 national oil companies that are listed here, we are actively working for 7 of them. So if you're going be -- have a global footprint, you've got to have demonstrated proficiency at working for small companies, big companies and national oil companies. So when you hear us talking about training and local content, and I don't know if you noticed on the video, the different nationalities of the people in our company, it is a large multinational company and a business that is going on all over the world. And not to be taken lightly, it's a business controlled by governments. Very few countries in the world have free companies. Most of these reserves are owned by host governments, and that's -- that we're doing with that as well, as well as our clients.
But just on deepwater for instance, this deepwater spend, as you'll see in a minute, is just practically doubling over this period. This is taking just the offshore spend from that previous chart that I showed you and looking at how it is split. In the circle, on the top right is 2001 to 2010, spent about $1.2 billion offshore, and the chart on the bottom right, the circle, is what's expected to spend between '11 and 2020, about $2.2 billion. And look at the growth in deepwater versus shallow water. It doesn't mean shallow water is not a great place to be, it is. That's why our company is so diversified. But it does mean that there's a tremendous growth in opportunity in deepwater, primarily driven by international oil companies, because as we mentioned earlier, most of the shallow water reserves are controlled by governments. You can see in 2009 and 2010, kind of in the middle of the chart there, the impact of the financial crisis in Macondo. And you can see that here in '12, we're back to where we were in 2008. So if we hadn't had the interruption due to those 2 events, we'd be right on the trend line.
Taking the same exact information, but looking at deepwater only. You can see how deepwater is split between the regions of the world. And again, the emphasis here is when you look at North America, Latin America, the Asia Pacific region, sub-Saharan Africa, which is the orange, and Northwest Europe, you can see that Ensco, again, is very strategically placed to take advantage of the activity of our clients.
Now how sustainable is all this? We get a lot of press about commodity price. Commodity price is still very important in our business, but this gives you the breakeven price on a dollar per barrel basis of the 5 major hydrocarbon plays going on in the world right now. You can see the second from the left, global deepwater, needs about $54 a barrel to breakeven. So if we have a $70 oil price, our clients have sufficient economics to sanction new developments. Well, we're over $100. Shallow water's a little cheaper, $42 a barrel. And you can see that how it compares to shale oil and Canadian oil sands on there.
Now let me kind of kick this down to the point here. Number of wells driven equals activity, and that's going to drive rig count. The forecast that PFC has shows about 3,500 to 4,000 offshore wells per year need to be drilled around the world, in all water depths. This excludes any new discoveries, and we're in the process of updating all this right now. But as you can appreciate, you got to have accurate public data to be able to do this kind of analysis. The highest well count is actually out in the Asia Pacific region. And that's due to the vast geographic area, and also a pretty high amount of sustaining drilling. So there's a lot of mature fields out there, similar to the Shelf, Gulf of Mexico and the North Sea. The deepwater Golden Triangle area, which is our traditional deep and ultra-deepwater areas, are the highest values per well. And now we all know that the sub-salt trend or the pre-salt trend goes from the Brazilian Coast into the West Coast of Africa starting right there in the Orange Basin in Namibia, going up the coast to the equatorial margin, and then back across the Atlantic into French Guiana and probably goes up the Eastern Coast of the United States, but we'll, we may never know if that's true or not.
The big thing about the well count that I want to point out, that's not factored into here, is that, there's no estimate right now on what kind of nonproductive time increase we're experiencing or going to experience as an industry due to the increased audit and verification of rig equipment functionality. Now the reason that John and Mark and David and the guys made such a big point about standardization and predictability of the training, all of this allows us to manage for our clients, times of government -- additional government restrictions that take more time. I mean, if you assume it takes 5% more time in the future than it does today to drill a well, and you're already drilling 4,000 wells, add 5%, and look at all the rig time, okay? We haven't measured yet that, that as an industry, but what I can tell you is our desire is to minimize that time for our clients and that will deliver value to our clients, which makes us preferred by them, which makes it a lot easier to drill for our clients.
Here is where that well count will materialize in the future. Again, we're positioned in all these markets. And these are the clients, I've kind of picked 15 here, that will drill about 7,400 wells. I didn't realize it, actually, PFC picked these. We currently have active rig contracts for every one of these clients. So I think when Jay said to a large degree we feel like we're where we should be strategically, every bit of data I can come up with indicates that, that's supported.
So here's the Gulf of Mexico. This is the impact of the financial crisis in Macondo, and you can really see what's happened to us in 2010, 2011. We are starting to bounce back in 2012. We're probably about 70%, 75% of the way back of where we were pre-Macondo. And clients are getting more and more confident. They're starting to build backlog, getting permits approved. It's still taking about 240 days per permit for a deepwater well. Our shallow water wells seem to be coming just in time to keep the jackup fleet of its current size employed. But this is still some good indication of future increase in demand.
Let me talk about supply. This is the current level of newbuilds that John mentioned. This combines both semis and drillships, and you can see that basically all the 2012 rigs except for 2 are under contract and the 2 that are mentioned there, I don't view as competitive because they're kind of special vessels.
2013, we've already got 5 of the 23 under contract and you can see the '14 order book. The nice thing about this is the '14 order book's almost full. So we can today have a pretty good idea of the supply side.
What I'm going to go into now gets a little bit complex, but I'm going to try to help you understand how we look forward and have a bullish view that allows us to go out and order a rig that won't be delivered until the third quarter of '14. This is a little chart of the average day rate in green and in red are the number of contracts executed by calendar year from 1995 to 2003 for deepwater contracts in excess of one year in term. So all the little 3 month contracts I have not included. And what you can see in '95, '96 and '97, the activity drove the fifth-generation building boom that we had. Those rigs got into the market beginning in '98 with the Pathfinder, and going all the way through the year 2000 and they primarily engaged in appraisal and exploration drilling from 2000 to 2003.
In 1995, deepwater operating costs on a big drillship like what John talked about were $35,000 a day. Day rate was $150 a day. Before 1995, the highest deepwater day rate we saw in the industry was about $85,000 a day, okay? So it gives you some perspective.
Let's look at what happened between 2004 and 2011. You see a tremendous amount of activity in '05, '06 and '07, down in '07 and back up in '08. This drove the 6th generation building boom of which those rigs have been hitting the market now for the last 4 or 5 years. This was driven by all the sanction of development projects that resulted from the discoveries that happened in the early part of the last decade. And what's interesting about this, you look at the impact of the financial crisis in '09, and Macondo in '10, of those 28 contracts in 2010, about half of them were in the fourth quarter. 2011, 42 contracts. So this begs the question, what is a normal year, okay? And I put it all together and look at '12 and '13 expected, and you can see how the day rate movement and the number of rig contracts per year has materialized.
So what this tells you is in 2012, if we have 42 contracts signed, just like in '11, we will completely absorb the 2012 available fleet. That yellow and blue is the available, ultra-deep and deepwater rigs. This encompasses newbuilds, rollovers, everything. In '13, we need 48 contracts. I think a normal year, if you look backwards, is between 40 and 60 contracts per year. And you can see that materializing when you go back to the model and look at this over in short. So what we did here is looked at it in terms of rig years. This was our view of the world in August of '11, and I want you to focus on the yellow box on the upper left. In August of '11, we felt like there was going to be, in 2011, a shortage of 2 rig years based on what we could see in terms of supply and demand. In '12, we thought it was pretty balanced. But in '13, because it was not a visible market, we thought there would be 50 rig years worth of business that needed to find contracts. We just redid it, and here's the comparison. So I want to show you in 6 months how much the market has moved.
We've gone from 2 rig years in '12 back in August to a shortage in '12 of minus 6. These are rig years, not number of contracts, okay? In '13, our 50 is now 13, okay? That is an unbelievable movement in just 6 months. And I think in our August or September earnings call, whenever we had that call, we mentioned that we could see '13 visibility around March of '12, and I think we can now. And that's why we believe that the supply-demand balance in '13 is basically balanced, which leads us to believe that we're going to continue to see rigs asked for now in '14. When we announced DS-8, we had 2 clients call us and inquire about the availability and the specs. So without a doubt, we're having work into '14. And you can go through the same analysis on midwater and jackups. And the proof is in the day rates. Here's the day rate trend over the last 3 quarters, and you can kind of look at these numbers and look at the lower and the upper ends and kind of see the movement. I think you guys are all aware of this. We spent a lot of time talking about this. But frankly, the real story needs to be the execution side.
And kind of in summary then, when you look at all this, I just don't want you to forget that we're first an operating company, and our first objective is to exceed the expectations of our clients. If we do that, it gives us the opportunity to earn maximum value with the people and equipment resources that our shareholders have given us. Drivers of rig demand encompass lots of variables. We're not clairvoyant, okay? You can have all the data you want, but it doesn't give you anything more than indicative direction. However, we do believe that studying the leading indicators, when we have a fleet the size of -- that we have, gives us a better opportunity to decide when to commit, where to commit, what kind of rigs to build, where we need to be 5 years out, 10 years out and what we need to do today. And basically, in summary, you can see that looking at the present and the future, the deepwater and midwater demand appears to just kind of absorb all available supply through the end of '13. Jackup demand is going to keep that utilization high, and basically, the strategy of the company's working. The quality of our people, our balance sheet, our fleet renewal strategy, the critical mass we have and our ability to anticipate change is why we are so passionate and bullish about what we expect from ourselves now and in the future.
A question on 5.6. 2013, what was the estimate again for contracts marked as being sold out?[ph]
Kevin C. Robert
25 -- 24, yes, 42 and 46. That's the number of contracts. So if a rig's available in December of that year, it's shown as a rig available, and it needs a contract in that year, okay?
That's not rig years, right?[ph]
Kevin C. Robert
That's the number of contracts. This is rig years. So this is taking known prospects. And of course, not all the prospects will materialize, but there's always some we don't expect that come in the market, okay?
Sean P. O'Neill
Okay. Thanks, Kevin. John Karish will now introduce our safety briefing for our rig tour, including safety in the shipyard. Before John starts though, just one last reminder on logistics, that during lunch, please pack all of your backpacks, briefcases, purses, et cetera so that they can store it underneath the bus during our tour for everybody's safety. Also, just a reminder, we handed out folders this morning that have detailed brochures giving specifics on the rigs. And in addition, just so you know, all of the presentations you've seen today will be on our website shortly after we actually end these presentations this morning. So you'll be able to go out and get these presentations. So with that, I'll turn it over to John.
Thanks, Sean. Whenever anyone lands on any of our rigs, we give them a very detailed safety briefing. It's the same briefing that we show across our fleet to ensure consistency. And to save time, we're going to go ahead and show that same video here while you're in this conference room so we don't have to do it when we get to the rig. But again, it is the same video that anyone that lands on an Ensco rig will see, and we want you to go through it, so you're aware of our policies and procedures and the importance that we do place on safety. Since we do have go through the shipyard to get to the rig, after the induction video, Joshua Brian [ph], who is with Kiewit at the shipyard, Safety Director, will say a few words about additional precautions when you transit into the shipyard to the rig. So with that, if you could roll the video. Thanks.
Okay, just a couple of things to add to that. First, we will not be utilizing the T Card System on this rig visit; two, if for some reason, an alarm does sound while we're out touring the rig, there'll be a number of rig-based personnel available, and we will follow their instructions if an alarm would go; third, please report any unplanned events that might happen while you're there; and fourth, always hold onto the handrails. We'll be going up and down stairs, and we would request that you hold onto the handrails while you're going up or down any staircases. And with that, I'll turn it over to Joshua with Kiewit to say a few additional words about shipyard safety.
Thank you. Good morning, everybody. Just real quick. I want to touch on a few things with you guys for some yard-specific rules that we have. One of the main things that we do want to reiterate is that you have to remove all jewelry before you get to the yard. You will be receiving your hard hats and safety glasses prior to entering the yard as well. We ask that you keep those on at all times even while you're riding in the bus out to the vehicle or out to the rig.
There is going to be roughly 5 flights of stairs that you have to go up to. They are at a steep incline. We ask that you do take breaks if you need to and breathe and let us know if there's any problems that you're having while you're going up there. We do have a fully functional dispensary on site. So if you are having shortness of breath, lightheadedness, nausea, anything like that, feel free to come talk to us, and we'll get you guys looked at and taken care of.
As far as any other safety requirements we have is we do ensure that you guys have close-toed shoes and no heels. So if you're wearing dress shoes, if you don't have a good solid grip on them, we ask that you do change your shoes before you come out there. The rig surface is fairly slick at times and going up and down the grated stairs could be a tripping hazard.
As far as that, the video pretty much covered every other standard that we have in our yard as well. If you guys have any questions directly related to safety, we'll have somebody there for you at the base of the stair tower to talk to you before you go onto the rig. It is kind of windy outside, so when you are crossing over the catwalk, please hold your hard hats and make sure that they are secure before crossing over. Any questions?
Sean P. O'Neill
Okay, thanks very much. At noon, in about 0.5 hour, we will start our Q&A session in this room. So at this point, we're going to break for lunch. So if you want to go out these doors, to the right, you'll be directed to the lunch buffet. If you could grab your lunch and then bring it back here in this room. This is where we'll be having lunch for about the next half hour before we start Q&A. Thanks.
Sean P. O'Neill
Lucy, can you grab those doors. Close those doors, please.
Okay, we are now going to start our Q&A session.
Sean P. O'Neill
And I think, Alice you had told me there was one question remaining from our morning Q&A.
My question was actually on the jackups, on the 120 series, and I guess I'll modify it a little bit based on some of your comments. You've had good success with the 120 series jackups. Now you're moving, it sounds like, to a little bit bigger jackup. Can you talk a little bit about what you're seeing in the market, what customers are telling you that's making you invest more in the harsh environment jackup market?
James W. Swent
One thing I'd say, Joe, and I'll let others jump in about the capabilities and the requirements, but this is not a move -- a whole scale move to high-end jackups vis-à-vis what we have today. The bread-and-butter will continue to be the rigs that we have today. On the 120 series, we think there's a few opportunities there. We don't think the whole rig fleet is going to move to 120-style rigs. And the same is true of the 130 series. I'll let somebody else talk about what we're hearing from customers.
John Stokes Knowlton
Well, I would say this, that we've already got more than one customer, very interested. We already had fairly high level meetings, presentations and even believe that we have some customers that are designing field developments around a rig like this, so it does seem to be drumming up a lot of interest.
And what kind of rig is addressing that market segment right now? Is it semi? Is it midwater semis? Or is it other jackups?
John Stokes Knowlton
Basically, there are no other jackups other than the largest jackups in the world.
Kevin C. Robert
So Joe, part of the problem is that some of the projects we're looking at with these big platforms and you need cantilever reach and the payload out on the end of the cantilever. They're not even accessible with semis. So some of it's an enabling technology. You're right, though. There are other parts of the world where the drilling's been done with a semi, then they had to move the platform in. So much of our market today is about multiple use of assets and trying to minimize. Like John talked about on the heat-compensated crane, if you can avoid a big crane barge or something to come out, that can save the client hundreds of thousands of dollars a day. Here, what our clients can do is compress the schedule a little bit by having a single unit get over all the templates, be able to reach all the places they need to go. And with the permitting and the environmental regulations, I think it's becoming easier if our clients can commit to the government that they're going to go to a single location and therefore, more extended-reach wells. So upsizing the drilling capability and being able to drill deeper and further from a single point is starting to have some knock-on benefits in terms of getting projects sanctioned. So the one project that the 120 is going on. It really, the rig, kind of helped the client sanction the project. Now like Jay said, we're not sure how big this market is yet, and we're studying that right now, doing some work with different consultants on understanding the geology and trying to get a handle on how much of this is there. But it's like Jay said, this is not going to replace our -- what I'll call our bread-and-butter jackup business.
Sean P. O'Neill
A question over here. And just to be clear, too, we haven't ordered any 130 series jackups. This is a design under development, but we wanted to give you a preview of kind of what we're always looking at the next generation of rigs.
Kevin C. Robert
Well, the choice of the client today -- the 130 series, it would replace the need for a client to go get one of these big monster jackups that's suitable for Norway. So when you look at the difference in construction and operating costs, you pull a Norwegian-specified rig outside of Norway, it's extremely expensive to operate. So that's what we're trying to do, is recognize there's a hole in the market that we can take advantage of with a rig like this.
John Stokes Knowlton
Just one more point, it also does bump up against the midwater semi. So you're actually -- could be taking, doing work that would be done by really -- most of all the old midwater semis that are very old generation, do not have anywhere near the efficiency. So if you can imagine operating -- doing the same sort of work that a midwater semi does with much, much more capability and more efficiency and less downtime due to weather.
Sean P. O'Neill
Yes, Stephen, you have a question?
Stephen Ellis - Morningstar Inc., Research Division
Sure, yes. My question was actually on the 130, and you kind of started addressing it. Is this -- you mentioned it would be cost effective relative to other ultra-harsh environments. Those can -- are almost like a drillship. Would these be significantly below that in terms of cost? And would the target market for that be Norway? Or are you guys -- you kind of made it sound like it would be kind of a tweener.
John Stokes Knowlton
I guess I'll answer that. Yes, significantly less -- very significantly less in price. And it will be so close to Norwegian spec that we'll certainly have an option to build it Norwegian and possibly go to Norway.
John Mark Burns
Steve, I'll just add one point. When you talk about operating in the North Sea, you're talking about a harsh environment jackup, significant wind and waves conditions, especially during the winter and where we're talking about operating the first -- the ENSCO 120, for example. During the winter, operators face a significant amount of waiting on weather time, and we've talked about our proprietary patent on our cantilever system on this rig and on the 130. And what that's going to allow us to do is skid out and transfers that cantilever in a large enough window, so when you get out at the very edge, as far out as you can go out after the rig and as far left or right as you could transfer the rig, you're going to still have the ability to stay on location and drill these deep wells. And you do not have to move the rig. So there's a number of operating benefits working in an area like the North Sea, where rig move costs you. Sometimes, you could be down a number of weeks waiting on weather. So we feel we've got a lot of excellent capability in this design.
Sean P. O'Neill
Zach, I think you had a question.
What's it going to take to pull the trigger on a couple of these units? Are you waiting on clarity in the U.K. with the Elgin field? Is it all about firming up customer demand now? Or still is it on the design side of things, hashing out some last things there?
Kevin C. Robert
Just one consideration for us is always the balance between uncontracted newbuild capacity and opportunity, although our balance sheet is strong enough to go ahead and afford it. We've still got 2 of the 120s that are not yet contracted. So we want to see that move along a little bit. Now having said that, the kind of business we're looking at for this particular series of jackups, the clients are working as far in advance on that as they are in ultra-deepwater because they basically are like an ultra-deepwater rig in a jackup formation. So the client discussions we're having are looking at projects starting in '14 and in some cases '15. So if we can get the two 120 rigs put away or we have clients coming at us that dictate that we move a little bit quicker, I think that would be the major gauge.
Kevin, in some of the supply-demand analysis that you showed, you indicate North Sea as a shrinking market in terms of production growth, yet you're building some jackups started towards that market. Do you see overall demand for jackups expanding? Or do you expect a lot more retirements for some of the older assets in that market? And then also, in general for semis, as well as jackups, what are your assumptions for rig attrition in the coming years?
Kevin C. Robert
The North Sea market, you can almost split into 2 sectors right now. You've really got kind of the southern, and I'll call it the south central North Sea, which is where more of the mature basins are and you don't see too many of the majors there anymore. That activity's been taken over by companies that specialize in the tail end production of mature fields. So the drilling that we're seeing in that area is largely trying to get every last drop of oil or gas out of the existing reserves. Now what's going on in the northern part of the North Sea, in west of Shetland, there is a fairly good amount of unproduced reserves and undiscovered reserves that are not yet added to the proven category, and that's been technology-limited. So the assets that we're looking at here in the 120 and 130 series, even though they could drill deep gas in the Gulf of Mexico, they could do HPHT work in Southeast Asia or the Middle East, they're really, as John mentioned, hitting at a technology that isn't as plentiful today for operators to allow them to sanction those fields. So the overall reduction on that one chart is really recognizing that if you take current reserves today, because remember those charts are frozen end of '10 data, and in a year or 2, when they're updated, you'll have new discoveries to add to it. That's really recognizing that the existing geology in the North Sea today, like the Gulf of Mexico. The Gulf of Mexico shelf is now a 40 to 50 rig jackup market, where it was 150 rigs 10 years ago. Now on the second question, it pertained to what again?
It was -- in general, in your supply-demand model, what were you assuming for attrition, jackups?
Kevin C. Robert
We don't -- actually, what we did on the attrition level is only used the historical attrition level on the jackup market, which is ranged between 4 and 6 per year, as you look backwards, and those are due to total constructive losses. We actually did not assume any attrition due to age.
Sean P. O'Neill
Just 2 quick questions. The first one is on -- it sounded like that you guys, from a semisubmersibles side, I guess we'd say, we're looking more in the future of building more drillships rather than semis, probably given the more capability of the drillships and then the fact you had so many semis delivered in the recent past. Is that fair to say? And can you talk about maybe that decision on future deepwater assets? And then the second question was just on the 130. I didn't get a chance to really look at the specs all that closely. Would that be Cat-J? Would that classify for Statoil's Cat-J? And just -- those are my 2 questions.
John Stokes Knowlton
Okay. I'll answer the last question is, the Cat-J, no it does not qualify for Cat-J. Cat-J, they're very specifically specifying the largest jackups in the world, the CJ-70s. Although when we presented it to them, they were -- they are interested. So they still want us to present it. It would not meet that criteria. But quite frankly, it would probably do most of the work that they're looking to do with Cat-J. So it's certainly a possibility, actually.
Kevin C. Robert
Let me take the first one. We actually are in the process of looking at semi designs as well. We think there are some opportunities in the newbuild semi market there. If you look at the age profile of the existing semi fleet and kind of look at that 3,000- to 6,000-foot level, both harsh environment, as well as some areas like Southeast Asia, where there's a lot of old semis, we think there's some application. There's still a couple of tenders out there right now that are asking for more applications. So I think the drillship, the GF12000, was our thought process on having a drillship that surpasses the capability of anything out there on order now. So we either achieve -- get the first job or we achieve a higher return for that. On the semi sector, we're just not as far along yet because we've just seen in the last, what, John, 6 months to a year, I guess, 2 or 3 requirements for semis. So from an engineering standpoint, we're probably a little further behind on that.
John Stokes Knowlton
With that said, we are very much looking at harsh environment semis and midwater semis, and we're pretty far along looking at it and settling on what we believe would be our preferred design. And we're working on that pretty heavily right now.
Sean P. O'Neill
We have another question back in the corner there. Scott?
This question is for Kevin. In the demand model in the deepwater, how many rigs do you have working in the subsalt Angola plays at the end of '13? Is that upside to the estimate?
Kevin C. Robert
Yes, that would be an upside. Actually, that particular data, which is now 2 weeks -- that analysis is from 2 weeks ago. We did not anticipate any more pre-salt West Africa type stuff other than what's in the market today for tender, and that's only about 3 or 4 rigs. I think there is upside there.
Sean P. O'Neill
Two quick questions. Looking at the DS-8, wondering if there's any meaningful cost savings on the lower displacement level versus the previous Samsung design?
Kevin C. Robert
We think the advantage there is going to be -- the question was with the lower center of gravity on the rig, by plenty more of the equipment in the hull, what's the advantage of that? First of all the big thing with -- in ultra-deepwater drilling and deepwater drilling, where you've got these big payloads, and as John mentioned, we've got bigger thrusters as well. The ability to station-keep and continue to work under almost any kind of weather condition is a money-saving opportunity for our clients. As I mentioned, clients are very much driven by nonproductive time. They don't want the rig broken down. They don't want you on standby due to Loop Currents because you can't manage your riser. And then there's the hull factor. So those type of engineering improvements are all designed to increase the operability window over the wellhead, and that ultimately would translate into more uptime for the client.
John Stokes Knowlton
And as far as the cost, because it's a little bit less steel, about 2,000 tons less, light ship. Yes, you would think that there might be some savings. But quite frankly, it's a new design. The engineering has to be backed [ph] in over several iterations, and so it's really not a savings. It's -- if anything, it's a little bit of a premium.
And real quick for Kevin. Completely understand and share the bullishness on the deepwater visibility. I was curious about your comment on the midwater visibility, looking good through '13.
Kevin C. Robert
Yes, the same numbers showed, like I had on supply and demand in terms of rig years for deepwater, showed midwater also through the end of '13, utilized almost exact supply and demand equality. Now, you have to break that down a little bit. There's about 109 midwater rigs. There's a number of them that are stacked. So that assumes those rigs stay stacked. It assumes nothing really goes into or out of the North Sea, which is a big chunk of that sector. And what you really see the difference between midwater and deepwater, which is why I think the midwater is showing a little bit stronger going forward for the next year, is the terms in midwater are still -- the length of contracts are still not real long, so there's got to be more contracting activity. And I think with the stable commodity prices that we've enjoyed and most of our clients expect to enjoy, we really haven't seen the resurgence of demand in that area yet. It's been filled by lower spec deepwater rigs. And I think we're about to start to see more -- so probably late this year and next year, more projects coming back for that fleet outside of the North Sea. So I think that's why that shows a good balance.
Sean P. O'Neill
Next question, in the front. Matt?
First, just a follow-up on the 130 and your conversations with Norway. It's a very niche market. Is it -- would you go into Norway strategically with just one rig? Is that something that's attractive to Ensco?
Kevin C. Robert
I mean, today, we're not contemplating going into Norway.
Okay, great. And then on the drillships, your -- the last 2 drillships both have 2.5 million pound hook loads. Can the first 4 be upgraded to 2.5? Is it just getting a new top drive? Or is there more structural work that would need to be done to do that?
John Stokes Knowlton
Yes, pretty much. Any of these rigs can be upgraded to 2.5 million with some additional strengthening and replacing the top drive. But it's certainly not preferable to do that with these, taking these expensive rigs out of service to do that kind of upgrade, so we're trying to build it in. Again, I think that for the near future, 2 million pounds is, quite frankly, it's enough. But we're going to be bumping in -- there'll be some rigs soon, real soon, that really do need 2.5 million pounds.
Kevin C. Robert
The last 6 tenders, though, Matt, we've had for ultra-deepwater equipment, have specified 2.5 million pound equipment. So again, think of our portfolio that we're trying to position for a very long period of time. And as you look at a drillship with the 2.5 million pound stuff versus the 2, versus our semis with 2 and then we've got some with 1.5, there's actually application for all of these rigs over a long period of time, but in different parts of the world, in different environmental conditions. So even though you could upgrade, there's demand for what we have that I think there will be. So it's always tough to upgrade something when you have to take it out of service, and our attitude today is if a client wants to upgrade, we'll entertain it, but he's got to pay basically the day rate of the rig while it's out of service, if we're going to take that out of our fleet to accommodate the client, which goes on sometimes. Some clients do want to do that.
Great. And one more very quick one. You mentioned that the riser on the last one is going under the hull. What was there on the first 5? I mean, are you using just dead space, or...?
John Stokes Knowlton
Yes, that's basically ballast tanks down there. That's all it is. Those -- these design ships are basically very large, like tanker-like hulls, double-hull tanker type hulls. So those are just spaces down there.
Kevin C. Robert
It's not ballast water, it's just void space. Think of the first series of rigs, as they called it, the 96K, where it kind of took a tanker philosophy, where you build on top of the deck, okay? So now by going into the deck, you can do a couple of things. You can narrow the beam a little bit without losing deck space. In fact, we increase deck space because now we free it up by putting things below the deck. So you improve the motions, lower center of gravity, more fuel efficient because you have a smaller profile that you've got to push through the water, a number of benefits.
It's quite clear that you have a very diverse and wide opportunity set. But from an engineering and project management perspective, how many additional rig projects can you manage at any one time? And secondly, Jay, in terms of financial capability, how much incremental CapEx over what you already have planned with the rigs under construction that you can manage on an annual basis?
John Stokes Knowlton
I guess I'll answer the first one. How many could we handle? We could probably handle about double what we're doing now as long as we get them at the same yards. And we have very, very experienced teams at both the Korean shipyard, at Samsung, and at Keppel FELS, so we're well geared up. We're in a great shape there. If we would to go to other yards, it would be a little more difficult for us, certainly other countries to build. Anyway, and Jay?
James W. Swent
I think on the financial capability, we have about $2 billion of excess or additional liquidity in our credit lines that we can easily draw on if we choose to. We've looked at credit metrics around adding a few more drillships, and I think we could comfortably stay within our BBB+ credit rating with a few more drillships. The payment terms right now, and that can always change and probably will change, but the payment terms right now are very attractive on these ships, and so it allows you to defer a lot of the payment, obviously, until the rig is delivered. So as long as we stagger these in some sort of rational fashion, then we can continue funding these out of operating cash flow for a long time.
Sean P. O'Neill
Stephen, you have a question in the back?
Can you talk about average number of days to drill a well, in some of the different regions post the new safety requirements?
Kevin C. Robert
Let me just address it in one area, in 2 areas. In general, without exception, every client is taking what they want to do in terms of verification of equipment operability, verification of crew competency, and most clients were already moving in this direction, but of course, the accident in the Gulf of Mexico has got them now moving faster. They want to bring third parties in and verify that what we say we have we actually have the capability of doing, so that takes time. That is extending the initial acceptance period of some rigs. It's extending the time between contracts. All that time, we charge the clients for. We usually give them some kind of a testing rate and say, look, we're there to make sure that you're satisfied, test all you want, but pay for the rig. Okay? The second thing going on, however, Mark mentioned it. API 53 was a recommended practice. At the end of this year, it's going to become mandatory. And that calls for a more prescriptive and detailed risk assessment and between well maintenance and verification of operability of a number of pieces of equipment, not to mention the BOP. As we implement that, that is going to take something that we used to be able to manage in the natural workflow to minimize downtime and put it more on a timeline. You have to do it regardless of where you are in the operation of the well. So in some cases, in a severe case, you can have an operator have to actually suspend the well for a period of time so that we can do this maintenance. Again, that really just means that, that future activity is part of the normal operating cost of running a rig that gets passed on to the client. But the net effect is the client's cost is going to go up because now it's going to take him longer to do the same work that he did a year ago, 2 years ago.
Sean P. O'Neill
Next question in the front here. Just, can you just wait 2 seconds for the mic just so people listening in on the webcast can hear your question.
Have your personnel needs changed since the automation has increased? And it sounds like you're going to have a lot more work to do. How are you going to get the crews to handle all of this?
John Stokes Knowlton
Okay. I didn't quite hear the beginning of the question, but I believe it's about with the rigs becoming much more automated, does it take a different type of person to run this equipment and then how are we getting all these people. It takes more people, if you will, to run simultaneous operations, which all of these rigs are running simultaneous operations. As far as running the equipment, it's actually pretty easy to train on this equipment. It's actually easier to run these more modern drilling rigs than the old rigs, really. It takes a little less skill, it's more a joystick-type control. These things are actually pretty intuitive, pretty easy to run, pretty automatic actually, almost robotic, and that's what they look like. So training people is an issue, for sure in the industry, just a period because we're growing so fast. But it's relatively reasonably easy to train people to run this equipment.
Kevin C. Robert
One comment on that, in places like Brazil, that have huge increase in rig supply and demand, requires 65% Brazilian nationals. Angola is 70% Angolan nationals, and the United States is 100% U.S. citizens. So the training that we have to do, we have to train and educate an awful lot. You just don't have the alternative anymore of moving people around the world as freely as you would like. So the local content issue is a big challenge for the company. The standardization of our training and the things you heard about help us get qualified people from all the different nationalities. Mark, what do we have in terms of how many different nationalities do we employ?
John Mark Burns
I don't know the exact number, but I will say that you want to promote and develop your people from within. You don't want to count on going out and recruiting from outside your company. We have a very comprehensive training program for roustabouts, on up through our OIM, subsea engineers, specialists. With the new type of risks that we've talked about today, we're seeing more -- the need for more electronic technicians. Everything is obviously more electronic, computer-based, PLC controls. Everything is AC-driven. You have inverters. So we have equipment offshore, and you'll see a lot of that this afternoon, that a few years ago we did not have. So this new, more complex equipment requires a different skill set in a lot of places. So now, we have electronic technicians on our rigs. A few years ago, we did not. We have hydraulic technicians on our rigs. So we've had to adapt and manage a very complex operation. But you will always do better when you promote from within and train and develop your people from within the company.
Sean P. O'Neill
Okay. This is going to conclude our Q&A session now. Before we leave the room, again, just please remember to bring your safety glasses with you that we distributed this morning. We have some extras if necessary. We will be distributing hard hats and gloves on the buses, all 3 must be worn at all times on the rig and in the shipyard. Please be on your buses in 15 minutes at 12:45 sharp. That's when they'll be leaving. We recommend if you want to use the restrooms quickly, there will be limited availability on the rigs. So think about using the restrooms here if necessary.
Finally, thank you, again, for -- all of you, for joining us. Have fun on the rig tour. And for everybody listening in on the webcast, thank you for participating. Thanks.
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