Paragon s Acquisition of 93.5% of Prospector Offshore. November 17, 2014

Transcription

1 Paragon s Acquisition of 93.5% of Prospector Offshore November 17, 2014

2 Disclosure This material contains forward-looking statements. Statements regarding statements related to the anticipated mandatory tender offer, the time frame in which it is expected to occur, the expected benefits of the proposed acquisition, the future financial performance of the assets after the proposed acquisition, and the contract backlog, revenue, condition or performance, contract commitments, dayrates, contract commencements, contract extensions or renewals of Prospector s fleet, as well as any other statements that are not historical facts in this release, are forward-looking statements that involve certain risks, uncertainties and assumptions. These include but are not limited to risks associated with the general nature of the oil and gas industry, risks associated with the operation of Paragon as a separate, publicly traded company, actions by regulatory authorities, customers and other third parties, and other factors detailed in the Risk Factors section of Paragon s registration statement on Form 10 as filed with the SEC on July 14, 2014, in Paragon s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2014, and in Paragon s other filings with the SEC, which are available free of charge on the SEC's website at Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated. Paragon disclaims any duty to update the information presented here. 1

3 Transaction Overview As of Monday November 17th, Paragon Offshore has acquired approximately 93.5% of the outstanding shares in Prospector Offshore Drilling S.A. ( Prospector ), a drilling contractor listed on the Oslo Stock Exchange under the ticker PROS NOK per share or approximately USD $2.13 per share Total cost of NOK 1,283 million / USD $188.6 million (at USDNOK 6.80) Paragon is financing the share purchase using its revolving credit facility Prospector operates two high specification/harsh environment (HS/HE) jack-ups in the North Sea and has three additional, identical rigs under construction Paragon will request an Extraordinary General Meeting (EGM) of shareholders in Prospector to appoint a new Board of Directors Paragon will commence a mandatory tender offer for the remaining outstanding shares in Prospector within four weeks with the intent to require all remaining shares The sellers are a broad group that includes the largest shareholders The price is approximately equal to the 3 month average stock price, but after exchange rate differentials, the USD price is 24% lower than the September 1 stock price 2

4 Transaction Rationale Excellent Strategic Fit Enhances Paragon s position in the key North Sea market Strengthens Paragon s relationship with Total, already an important customer Expands the technical capabilities of Paragon s fleet immediately and reduces Paragon s total fleet age by 5 years (if all five rigs are built) Provides future contract opportunities for high-spec rigs in Paragon s core markets Adds two newbuild jackups that are contracted to Total E&P UK High Quality Assets Adds five years of backlog at strong dayrates plus options for additional term Provides optionality for three additional HS/HE jackups in 2015 and 2016 All rigs are Friede & Goldman JU-2000E design capable of working every market excluding Norway Rigs under construction are optional with no recourse to Prospector Limited Risk Operating rigs expected to be cash flow positive in Q Synergies exist with Paragon s corporate and North Sea offices Operating rigs leverage Paragon s economies of scale in the North Sea market Favorable timing for the USD/NOK exchange rate 3

5 Prospector Revenue and EBITDA Forecast Revenue and EBITDA Estimates $ millions Year-End Net Debt Estimate $ millions Reflects contributions only from Prospector 1 and Prospector Steady revenue and EBITDA contributions Revenue Estimate EBITDA Estimate Prospector Net Debt Est. at 12/31/XX 50 0 Assumes Prospector cash flow used to reduce Prospector debt 4

6 Builds on PGN s Strengths in Key Jackup Markets Paragon fleet Jack-Ups Drillships Prospector fleet Jack-Ups, operating 100% Jack-Ups, marketed utilization World NW Europe Mexico Semisubmersibles Other Jack-Ups, under construction 80% % 40% Source: Prospector; Paragon, ODS-Petrodata 5

7 Total Contract Terms Summary PROSPECTOR 1 PROSPECTOR 5 Area of Operations Contractor: Total E&P UK Ltd. and Elf Exploration UK Ltd. Total E&P UK Ltd. and Elf Exploration UK Ltd. Contract Value: USD 135 million USD 249 million Contract Duration: Fixed: Option 1: Option 2: 730 days 1x12 months 4x6 months Fixed: Option 1: Option 2: 1095 days 1x12 months 1x12 months Day Rate: USD 185k per day USD 218k per day Area of Operations: Franklin location, Central Graben area of the UK North Sea Elgin location, Central Graben area of the UK North Sea Option Day Rate: USD 185k per day USD 218k per day Contract Start Date: Sept 2014 Approx. Nov 2014 Operating Cost: USD 70k per day USD 70k - 75k per day Estimated Annualized EBITDA: Approx. USD 35 million Approx. USD 45 million The Elgin Franklin fields are two adjacent gas condensate fields located in the Central Graben Area of the North Sea at a water depth of 305ft. Option Notice Period 120 days' notice 180 days' notice Source: Prospector; Paragon 6

8 Production (kbbl/day) Elgin-Franklin A Key Asset for Total 180 Elgin-Franklin profile Elgin-Franklin was shut down for 12 months following a gas leak in March Before incident, Elgin-Franklin produced ~7% of the UK s gas production Post-incident output declined 50%, but planned to be ramped back up to pre-incident levels by Elgin-Franklin is a key project for Total Total has invested $1.7 billion in two new platforms (West Franklin and Elgin B) to deliver 9 & 12 new HP/HT wellheads respectively Production design rate of 40,000/day and 90,000/day respectively Total has stated drilling operations are planned for minimum 7 years 0 Operator announcements Rystad estimate Elgin-Franklin has already produced 700 million barrels of oil equivalent, with a further 500 million remaining to be extracted over the next two decades. So the field has plenty of productive life left. Philippe Guys, MD Total E&P UK, March 14 Source: Total E&P UK, Rystad Energy 7

9 Acquisition Improves Fleet Age by 5 Years Average fleet age in years, Jack-Up fleets Jack-Up fleet sizes (# rigs) Prospector 0 Ensco 42 Seadrill 3 PGN + PROS 39 Transocean 7 Shelf Drilling 39 Maersk Drilling 11 Hercules Offshore 36 Noble 13 COSL 35 COSL 15 Paragon Offshore 34 Rowan 18 Rowan 30 Ensco 23 Seadrill 29 PGN + PROS Hercules Offshore Maersk Drilling Transocean Shelf Drilling Paragon Offshore Noble Nabors Nabors 37 Prospector 5 Note: Assumes Prospector s fleet includes the two delivered rigs as well as the three rigs under construction. Source: ODS-Petrodata 8

10 JU-2000E Harsh Environment, High Spec Design Operations in water depths up to 400 feet Up to 35,000 feet drilling depth 2 million pounds hook load capacity 14,300,000 pounds variable deck load HP/HT capable Accommodation for 140 persons PROSPECTOR 1 JU-2000E in operation, by region Capable of working year round in harsh environment on the UK continental shelf and other major jack-up regions Primarily working in locations where operators specifically demand higher specification rigs Limited overlap with Paragon s current fleet Source: ODS-Petrodata, Prospector UK, 3 Far East, 2 Middle East, 3 Mexico, 5 SE Asia, 4 9

11 Contract Overview and Delivery Schedule PROSPECTOR 1 has a firm charter duration of 730 days, plus one 1-year option and four 6-month options with Total The total revenue backlog for firm period is estimated to be USD 135 MM excluding mobilization fee PROSPECTOR 5 has a firm charter duration of 1,095 days, plus two 1-year option with Total The total revenue backlog for firm period is estimated to be USD 249 MM including mobilization fee PROSPECTOR 6 has an option with the shipyard to delay the deliver of the rig by four months from Dec 2014 to Apr 2015 The remaining yard installments for PROSPECTOR 6-8 are USD 201MM, USD 199MM and USD 199MM respectively (payable at delivery) The new-building contracts are non-recourse to Prospector Rig Yard Construction costs Delivery Schedule & Contract day rate (USD k/d) PROSPECTOR 1 DSIC (CN) 185 Sep 2013 $185k/d $185k/d PROSPECTOR 5 SWS (CN) 203* June 2014 $218k/d $218k/d PROSPECTOR 6 SWS (CN) 203* Apr 2015 PROSPECTOR 7 SWS (CN) 214* Sep 2015 PROSPECTOR 8 SWS (CN) 214* Mar 2016 *Includes USD 7MM OFE allowance Under construction Mobilization / Site preparations Contracted Options Uncontracted Source: Prospector 10

12 USDNOK (NOK per USD) PROS (USD/share) Prospector Price and USDNOK Exchange Rate Trends USDNOK Exchange Rate Impact PROS Share Price History Latest close (14 Nov): NOK 9.76 VWAP and volume: (NOK, calendar months) Period (calendar) VWAP (NOK) Volume % of outstanding shares 1 month % 2 months % 3 months % 6 months % 12 months % USDNOK USD up 10% vs NOK since September 1 PROS (USD/share) Note: Standard Drilling acquisition of 24MM shares at NOK and related party purchase of 4.6MM shares at NOK excluded from VWAP calculation. Volumes have been significantly reduced following proxy fight in 2013 due to low free float Source: Factset 11

13 Summary Paragon has acquired 93.5% of Prospector Offshore Drilling from a broad group of selling shareholders Paragon will commence a mandatory tender offer for the remaining outstanding shares in Prospector within four weeks with the intent to require all remaining shares Paragon is financing the acquisition with its revolving credit facility Prospector is an excellent strategic fit with Paragon Brings two HS/HE rigs with attractive contracts in the key North Sea market Strengthens Paragon s relationship with Total Expands the technical capabilities of Paragon s fleet, reduces Paragon s fleet age and provides future contract opportunities for high-spec rigs in core markets Prospector has two high quality F&G JU-2000E rigs already delivered and the option for three additional rigs in 2015 and 2016 The transaction has limited risk for Paragon Operating rigs expected to be cash flow positive in Q Operating rigs leverage Paragon s economies of scale in the North Sea Rigs under construction are optional with no recourse Favorable timing for the USD/NOK exchange rate 12

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