Rig Stacking Strategies 6th Annual Offshore Finance Forum

Houston - 7 April 2016

Chip Keener Integrated Rig Stacking Solutions LLC

www.keener-consulting.com 1

Industry Cycles The Risks Warm Stack vs Cold Stack The Cost of Responsibly Stacking

Rig Stacking Strategies

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Oil Price vs Industry Build

Jackup Floater $/bbl Inflation adjusted

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1. Corrosion – hull, machinery, piping, electrical systems • VCI’s, dehumidification, cathodic protection

2. Mold – accommodations 3. Weather Events – particularly cyclonic storms 4. Certification – dates of reference

• IMO MODU Code / Flag State – keel laying • CLASS – shipyard contract … or reactivation

5. Control Systems – drilling, well control, vessel management, power management, dynamic positioning • 1000’s of parameters (software & several 100 PLC’s) • 3-6 months of commissioning with the OEM’s

Layup Risks – Startup Time / Asset Valuation

1. Documentation 2. Inventory & Capital Spares 3. System Commissioning & Validation 4. Infant Mortality

Added Burdens & Risks – New Construction

Warm Stacking correlates with a sustained crew component, and expectation of vessel readiness … though not always. Cold Stacking implies unmanning of a vessel, and presumption of neglect … though not necessarily.

Cold Stack vs Warm Stack

Responsible Stacking – Jackups

~ $600,000 Setup Cost (excludes ~ 4 wks crew participation) • Intake Survey, Dehumidification, VCI’s, Monitoring

Equipment, Accommodation Module

~ $4,800 Daily Run Cost • Labor (3 rotators), Generator, Fuel, R&M, Insurance,

Class - COC Compliance , Local Permits

Incremental Nested Jackups ~ $500,000 Setup Cost ~ $2,400 Daily Run Rate

~ $1,100,000 Setup Cost (excludes ~ 6 wks crew participation) • Intake Survey, Dehumidification, VCI’s, Monitoring

Equipment, Accommodation Module

~ $6,000 Daily Run Cost • Labor (4 rotators), Generator, Fuel, R&M, Insurance,

Class - COC Compliance , Local Permits

Incremental Unmanned Semis in Proximity ~ $1,200,000 Setup Cost (includes SOLUS boat & davit) ~ $3,000 Daily Run Rate

Responsible Stacking – Moored Semis

~ $1,800,000 Setup Cost (excludes ~ 6 wks crew participation) • Intake Survey, Dehumidification, VCI’s, Monitoring

Equipment, Accommodation Module

~ $20,000 Daily Run Cost • Labor (8 rotators), Generator, Fuel, R&M, Insurance,

Class - COC Compliance , Local Permits • ~ $3,500/day additional for tri-catenary moorings

Incremental Unmanned DP Rigs in Proximity

~ $2,000,000 Setup Cost (includes SOLUS boat & davit) ~ $7,500 Daily Run Rate (inclusive of tri-catenary moorings)

Responsible Stacking – DP Floaters

DP Floaters – Warm vs Cold Stack

Months

$’s millions

Assumptions – Cold Stacking $ 3,000,000 setup fee per rig (VCIs, dehumidification, monitoring, mooring) $ 3,500/day mooring rental per rig $ 1,800/day insurance per rig $ 18,000/day 8 man response team & services amortized across all the rigs

Assumptions – Warm Stacking $ 50,000/day per rig

$36.5

$20.6

$10.7

$14.0

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Management & support services:

• project management & staffing • guidance in maintaining sensitive equipment

(e.g. volatile memory, software management) • counsel in the maintenance & suspension of

class & flag state certification • underwriter engagement on insurance risk • commissioning services on startup

Comprehensive Integrated Services

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www.keener-consulting.com 12