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Article by DailyStocks_admin    (12-09-08 01:50 AM)

The Daily Magic Formula Stock for 12/07/2008 is ENSCO International Inc. According to the Magic Formula Investing Web Site, the ebit yield is 31% and the EBIT ROIC is 25-50 %.

Dailystocks.com only deals with facts, not biased journalism. What is a better way than to go to the SEC Filings? It's not exciting reading, but it makes you money. We cut and paste the important information from SEC filings for you to get started on your research on a specific company.


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BUSINESS OVERVIEW

General

ENSCO International Incorporated is an international offshore contract drilling company. As of February 15, 2008, our offshore rig fleet included 44 jackup rigs, one ultra-deepwater semisubmersible rig and one barge rig. Additionally, we have four ultra-deepwater semisubmersible rigs under construction.

We are one of the leading providers of offshore contract drilling services to the international oil and gas industry. Our operations are concentrated in the geographic regions of Asia Pacific (which includes Asia, the Middle East, Australia, and New Zealand), Europe/Africa, and North and South America. In this report, the terms "ENSCO," "Company," "we," "us" and "our" mean ENSCO International Incorporated and all of its subsidiaries included in our consolidated financial statements.

We provide drilling services on a "day rate" contract basis. Under day rate contracts, we provide the drilling rig and rig crews and receive a fixed amount per day for drilling the well. Our customers bear substantially all of the ancillary costs of constructing the well and supporting drilling operations, as well as the economic risk relative to the success of the well. In addition, our customers may pay all or a portion of the cost of moving our equipment and personnel to and from the well site. We do not provide "turnkey" or other risk-based drilling services.

We have assembled one of the largest and most capable offshore drilling rig fleets in the world. We have grown our fleet through corporate acquisitions, rig acquisitions and new rig construction. We acquired a total of 32 jackup rigs through acquisitions of Penrod Holding Corporation in 1993, Dual Drilling Company in 1996 and Chiles Offshore Inc. in 2002. From 1994 to 1999, we acquired five additional jackup rigs and built seven barge rigs (only one of which remains in our fleet). In 2000, we completed construction of ENSCO 101, a harsh environment jackup rig, and ENSCO 7500, a dynamically positioned ultra-deepwater semisubmersible rig capable of drilling in water depths of up to 8,000 feet.

During 2004 and 2005, we purchased a harsh environment jackup rig, ENSCO 102, and an ultra-high specification jackup rig, ENSCO 106. Although both rigs were constructed through joint ventures with Keppel FELS Limited ("KFELS"), a major international shipyard, we subsequently acquired full ownership of these rigs. In January 2006 and March 2007, we completed construction of ENSCO 107 and ENSCO 108, both of which are ultra-high specification jackup rigs.

We also have contracted KFELS to construct four ultra-deepwater semisubmersible rigs (the "ENSCO 8500 Series®"). In 2005, we entered into the ENSCO 8500 construction agreement with delivery anticipated in the third quarter of 2008. In 2006, we entered into agreements to construct ENSCO 8501 and ENSCO 8502, with deliveries expected during the first and fourth quarters of 2009, respectively. In June 2007, we entered into the ENSCO 8503 construction agreement with delivery anticipated in the third quarter of 2010. The ENSCO 8500 Series® ultra-deepwater semisubmersibles are based on our proprietary design and are enhanced versions of the ENSCO 7500 capable of drilling in up to 8,500 feet of water. The ENSCO 8500, ENSCO 8501 and ENSCO 8502 are subject to long-term drilling contracts of four years, three and one half years and two years, respectively.

Our business strategy has been to focus on jackup rig and ultra-deepwater semisubmersible rig operations and we have de-emphasized other operations and assets considered to be non-core or that do not meet our standards for financial performance. Accordingly, we sold our marine transportation fleet, two platform rigs and two barge rigs in 2003. We sold one jackup rig and two platform rigs to KFELS in 2004 in connection with the execution of the ENSCO 107 construction agreement. We also disposed of five barge rigs and one platform rig in 2005 and our one remaining platform rig in 2006.

We were formed as a Texas corporation in 1975 and were reincorporated in Delaware in 1987. Our principal office is located at 500 North Akard Street, Suite 4300, Dallas, Texas, 75201-3331, and our telephone number is (214) 397-3000. Our website is www.enscous.com.


Contract Drilling Operations

Our operations consist of one reportable segment: contract drilling services. We engage in the drilling of offshore oil and gas wells in domestic and international markets by providing our drilling rigs and crews under contracts with major international, government-owned and independent oil and gas companies.

As of February 15, 2008, we own and operate 44 jackup rigs, one ultra-deepwater semisubmersible rig and one barge rig. Of the 44 jackup rigs, 19 are located in the Asia Pacific region, 10 are located in the Europe/Africa region and 15 are located in the North and South America region. Our ultra-deepwater semisubmersible rig is located in the Gulf of Mexico and our barge rig is located in Indonesia. In addition to our deepwater semisubmersible rig currently operating in the Gulf of Mexico, we have four ultra-deepwater semisubmersible rigs under construction with scheduled delivery dates in the third quarter of 2008, the first and fourth quarters of 2009 and the third quarter of 2010. The first three rigs to be delivered have secured long-term drilling contracts in the Gulf of Mexico and we are currently marketing ENSCO 8503 and anticipate that it will be contracted in advance of delivery.

Our drilling rigs are used to drill and complete oil and gas wells. Demand for our drilling services is based upon many factors which are beyond our control, including:

• market price of oil and gas and the stability thereof,
• production levels and related activities of the Organization of Petroleum Exporting Countries ("OPEC") and other oil and gas producers,
• global oil supply and demand,
• regional natural gas supply and demand,
• worldwide expenditures for offshore oil and gas drilling,
• long-term effect of worldwide energy conservation measures,
• the development and use of alternatives to hydrocarbon-based energy sources, and
• worldwide economic activity.


We provide drilling services on a "day rate" contract basis. Under day rate contracts, we provide the drilling rig and rig crews and receive a fixed amount per day for drilling the well. Our customers bear substantially all of the ancillary costs of constructing the well and supporting drilling operations, as well as the economic risk relative to the success of the well. In addition, our customers may pay all or a portion of the cost of moving our equipment and personnel to and from the well site. We do not provide "turnkey" or other risk-based drilling services.

Our drilling contracts are the result of negotiations with our customers, and many contracts are awarded upon competitive bidding. Our drilling contracts generally contain the following commercial terms:

• contract duration extending over a specific period of time or a period necessary to drill one or more wells,
• term extension options in favor of our customer, generally upon advance notice to us at mutually agreed rates,
• provisions permitting early termination of the contract (i) if the rig is lost or destroyed or (ii) by the customer if operations are suspended for a specified period of time due to breakdown of major rig equipment, unsatisfactory performance, "force majeure" events beyond our control and the control of the customer, or other specified conditions,
• some of our drilling contracts permit early termination of the contract by the customer without cause, generally exercisable upon advance notice to us and in some cases without making an early termination payment to us,
• payment of compensation to us (generally in U.S. dollars although some contracts require a part of the compensation to be paid in local currency) on a "day work" basis such that we receive a fixed amount for each day ("day rate") that the drilling unit is operating under contract (lower rates or no compensation generally apply during periods of equipment breakdown and repair or in the event operations are suspended or interrupted by other specified conditions, some of which may be beyond our control),
• payment by us of the operating expenses of the drilling unit, including crew labor costs and the cost of incidental rig supplies, and
• provisions in many of our contracts allowing us to recover certain labor and other operating cost increases from our customers through day rate adjustment (or otherwise).

Financial information regarding our operating segment and geographic regions is presented in Note 11 to the Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data." Additional financial information regarding our operating segment is presented in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations."

Backlog Information

Our contract drilling backlog reflects firm commitments, typically represented by signed drilling contracts, and is calculated by multiplying the contracted operating day rate by the firm contract period. The contracted operating day rate excludes certain types of non-recurring revenues for rig mobilization, demobilization, contract preparation and customer reimbursables.

Our current and historic backlog of business as of February 1, 2008 and 2007 were $3,870.8 million and $3,177.4 million, respectively. Our jackup backlog increased $388.6 million primarily due to increased day rates and contract durations for our international rigs, while our semisubmersible backlog increased by $304.1 million primarily due to the ENSCO 8502 contract entered into in September 2007.

Major Customers

We provide our services to major international, government-owned and independent oil and gas companies. The number of customers we serve has decreased in recent years as a result of mergers among oil companies. In 2007, no customer represented more than 10% of our revenues and our five largest customers accounted for approximately 35% of our consolidated revenues in the aggregate.

Competition

The offshore contract drilling industry is highly competitive with numerous industry participants. Drilling contracts are, for the most part, awarded on a competitive bid basis. Price competition is often the primary factor in determining which contractor is awarded a contract, although quality of service, operational and safety performance, equipment suitability and availability, location of equipment, reputation and technical expertise are also factors. We have numerous competitors in the offshore contract drilling industry, several of which are larger and have greater resources than us including a company which resulted from the merger of two of our largest competitors in late 2007.

Governmental Regulation

Our operations are affected by political developments and by local, state, federal and international laws and regulations that relate directly to the oil and gas industry. Accordingly, we will be directly affected by the approval and adoption of laws and regulations curtailing exploration and development drilling for oil and natural gas for economic, environmental, safety or other policy reasons. It is also possible that these laws and regulations could adversely affect our operations in the future by significantly increasing our operating costs.

Environmental Matters

Our operations are subject to local, state, federal and international laws and regulations controlling the discharge of materials into the environment, pollution, contamination, and hazardous waste disposal or otherwise relating to the protection of the environment. Laws and regulations specifically applicable to our business activities could impose significant liability on us for damages, clean-up costs, fines and penalties in the event of the occurrence of oil spills or similar discharges of pollutants or contaminants into the environment or improper disposal of hazardous waste generated in the course of our operations. To date, such laws and regulations have not had a material adverse effect on our operating results, and we have not experienced an accident that has exposed us to material liability for discharges of pollutants into the environment. However, events in recent years have heightened environmental concerns about the oil and gas industry.

The United States Oil Pollution Act of 1990 ("OPA 90"), as amended, and other federal statutes applicable to us and our operations, as well as similar state statutes in Texas, Louisiana and other coastal states, address oil spill prevention and control and significantly expand liability, fine and penalty exposure across many segments of the oil and gas industry. Such statutes and related regulations, both federal and state, impose a variety of obligations on us related to the prevention of oil spills and liability for resulting damages. For instance, OPA 90 imposes strict and, with limited exceptions, joint and several liability upon each responsible party for oil removal costs and a variety of fines, penalties and damages. A failure to comply with these statutes, including OPA 90, may subject us to civil or criminal enforcement action, which may not be covered by contractual indemnification or insurance, and could have a material adverse effect on our financial position, operating results and cash flows.

From time to time, legislative proposals have been introduced that would materially limit or prohibit offshore drilling in certain areas. To date, no proposals which would materially limit or prohibit offshore drilling in our principal areas of operation have been enacted into law. However, we are adversely affected by moratoria on drilling in certain areas of the Gulf of Mexico. If new laws are enacted or if other environmental related or other governmental action is taken that restrict or prohibit offshore drilling in our principal areas of operation or impose environmental protection requirements that materially increase the cost of offshore drilling, exploration, development or production of oil and gas, we could be materially adversely affected.

International Operations

A majority of our contract drilling operations are conducted in countries outside the U.S. Revenues from international operations as a percentage of our total revenues were 75% and 61% in 2007 and 2006, respectively. Our international operations and our international shipyard rig construction and enhancement projects are subject to political, economic and other uncertainties, such as the risks of:

• terrorist acts, war and civil disturbances,
• expropriation, nationalization, deprivation or confiscation of our equipment,
• expropriation or nationalization of a customer's property or drilling rights,
• repudiation or nationalization of contracts,
• assaults on property or personnel,
• exchange restrictions,
• currency fluctuations,
• changes in the manner or rate of taxation,
• limitations on the ability to repatriate income or capital to the United States,
• changing local and international political conditions, and
• international and domestic monetary policies.

We historically have maintained insurance coverage and obtained contractual indemnities that protect us from some, but not all, of the risks associated with our non-U.S. operations such as nationalization, deprivation, confiscation, political and war risks. However, there can be no assurance that any particular type of contractual or insurance protection will be available in the future or that we will be able to purchase our desired level of insurance coverage at commercially feasible rates. In circumstances where we have insurance protection for some or all of the risks associated with non-U.S. operations, such insurance may be subject to cancelations on short notice and it is unlikely that we will be able to remove our rig or rigs from the affected area within the notice period. Accordingly, a significant event for which we are uninsured or underinsured, or for which we have not received a contractual indemnity from a customer, could cause a material adverse effect on our financial position, operating results and cash flows.

We are subject to various tax laws and regulations in substantially all of the non-U.S. countries in which we operate or have a legal presence. We evaluate applicable tax laws and employ various business structures and operating strategies in non-U.S. countries to obtain the optimal level of taxation on our revenues, income, assets and personnel. Actions by international tax authorities that impact our business structures and operating strategies, such as changes to tax treaties, laws and regulations, or the interpretation or repeal of same, adverse rulings in connection with audits or otherwise, or other challenges, may substantially increase our tax expense.

Our international operations also face the risk of fluctuating currency values, which can impact our revenues and operating costs. In addition, some of the countries in which we operate have occasionally enacted exchange controls. Historically, these risks have been limited by invoicing and receiving payment in U.S. dollars or freely convertible international currency and, to the extent possible, by limiting acceptance of foreign currency to amounts which approximate our expenditure requirements in such currencies. However, there is no assurance that our contracts will contain such terms in the future. We also use foreign currency purchase options or futures contracts to reduce our exposure to foreign currency risk.

We currently conduct contract drilling operations in certain countries that have experienced substantial fluctuations in the value of their currency compared to the U.S. dollar. Our drilling contracts generally stipulate payment wholly or substantially in U.S. dollars, which reduces the impact currency fluctuations have on our earnings and cash flows. However, there is no assurance that our contracts will contain such payment terms in the future.

A substantial portion of the costs and expenditures incurred by our international operations are settled in the local currencies of the countries in which we operate, exposing us to risks associated with fluctuation in the value of these currencies relative to the U.S. dollar. We use foreign currency purchase options or futures contracts to reduce this exposure, however, the relative weakening in the value of the U.S. dollar in relation to the local currencies in these countries may increase our costs and expenditures.

Our international operations are also subject to various laws and regulations in countries in which we operate, including laws and regulations relating to the equipment and operation of drilling rigs. Governments in some non-U.S. countries have become increasingly active in regulating and controlling the ownership of oil, gas and mineral concessions and companies holding concessions, the exploration of oil and gas and other aspects of the oil and gas industries in their countries. In addition, government action, including initiatives by OPEC, may continue to cause oil or gas price volatility. In some areas of the world, government activity has adversely affected the amount of exploration and development work performed by major international oil companies and may continue to do so. There can be no assurance that such laws and regulations or activities will not have a material adverse effect on our operations in the future.

CEO BACKGROUND

J. Roderick Clark; age 57; Former President and Chief Operating Officer of Baker Hughes Incorporated (Retired)

Mr. Clark is a nominee for election to the Board as a Class II Director.

Mr. Clark served as President and Chief Operating Officer of Baker Hughes Incorporated from February 2004 through January 2008. Before becoming President and COO, he served as Vice President, Marketing and Technology. Mr. Clark joined Baker Hughes Incorporated in 2001 as President of Baker Petrolite. He formerly served as President and CEO of Consolidated Equipment Companies Inc. He also formerly served as President of Sperry-Sun, a Halliburton company. Mr. Clark has held financial, operational and leadership positions with FMC Corporation, Schlumberger and Grace Energy Corporation. Mr. Clark serves as a member of the Board of Directors and Audit Committee of Teekay Corporation. He holds Bachelor of Science and Masters of Business Administration Degrees from the University of Texas. He lives in Fort Worth, Texas.

Daniel W. Rabun; age 53; Chairman, President and Chief Executive Officer of the Company

Mr. Rabun is a nominee for reelection to the Board as a Class II Director.

Mr. Rabun joined us in March 2006 as President and as one of our Directors, having been duly elected and appointed to such positions by our Board of Directors on February 6, 2006. At the Annual Meeting held on May 9, 2006, our stockholders elected Mr. Rabun to serve for the remainder of the term as a Class II Director. Our Board of Directors appointed Mr. Rabun to serve as our Chief Executive Officer effective January 1, 2007, and appointed him to serve as Chairman of our Board on May 22, 2007. Before joining us in 2006, Mr. Rabun was a partner at the international law firm of Baker & McKenzie LLP where he had practiced law since 1986, except for one year when he served as Vice President, General Counsel and Secretary of a company in Dallas, Texas. Mr. Rabun provided legal advice and counsel to us for over fifteen years before joining the Company, and served as one of our Directors during 2001. He has been a Certified Public Accountant since 1976 and a member of the Texas Bar since 1983. He holds a Bachelor of Business Administration Degree in Accounting from the University of Houston and a Juris Doctorate Degree from Southern Methodist University. He lives in Flower Mound, Texas.

Keith O. Rattie; age 54; Chairman, President and Chief Executive Officer of Questar Corporation

Mr. Rattie is a nominee for election to the Board as a Class II Director.

Mr. Rattie serves as Chairman, President and Chief Executive Officer of Questar Corporation. He was named President of Questar in February 2001, Chief Executive Officer in May 2002 and Chairman in May 2003. Mr. Rattie previously served as Vice President and Senior Vice President of Coastal Corporation. Mr. Rattie also spent 19 years with Chevron Corporation in various engineering and management positions, including General Manager of Chevron’s international gas unit. Mr. Rattie serves as a Director of Zions First National Bank, a subsidiary of Zions Bancorporation, and is a past Chairman of the Board of the Interstate Natural Gas Association of America. He holds an undergraduate Degree in Electrical Engineering from the University of Washington and a Masters of Business Administration Degree from St. Mary’s College. He lives in Park City, Utah.

C. Christopher Gaut; age 51; President, Halliburton Drilling and Evaluation Division

Mr. Gaut is a nominee for election to the Board as a Class I Director.

Mr. Gaut was named President of Halliburton’s Drilling and Evaluation Division in January 2008. Prior to assuming that position, he served as Executive Vice President and Chief Financial Officer of Halliburton Company. Prior to joining Halliburton in March 2003, Mr. Gaut shared the role of Chief Operating Officer of ENSCO International Incorporated and also served our Company as Senior Vice President and as Chief Financial Officer, a position he assumed in 1988. Prior to joining ENSCO, Mr. Gaut was a partner at Pacific Asset Capital and held various financial management positions with Amoco Corporation. He is on the Board of Directors of Forum Oilfield Technologies, Inc., the National Ocean Industries Association and the Houston Museum of Natural Science. Mr. Gaut holds a Bachelor Degree in Engineering from Dartmouth College and a Masters of Business Administration Degree from the Wharton School of Business at the University of Pennsylvania. He lives in Houston, Texas.

The Board of Directors recommends that stockholders vote “FOR” the election of each of the Board’s nominees for Class II and Class I Directors.

Current Directors

Class I Directors (Term expires in 2009)

Gerald W. Haddock; age 60; Private Investor

Mr. Haddock has been one of our Directors since December 1986. He founded Haddock Enterprises, LLC, an entrepreneurial development company concentrating in oil and gas and real estate, located in Fort Worth, Texas, in 1999, and has served as its President since that time. Mr. Haddock formerly served as President and COO of Crescent Real Estate Equities from 1994 to 1996 and as President and CEO of Crescent Real Estate Equities from 1996 to 1999. In 2004, Mr. Haddock joined the Board of Directors of Cano Petroleum, Inc., a Fort Worth-based producer of crude oil and natural gas that specializes in enhanced recovery technology. In 2005, Mr. Haddock joined the Board of Directors of Meritage Homes Corporation, and has served on its Executive Compensation Committee since August 2005. In addition, he was named Chairman of its Nominating Corporate Governance Committee in 2006. He also serves on the Baylor Foundation Board of Directors. In August 2005, Mr. Haddock was named a member of the Board of Trustees of The M.D. Anderson Proton Therapy Education and Research Foundation. Mr. Haddock holds Bachelor of Business Administration and Juris Doctorate Degrees from Baylor University. He also received a Masters of Laws in Taxation Degree from New York University and a Masters of Business Administration Degree from Dallas Baptist University. Mr. Haddock currently is Chairman of our Audit Committee. He lives in Fort Worth, Texas.

Paul E. Rowsey, III; age 53; Managing Partner, E2M Partners, LLC

Mr. Rowsey has been one of our Directors since January 2000. He is currently the Managing Partner and a founder of E2M Partners, LLC, a private real estate management and investment firm. Prior to forming E2M in January 2005, Mr. Rowsey was a founder and President of Eiger, Inc., a sponsor and manager of real estate funds. Prior to forming Eiger in 1999, he was the President and a member of the Board of Directors of Rosewood Property Company, a vertically integrated real estate operating, development and investment company. He holds a Bachelor of Arts Degree in Management Science from Duke University and a Juris Doctorate Degree from Southern Methodist University. Mr. Rowsey serves on our Audit Committee. He lives in Dallas, Texas.

Class III Directors (Term expires in 2010)

David M. Carmichael; age 69; Private Investor

David M. Carmichael has been one of our Directors since May of 2001. He has been a private investor since June 1996. Between 1994 and 1996, he served as Vice Chairman and Chairman of the Management Committee of KN Energy, Inc., which merged with American Oil & Gas Corporation in 1994. From 1985 until its merger with KN Energy, Inc., Mr. Carmichael served as Chairman, Chief Executive Officer and President of American Oil & Gas Corporation. He formed CARCON Corporation in 1984, where he served as President and Chief Executive Officer until its merger into American Oil & Gas Corporation in 1986. From 1976 to 1984, Mr. Carmichael was Chairman and Chief Executive Officer of WellTech, Inc. He served in various senior management positions with Reading & Bates Corporation between 1965 and 1976. Mr. Carmichael is a Director of Cabot Oil & Gas Corporation and National Resource Partners. Mr. Carmichael holds a Plan II Honors Degree from the School of Arts and Sciences at The University of Texas at Austin, and a Juris Doctorate Degree from The University of Texas School of Law. Mr. Carmichael serves on our Nominating, Governance and Compensation Committee. He lives in Houston, Texas.

Thomas L. Kelly II; age 49; General Partner of CHB Capital Partners

Mr. Kelly has been one of our Directors since September 1987. He has been a General Partner of CHB Capital Partners, a private equity fund that provides capital and expertise to closely-held businesses, since July 1994. Between 1984 and 1994, he served as a principal with private equity investment companies. Mr. Kelly holds a Bachelor of Arts Degree in Economics and a Bachelor of Science Degree in Administrative Science from Yale University and a Masters of Business Administration Degree from Harvard University. Mr. Kelly currently is Chairman of our Nominating, Governance and Compensation Committee. He lives in Denver, Colorado.

Rita M. Rodriguez; age 65; Senior Fellow, Woodstock Theological Center at Georgetown University

Dr. Rodriguez has been one of our Directors since August 2003. An international finance researcher and advisor who has authored numerous books and articles, Dr. Rodriguez has been a Fellow and Senior Fellow of the Woodstock Theological Center at Georgetown University since September 2002. Dr. Rodriguez was self-employed in the field of international finance from March 1999 to September 2002. She was a full-time member of the Board of Directors of the Export-Import Bank of the United States between 1982 and March 1999, a Professor of Finance at the University of Illinois at Chicago from 1978 to 1982 and an Assistant and Associate Professor of Business Administration at Harvard Business School from 1969 to 1978. Dr. Rodriguez serves as a member of the Board of Directors of Affiliated Managers Group, Inc., Phillips-Van Heusen Corporation and Private Export Funding Corporation (a private sector company, which assists in the financing of U.S. exports through the mobilization of private capital). She is Chairperson of the Audit Committees of Private Export Funding Corporation and Affiliated Managers Group, Inc. and is a member of the Audit Committee of Phillips-Van Heusen Corporation. Dr. Rodriguez holds a Bachelor of Business Administration Degree from the University of Puerto Rico, as well as a Masters of Business Administration Degree and Doctor of Philosophy Degree from the New York University Graduate School of Business. Dr. Rodriguez serves on our Audit Committee. She lives in Washington, D.C.

Class II Directors (Term expires in 2008)

Morton H. Meyerson; age 69; Chairman and Chief Executive Officer, 2M Companies, Inc.

Mr. Meyerson has been one of our Directors since September 1987. Mr. Meyerson currently serves as Chairman and Chief Executive Officer of 2M Companies, Inc., a private equity firm he founded in 1987 that invests in real estate, high-tech and private and public equities. From 2005 to present, Mr. Meyerson has served as Chairman of E2M Partners, LLC, a private real estate management and investment firm. He served as Chairman of the Board, Chief Executive Officer and President of Perot Systems from July 1992 until January 1998. From 1966 to 1986, Mr. Meyerson served in various management and executive positions with Electronic Data Systems Corporation, including President and Vice Chairman. From 1999 to present he has served as President of the Morton H. Meyerson Family Foundation. Mr. Meyerson holds Bachelor of Arts Degrees in Economics and Philosophy from The University of Texas at Austin. Mr. Meyerson serves on our Nominating, Governance and Compensation Committee. He lives in Dallas, Texas.

Joel V. Staff; age 64; Non-Executive Chairman, Reliant Energy, Inc.

Mr. Staff has been one of our Directors since May 2002. He was Chairman and Chief Executive Officer of Reliant Energy, Inc., a provider of electricity and energy services, from April 2003 until his retirement in May 2007. He currently serves as Non-Executive Chairman of Reliant Energy, Inc. From July 1993 to May 2002, Mr. Staff served in various management positions, including Chairman, President and Chief Executive Officer, with National Oilwell, Inc., a company that designs, manufactures and sells oilfield equipment and related services. He holds a Bachelor of Administration Degree from The University of Texas at Austin and a Masters of Business Administration Degree from Texas A&M University-Kingsville. Mr. Staff serves on our Nominating, Governance and Compensation Committee. He lives in Houston, Texas.

Daniel W. Rabun; age 53; Chairman, President and Chief Executive Officer of the Company

Mr. Rabun is a nominee for reelection to a new three-year term on the Board of Directors as a Class II Director (see p. 9).

Retiring Class II Directors

Morton H. Meyerson and Joel V. Staff, whose terms as Class II Directors expire at the Meeting, will retire from the Board upon expiration of their terms. We express our gratitude to Messrs. Meyerson and Staff for their years of exemplary service on our Board of Directors and their outstanding contributions to our success.

MANAGEMENT DISCUSSION FROM LATEST 10K

Our Business

We are a leading provider of offshore contract drilling services to the international oil and gas industry. We own and operate a fleet of 46 drilling rigs and have four ultra-deepwater semisubmersible rigs under construction. Our drilling rigs are located throughout the world and concentrated in the major geographic regions of Asia Pacific (which includes Asia, the Middle East, Australia and New Zealand), Europe/Africa, and North and South America.

We provide our drilling services to major international, government-owned and independent oil and gas companies on a "day rate" contract basis. Under day rate contracts, we provide the drilling rig and rig crews and receive a fixed amount per day for drilling the well. Our customers bear substantially all of the ancillary costs of constructing the well and supporting drilling operations, as well as the economic risk relative to the success of the well. Drilling contracts are, for the most part, awarded on a competitive bid basis. We do not provide "turnkey" or other risk-based drilling services.

In 2007, our revenues and net income increased significantly to record levels as we continued to experience strong rig demand, high utilization and escalating day rates in a majority of the geographic regions in which we operate. We added our tenth new ultra high-specification jackup rig, ENSCO 108, to our fleet and commenced construction of ENSCO 8503, our fourth ENSCO 8500 Series® ultra-deepwater semisubmersible rig. We entered into a long-term drilling contract for ENSCO 8502 in the Gulf of Mexico that is scheduled to commence upon its delivery from the shipyard in 2009. In addition to the substantial capital investment being made to our deepwater fleet, our Board of Directors authorized an additional $500.0 million of stock repurchases following the completion of our initial $500.0 million stock repurchase authorization.

We are looking forward to the positive impact our deepwater initiative will have in 2008 as ENSCO 7500, our semisubmersible rig currently operating in the Gulf of Mexico, rolled to a significantly higher day rate in February. Furthermore, ENSCO 8500 is expected to commence its initial four-year contract in the Gulf of Mexico by late 2008 following completion of commissioning, mobilization and final outfitting.

Our Industry

Financial operating results in the offshore contract drilling industry have historically been very cyclical and are primarily related to the demand for drilling rigs and the available supply of rigs.

Drilling Rig Demand

Demand for rigs is directly related to the regional and worldwide levels of offshore exploration and development spending by oil and gas companies, which is beyond our control. Offshore exploration and development spending may fluctuate substantially from year to year and from region to region. Such spending fluctuations result from many factors, including:

• demand for oil and gas,
• regional and global economic conditions and expected changes therein,
• political, social and legislative environments in the U.S. and other major oil-producing countries,
• production levels and related activities of OPEC and other oil and gas producers,
• technological advancements that impact the methods or cost of oil and gas exploration and development,
• disruption to exploration and development activities due to hurricanes and other severe weather conditions, and
• the impact that these and other events have on the current and expected future prices of oil and natural gas.

During 2007, jackup rig demand continued to meet or exceed supply in all major geographical regions except the Gulf of Mexico, where there continued to be an excess supply of available jackup rigs due to a decline in shallow-water drilling activity over recent years, especially during the June through November hurricane season. Throughout the year, major international and large independent oil and gas companies diverted spending to areas outside of the shallow waters of the Gulf of Mexico in search of more productive oil and gas fields. However, late in the fourth quarter it appeared that shallow-water activity among the Gulf of Mexico operators began to generate a slight pick-up in demand as the hurricane season came to an end and operator budgets and drilling plans were established for 2008.

Due to the high demand for jackup rigs on a global basis, leading day rates in 2007 were near record levels for most rig classes, utilization remained high and recently executed contracts typically had favorable terms and conditions for drilling companies. The unprecedented demand was derived, for the most part, from increased exploration and development spending by oil and gas companies as they took advantage of high oil and gas prices and the rapid growth of global energy consumption.

The demand for ultra-deepwater drilling rigs in 2007 exceeded the available supply, both internationally and in the Gulf of Mexico. The limited availability of deepwater rigs and intense competition among oil and gas companies to contract them has increased day rates to record highs. As oil and gas companies continue to increase their investment in deepwater projects, it is anticipated that demand and utilization of the global deepwater rig fleet will remain elevated sustaining the upward pressure on day rates.

Since factors that affect offshore exploration and development spending are beyond our control and because rig demand can change quickly, it is difficult for us to predict industry conditions, demand trends or future operating results. Periods of low demand result in excess rig supply, which generally reduces rig utilization levels and day rates; periods of high demand tighten rig supply, generally resulting in increased rig utilization levels and day rates.

Drilling Rig Supply

Although an estimated 50 newly constructed jackup and semisubmersible rigs are scheduled for delivery during 2008, the current supply of offshore drilling rigs is limited and new rigs require a substantial capital investment and a long period of time to construct. In addition, it is time consuming to move offshore rigs between markets. Accordingly, as demand changes in a particular market, the supply of rigs may not adjust quickly, and therefore the utilization and day rates of rigs in specific markets could fluctuate significantly. Certain events, such as limited availability of insurance for certain perils in some geographical areas, rig loss or damage due to hurricanes, blowouts, craterings, punchthroughs, and other operational events may impact the supply of rigs in a particular market and cause rapid fluctuations in rig demand, utilization and day rates.

During the past several years, the supply of available offshore drilling rigs has been unable to meet the increasing demand of oil and gas companies on a global basis. As a result of this global supply imbalance and other commercial considerations, various industry participants ordered the construction of over 120 new offshore rigs, approximately 50 of which are scheduled for delivery in 2008. The deliveries scheduled for 2008 include approximately 35 jackup rigs, the majority of which are not contracted for work upon delivery from the shipyard. The completion of these new drilling rigs will increase supply and could reduce day rates and/or utilization as a result of softening of the affected markets as rigs are absorbed into the active fleet.

The new rigs to be delivered in 2008 will require new skilled and other personnel to operate and it is estimated that competition for skilled and other labor will continue to intensify as a result. Furthermore, periods of high utilization, such as the current period, make it more difficult and costly to recruit and retain qualified employees. Although competition for skilled and other labor has not materially affected us to date, competition for such personnel could increase our future operating expenses with a resulting reduction in net income, or impact our ability to fully staff and operate our rigs.

BUSINESS ENVIRONMENT

Asia Pacific

Demand for jackup rigs in 2005 strengthened and day rates improved as increased activity levels absorbed the additional rigs that mobilized to this region in the prior year. During 2006, demand for jackup rigs in this region exceeded the supply of available rigs. As a result, jackup rig utilization levels remained high and day rates continued to increase. During 2007, the prevailing demand, coupled with limited rig availability, enabled drilling contractors to continue experiencing high day rates and utilization. Jackup rig drilling contracts in the Asia Pacific region historically have been for substantially longer durations than those in other geographical regions. Since day rates for such contracts generally are fixed, or fixed subject to adjustment for variations in the contractor's costs, our Asia Pacific operations generally are not subject to the same level of day rate volatility as other regions where shorter term contracts are more prevalent.

Europe/Africa

Our Europe/Africa offshore drilling operations are mainly conducted in northern Europe where moderate duration jackup rig contracts are prevalent. Beginning in 2005, oil and gas companies increased their spending as a result of higher oil and natural gas prices and the growing demand for oil. This led to an increase in jackup rig demand and average day rates. The trend continued into 2006, when a strong backlog of firm commitments and options in northern Europe resulted in little or no availability of jackup rigs. This caused demand to exceed the supply of available rigs and resulted in a substantial increase in day rates from the prior year. During 2007, oil and gas companies continued to increase their spending in this region and, with the shortfall of available jackup rigs, the additional demand increased average day rates further.

Many of our jackup rig contracts in the Europe/Africa and Asia Pacific regions contain cost adjustment provisions. These provisions are designed to protect our operating margin during times when contract drilling expenses are increasing. The cost adjustment provisions usually result in an increase in contract day rates or cost reimbursement to offset operating cost increases since the inception of a contract, and may also include rate adjustment provisions addressing rate reductions in the event of a decrease in operating costs. A small portion of our average day rate increases experienced in the Europe/Africa and Asia Pacific regions are attributable to contractual cost adjustment provisions.

North and South America

Our North and South America offshore drilling operations are mainly conducted in the Gulf of Mexico where jackup rig contracts are normally entered into for relatively short durations and day rates are adjusted to current market rates upon contract renewal. Therefore, average day rates in this region appear more volatile than in regions where longer duration contracts are more prevalent.

During 2005, jackup rig day rates continued to increase from prior year levels as a result of a further reduction in the supply of rigs after several jackup rigs were relocated to international markets. Furthermore, two hurricanes in the region disrupted drilling operations and severely damaged or destroyed several rigs, which reduced the number of available rigs even further. Day rates continued to increase through the first half of 2006 as drilling contractors moved additional rigs out of the Gulf of Mexico to take advantage of longer duration international contracts. However, day rates began to moderate in the second half of 2006 due to a decrease in demand as oil and gas companies were reluctant to start new projects during the hurricane season. Additionally, a decrease in the price of natural gas as well as increased cost and limited availability of insurance coverage for hurricane (windstorm) loss or damage also made this region less attractive to oil and gas companies.

During the first half of 2007, demand continued to decrease and day rates softened as a result of competition for work among drilling contractors, particularly related to smaller premium jackup rigs. In the latter half of the year, oil and gas companies remained cautious during the hurricane season and continued to shift their focus to more economically attractive prospects in the deeper waters of the Gulf of Mexico and elsewhere. As a result, jackup rig demand decreased further, resulting in an adverse impact on utilization and day rates. Drilling contractors continued to pursue international opportunities and, despite the relocation of several jackup rigs from the region in 2007, rig demand decreased at a faster pace than supply. We anticipate that drilling contractors will continue to market their Gulf of Mexico jackup rigs for longer term international contracts which, in turn, will help bring rig supply more into balance with demand.

Our North and South America offshore drilling operations are also conducted in the Latin American countries of Mexico and Venezuela. In 2007, the demand for rigs increased as the national oil company in Mexico increased its drilling requirements in an attempt to offset continued depletion of its oil reserve. As a result, to entice rigs into this market, drilling contractors were able to obtain pricing at international day rates. Day rates moderated in the later part of 2007 as drillings rigs in the Gulf of Mexico became idle and available for service in Mexico. The national oil company in Mexico has indicated that it plans to continue its increased drilling requirements during 2008. Day rates will depend on the magnitude of their drilling requirements and the availability of drilling rigs from the Gulf of Mexico.

Demand for deepwater semisubmersible rigs in the Gulf of Mexico continues to outpace supply resulting in high day rates and utilization for deepwater rigs. In addition to the ENSCO 7500 deepwater semisubmersible rig currently operating in the Gulf of Mexico, we have four ultra-deepwater semisubmersible rigs under construction with scheduled delivery dates in the third quarter of 2008, the first and fourth quarters of 2009 and the third quarter of 2010. The first three rigs to be delivered have secured long-term drilling contracts in the Gulf of Mexico and we are marketing ENSCO 8503 and anticipate that it will be contracted in advance of delivery. As oil and gas companies continue to increase their investment in deepwater projects, it is anticipated that the semisubmersible rigs in the Gulf of Mexico, as well as other geographical regions of the world, will remain at near full utilization for the next several years.

RESULTS OF OPERATIONS

In 2007, our net income increased by $222.3 million, or 29%, and operating income increased by $198.7 million, or 20%, as compared to 2006. The increases were primarily due to improved average day rates of our jackup rigs in the Europe/Africa and Asia Pacific regions, partially offset by a reduction in average day rates and utilization of our Gulf of Mexico jackup rigs, as compared to the prior year.

In 2006, our net income increased by $484.8 million, or 170%, and operating income increased by $622.7 million, or 158%, as compared to 2005. The increases were primarily due to improved average day rates in all operating areas and improved utilization of Europe/Africa and Asia Pacific jackup rigs, as compared to the prior year.

Detailed explanations of our operating results, including discussions of revenue and contract drilling expense based on geographical location and type of rig, are provided below.

Asia Pacific Jackup Rigs

In 2007, revenues for our Asia Pacific jackup rigs increased by $325.3 million, or 58%, as compared to 2006. The increase in revenues was primarily due to a 47% increase in average day rates and the increased size of our Asia Pacific fleet as ENSCO 84 mobilized to the region in late September 2006 and ENSCO 108 was delivered by a shipyard in the first quarter of 2007. The two rigs accounted for $101.5 million of the increase from prior year. The increase in average day rates resulted from stronger demand due to higher levels of spending by oil and gas companies coupled with limited rig availability in the region. Contract drilling expense increased by $47.4 million, or 22%, as compared to 2006, primarily due to the increased size of our fleet. Excluding the impact of the two additional rigs, contract drilling expense increased by $26.2 million, or 13%, as compared to the prior year due to increased personnel costs and repair and maintenance expense. The increased costs were partially offset by a $2.7 million estimated loss recognized in the prior year related to damage sustained by ENSCO 107 while pre-loading on a drilling location offshore Vietnam.

In 2006, revenues for our Asia Pacific jackup rigs increased by $209.6 million, or 59%, as compared to 2005. The increase in revenues was primarily due to a 29% increase in average day rates and an increase in utilization to 98% in 2006 from 84% in the prior year as a result of increased demand caused by higher levels of spending by oil and gas companies. Contract drilling expense increased by $40.7 million, or 24%, as compared to 2005, primarily due to increased utilization, increased personnel, maintenance and repair expense and a $2.7 million loss related to leg damage sustained by ENSCO 107 as noted above.

Europe/Africa Jackup Rigs

In 2007, revenues for our Europe/Africa jackup rigs increased by $173.7 million, or 35%, as compared to 2006. The increase in revenues was primarily attributable to the addition of ENSCO 105 to the Europe/Africa jackup fleet in the first quarter of 2007, which provided $55.7 million of revenue in the current year, and to a 33% increase in average day rates. The increase in revenues was partially offset by a decrease in utilization to 93% in 2007 from 100% in 2006 primarily due to the mobilization of ENSCO 100 from Nigeria to the North Sea, which commenced in late August of 2007. The improvement in average day rates was attributable to improved demand resulting from increased spending by oil and gas companies. Contract drilling expense increased by $50.4 million, or 32%, as compared to 2006, with the majority of the increase due to the relocation of ENSCO 105, $5.5 million of costs associated with the departure of ENSCO 100 from Nigeria and a $4.2 million increase in reimbursable costs associated with ENSCO 100. Excluding the impact of the three items above, contract drilling expense increased by $19.6 million, or 13%, as compared to the prior year due to increased personnel costs and repair and maintenance expense, partially offset by a reduction in fleet-wide mobilization expense.

In 2006, revenues for our Europe/Africa jackup rigs increased by $255.6 million, or 106%, as compared to 2005. The increase in revenues was primarily attributable to a 77% increase in average day rates and to a lesser extent, the addition of ENSCO 102 to the Europe/Africa jackup fleet in February 2006, which provided $57.2 million of revenue in 2006. The improvement in day rates and utilization was primarily attributable to increased spending by oil and gas companies and a decrease in the supply of available jackup rigs. Contract drilling expense increased by $43.9 million, or 38%, as compared to 2005, primarily due to the addition of ENSCO 102, which added $25.2 million of expense in 2006, and to increased personnel costs, rig mobilization expense, and repair and maintenance expense.

North and South America Jackup Rigs

In 2007, revenues for our North and South America jackup rigs decreased by $182.5 million, or 27% as compared to 2006. The decrease in revenues was partially due to the reduced size of our North and South America jackup fleet as ENSCO 105 relocated from the Gulf of Mexico during the first quarter of 2007 and ENSCO 84 relocated from the region during the third quarter of 2006. Excluding the impact of these two rigs, revenues decreased $114.4 million, or 19%, as compared to the prior year. An 11% decrease in average day rates and a decrease in utilization to 80% in 2007 from 90% in 2006 also contributed to the reduction in revenue from the prior year. The decrease in utilization and average day rates was due to a decrease in demand by oil and gas companies as they have reduced spending on shallow water drilling in this region. Contract drilling expense increased by $8.6 million, or 5%, as compared to 2006. Excluding the impact of the two rigs relocated from the region, contract drilling expense increased $24.3 million or 16%, primarily due to increased personnel, insurance, and repair and maintenance expense.

In 2006, revenues for our North and South America jackup rigs increased by $303.8 million, or 83%, as compared to 2005. The increase in revenues was primarily due to an 80% increase in average day rates attributable to the reduced supply of Gulf of Mexico jackup rigs as we, and several of our competitors, mobilized rigs contracted for work in international markets out of the Gulf of Mexico. Contract drilling expense increased by $30.5 million, or 22%, as compared to 2005, primarily due to increased personnel costs, insurance costs and rig mobilization expense as compared to the prior year.

North America Semisubmersible Rig

In 2007, revenues for ENSCO 7500 increased $11.9 million, or 20%, as compared to 2006. The increase in revenues was primarily due to a 4% increase in the average day rate which resulted from a cost escalation provision in the contract, and an increase in utilization to 97% in 2007 from 87% in 2006, as ENSCO 7500 was idle for approximately one month in the prior year while undergoing minor enhancement and preparatory work for its current contract. Contract drilling expense increased by $2.5 million, or 10%, as compared to 2006, primarily due to increased personnel costs and reimbursable expense partially offset by a reduction in repair and maintenance expense.

In 2006, revenues for ENSCO 7500 increased by $8.9 million, or 17%, and contract drilling expense increased $4.5 million, or 21%, as compared to 2005. The increase in revenues was primarily due to an 18% increase in the average day rate and the increase in contract drilling expense is mainly attributable to increased personnel costs.

Depreciation

Our depreciation expense for 2007 increased by $9.3 million, or 5%, as compared to 2006. The increase was primarily attributable to depreciation associated with ENSCO 108 and ENSCO 107, which were placed into service in April 2007 and March 2006, respectively, and capital enhancement and upgrade projects completed in 2007 and 2006.

Our depreciation expense for 2006 increased by $21.6 million, or 14%, as compared to 2005. The increase was primarily attributable to depreciation associated with capital enhancement projects completed in 2006 and 2005 and depreciation on ENSCO 107, which was placed into service in March of 2006.

General and Administrative

Our general and administrative expense for 2007 increased by $14.9 million, or 33%, as compared to 2006. The increase was primarily attributable to an $11.3 million expense incurred during the current year in connection with a retirement agreement entered into in February of 2007 with our former CEO and to an increase in professional fees, salary expense and share-based compensation expense as compared to the prior year.

Our general and administrative expense for 2006 increased by $12.6 million, or 39%, as compared to 2005. The increase was primarily attributable to an increase in salary expense and share-based compensation expense.






MANAGEMENT DISCUSSION FOR LATEST QUARTER

BUSINESS ENVIRONMENT

During the first nine months of 2008, day rates remained at or near record levels for most jackup rig classes, utilization remained high and recently executed contracts continued to include favorable terms and conditions for drilling contractors. In addition, limited rig availability and strong demand have continued to push day rates higher for deepwater drilling rigs on a global basis.

During recent months, there has been substantial volatility and a decline in oil and gas prices due to the deteriorating global economic environment. In addition, there has been substantial uncertainty in the capital markets and access to financing is uncertain. These conditions could have an adverse effect on our business environment. Our customers may curtail their drilling programs, which could result in a decrease in demand for drilling rigs and a reduction in day rates and/or utilization. In addition, certain of our customers could experience an inability to pay suppliers, including our Company, in the event they are unable to access the capital markets to fund their business operations. During the first nine months of 2008, more than 20 new jackup and semisubmersible rigs were delivered and another 125 are reported to be on order or under construction. It is uncertain whether current volatility in oil and gas prices and uncertainty in the capital markets will affect the delivery of rigs currently on order or under construction.

For additional information concerning the effects of the volatility in oil and gas prices and uncertainty in the capital markets, see "Item 1A. Risk Factors" in Part II of this report. For additional information concerning the effects new drilling rigs may have on our business, our industry, global supply, day rates and utilization, including potential risks and uncertainties, see "Item 1A. Risk Factors" in Part I and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II of our Annual Report on Form 10-K for the year ended December 31, 2007, as updated in this report.

Asia Pacific Jackup Rigs

Jackup rig drilling contracts in the Asia Pacific region have historically been for substantially longer durations than those in other geographic regions. Since day rates for such contracts generally are fixed, or fixed subject to adjustment for variations in the drilling contractor's costs, our Asia Pacific operations generally are not subject to the same level of day rate volatility as other regions where shorter term contracts are more prevalent. During 2007, demand for jackup rigs in the region exceeded the supply of available rigs, enabling drilling contractors to realize high day rates and utilization. During the first nine months of 2008, day rates stabilized and utilization rates remained high as increased rig demand was largely offset by new rig deliveries. We are uncertain how continued new rig deliveries will impact the region during the remainder of the year.

Europe/Africa Jackup Rigs

Our Europe/Africa offshore drilling operations are mainly conducted in northern Europe (North Sea) where moderate duration jackup rig contracts are prevalent. During 2007, a shortfall of available jackup rigs combined with the continued increase in spending by oil and gas companies in the region led to increased day rates. During the first nine months of 2008, shortfalls in rig availability continued, causing a slight increase in day rates over the prior year. Although several newbuild jackup rigs are expected to be added to the region, we anticipate a balanced market and relatively stable day rates through the remainder of the year.

North and South America Jackup Rigs

Our North and South America offshore drilling operations are mainly conducted in the Gulf of Mexico where jackup rig contracts are normally entered into for relatively short durations and day rates are adjusted to current market rates upon contract extension or renewal. Therefore, jackup rig day rates in the region are more volatile than in regions where longer duration contracts are more prevalent. During 2007, day rates softened compared to prior levels as a result of decreased demand and competition for work among drilling contractors as oil and gas companies shifted their focus to more economically attractive prospects in the deeper waters of the Gulf of Mexico and elsewhere. Drilling contractors continued to pursue international opportunities but, despite the relocation of several jackup rigs from the region in 2007, jackup rig demand decreased at a faster pace than supply.

Demand for jackup rigs in the Gulf of Mexico has increased steadily during the first nine months of 2008 as compared to year-end 2007 levels. As a result, utilization levels began to improve in early 2008 and day rates began to increase during the second quarter. In September 2008, Hurricane Gustav and Hurricane Ike forced more than two weeks of work stoppages and damaged or destroyed several rigs and platforms in the Gulf of Mexico, thereby reducing the supply of available jackup rigs. It is uncertain how the disruption from these two hurricanes, the reduced supply of available rigs and the recent reduction in oil and natural gas prices will affect demand in the region during the remainder of the year.

Semisubmersible Rigs

Demand for deepwater semisubmersible rigs continued to outpace supply resulting in high day rates and utilization during the first nine months of 2008. Despite two hurricanes striking the Gulf of Mexico in September, the deepwater semisubmersible rig fleet suffered relatively little damage. Increased deepwater exploration and development activity continues to drive strong demand for deepwater drilling rigs on a global basis, and we expect semisubmersible rig utilization to remain near 100% for the remainder of the year and into 2009.

The ENSCO 8500 ultra-deepwater semisubmersible rig was delivered during the third quarter and is currently mobilizing to the Gulf of Mexico to commence operations under a long-term drilling contract. We have six additional ENSCO 8500 Series® rigs under construction with scheduled delivery dates in the second and fourth quarter of 2009, the third quarter of 2010, the second half of 2011 and the first and second half of 2012. Three of the six ENSCO 8500 Series® rigs under construction have secured long-term drilling contracts in the Gulf of Mexico. Our ENSCO 7500 ultra-deepwater semisubmersible rig secured a new long-term contract for work offshore Australia during the third quarter of 2008 and is expected to mobilize from the Gulf of Mexico to Australia during the fourth quarter of 2008.

RESULTS OF OPERATIONS

For the quarter ended September 30, 2008, revenues increased by $99.4 million, or 19%, and operating income increased by $76.3 million, or 25%, as compared to the prior year quarter. For the nine-month period ended September 30, 2008, revenues increased by $257.4 million, or 16%, and operating income increased by $165.8 million, or 19%, as compared to the prior year period. The increases were primarily due to improved average day rates earned by our international jackup rigs and ENSCO 7500 ultra-deepwater semisubmersible rig and improved utilization of our Gulf of Mexico jackup rigs, partially offset by increased personnel costs and repair and maintenance expense across the majority of our fleet. Revenues and operating income increases realized during the nine-month period ended September 30, 2008 were also partially offset by a reduction in day rates earned by our Gulf of Mexico jackup rigs as compared to the prior year period.

Asia Pacific Jackup Rigs

Asia Pacific jackup rig revenues for the quarter ended September 30, 2008 increased by $28.5 million, or 12%, as compared to the prior year quarter. The increase in revenues was primarily due to an 18% increase in average day rates, partially offset by a decline in utilization to 96% from 99% during the comparable prior year quarter. The increase in average day rates resulted from an increase in demand due to higher levels of spending by oil and gas companies coupled with relatively limited rig availability in the region. The decline in utilization was primarily the result of scheduled maintenance on ENSCO 54 during the current year quarter. Contract drilling expense increased by $8.5 million, or 13%, as compared to the prior year quarter primarily due to increased personnel costs and, to a lesser extent, increased repair and maintenance expense associated with the aforementioned maintenance project.

For the nine-month period ended September 30, 2008, Asia Pacific jackup rig revenues increased by $113.6 million, or 17%, as compared to the prior year period. The increase in revenues was primarily due to a 17% increase in average day rates and the increased size of the Asia Pacific jackup fleet, partially offset by a decline in utilization to 95% from 99% during the comparable prior year period. The increase in average day rates resulted from an increase in demand due to higher levels of spending by oil and gas companies coupled with relatively limited rig availability in the region. The addition of ENSCO 108 to the fleet late in the first quarter of 2007 resulted in an additional $28.0 million of revenues and $5.8 million of contract drilling expense as compared to the prior year period. The decline in utilization was the result of scheduled maintenance projects on ENSCO 54, ENSCO 56, ENSCO 57 and ENSCO 96. Contract drilling expense increased by $46.0 million, or 24%, as compared to the prior year period primarily due to increased personnel costs, the aforementioned maintenance projects and the addition of ENSCO 108 to the fleet.

Europe/Africa Jackup Rigs

Europe/Africa jackup rig revenues for the quarter ended September 30, 2008 increased by $35.0 million, or 20%, as compared to the prior year quarter. The increase in revenues was primarily due to an 11% increase in average day rates and an increase in utilization to 96% from 90% during the comparable prior year quarter. The increase in average day rates was attributable to limited rig availability in the region coupled with improved demand resulting from increased spending by oil and gas companies. The increase in utilization was primarily due to the mobilization of ENSCO 100 from Nigeria to the North Sea during the comparable prior year quarter. ENSCO 100 was fully utilized during the quarter ended September 30, 2008. Contract drilling expense increased by $5.7 million, or 10%, as compared to the prior year quarter primarily due to increased mobilization expense and repair and maintenance expense, partially offset by costs incurred in the prior year quarter related to the departure of ENSCO 100 from Nigeria.

For the nine-month period ended September 30, 2008, Europe/Africa jackup rig revenues increased by $107.1 million, or 22%, as compared to the prior year period. The increase was primarily due to a 13% increase in average day rates and an increase in utilization to 97% from 95% during the comparable prior year period. The improvement in average day rates was attributable to limited rig availability in the region coupled with improved demand resulting from increased spending by oil and gas companies. The increase in utilization was due to the mobilization of ENSCO 100 during the comparable prior year period as discussed in the preceding paragraph. In addition, the relocation of ENSCO 105 to the Europe/Africa region during the second quarter of 2007 contributed an additional $32.4 million of revenues and $8.8 million of contract drilling expense as compared to the prior year period. Contract drilling expense increased by $27.8 million, or 18%, as compared to the prior year period. The increase in contract drilling expense was primarily due to increased mobilization expense, the addition of ENSCO 105 to the fleet and increased repair and maintenance expense and personnel costs, partially offset by a reduction in reimbursable expenses.

North and South America Jackup Rigs

North and South America jackup rig revenues for the quarter ended September 30, 2008 increased by $31.4 million, or 29%, as compared to the prior year quarter. The increase in revenues was primarily due to an increase in utilization to 98% from 77% in the comparable prior year quarter and, to a lesser extent, a 2% increase in average day rates. The increase in utilization was attributable to decreased rig supply, as drilling contractors mobilized rigs to international locations, and an increase in customer demand. Contract drilling expense increased by $3.6 million, or 9%, as compared to the prior year quarter, primarily due to increased personnel costs and the impact of increased utilization, partially offset by decreased mobilization expense and repair and maintenance expense.

For the nine-month period ended September 30, 2008, North and South America jackup rig revenues increased by $9.2 million, or 3%, as compared to the prior year period. The increase in revenues was primarily due to an increase in utilization to 96% from 81% in the comparable prior year period, partially offset by a 12% decrease in average day rates. The increase in utilization was primarily attributable to the improvement in market conditions during 2008, as discussed in the previous paragraph. Although we realized day rate increases during the second and third quarter of 2008, day rates earned during the current year were generally lower than day rates earned during the early portions of 2007. The increase in revenues was also partially offset by ENSCO 105, which generated $7.1 million of revenues and $2.0 million of contract drilling expense during the first quarter of 2007 prior to relocation from the region. Contract drilling expense increased by $12.2 million, or 10%, as compared to the prior year period. The increase was primarily due to increased personnel costs and the impact of increased utilization, partially offset by decreased mobilization expense and the relocation of ENSCO 105 during the comparable prior year period.

Semisubmersible Rigs

Revenues for the quarter ended September 30, 2008 for ENSCO 7500 increased by $8.4 million, or 45%, as compared to the prior year quarter. The increase in revenues was primarily due to an 80% increase in the average day rate as compared to the prior year quarter, as ENSCO 7500 began earning a significantly higher day rate during February 2008. Contract drilling expense totaled $8.3 million for the quarters ended September 30, 2008 and 2007, as increased personnel costs were offset by decreased repair and maintenance expense.

For the nine-month period ended September 30, 2008, revenues for ENSCO 7500 increased by $29.9 million, or 55%, and contract drilling expense increased by $5.5 million, or 26%, as compared to the prior year period. The increase in revenues was primarily due to a 68% increase in the average day rate as compared to the prior year period. The increase in contract drilling expense was primarily due to increased personnel costs and repair and maintenance expense. Beginning in the second quarter of 2007, ENSCO 7500 staffing levels were increased to facilitate training in preparation for delivery of our ENSCO 8500 Series® rigs.

Depreciation

Depreciation expense for the quarter ended September 30, 2008 increased by $1.5 million, or 3%, as compared to the prior year quarter. The increase was primarily attributable to depreciation associated with the ENSCO 93 capital enhancement and upgrade project completed during the first quarter of 2008 and depreciation on other minor upgrades and improvements completed subsequent to the third quarter of 2007.

Depreciation expense for the nine-month period ended September 30, 2008 increased by $5.6 million, or 4%, as compared to the prior year period. The increase was primarily attributable to depreciation associated with the ENSCO 83 and ENSCO 93 capital enhancement projects completed during the second quarter of 2007 and first quarter of 2008, respectively, depreciation on ENSCO 108, which was placed into service in April 2007, and depreciation on other minor upgrades and improvements completed subsequent to the third quarter of 2007.


CONF CALL

Richard A. LeBlanc - Vice President, Investor Relations

Thank you, Diana. We'd like to welcome everyone to our third quarter conference call. With me in Dallas are Dan Rabun, our Chief Executive Officer; Bill Chadwick, our Chief Operating Officer; Jay Swent, our Chief Financial Officer, as well as other members of our executive management team.

This morning we released our earnings announcement and we filed our 8-K with the SEC. We also expect to file our 10-Q later today. The earnings release is available on our website, www.enscointernational.com.

As usual, we'll keep our call to about an hour. Jay will first provide a financial overview. Then Dan will discuss our markets and operations.

I'd like to remind everyone that any comments we make today about our expectations of future events are forward-looking statements pursuant to the Private Securities Litigation Reform Act of 1995. All such statements are subject to risks and uncertainties and many factors could cause actual results to differ materially.

We refer you to our earnings release and SEC filings available on our website, which defines such forward-looking statements, states that the company undertakes no duty to update any such statement and lists risk factors which could cause actual results to differ materially from our expectations.

I'd also like to remind everyone that with regard to our rig status, a detailed listing is provided on our website, and it's updated the middle of each month when we file our 8-K with the SEC. The last update was as of mid-October. At the end of our prepared remarks, we will have some time for questions.

At this time, let me turn it over to Jay.

Jay W. Swent III - Senior Vice President and Chief Financial Officer

Thank you, Richard. Good morning and thank you all for joining us. Today's call is a bit unusual for us because I will be describing a business as usual third quarter and what we believe will be largely a business as usual fourth quarter, while at the same time recognizing that we're in a period of unprecedented economic uncertainty.

I'll review the current business details and conclude with some comments about how we are financially positioned for 2009. Dan will then review his thoughts about the current and future business climate. So, let's get started. We're pleased to report another solid quarter despite some weather related and non-operating issues that adversely impacted results. I'll talk more about these items in just a moment.

Income from continuing operations increased 16% from prior year levels to $301.2 million and earnings per share from continuing operations were up 20% to $2.13. Our year-over-year operating improvement reflects higher average day rates for our jackups across all regions and for the ENSCO 7500 semisubmersible rig as well as higher utilization from our North and South America and Europe jackup fleets.

We reported a $0.13 per share loss from discontinued operations during the quarter. This relates to the loss of ENSCO 74 as a result of hurricane Ike in September. The rig has not been located and has been assumed to be a total loss for insurance purposes.

We recorded a $23.5 million net loss on disposal of the rig offset in part by a $4.6 million net income that the rig earned during the quarter prior to its loss. In connection with the loss, we expect to receive insurance proceeds of $50 million sometime during the fourth quarter. This matter is detailed more fully in our SEC Form 10-Q that is being filed today.

The U.S. dollar appreciated against the Singapore currency during the third quarter which resulted in approximately $10 million of exchange losses related to our Singapore dollar denominated investments. These investments are being held to fund a portion of our deepwater rig construction obligations that are denominated in Singapore dollars. Exchange gains or losses incurred on these investments will be offset in the future by a corresponding increase or decrease in the U.S. dollar cost of these rigs.

During the quarter, we repurchased 2.2 million shares of a total cost of $148 million or an average price of $68.20 per share. Since inception of our share repurchase program on March 2006, we have repurchased $16.5 million shares at a cost of $938 million or an average price of $56.79 per share. At this time, we have $562 million remaining under our total $1.5 billion share repurchase authorization.

Now let's look more closely at third quarter specifics. Here we will compare third quarter 2008 sequentially to second quarter 2008 and these comparisons will exclude ENSCO 74 for both periods. Third quarter revenue increased by approximately 2% from second quarter levels less than the 5% growth we had predicted.

Third quarter revenue was adversely impacted by approximately $16 million of revenue, that was deferred to future quarters as a result of two rigs waiting on weather prior to commencement of new contracts in New Zealand and by 18 days of repair downtime and mobilization on ENSCO 7500.

Contract drilling expense decreased by about 8% in the third quarter to $193.4 million. As indicated on our last conference call, the second quarter included an unusual level of rig inspection and repair cost related to our Asia Pacific jackup rig fleet. These expenses return to more normal levels during the third quarter resulting in a contract drilling expense decline.

The quarter-over-quarter decline was greater than expected because other jackup rigs for fleet repairs planned for the third quarter were not completed and it slipped into the fourth quarter. G&A expense increased by approximately $1.5 million compared to the second quarter due to an increase to outside legal and professional fees and costs associated with our corporate branding initiative.

Our third quarter effective tax rate was 19% consistent with the second quarter and inline with our earlier guidance. Our cash generation on the balance sheet remains strong during the third quarter. We generated $349 million from operating activities of continuing operations. We utilized this amount plus cash on hand to fund $239 million of capital expenditures, those of which related to our deepwater fleet expansion and the repurchase of $148 million of stock.

Now let's look more specifically at third quarter results in each of our major geographic markets. The average day rate for our Asia Pacific jackups was $157,000, a 3% increase compared to the second quarter as we realized day rate increases from contract rollovers or contractual cost escalations on approximately half of our Asia Pacific fleet.

Asia Pacific jackup rig utilization was 96%, an increase from 91% last quarter as several rigs returned to work after undergoing repairs or inspections during the second quarter. The average day rate for our Europe/Africa jackup fleet increased to $226,100 from $217,700 in the second quarter. This was primarily due to application of contractual cost escalation provisions and ENSCO 71 rolling off a legacy contract to a new contract at nearly double the day rate in early August.

Utilization in our Europe/Africa fleet was 96% on the quarter, with little change from the 97% second quarter level. Day rates for our North and South America jackup rigs increased 14% to an average of $108,200 in the third quarter compared to $94,800 in the second quarter. North South America jackup rig utilization was slightly lower in the third quarter 98% compared to 100% in the second quarter as ENSCO 82 was idle for approximately three weeks during hurricane season.

ENSCO 7500 worked during the third quarter with an average day rate of 362,000 per day, generally inline with the second quarter. Utilization decreased to 87% in the third quarter from 98% due to downtime associated with VOP repairs.

Let's now turn to the outlook for the fourth quarter 2008. We currently expect fourth quarter revenue to be down approximately 3% from third quarter levels. ENSCO 7500 will be mobilizing to its new contract in Australia during the entire fourth quarter and even though we will receive day rate at the old contract rate, we will defer revenue of almost $33 million in the fourth quarter until the rig commences operations early next year.

In addition, ENSCO 53 will be in a shipyard for upgrade and life extension during most of the quarter. Partially offsetting these items, ENSCO 107 was finally able to establish location just last week and commencing new contract after 74 days of waiting on weather.

We anticipate fourth quarter contract drilling expense will increase by about 4% from third quarter levels as we complete repair and maintenance projects that were not completed during the third quarter.

Depreciation expense is expected to increase slightly to $50 million in the fourth quarter and we expect our effective tax rate to be approximately 18%, slightly below our third quarter rate of 19%.

Thinkable comments on 2008 CapEx. 2008 capital spending should be approximately $820 million. $670 million of this amount represents interim payments on our six new deepwater rigs now under construction and the recently delivered ENSCO 8500. We also expect to spend about $40 million for rig enhancement projects and $110 million for sustaining projects. This is an increase of $95 million versus last quarter and primarily represents the initial payment for ENSCO 8506 which was ordered on August 15, 2008.

Total capital expenditures at the end of the quarter were $654 million, leaving $166 million for the balance of the year. We are in the process of finalizing our 2009 budget and currently expect CapEx will drop to $720 million in 2009. We expect to spend approximately $490 million on deepwater construction, $120 million on enhancement projects and $110 million for sustaining projects.

This includes provisional funds to prepare a number of rigs for international service, but we will only make these expenditures if we are awarded new international contracts.

So, given the current economic uncertainties, I would like to conclude with a few comments about our financial position. We ended the third quarter with more cash than debt. $486 million of cash and short-term investments at the end of the third quarter versus $300 million of debt. Half of this debt is not due until 2027 and our repayments on the balance are less than $20 million annually.

We expect to end the year with a very strong cash position based on our current outlook and the contemplated receipt of $50 million related to the ENSCO 74 loss. In addition, we have an undrawn $350 million revolving credit facility.

We have not repurchased any shares during the fourth quarter and you should not read anymore into this other than an abundance of caution on our part. We are currently evaluating how best to manage our cash balances in these unprecedented times. So, for the time being we will probably deemphasize share repurchases.

We have approximately 95% contract coverage for our projected fourth quarter revenue and our expense levels are relatively firm at this point. So, our 2008 outlook seems to be in good shape. Looking at our backlog for 2009 and beyond, 85% of our customers are investment grade companies or national oil companies with a strong incentive to drill.

We expect about 15% of our 2009 revenue to come from the Gulf of Mexico jackup market. So, our geographic exposure is reasonably well balanced. As noted in our latest rig status report, we recently signed some term contracts in the Gulf of Mexico and customers continue to approach us regarding term work there.

With these comments, I'll now turn the call over to Dan.

Daniel W. Rabun - Chairman, President and Chief Executive Officer

Thank you Jay, and good morning everyone. I'm going to depart from my normal earnings call format and begin by addressing matters we believe that are top of everyone's minds. We believe ENSCO is well positioned to maneuver through the many challenges facing all global businesses. ENSCO historically has been physically conservative in good times and in bad.

We have always believed that a strong balance sheet is especially critical in a cyclical industry such as ours. As Jay highlighted in his remarks, we have more cash than debt and our cash generation from our existing backlog remains strong. We believe our financial position allows us to manage the current capital market situation and to take advantage of any opportunity that may arise as a result of existing and future market conditions.

We have been using internally generated funds to grow our deepwater fleet, while at the same time maintaining one of the industry's least levered balanced sheets. We have been discussing drilling programs with our customers. Much of the discussion about changes to the drilling program centered on reductions in U.S. insured gas related activities.

As of today, we have not seen much impact on the offshore market and customers and international markets continue to discuss increases in spending for 2009. Much of the incremental demand is from national oil companies that have a strategic imperative to drill. The mega majors are challenged to grow productions and they've continued to pursue major multi-year projects that are predicated on lower commodity prices than we are experiencing today.

We would expect that some of the small independents, however, make defer programs and then they tend to more dependent on cash flow and or leverage. But that is likely to impact mostly short-term programs. While we are encouraged by the dialog with our customers, we continue to remain vigilant, and understand their outlook and programs may change, and we maybe required to respond accordingly.

In some markets, such as the Gulf of Mexico, we have seen an increase in premium jackup day rates and term work, which appears to be driven more by the lack of premium drilling rigs and not affected by current commodity prices. I'd like to point out that the long-term fundamentals that have been driving new oil markets for the last several years have not changed that dramatically in the last few months.

We've seen some reductions in demand for oil, and reasonably would expect additional reductions in demand if the global economic cycle continues to slow. All the forecasts that we've reviewed still point to a diminishing supply of hydrocarbons over the longer term, which can only be addressed by increased drilling activity.

However, we clearly recognize the long-term fundaments maybe disrupted in the short-term by troubled world capital markets. We're being very proactive in monitoring our customers and suppliers to determine any effects the current environment may have on their business.

With regard to new industry entrance and speculative new building, a number of these companies were built on the premise of easy access to capital, and this clearly is not the current environment. If this environment persists for an extended period of time, we would expect that a number of these assets will not be built or if built, then would end up in the hands of drilling contractors with less exposure to leverage.

I know this subject will likely draw a number of questions, and all we can say at this point is that there are a number of rigs being marketed, and it remains too early to make any predictions.

Now let's review our operations and market reports. I'll refer to our monthly contract status report of eight days ago for specific rig details. Starting with Eastern Hemisphere, in Southeast Asia-Pacific Rim area, numerous contracts have been awarded, and multiple requirements are outstanding.

In some cases, industry newbuild jackups have had to discount day rates to get work. But this has not significantly impacted the market today. We still see opportunities to command leading edge rates for our highest deck rig as most operators see contractors with proven safety records and equipment as an advantage.

The ENSCO fleet is fully contracted to 2008 with the exception of ENSCO 56. On completion of this drilling program under [ph] of late this year, we plan to mobilize the rig to shipyard for late repairs. We are actively marketing ENSCO 56 and we are in the process of finalizing contract works... contracts for following work where several of our other Asia Pacific rig after contracts are completed in 2009.

In the Middle East, several tenders are outstanding for term work in Saudi Arabia, UAE, India and Qatar with the exception of ENSCO 53 which is entering shipyard for upgrade and life extension and ongoing customer discussions for following work for ENSCO 50. Our Middle East jackup fleet would anticipated contract extensions is well committed through 2009.

In the North Sea, there is continuing strong interest in demand for jackups in 2009 and beyond, especially for standard day rates of the UK and U.S. sectors. The ENSCO jackup fleet has only limited availability in the second half of 2009 with a number of options still to be declared.

The heavy duty jackup remains firm and we expect our highest deck rigs will be contracted through 2009. We are encouraged by the level of additional enquires for drilling in the Mediterranean. We have two jackups committed to this market with good prospects for continued work.

Turning to the Western Hemisphere, the U.S. Gulf of Mexico jackup market has recently shown improvement. Operators are contracting premium jackups for extended terms put up substantial decrease in the size of the jackup fleet in recent years. Following the recent loss of two premium jackups, three if you could the diamond rig which is now serving in a support role due to the damage from hurricane Ike and the departure of two rigs offset by one newbuild entry, there are only 20 premium independently cantilever rigs in the U.S. Gulf of Mexico.

We expect the market will remain firm with the likelihood that additional premium jackups will move to Mexico, Venezuela or Brazil. We have been adding backlog and as evidenced in the our recent contracts status report day rates have increased.

With regard to PEMEX, we were the low bidder on the recent tender for two jackups. We have been formed by PEMEX that we can expect to hear the results of that tender very shortly. PEMEX recently was out with another tender for four jackups in the deepwater rig, but that request was withdrawn the same day.

PEMEX representatives have informed us that they needed to work due to internal processes and that they will retender for these rigs in the next few weeks. PEMEX has also informed us that their current intent is to tender for more incremental rigs later in the year.

Now let's turn to the deepwater market. We are encouraged by the level of dialog with customers for our three available newbuild rigs. We continue to see an increase in deepwater discovery being made in Brazil, West Africa, India, Malaysia, Australia and U.S. Gulf of Mexico.

As mentioned earlier, the current worldwide liquidity situation is beginning to impact speculative rig contractors. Industry speculation indicates some operators may now need to seek alternative assets as some of the speculative newbuild rigs are cancelled or delayed. We have not seen any drawback in programs as a result of the current commodity price environment, but we will continue to closely monitor developments.

We continue to make good progress on our deepwater newbuild program underway Keppel FELS shipyard in Singapore. ENSCO 8500, the first in the series of seven for deepwater semisubmersibles departed from Singapore on September 23rd, and it is expected to arrive on the Gulf of Mexico in mid-December when it undergo deepwater sea prowls and final out on a date.

We expect that drilling operations will commence in mid-February 2009. ENSCO 8501 is progressing well and we anticipate delivery in the second quarter of 2009. The rig will then mobilize to the U.S. Gulf of Mexico and operations are expected to commence in the third quarter.

On to ENSCO 8502, we're successfully joined and removed from drydock just last week and ENSCO 8503 continues on track with plan propone [ph] to launching in April 2009. Jay gave some color into our 2009 outlook. Our deepwater investments will begin to make a meaningful contribution in 2009.

ENSCO 7500 will commence for a new contract in Australia at a day rate of $550,000 per day. With the revenue deferred during mobilization, the actual recognized revenue from this contract will exceed $600,000 per day. In addition, we expect that ENSCO 8500 and ENSCO 8501 will be on the payroll in 2009 adding to our financial results.

Our global diversification of assets continues to service well. In some markets, it experience a flatting in day rates. We'll see other market experiencing growth.

In closing, as we have stated, the current business environment will be challenging for all global businesses, but we believe ENSCO is well positioned. We will continues to be conservative in our business approach and should market conditions worsen, we can and will adjust business operations accordingly.

As strategic opportunities arrive, we believe we have the financial flexibility to respond. However, we will continue to preserve our conservative balance sheet. In addition, we have excellent growth expectations with our deepwater fleet expansion which may count any market softness elsewhere.

Before opening the call to questions, I want to acknowledge our newest addition to our senior management team, Carey Lowe joined the company in August 2008 as Senior Vice President. His responsibilities includes safety, health and environmental matters, capital projects, engineering and strategic planning.

Prior to joining the company, Carey served as various capacities at Occidental Oil & Gas, Sedco ForEx and Schlumberger Oilfield Services. We look forward to his contributions.

Jay and I are available now to answer your questions. Additionally, several other members of management are also available to address questions regarding the respective areas.

Richard, I will now hand the call back to you.

Richard A. LeBlanc - Vice President, Investor Relations

Yes, Diana, we're happy to take questions at this time.

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