Rowan Companies PLC (RDC) Q4 2018 Earnings Conference Call Transcript
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Rowan Companies PLC (NYSE: RDC)
Q4 2018 Earnings Conference Call
Feb. 27, 2019, 11:00 a.m. ET
Contents:
Prepared Remarks
Questions and Answers
Call Participants
Prepared Remarks:
Operator
Good morning. My name is Amy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q4 2018 Rowan Companies PLC Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question-and-answer session. (Operator Instructions)
I would now like to turn the call over to Mr. Brian Jackson, Manager of Investor Relations. Please go ahead.
Brian Jackson -- Manager, Investor Relations
Thank you, Operator, and welcome to Rowan's Fourth Quarter and Full Year 2018 Earnings Call. We appreciate your interest in Rowan. A copy of the company's earnings report issued earlier this morning can be found on our website at rowan.com.
Joining me on today's call are Tom Burke, President and Chief Executive Officer; and Stephen Butz, Executive Vice President and Chief Financial Officer as well as other members of the Rowan team.
Before I turn this call over to Tom, I'd like to remind you that during this call, we may make certain forward-looking statements regarding our company and business that are not historical facts. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict.
Please refer to our annual report and most recent quarterly report filed with the SEC for more information regarding our forward-looking statements, including the risks and uncertainties that could impact our future results.
Our actual results may differ materially from those contemplated by these forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. They are neither statements of historical fact, nor guarantees or assurances of future performance. Any forward-looking statement made by us during this call speak only as of the time at which it was made.
Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
With that, I would like to turn the call over to Tom Burke, Rowan's President and Chief Executive Officer.
Thomas P. Burke -- President and Chief Executive Officer
Thank you, Brian. Good morning, and welcome to Rowan's fourth quarter 2018 earnings call. We appreciate you joining us today and your continued interest and investment in Rowan. Following my prepared remarks, Stephen will walk you through Rowan's financial performance. We will then open the call for questions.
I would like to take a moment to make a few comments regarding our proposed combination with Ensco. As disclosed last week, Rowan shareholders overwhelmingly supported the merger with approximately 91.5% of shares voted approving the transaction. From a regulatory standpoint, last November, the U.S. Department of Justice and the Federal Trade Commission granted early termination of the waiting period under the HSR Act.
The United Kingdom's Competition and Markets Authority cleared the combination earlier this month on February the 15th. We recently received clearance from the Committee on Foreign Investment in the U.S. Lastly, the initial review period for our filings with Saudi Arabia's General Authority for Competition will likely expire on April the 4th.
Over the past several months, we've been diligently working with Ensco to map out the new organization while respecting regulatory imposed limitations. I'm highly encouraged by the process in which the Rowan and Ensco teams have professionally worked together to prepare for the transaction closing and plan combined company operations.
Well, there is still much to do, we have completed a great deal of detailed integration planning, and I'm pleased to see our cost synergy target increased to $165 million per year from a $150 million per year as originally announced in 2018. We would expect to reach full run rate synergies by year-end 2020.
I would also note that this synergy figure is largely reflective of on-shore cost reductions, insurance and facilities. Once we close the transaction, we can better assess rig level opportunities such as procurement savings and best-in-class crewing practices. Also the synergy number does not include any potential savings in capital expenditures, which we will be able to evaluate upon the closing.
Customer feedback regarding the combination continues to be positive, but demands on drillers to work with customers to bring down overall well costs has never been greater. Rowan's combination with Ensco is exactly what is needed to become more competitive, while still managing our cost structure to more appropriate levels.
Turning back to our quarterly results, as we done in past calls. I'm going to discuss the overall market, recent contract awards to Rowan, and what to expect in terms of future contracting opportunities. The fourth quarter of last year with a particularly volatile period in the old markets, as Brent crude oil prices dropped from $86 per barrel to a low of $50 per barrel.
Prices have recovered somewhat with Brent hovering around the low 60s for much of this year, and more recently, improving to the mid to high 60s. Despite this decline in oil prices, oil and gas companies are expected to sanction at least 100 offshore projects in 2019, which is ahead of the 96 projects that received final investment decision last year.
Overall, contracting activity increased significantly in 2018 over previous years. Although contracts would generally have shorter duration. Rowan has clearly benefited from this improvement in the contracting environment, as our backlog days grew substantially in 2018. The number of backlog days for Rowan's fleet, excluding ARO Drilling owned rigs rose from approximately 3,000 days as of April 2018 to 11,300 days based on our last fleet status reported earlier this month.
Assuming a relatively steady oil price environment at roughly current levels, we expect contracting activity to continue to improve in 2019 as our customers take advantage of low service costs and spend offshore capital budgets that appear to be on par with, but slightly higher than 2018 levels.
From an execution standpoint, 2018 was a successful year in which we achieved our best safety performance ever. Our operational up-time, while still very high was slightly lower than 2017 impacted by the reactivation of several rigs during the year.
Over the past year, utilization for the global fleet of ultra-deepwater drillships has remained relatively stable at around 75%. Picks our activity for these types of assets continues to be higher than at any point since before the start of the 2014 downturn. Although, the average firm term of new contracts continues to remain well below one year. Day rates have also improved since bottoming in mid 2018, and customers have a clear preference for high specification assets such as our R-Class rigs.
We expect both trends to continue with the magnitude of further pricing improvements dependent on several factors including equipment availability, and timing of contract commencements. In the U.S., Gulf of Mexico, BP and other operators have announced significant oil discoveries.
Drilling plans and permits activity in the U.S., Gulf today is much higher than at this point last year. And we continue to consider the U.S. Gulf of Mexico, a key part of our future. Currently the Rowan Resolute is finishing up its contract with LLOG, after a short break period the rig will mobilize the Fieldwood for a one-year contract.
The Rowan Relentless is on its first option well with ExxonMobil, who have exercised their second and third options, which should keep the rig busy until the end of the third quarter of this year. The Rowan Reliance is warm-stacked in the U.S. Gulf of Mexico, and is available for suitable opportunities.
Although the recent leadership changes maybe creating somewhat uncertainties in Mexico and Brazil. We believe that recent exploration successes in Mexico by BHP and in Guyana by ExxonMobil as well as the upcoming bid round in Brazil will keep the industry keenly watching Latin America where ultra-deepwater drillship utilization has increased by 15% to 74% over last year, while marketed utilization is at a strong 95%.
The Rowan Renaissance began operations with Total in Mexico drilling in water depths that we believe is the deepest ever in the Gulf of Mexico. Following this current well for Total, the Renaissance will mobilize to Petronas for a one well plus one option well program also in Mexico.
In Africa, we are seeing many of the long-term requirements in the region shifting to the right sum to 2020. That said, we are tracking opportunities in Ghana, Namibia, Angola, Equatorial Guinea and Mauritania among others. Now I'm going to shift to the jack-up market.
Recovery for jack-ups certainly appears to be unfolding ahead of that for floaters. As of today all of Rowan's jack-up units are contracted, except for our two vintage cold stacked units. In the worldwide fleet, there are 26 more jack-up units contracted than a year ago that in conjunction with the retirements of nine units over that period have resulted in an increased in global marketed utilization by 7% to 76%.
The North Sea continue to experience strong marketed utilization of around 93%, which we expect to remain robust over the near-term. Currently, we have two Super Gorilla rigs, and all three N-Class rigs with contracts in the region including the recently announced contract with ConocoPhillips in Norway for the Rowan Norway, and direct continuation of the current program in Turkey for Turkish Petroleum.
We expect the firm program with ConocoPhillips to keep the Rowan Norway busy until early 2020. Our biggest risk in the North Sea are the gaps between contract periods and we're doing our best to manage these. Latin America and particularly, Trinidad, continues to be an important region for Rowan, as shown by our recent announcements of a further extension for the Joe Douglas with BP in Trinidad, and an extension for the Gorilla 6, with Shell also in Trinidad.
In addition, we secured new contracts with the Ralph Coffman with EOG in Trinidad and CGX in Guyana with other opportunities in the area also being explored. Activity in the Gulf of Mexico has remained steady. In the U.S. Gulf of Mexico 10 to 12 jack-ups have been operating since last March. Mexico is gaining steam with potential interest by the new government that may generate jack-up activity for Pemex.
Finally, the Middle East continues to be a healthy consumer of jack-ups with 132 units on charter, mostly in the UAE and in Saudi Arabia where we operate as ARO Drilling in our joint venture with Saudi Aramco. The Bess Brants and Earnest Dees are in the ASRY shipyard preparing for their contracts with Saudi Aramco. Completion of the reactivation and upgrades on these rigs has been challenging for a number of regions, and as previously disclosed in our recent fleet status are expected to start their drilling contracts in April.
Staying with ARO Drilling for a moment. As disclosed last December, it was decided to push out the ordering of the first two newbuilds to later this quarter or early next quarter. At year-end, ARO Drilling has approximately $178 million of cash on hand, which we believe will be sufficient to fund the down payment and meet ARO Drilling's operating needs.
That concludes my remarks on our business. In closing, the recent decline in oil prices was a stark reminder of the volatility that we must stay within our industry. Although this unexpected price change postponed some potential drilling programs, especially with the few smaller customers and independent. We continue to believe in a long-term cyclical recovery.
Oil price volatility aside, as we start, what will be the fifth year of the downturn in offshore drilling. I'm really encouraged by developments in the offshore drilling industry that have made the exploitation of offshore hydrocarbon resources much more competitive today than when the downturn began in late 2014.
Our pending combination with Ensco comes at an opportune moment in the cycle. Together, we can offer much more to our customers regardless of the commodity environment. We will be prudent with the balance sheet and are better equipped to manage through any prolonged down cycle. When the cyclical market recovery is more pronounced, we'll have greater upside exposure with a larger more diversified fleet and some of the best people in the business to execute operations.
This concludes my remarks. I do not expect that we'll have another earnings release before the merger closes. So, this will be the last Rowan earnings call with Stephen and the rest of the team here in the room at Rowan. It's been a real pleasure working with you through some good times and some tough times.
Some of you will leave, and some will continue with the combined company, but either way. I want to say a deeply felt, Thank You, for all your hard work.
With that, over to you, Stephen.
Stephen M. Butz -- Executive Vice President and Chief Financial Officer
Thank you, Tom, and good morning, everyone. On the call today, I will review our fourth quarter 2018 results in comparison to third quarter 2018 results. I will also briefly discuss ARO Drilling's operating results. Given the pending merger with Ensco, we will not be providing stand-alone guidance for Rowan at this time.
Earlier this morning, we reported a net loss of $14 million or $0.11 per diluted share for the fourth quarter 2018, compared to a net loss of $144 million or $1.13 per diluted share in the third quarter of 2018. The net loss for the fourth quarter of 2018 included a $66 million gain on the sale of rigs to ARO Drilling, a $68 million tax benefit related to the release of valuation allowance on the company's net U.S. deferred tax assets and $8 million of merger-related expenses.
Excluding the impact of these three items, Rowan reported a net loss of $1.11 per share in the fourth quarter of 2018. Adjusted EBITDA for the fourth quarter was a negative $7 million, which excludes the aforementioned $8 million of merger-related expenses. And compares to a loss of $15 million in the third quarter, which excludes $1 million of merger-related costs.
The EBITDA improvement was driven by higher deepwater revenue and lower general and administrative expense, partly offset by lower jack-up revenues following the sale of our Scooter Yeargain and Hank Boswell rigs to ARO Drilling.
Fourth quarter 2018 revenue of $179 million, includes $7 million of transition services revenue from ARO Drilling and $26 million of rebillables. Excluding transition services and rebillables, contract drilling revenue was $147 million and a 11% decline from the third quarter level. Jack-up revenue excluding rebillables was $122 million, a decline from $152 million in the third quarter.
The revenue decline was largely driven by the sale of the Yeargain and Boswell as well as the transition of four rigs operated by ARO from managed to leased during the third and fourth quarters. Utilization improved to 91% during the fourth quarter from 74% in the third quarter mainly due to the Rowan Norway and Rowan Stavanger recommencing operations and the leasing of the EXL I and EXL IV to ARO.
Average day rates for our jack-up fleet declined by 27%, largely on mix, due to the ARO related rigs that transitioned from managed to leased, lease commencement on the EXL I and EXL IV, and again the sale of the Boswell and Yeargain.
Deepwater revenue excluding rebillables was $25 million, an increase from $14 million in the third quarter, primarily due to a full quarter of operations on the Rowan Relentless, which also drove the improvement in utilization to 49% during the fourth quarter.
Average deepwater day rates rose modestly to 138,000. Direct operating costs in the fourth quarter were $141 million, excluding cost of rebills compared to $164 million in the third quarter and near the low end of our prior guidance.
Lower costs were mainly due to the elimination of direct operating expense on ARO related rigs that transition from managed to leased as well as the sale of the Yeargain and Boswell. This was partially offset by higher costs on the Stavanger and Norway, as they return to service, and reactivation costs on the Rowan Renaissance to prepare the rig for its contract commencement in the first quarter 2019.
SG&A expenses, excluding merger-related costs for the fourth quarter were $20 million, down from $25 million in the third quarter. This reduction was due to lower professional fees and mark-to-market adjustments on stock-based compensation. We also incurred $8 million of merger-related expenses during the fourth quarter compared to approximately $1 million incurred during the third quarter.
Depreciation expense in the fourth quarter totaled $95 million, down from $99 million in the third quarter and in line with our prior estimate. Interest expense totaled $40 million, essentially flat with the third quarter and in line with our previous estimate. We recorded an income tax benefit of $57 million during the fourth quarter, which includes a $68 million income tax benefit due to an adjustment on our U.S. valuation allowance on deferred tax assets.
For 2018, our tax benefit amounts to $52 million, which includes the fourth quarter adjustment I just mentioned and prior quarters benefits from the resolution of prior-year tax contingency. Income tax expense without these discrete benefits would have been $26 million primarily due to profitable operations in Saudi Arabia and the U.S.
Moving to our balance sheet and cash flow. We ended the year with just over $1 billion in cash and essentially flat with the September 30, 2018 level. Our ARO shareholder loan balance increased to $456 million at year-end from $269 million at the end of the third quarter, largely as a result of the sale of the Yeargain and Boswell to ARO. Rowan also received a net of $91 million in cash from ARO.
As we disclosed last December, the ARO Board during its last meeting elected to pick the interest earned on the shareholder notes during 2018. This move contributed $12 million to the increase in the shareholder loan balance.
Capital expenditures during the fourth quarter totaled $52 million, which was well below our prior guidance of $100 million to $120 million principally due to some slippage of spending on the Bess Brants and Earnest Dees in preparation for their three-year contracts with Saudi Aramco.
As we disclosed in our latest fleet status report published on February 13, we now anticipate contract commencement for the Brants and Dees will occur in April. As a result of the delay, a portion of capital expenditures needed to get these rigs compliant with Aramco requirements has been pushed into the first quarter of 2019.
I would now like to take a moment to discuss the operating results for ARO Drilling, which Rowan accounts for under the equity method. In the fourth quarter, ARO generated net income of $13.6 million compared to $6.3 million during the third quarter. Rowan's 50% share of this net income is reflected on our income statement.
The joint venture generated revenue of approximately $131 million in the fourth quarter, an increase from $89 million in the third quarter. The strong revenue growth stemmed from the addition of the Yeargain and Boswell as owned rigs to the ARO fleet. A full quarter's contribution from the Arch Rowan, Charles Rowan, Rowan Middletown and EXL IV as leased rigs to ARO, and a partial quarter contribution of the Rowan Mississippi and EXL I that are now also leased to ARO.
Operating expenses increased to $73 million from $51 million in the third quarter. This increase was primarily driven by the transition of previously managed rigs to leased rigs, which shifts direct operating costs of these rigs from Rowan to ARO. The lease commencement of the EXL I and EXL IV and the addition of the Yeargain and Boswell as wholly owned rigs by the JV.
All-in-all, ARO generated adjusted EBITDA of $15 million in the fourth quarter compared to $31 million in the third quarter. Looking forward for ARO Drilling, we still expect 2019 EBITDA will range between $160 million and $180 million. Although the delay in the start-up of the Brants and Dees makes the lower end of this range more likely than when we initially provided it.
Now before we start our question-and-answer session, please allow me to digress for a moment. As you all know while our combination with Ensco waits final regulatory approval and other customary closing conditions. These may occur prior to our first quarter earnings call. Since I will not be continuing with the combined company, this may be my final earnings call at Rowan.
Therefore, I would like to take this opportunity to thank all of our sell-side research analysts that cover the company for the diligent work you do and the important function in the market that you fulfill. I also sincerely appreciate all of our shareholders and creditors for the strong support you have shown to our company.
It has been my great pleasure to serve you as well as Rowan's world-class employees, management team and Board of Directors as Chief Financial Officer for the last 4.5 years. During this period, our industry has faced some incredibly tough headwinds. Through Tom's leadership, we have been able to manage through these challenges, and I'm confident that Tom along with the combined company Board and senior management team will successfully navigate Ensco Rowan to more prosperous times ahead. That concludes my prepared remarks.
With that, we're now ready to open the call to questions and answers. Operator?
Questions and Answers:
Operator
(Operator Instructions) Your first question today comes from the line of Kurt Hallead of RBC. Your line is open.
Kurt Hallead -- RBC Capital Markets -- Analyst
Hey, good morning.
Stephen M. Butz -- Executive Vice President and Chief Financial Officer
Good morning, Kurt.
Brian Jackson -- Manager, Investor Relations
Hey, Kurt.
Thomas P. Burke -- President and Chief Executive Officer
Hey, Kurt.
Kurt Hallead -- RBC Capital Markets -- Analyst
So, congrats to you guys on the next chapter. Stephen very well said. Thank you. Thank you for that. That chat out to what we do, I appreciate that. So, in the context of the fact that you'll be providing some specific kind of guided points on Rowan stand-alone, maybe could focus my Q&A and attention more about the evolving market dynamics, and I know you went through some great detail on that, Tom. But in the context of how we think about the deep -- the drillship market in the fact that you have a warm-stacked asset, you know, how are you looking at that opportunities and do you think that rig potentially get on land to contract in 2019?
Thomas P. Burke -- President and Chief Executive Officer
Sure, I'll give you some comments on that. And then I have Alan Quintero who is our SVP of Business Development and Marketing who may want to comment on that as well. So, I think, when we think about our strategy on the drillships as our contracts are fairly short.
We definitely -- we have a year contract with Fieldwood and we have customers with option -- with options with ExxonMobil contract, but we definitely want to try and push work to the hot rigs and on the Rowan Reliance, we would not want to reactivate that unless it had an opportunity to have a reasonable amount of work. So, and the reason for that is that all the rig is hot stacked.
There is a cost both the financial cost and sort of a morale cost ramping a rig up and then ramping it down again around the cost to do that, but also the cost of hiring people and then having to let them go. So, I think, as we think we've got three rigs that are working. We are trying to keep those three working, but it's an opportunity for some longer work or work that clashes comes up. We would put it on the Reliance. Alan, do you want to comment on the opportunities on the Reliance?
Alan Quintero -- Senior Vice President, Business Development
Yeah. So like we said in the prepared comments that we are seeing a high level of fixtures and a high level of interest for rigs. They continue to be primarily short term, but we have seen a couple of longer-term fixtures recently, and we are talking to one or more customers right now about longer-term work that could potentially be something that we bring the rig out for.
Thomas P. Burke -- President and Chief Executive Officer
This year.
Alan Quintero -- Senior Vice President, Business Development
Yes.
Thomas P. Burke -- President and Chief Executive Officer
Kurt, that answers that question?
Kurt Hallead -- RBC Capital Markets -- Analyst
That's really helpful. So maybe the second part of the question then would be, I think, we're all pretty much well first on how challenging the day rate market had been at least very near term for some of the spot work or short term work. Yet, there are some markers out there with respect to say contract starts in 2020 or 2021 that could indicate the near-term dynamics should be positive for near-term dynamics on pricing for ultra-deepwater drillships. So, I guess, what I'm really looking to do here is that, can you help us bridge potentially kind of what the current day rate structure is vis-a-vis the perspective for the day rate structure that's out there for work in 2021 that for all intents and purposes seems being priced somewhere in the $300,000 per day range versus I guess what the current market range have been kind of 135 to 150. So, when we are going to get the uplift on the short-term dynamics and how do you see us bridging that gap?
Alan Quintero -- Senior Vice President, Business Development
Yeah. It's Alan here again, Kurt. Yeah, I think, there are some markers out there that have been made public that show that longer-term work are being bid at higher day rates and the spot market is today. And we ourselves are proposing our rigs for longer-term work at higher rates. And today not just in the ultra-deepwater, but I think we've also made public the fact that we have some of our jack-up work with long-term options also being bid and the options being higher rates than current rates. So, like what's said in our prepare moments, I think, we did hit bottom mid '18 and we see better things ahead.
Kurt Hallead -- RBC Capital Markets -- Analyst
Great, thanks. Thanks and congrats on the merger.
Stephen M. Butz -- Executive Vice President and Chief Financial Officer
Thank you.
Thomas P. Burke -- President and Chief Executive Officer
Thank you, Kurt.
Operator
(Operator Instructions) Your next question today comes from the line of Greg Lewis of BTIG. Your line is open.
Gregory Lewis -- BTIG -- Analyst
Hi, good morning, and thanks.
Thomas P. Burke -- President and Chief Executive Officer
Hey, Greg.
Gregory Lewis -- BTIG -- Analyst
Hey guys. First, congrats on getting this to the finish line and Stephen hey it's been a pleasure and hope forward to seeing you soon.
Stephen M. Butz -- Executive Vice President and Chief Financial Officer
Thank you, Greg.
Gregory Lewis -- BTIG -- Analyst
Yeah, my -- when I look at clearly congratulations you guys were able to get the Rowan Norway back into Norway. So, we kind of have all three of the N-Class rigs back in the Norway under contract. Just as we think about this are we at a point now in the North Sea or specifically Norway where we are going to start to see some pricing momentum or have we already started to see some pricing momentum.
Thomas P. Burke -- President and Chief Executive Officer
Yeah, Alan, why don't you take that as well.
Alan Quintero -- Senior Vice President, Business Development
Yeah, hi Greg. Well, like I said, just a little while ago here we are already seeing some pricing momentum, we are being able to price rigs off bottom for the short-term and to price some of our options at increasingly higher day rates. So and we see the North Sea market as a whole, the whole North Sea region as a whole picking up momentum.
Thomas P. Burke -- President and Chief Executive Officer
And it's certainly just add to that and certainly where there's a technical differentiation in Norway and the Central North Sea for sure more in Norway some in the Central North Sea. We are seeing more pricing momentum than into perhaps some of the other areas.
Alan Quintero -- Senior Vice President, Business Development
Yeah, good point, Tom.
Thomas P. Burke -- President and Chief Executive Officer
Greg, does that help?
Gregory Lewis -- BTIG -- Analyst
And then just, yeah, perfect and then just big picture, I mean, clearly you guys are emerging, but I know you were pretty active in looking at a lot of potential matches prior to agreeing for the merger with Ensco as you kind of look around the offshore drilling landscape, are we going to look back and see this is probably the last sort of deal out there this sort of cycle -- down cycle or do you think there's still opportunities for some more consolidation?
Thomas P. Burke -- President and Chief Executive Officer
Yeah, that's a really good question. I think from Rowan's perspective we are very focused on this merger with Ensco and so that's got all of our attention. But I would say in a sort of a much bigger picture for the whole industry, I wouldn't be surprised, if there's more changes and more moves. I think you know when you're in the top of an up-cycle and you think about what the company should do versus five years into a very tough downturn definitely give a different perspective on the world. So, I think, you know the, I think, big picture, certainly I would expect more things to happen, but certainly at Rowan we are absolutely focused on making this merger successful.
Gregory Lewis -- BTIG -- Analyst
Okay. Absolutely guys. Hey, thank you very much and good luck to everybody.
Alan Quintero -- Senior Vice President, Business Development
Thank you.
Thomas P. Burke -- President and Chief Executive Officer
Thanks, Greg.
Operator
And at this time there are no further questions in queue. I turn the call, sorry. We do have another question from the line of Kurt Hallead of RBC. Your line is open.
Thomas P. Burke -- President and Chief Executive Officer
Hi, Kurt.
Alan Quintero -- Senior Vice President, Business Development
Kurt, go ahead.
Operator
Kurt, you may be on mute.
Kurt Hallead -- RBC Capital Markets -- Analyst
Thank you. Here we go. Couldn't let you guys off that easy.
Thomas P. Burke -- President and Chief Executive Officer
Thanks, Kurt.
Kurt Hallead -- RBC Capital Markets -- Analyst
Sure. Hey, Tom, in the past you kind of talked about some technologies that you guys are deploying on a variety of your rigs to kind of make them more efficient to help the oil companies kind of drive down the well costs. Can you give us an update on how that has progressed and what kind of successes you've seen?
Thomas P. Burke -- President and Chief Executive Officer
Yes, it's something I'll try and keep it very short because I can kind of waffle on about it all day, because I'm very passionate about it.
But I would say that as we think about the offshore drilling space, when you're in the sort of cyclical upturn, what you really just focused on is getting, not in the good thing, but when you have a cyclical upturn, and the customers are demanding rigs, everybody is very, very focused on construction, and just getting rigs out of the yard. In a downturn it makes you a lot more introspective about the industry structure, and who earns the technology and how do we compete with other hydrocarbon resource accumulations.
So we've got to become more efficient. And so as I think about some of the things we've done, it's been, we have done and Ensco has done as well. Now, obviously we are separate, but a couple of things that have been really interesting.
One is the ability to move on and off location, the classic offshore drilling of the jack-up, on the jack-up, classically what would happen is the crew would look over the side of the rig and see how -- what the wave height was, and look in the operating manual, it would say don't move at the wave height is more than 5 feet, 10 feet or 15 feet, and that was what the industry has used as a way of moving a jack-up.
The reality is you can do a lot better than that. And so we've applied some fairly, I would say, commodity sensors, but in a very smart way such as wave height, millimeter wave radar, gyroscopes to work out what the rig is actually doing comparing it to the structural model of the rig, and then making and then giving the rig crew actually a decision window based on true structural dynamics of, can I move the rig in this location?
And it's not something that you would leave, you would use in every market around the world because it's dependent on the market. So, that's something we've used to good effect in Trinidad, where the issue in Trinidad is actually getting off location, getting your jack-ups off the platforms when you're in this big Atlantic Swell. And so, I think, we've used that to good effect in Trinidad, we use that on our rig moves down there.
In the North Sea and that's, sorry, and in Trinidad because the bottoms of the ocean is very sticky and you got a lot of penetration. North Sea has very different issues, you don't get a lot of penetration with jack-ups. So, you really have a hard surface on the bottom, and so you have definitely have different issues.
So, that's an area where we've done it, the business has done, the operations that we done one way for years and years and years, but standing back and thinking about how am I more efficient, where can I move, we shouldn't be waiting on weather that just cost the customer a lot of money or it cost the driller a lot of money. How do we become more efficient and that's just a good example of that.
I'm not as familiar with this system, but the Ensco has deployed some continuous tripping technology on a rig, which I believe is going to the North Sea. Again, we're not, I'm not super involved or -- I don't have a detailed understanding on it, but because for competitive reasons, we haven't been able to, but that's an example on the Ensco side of some very clever intellectual property to be able to remove those three minute, two minute breaks when you're connecting pipe. If you can do it without stopping the pipe, it just has immense opportunities.
And the final thing I would say is, I think, all of the companies are doing, but there's a huge amount of data on our rigs and how do we really use that to make safer and more reliable operations. I think that's been a big focus for us on the last couple of years, and we focused on drilling performance, I would say, today compared to 2013, 2014, we truly understand our performance as far as drilling.
We really understand how efficient we are, we are probably four years ago, it just simply didn't and that's has been a big data analytics program at Rowan. And I think it's really helping us as we think about contracting models. That's quite a lot, Kurt. So, but I appreciate the question.
Kurt Hallead -- RBC Capital Markets -- Analyst
That's helpful. And I did have a follow-up on coming back around to the Reliance. How long would it take for that rig to get on location and start to drill and what do you think the cost would be to get it to that state?
Thomas P. Burke -- President and Chief Executive Officer
Sure. We've had quite a bit of experience around this in the last. So, we've done this twice actually, recently. What will actually probably dictate the time is customer acceptance, but assuming the customers are, have a ready-to-go when they accept the rig, it's probably 90 days, 60 days to 90 days, 90 days to get the rig from where it is now to ready to move to location.
And as far as the cost, what is the cost, the cost is crew ramp up, right? That is a big part of it, and so the rig is in a warm-stacked state, which means, we don't have any much capital to spend, but we do have to spend some money on moving from a warm-stacked to a live rig maintenance. So, I would guess Alan, Darren $5 million to $10 million?
Alan Quintero -- Senior Vice President, Business Development
Probably, yeah.
Thomas P. Burke -- President and Chief Executive Officer
Yes, $5 million to $10 million. And what is that $5 million to $10 million some of it that crew ramp up, some of these things like the rubber goods. Rubber goods have a shelf life for the BOPs and other things. There's no point stocking the rig with rubber goods because that stuff is sort of go stay and even if you keep it in a refrigerated room which we do, and so we don't buy that stuff until you're ready to go. And frankly we've run down that inventory and using it on other rigs to save money. So, there's probably $600, 000, $700,000 of rubber goods to add. I wouldn't and that's just a guess off the top of my head.
Kurt Hallead -- RBC Capital Markets -- Analyst
Great. Thank you.
Thomas P. Burke -- President and Chief Executive Officer
Does that help?
Kurt Hallead -- RBC Capital Markets -- Analyst
Yes, perfect. Thank you.
Thomas P. Burke -- President and Chief Executive Officer
Yeah, thanks for the questions, Kurt. I appreciate it.
Operator
And at this time I turn the call back to the presenters.
Brian Jackson -- Manager, Investor Relations
Thank you, operator, and thank you all for your interest and participation. If there are any additional questions, feel free to reach out to us for a follow-up call.
Operator
And this concludes our conference call for today. You may now disconnect.
Duration: 42 minutes
Call participants:
Brian Jackson -- Manager, Investor Relations
Thomas P. Burke -- President and Chief Executive Officer
Stephen M. Butz -- Executive Vice President and Chief Financial Officer
Kurt Hallead -- RBC Capital Markets -- Analyst
Alan Quintero -- Senior Vice President, Business Development
Gregory Lewis -- BTIG -- Analyst
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