Newsletter. 3,000 new colleaques what s in it for you? #2 August Do s and don ts when growing the company

1 Newsletter #2 August ,000 new colleaques what s in it for you? Do s and don ts when growing the company Maersk Resolve beat the deadline and saved USD 4 million Maersk Drilling celebrates 40-year anniversary

2 Contents 4 Staying on course in times of growth Maersk Resolve beat the deadline and saved four million dollars THEME. 3,000 new colleagues Plan 3000 what s in it for you? From 3,000 tons of steel to the largest jack-up rig in the world Lessons learned from earlier periods of growth OIMs give their do s and don ts Maersk Drilling celebrates 40-year anniversary I have been extremely privileged SAFETY BULLETIN ENVIRONMENT BULLETIN MARKET INSIGHT SHORT NEWS Maersk Discoverer makes room for everyone PERSONNEL Mærsk Deliverer on a challenging ride into Angola Published by: Maersk Drilling Esplanaden 50 DK-1098 Copenhagen Tel: Fax: Mail: Beating the deadline. The yard team in Esbjerg finalised Maersk Resolve s yard stay six days before scheduled. This saved four million dollars in reduced costs and otherwise lost day rates. Still going strong. In June Maersk Drilling celebrated its 40th birthday. Vice President and Senior Technical Advisor Gregers Kudsk has been part of the journey from the beginning and is still equally fascinated by the drilling industry. 14 Volume 26, No. 2 August 2012 Editor/layout: Marlene Lyhne Sørensen Printers: Hertz bogtrykkergården a/s Copies: Deadline next issue: December 2012 This Newsletter is published three times a year for the employees, retirees and business connections of Maersk Drilling. The NewsLetter is printed on Forrest Stewardship Counciled (FSC) and ISO certified paper. Reproduction permitted only after agreement with the editor. Front page photographer: Bent Sørensen Growing the family. Three XLE jack-up rigs are under construction in Singapore as part of Maersk Drilling s accelerated growth strategy. In July asset manager Per Gøbel went to see his babies. 8 2 Maersk Drilling

3 EDITORIAL By Claus V. Hemmingsen, CEO of Maersk Drilling Partner & member of the Group Executive Board (Maersk Drilling, Maersk Supply Service, Maersk Tankers Maersk FPSOs, Maersk LNG and Svitzer) Staying the course in times of growth Dear colleagues, As a result of our accelerated growth stra tegy and growing fleet we will be hiring around 3,000 new employees within the next four years. The first task is to fill the 1,300 vacancies for the seven upcoming new buildings. How to find enough people with the right qualifications and how the significant influx of new employees will impact our way of doing business is a concern throughout the organisation. I agree it is not going to be easy; however, it is not a mission impossible. Our Plan 3000 contains detailed action plans covering recruitment, competence-building and competence-assurance, as well as integration of new colleagues into the organisation. The plan also focuses on developing the careers of current employees to fill many of the challenging new positions. Finally, the plan will mobilise the efforts of the entire organisation in attaining the targets set for Maersk Drilling. Jesper B. Madsen, Head of HR, and Jacob Odgaard, Head of the Operational Readiness Team, elaborate on the plan in this magazine. In June we celebrated Maersk Drilling s 40- year anniversary. Throughout those 40 years we have stayed true to setting new standards in terms of size, operating capabilities, safety features and technology of the rigs. We have constantly changed, but relentlessly remained focused on moving boundaries within offshore drilling. I am confident we can and will continue this course; however it requires hard work and a steady focus from everyone. Looking at 2012 and 2013 our ability to stay focused on current business is my biggest concern. Regardless of our accelerated growth and the challenges involved, it is of vital importance that we remain focused on the current business and make sure we live up to our high operational and safety standards. So far, in 2012 we can take pride in a wide range of achievements, such as the successful yard stay of Maersk Resolve as explained in this magazine. Most units have maintained their operational performance close to or higher than the minimum target, however we have suffered dramatic set-backs in particular on Maersk Discoverer and Maersk Endurer. This is highly unsatisfactory both in terms of our pride, our financial performance and most importantly to our customers. We must avoid such adverse events in the future. In spite of this, I have to congratulate the rest of the fleet on a predominantly outstanding performance. With regard to safety it is with regret that I have witnessed the frequencies of both TRCs and LTIs heading the wrong direction. In the first six months of 2012 we have had four LTIs compared to three cases in all of On top of this the yard in Hirtshals experienced a dreadful incident involving four LTIs at the start of the Maersk Giant yard stay. A number of initiatives have been taken to reverse this trend and it should remind us never to relax our relentless focus on safety. We all have a responsibility in this regard. Until next time: Stay on top of our current performance and be safe, offshore as well as onshore. Maersk Drilling 3

4 Maersk Resolve beat the deadline and saved four million dollars A combination of strong team work, good planning and plenty of jokes cut six days off the schedule and saved about USD 4 million, when the Maersk Resolve went on yard stay in May-June. By Marlene Lyhne Sørensen, Strategy and Communication Well, what motivates a football player? The question comes from Jens Husted and he looks as though the answer is the most obvious thing in the world. We want to win. Of course we do. And so they did. When Maersk Resolve went on yard stay in May, the yard team and rig team were up against a deadline of 43 days to finish the planned maintenance, repair and upgrades on the jack-up rig before sending it off to its next operation in the UK sector of the North Sea. The teams not only met the deadline, they beat it by six days, reducing the cost of the yard stay by about USD 1 million as it could now get on contract and earn its day rate of about USD 150,000 almost a week before scheduled. Moreover the team managed to save around 30 percent of the USD 10 million budget, in total saving about USD 4 million. Hard but fun work How did they achieve such a massive saving? Part of it is that we have all been on the same page from the beginning, explains project manager Jens Husted a few days before Maersk Resolve s yard stay was finalised. Two people from the rig team joined the yard team before the rig arrived, and this gave us time to find a mutual voice and common goal. Our slogan has been one Maersk Drilling, one goal and we have pulled in the same direction from the very beginning. On the drill floor, senior tool pusher Brad Sullivan is working on the final tests of the drilling equipment before the rig s take-off to the North Sea. In his view, the level of planning is one of the essential factors when explaining the successful yard stay: We have had straightforward dialogue and the teamwork and planning of the project have been excellent, says Brad Sullivan. Jens Husted adds: The only night I have had off in 37 days was when I went to a Metallica concert with my sons, but that s the way it is. A yard stay is very intense and that s what I like. It has been hard work but still a lot of jokes have been shared, and other than our determination to win I think the humorous tone has made us all extra motivated to do a good job. Good case for inspiration The main repair on Maersk Resolve was the drag chain, and according to Jakob Diemer, rebuild director, six days were cut off the yard stay and about one million dollars was gained in otherwise lost day rates due to an extraordinary team effort from the time the Facts: Purpose of yard stay: Preparation for contract with ConocoPhillips in UK sector of the North Sea Planned duration: 43 days Actual duration: 37 days Main tasks: Modifications to UK legislation Repair of drag chain Inspection of spud cans Crane update rig left its last location of work in the Danish sector of the North Sea. The repair work started as soon as the rig initiated its travel towards the Esbjerg harbour, and it underpins the importance of an open dialogue and close cooperation between the rig team and the yard team. In this case it led to a good start on the repair work, before the rig had even arrived to Esbjerg, says Jakob Diemer from the headquarters in Lyngby. Maersk Drilling CEO Claus V. Hemmingsen points to the Maersk Resolve yard stay as an example to follow: It shows that a lot can be achieved from thorough planning and a good dialogue between onshore and offshore. It was done well by all the personnel involved and going forward it should be a case for inspiration across the organisation, says Claus V. Hemmingsen. Yard stay budget: USD 10 million Actual cost: Approx USD 7 million Another five rigs will undergo modifications and repairs in 2012: Mærsk Innovator Mærsk Giant Maersk Resolute Heydar Aliyev (Maersk Explorer) Maersk Completer 4 Maersk Drilling

5 The only night I have had off in 37 days was when I went to a Metallica concert with my sons, but that s the way it is, says project manager Jens Husted. Photo: Nicky Bonne Newsletter August 2012 Strong team work, good planning and plenty of jokes led to a shorter yard stay and millions of dollars saved. Photo: Nicky Bonne Maersk Drilling 5

6 3,000 new colleagues what s in it for you? Maersk Drilling is aiming high with currently seven new buildings under construction, 3,000 new employees by 2016 and a target to expand operations around the globe. But what s in it for the current employees? We asked Head of HR and Vice President, Jesper B. Madsen. By Marlene Lyhne Sørensen, Strategy and Communication In light of the ongoing growth what changes should the present employees prepare for? First and foremost, it creates a lot of new career opportunities both onshore and offshore. A total of 75% of management positions and 50% of the pipeline positions just below management level will be filled with internal candidates on new rigs. Of course, there is no guarantee that the growth will accelerate your career. It still depends on your performance and qualifications, but the opportunities will increase. Secondly, the growth creates more frequent rotations from existing rigs, as we will take up to 30% of the current crews from some rigs and transfer them to new rigs during the next four years. So whether you are on a new or an existing rig, you will most likely meet many new colleagues in the future. The reason we need to mix new and experienced crew is to make sure we keep building on the Maersk DNA. To become integrated in Maersk Drilling and its values, procedures and systems, the new employees need experienced employees to show them the way. How will you ensure these rotations do not bring down performance on existing rigs? We all need to contribute. The current managers will play a crucial role in integrating and motivating the new teams and making sure safety and operational performance remain high priority. The key is to plan well, so that when a team member on an existing rig moves to another rig, a new employee will already have been trained before the experienced team member leaves the unit. We will try to ensure manning plans allow for this. For the new buildings there will be extensive training and teambuilding sessions using simulators before the rig starts operating. Here the leaders will also be important, so we 6 Maersk Drilling

7 Newsletter August 2012 intend to hire these leaders early so that they can help drive these activities. How will the growth affect the salary level? Our salary levels will remain market-based, so that really depends on how the market develops. Twice a year we benchmark the salary level on all positions and within all segments with 21 other contractors, and our strategy is to have a salary level which is, as a minimum, similar to the average market level. For critical positions we will be above average salary levels. Many new drilling units will come to the market in the coming years while the inflow of newly qualified employees is low. This might increase the average salaries and in that case we will follow suit. Maersk Drilling wants employees to feel like more than just a number. How will you retain this principle as the company grows? It is indeed an exciting challenge. We will strive to stick to our values, and certain things will not change in spite of growing bigger. The close relationship between Maersk Drilling and its employees will remain our focus. As an example, other drilling contractors lay off the employees when a rig is no longer on contract. We look further into the future to see if we can keep the crew until the rig is on a new contract. After the Macondo blowout in the U.S. Gulf of Mexico all drilling activities How to apply: If you are interested in applying for an offshore position on a new building please use the transfer request form. If you do not have the form please contact your local HR coordinator or Global People Support ( com). were put on standby for months, but we still kept our employees. What will you do in HR to embrace the current and new employees? We have been implementing a new induction process over the past 18 months with the intention of welcoming new employees in a structured and meaningful way. This means that employees have a smooth introduction to the way we work in Maersk Drilling our values, processes, system and people. We will continue to welcome new employees this way, and for the new buildings there will be additional team building activities. Unit Internal manning starts Drill Ship 1+2 August 2012 Drill Ship 3+4 March 2013 XLE 1 February 2013 XLE 2 May 2013 XLE 3 December 2013 PLAN 3000 our way to grow in a sustainable way Develop, Recruit and Integrate Five elements to grow sustainable 1. Grow our people Enlarge our internal talent pool, accelerate talent growth and increase internal career opportunities 2. Branding Attract the right people from the drilling industry and related industries to increase the talent pool 3. Recruitment Ensure sufficient internal and external recruitment via referrals, network, and social media along with traditional channels 4. Set the best teams Ensure high level of experienced Maersk employees in leadership and pipeline positions on both current rigs and new buildings; timely communication to our customers and rigs to ensure proper handovers Integration Set the best teams Grow our people Plan 3000 Branding towards potential employees Recruitment 5. Integration: Reduce time to competence to sustain performance through team and integration training Maersk Drilling Newsletter Nr indd :36:29

8 From 30,000 tons of steel to the largest jack-up rig in the world Some of the new and current employees will be going to the XLE jack-up rigs now being built in Singapore. In July, asset manager Per Gøbel went to see his babies which will be going to his asset area the ultra harsh environment in Norway. By Marlene Lyhne Sørensen, Strategy and Communication They are going to be part of my family and I m looking forward to seeing them for the first time, said Per Gøbel before he stepped into the Keppel Fels yard, where Maersk Drilling s R- rigs, D-rigs and Mærsk Gallant were also built. He is now standing under the pent roof with site manager Lars Ravn Hansen waiting for the rain to stop. The floor is covered with steel plates and it is hard to tell that it will eventually take shape and become the world s largest jack-up rig. The first XLE in order is taking shape at the KeppelFels yard in Singapore. Heavy rain pours down from a thick grey sky on 55 Gul Road in Singapore. Yeah, the weather is yet another challenge, says Lars Ravn Hansen, Maersk Drilling s site manager at the KeppelFELS yard, as he looks out at the rain forming a transparent curtain along the sides of the pent roof. Maersk Drilling has ordered three ultra harsh environment jack-up rigs (XLEs) from the yard, and the clock is ticking to meet the deadline for delivery. The first one is due in April Rain is just one of the challenges to this deadline, and right now about 50 yard workers with welding screens raised over their foreheads have taken shelter under the pent roof. All welding work has been paused, while the piercing sound of steel being grinded drowns the sound of splashing rain. When it rains like this, welding is not an option due to the humidity, explains Lars Ravn, shaking his head in regret while looking at Per Gøbel, senior director of the jack-up rigs operating in Norway. Can t they plan it better? I mean, can t they do more grinding work when it rains to optimise productivity? asks Per Gøbel. They are trying to but it only works to a certain extent, replies Lars Ravn Hansen. 30,000 tons of steel Per Gøbel is in Singapore to gain a first impression of the construction of three new ultra harsh environment jack-up rigs. They are all going to the Norwegian market, and being the asset manager of the ultra harsh jack-ups in Norway means that the three new buildings at KeppelFELS will become Per Gøbel s responsibility when they leave the yard. The need for steel adds up to 30,000 tons per jack-up rig and only the highest steel grades are good enough. India and China still can t live up to our demands in this regard. We only want the highest quality steel from Germany and Japan, says Lars Ravn Hansen. Single cabins to all crew members Yesssss! Per Gøbel sounds like a climber who has just reached the top of a mountain. It has finally stopped raining, and Per Gøbel has stepped down onto the KeppelFELS dock where eight out of the total 50 blocks for the first XLE are located. I m onboard the rig! he exclaims while taking a glance at the wet machinery deck. Then he smiles: Ahh, it feels good. The size of the XLE will be about double the size of the G-rigs and slightly bigger than 8 Maersk Drilling

9 Site manager Lars Ravn Hansen explains the progress in the challenging rig construction to asset manager Per Gøbel. Mærsk Innovator, so far the biggest rig in the Maersk Drilling fleet. It will be gigantic, but there is still no room for a badminton court because of the extra tanks and other equipment on the rig, says Per Gøbel who has been requesting a badminton court since the XLE was ordered in However there will be lots of opportunities on the new buildings to exercise and socialise. A cinema with room for 50 people and a large gym, along with a computer room with Wii games, are among the features. On top of that the XLEs will offer single cabins to employees and thus provide a greater degree of privacy. Lack of space is a major challenge Mærsk Innovator was built in South Korea, and this is the first time KeppelFELS builds a jack-up rig the size of an XLE. KeppelFELS is the most experienced yard when it comes to the construction of jack-up rigs for the Norwegian market. They are well known for high quality products and have a whole department following the legislation and required standards for drilling contractors operating in Norway, which is part of the reason for placing the order here, says Per Gøbel. Singapore has one of the highest population densities in the world and there is literally no available land for expansions. Facts about XLE features: The total cost of the rigs is about USD 2 billion, including a turnkey contract with the yard, owner-furnished equipment, project management, commissioning, start-up costs and capitalised interest. The rigs will represent a new generation of jack-up rigs and are especially suited for operation in the harsh environment of the North Sea at water depths of up to 150 metres. A total of 150 people can be accommodated on board in single cabins. The high capacity features include: Offline pipe handling Simultaneous operations Enlarged cantilever reach Multi-machine control on the drill floor, which will allow for a degree of automation to ensure a safe operation and consistent performance. KeppelFELS, currently building 32 new rigs, is also running out of space and the yard has bought an extra dock to make room for assembling the XLE. The yard workers need two block transporters to move the larger of the XLE blocks. Normally they only need one. Just to put into perspective how big this project is, says Ian Bentley, HSE Manager and Coating Supervisor on the Maersk Drilling site team in Singapore. Nine million man hours The shortage of space is not the only challenge facing the XLEs under construction. We need skilled manpower from outside, but the Singaporean government has decided to put a limit on the influx of foreign workers as a reaction to a popular sentiment that foreign workers are pushing the price level up, explains Lars Ravn Hansen. So yes, there are some challenges. And that is what makes a project like this fun and intriguing, he adds. It will be a while before Per Gøbel can take the XLEs under his wing, but seeing the building process firsthand and actually stepping on to the first blocks in the dock has made the future fathership more tangible. It will be the most advanced and high quality rig on the market in spite of lacking a badminton court! I can t wait to see it operate, says Per Gøbel. Maersk Drilling 9

10 Lessons learned from earlier times of growth To double the fleet and hire 3,000 new employees before 2016 is quite an exercise. It is providing a lot of opportunity but also puts pressure on the organisation striving to deliver the new buildings on time, put them on contracts and recruit the right people. How do we prepare for the growth ahead? By Marlene Lyhne Sørensen, Strategy and Communication We can do it again. CEO in Maersk Drilling, Claus V. Hemmingsen, seems to have no doubts regarding the ambitious and challenging growth plans ahead. Of course it puts pressure on all levels of the organisation, and of course it is not going to be easy. But to be ambitious and aim high was never meant to be easy. Earlier periods of growth demonstrate that we can grow our business successfully and sustainably, and if we stay focused and consistent I am most confident that we can do it again, says CEO Claus V. Hemmingsen. Last time Maersk Drilling grew the business was in due to the progressive world economy and increasing oil prices. Maersk Drilling responded to the market by ordering nine new drilling units. This time the growth is driven by an increasing demand for ultra deepwater and ultra harsh environment drilling, and so far seven new buildings three jack-ups and four drill ships have been ordered for operation in those two segments where Maersk Drilling already has a strong market position. To date (August 2012) four nearly five of the new buildings have secured contracts. The three jack-ups are going to the ultra harsh market in Norway, and one drill ship is going to U.S. Gulf of Mexico. Other than US GoM, West Africa is an area of particular interest when getting contracts for the drill ships under construction. Setting the right teams The strategy is to double the fleet and hire 3,000 new employees by 2016, and one of the biggest and most essential challenges will be finding and hiring the sufficient number of people with the right qualifications for the new buildings, says Jacob Odgaard, head of the Operational Readiness Team, a special unit clearing the way for the accelerated growth in terms of administration and technical issues. The special force consists of six people but will reach 18 by the end of When taking new buildings into use, the main challenge does not lie in the technical side. The people are the most decisive factor. Approximately 85% of a successful start-up depends on the crew performance on board, says Jacob Odgaard. Due to this acknowledgement, HR and the Operational Readiness Team have put a lot of effort into setting up the best teams, both in terms of competence and experience. Furthermore, personality traits will be taken into consideration when forming the teams. If two people in the crew don t get along it will most likely disturb the functioning of the team and bring down performance, says Jacob Odgaard. Training turned dusty According to Jacob Odgaard, some of the newly hired people in Maersk Drilling s last period of growth in 2006 were hired too early. When they had completed the necessary training, the new buildings had been delayed, and when the rigs were finally ready it had been so long that the crew s skills acquired in training had become rusty. They were demotivated and a lot of them left us before they even got started. This time we will be more realistic about when to recruit and start the training. Compared to last time we will also accelerate the usage of simulators to make the training as realistic as possible without actually being on a rig, says Jacob Odgaard. Moreover the Operational Readiness Team will have people at the yards answering customer queries and planning acceptance tests: Naturally the customer who has signed a contract for a new building has a great interest in following the process and making sure that everything is as they expect it to be, and traditionally the yard team has provided answers. We want to give the customer a good service and answer their questions without disturbing the yard team s focus on getting the new building ready, explains Jacob Odgaard. Good times, bad times Erik Schou, senior director for the Norwegian jack-up market, has been with Maersk Drilling for 20 years and is optimistic about Maersk Drilling s ability to exploit the great potential in the ultra deepwater and the ultra harsh environment segment. But at the same time he points out the cyclical pattern of the drilling industry: No matter how positive the trends are today, we will eventually be hit as we were when the financial crisis struck in Our only defence is to make sure that we make long contracts ensuring a steady income for years to come, regardless of what happens to the oil price, and to ensure that our performance does not give our customer a desire, or an opportunity, to get out of the contract. In this strong market we should go for a long contract at a lower rate rather than a short contract on a very high day rate, concludes Erik Schou. 10 Maersk Drilling

11 How do we ensure a sustainable growth? Three OIMs give their do s and dont s. Jack Pieterse, OIM Mærsk Developer An important precondition for success is to grow the fleet and crew up the new buildings without diminishing the crews already in place on other rigs. Maersk Drilling USA does handle employees differently. The biggest difference from other companies that I have seen is the respect with which employees are treated. It may seem like a small thing, but I have always been asked which dates I would prefer for mandatory/ required training on my days off, and Maersk Drilling USA is surprisingly accommodating with employees scheduling, handling personal issues with the same respect mentioned above. Other companies that I have worked for in the past 23 years seem to forget that offshore employees have lives outside of the rig. Maersk Drilling is different and should nurse this difference in spite of growing. Mark Holden, OIM Maersk Completer Do: Ensure the manpower is fully trained on all the mandatory courses prior to being put onboard e.g. firefighting, IWCF, HLO, crane operator, helideck attendant, lifeboat coxswains, etc. One of the main jobs of the OIM is to ensure that all the crew is fully trained for their positions onboard. They should come fully trained as was the case on the Maersk Resilient before going to Dubai. Do Not: Order materials, spares and equipment too late so that the rig sails only half stocked. To forward these items to catch up with the rig is expensive and leaves the rig vulnerable to breakdowns that cannot be fixed, which does not go down well with the customer on a new rig when paying a premium day rate. Jakob Bjernemose, OIM Maersk Resolve I have only been with the company for four years, so I don t have that much experience from earlier periods of growth. But in my view the three most important preconditions for being successful when growing the fleet are: 1. Manpower with sufficient qualifications, experience and training for the rig before it starts operation. 2. Enough time for crews on new units to get to know each other in order to establish good team work. 3. Sufficient support from shore organisation. Maersk Drilling 11

12 Maersk Drilling ce In 1972 the A.P. Moller Maersk Group inve discoveries of oil in the North Sea. Since the around the world. The 40-year anniversary c shapes and so Headquarter celebrations, Copenhagen Houston, USA Maersk Completer, Brunei Houston, USA Maersk C

13 lebrates 40 years sted in the drilling industry due to the first n Maersk Drilling s activities have spread elebrations on June 21st 2012 came in many did the cakes! Headquarter celebrations, Copenhagen Australia Maersk Resolute, Holland ompleter, Brunei Headquarter celebrations, Copenhagen

14 I have been extremely privileged The drilling industry has seen an evolution like few others, transforming from a dangerous guessing game into a technologically advanced, multi-billion dollar business. Maersk Drilling has been at the forefront of this development since the company started 40 years ago and Gregers Kudsk has been part of the journey from the beginning. By Marlene Lyhne Sørensen, Strategy and Communication In 1972 Gregers Kudsk saw a job advertisement from the newly established company, Maersk Drilling. Gregers had recently graduated in mechanical engineering, specialised in ship building and had only followed the discoveries of oil and the setting-up of the first permanent production site in the North Sea in 1972 from a distance. But he was still fascinated by the offshore industry and decided to apply for the job. Gregers Kudsk is now Vice President and Senior Technical Advisor, and is the longestserving employee at Maersk Drilling. I have been extremely privileged. I cannot think of a more exciting and challenging industry to work in. Offshore drilling is a complicated business and the challenges involved have never ceased to fascinate me, says Gregers Kudsk. We can do better Gregers entered the offshore industry in 1973, only a year after Maersk Drilling was founded and shortly after he became involved in building new rigs set to operate in areas such as the North Sea, Brazil, Australia, the Far and Middle East and the Gulf of Mexico. In spite of more than 20 years of experience, the well-established contractors lacked acceptable standards in many aspects and eventually we generated a confidence that we could do better, says Gregers Kudsk. In 1975 a storm in the North Sea forced an evacuation of the crew on the Mærsk Explorer. Fortunately nobody was hurt and the crew returned to the rig a few hours later. Groundbreaking new buildings When Maersk Drilling put one of its first new buildings the jack-up Mærsk Explorer into service in 1975 it was the largest of its kind in the world and became the benchmark rig used by Maersk Drilling to analyse the drilling performance and to identify areas where improvements could and should be made. Soon Gregers was involved in pursuing some of the technologies that would lead to automation at a time when resources and knowledge were limited. 14 Maersk Drilling

15 Some of the things we did in those days were really ground breaking and ever since we have worked on further developing the automated equipment on board our drilling rigs. One of the things that has improved tremendously is the operational safety level. Back then our Lost Time Incidents frequency was around 50 and instead of tattoos, people would show off their missing fingers as a sign of seniority, says Gregers Kudsk. In comparison the 2011 LTIs frequency was down to 0,37. Yard got the wrong drawings Seven new buildings are currently under construction, which ensures that Maersk Drilling will be in the lead as one of the drilling contractors with the youngest and most advanced rigs in the market. But to Gregers Kudsk the rig that has left the biggest imprint in his mind is the Maersk Pioneer from In the building process the designers had spent the budget without updating the drawings. And then they just closed down. Soon it turned out that they had sent the wrong drawings to the yard in Korea. I ended up making the necessary drawings from Copenhagen. When the rig left Korea it was sailed directly to location off the coast of Rio de Janeiro in Brazil. Something we would never do today without making the necessary safety and commissioning checks. And of course the rig was not in a condition to operate properly after having been transported half way across the planet. I spent quite some time on that rig, smiles Gregers Kudsk. What are the biggest leaps forward in the offshore drilling technology as you see it? The introduction of the topdrive in Later we added the iron roughnecks and automated pipe handling systems on the drill floor. Another milestone was the stand building technology using the Foxhole, which allowed crews to build stands of drill pipe and bottomhole assemblies while drilling. The first introduction of the X-Y cantilever on the Mærsk Innovator and the Mærsk Inspirer was also a big step forward. All the new Maersk Drilling jack-ups have by far the largest and most efficient deck layout in the industry. What will happen in the near future in the drilling industry? The demand for ultra deepwater operations and high-pressure drilling will keep growing. Many changes will come related to automation, not only in connection with the pipe handling systems and the drilling equipment on the rigs but also what s going on downhole. This will provide for step changes in the efficiency and the safety of drilling those demanding wells our customers will require from us. The need for improved systems to control the processes and avoid accidents will grow. Our new build drillships and jackups will introduce better solutions for controlling the wellbore pressures, and safer and more reliable BOPs which in turn will improve the overall safety of the operation. Learn more about Maersk Drilling s first 40 years on MaerskDrilling Maersk Drilling 15

16 SAFETY Newsletter August 2012 Safety bulletin From January to June 2012 the safety performance has been negatively impacted by 4 lost time incidents (LTIs) and 20 total recordable cases (TRCs). This made the YTD LTI frequency to 0.92 while the YTD TRC frequency is Compared to Q IADC benchmarking of 1.01 for LTI frequency and 3.24 for TRC frequency, Maersk Drilling has still reached better than industrial average for LTIF, while the TRC frequency has become higher than industrial average. MD overall safety performance Maersk Drilling LTIs and LTI Frequency (incl. Administration) 12 Months Rolling Trend Top 5 HSE Awards issued during Q Days without any Recordable Date of Unit HSE Incidents HSE Award MAERSK CONVINCER April 2012 MÆRSK GUARDIAN April 2012 MAERSK RESOLVE April 2012 MAERSK COMPLETER May 2012 MÆRSK INNOVATOR June , Top 3 Safety awards issued for Venezuela barges during Q ,00 4 LTI Frequency 0,80 0,60 0,40 0,20 0, jul-11 aug-11 sep-11 oct-11 nov-11 dec-11 jan-12 feb-12 mar-12 apr-12 may-12 jun No.of LTIs as per Month Days Date of Unit without any LTIs Safety Award MAERSK RIG 62 3, April 2012 MAERSK PATHFINDER 3, April 2012 MAERSK PIONEER 4, May 2012 jul-11 aug-11 sep-11 oct-11 nov-11 dec-11 jan-12 feb-12 mar-12 apr-12 may-12 jun Maersk Drilling TRCs and TRC Frequency (incl. Administration) 12 Months Rolling Trend Personal Injuries in Q A total of 67 records were reported with Hand/Finger/Wrist (19 injuries) surpassing Head & Face (8 injuries) as the body parts receiving the most injuries. Personal injuries occurred in Q , ,00 18 Head & Face 18 %, 12 injuries Front & Side Trunk 12 %, 8 injuries 8,00 16 TRC Frequency 7,00 6,00 5,00 4,00 3,00 2,00 3,89 2,74 3,42 3,31 2,58 2,63 3,07 2,95 3,21 3,08 3,10 3,08 5,70 4,34 3,31 3,40 3,42 3,24 4,20 3,69 4,71 4,62 4,04 4, No.of TRCs as per Month Neck 1 %, 1 injuries Arm/Shoulder/ Elbow 13 %, 9 injuries Hand/Finger/ Wrist 28 %, 19 injuries Back 3 %, 2 injuries Leg 9 %, 6 injuries Ankle & Foot 15 %, 10 injuries 1,00 2 0,00 jul-11 aug-11 sep-11 oct-11 nov-11 dec-11 jan-12 feb-12 mar-12 apr-12 may-12 jun-12 0 jul-11 aug-11 sep-11 oct-11 nov-11 dec-11 jan-12 feb-12 mar-12 apr-12 may-12 jun Work Activities involved Hand/Finger/Wrist Maintenance and technical modifications and Drilling / Well activities covered more than half of the total work activities involved in Hand/ Finger/Wrist injuries. 16 Maersk Drilling

17 SAFETY Work Activities involved Hand / Finger / Wrist Injuries 5 % 5 % 11 % 11 % 5 % 5 % MAINTENANCE AND TECHNICAL MODIFICATIONS, 7 37 % DRILLING / WELL ACTIVITIES, 4 CATERING SERVICE, 2 TRANSPORT, 2 AUDIT, INSPECTION, VERIFICATION, ETC., 1 CRANE- AND LIFTING OPERATIONS, 1 MARINE OPERATIONS, 1 PURCHASING AND LOGISTICS, 1 21 % Potential and Actual DROPs per offshore location Maersk Discoverer scores high on safety performance After a period with several incidents, initiatives have been sparked to stop the trend and fortunately this is coming into effect. For the second month in succession Maersk Discoverer has not had any recordable incidents, except for one contained spill. I am delighted to witness this outstanding achievement which is the result of a number of initiatives made in corporation with the rig crew and the rig team. The background for the success is a huge joint effort from all involved, and I think it proves that if there is a determination to break a negative trend it can be done, says HSE director Søren Risgaard Jeppesen. Numbers of Poten al and Actual DROPs YTD Maersk Pathfinder Maersk Rig 12 Maersk Rig 42 Maersk Rig 45 Maersk Rig 62 Maersk Rig 41 Maersk Rig 44 Maersk Rig 52 Maersk Pioneer Maersk Rig 61 0 NanHai VI 0 Mærsk Innovator 0 Mærsk Developer 0 Maersk Completer 0 Maersk Convincer 1 Mærsk Gallant 1 Maersk Guardian 1 Mærsk Giant 1 Maersk Resolve 1 Mærsk Deliverer 1 Maersk Endurer 1 Maersk Explorer 1 Maersk Reacher Maersk Discoverer The chart above shows dropped object incidents for YTD June 2012 and DROPs >40J frequency for last 12 months. Maersk Discoverer has the highest record (5) of DROPs over 40J while Maersk Resolve, Maersk Resolute, Maersk Innovator, Maersk Reacher and Maersk Resilient have the highest number of DROPs (4) less than 40J. Maersk Resilient has the highest 2011 rolling frequency of actual DROPs over 40J (11.69). 5 4 Maersk Resolute 4 Maersk Resilient Frequency of Actual DROPs Over 40J L12 (July 2011 to June 2012) The positive news about Maersk Discoverer comes after a worrying development in the safety statistics, as the performance score covering January to May 2012 across the organisation mirrors a rising number of injuries affecting the TRC frequency. Compared to three LTI s last year, so far this year the number has already reached four,which has affected the trend and hence the frequency, says HSE director Søren Risgaard Jeppesen. Every single LTI has a significant impact, not only on the injured person and the company, but also on colleagues, familiy and friends. We have also seen a rise in injuries to hands and fingers and Slips, Trips and Falls, which has brought the total number of incidents up to 13 (Jan May). And as safety is a major concern to us, we have taken a number of initiatives to stop the trend, he says. HSE coaches have been assigned By the end of June Maersk Drilling s TRC frequency (12 months rolling) was 4.03, compared to 3.08 at the beginning of the year. One of the initiatives taken to push back the number of incidents is the assigning of HSE coaches. All coaches have offshore experience, some as OIMs. Work activities involved in Actual DROPs during Last Quarter 3,16 % HSE director Søren Risgaard Jeppesen: There is no excuse for not putting safety first and for not planning and executing the jobs in accordance with our management system. Safety is a top priority for the company as well as safeguarding the health and wellbeing of our employees, so let s do everything we can to retain our high safety standards. 5,26 % 11,58 % DRILLING/WELL ACTIVITIES MAINTENANCE AND TECHNICAL MODIFICATIONS CRANE- AND LIFTING OPERATIONS Some of the initiatives taken to break the rise in the TRC trend: Launch of the Hand & Finger campaign Assignment personnel from headquarter to assist rig teams on location Hiring of external leadership training companies On-the- Job Training requirements adjusted and made more comprehensive. Maersk Drilling 17

18 Environment Newsletter August 2012 Environment bulletin Maersk Drilling has a strong focus on the environment and has conducted an in depth analysis on spills and how to improve the performance of the fleet. Furthermore, guidelines on the management of hoses have been concluded and are now being implemented across the fleet. Maersk Drilling performs daily quality checks of incident reports with regards to external spills/discharges as well as accidental spills/ discharges contained on board. During the past 12 months period we have had a number of spills, including oily products spills, chemical spills and drilling fluid spills, however by June 2012, the total amount of external spills began to show a decreasing trend. Chemical product was the most spilled content among these external spills (58%). The reported root causes of external spills by June 2012 were Inspection & Maintenance of MD/MFPSOs Machinery/ Equipment/etc. (23%), Environmental Management/Control. (23%), Engineering controls, Design, R&D, etc. (18%), and Analysis of critical tasks and procedures (14%). Offshore CO2 Emission CO2 emissions from Maersk Drilling offshore activities are currently calculated based on the monthly diesel oil consumption from active rigs. The big reduction of CO2 emission from DeepWater assets was mainly due to the out of operation from Maersk Discoverer. Maersk Drilling Offshore CO₂ Emission this Year 50 Total CO2 Harsh Env. J/U International J/U DWSS Drilling Barges Total Offshore YTD CO2 frequency External spills in Maersk Drilling for the last 12 months Amount of External Spills per Month (in Liter) Oily product Chemical product Drilling product No.of External Spills ,5 4,0 3,5 3,0 2,5 2,0 1,5 1,0 Numbers of External Spills per Month Montjly CO2 Emission Frequency per Month (in 1,000 tonnes per 1,000,000 Exposure hours) Jan Feb Mar Apr May 2012 Jun Accumulated CO2 Emission by each Month (in tonnes) 0,5 0 0,0 CO₂ emission frequency per unit type for 2012 jul-11 aug-11 sep-11 oct-11 nov-11 dec-11 jan-12 feb-12 mar-12 apr-12 may-12 jun % 47 % DEEPWATER INTERNATIONAL J/U Type of spilled content in Maersk Drilling for Q % DRILLING BARGE HARSH ENV. J/U LEAK FROM PIPE AND FITTINGS BURST HOSE 19 % LEAK FROM VALVE TANK OVERFLOWED SPILL DURING TRANSFER OPERATION LEAK FROM ANNULAR IMPROPER STORAGE LEAK DURING MAINTENANCE LEAK FROM EXHAUST The emission frequency is based upon 24 exposure hours, which is the metric used at the moment. DWSS have the highest CO2 emission frequency due to the fact these units uses dynamic positioning unlike the Jack-up rigs. There were 74 cases of contained spills and 13 cases of external spill for Maersk Drilling by June Maersk Drilling

19 MARKET INSIDE Focus leads the way to winning businesses By Michael Harboe-Jørgensen, Head of Strategy & Communication Maersk Drilling s leading position in Norway shows that focus is a key element to winning businesses. The deepwater market is next in line. Think back more than 20 years. Back in 1990, the jack-up Maersk Guardian entered Norwegian waters for the first time for an eight well programme for Phillips later ConocoPhillips at a rate of USD 62,000. The semisubmersible Maersk Jutlander had moved to Norway the year before, but otherwise it was completely new territory to Maersk Drilling, and the Norwegian rig market was mainly dominated by floaters, while the jack-up market was fairly underdeveloped. However, Maersk Drilling saw an opportunity to provide a competitive offering with a jack-up rig which carried lower operational and capital costs compared to semi-submersibles. leading position in Norway With the decision to move Maersk Guardian to Norway in 1990, the first in a series of steps was taken which more than 20 years later would position Maersk Drilling as the leading offshore driller in Norway. It is highly questionable whether anyone would have predicted this outcome, although the reality is that this created the foundation for Maersk Drilling s position today. When Maersk Drilling takes delivery of the last of its three new buildings in first half of 2015, Maersk Drilling will have nine jack-up rigs in Norway, which assuming everything else is equal will establish Maersk Drilling as the largest rig operator in Norway considering both jack-up and floater competition. But this is not just a numbers game. As a result of its continuous presence over more than 20 years, Maersk Drilling has built a strong knowledge of local rules and regulations, a reputation as an expert in jack-up technology and a proven track record of high and consistent operational performance. The long relations with leading operators in Norway has led to a unique customer insight and enabled Maersk Drilling to invest in the right equipment, at all times meeting customer requirements for many years ahead. Just mention Mærsk Gallant, Mærsk Innovator and Mærsk Inspirer, which were all state-ofthe-art in their time and the same goes for the three new XL Enhanced jack-ups. Deepwater markets are next in line So what can we learn from the Norwegian story? The essence is that focus and persistence seem to be the key words for the course of action laid out over the last 20 years in regard to the Norwegian market. Only through focus and persistence has Maersk Drilling managed to grow its young one-rig business in 1990 into a market leader more than 20 years later. And only through focus and persistence has Maersk Drilling been able to build relations with customers and improve capabilities that allow it to lead the game. This is how Maersk Drilling can grow similar positions in new markets. Alongside leveraging our position in Norway, Maersk Drilling has taken strategic decisions to grow its position in the ultra deepwater market, specifically the US GoM and West Africa. US GoM and West Africa might be different from Norway in many aspects, but the point is that with the same persistence and focus as applied in Norway, we believe we can build a strong and stable operation in these markets providing an edge to competition. This will ultimately be to the benefit of the customer of Maersk Drilling and make us one of the top performers in the ultra deepwater segment. Maersk Drilling 19

20 SHORT NEWS Newsletter August 2012 Short news Sold out in Norway until 2014 In April Maersk Drilling signed a contract with Centrica Energi of at least USD 60 million. With this contract in place, Maersk Drilling s rig capacity in Norway is sold out until 2014, and demand for harsh environment rigs keeps growing while rig supply remains tight. The contract employing Mærsk Giant covers the drilling of two or three wells with an estimated duration of days at an agreed day rate of USD 350,000. The contract is expected to commence in the fourth quarter of Maersk Drilling orders third XLE against a fouryear contract In May Maersk Drilling ordered a new XL Enhanced, ultra harsh environment jack-up rig at KeppelFELS in Singapore, backed by a fouryear contract with Statoil for development drilling on the Dagny field in the Norwegian North Sea. The new rig is identical to the two XLE rigs ordered in early 2011 and delivery is scheduled for the beginning of The total project cost is close to USD 650 million, including a turnkey contract with the yard, owner-furnished equipment, project management, commissioning, start-up costs and capitalised interest. Maersk Drilling launches Facebook site In June Maersk Drilling launched a Facebook site including a timeline of our first 40 years told through milestones, pictures and movie clips. Along with building a global Maersk Drilling community that is easily accessible no matter where you are stationed in the world, and where you can grow your network, share experiences and stay connected to your colleagues, the purpose is to find and attract new employees. In August the new Facebook site had already reached more than 10,000 likes. See more Reinforcing our stronghold in Norway In July Maersk Drilling signed a contract with Statoil for the ultra harsh environment jack-up rig, Mærsk Gallant, for work in the Norwegian North Sea. The contract duration is two years and includes an option for one additional year. The value of the firm contract is USD 284 million, and it will commence immediately after the present contract with ConocoPhillips ends either in the second quarter of 2014 or second quarter of 2015 depending on whether ConocoPhillips declares their one-year option for Mærsk Gallant. 20 Maersk Drilling

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