Ensco PLC: Valuation And Financial Strength Make It A Compelling Buy
Tim Travis • 39 Comments
Tim Travis • 39 Comments
Today, 5:35 PM
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Mon, Oct. 17, 1:19 PM
- Atwood Oceanics (ATW +2.4%) is downgraded to Underperform from Market Perform with a $7 price target, down from $8, at BMO Capital, whose stress test analysis suggests that the company is most at risk of needing high cost capital or even equity.
- BMO sees risk of ATW running out of liquidity by Q2 2018 unless it is able to defer $400M of payments related to two uncontracted ultra-deepwater rigs, but even if ATW is able to defer payments, there is risk of running out of liquidity in Q2 209, which also is when its credit facility expires.
- The firm says there are 32 idle UDW floaters, and ATW is highly unlikely to be able to secure a cash flow positive contract on one of its two undelivered new builds, which is what it likely needs to secure additional financing.
- BMO believes there are better options to gain exposure to a potential recovery in offshore drilling, notably Ensco (ESV +0.7%), which the firm upgrades to Market Perform from Underperform and moves to the top of its list for investors that want long exposure to offshore drillers.
Fri, Oct. 14, 3:18 PM
- Ensco’s (ESV -0.9%) fleet status update yesterday illustrates the ultra-deepwater rig market remain woefully oversupplied, Tudor Pickering says as it maintains its Hold rating on the shares.
- ESV extended contracts with Saudi Aramco for two jack-up rigs, with one signed on for an additional three years but settling for a lower dayrate in the mid-60s the new contract begins in December, and another coming out of stacking to start a new five-year contract at a dayrate in the low 70s.
- However, ESV said two of its uncontracted sixth generation rigs in the Gulf of Mexico were preservation stacked, a decision Tudor says is not surprising.
Wed, Sep. 21, 3:55 PM
- Ensco (ESV +6.8%) is upgraded to Buy from Neutral with a $10.50 target price at Goldman Sachs, which says the stock offers an option to investors to participate in upside from a potential sharp rebound in oil prices without taking too much downside risk.
- While offshore drillers face industry headwinds, Goldman believes ESV's balance sheet strength and liquidity allow it to remain relatively better positioned than peers, offering attractive stock upside due to its YTD underperformance.
- ESV also offers exposure to the jack-up market, which the firm sees more positively than the floater market in the near term; limited jack-up exposure was among the reasons Goldman downgraded Diamond Offshore.
Tue, Sep. 20, 3:45 PM
- Diamond Offshore (DO +2.4%) is upgraded to Buy from Hold at Evercore ISI, which believes the unwinding of shorts as oil prices firm and an offshore rig market bottom materializes over the next 6-12 months could be a catalyst for offshore drillers.
- The firm notes the recent news that the Rowan Reliance drilling contract may be terminated early - the news was expected but was surprised that the company said an exclusive five-year service agreement could be in lieu of a contract termination; it sees the modified blend-and-extend agreement suggests the operator could see a potential offshore rig market bottoming by March 31 and tightening within the next 12 months.
- Evercore continues to rate Ensco (ESV -1.4%), Rowan ([[RDC] -0.5%) and Noble Corp. (NE -2%) as Buys, "as this select group of offshore drillers will be survivors of the current multi-year cyclical downturn."
Thu, Aug. 25, 12:27 PM
- Transocean (RIG +1.4%) is upgraded to Neutral from Sell with an $11 price target at Citigroup, which says RIG has exceeded expectations for cost reductions while the backlog remains superior to peers.
- Citi says that while RIG's EBITDA should steadily decline, the company does not face an EBITDA cliff unlike some peers, and the company also was able to issue debt which has lowered bond yields.
- Among offshore drillers, Citi rates Ensco (ESV +0.1%), Diamond Offshore Drilling (DO +0.1%), Noble Corp. (NE -0.6%), Atwood Oceanics (ATW -1.4%), Rowan (RDC -0.6%) and RIG at Neutral, while Pacific Drilling (PACD -2.7%) remains rated a Sell.
Tue, Aug. 23, 12:58 PM
Thu, Aug. 18, 5:35 PM
Wed, Jul. 27, 5:57 PM
- Offshore drilling stocks were slammed today as crude oil prices fell to three month lows, but Atwood Oceanics (NYSE:ATW) took the worst beating, -8.6% following its latest fleet status update.
- The contract for the Atwood Osprey rig, which had been expected to start working for Woodside Energy until January 2017 at a $450K dayrate, was extended but at a new rate of $190K; also, no contracts were announced for two uncontracted, newbuild drillships despite talk of a potential Brazil agreement in the works.
- Also in today's trade: RIG -4.1%, DO -3.1%, RDC -4.6%, ESV -4.7%, SDRL -0.6%, NE -3%.
Wed, Jul. 27, 4:50 PM
Tue, Jul. 26, 5:35 PM
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Fri, Jul. 22, 2:23 PM
- Transocean (RIG -5.5%) falls more than 5% after its latest fleet status report showed it stacked an additional six rigs, taking its total number of currently stacked rigs to 28, with reduced dayrates for others.
- RIG says it won a two-year contract for one of its semi-submersibles to operate off India for ONGC at a $127K dayrate, and a newbuild ultra-deepwater rig started operations on a 10-year contract in the Gulf of Mexico at a $498K dayrate.
- Following the report, RBC's Kurt Hallead says RIG shares have limited upside until the market gains more confidence in the supply and demand outlook for floating rigs in 2017-18. Currently, fundamentals continue to weaken for floating rigs, and it remains unclear where dayrates and utilization may bottom.
- Offshore drillers are broadly lower: RIGP -1%, DO -1.5%, ESV -4.2%, RDC -5%, SDRL -1.6%, NE -4.8%, ATW -3.6%, PACD -3.8%.
Tue, Jul. 19, 2:27 PM
- Ensco (ESV -4.9%) has sold off six assets for scrap and signed new short-term contracts but also was hit by a contract cancellation, according to its latest fleet status report.
- ESV says Japan’s Marubeni exercised its right to terminate its contract early, effective in August, for the Ensco 8505 semisubmersible, which was operating at a dayrate in the low $150Ks.
- Inpex extended its contract by about 15 months for an ESV semisubmersible at a lower dayrate in the mid $350Ks, plus ~$125K/day for capital upgrades and dayrates during shipyard stay and mobilizations; the contract is expected to end in September 2019.
- Summing up, Fun Trading finds encouragement that ESV was able to secure some contracts recently despite terminations and slashed dayrates.
Mon, Jul. 11, 3:19 PM
- Transocean (RIG -2.4%) is sharply lower after Seaport Global downgraded its rating to Sell from Neutral with a $10 price target, as valuation "seems stretched... given that little has changed regarding the protracted oversupply of rigs in offshore markets."
- RIG also will have a higher annual cash interest expense burden due to last week's $1.25B unsecured note issuance, Seaport says.
- Offshore drillers are broadly lower as crude oil futures fell 1.4% to a two-month low $44.76/bbl: RIGP -2.2%, SDRL -1.1%, DO -0.3%, ESV -3%, NE -1.1%, RDC -0.4%, ATW -2.6%.
Tue, Jul. 5, 7:19 PM
- Citigroup reshuffles its rankings a bit among offshore drillers in light of the wide spread in YTD performance that has seen the likes of Ensco (NYSE:ESV) and Noble Corp. (NYSE:NE) suffer sizeable losses while Diamond Offshore (NYSE:DO) and Atwood Oceanics (NYSE:ATW) sport double-digit gains.
- The firm ranks ESV at Neutral but nevertheless atop the group given its YTD underperformance (-37%) and balance sheet improvement through its April debt tender, while DO ranks second given backlog into 2019 and healthy balance sheet, and ATW is a close third as short covering could fuel further upside.
- Citi says Rowan (NYSE:RDC) has slipped to the bottom of its Neutral-rated stocks in the group on YTD outperformance (+4%), risk of contract cancellation and an EBITDA cliff in 2018; the firm continues to rate Transocean (NYSE:RIG) and Pacific Drilling (NYSE:PACD) at Sell.
Wed, Jun. 29, 4:49 PM
- Stone Energy (NYSE:SGY) +6.4% AH after announcing the termination of its existing long-term deepwater rig contract with Ensco (NYSE:ESV) for $20M; the ENSCO 8503 deepwater rig contract was at a dayrate of $341K and was scheduled to expire in August 2017.
- Additionally, SGY says it entered into an interim gas gathering and processing agreement with Williams Cos. (NYSE:WMB) at the Mary field in Appalachia, which SGY says provides near-term relief by permitting it to resume production at the Mary field.