Ensco PLC: Valuation And Financial Strength Make It A Compelling Buy
Tim Travis • 39 Comments
Tim Travis • 39 Comments
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
- ABCO, ABX, ACGL, AEM, AF, AGNC, AHL, ALEX, ALSN, AMCC, AMGN, ANIK, ARRS, ASGN, AXTI, BKCC, CA, CAKE, CBI, CBT, CDE, CMO, CMPR, CMRE, CNMD, COHR, CRUS, CSGP, CVTI, CW, CYS, DLB, DRE, ECHO, EFX, ELY, EQY, ESRT, ESV, EXR, FB, FBHS, FOE, FORR, GG, GPRO, GRPN, HOLX, HT, IAC, IBKC, INFN, INT, ISBC, KEX, KGC, KIM, KNL, KNX, KONA, KRA, KS, LLNW, LM, LOGI, LPSN, LRCX, MAA, MANT, MAR, MCK, MEOH, MKSI, MMLP, MMSI, MN, MOH, MUR, NATI, NE, NEU, NGD, NOW, NTGR, NTRI, NVDQ, NXPI, O, OCN, OI, ORLY, OTEX, PEIX, PPC, PSA, PXD, QDEL, QEP, QTM, RCII, ROIC, RRTS, SCI, SFLY, SIGI, SPRT, SPSC, SSNC, SU, TER, TILE, TIS, TMK, TMST, TTEK, TTMI, TYL, UNM, VAR, VNDA, VNR, VRTX, WFM, WFT, WIRE, WLL, WRE, WSR, XL, XLNX
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.
Wed, Jun. 29, 3:35 PM
- Transocean (RIG +5.1%) is upgraded to Hold from Sell with a $12 price target, raised from $11, at Evercore ISI, which says it is optimistic that the company has the management team to lead it out of the current downturn, and that earnings visibility and the balance sheet should improve shortly.
- The firm notes that RIG has enjoyed some success in securing new contracts, and some potential blend-and-extends are expected to be finalized shortly, but dayrates likely are at or near cash breakeven levels and RIG still needs to take additional steps to right-size its fleet.
- Evercore rates offshore drilling peers Ensco (ESV +3.3%), Noble Corp. (NE +2.4%) and Rowan (RDC +0.8%) at Buy, while Seadrill (SDRL +0.9%) and North Atlantic Drilling (NADL +0.7%) are rated Sell.
Tue, Jun. 28, 3:28 PM
- Ensco (ESV +5.9%) surges after Susquehanna upgrades shares to Neutral from Negative, citing recovering crude oil prices and the stock's valuation and relative underperformance; of course, rising crude prices today also are helping.
- The firm says higher crude prices has not sparked improved demand for offshore rigs, and it could take through 2018 before any material demand potentially arises, but ESV has underperformed other offshore drillers by a wide margin and now trades below the average for offshore drillers.
- But Evercore ISI remains cautious on offshore drillers, arguing that "not a single stock screens 'cheap,'" although it prefers ESV, Noble Corp. (NE +1.2%) and Rowan (RDC +3.5%) as relative Buys for their superior fleet quality, low operating cost basis, low capex and solid backlog, while Hold-rated Ocean Rig UDW (ORIG +3.6%) and Diamond Offshore (DO +1.8%) deserve "a degree of valuation differentiation due to its highly contracted fleet in the near term."
- Also higher today: RIG +3.9%, ATW +7.1%, SDRL +2.2%, SDLP +12.3%, PACD +2.7%.
Wed, Jun. 22, 5:36 PM
Wed, Jun. 8, 7:12 PM
- The recent sharp rally in offshore drillers may be due to short covering, potentially in the midst of a “2 sigma short interest unwind" if oil prices continue to strengthen, according to Evercore ISI analyst James West.
- A portfolio of lower-risk offshore drillers - Atwood Oceanics (NYSE:ATW), Diamond Offshore (NYSE:DO), Ensco (NYSE:ESV), Noble Corp. (NYSE:NE), Rowan (NYSE:RDC) and Transocean (NYSE:RIG) - has been shorted 4.4x their historical average, and a total of 200M shares were short as of May 31 vs. a 50M monthly average during 2005-13, West calculates.
- Short interest as a percentage of the float as of yesterday, according to Markit: ATW 34.5%, DO 20%, RDC 17%, RIG 17%, NE 14%, ESV 3.5%.
- While the firm rates ESV, NE and RDC as relative Buys and believes Hold-rated Ocean Rig UDW (NASDAQ:ORIG) and DO deserve a degree of valuation differentiation, West urges caution on the overall group, seeing the industry as fundamentally oversupplied.
Mon, May 23, 2:59 PM
Ensco Plc provides offshore drilling services to the petroleum industry. The company provides drilling services to major international, government-owned and independent oil and gas companies. It operates its business through the following segments: Floaters, Jackups and Others. The Floaters... More
Sector: Basic Materials
Industry: Oil & Gas Drilling & Exploration
Country: United Kingdom