Ensco PLC: Valuation And Financial Strength Make It A Compelling Buy
Tim Travis • 39 Comments
Tim Travis • 39 Comments
Ensco Offers A Fat Dividend Yield Plus Much More
George Rho • 52 Comments
George Rho • 52 Comments
Yesterday, 3:45 PM
- Diamond Offshore (DO +1.4%) is higher after Q1 earnings easily exceeded analyst estimates, but it is not helping shares of other oilfield services companies in today's trade.
- Wells Fargo views DO's report positively, although results likely included noise from the accounting of a demobilization fee and notes that another contract termination in Mexico could be viewed as a partial negative offset.
- The Zephirin Group contends that DO's do not overshadow weak fundamental conditions in the offshore industry likely to persist, hurting earnings through 2018 and beyond for the likes of Noble Corp. (NE -2%) and Ensco (ESV -3.2%), which reported earnings last week (I, II).
- Zephirin rates NE and ESV at Hold - High Risk, forecasting a 30% reduction in dayrates for NE's Sam Croft and Tom Madden drillships and rate reductions of up to 25% or termination in the near future for ESV's four rigs working in Brazil for Petrobras at a day rate range of $300K-345K.
- Also: RIG -0.7%, RDC -1.4%, ATW -0.7%.
- Now read Diamond Offshore names Youngblood as new CFO
Fri, Apr. 15, 9:13 AM
Fri, Apr. 15, 8:28 AM
- Ensco (NYSE:ESV) discloses preliminary Q1 financial results, and revises its planned 2016 capex to $400M.
- ESV expects Q1 operating revenues of $812M-$817M vs. $788M analyst consensus, benefiting from better than expected 64%-66% fleet utilization and average dayrates that fell by 3%-4% instead of a 7%-8% decline in its prior guidance.
- ESV -7.7% premarket following yesterday's announcement that it will begin a public offering of 50M Class A ordinary shares.
- Update: ESV upsizes its public offering to 57M shares, priced at $9.25M, with an underwriters option to purchase up to an additional 8.55M shares.
Thu, Apr. 14, 5:40 PM
Thu, Apr. 14, 4:30 PM
- Ensco (NYSE:ESV) -6.5% AH after announcing a public offering of 50M common shares, with an underwriters option to purchase up to an additional 7.5M shares.
- ESV says it plans to use the proceeds for general corporate purposes.
- Now read How to earn a higher than 10% annual return with Ensco
Thu, Apr. 14, 3:30 PM
- The Obama administration announces new oil well control rules aimed at preventing the kind of blowout that happened in the 2010 Gulf of Mexico oil spill.
- The regulations announced by the Interior Department tighten requirements for blowout preventers, well design, well control casing, cementing and sub-sea containment, and call for real-time monitoring, third-party reviews of equipment, regular inspections and safe drilling margin requirements.
- The effects will be particularly acute for the Gulf’s top crude oil and gas producers, Royal Dutch Shell (RDS.A +1.1%), BP (BP -1.6%), Chevron (CVX +0.1%) and Exxon Mobil (XOM +0.4%); XOM says the new rules will cost $25B over 10 years and render many offshore discoveries worthless.
- Offshore drilling stocks are broadly lower on the news: RIG -6.1%, DO -1.4%, ESV -5.1%, RDC -7.3%, NE -5.4%, ATW -9%, SDRL -8.9%, SDLP -4%.
- ETFs: XLE, VDE, ERX, OIH, XOP, FCG, ERY, GASL, DIG, DUG, BGR, XES, IYE, IEO, FENY, IEZ, PXE, FIF, PXJ, RYE, NDP, GUSH, DRIP, DDG, FXN
Thu, Mar. 24, 5:43 PM
- Hologic (NASDAQ:HOLX) is replacing Pepco Holdings (was just acquired by Exelon), and Centene (NYSE:CNC) will replace Ensco (NYSE:ESV), in the S&P 500 after Tuesday's close. (Press Release - .pdf)
- Abiomed (NASDAQ:ABMD) will take Hologic's spot in the S&P MidCap 400, and Ensco will take Centene's spot. First Industrial Realty Trust (NYSE:FR) will replace Health Net (just acquired by Centene) in the 400.
- ServisFirst Bancshares (NASDAQ:SFBS) will replace National Penn Bancshares (about to be acquired by BB&T) in the S&P SmallCap 600 after the April 1 close. Banc of California (NYSE:BANC) will take Abiomed's spot in the 600.
- HOLX +2% after hours. CNC +1.6%. FR +3.5%. BANC +3.5%. ESV -0.5%.
Wed, Mar. 9, 3:23 PM
- Ocean Rig UDW (ORIG -22.9%) plunges after missing Q4 earnings expectations and saying "prospects for the industry remain bleak” and “are likely to remain so at least until 2018.”
- ORIG says it is in discussions with lenders of its loan agreement related to the consequences of Ocean Rig Apollo termination, and that the situation could evolve into a "significant prepayment" of the loan.
- ORIG says its fleet operated at 99.5% utilization during Q4, and FY 2015 fleet operating efficiency was ~98.2%.
- Although ORIG’s comments were more bearish than the outlook described by other offshore drillers, the company’s earnings are hurting other names in the space: DRYS -19.6%, SDRL -16.4%, RIG -2.3%, NE -5.7%, ESV -3.9%, DO -1.4%, RDC -4.4%, ATW -3.3%.
Thu, Mar. 3, 2:58 PM
- Offshore drillers are surging today, which RBC analysts at least partially attribute to Noble Corp.'s (NE +16.1%) news that it spent $200M to buy back bonds due in 2020 and 2021, greatly reducing its debt.
- RBC estimates that NE would be able to retire ~$300M of debt principal at face value for $200M with new borrowings on the revolver, which should generate annual interest savings of ~$10M or a ~$0.03 impact to EPS.
- Ben Levisohn of Barron's also notes that oil companies in general have been able to offer stock and pay down debt, which has reduced some of the fears that the entire sector could go bankrupt, and that short interest in offshore drillers has been high.
- Also: RIG +9.9%, SDRL +11.7%, ESV +13.2%, RDC +10.5%, DO +5.9%, ATW +20%, PACD +42.6%.
Tue, Mar. 1, 10:58 AM
- Moody’s cut the credit ratings of six offshore drillers late Monday, expecting the group to face an extremely challenging operating environment through at least 2018.
- Moody's cuts Ensco (ESV -7.2%) by five notches to B1 from Baa2, saying "earnings and liquidity will decline over time as the company is compelled to rationalize its fleet to adjust to reduced demand conditions."
- Falling four notches were Atwood Oceanics (ATW -8.8%), Noble Corp. (NE -2%) and Rowan (RDC -2.1%); the ratings agency expects ATW to breach a debt covenant in 2017 and says the company is at increased risk of having to restructure.
- Debt ratings falling three notches were Diamond Offshore (DO -0.5%) and Transocean (RIG -1.8%).
Thu, Feb. 25, 11:36 AM
- Ensco (ESV -10.8%) sinks after beating Q4 earnings expectations but cutting its dividend to $0.01/share from $0.15/share.
- ESV says it will scrap another five jackup rigs and a drillship, in addition to scrapping three jackups and three semisubmersible rigs currently classified as held for sale.
- Citi analysts say the results may not be as bad as they look, however, as ESV demonstrates its intentions to continue scrapping rigs that are otherwise stacked, driving further cost savings through the downturn, and the dividend cut helps shore up liquidity on an already healthy balance sheet.
Thu, Feb. 4, 11:48 AM
- Offshore drillers are on the move today as rising oil prices ease concerns about the difficult market that remains apparent in earnings releases from Noble Corp. (NE +1.1%), which reported last night, and Atwood Oceanics (ATW +17.2%), which reported earlier this week.
- NE reported below consensus Q4 earnings, but Evercore ISI's James West says the company continues to perform well operationally, with YTD unpaid fleet operational downtime edging up slightly to 5% from 4.6% in Q3.
- NE also announced plans to retire two rigs, the drillship Noble Discoverer and jackup Noble Charles Copeland, bringing its total rig attrition to four floaters and one jackup during the oil downturn.
- Jefferies says ATW has the most challenged balance sheet over the longer-term among its mid-cap coverage, but it is encouraged by ATW’s prospects to better position itself for the near-term with a covenant amendment, and maintains its Buy rating with a $9 price target (Q4 earnings).
- Related peers: RIG +3.6%, DO +3.8%, ESV +5.2%, RDC +4.3%, SDRL +2.5%.
Fri, Jan. 29, 5:39 PM
Fri, Jan. 29, 2:57 PM
- Offshore drillers such as Transocean (RIG +2.7%), Rowan (RDC +2.2%) and Noble Corp. (NE +1.6%) are "racing toward the EBITDA cliff," lacking a compelling investment purpose until there’s either confidence in crude price recovery to $65/bbl and/or the industry scraps a large share of middle aged assets, Citigroup analysts say.
- Citi foresees no improvement in dayrates until mid-2018, and even then does not anticipate a return to newbuild economics before 2020 given ample excess supply.
- The firm views Ensco (ESV +1.6%) as the premier operator but it too should struggle, thus meriting a downgrade to Neutral; Diamond Offshore (DO +3.6%) is upgraded to Neutral, as the remaining contract backlog appears at less risk vs. peers, the balance sheet is healthy, and earnings should remain positive assuming the backlog holds.
- Citi least favorite in the group is Sell-rated Transocean, saying that if RIG's fifth generation assets are completely displaced this cycle, then the enterprise value of the company is swallowed by the debt load; the firm rates ESV and NE at Neutral.
Fri, Jan. 8, 12:59 PM
- Noble Corp. (NE -2.7%) shares are not helped by an upgrade from analysts at Societe Generale, which raises its rating on the company to Buy from Hold and thinks NE is better positioned to weather the storm than Wall Street believes.
- The firm says revenue coverage from NE's deepwater fleet stands at 28% of its forecast 2018 revenue, vs. just 7% for peer Ensco (ESV -1.9%) and 0% for Rowan (RDC -2.7%), which "provides better cash flow visibility for Noble, which we view as critical in the early stages of a recovery given the high leverage ratios drillers currently carry."
- Any positive news could spark a significant short-term short covering rally in which NE is poised to outperform, the firm adds.
Thu, Jan. 7, 11:42 AM
- Brazil remains a major concern for Ensco (ESV -2.9%) after Petrobras (PBR -0.2%) quashed a rig contract with the company earlier this week, Cowen analysts say, noting that ESV has four other rigs working for PBR contracted for work in Brazil and scheduled roll off contract between October 2016 and July 2018 accounting for ~15% of ESV’s $6.6B backlog as of Sept. 30, 2015.
- While two of the rigs underwent significant equipment upgrades in recent years, funded by PBR and tailored to meet specific project requirements in Brazil, Cowen says this by no means offers protection against a contract cancellation.
- The firm see further downside to ESV shares if additional contracts are canceled, despite the sharp move lower in the last two days.
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
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