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Ensco: Q4 2017 Results Analysis

Mar. 06, 2018 7:52 AM ETValaris Limited (VAL)NE12 Comments


  • Ensco's Q4 2017 results were quite disappointing, particularly when compared to those of its peers.
  • The company completed the Atwood acquisition in October, which had the result of growing the company's fleet and should enhance its money making capability in future quarters.
  • Revenues declined while expenses increased.
  • Some of the company's profitability decline was due to non-recurring and non-cash items, however free cash flow also declined year-over-year.
  • The industry has been recovering but Ensco has not benefited to the same degree as other drillers and needs to correct this situation.

On Monday, February 26, 2018, offshore drilling giant Ensco plc (ESV) announced its fourth quarter 2017 results. These results were rather disappointing as the company saw its net profit last year swing to a net loss in the most recent quarter. This is particularly true since it comes at a time when other large drilling firms such as Noble (NE) have seen their results improve year-over-year. However, it was certainly not all bad news and there are certainly things to like here, notably the fleet expansion that the company saw via the Atwood Oceanics acquisition.

As my long-time readers are no doubt already well aware, it is my usual practice to share the highlights from a company's earnings results before delving into an analysis of those results. This is because these highlights serve to provide background for the remainder of the article and provide a framework for the resultant analysis. Therefore, here are the highlights from Ensco's fourth quarter 2017 results:

  • Ensco had total revenue of $454 million in the fourth quarter of 2017. This compares unfavorably to the $505 million that the company brought in during the prior year quarter.
  • The company incurred total contract drilling expenses of $334 million in the quarter. In the prior year quarter, the company had $289 million of contract drilling expenses so these increased by 15.6%.
  • The company's floater fleet had total operational utilization of 97% and its jackup fleet achieved operational utilization of 98%. Both of these figures are in line with the year-ago numbers.
  • Ensco completed the acquisition of Atwood Oceanics.
  • The company reported a net loss of $207.1 million in the fourth quarter of 2017, which works out to $0.49 per basic and diluted share. This compares unfavorably to the $39 million in net income that the company had in the fourth quarter of 2016.

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