Friday, November 21, 2008

Ensco 19.9% loss-James Fowler

Yesterday ESV fell roughly 20%. The main reason is that oil traded down to a 3 year low, below $50 a barrel. In the current market environment, energy names seem to move with the price of oil and natural gas. I still believe that oil is not going to stay this low for long and as oil begins to trade back up, so will energy names. ESV still has a tremendous amount of backlog and continues to win new contracts. Just recently, ESV won two three-year contracts in the GOM for $367M, at around $167K a day per contract.

I went into the model and did a scenario analysis, and assumed revenues would be flat from 3Q08 through 4Q09, while keeping expenses the same and I still come up with a price target of $69. Nothing has fundamentally changed with ESV and feel it is still a definite hold.

No comments: