Tuesday, October 27, 2009

Ensco International 3Q09

Ensco reported diluted eps from continuing operations of $1.05, compared to $2.06 last year. Earnings from discontinued operations was zero as opposed to a loss $.09 last year.

Revenues in third quarter 2009 declined to $425 million from $620 million a year ago. Average day rates increased year-to-year for the deepwater segment, but declined for the premium jackup fleet. Rig utilization in third quarter 2009 declined in all of the operating segments, compared to the prior year. Total third quarter 2009 operating expenses increased to $250 million from $247 million last year, primarily due to an increase in depreciation related to ENSCO 8500 commencing operations.

Ensco recently added an Ultra-deepwater semisubmersible rig to their fleet and they expect that their deepwater revenue will grow significantly in 2010 and 2011. Furthermore the company projects Jackup utlization rates to rise.


Deepwater segment revenues grew by 131% year-to-year to $63 million in third quarter 2009, mostly driven by commencement of ENSCO 8500 operations in early-June 2009. The average deepwater rig day rate increased to $387,000 from $362,000 a year ago, however, utilization declined to 64% from 87% in third quarter 2008.

Revenue from Jackup fleet totaled $363 million in third quarter 2009, down from $592 million a year ago. The decline was largely due to a decrease in utilization to 61% from 97% last year and an $8,000 decline in the average day rate to $148,000.

They still maintain a strong financial position with more than a billion dollars of cash and cash equivalents, $350 million in a revolving credit facility, LTD is $266 million and there contract backlog stands at $3.3 billion.

Some thoughts about 3Q09 and outlook going forward. If oil continues to maintain it current trend of increasing price or even stays around $80 dollars a barrel the company could see an increase in upstream spending. This will play an important role in the companies Jackup segment going forward. Currently there is an oversupply in the Jackup drilling market which is driving day and utilization rates down. This is something to be cautious about going forward given that the Jackup segment accounts for over 80% of the company revenue. Furthermore, I would be cautious of a pullback in oil prices given the current over supply. Currently the US oil inventories are 339.1 million, leaving stockpiles 9.4 percent above the five-year average for the period.

If anyone has any question please email me at James.Menicucci@gmail.com

James Menicucci

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