The Company
Ensco operates through three segments: Floaters, Jackups, and Other. The company owns and operates an offshore drilling rig fleet of 68 rigs, including 30 located in the Middle East, Africa, and the Asia Pacific, which comprise 4 rigs under construction; 21 situated in North and South America, including Brazil; and 17 located in Europe and the Mediterranean. It also offers management services on rigs owned by third-parties. The company serves government-owned and independent oil and gas companies. Ensco plc was founded in 1975 and is headquartered in London, the United Kingdom.
Recent Events
Ensco announced on July 11th that it has been awarded three drillship contracts offshore West Africa, representing an aggregate three years of contracted term and more than six additional years of options.
As a result of these new contracts, contract drilling expense for second quarter 2017 is expected to be approximately $282 million after adjusting for a $10 million settlement of a previously disclosed legal contingency, slightly higher than the prior guidance of $270 million to $280 million, or $292 million on an unadjusted basis. Anticipated capital expenditures are now expected to total approximately $350 million for the nine month period from second quarter 2017 through fourth quarter 2017. This capital expenditure estimate includes approximately $240 million for new rig construction, inclusive of approximately $29 million of capitalized interest, and approximately $110 million for rig enhancements and minor upgrades and improvements.
At the end of May, Ensco and Atwood Oceanics, Inc. (NYSE: ATW) jointly announced that they have entered into a definitive merger agreement under which Ensco will acquire Atwood in an all-stock transaction.
Under the terms of the merger agreement, Atwood shareholders will receive 1.60 shares of Ensco for each share of Atwood common stock for a total value of $10.72 per Atwood share based on Ensco’s closing share price of $6.70 on 26 May 2017. This represents a premium of approximately 33% to Atwood’s closing price on the same date. Upon close of the transaction, Ensco and Atwood shareholders will own approximately 69% and 31%, respectively, of the outstanding shares of Ensco plc. There are no financing conditions for this transaction.
Ensco expects to realize annual pre-tax expense synergies of approximately $65 million for full year 2019 and beyond. The combination is expected to be accretive on a discounted cash flow basis.
First Quarter Results
The company reported a loss of $0.09 per share for first quarter 2017 compared to earnings per share of $0.74 a year ago. Results from discontinued operations were zero cents per share in both first quarter 2017 and first quarter 2016.
Revenues were $471 million in first quarter 2017 compared to $814 million a year ago, primarily due to a decline in reported utilization to 58% from 65% in first quarter 2016 as well as previously announced sales of rigs that operated a year ago. The average day rate for the fleet declined to $156,000 in first quarter 2017 from $208,000 in first quarter 2016.
Contract drilling expense declined to $278 million in first quarter 2017 from $364 million a year ago as lower personnel expense and other activity-based costs due to fewer rig operating days more than offset rig reactivation and contract preparation costs.
Depreciation expense declined to $109 million from $113 million a year ago due to the extension of useful lives for certain contracted assets. General and administrative expense increased to $26 million in first quarter 2017 from $23 million a year ago due to higher accrued performance-based compensation, partially offset by lower personnel costs from organizational restructuring and other expense management actions.
Interest expense in first quarter 2017 was $59 million, net of $17 million of interest that was capitalized, compared to interest expense of $65 million in first quarter 2016, net of $12 million of interest that was capitalized. As noted above, first quarter 2017 other expense included a $6 million loss to complete a previously announced exchange offer for $650 million aggregate principal amount of senior notes.
The company will hold its second quarter 2017 earnings conference call at 10:00 a.m. CDT (11:00 a.m. EDT and 4:00 p.m. London) on Thursday, July 27, 2017. The earnings release will be issued before the New York Stock Exchange opens that morning.
Stock Influences and Risk Factors
The development and exploitation of alternative fuels;
Disruption to exploration and development activities due to hurricanes and other severe weather conditions and the risk thereof;
Improvement or stability in oil prices could improve the company’s performance;
Natural disasters or incidents resulting from operating hazards inherent in offshore drilling, such as oil spills, and;
The worldwide military or political environment, including uncertainty or instability resulting from an escalation or additional outbreak of armed hostilities or other crises in oil or natural gas producing areas of the Middle East or geographic areas in which we operate, or acts of terrorism.
Stock Performance
ESV shares closed on July 12, 2017 at $4.92, off 3.53% on traded volume of 20.9 million shares. The current RSI(14) is 35.29. At $4.92 ESV shares are trading below their 50-day and 200-day moving averages at $6.33 and $8.58 respectively.
Summary
Ensco is a profitable company trading below its 50 day and 200 day moving averages. More than one source list the company’s book value over $27.00 per share, as well as a cash position over $6.50 per share. These metrics indicate that Ensco (ESV) could be trading in value territory.
***Get our small cap profiles, special situation and watch alerts in real time. We are now offering our VIP – SMS/text alert service for free, simply text the word “Traders” to the phone number “25827” from your cell phone***
Disclaimer
Traders News Source is a wholly owned subsidiary of Traders News Source LLC, herein referred to as TNS LLC.
Traders News Source has not been compensated for this report by anyone and the opinions if any are that of the author Vikas Agrawal, CFA. Author’s Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I, wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in the article.
This web site, published by TNS LLC, and is an investment newsletter that is built on the premise of assisting individual investors in learning about investing. Our goal as publishers of financial information is to provide research and analysis of investments to our subscribers. TNS LLC does not give buy or sell recommendations. We do purchase distribution rights from analyst, financial writers and bloggers for a fee that may be licensed to issue price targets and recommendations. Furthermore, we encourage you to speak to a licensed professional prior to making an investment in any type of publicly traded security.
We do sell advertising to other companies including brokerage firms, web sites, publicly traded issuers, investor relations firms, and investment publications, among others. TNS LLC makes no warranty as to the policies of these organizations, and in no way endorses their offers, services, or the content of their advertisements.
When an advertiser is a publicly traded company or a third party acting on behalf of a public company, we fully disclose all compensation in the email advertisement. Such disclosure is included in a disclosure statement in each of the advertisements sent via email.
17B Disclosure
Our reports/releases are a commercial advertisement and are for general information purposes ONLY. We are engaged in the business of marketing and advertising companies for monetary compensation. Never invest in any stock featured on our site or emails unless you can afford to lose your entire investment. The disclaimer is to be read and fully understood before using our services, joining our site or our email/blog list as well as any social networking platforms we may use.
PLEASE NOTE WELL: TNS LLC and its employees are not a Registered Investment Advisor, Broker Dealer or a member of any association for other research providers in any jurisdiction whatsoever.
Release of Liability: Through use of this website viewing or using you agree to hold TNS LLC, its operator’s owners and employees harmless and to completely release them from any and all liability due to any and all loss (monetary or otherwise), damage (monetary or otherwise), or injury (monetary or otherwise) that you may incur. The information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of the available data. TNS LLC encourages readers and investors to supplement the information in these reports with independent research and other professional advice. All information on featured companies is provided by the companies profiled, or is available from public sources and TNS LLC makes no representations, warranties or guarantees as to the accuracy or completeness of the disclosure by the profiled companies. None of the materials or advertisements herein constitute offers or solicitations to purchase or sell securities of the companies profiled herein and any decision to invest in any such company or other financial decisions should not be made based upon the information provide herein. Instead TNS LLC strongly urges you conduct a complete and independent investigation of the respective companies and consideration of all pertinent risks. Readers are advised to review SEC periodic reports: Forms 10-Q, 10K, Form 8-K, insider reports, Forms 3, 4, 5 Schedule 13D.
TNS LLC is compliant with the Can Spam Act of 2003. TNS LLC does not offer such advice or analysis, and TNS LLC further urges you to consult your own independent tax, business, financial and investment advisors. Investing in micro-cap and growth securities is highly speculative and carries an extremely high degree of risk. It is possible that an investor’s investment may be lost or impaired due to the speculative nature of the companies profiled.
The Private Securities Litigation Reform Act of 1995 provides investors a ‘safe harbor’ in regard to forward-looking statements. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance are not statements of historical fact may be “forward looking statements”. Forward looking statements are based on expectations, estimates, and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Forward looking statements in this action may be identified through use of words such as “projects”, “foresee”, “expects”, “will”, “anticipates”, “estimates”, “believes”, “understands”, or that by statements indicating certain actions & quote; “may”, “could”, or “might” occur.
Understand there is no guarantee past performance will be indicative of future results. In preparing this publication, TNS LLC has relied upon information supplied by its customers, publicly available information and press releases which it believes to be reliable; however, such reliability cannot be guaranteed. Investors should not rely on the information contained in this website. Rather, investors should use the information contained in this website as a starting point for doing additional independent research on the featured companies. The advertisements in this website are believed to be reliable, however, TNS LLC and its owners, affiliates, subsidiaries, officers, directors, representatives and agents disclaim any liability as to the completeness or accuracy of the information contained in any advertisement and for any omissions of materials facts from such advertisement. TNS LLC is not responsible for any claims made by the companies advertised herein, nor is TNS LLC responsible for any other promotional firm, its program or its structure.
