) reported record adjusted third quarter 2012 profit of $1.53 a
share, which surpassed the Zacks Consensus Estimate of $1.30.
Moreover, the quarterly earnings increased approximately 66% from
92 cents earned in the year-earlier quarter.
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The substantial jump in the quarterly profit was buoyed by
vigorous demand for oil rigs as well as new rigs joining the
Total revenue surged 22.7% to $1,123.6 million from last year's
revenue of $915.6 million. Total revenue also beat our
expectation of $1,101.0 million.
Most of the increment came from the overall higher utilization
and average day rates in deepwater and jackup segments.
Revenue jumped to $629.2 million in the reported quarter from the
year-earlier level of $440.4 million. The outperformance was
mainly aided by the start-up of ENSCO 8505 and a full quarter
contribution from ENSCO 8504, accompanied with the increase in
average day rate and utilization.
Rig utilization in this segment climbed to 90% from 74% in the
year-earlier quarter. Dayrate increased to $402,489 from the
year-earlier level of $391,129.
Revenue came in at $93.8 million in the reported quarter versus
$121.3 million in the third quarter of 2011 mainly because of
poor utilization as well as weak dayrate. Midwater registered a
dayrate of $221,420 (versus $239,379) while rig utilization was
74% (versus 89%).
Revenues from the Jackup fleet jumped to $380.9 million in the
third quarter from last year's $330.1 million, with its average
dayrate climbing 8.8% to $108,588 from $99,775. Overall jackup
utilization in this segment increased to 83% from 77% in the
Costs and Expenses
On the cost front, depreciation expense increased 6.6%, contract
drilling expenses climbed 9.5%, while general and administrative
expenses declined almost 2% on a year-over-year basis.
Balance Sheet and Capex
At the end of the quarter, Ensco had $159.8 million in cash.
Long-term debt (inclusive of current maturities) was $4,870.4
million, with a debt-to-capitalization ratio of 29.4% (compared
with 30.0% in the preceding period).
For the first three quarters of 2012, the company spent $1.6
billion in total, out of which 75% was expended in new
construction. Ensco remains committed to the enhancement of its
fleet. To this end it divested a barge rig in the quarter and a
jackup rig in early October.
We appreciate Ensco's financial discipline and organically
developed asset base. International deepwater market
opportunities are stepping up on new multi-year programs in West
Africa, South East Asia, Brazil and the Mediterranean. This
should eventually be accretive to the company's earnings.
We believe Ensco should be well positioned to improve its
earnings and revenue in the foreseeable future, as well as
benefit from oil-directed drilling. With the completion of the
construction phase of its six additional rigs − scheduled to be
delivered by the end of 2014 − Ensco is expected to achieve
Recently, leading contract drilling company,
) third quarter earnings dropped 15.1% from the year-earlier
profit level mainly due to extended downtime from rigs in the
Gulf of Mexico (GoM) and offshore Brazil.
Ensco has $9 billion of contract revenue backlog excluding bonus
opportunities. The company's solid backlog position provides it
with excellent cash flow visibility. Additionally, the company's
impressive balance sheet and sufficient liquidity help it to
address operational or corporate needs.
However, we believe that Ensco's current valuation adequately
reflects its growth profile. We would suggest waiting for a
better entry point before accumulating shares. Hence, we are
maintaining our Neutral recommendation on Ensco shares,
reflecting a balanced risk/reward profile.
The company retains a Zacks #3 Rank (short-term Hold rating).