Oil and natural gas driller
) reported impressive first quarter 2013 results on the back of
increased utilization, rising customer demand as well as new rigs
joining the fleet.
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Diluted first quarter earnings were $1.36 a share, which
surpassed the Zacks Consensus Estimate of $1.32. Earnings
increased approximately 13.3% from $1.20 earned in the
Total revenue surged 12.7% to $1,149.9 million from $1,020.6
million generated last year. Total revenue also beat our
expectation of $1,147.0 million.
Ensco attributed the deployment of new rigs over the past year
that increased utilization and average dayrate for the growth in
During the quarter, ENSCO 8506 and ENSCO DS-6 (the fourth Samsung
DP3 drillship) commenced multi-year programs for repeat customers
emphasizing the benefits provided by fleet standardization.
Moreover, two of its newbuild rigs - ultra-deepwater drillship
ENSCO DS-7 and premium jackup ENSCO 121 - were also contracted.
Ensco ordered a premium jackup - ENSCO 110 - for delivery in
early 2015, in view of increased customer demand.
First Quarter Segment Performance
In fourth quarter 2012, Ensco changed its reporting segments. The
Floaters segment now consists of all its drillships as well as
semisubmersibles. However, the Jackups and Other segments were
Floaters: Revenues jumped 12.5% to $719.2 million in the reported
quarter from the year-earlier level of $639.3 million. The
outperformance was mainly backed by the addition of three
Rig utilization in this segment dropped to 83% from 85% in the
year-earlier quarter. Dayrate increased to $379,801 from the
year-earlier level of $349,942.
Jackups: Revenues from the Jackup fleet jumped to $410.5 million
from $359.8 million in the prior-year quarter, with its average
dayrate climbing 17.7% to $117,268 from $99,618. However, overall
jackup utilization decreased to 88% from 91% in the year-earlier
Other: Revenues came in at $20.2 million, down 6.0% from $21.5
million in the first quarter of 2012.
Costs and Expenses
On the cost front, depreciation expense increased 9.6%, contract
drilling expenses rose 11.7%, while general and administrative
expenses dropped 1% on a year-over-year basis in the quarter.
Balance Sheet and Capex
At the end of the first quarter, Ensco had $561.8 million in
cash. Long-term debt (inclusive of current maturities) was
$4,830.8 million, with a debt-to-capitalization ratio of 28.6%
(compared with 29.0% in the preceding quarter).
With the completion of the construction phase of its 6 additional
rigs − scheduled to be delivered by the end of 2014 − Ensco is
expected to achieve significant growth. Ensco has $12 billion
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
The company retains a Zacks Rank #3 (short-term Hold rating).
However, there are certain Zacks Ranked #1 stocks -
Harvest Natural Resources, Inc.
Lehigh Gas Partners LP
EPL Oil & Gas, Inc.
) - that appear more rewarding in the short term.