) registered a substantial growth in first quarter 2012 profit,
buoyed by its $7.3 billion purchase of Pride International last
The company's quarterly adjusted profit was $1.16 a share, was
in line with the Zacks Consensus Estimate and increased from 51
cents in the year-earlier period.
Total revenue increased 184% to $1,026.4 million from last
year's revenue of $361.5 million. However, total revenue fell short
of our expectation of $1,058.0 million.
Most of the increment came from the Pride International
acquisition and new ultra-deepwater rigs in the active fleet.
Overall higher utilization and average day rates in all segments
also contributed to the revenue increase.
Revenue jumped to $548.6 million in the reported quarter from the
year-earlier level of $98.2 million. The outperformance was mainly
related to the Pride International acquisition as well as the
addition of two ultra-deepwater semisubmersible rigs (ENSCO 8503
and ENSCO 8504). Additionally, ENSCO 7500, which was undergoing an
enhancement project in a shipyard, also commenced a multi-year pact
in Brazil in late December 2011.
Rig utilization in this segment climbed to 87% from 77% in the
year-earlier quarter. Dayrate increased to $382,618 from the
year-earlier level of $304,220.
Revenue came in at $91.1 million in the reported quarter mainly
from the acquisition, as prior to this Ensco had no midwater rigs.
Midwater registered a dayrate of $227,319 and rig utilization of
Revenues from the Jackup fleet jumped to $365.1 million in the
first quarter from last year's $263.3 million, with its average
dayrate showing an increase of 2.8% to $99,449 from $96,766.
Overall jackup utilization in this segment jumped to 84% from 72%
in the year-earlier period.
Costs and Expenses
On the cost front, depreciation expense increased more than
134%, contract drilling expenses climbed nearly 171.5% and general
and administrative expenses increased almost 27% on a
Balance Sheet and Dividend
At the end of the quarter, Ensco had $208.9 million in cash.
Long-term debt (inclusive of current maturities) was at $4,910.1
million, with a debt-to-capitalization ratio of 30.7% (compared to
31.1% in the preceding period).
The company boosted its quarterly cash dividend by 7% to $0.375
per share, or $1.50 per share annually, aided by a strong financial
position and an encouraging outlook for future earnings growth
fueled by mounting utilization and day rates, associated with
organic growth from newbuild rigs.
We appreciate Ensco's financial discipline, attractive dividend
yield and organically developed asset base. International deepwater
market opportunities are stepping up on new multi-year programs in
West Africa, SE Asia, Brazil and the Mediterranean. This should
eventually be accretive to the company's earnings.
Moreover, we foresee substantial earnings visibility for Ensco
following the merger with Pride International. The combined company
is reaping results on the back of rising average day rates as well
as higher utilization, which are considered long-term growth
Management also pointed out that offshore drilling is showing
strong customer demand. The company recently contracted two
newbuild rigs -- ENSCO DS-6 and ENSCO 8506. Of these, ENSCO DS-6
was contracted by
) under a five-year agreement for approximately $522,000 a day,
plus cost adjustment, with two one-year extension options.
For Ensco, the deal will not only generate $1 billion revenue
backlog but will enhance its active ultra-deepwater fleet size to
10 rigs. This also gives Ensco the latest ultra-deepwater fleet
worldwide with an average age of only two years.
Semisubmersible ENSCO 8506 was contracted with
Anadarko Petroleum Corporation
) for an initial two-and-one-half year term in the U.S. Gulf of
Ensco has more than $10 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 helps
it to address operational or corporate needs.
However, we believe that Ensco's current valuation adequately
reflects its growth profile, and would rather wait for a better
entry point before accumulating shares. Hence, we are maintaining
our Neutral recommendation on Ensco shares, reflecting a balanced
The company retains a Zacks #3 Rank (short-term Hold
ANADARKO PETROL (APC): Free Stock Analysis
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ENSCO PLC (ESV): Free Stock Analysis Report
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