Ensco Rig Sale Fetches $33M - Analyst Blog

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U.K.-based drilling contractor Ensco plc ( ESV ) has received $33 million from the sale of its two cold-stacked jackup rigs.

The two rigs - ENSCO 69 and Wisconsin - both built in 1976 had a net book value of around $9 million. The pre-tax gain on the sale is about $24 million and is likely to be reflected in the operating results of first quarter 2014.

The divestiture of the rigs represents Ensco's continuous effort to upgrade its fleet by selling the older, less competent assets and reinvesting in advanced-technology rigs. The high demand for advanced rigs positions the company advantageously as it has one of the most capable fleet in the world.

The last few years saw an upgrade of several Ensco rigs. The upgrade project of ENSCO DS-1 is complete while ENSCO 5005, ENSCO 5006, ENSCO DS-2, ENSCO 6001 and ENSCO 6002, are undergoing modernization. Almost 55% of the jackups completed upgrade in 2012-2013. Fewer jackup upgrades are expected in 2014-2015. This is, however, a positive for the company as it will improve utilization and boost operating margins.

Over the last four years, Ensco has disposed 13 rigs and reinvested the funds into fleet modernization.  During the same period, Ensco took delivery of 12 high-performance rigs, namely five Samsung DP3 ultra-deepwater drillships, five ENSCO 8500 Series ultra-deepwater semisubmersibles and two ENSCO 120 Series ultra-premium harsh environment jackups. Moreover, Ensco has six rigs under construction - three ultra-deepwater drillships and three premium jackups - that support its commitment to standardization.

Ensco carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the oil and gas sector include NGL Energy Partners LP ( NGL ), Cheniere Energy Partners L.P. ( CQP ) and Cabot Oil & Gas Corporation ( COG ). All these stocks hold a Zacks Rank #1 (Strong Buy).



CABOT OIL & GAS (COG): Free Stock Analysis Report

CHENIERE ENERGY (CQP): Get Free Report

ENSCO PLC (ESV): Free Stock Analysis Report

NGL ENERGY PART (NGL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: COG , CQP , ESV , NGL

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