Ensco (ESV) Defers Delivery of Newbuild Drillship by 2 Years

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According to recent reports, Ensco plcESV has inked an agreement with Samsung Heavy Industries to yet again defer the delivery of a newbuild drillship by two years.

Per Ensco, a payment of $75 million of the $309 million unpaid balance of the purchase price for the drillship has been delayed to Mar 31, 2019. An amount of $234 million is likely to be paid in Jan 2017.

Originally, the ultra-deepwater drillship Ensco DS-10 was ordered in 2013 and was expected to be delivered in the third quarter of 2015. However, but delivery and payment was deferred to the first quarter of 2017.

Given the prolonged weakness in crude prices, the top energy companies have resorted to spending cuts (particularly on costly upstream projects) due to lower profit margins. This, in turn, means less work for drilling contractors like Ensco. This is also reflected in its price chart. Over the last one year, the stock gained 25.2% compared with Zacks categorized Oil & Gas-Drilling industry, which increased by 76.5%.

With large, multinational energy firms looking to reign in their skyrocketing capital expenses, the drilling space is witnessing intense competition, as multiple firms chase a single contract. This excess capacity, in turn, could lead to further lowering of utilization or dayrates.

Nonetheless, Ensco has been selling/stacking older rigs as well as investing in high-specification rigs in order to improve the quality of its fleet.

Ensco is a leading supplier of offshore contract drilling services to the oil and gas industry. The company caters to a varied range of customers. Its clientele includes many of the leading national and international oil companies as well as many independent operators.

Ensco is among the most geographically diverse offshore drilling companies, with current operations and drilling contracts spanning approximately 15 countries on six continents in nearly every major offshore basin around the world. The markets in which the company operates include the U.S. Gulf of Mexico (GoM), Mexico, Brazil, the Mediterranean, the North Sea, the Middle East, West Africa, Australia and Southeast Asia.

Investors may also consider other stocks from the energy sector like Braskem S.A. BAK , Suncor Energy, Inc. SU and Noble Midstream Partners L.P. NBLX .

Braskem posted a positive earnings surprise of 107.79% in the last reported quarter.

Suncor Energy posted a positive earnings surprise of 300.00% in the preceding quarter. It had an average earnings surprise of 40.55% in the four trailing quarters.

Noble Midstream Partners posted a negative earnings surprise of 77.78% in the last reported quarter.

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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 Nasdaq, Inc.

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

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