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Ensco's Drillship ENSCO DS-9 Receives Termination Notice - Analyst Blog

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Ensco plcESV received a notice of termination for ENSCO DS-9 drillship contract from ConocoPhillips COP . The company's share price has been trending downward post-announcement and has decreased by 6.4%.

The drillship contract, which was for three years, has been revoked by ConocoPhillips. Per the terms of the contract, ConocoPhillips is bound to compensate Ensco with a monthly termination fee for the coming two years. The termination fee is equivalent to the operating dayrate of about $550,000. The fee may be partly financed provided Ensco re-contracts the rig within the next two years or eases certain costs during the period the rig is idle and without a contract.

Ensco will also receive reimbursement for certain costs that it incurs due to the termination of the contract by ConocoPhillips. In view of these terms, Ensco's financial results for 2015 and 2016 are not likely to be substantially affected by this termination.

Ensco DS-9 was delivered recently and was slated to begin its first drilling contract for ConocoPhillips in the fourth quarter of 2015.

Ensco is a leading supplier of offshore contract drilling services to the oil and gas industry. The company has an offshore drilling fleet of 70 rigs, which consists of 10 drillships, 18 semi-submersible rigs and 42 jackup rigs. Of these seven rigs are currently under construction.

The company caters to a varied range of customers - the leading national and international oil companies as well as many independent operators. Ensco is among the most geographically diverse offshore drilling companies.

The company currently boasts operations and drilling contracts spanning approximately 20 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, Mexico, Brazil, the Mediterranean, the North Sea, the Middle East, West Africa, Australia and Southeast Asia.

Currently, Ensco carries a Zacks Rank #5 (Strong Sell). Better-ranked stocks from the same space include Enbridge Energy Partners L.P. EEP and EQT Midstream Partners L.P. EQM . All these stocks sport a Zacks Rank #1 (Strong Buy).

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CONOCOPHILLIPS (COP): Free Stock Analysis Report

ENSCO PLC (ESV): 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 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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