Oil and natural gas driller Ensco plc (ESV) reported diluted first-quarter 2014 earnings of $1.31 a share (excluding onetime items), which surpassed the Zacks Consensus Estimate of $1.21. Significant improvement in Floaters’ average dayrates aided the results.
However, the earnings decreased 3.7% from $1.36 earned in the year-earlier quarter, owing to reduced rig utilization along with increased contract drilling expenses.
Total revenue grew 3.2% to $1,187.0 million from $1,149.9 million generated in the year-ago quarter. On the flip side, total revenue missed the Zacks Consensus Estimate of $1,193.0 million.
Segment Performance
Floaters: Revenues rose 3.0% to $740.5 million in the reported quarter from the year-earlier level of $719.2 million. The improvement was mainly backed by the commencement of initial contract for ENSCO DS-7.
Rig utilization in this segment dropped to 68% from 83% in the year-earlier quarter. However, dayrate increased to $446,801 from $379,801 a year ago.
Jackups: Revenues at the Jackup fleet jumped to $429.9 million from $410.5 million in the prior-year quarter. The average dayrate improved 11.7% to $130,934 from $117,268. Overall jackup utilization fell to 84% from 88% in the year-earlier quarter.
Other: Revenues came in at $16.6 million, down 18.0% from $20.2 million in the first quarter of 2013.
Costs and Expenses
Depreciation expenses grew 7.4%, contract drilling expenses rose 7.8%, while general and administrative expenses increased 0.8% on a year-over-year basis.
Balance Sheet and Capex
At the end of the first quarter of 2014, Ensco had $122.5 million in cash. Long-term debt stood at $4,703.7 million, with a debt-to-capitalization ratio of 26.9% (compared with 27.0% in the preceding quarter).
With the completion of the construction phase of six additional rigs − scheduled to be delivered by the end of 2014 − Ensco is expected to achieve significant growth. During 2013, Ensco received the delivery of three ultra-deepwater drillships and the ultra-premium jackup ENSCO 120. Ensco has a $10 billion contract revenue backlog, excluding bonus opportunities. The company’s solid backlog position provides it with excellent cash flow visibility. Additionally, an impressive balance sheet and sufficient liquidity will help it address operational and corporate needs.
Zacks Rank
Ensco carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S equity market over the next one to three months.
Meanwhile, one can look at better-ranked players in the energy sector like Boardwalk Pipeline Partners LP (BWP), Matrix Service Company (MTRX) and Helmerich & Payne Inc. (HP). All the stocks sport a Zacks Rank #1 (Strong Buy).
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