Oil and natural gas driller, Ensco plc (ESV) has priced an underwritten offering of $1.25 billion principal amount of senior unsecured notes. Of this, $625 million of notes due 2024 have a coupon rate of 4.50% and are priced at 99.864%. The remaining $625 million of notes due 2044 with a coupon rate of 5.75% senior unsecured notes are priced at 99.560%.
The company plans to use the net proceeds from the offering for general corporate purposes, which may include payments with respect to its seven rigs under construction and other capital expenditures. The expected settlement date for the offering is Sep 29.
At the end of second-quarter 2014, Ensco had $145 million in cash. Long-term debt was $4,679.1 million, with a debt-to-capitalization ratio of 29% (compared with 26.9% in the preceding quarter).
With the completion of the construction phase of seven additional rigs, Ensco is expected to achieve significant growth. During 2013, the company 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 to address operational and corporate needs.
Ensco − a leading supplier of offshore contract drilling services to the oil and gas industry − remains well positioned to improve its earnings and revenues in the foreseeable future, as well as benefit from a recovery in oil-directed drilling.
Ensco currently carries a Zacks Rank #3 (Hold). Investors interested in the oil and gas sector could consider better-ranked stocks like Patterson-UTI Energy Inc. (PTEN), Pioneer Energy Services Corp. (PES) and Ocean Rig UDW Inc. (ORIG). Patterson-UTI and Pioneer Energy sport a Zacks Rank #1 (Strong Buy), while Ocean Rig holds a Zacks Rank #2 (Buy).
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