It is a total overreaction. Ensco lowered the price on its 8503 rig from $550K per day to $495-530K per day. Sure this isn't the best news, but this just puts the price in line with what Ensco is getting for the rest of the 8500 series of $480K/day to $530K/day. Cobalt was paying $550K/day but that was an anomaly. A similar price reduction was offered by Transocean and Wall Street is freaking out.
Ensco has many the best rigs out there at reasonable prices. Any price reductions will hit the competitors more than ESV. The Pemex deal announced this week will lead to huge growth in Gulf of Mexico. Pemex uses rigs from 17 different companies and has rated Ensco as its #1 driller in terms of performance and satisfaction. This a big source of growth for Ensco.
The new rigs that are coming online will add almost $3 per share to earnings by 2016. Look at the long term chart of ESV and you will see a nice uptrend.
This should help ESV in the years ahead:
Legislation that opens the door to oil and gas drilling in international Gulf waters has cleared Congress, just in time for Mexico’s energy reforms and a Jan. 17 deadline for the U.S. to sign off on the work.
The Gulf of Mexico measure was embedded in a two-year budget deal that cleared the Senate on Wednesday and passed the House last week. President Barack Obama is expected to sign the broad budget legislation soon. In doing so, he effectively will implement a long-stalled international treaty that was first signed in February 2012 and ratified by Mexico two months later. Under the pact, a moratorium on oil and gas drilling is set to end on Jan. 17, 2014.
The pact sets a framework for oil and gas development along the U.S.-Mexico maritime boundary in the Gulf, including the “Western Gap” area that some energy companies have been eager to explore. The treaty encourages commercial unionization agreements where resources straddling the boundary are divided up, effectively encouraging U.S. companies to partner with Mexico’s Pemex to produce oil and gas in the 1.5 million acre area.
Sentiment: Strong Buy
Right now ESV and DO are trading at the exact same price per share. However, I don't know why anyone would rather own DO over ESV. ESV has a much more modern fleet, best-in-class management, higher dividend, higher margins, lower cost structure, higher EPS/lower P/E, and a lower P/B. The only advantage that DO is has is a lower debt per share, but ESV's debt level is totally normal at 26% of cap.
Can anyone give any reason why you shouldn't sell DO and buy ESV?
One of third of the rig contracts expire next year and some are getting unattainable rates. People are worried about if 2014 earnings are realistic.....
I said that when I bought just under $15/share and book value was $16/share. "If it just goes back to NAV". Meanwhile, NAV, the dividend, and the share price all dropped over 20%......
at some point in the next few quarters. So annual dividend yield will go to 10%-10.%. Not terrible, but not worth the risk.
The quarter was great, but the comparisons will be that much tougher in 2014. We know that Medicare is going to lower the rate paid to Davita in 2014 and we know that with Obamacare, insurers are also forcing Davita to take a lower rate in 2014. So Wall Street is now starting to look at 2014, which will be a down year.
That said, the rate cuts may encourage a few smaller players to sell out to Davita and Davita is still the best positioned dialysis company, and the stock will do well in the long run if you don't mind holding at least a few years like Buffett.
Ackman was up big in October on an unnamed short....
As Occidental shines a light on its respective businesses, we see three drivers of $123/share NAV [net asset value] and $120/share target price, up from $110: (1) The company's Middle East free cash flow and resource base; (2) higher nonconventional activity in the Permian; and (3) higher activity in California. On top of this rising NAV, OXY should have $18 billion of cash once disposals are complete. Some of this will be used for debt repayment, reinvestment, and continuing cash needs, but a $10 billion buyback in first-half 2014 is in the realm of possibility (perhaps as a Dutch auction). As we have argued before, there is room for the shares of pure-play shale companies in the right basins to rise (even with tough competition for investor dollars). However, OXY could outperform mega-cap peers.
Our earnings increase is due to slightly higher volumes in second-half 2013 and to the ramp-up in Permian production volumes in 2014 and beyond. We are raising our 2013/2014/2015 EPS estimates to $7.07/$7.17/$7.62 (from $6.76/$7.11/$7.45).
Sentiment: Strong Buy
Hahaha! I work for one....and you don't have a clue about the challenges facing data center REITs right now.....you just keep holding on...DLR will one day give you a huge tax loss!!
You are the moron. They generate around $600M a year and use $400M for the dividend, leaving $200M for the buyback over the course of a year!!
They only have $50 million in cash, so either the buyback is BS or they will have to borrow. Jacobson has made billions and is no dummy.....
At the Ira Sohn Investment conference in May, Highfields' Chief Executive Jonathon Jacobson unveiled a short position against Digital Realty Trust saying its stock price could drop as low as $19 a share.
Jacobson, who rarely discusses short positions by name, said Digital Realty Trust, or DRT, would not only have to battle more with Google, Microsoft and Amazon, which all have their own data centers, but also face higher spending.
Jacobson said the dividend payments set at 78 cents a common share in March, June and September and kept there for a payout in December are unsustainably high.
"We have a lot of cash in the balance sheet. We had $3.8 at the end of the quarter plus the money from the sale of the midstream assets. We would expect to begin a repurchase of some shares shortly. As far as the scale goes, we’re not going to build cash. We’re not going to pay down the debt reduction to be proportional. So if we sell 10% of the assets maybe the debt will go down 10%. We only have about of $7 billion of debt.
So you should expect the bulk of the proceeds to go towards share repurchases and else we’re not going to build cash. "
Sentiment: Strong Buy
People are worried about how large the cuts in the rate paid by Medicare will be. Announcement coming next week (before earnings)