Ensco plc (ESV): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report
Summary:
We are downgrading our recommendation on Ensco to Underperform from Neutral. The bearish crude price outlook continues to weigh on the company as higher rig availability drags dayrate expectations lower for Ensco's 8500 series, five of which will be available in 2015. Additionally, the outlook for future floater demand looks dimmer than ever with depressed oil prices during the exploration and production budget review period. We believe that Ensco's additional downtime in 2015 is a negative. As the current valuation adequately reflects its growth profile, we would rather wait for a better entry point before accumulating shares.
Overview:
The U.K.-based Ensco Plc (ESV) is a leading supplier of offshore contract drilling services to the oil and gas industry. Effective Dec 23, 2009, Ensco has shifted its corporate headquarters from Delaware, U.S. to London, U.K. As of Dec 31, 2013, the company has an offshore drilling fleet of 76 rigs, consisting of 10 deepwater drillships, 19 semisubmersible rigs and 47 independent leg jackups.
In May 2011, Ensco completed the acquisition of Pride International Inc. in a cash and stock deal valued at $7.3 billion. This move made Ensco the world's second-largest offshore oil and gas driller after Transocean Inc. and widened its exposure to the fast growing markets of Brazil and West Africa.
Ensco remains focused on its long-established strategy of high-grading and expanding the size of its fleet. In response to customer demand for its differentiated rig technology and contract drilling services in the Middle East, Ensco recently entered into an agreement with Lamprell to construct two premium jackup rigs (ENSCO 140 and ENSCO 141). These rigs are scheduled for delivery during mid-2016. Currently, the company has eight rigs under construction, including three ultra-deepwater drillships, three premium jackup rigs and two ultra-premium harsh environment jackup rigs. During 2014, Ensco expects to take delivery of two ultra-deepwater drillships (ENSCO DS-8 and DS-9) and an ultra-premium harsh environment jackup rig (ENSCO 122).
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