Oil and natural gas driller, Ensco plc (ESV) remains steadfast in its focus on enhancing shareholder value. The company recently announced the authorization of a $2 billion shares repurchase program of the Class A ordinary shares and a regular dividend payment.
This authorization replaces a previous share purchase agreement that expired with the last year’s conversion of Ensco's American Depository Shares to Class A ordinary shares. Alongside, the company announced a regular quarterly dividend payment of 50 cents per Class A ordinary share. The dividend is payable on Jun 21, 2013 to holders of shares as of Jun 10.
Going forward, Ensco’s impressive balance sheet and sufficient liquidity will likely help it to address any operational or corporate need. With a current dividend yield of 3.2%, we believe Ensco remains well positioned to comfortably increase its dividend in the future amid a manageable debt position.
At the end of the first quarter, Ensco had $561.8 million in cash. Long-term debt (inclusive of current maturities) was $4,830.8 million, with a debt-to-capitalization ratio of 28.6% (compared with 29.0% in the preceding quarter).
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 will continue to see tightness in the jackup markets as well around the world through 2013. The jackup market is experiencing a series of attractive awards and has possibly a stronger outlook than even the floater market. Almost every region is anticipated to have weak rig availability this year and in the next.
With the completion of the construction phase of its 6 additional rigs − scheduled to be delivered by the end of 2014 − Ensco is expected to achieve significant growth. Ensco has $12 billion contract revenue backlog, excluding bonus opportunities. The company’s solid backlog position provides it with excellent cash flow visibility.
The company retains a Zacks Rank #3 (short-term Hold rating). However, there are certain Zacks Ranked #1 stocks – Ultrapar Holdings Inc. (UGP), Enerplus Corporation (ERF) and EPL Oil & Gas, Inc. (EPL) – that appear more rewarding in the short term.
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