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Ensco (ESV) Q3 Loss Narrower Than Expected, Revenues Beat

Zacks Equity Research
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Oil and natural gas driller, Ensco plc ESV reported third-quarter 2016 loss of 5 cents per share (excluding one-time items) on a diluted basis, which was narrower than the Zacks Consensus Estimate of a loss of 16 cents. The figure, however, deteriorated from earnings of 21 cents recorded in the year-earlier quarter mainly due to lower day rates from floaters and jackups, which was partially offset by higher jackup utilization.

Total revenues declined to $460.2 million from $548.2 million in the year-ago quarter. The top line beat the Zacks Consensus Estimate of $454 million.

Segmental Performance

Floaters: Revenues from floaters plunged 8.6% to $291.9 million in the third quarter from $319.3 million a year ago. The decline primarily stemmed from lower utilization of several floaters, which led to a fall in the average day rate to $334,218 from $353,187 a year ago. Reported utilization was 46% as against 48% in the prior-year quarter. Floater contract drilling expenses declined 9.5% to $139.1 million from $153.7 million in third-quarter 2016.

Jackups: Revenues from this segment decreased 28.4% to $153.1 million from $213.8 million a year ago. The downside mainly stemmed from fewer rig operating days for several jackups and a decline in the average day rate to $88,272 from $109,379. Reported utilization increased to 60% from 55% a year ago. Contract drilling expenses decreased 0.2% year over year to $132.9 million in the third quarter. The decline was partly due to higher contract preparation costs.

Other: Revenues increased 1% to $15.2 million from $15.1 million in third-quarter 2016. Contract drilling expenses increased to $13.8 million from $11.2 million a year ago.

Costs and Expenses

Depreciation expenses were $108.2 million compared with $109.4 million in third-quarter 2016. General and administrative expenses increased to $30.4 million from $25.3 million last year.

Balance Sheet and Capex

At the end of the third quarter, Ensco had $724.4 million in cash and cash equivalents. Long-term debt was $4,747.7 million, with debt-to-capitalization ratio of 36.8% compared with 36.9% in the year-ago quarter.

Q3 Price Performance

The pricing chart reveals that the company’s shares have outperformed the industry in the last three months. During this period, the company’s shares have gained 15.7% as compared with the industry’s rally of 8%.

Zacks Rank & Key Picks

Currently, Ensco carries a Zacks Rank #3 (Hold). A few better-ranked players in the energy sector include Canadian Natural Resources Limited CNQ, Braskem SA BAK and Noble Midstream Partners LP NBLX. All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Canadian Natural Resources, based in Austin, TX, is an independent oil and gas company. The company delivered earnings surprise of 22.22% in the preceding quarter.

The largest petrochemical operator in Latin America, Braskem, delivered an average positive earnings surprise of 88.17% in the last four quarters.

Noble Midstream Partners, headquartered in Houston, TX, has diversified energy infrastructure properties. The company delivered positive earnings surprise of 30.67% in the preceding quarter.

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Canadian Natural Resources Limited (CNQ) : Free Stock Analysis Report
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