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EnscoRowan (ESV) to be Renamed Valaris Effective Jul 31

Zacks Equity Research

Ensco Rowan plc ESV recently announced that the company is planning to change its name to Valaris plc. Post the change of name, which will be effective Jul 31, 2019, the stock will trade under the new ticker “VAL” in the NYSE. The company came to its existing form following the completion of the merger of Rowan and Ensco in April 2019.

Notably, for full-year 2019 and beyond, the merger is expected to result in annual pre-tax expense synergies of about $165 million. Based on the anticipated annual savings, the union is likely to be accretive on a discounted cash flow basis. The synergies from the deal are expected to create around $1.1 billion of capitalized value. This change of name, signifying the creation of a new identity, seems appropriate at the moment.

Per the company, the new name was inspired by the Latin root meaning strength, courage and signifying something of value. According to the offshore contract drilling services supplier, the new name signifies its intention to be the industry leader.

The name change came at a time when demand for offshore contract drillers are under pressure. Explorers and producers kick-started 2019 with a conservative capital budget as they witnessed massive crude downturn during the fourth quarter of 2018. Moreover, explorers are more bothered about bottom-line growth — being forced by investors following years of dull returns — than oil and gas production. Conservative spending by upstream companies can further lead to lower rate of reserve replacement. This, in turn, will result in lower work opportunities for EnscoRowan.

The situation is further worsened by the ongoing political tensions related to trade between the United States and China. Notably, WTI Crude, the American benchmark, is currently struggling to cross the $60 per barrel mark. Tepid demand outlook for oil and gas is expected to affect the demand for offshore contract drillers to a great extent in the coming days. This negative outlook has been reflected in the company’s price performance. The stock, which currently carries a Zacks Rank #3 (Hold), plunged 39.7% year to date compared with the 4.4% decline of the industry it belongs to.

Stocks to Consider

Some better-ranked players in the energy space include Approach Resources Inc. AREX, Noble Corporation NE and Cheniere Energy, Inc. LNG. While Approach Resources sports a Zacks Rank #1 (Strong Buy), Noble and Cheniere have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.  

Approach Resources beat earnings estimates thrice in the trailing four quarters, with positive surprise of 12.7%.

Noble’s 2019 earnings per share are expected to grow 6.5% year over year.

Cheniere’s 2019 earnings per share are expected to grow 8.4% year over year.

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