First, the basics. For the quarter, ENSCO's average dayrate
across 43 jackup rigs clocked in at $168,200, which is 18% higher than
last year, and 5% above last quarter's figure. However, revenue dropped
10% and 17%, respectively, as utilization sagged from 95% in each of
those past periods to 80% this time around.
This drilling drop-off would really torpedo 2009 results, were it
not for ENSCO's three lucrative deepwater contracts kicking in this
year. While the jittery jackup situation for ENSCO and competitors like
Noble (NYSE: NE) and Rowan Companies
(NYSE: RDC) can pretty much be summed up as "Duh, lower oil prices,"
management's discussion of regional trends helps to flesh out that
abrupt assessment.
It's pretty much the same old story in two spots: the North Sea,
something of a closed market on account of high regulatory hurdles,
remains pretty well balanced, while the U.S. Gulf of Mexico, which was
oversupplied even before the crash in commodities, continues to shed
rigs.
Most striking was management's estimate that later this year, only
14 premium jackups will remain in the U.S. Gulf (with half bearing the
ENSCO emblem). There were 22 in early February. That skedaddle ought to
at least speed up long-sought stabilization in this market.
A more dynamic situation is to be found in the Middle East and Asia,
regions that were driving a lot of incremental jackup demand over the
past few years. Saudi Aramco 's early release of some
rigs is pretty symbolic of the sea change. Competition among
contractors is now fierce, and both utilization and rates are dropping
hard.
For all this turmoil, ENSCO investors can rest pretty easy for two
reasons. One, the firm's revenue profile is shifting toward one-third
deepwater work by 2013, as ENSCO's state-of-the-art semisubmersible
fleet leapfrogs Diamond Offshore 's (NYSE: DO) position and grows to rival that of Transocean
(NYSE: RIG). Two, the balance sheet is a dream, with hardly any debt to
speak of. If you're an ENSCO owner, I see no reason to jump overboard.
© 2009 UCLICK, L.L.C.
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