Seekingalpha.com
0
All posts from Seekingalpha.com
Seekingalpha.com in Seekingalpha.com,

Ensco Plc: Commentary On The 2nd-Quarter Results And July Fleet Status

  • Ensco PLC, released its second-quarter 2015 results on July 29, 2015. Revenues for Q2'15 were $1.06 billion with an EPS of $1.18. Decent quarter overall.
  • Ensco Plc, is doing a good job at controlling costs during this very challenging market that may continue into 2015 with a potential tendering improvement in mid-2016 .
  • ESV has a solid balance sheet and this downturn should be seen as an opportunity to buy and accumulate.

Ensco Plc (NYSE:ESV)

This article is an update of my preceding article on ESV on May 3, 2015 about the Q1'15 results.

[I] Fleet Status as of July 16, 2015. (Updated on July 17, 2015.)

1. Drillships

#Name

Year

Built

Water Depth Max

K feet

Contract

End

Day rate

K $

LocationInfo
1

Ensco DS-1

19996/10Cold stacking preparation

Angola

2

Ensco DS-3

201010/126/16489

[BP]

U.S. GOM

3

Ensco DS-4

201010/12

8/15

Early termination

Lump sum payment by BP

[BP]

US GOM

4

Ensco DS-5

201110/127/16435

[Petrobras]

US GOM

Eligible for bonus 17%

Plus Options

5

Ensco DS-6201110/122/18

548

+102 for upgrade/amort.

380 (From 9/15 to ?)

[BP]

Angola

(Customer has delivered notice to place rig on special
standby rate of mid 380s beginning late Sep. 15.)

2x1Y option

6Ensco DS-7201310/12

11/16

585k +28

[Total]

Angola

7Ensco DS-8201410/12

under constr.

Q4'15-Q4'20 from $610k to $655k +15 (+ $26 million in mob.)

[Total]

Angola

1 Y option
8Ensco DS-9201510/12

Q4 '15-Q4 '18 552 +30(mob.)

Contract termination for convenience

Available

[ConocoPhillips]

Thailand

2-year paid.

9Ensco DS-10201510/12

under constr.

deferred by 18 months

Q3 '15 Q1' 17

Available

--

2. Semi-Submersibles

#Name

Year

Built

Upg.

Water

Depth

Max

K feet

Contract

End

Day rate

K $

LocationInfo.
1Ensco 850020088.5/1011/15312

[Anadarko

/ENI]

U.S. GOM

2Ensco 850120088.5/10

Cold-stacked

3Ensco 850220108.5/10

Cold-stacked

4Ensco 850320108.5/10

8/15

8/15-10/15

10/15-7/17

352

-

352

[Stone Energy]

-

U.S. GOM

Upgrade and insp. in Q3 '15/Q4 '15 (60d)

5Ensco 850420118.5/10AvailableMalaysia
6Ensco 850520128.5/10

Available

U.S. GOM

7Ensco 850620128.5/10

8/15

215U.S. GOMRig to perform plug and abandon work mid Jul. 15 to mid Aug. 15.
8

Ensco 6001

20005.76/18

352

+20 amort.

[Petrobras] Brazil
9Ensco 600220015.7

Upgrade shipyard 46d total (Q3'15)

7/18

165

362 (+23 amort.)

[Petrobras] Brazil

$165k/d rate:(46d) Q3 '15

+23K/d From 8/15 to 7/18

Bonus 15% possible

10Ensco 600320045.71/17312[Petrobras] Brazil

Bonus possible 15%

11Ensco 600420045.710/16312[Petrobras] BrazilBonus possible 15%
12Ensco 500419821.5

1/17

298

+30 For mob. and upgrade

[Mellitha] Mediterranee

(5d)Q3'15
13Ensco 5005

1982

1997

1.5/1.7AvailableSingapore
14

Ensco 5006

1998

1999

7.5

5/18

472-505

[Inpex] Australia

Upgrade +206k/d amortized on contract duration

3. Jackups

#Name

Year

Built

Upg.

Water Depth Max

K feet

Contract

End

Day rateLocationInfo.
1Ensco 1412016Cap. 400'Under-constructionQ3 '16UAE-
2Ensco 1402016Cap. 400'Under-constructionQ2 '16UAE-
3Ensco 1232016Ultra-Premium Harsh Environment Water Depth Max: 400'Under-constructionQ2 '16Singapore-
4Ensco 1222014Ultra-Premium Harsh Environment Water Depth Max: 400'

11/16

232

+14 for mob. and upgrade

[NAM]

U.K.

2x1Y priced option
5Ensco 1212013Ultra-Premium Harsh Environment Water Depth Max: 400'6/16

232

+11

[Wintershall]

Holland

1Y unpriced option
6Ensco 1202013Special Capabilities: High Specification, HPHT Capable Water Depth Max: 400'5/16

235

+13 until 11/15

[Nexen]

U.K.

11x 1 well options

7Ensco 1102015Special Capabilities: High Specification, HPHT Capable Water Depth Max: 400'

5/18

114

[NDC]

UAE

-
8Ensco 1092008Special Capabilities: High Specification, HPHT Capable Water Depth Max: 400'

1/18

172

+13 for mob.

[Chevron]

Angola

9Ensco 1082007High Specification, HPHT Capable Water Depth Max: 400'4/17162

[PTTEP]

Thailand

1Y option
10Ensco 1072006High Specification, HPHT Capable Water Depth Max: 400'Available

New Zealand

11Ensco 1062005High Specification, HPHT Capable Water Depth Max: 400'

8/15

155(+5)

[CPOC]

Malaysia

2x90d options

12Ensco 105

2002

2010

High Specification, HPHT Capable Water Depth Max: 400'

Available

Singapore
13Ensco 104

2002

2011

High Specification, HPHT Capable Water Depth Max: 400'

8/18

114

[NDC]

UAE
14Ensco 1022002Heavy Duty, HPHT Capable Water Depth Max: 400'

Available

U.K.

15Ensco 1012000Heavy Duty, HPHT Capable Water Depth Max: 400'

12/15

12/15-6/16

218

155

[BP]

U.K.

2x6 months unpriced option

16Ensco 100

1987

2009

Heavy Duty, HPHT Capable Water Depth Max: 400'

6/18

185

[Premier]

U.K.

17Ensco 99

1985

2005

Special Capabilities: 30,000' Drilling Depth Rated Water Depth Max: 250'

Cold-stacked

-GOM
18Ensco 98

1977

2009

Water Depth Max: 250'

Under management Pemex

11/15

92

Mexico

Pemex

Insp. (14d) Q4 '15
19Ensco 97

1980

2005

Water Depth Max: 250'

1/16

1/16 - 2/19

68

75

[Aramco]

Saudi Arabia

-
20Ensco 96

1982

2011

Water Depth Max: 250'

1/16

1/16-1/16

1/16 - 2/19

68

75

120

[Aramco]

Saudi Arabia

-
21Ensco 94

1981

2008

Water Depth Max: 250'

1/16

1/16-2/16

2/16 - 5/16

85

75

120

[Aramco]

Saudi Arabia

1Y priced option
22Ensco 93

1982

2009

Water Depth Max: 250'

Under management Pemex

7/15

Status unknown-available?

92

Mexico

Pemex

23Ensco 92

1982

1996

Water Depth Max: 225'

1/16

1/16 - 8/18

112

To be mutually agreed

[Conoco

Phillips]

U.K.

24Ensco 91

1980

2012

Water Depth Max: 270'

Cold-stacked

Bahrain
25Ensco 89

1982

2009

Water Depth Max: 250'

Under management Pemex

11/15

92

Mexico

Pemex

26Ensco 88

1982

2004

Water Depth Max: 250'

1/16

1/16 - 11/16

85

110

[Aramco]

Saudi Arabia

1Y priced option
27Ensco 87

1982

2006

Water Depth Max: 350'

9/15

75

[Castex]

GOM

28Ensco 86

1981

2006

Water Depth Max: 250'Available

GOM

29Ensco 84

1981

2013

Water Depth Max: 250'

1/16

1/16 - 3/19

75

125

[Aramco]

Saudi Arabia

Insp.(18d) Q3 '15
30Ensco 83

1979

2009

Water Depth Max: 250'

Under management Pemex

10/16

92

Mexico

Pemex

31Ensco 82

1979

2003

Water Depth Max: 300'Cold-stacked

GOM

32Ensco 81

1979

2003

Water Depth Max: 350'Cold-stacked

GOM

33Ensco 80

1978

2011

Water Depth Max: 225'4/17145

[GDF]

U.K.

opt. +Cost adj. and option
34Ensco 762000Special Capabilities: HPHT Capable Water Depth Max: 350'

1/16

1/16 - 12/18

125

172

[Aramco]

Saudi Arabia

35Ensco 751999Water Depth Max: 400'

7/15

Status unknown, probably available.

Private

[Talos]

GOM

Term amended in conjunction with Ensco 8503
36Ensco 72

1981

2012

Water Depth Max: 225'

9/15

9/15 - 9/18

172

172

[Maersk] Denmark
37Ensco 71

1982

2012

Water Depth Max: 225'

Available (7/18/15)

Denmark
38Ensco 70

1981

1996

Water Depth Max: 250'Available

U.K.

39Ensco 68

1976

2004

Water Depth Max: 400'10/15118

[Chevron]

GOM

Insp.

(28d) Q3 '15

40Ensco 67

1976

2005

Water Depth Max: 400'AvailableMalaysia
41Ensco 56

1982

2006

Water Depth Max: 300'

Cold stacking prep.

Malaysia
42Ensco 54

1982

2004

Water Depth Max: 300'

1/16

1/16 - 9/17

92

115

[Aramco]

Saudi Arabia

1Y priced option
43Ensco 53

1982

2008

Water Depth Max: 300'2/16115

[NDC]

UAE

2x1Y unpriced option
44Ensco 52

1983

2013

Water Depth Max: 300'8/1798[Murphy] Malaysia1Y unpriced option

4. Under Management

#Name

Year

Built

Water Depth Max

K feet

Contract

End

Day rateLocation
1Thunder HorseDeepWater semi-sub1/16120

[BP]

GOM

1Y opt.

2Mad DogDeepWater Spar Drilling Rig1/1665

[BP]

GOM

Held for Sale

Ensco 7500Cold stackedSpain
Ensco DS-2Cold stackedSpain
Ensco 6000Cold stackedSpain
Ensco 5002SOLD
Ensco 5001Cold stackedMalaysia
Ensco 90Cold stackedGOM
Ensco 58Cold stackedBahrain

Fleet Analysis as of July 15

TotalDrillshipsSemi-subsJackupsUnder management
Under-construction5203-
Total rigs including under-construction75914442
Cold-stacked/Warm-stacked/Available21

3

513-
Held for sale7142-

* Now including the Ensco DS-4.

[II] Second-quarter 2015 results snapshot:

Q2 2015Q1 2015Q4 2014Q3 2014Q2 2014
Contract drilling revenue in $ Billion1.0591.16391.15981.2611.203
Contract drilling expense in $ million503518.3514.0531.4576.0
Net Income in $ million262.7324.7391.0424.5366.0
G&A in $ million29.730.128.32936
Cash flow from operations $ million386.2467.7546--
Cash on hand in $ million648.3887.8664.81,173.7145
Long-term debt in $ Billion5.91135.91935.88565.90394.6791
Non-cash impairment in $ Billion703,515.2n/an/a
Backlog in $ Billion7.48.49.71111
Earnings per share $1.181.381.681.831.58
Average day rate $237,263243,902242,781239,233241,756
Utilization76%86%86%89%85%
Long-term debt to capital32%31%42%33%29%
Shares outstanding (diluted) in million232.2231.9231.9232.0231.5
Dividend $/share0.15/Q0.15/Q0.15/Q0.75/Q0.75/Q

Rig Revenues and drilling expenses per segment.

Q2 2015Q1 2015Q4 2014Q3 2014Q2 2014
FloatersRevenues634.3695.0663.0745.3720.6
Drilling expense277.7293.5293.4309.7330.3
JackupsRevenues384.1428.3454.5499.0465.9
Drilling expense192.7191.5186.3210.2234.0
Managed drilling rigsRevenues40.640.642.316.916.5
Cost32.2n/a34.311.511.5

Rig Utilization and average day rate per segment.

Q2 2015Q1 2015Q4 2014Q3 2014Q2 2014
FloatersUtilization76%86%81%82%77%
Average day rate $417,463425,278428,734451,078479,176
JackupsUtilization77%87%86%92%89%
Average day rate $139,797144,139147,052139,997134,456

M. Carl Trowell, CEO, said in the conference call:

As a reminder, we have no significant debt maturities until the second quarter of 2019. We've maintained our investment grade credit rating and we continue to have significant liquidity and capital management flexibility with $1.3 billion of cash and short-term investments on the balance sheet, fully available $2.25 billion revolving credit facility, and revenue backlog of about $7.4 billion.

Ensco Plc delivered another strong quarter despite this terrible bear market. Revenues were $1.059 billion down 9.9% quarter over quarter with net income of $262.7 million or an EPS of $1.18.

The 2Q'15 quarter was highlighted by few change in the fleet:

  • Drillship DS-8 on track to commence operation later this year, which will be a major fiancial contributor.
  • Drillship DS-9 contract termination with obligation to pay the day rate for 2-year at $550k/d
  • Drillship DS-10 delayed to 2017 which will reduced 2015 CapEx to $1.7 billion
  • The Ensco 5002 has been sold for scrap value
  • Several contract in the Middle East with NDC.
  • Ensco 8501 and Ensco 8502 cold stacked at $10k/d.

One issue that it is still ongoing is regarding DS-5 drilling services contract from Petrobras and allegations of bribery for both VTG and ESV. I wrote an recent article regarding this particular situation. I do not believe it will be any problem, however, we will have to see...

The company indicated that it may be an uptick in tendering activity for the jackups in general, and in the shallow drilling particularly, which is still economical at oil at $50. However, ESV is not optimistic for 2016 but see changes in 2017. Mr Carl Trowell said:

I don't believe that we will see any increase in our customers' offshore budgets next year. And so, accordingly, we're going to see utilization and day rates still under pressure through 2016. Now that said, when we talk to customers, we do see a number of projects that have been pushed out that seemed to be scheduled for 2017 and we're tendering in the latter half of 2016. And we do see a little bit of evidence of customers coming and trying to take current pricing now for 2017 activity which maybe indicates where they feel things might go. And so, I think, it's going to be weak throughout the remainder of 2015 and 2016. And then, for a pickup in 2017, we need to see some key things happen on the macro environment. But certainly that's where a lot of the delayed work seems to be getting pushed out here.

It is probable that we are at the bottom here in term of PPS and I do not see a terrible slide from these already depressed price. ESV is a survivor and will be here for many years to come. I believe it is a time to accumulate and take advantage of this discounted value. I personally added to my long position last week.

ESV Chart

More