Morningstar Rating

Stock Research and Analysis

by Jason Stevens

Bulls Say

Despite low price tags, Ensco's new rigs are obtaining high day rates. We think the firm is earning some of the highest aftertax returns in the industry on its new rigs.
We estimate the net asset value of Ensco's fleet to be about $10.2 billion, or $44 per share.
Ensco's move to stack or sell old rigs is paying off, in our view. We see this as shrewd portfolio management as it reduces competition for contracts and lowers overall maintenance costs, which tend to be concentrated among older rigs. Read more 

Bears Say

A decline in day rates can have a substantial impact on Ensco. Semisubmersible day rates declined 21% from 2002 to 2004 and 70% from 1998 to 1999. Jackup day rates declined 70% from 1997 to 1999.
About 50% of the jackup market spending is controlled by 10 companies. This means that a decrease in spending by one of these companies can have a significant effect on Ensco.
There are many jackups under construction, and most of them do not have a contract. The large order book could push the premium jackup market into oversupply. Read more 

Management

Carl Trowell took over as CEO and president in June. Dan Rabun, who led the firm for eight years, remains as nonexecutive chairman for an unspecified period to ensure a smooth transition. Trowell joined Ensco following a long career at Schlumberger.  Read more 

Profile

Ensco owns one of the newest jackup and deep-water fleets in the contract drilling industry, which drills for oil and natural gas globally. The firm is based in London,   Read more 

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