Notes
ENSCO International Incorporated (ESV), together with its subsidiaries, operates as an offshore contract drilling company in the United States and internationally. Its offshore contract drilling operations include exploration, development, and production of oil and natural gas, as well as the provision of offshore drilling services to the international oil and gas industry. As of February 15, 2007, the company operated a fleet of 43 jackup rigs, 1 ultra-deepwater semisubmersible rig, and 1 barge rig. ENSCO International provides its services to international, government-owned, and independent oil and gas companies. It has operations in North and South America; Europe; Africa; and Asia Pacific, including Asia, the Middle East, Australia, and New Zealand.http://www.enscous.com/default.aspx
No preferred shares, small number of options for employees: diluted and basic shares almost identical. The book value per share has increased every year for the last 9 years.
31JUL07 $61
Market Cap (intraday): 9.11BEnterprise Value (31-Jul-07)3: 9.03B
Trailing P/E: 10.21
Forward P/E (fye 31-Dec-08) : 7.52
PEG Ratio (5 yr expected): 0.32
Price/Sales (ttm): 4.50
Price/Cash Flow: 8.60
Price/Book: 2.62 (almost all tangible)
Current ratio: 2.3
Debt/Equity Ratio 0.13
All the efficiency numbers are excellent. Return on equity is 28%
Second quarter profit grew 31%.
Growth Estimates: Revenue, 2008: 15% Earnings: next qtr. 38%; next yr. 19%; next 5 yr.s 23%
No insider buying (some selling). Share repurchase program in effect, expected to be completed in the third quarter.
The company is increasing its exposure to deepwater drilling. From the Q2 report:
"With the ENSCO 8503 announcement, we now have four ultra-deepwater semisubmersible rig construction projects underway, with deliveries anticipated in the second quarter of 2008 (ENSCO 8500), first quarter 2009 (ENSCO 8501), fourth quarter 2009 (ENSCO 8502), and third quarter 2010 (ENSCO 8503). Both the ENSCO 8500 and ENSCO 8501 are being built against firm multi-customer long-term drilling contracts. We have also recently received a letter of intent from a customer for a minimum two-year contract on the third rig, ENSCO 8502, which can be extended for a three or four year primary term before the commencement of operations. The day rate will vary slightly depending on the primary term of the contract. We currently expect that the revenues to be recognized from this contract during the primary two-year term will be approximately $340 million. The final terms and conditions are subject to a definitive agreement being executed between the parties.
Thoughts: The price to growth ratios are superb. A PEG of 0.3 and a forward PE of 8....even if the estimates are off by a bunch, those are still sound numbers. The book value is almost all tangible and the rest of the balance sheet is very solid, particuarly for a company with such good growth prospects. In other words, Ensco is a growth company with a large cushion of safety. Currently, all but one of Ensco's operating rigs are jackups, which operate in shallow water (less than 400'). It is moving rigs out of the Gulf of Mexico; the general opinion is that shallow water exploration in the Gulf is exhausted. Deepwater rigs are much scarcer and profitable; the company has several of those in the pipeline, but only one in operation (it's in the Gulf). Looks like a strong buy to me.
15SEP07 - $53
The price has lost over 10% since mid-summer because the company revenue this quarter will be the same as last; it had previously estimated 3% growth. It is very exposed to shallow-water drilling in the Gulf of Mexico, which is an exhausted resource. Big whoop. Motley Fool article:http://www.fool.com/investing/general/2007/08/30/scolding-ensco.aspx
Simultaneously, it announced a $500m share buyback program.
Trailing P/E (ttm, intraday): 8.81
Forward P/E (fye 31-Dec-08) : 6.55
PEG Ratio (5 yr expected): 0.36
Price/Sales (ttm): 3.88
Price/Book (mrq): 2.26
Price/Cash Flow Ratio 7.20
Total Debt/Equity (mrq): 0.134
Current Ratio (mrq): 2.643
HELLO!!!
Operating Margin (ttm): 56.74%
Return on Equity (ttm): 28.63%
No insider buying (lots of selling).
Thoughts: A compelling buy.
10NOV07 - $56
Still a bargain, in terms of estimated and historic growth:Forward P/E (fye 31-Dec-08): 7.22
PEG Ratio (5 yr expected): 0.27
Price/Sales (ttm): 3.80
Price/Book (mrq): 2.21
Enterprise Value/EBITDA (ttm): 5.756
Operating Margin (ttm): 57.79%
Return on Equity (ttm): 28.93%
Current Ratio (mrq): 2.689
Almost all assets are tangible.
Goldman-Sachs: Neutral+. S&P: 4 Stars. Schwab: B.
Thoughts: a bargain. Earnings growth is expected to slow to around 15%, which is still great given the current PE of around 8. The forecast growth rate for the next 5 years (pretty speculative) is 30%, probably because the company is building deep-water rigs, which are in demand.
top of page
