Ensco plc (ESV) has positioned itself favorably in the offshore drilling market with a steady backlog and a build program that was started ahead of peers, and the company’s large asset base and capex foresight allows it to reap the rewards of previous investments, says Matt Beeby, Senior Equity Research Analyst of Oilfield Services at Williams Financial Group.
“[Ensco] started their new build program a couple of years in advance of a lot of drillers, so they’ve gotten most of their large cash flow outlays largely taken care of. They still are taking delivery of assets, but given their larger asset base, they have the ability to, I think, do a more meaningful return of cash to shareholders, which is something that a lot of people are looking for today.”
Beeby says earnings for offshore drillers continue growing even as companies across the board are building rigs, and smaller companies in the space have the potential to double their earnings in the next four years.
“The demand is out there, and we’re seeing longer-term programs that work at a reasonable commodity price; it doesn’t even have to be $95 a barrel oil. If you have confidence that oil will be above $80, generally everything across the globe is going to be profitable to the companies that continue to drill,” Beeby said.
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