Offshore drilling contractor Ensco International, Inc. (ESV) on Wednesday reported a 47% year-over-year drop in profit for the third quarter, as revenues declined 31% due to fall in fleet utilization. Average day rates increased for the deepwater segment, while it declined for the premium jackup fleet. Earnings per share from continuing operations, however, came in ahead of analysts' expectations by a penny.
In a statement, chairman, president and chief executive officer, Dan Rabun said, "We recently added ENSCO 8501 to our active fleet of ultra-deepwater semisubmersibles, and we expect deepwater segment revenues to grow significantly in 2010 and 2011. We also are pleased to report that new and existing customers recently contracted several of our premium jackups. Jackup utilization is projected to rise, which will help to lessen the impact of declining day rates."
Third Quarter Results
Dallas, Texas-based Ensco reported net income of $147.8 million or $1.05 per share for the third quarter, lower than $278.8 million or $1.97 per share in the prior-year quarter.
Income from continuing operations was $150.4 million or $1.05 per share, compared to $283.7 million or $2.06 per share in the year-ago quarter. On average, 31 analysts polled by Thomson Reuters expected the company to earn $1.04 per share for the third quarter. Analysts' estimates typically exclude special items.
Ensco noted that earnings for the latest quarter were reduced by $0.19 per share, due to the unplanned downtime for Ensco 7500 and Ensco 8500 rigs in September. The company last month said that its third quarter earnings are likely to be negatively impacted due to unanticipated incremental downtime and repairs required the two offshore rigs. Ensco then projected third-quarter earnings to be reduced by about $0.14 to $0.18 per share.
Operating revenues for the quarter dropped 31% to $425.4 million from $619.5 million in the same quarter last year. Twenty-two analysts expected the company to report revenues of $438.61 million for the quarter.
Peer Performance
Among others in the industry, Hamilton, Bermuda-based Nabors Industries Ltd. (NBR) reported on Tuesday a profit for the third quarter that plunged from last year, hurt by weak demand. Net income was $29.5 million or $0.10 per share, compared to $194.0 million or $0.67 per share in the prior-year quarter. Excluding items, adjusted net income was $42.5 million or $0.15 per share for the latest quarter. Total revenues and other income for the third quarter declined to $803.57 million from $1.44 billion in the same quarter last year. Looking ahead, the company sounded optimistic indicating higher rates and demand for its rigs in select markets.
Houston, Texas-based Diamond Offshore Drilling, Inc. (DO) is slated to report financial results for the third quarter on October 22, 2009. Analysts are currently looking for earnings of $2.30 per share, on revenues of $872.71 million. Another competitor, Vernier, Switzerland-based Transocean Ltd. (RIG) is scheduled to announce its third quarter results on November 4, 2009. Analysts currently expect the company to post earnings of $2.65 per share, on revenues of $2.85 billion.
Segment Details
Revenues for the company's deepwater segment for the third quarter soared 131% to $63 million from last year's $27.1 million, driven by Ensco 8500, which commenced drilling in early-June 2009. The average deepwater rig day rate increased to $387 thousand from $362 thousand last year, while utilization dropped to 64% from last year's 87%.
Worldwide premium jackup fleet revenues declined to $363 million from $592 million in the year-ago quarter, reflecting a drop in utilization to 61% from last year's 97%. The average day rate also declined to $148 thousand from $156 thousand last year.
Other Metrics
Operating income for the third quarter plunged 53% to $175.2 million from $372.1 million in the prior-year quarter.
Total operating expenses edged up to $250.2 million from $247.4 million in the year-ago quarter, primarily due to an increase in depreciation related to Ensco 8500 commencing operations. The company noted that the second of the Ensco 8500 Series ultra-deepwater semisubmersibles commenced drilling early-June 2009.
The company ended the third quarter with cash and cash equivalents of $1.02 billion, compared to $447.6 million at end of the prior-year quarter.
Nine Month Highlights
For the nine month period, Ensco reported net income of $563.7 million or $4.01 per share, lower than $842.1 million or $5.91 per share in the prior-year period. Income from continuing operations for the period dropped to $602.5 million or $4.21 per share from $853.7 million or $5.90 per share in the year-ago period.
Operating revenues for the year-to-date period declined to $1.45 billion from $1.79 billion in the same period last year.
Stock Quote
ESV closed Wednesday's regular trading session at $47.54, down $0.22 or 0.46% on a volume of 3.67 million shares, higher than the three-month average volume of 2.59 million shares. In the past 52-week period, the stock has been trading in a broad range of $22.04 to $49.26.
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