Ensco Quarterly Earnings at $619 Million

Ensco Quarterly Earnings at $619 Mln

Ensco plc has reported that diluted earnings per share increased 9% to $1.62 in third quarter 2013 from $1.48 a year ago. Discontinued operations primarily related to rigs and other assets no longer on the Company’s balance sheet reduced earnings last year by $0.07 per share. Diluted earnings per share from continuing operations were $1.62 in third quarter 2013 compared to $1.55 in third quarter 2012.

Certain items influenced third quarter 2013 results. A favorable settlement with the Mexican tax authority of $31 million, $0.10 per share, benefited other income. ENSCO 5002 and ENSCO 5004 contracted to OGX in Brazil negatively influenced results: $27 million, $0.12 per share, of contract backlog was not recognized as revenues and an $11 million, $0.05 per share, provision for doubtful accounts was included in contract drilling expense. Adjusted for these items, diluted earnings per share from continuing operations increased 9% to $1.69 compared to $1.55 in third quarter 2012.

Chairman, President and Chief Executive Officer Dan Rabun stated, “During the third quarter, we accepted delivery of two more rigs that will commence multi-year contracts later this year – – ENSCO DS-7, an ultra-deepwater drillship, and ENSCO 120, an ultra-premium harsh environment jackup. These newbuild rigs plus six more under construction will drive revenue and earnings growth in the years ahead.”

Rabun added, “I commend our capital projects teams in South Korea and Singapore for their diligence in overseeing the successful delivery of four new rigs over the past year alone.”

Earnings increased $35 million to a record $379 million. Revenues grew 13% to a record $1.266 billion in third quarter 2013 from $1.124 billion a year ago. The average day rate for the fleet increased 13% to $225,000, mostly due to adding ENSCO 8506 and ENSCO DS-6 to the active fleet, as well as higher day rates for several floaters and an increase in the jackup segment average day rate.

Contract drilling expense was $619 million, up from $507 million in third quarter 2012. This increase was primarily due to adding new floaters to the active fleet as well as a previously anticipated increase in unit labor costs. As reported a year ago, favorable settlements reduced contract drilling expense by $31 million in third quarter 2012.

Depreciation expense was $153 million compared to $142 million in third quarter 2012. The $11 million increase was mostly due to a growing active fleet. General and administrative expense was $37 million compared to $40 million in third quarter 2012.

Other expense was $2 million for third quarter 2013, down from $26 million a year ago. This decrease was primarily due to a $31 million favorable settlement with the Mexican tax authority included in other income as noted above, partially offset by a $9 million increase in interest expense. Third quarter 2013 interest expense was $40 million, net of $16 million of interest that was capitalized, compared to $31 million a year ago, net of $26 million of interest that was capitalized.

The effective tax rate was 16.1% compared to 11.5% in third quarter 2012. A $31 million favorable settlement with the Mexican tax authority, noted above, increased tax expense by $7 million. Adjusted for discrete items, the effective tax rate was 15.6% in third quarter 2013. The year-to-year comparison was also influenced by the relative percentage of earnings from various tax jurisdictions.

Segment Highlights

Floaters

Floater revenues grew 9% to $788 million in third quarter 2013 from $723 million a year ago, primarily due to the commencement of ENSCO 8506 and ENSCO DS-6. As noted above, the Company did not recognize revenue for ENSCO 5002 and ENSCO 5004 contracted to OGX in Brazil during third quarter 2013. The average day rate increased 15% to $416,000 from $362,000 in third quarter 2012.

Utilization was 79% compared to 90% a year ago. This decline was mostly due to a shipyard upgrade project for ENSCO 5005, an inspection for ENSCO DS-2, mobilizations for two rigs and no revenues being recognized for ENSCO 5002 and ENSCO 5004 that are contracted to OGX. Adjusted for non-operational items, utilization increased to 93% from 92% in third quarter 2012.

Floater contract drilling expense was $394 million in third quarter 2013, up from $306 million in third quarter 2012. A growing active floater fleet contributed to this increase along with higher unit labor costs. Contract drilling expense included an $11 million provision for doubtful accounts in third quarter 2013 related to previously recognized revenues for ENSCO 5002 and ENSCO 5004. In third quarter 2012, $31 million of favorable settlements reduced contract drilling expense. Adjusted for these items, contract drilling expense increased 14% year to year.

Jackups

Jackup revenues grew 21% to $460 million, up from $381 million a year ago. The increase was mostly due to a $16,000 increase in the average day rate to $125,000, driven by strong customer demand around the world. Utilization was 90% compared to 87% a year ago. Adjusted for non-operational items including planned upgrade projects, inspections and cold stacked rigs, utilization was 99% compared to 97% in third quarter 2012. Contract drilling expense increased 12% to $210 million, due in part to a previously anticipated increase in unit labor costs and higher utilization.

Other

Other is composed of managed drilling rig operations. Revenues decreased to $19 million from $20 million in third quarter 2012, primarily due to the expiration of a managed drilling contract during third quarter 2013. Contract drilling expense was $15 million compared to $14 million in third quarter 2012.

Press Release, October 24, 2013

 

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