For the year ended December 31, 2003, ENSCO reported net income of $108.3 million ($0.72 per diluted share) on revenues of $790.8 million, compared to net income of $59.3 million ($0.42 per diluted share) on revenues of $649.5 million for the year ended December 31, 2002. The Company's net income for 2002 included the after tax impairment charge of $46.1 million discussed above and a $3.8 million after tax gain in connection with an insurance recovery for a rig that had earlier sustained extensive damage from a natural gas fire.
The Company's balance sheet at year-end 2003 remained strong, with cash of $354.0 million and a 21% long-term debt to total capitalization ratio (defined as long-term debt divided by the sum of long-term debt plus stockholders' equity).
The average day rate for ENSCO's jackup rig fleet was $48,800 during the fourth quarter of 2003, compared to $48,000 in the year earlier period. Utilization for the Company's jackup fleet in the most recent quarter decreased slightly to 84%, down from 86% in the fourth quarter of 2002. Excluding rigs in a shipyard for contract preparation, regulatory inspection and enhancement, ENSCO's jackup utilization in the most recent quarter was 91%, compared to 93% in the year earlier period.
Carl Thorne, Chairman and Chief Executive Officer of ENSCO, commented on the Company's markets and outlook: "As anticipated, fourth quarter 2003 results were impacted by lower average day rates in the North Sea and a temporary lull in Asia Pacific activity as 2003 programs were completed, offset in part by higher average day rates for our Gulf of Mexico jackup rigs.
"In our Asia Pacific business unit, all five of our jackup rigs that underwent remedial shipyard and/or contract preparation work during the fourth quarter of 2003 have either returned to service or have been committed to return to work during the first quarter of 2004. Another jackup rig completed a contract at the end of 2003 and will have approximately two and one half months downtime before commencing a new contract in March of 2004. Despite the incurred and expected downtime for various jackup rigs during the fourth quarter of 2003 and the first quarter of 2004, we remain positive on the outlook for the markets which comprise our Asia Pacific business unit. We now enjoy approximately ten rig-years of contract backlog for our Asia Pacific jackup fleet.
"Given our favorable market outlook in Asia Pacific and our strong cash position, we have elected to exercise our option to acquire the non-owned 75% interest in ENSCO 102, a jointly owned jackup rig now operating for Shell in Malaysia. The option to purchase the remaining ownership interest was scheduled to expire in May 2004. ENSCO will pay approximately $95 million from available cash to acquire full ownership of the rig in a transaction that is expected to close before the end of this week.
"In the North Sea, the jackup market is stable and we expect little change in day rates over the next three months.
"In the Gulf of Mexico, day rates for our jackup rigs are stable. We continue our rig enhancement program with ENSCO 68 in a shipyard until the end of the third quarter of 2004, and with ENSCO 67 scheduled to enter a shipyard early in the second quarter for approximately nine months of work. ENSCO 7500, our deepwater semisubmersible rig currently under contract in the Gulf of Mexico, is expected to complete its contract in early March. We are currently marketing the rig.
"Looking ahead, we expect first quarter 2004 results to be impacted by several factors. Our Asia Pacific business unit will continue to experience downtime on certain rigs before they commence new contracts during the quarter. First quarter 2004 results will be adversely impacted, relative to our fourth quarter 2003 results, due to completion of the favorable term contract on the ENSCO 7500 in early March.
"Based on our current view of market conditions, we anticipate an improving trend in our 2004 results starting in the second quarter."
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