Included in the Company's quarter ended September 30, 2005 results is $5.5 million of expense ($4.0 million after tax, or $0.03 per diluted share) relating to the estimated insurance deductible associated with rig damage sustained during Hurricane Katrina (as further discussed herein).
For the nine months ended September 30, 2005, ENSCO's net income was $188.3 million ($1.24 per diluted share) on revenues of $737.1 million, compared to net income of $64.3 million ($0.43 per diluted share) on revenues of $536.0 million for the nine months ended September 30, 2004.
The average day rate for ENSCO's operating jackup rig fleet for the quarter ended September 30, 2005, increased by 37% to $75,400, compared to $54,900 in the prior year quarter. Utilization of the Company's jackup fleet increased to 85% in the most recent quarter, up from 82% in the quarter ended September 30, 2004. Excluding rigs in a shipyard for contract preparation, regulatory inspection and enhancement, ENSCO's jackup utilization was 98% in the quarter ended September 30, 2005, compared to 91% in the prior year quarter.
Carl Thorne, Chairman and Chief Executive Officer of ENSCO, commented on the Company's current results and outlook: "The third quarter represented our fifth successive quarter of earnings improvement. Day rates increased from second quarter levels in all of our major markets, with double-digit percentage improvement realized in both the North and South America, and Europe and Africa business units.
"We were fortunate not to have sustained any significant damage to our Gulf of Mexico jackup rig fleet as the result of Hurricanes Katrina and Rita. Two ENSCO non-jackup rigs were damaged by Hurricane Katrina. ENSCO 29, one of our Gulf of Mexico platform rigs, incurred significant damage as a result of the storm. Although assessment is ongoing, it presently appears likely that the rig will be declared a constructive total loss. The insured value of ENSCO 29 is $15.0 million and the rig has a net book value of approximately $7.5 million. Further inspection of ENSCO 7500, our deepwater semisubmersible rig, revealed minor deflection in the forward column bulkheads that apparently was sustained in heavy seas while attempting to escape the path of Hurricane Katrina. The rig will continue to operate under contract in the Gulf of Mexico until late October or early November 2005, at which time it will enter a shipyard for scheduled contract preparatory work, and hurricane-damage repairs also will be made at that time. As noted hereinabove, we recorded a $5.5 million expense in the third quarter to cover the estimated insurance deductible for rig damage caused by Hurricane Katrina. It appears that no significant damage to ENSCO rigs was incurred as a result of Hurricane Rita.
"Two of our Gulf of Mexico jackup rigs (ENSCO 86 and ENSCO 87) are currently in shipyards for enhancement and life extension work, with redelivery scheduled for February 2006 and March 2006, respectively. Redelivery of these two rigs next year will substantially complete our ten-year, $1.3 billion rig enhancement program.
"In Asia Pacific, two of our Middle East jackup rigs (ENSCO 88 and ENSCO 96) and one of our Southeast Asia rigs (ENSCO 56) are currently in shipyards undergoing preparatory work for term contracts commencing in the fourth quarter of 2005 and early 2006.
"Construction continues on our new high-specification jackup rigs, ENSCO 107 and ENSCO 108, with deliveries scheduled for the first quarters of 2006 and 2007, respectively. ENSCO 107 is committed for work in Southeast Asia commencing in February 2006 at a day rate in the $105,000 to $110,000 range, with follow-on work starting in late 2006 or early 2007 at a rate of approximately $185,000.
"We recently announced construction of our second deepwater semisubmersible rig, ENSCO 8500, to be built against a firm, four year contract with a consortium of three large independent oil companies. ENSCO 8500 is scheduled for delivery in May 2008 and will represent our twelfth new offshore rig added since mid 2000.
"Looking ahead, we expect further market improvement and increased operating days to contribute to continued earnings growth into 2006. The Gulf of Mexico jackup market could be particularly tight, due to an anticipated 18% reduction in jackup rig supply as the result of the two recent hurricanes, and scheduled mobilization of rigs to international markets. Increased operating days resulting from completion of our enhancement program and commencement of ENSCO 107 operations are expected to add approximately four and one half rig years of revenue, and should contribute meaningfully to our 2006 results."
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