Ensco Sees New Rigs Online '06 - '07, Depressing Day Rates

Mar 15, 2005 (ODJ Select via COMTEX)

Ensco International Inc. (ESV) said Tuesday that new jackup rigs being built throughout the oilfield service industry will likely depress daily rental rates once they are delivered in 2006 and 2007.

With 24 new builds now in the pipeline, Ensco's Chief Financial Officer Jay Swent said he is slightly more concerned about the overhang effect they will have than he was when only 13 were under construction a year ago.

Tight supply and a surge in demand for rigs amid record-high crude oil prices have sent day rates for rigs soaring since early last year.

The new rigs coming on line next year and in 2007 will all go to work, however, and utilization rates will remain high, he predicted.

Swent told analysts and investors at the A. G. Edwards & Sons Energy Conference in Boston not to be surprised if the contract drilling company ends up building one or two more jackups.

The company plans to move more rigs into Saudi Arabia but wants to have no more than five or six working there.

"Unless we can get different terms with Saudi Aramco than they're prepared to give us today, we won't increase our exposure," he said, citing inadequate coverage for political and war risk. "There's more than enough work in the rest of the region"

Ensco is working on several liquefied natural gas projects in Qatar.

Ensco recently opened a new office in Dubai, which it sees as becoming an increasingly important hub for an expanding drilling market in the Middle East and Southeast Asian regions.

In the Gulf of Mexico, he sees operators day rates stabilizing at the current level for the next few months as operators catch their breath before continuing to push higher.

Ensco shares recently traded up 15 cents, or 0.4%, at $38.95.

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