Ensco Reports 3Q Earnings; ENSCO 8500 Starts Drilling
Ensco reported diluted earnings per common share from continuing operations of $1.05 for third quarter 2009, compared to $2.06 per share in third quarter 2008. Earnings from discontinued operations were zero cents per share in third quarter 2009, compared to a loss of $0.09 per share a year ago. Diluted earnings per share were $1.05 in third quarter 2009, compared to $1.97 in third quarter 2008. Discontinued operations relate to rigs no longer in the Company's fleet.
Chairman, President and Chief Executive Officer Dan Rabun stated, "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."
On October 14, 2009, Ensco filed a Current Report on Form 8-K with the SEC updating the Company's Annual Report on Form 10-K for the year ended December 31, 2008 to reflect the retrospective application of two accounting standards adopted on January 1, 2009, and the reclassification of ENSCO 69 as discontinued operations in 2008 and prior periods. Prior period results in this news release and the attached schedules reflect the updated amounts in the Current Report.
On September 4, 2009, the Company reported that unplanned downtime for ENSCO 7500 and ENSCO 8500 would reduce diluted earnings per share for third quarter 2009. Based on the actual downtime incurred for repairs required on these two rigs in the third quarter, earnings were reduced by $0.19 per share.
Revenues in third quarter 2009 declined to $425 million from $620 million a year ago. Average day rates increased year-to-year for the deepwater segment, but declined for the premium jackup fleet. Rig utilization in third quarter 2009 declined in all of the operating segments, compared to the prior year. Total third quarter 2009 operating expenses increased to $250 million from $247 million last year, primarily due to an increase in depreciation related to ENSCO 8500 commencing operations.
Deepwater segment revenues grew by 131% year-to-year to $63 million in third quarter 2009, mostly driven by commencement of ENSCO 8500 operations in early-June 2009. The average deepwater rig day rate increased to $387,000 from $362,000 a year ago, however, utilization declined to 64% from 87% in third quarter 2008. Contract drilling expense increased 318% year-to-year, primarily due to adding ENSCO 8500 to the active fleet and ENSCO 7500 incurring both higher operating costs in Australia and increased mobilization expense that is deferred and recognized over the term of the contract.
Total Jackup Segments
Revenues from Ensco's worldwide premium jackup fleet totaled $363 million in third quarter 2009, down from $592 million a year ago. The decline was largely due to a decrease in utilization to 61% from 97% last year and an $8,000 decline in the average day rate to $148,000.
Contract drilling expense declined 16% year-over-year, mostly due to reduced personnel and other costs related to lower utilization.
Strong Financial Position
Ensco continues to maintain a strong financial position:
- More than $1 billion of cash and cash equivalents
- $350 million fully available revolving credit facility
- Long-term debt remains low at $266 million
- Long-term debt-to-capital ratio of 5%
- Contract backlog equals $3.3 billion
Chief Financial Officer Jay Swent commented, "Cash now exceeds $1 billion, and we expect cash generation will continue to be strong as total capital commitments for the ENSCO 8500 Series® newbuild program decline, just as deepwater segment revenues begin to rise."
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