Scolding ENSCO

Ensco International (NYSE: ESV), an offshore contract driller that operates almost entirely in the shallow water, tends to get treated like the runt of the pack. Unlike deepwater player Transocean (NYSE: RIG), the company's fleet doesn't clear an average of 200K per day. Contracts tend to be of shorter duration, subjecting Ensco to more volatility in dayrates. The firm also does plenty of business in the Gulf of Mexico, which is the most oversupplied offshore basin in the world.

It may be of little surprise, then, that analysts are quick to downgrade Ensco on any sign of near-term weakness. They got just such an opportunity on Thursday, when the firm announced that it expects sequential revenue to come in flat this quarter, rather than the 3% lift previously forecast.

It now looks like Ensco will be making slightly less (oodles of) cash for the balance of 2007, because of continuing weak rates in the Gulf and some mobilization delays internationally. If anything, investors should be concentrating more on the latter point.

While it's possible to blame work delays on exogenous factors, they will still influence customer perceptions of reliability. For that reason, I didn't take it lightly when Rowan (NYSE: RDC) noted that it was the only company to send jackups to work for Saudi Aramco last quarter in a timely manner.

I'm quite positive on Ensco for a host of reasons. I like its terrific margins, its lovely balance sheet, and its geographic and customer diversity. The only thing that bothers me is this issue of customer perception. It's a key factor whether dayrates weaken further or manage to rebound. Present customers like BP (NYSE: BP), Newfield Exploration (NYSE: NFX), and ATP Oil & Gas (Nasdaq: ATPG) are willing to pay for quality, and Ensco needs to demonstrate that it will continue to be a dependable partner.

Drill down into related Foolishness:

• Rowan is both a driller and a drillmaker, for now.
• Pride International has stoked hopes of further M&A in the driller space.
• Here's one energy play that may sidestep the volatility of the drillers.

Fool contributor Toby Shute doesn't own shares in any company mentioned. The Motley Fool has a dependable disclosure policy.