"There just seems to be a complete disconnect between the health of the business and what's going on in the marketplace."
- Dan Rabun, Chairman/CEO of Ensco International
I figured I'd lead off with that quote, since it summarizes this offshore driller's situation quite succinctly. Ditto for competitors like Diamond Offshore
Given the latest Friday freakout, I'm not sure anyone really cares about what happened in the third quarter, but it was naturally a good one for Ensco, considering the tightness in offshore drilling markets around the world. Per-share earnings from continuing operations were up 20%. Neato.
So business is in shambles now that oil prices have been cut in half, right? The share price seems to say so. But the facts are quite different: Ensco has 95% contract coverage for fourth-quarter revenue. So I guess 2009 is where this all falls apart?
Well, no. 2009 is actually when a lot of great things start happening, including three newbuild deepwater vessels beginning new multiyear contracts. Chevron
For 2009 and beyond, 85% of customers are either investment-grade companies or national oil companies. These people won't pack up and leave at $50 to $75 oil. If we go lower, things will get hairy, but so far, there's just no sign of the offshore implosion that today's share prices seem to signal.