Ensco's Halfway There

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

It feels like only yesterday that Ensco International (NYSE: ESV  ) launched its ambitious push into the deepwater drilling market. Today, the firm has funded more than half of the program's $3 billion-plus price tag.

With massive discoveries by the likes of Chevron (NYSE: CVX  ) and Petrobras (NYSE: PBR  ) in the world's premier offshore basins, and access to more-conventional oil pools dwindling by the day, this ultra-deepwater push has proved a sound strategy. When considering that Ensco has funded its fleet buildout from cash flow, rather than with piles of debt, the plan looks sounder still.

I should point out that the shallow-water jackup market isn't chopped liver. Sure, it's sagging today; Ensco's jackup utilization fell to 72% in the quarter, from 80% last quarter and 95% in the second quarter of 2008. But Ensco's high-margin, efficient operations in the shallow water have kicked off billions in free cash flow over the years, and they will remain a valuable piece of the enterprise. Yes, Pride International (NYSE: PDE  ) is disassociating itself from the shallow-water market as fast as it can, but Pride has never executed on the same level as Ensco -- or Noble (NYSE: NE  ) or Diamond Offshore Drilling (NYSE: DO  ) , for that matter.

So now that Ensco has funded more than half of its new venture into deep waters, is the firm eyeing its next round of rigs? Actually, no. CEO Dan Rabun said the company has its hands full with the current seven-vessel rollout. The most probable use of excess cash generated over the near term would be a return of capital to shareholders. That's a rare circumstance for an oil service firm these days, and it speaks to Ensco's financial savvy.

Start investing today – just $7 per trade with Scottrade. Or find the broker that's right for you.

Fool contributor Toby Shute doesn't have a position in any company mentioned. Check out his CAPS profile or follow his articles using Twitter or RSS. Petrobras is a Motley Fool Income Investor recommendation. The Motley Fool has a deep disclosure policy.

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 949988, ~/Articles/ArticleHandler.aspx, 10/23/2016 2:23:53 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
ESV $8.90 Down -0.05 -0.56%
Ensco CAPS Rating: *****
CVX $101.30 Down -0.57 -0.56%
Chevron CAPS Rating: ****
DO $17.40 Down -0.50 -2.79%
Diamond Offshore D… CAPS Rating: **
NE $5.97 Down -0.04 -0.67%
Noble CAPS Rating: ****
PBR $12.17 Up +0.16 +1.33%
Petroleo Brasileir… CAPS Rating: **
PDE.DL $0.00 Down +0.00 +0.00%
Pride Internationa… CAPS Rating: ****