Ensco's 2Q17 Results Are around the Corner—What to Expect

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Part 4
Ensco's 2Q17 Results Are around the Corner—What to Expect PART 4 OF 5

How Analysts View Ensco’s 2Q17 Earnings

EBITDA estimates

Along with a fall in revenues, analysts expect a fall in Ensco’s (ESV) EBITDA1 for 2Q17. Analysts estimate that Ensco’s EBITDA would be $157 million in 2Q17, down from $167 million in 1Q17.

How Analysts View Ensco&#8217;s 2Q17 Earnings

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As we saw in the earlier articles, Ensco has secured three new contracts. To commence these newly secured contracts, Ensco would have to shed some upfront costs. For example, the drillship DS-4 was stacked, and the company expects to incur around $28 million toward reactivation of this rig and $15 million toward the rig’s upgrades. 

The company now expects its 2Q17 contract drilling expense to be $282 million, which is higher than its previous guidance of $270 million–$280 million.

As Ensco’s revenues are expected to rise from the third quarter so would its EBITDA. For 3Q17, Ensco’s estimated EBITDA stands at $162 million. In 2017, analysts expect the company’s EBITDA to be ~$643 million, which is much lower than its EBITDA of ~$1.2 billion in 2016. However, declining EBITDA readings have been common among offshore drillers (IYE) during the current downturn.

Based on its EBITDA and revenues, Ensco’s EBITDA margin was 35.4% in 1Q17. The following are the EBITDA margins for Ensco’s peers based on their 1Q17 EBITDA and revenues:

  • Rowan Companies’ (RDC) EBITDA margin is 48.2%.
  • Transocean’s (RIG) EBITDA margin is 47.9%.
  • Seadrill’s (SDRL) EBITDA margin is 51.0%.
  • Diamond Offshore Drilling’s (DO) EBITDA margin is 38.5%.

EPS estimate

Wall Street analysts forecast a significant fall in Ensco’s EPS (earnings per share). The estimated EPS is $0.06 lower than its EPS of -$0.09 in 1Q17.

  1. earnings before interest, tax, depreciation, and amortization

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