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Ocean Rig’s EBITDA Rose in Past 4 Quarters: What’s Coming Next?

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May. 18 2016, Updated 8:08 a.m. ET

EBITDA estimates

Along with the dip in revenues, analysts estimate a decline in Ocean Rig’s (ORIG) EBITDA (earnings before interest, taxes, depreciation, and amortization) for 1Q16. Analysts’ estimates for Ocean Rig’s EBITDA in 1Q16 is $259 million, which would mean a 14% decrease from $301 million in 4Q15.

For the second quarter, the company’s estimated EBITDA stand at $223 million. Analyst estimates for ORIG’s EBITDA in 2016 and 2017 are ~$851 million and $551 million, respectively—much lower than its EBITDA of ~$1.1 billion in 2015. However, drops in EBITDA have been common among offshore drillers (IYE) during the current downturn.

Based on its 2015 EBITDA, Ocean Rig’s EBITDA margin is 61%. Based on its estimated revenue and estimated EBITDA, we have calculated that ORIG’s estimated first quarter EBITDA should be 60%.

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EPS estimate

As compared to the estimated drops in revenue and EBITDA, Wall Street analysts forecast a very little drop in ORIG’s EPS (earnings per share). The estimated drop is only 1.3% to $0.75 in 1Q16, as compared to $0.76 in 4Q15.

Although very little drop is expected in 2Q16, the fiscal 2016  EPS is expected to fall by 30% to $1.63 from 2015’s EPS of $2.30. In 2017, analysts estimate EPS of -$0.50 for Ocean Rig.

Actual versus estimate

Ocean Rig (ORIG) has beaten EPS estimates four times in the past five quarters. Also, it has beaten analysts’ revenue estimates three out of the last five times.

Noble (NE) has beaten EBITDA estimates in six out of the past eight quarters and on average, its EBITDA has come in 1.8% ahead of estimates. Similarly, Ensco (ESV) and Diamond Offshore (DO) have beaten EBITDA estimates seven times in the past eight quarters, by ~3.1% and 7.4%, respectively.

Seadrill (SDRL) has an even rate in beating estimates. In the past eight quarters, Seadrill has surpassed EBITDA estimates four times, and its average surprise has been 0.05%.

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