Ensco plc Reports Fourth Quarter and Full-Year 201
Ensco plc Reports Fourth Quarter and Full-Year 2012 Results
20 February 2013
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Record Full-Year 2012 Revenues and Earnings
Reinvested a Record $1.8 Billion in Fleet
#1 Total Customer Satisfaction Rating
Realized More Than $100 Million of Targeted Expense Synergies
Sold Additional Rigs as Part of Continuous High-Grading Strategy
ENSCO 8505 Commences Initial Term Contract and ENSCO 8506 Delivered
LONDON--(BUSINESS WIRE)-- Ensco plc (NYSE: ESV) reported diluted earnings per share from continuing operations of $1.04 in fourth quarter 2012, compared to $0.97 per share in fourth quarter 2011. Discontinued operations primarily related to rigs and other assets no longer on the Company’s balance sheet resulted in a loss of $0.10 per share in fourth quarter 2012. Earnings from discontinued operations in fourth quarter 2011 were $0.02 per share. Diluted earnings per share were $0.94 in fourth quarter 2012, compared to $0.99 in fourth quarter 2011.
Certain items influenced earnings per share from continuing operations comparisons year to year. Provision for income taxes in fourth quarter 2012 included $75 million, $0.33 per share, in discrete tax items including $51 million related to restructuring certain subsidiaries from the 2011 acquisition and $24 million of additional discrete tax items primarily related to adjustments of certain prior year tax positions. Professional fees, severance payments and other acquisition-related costs in fourth quarter 2011 general and administrative expense totaled approximately $8 million, $0.03 per share. In addition, fourth quarter 2011 contract drilling expense included approximately $4 million, $0.02 per share, of severance and relocation costs related to the acquisition. Adjusted for these items, fourth quarter earnings per share from continuing operations increased approximately 34% year to year to $1.37 from $1.02.
Full-year 2012 diluted earnings per share from continuing operations were $5.23, compared to $3.09 per share in 2011. Discontinued operations resulted in a loss of $0.19 per share in 2012, compared to a loss of $0.01 per share in 2011. The $0.19 per share loss from discontinued operations in 2012 includes losses from asset sales and operating results during the first three quarters of 2012 that were reclassified from continuing operations to discontinued operations. Diluted earnings per share were $5.04 in 2012, compared to $3.08 in 2011.
Chairman, President and Chief Executive Officer Dan Rabun stated, “The past year has been a remarkable period of growth for Ensco. We achieved record revenues and earnings as we added new ultra-deepwater rigs, increased utilization and benefited from rising customer demand. During the year, we delivered ENSCO 8505 and ENSCO 8506, the final two rigs in the ENSCO 8500 Series®, as well as ENSCO DS-6, our fourth Samsung DP-3 ultra-deepwater drillship. Each of these rigs has commenced work on multi-year programs for repeat customers, reinforcing the advantages of fleet standardization.”
Mr. Rabun added, “We are gratified to, once again, achieve the #1 customer satisfaction award given the exceptional work of our crews who achieved the best safety record in our history and a significant increase in overall rig utilization. All of this was accomplished as we integrated our acquisition - achieving expense synergies above initial targets.”
Mr. Rabun concluded, “Ensco’s growth will continue as we complete the construction of six additional rigs that are scheduled for delivery through the end of next year. These rigs will provide future earnings growth and afford us the flexibility to invest further in our fleet while returning additional capital to shareholders.”
Revenues grew 12% to $1.086 billion in fourth quarter 2012 from $973 million a year ago. A growing active fleet, higher average day rates in the jackups segment and improved utilization and average day rates for the floaters segment contributed to this increase.
Contract drilling expense was $525 million, up from $498 million in fourth quarter 2011. More rigs in the active fleet as well as higher utilization in the floaters segment drove this increase along with a rise in unit labor costs. Warranty claim settlements of $11 million related to lost revenues and costs incurred in prior periods reduced fourth quarter 2012 contract drilling expense. Adjusted for this item and acquisition-related costs equaling $4 million in fourth quarter 2011, contract drilling expense increased 9%.
Depreciation expense was $144 million, compared to $137 million a year ago. The $7 million increase was mostly due to the addition of ENSCO 8505 to the active fleet.
General and administrative expense declined to $35 million from $40 million in fourth quarter 2011. Acquisition-related costs in fourth quarter 2011 equaled $8 million as noted above.
Interest expense in fourth quarter 2012 was $28 million, net of $28 million of interest that was capitalized, compared to interest expense of $41 million in fourth quarter 2011, net of $17 million of interest that was capitalized.
Segment Highlights
In fourth quarter 2012, the Company changed its segment reporting. All drillships and semisubmersibles are now reflected in a Floaters segment. The Jackups and Other segments are unchanged.
Floaters
Floater revenues were $672 million in fourth quarter 2012, up 10% from $610 million a year ago. A full quarter of operations for ENSCO DS-5, the commencement of ENSCO 8505, and an increase in the average day rate and utilization contributed to this growth. The average day rate increased to $368,000 from $342,000 in fourth quarter 2011. Utilization improved three percentage points to 83%.
Floater contract drilling expense was $313 million in fourth quarter 2012, up from $312 million in fourth quarter 2011. Adjusted for warranty claim settlements of $11 million noted above and ENSCO 5005 and ENSCO DS-1 deferring expenses related to shipyard upgrades, contract drilling expense increased 9%. Commencement of operations for ENSCO 8505 and an increase in unit labor costs contributed to this increase.
Jackups
Jackup revenues grew 15% to $393 million, up from $341 million a year ago. The increase was due to a $14,000 increase in the average day rate to $111,000, partially offset by a one percentage point decline in utilization to 87%. A broad-based pickup in customer demand around the world drove the increase in average day rate. Contract drilling expense increased $29 million to $196 million, mostly due to an increase in unit labor costs.
Other
Other is composed of managed drilling rig operations. Revenues decreased to $20 million from $22 million in fourth quarter 2011 due to a $12,000 decline in average day rates. Contract drilling expense was $15 million, compared to $19 million a year ago. The decreases in average day rate and contract drilling expense are related to declining crew requirements year to year.