Esperanza floats for offshore oil drillers

Esperanza floats for offshore oil drillers https://www.eresviral.com/wp-content/uploads/2018/10/Esperanza-flota-para-los-perforadores-de-petróleo-costa-afuera-219x146.5

Esperanza floats for offshore oil drillers







Companies that earn their money in the offshore energy market died in the water until recently.

While the mood has improved with oil prices reaching a maximum of four years,

            Ensco



                IS V 3.54%


            PLC is still purchase rival offshore drilling Rowan Co from a position of weakness instead of strength. Rowan shares rose 50% this year and Ensco shares rose 80%, but the combined market value of the two companies is just one third of what it was at the beginning of 2014.

The offshore drilling economy has deteriorated not only because oil prices are still lower than their previous peak, but because shale production on land has become much more efficient, attracting more capital. At the same time, the market for offshore drilling platforms continues to have an excess supply, particularly when it comes to less modern platforms. Global utilization went from almost 90% in 2014 to just half of last year, and now it is just over 60%.



Ensco and Rowan combined will have a fairly modern fleet, but platform prices will not improve throughout the industry until rivals remove older platforms. Meanwhile, the combined company plans to save $ 150 million a year, a figure that capitalizes with a significant value of $ 1,000 million after taxes, or approximately 15% of the combined market value.

Investors in the combined firm must be satisfied with future savings, while understanding that the surge in driller stocks so far this year is about the furthest future. Higher oil prices are stimulating some offshore activity but not a better platform price. Analysts' forecasts for both companies, even for 2019, have been reduced in recent months. The combined operating income of the companies was more than $ 2 billion in 2015 and is estimated at a loss of $ 530 million in 2018, according to FactSet.

The market for the platforms will narrow over time, but the short-term factors that raise oil prices could also have vanished by then.

 Write to Spencer Jakab in spencer.jakab@wsj.com



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