Ensco sees drilling expenses to rise on pick-up in activity

Thu Feb 21, 2013 1:22pm EST

Feb 21 (Reuters) - Ensco Plc, owner of the world's
second-largest offshore drilling fleet, expects contract
drilling expenses to rise by 19 percent this year as a pick-up
in drilling activity leads to more spending to get rigs ready to
work.
    Ensco announced just this week a contract with Total
 for its newly built DS-7 ultra-deepwater drillship off
Angola at an average rate of $648,000 per day, which will start
later this year. 
    Jay Swent, Ensco's chief financial officer, said revenues
from all its floating rigs would grow in the low 20 percent
range in 2013, helped by the activation of three rigs. But
getting them prepared would contribute heavily to a 19 percent
rise in drilling expenses, as would labor costs.
    "We anticipate an 8 percent increase in average unit labor
rates for offshore employees to meet current market conditions,"
Swent said, though he noted many of Ensco's long-term contracts
had provisions to protect it from cost inflation.
    Costs will be a key question for analysts about the
operations of industry leader Transocean, which is due
to report results on March 4. The introduction of new rigs also
weighed on the profits of Noble Corp. 
    Shares of Ensco were down 2.7 percent in midday trading on
Thursday at $61.55, extending an early sector-led decline
despite the London-based company's higher-than-expected profits
reported late on Wednesday.
    Adjusted fourth-quarter earnings rose to $1.37 per share, or
8 cents higher than the average estimate on Thomson Reuters
I/B/E/S. Revenue increased 12 percent to $1.09 billion, and
drilling expenses rose 5 percent.
    Compared with the previous quarter's figures, Swent told
analysts on a conference call that he anticipated a 7 percent
rise in revenue and an 11 percent increase in contract drilling
expenses in the first quarter.
    As for market opportunities, Gulf of Mexico deepwater demand
remains very strong, and Ensco sees opportunities surfacing in
Indonesia, Malaysia and Australia this year. In shallow water,
Ensco said Pemex would need six to eight more jackups off Mexico
this year, while India's market could add six to 10 more.
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