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