UPDATE 1-JP Morgan cuts Ensco to "underweight"
(Recasts; adds details, share movement)
Sept 2 (Reuters) - JP Morgan cut its rating on offshore drilling contractor Ensco International Inc (ESV.N) to "underweight" from "neutral," citing few positive catalysts against a backdrop of growing pressure on international jackup rates and peaking U.S. Gulf jackup rates.
"While international jackup rates appear to have stabilized recently, we believe the longer decline trend remains intact," analyst David Smith said in a note to clients.
There were few positive near-term catalysts for Ensco, in contrast to its peers, said Smith. He expects little incremental data from the company's deepwater construction program in the next few months.
Smith also questioned Ensco's share buyback program, saying it was unlikely that the company had better long-term view of the jackup market than the investors.
"Using peak cash flows to repurchase shares does not favor the long-term shareholder," said Smith, whose earnings estimate for Ensco's third quarter is $2.17 a share.
Shares of the Dallas-based Ensco fell more than 6 percent to $63.52 in early morning trade Tuesday on the New York Stock Exchange.
(Reporting by Arup Roychoudhury in Bangalore)
