In the past Ensco plc (NYSE:ESV) hasn’t been faring that well and consequently its shareholders weren’t sure of very bright prospects. Even now, the stock has seen a decline of 56%. Moreover, the decreasing prices of crude oil have also had a toll on the company’s performance. The industry has been reduced to a stagnant state, and no one knows when the situation is going to improve.
Apparently, there are quite a number of disadvantages of offshore drilling; however there are many perks of investing in this business as well. Some important reasons why investing in Ensco plc (NYSE:ESV) can turn out to be profitable, have been elaborated below.
- An improved balance sheet
The biggest fear which is looming for offshore drilling companies is that the funding required for their operations to run will dry out. Lack of sustainable balance sheets which can still persist in case of freezing up of credit markets, is what will bring about the doom of these companies. Yet, as far as this is concerned, Ensco plc (NYSE:ESV) is pretty safe.
Its balance sheet reflected quite stable figures by the end of the fourth quarter. The company comprised of a debt of $5.9 billon. Its cash reserves amounted to $1.4 billion. Moreover, this was conjugated with the company’s short term investments.
This balance sheet appears to be quite impressive, especially when studied in comparison to that of other companies such as Seadrill and Transocean.
A good balance sheet can take the company through bad times, particularly when its operations suffer. Furthermore, it can help the company in adjusting to the developing trends in offshore drilling industry.
- The profitable nature of Ensco plc (NYSE:ESV)
Even though apparently, there might not be very bright prospects out there for offshore drilling industry, even then Ensco plc (NYSE:ESV) is quite prone to profits- at least for now. Its financial results delineated an operating income of $478.1 million for its fourth quarter, while its income for the whole year amounted to approximately $1.82 billion. Last year’s operations yielded an income of $2.06 billion. There is a very high probability that this cash flow and profits wouldn’t continue their trend if oil prices keep plunging. On the other hand, it also implies that if the industry improves then there are very likely chances of high profitability.
- Diversity of its customer base
Another reason because of which investing in Ensco plc (NYSE:ESV) can turn out to be highly profitable is the diverse nature of its customer base. Ensco plc (NYSE:ESV) doesn’t respond to any specific market; rather its customer base encompasses both US and Asia. It also has its customers in small independent companies as well as national oil companies. The biggest customers from amongst them are undeniably the national oil companies.
Relying upon a single market can turn out be risky for investors, however owing to its diverse customer base, Ensco plc (NYSE:ESV) has minimized that risk. Despite this fact the crux of the entire matter depends upon the oil-prices. If they do not rise, the whole business would turn out to be futile.
