ENSCO International (ESV)
The recent strength in crude oil prices has improved the outlook for a cyclical recovery. Historically, jackup drillers like ENSCO (ESV - Analyst Report) have enjoyed strong early-cycle leverage, a trend that we believe will play out this time as well.
While the near-term situation is expected to remain weak, with rig oversupply and soft demand weighing on dayrates, the medium to long-term outlook remains favorable. ENSCO enjoys strong leverage to this outlook given its fleet of premium jackup rigs, an exceptionally strong balance sheet, and growing deepwater exposure.
Our new $45 price objective, raised from $40 before, results from 2009 P/E and EV/EBITDA multiples of 7.4x and 4.3x, respectively, both well within historical trading ranges.
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| Market Summary | Nov 08, 2009 11:52 am ET |

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