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Ensco plc

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Ensco’s loss was narrower than expected and revenues beat the Zacks Consensus Estimate during the second-quarter of 2018. The improvement can be attributed to higher utilization as well as lower general and administrative expenses. Ensco’s merger with Atwood Oceanics will bring together two leading offshore drillers with premium assets that cover the world’s most prolific basins along with a diverse customer base. While the bigger ‘Ensco’ should fare better, given the combined entity's size and scope of operations, it remains heavily exposed to offshore drilling's very weak fundamentals. We are concerned about Ensco’s weak balance sheet. During the second quarter of 2018, there was a significant rise in contract drilling expenses of floaters and jackups. If the trend continues, the company’s future earnings will get hurt. Moreover, the company’s high debt burden is also a cause of concern.

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