Tag Archives: ESV

ESV acquires ATW to create an undervalued rig behemoth

In line with our expectations expressed in our initiation of Ensco (BUY, TP 17), the company takes on the role as consolidator in the current trough. Today, ESV announced the acquisition of Atwood Oceanics (BUY, TP 19) in an all-share deal that values ATW at a 33% premium to last close and leaves ATW shareholders with around 31% of the NewCo. Although we believe the offer to be a bit fresh at an EV/EBITDA ‘17E of 8.3x (vs peers at 7.0x), P/NAV of 1.18 and EV/GAV of 1.05, we see a good fit between the fleets and organizational synergies. Overall, we believe the offer is most beneficial for Atwood’s shareholders, but also expect valuation release for Ensco shareholders as the USD 10.72/sh acquisition price is far below our USD 19/sh pre-deal target price for Atwood. We estimate a pro-forma fair value USD 14.2/sh and reiterate our BUY recommendation.

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ESV-US: Initiation (BUY, TP 17)

We initiate coverage of Ensco with a BUY recommendation and target price of USD 17

The company has 59 rigs on the water in addition to two deferred newbuildings, a market cap of USD 2.5bn and is on of the most liquid names in the industry. Despite this, we estimate the company is trading at a discount to NAV and an implied 3% discount per rig at current trough levels.

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