The Money Tree

Safely Generating Income in Retirement

New NP Trade – ESV

Posted by mounddweller on June 1, 2010

All,

Sold 3 JUN ESV $30 puts at $0.45 this morning.  ESV is a oilfield services
company.  Historically they owned/operated a fleet of jack-up rigs.  Currently
they are midway through a multi-year expansion into acquiring a deepwater fleet
of rigs.  Because of the disaster in the gulf they have been beaten down from
$51 to almost $35.  They have an excellent balance sheet and pay a small
dividend.  I anticipate they will begin increasing the dividend after they have
completed the buildout of their deepwater fleet.  They used to be headquartered
here in Dallas but recently moved to London.  Their shares now trade as ADRs.   FYI…they currently do not have any deepwater rigs operating in the gulf!  It seems to me the market has ‘thrown the baby out with the bath water’.

My $30 puts yield 1.5% and have 17% downside protection.  Ron’s PF = 2.96.  With
only 17 days to expiration, I think it is a good trade.

Regards,
Troy

Advertisements

2 Responses to “New NP Trade – ESV”

  1. dealmakr said

    Hi Troy,

    Did some digging around and found from the last ESV 10Q;

    In June 2009, we accepted delivery of ENSCO 8501, which commenced drilling operations in the Gulf of Mexico under a three-and-a-half year contract in October 2009. In January 2010, we accepted delivery of ENSCO 8502, which is expected to commence drilling operations during the third quarter of 2010.

    From a Yahoo message board poster ( I find that about 98% of the posts on Yahoo meaningless, but there are some nuggets of info to be gleaned). You can read the rest on Yahoo if you want.

    Two rigs working now (day rates)
    The 8500 @ 290k for Eni/Anadarko
    The 8501 @ 360 for Nexen/Noble

    The Ensco 8500 series are deepwater rigs

    One starting 8/12/10
    The 8502, prob around rate of other 2

    I like the ESV balance sheet and the sector is going down the toilet with the BP headline risk so you have to look at the impact if things go on hold there for all like a moratorium and the costs associated along with the revenue possibly decreasing. Will put ESV on the screen and see how it goes, maybe if something positive comes out from BP’s new capping attempt the headline risk will be on the upside. Don’t want to dissuade you from any trades, just taking time for some DD and seeing what I can see and looks to be a lot of uncertainy along with volatility.

    Good trading

    dealmakr

    dealmakr

  2. mounddweller said

    dealmakr,

    You are correct. Ensco does indeed have deepwater rigs under contract in the Gulf of Mexico. I will post a new message on my blog. This is what happens when you are in a hurry and don’t take time to verify information you’ve read elsewhere. I read an article earlier today on SeekingAlpha that said ENSCO’s latest Fleet Status Report dated 5/14/2010 indicated that they did not have any deepwater rigs operating in the gulf. If I had done two more minutes worth of DD I would have found that the SeekingAlpha author was full of sh*t.

    ENSCO, in fact, has 2 deepwater rigs operating in the gulf, the ENSCO 8500 and 8501. In addition, their newest deepwater rig, the ENSCO 8502, is currently under contract to begin operations in the gulf in August 2010.

    Thanks again for taking the time to call this to my attention. I appreciate it!

    Regards,
    Troy

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

 
%d bloggers like this: