New Purchase – Ensco (ESV)

Ensco plc (Ensco) is a provider of offshore contract drilling services to the international oil and gas industry. As of December 31, 2011, the Company owned and operated an offshore drilling rig fleet of 77 rigs, including rigs under construction. As of December 31, 2011, its rig fleet included seven drillships, 13 dynamically positioned semisubmersible rigs, seven moored semisubmersible rigs, 49 jackup rigs and one barge rig. Its customers include national and international oil companies. On May 31, 2011, the Company completed a merger transaction (the Merger) with Pride International, Inc., (Pride), ENSCO International Incorporated, an indirect, wholly owned subsidiary and predecessor of Ensco plc (Ensco Delaware), and ENSCO Ventures LLC, an indirect, wholly owned subsidiary of Ensco plc (Merger Sub). Pursuant to the Agreement and Plan of Merger, Merger Sub merged with and into Pride, with Pride as the surviving entity and an indirect, wholly owned subsidiary of Ensco plc.

I decided on purchasing shares after looking into the company further.  Earnings are projected to be 6.24, 7.04 and 8.01 for 2013, 2014 and 2015.  ESV has been expanding and now is an international company based in the UK.  So there is no withholding tax for U.S. investors.  Since the end of last year, ESV has increased its quarterly dividend 100%!  From .375 to the recently declared .75.  While I don’t expect the company to keep that pace up, I do think they can easily have double digit growth.  Add to that the fact that they are currently yielding 5.3% and I can see this company producing some nice returns for investors.  You can find some good articles on Seeking Alpha.

I previously owned Transocean (RIG) and sold shares after they cut their dividend.  ESV is the second largest offshore driller next to RIG (17.6B vs 13.2B market cap).  This is a cyclical industry but I like the numbers of ESV better than some of their competitors, including RIG and NE.  

So for me this is a little riskier dividend growth play.  This also puts my portfolio a little overweight in energy.  I see the energy sector as one of the most undervalued sectors currently and don’t mind plowing extra money here while the prices are good.  I’m confident my portfolio will balance out when I’m closer to FI.  

I purchased 100 shares of ESV @ $56.12/share.  This is towards the lower end of their 52-week range os $51-$65.  These 100 shares will provide $300 in yearly dividends and boost my forward dividends to $8690.07.  I’m now higher than my updated forward income goal of $8500.  

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