Ensco Plc: Oil Prices and Improving Production Boosts Future Fundamentals

Ensco Plc

Ensco Plc (NYSE:PLC) share price outperformed the S&P 500 index since the start of this year; the stock is likely to soar further considering the growth in exploration and production activities and robust oil prices.  

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Ensco plc shares rose 24% year-to-date compared to the 7% gain from S&P 500. Ensco shares hit its one-year high this week, following a rally of 56% in the last twelve months. Future fundamentals for drilling companies are positive as E&P investments are likely to increase in the days to come.

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E&P Investments Likely to Increase

Oil prices are trading at the highest level in the last four years due to lower supplies and increasing demand. The output cuts in the past year, along with sanctions on Iran and Venezuela has declined oil supplies. As a result, oil prices are escalating at a sharp pace over the last couple of months.

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OPEC and Russian producers have decided to fill the gap between supply and demand; they are planning to boost production by $1 million barrels a day in the days to come.

Exploration and production activities in the United States are also growing at a significant pace – thanks to higher oil prices. Reports indicate that the U.S. could become the globe’s largest oil producer. U.S. oil production is likely to exceed 10 million barrels per day this year and could possibly hit 11.4 million barrels per day in 2019 – which is higher than Saudi and Russian production.

Ensco Plc Is Set to Capitalize on Demand

Ensco has a modern rig fleet portfolio, and the company has a presence in all major markets. The driller has achieved 99% operational utilization across its rig fleet in the latest quarter, and it has secured contracts from Saudi Arabia and the rest of the world. Ensco expects its backlog to grow sharply in the following quarter, thanks to E&P investments to increase oil supplies.

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