Analysts split over $45 million drilling partner consolidation by Ensign Energy

Image: Ensign

Analysts are split on the wisdom of Ensign Energy Services Inc.’s US$33.4-million move to buy out partner Halliburton Company’s stake in an international drilling joint venture.

The Calgary-based drilling company announced Friday after markets closed that it would buy the 40 per cent it doesn't already own in Trinidad Drilling International from its American oilfield services partner.

The joint venture operates five drilling rigs — two under long-term contracts in Kuwait, another under contract in Bahrain and two “cold-stacked” (idle) rigs in Mexico.

Ensign inherited its 60 per cent stake in the partnership when it bought Calgary rival Trinidad Drilling Ltd. in 2018, but Canadian drillers have been loath to spend capital this year as oilfield activity slows due to the economic affect of the COVID-19 pandemic.

Analyst Ian Gillies of Stifel FirstEnergy says in a report the purchase creates balance sheet risk, noting that Ensign also warns it may be in violation of a debt covenant later this year.

But RBC analysts say in report the “counter-cyclical” manoeuvre ahead of its bank line renewal and covenant relief discussions signals Ensign's confidence.

Ensign's shares fell by as much as four cents on Monday morning to 69 cents before recovering to 73 cents. A year ago, they were trading for $4.40 each.

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