Oil and natural gas driller Ensco plc (ESV) reported impressive first quarter 2013 results on the back of increased utilization, rising customer demand as well as new rigs joining the fleet.

Diluted first quarter earnings were $1.36 a share, which surpassed the Zacks Consensus Estimate of $1.32. Earnings increased approximately 13.3% from $1.20 earned in the year-earlier quarter.

Total revenue surged 12.7% to $1,149.9 million from $1,020.6 million generated last year. Total revenue also beat our expectation of $1,147.0 million.

Ensco attributed the deployment of new rigs over the past year that increased utilization and average dayrate for the growth in earnings.

During the quarter, ENSCO 8506 and ENSCO DS-6 (the fourth Samsung DP3 drillship) commenced multi-year programs for repeat customers emphasizing the benefits provided by fleet standardization. Moreover, two of its newbuild rigs – ultra-deepwater drillship ENSCO DS-7 and premium jackup ENSCO 121 – were also contracted. Ensco ordered a premium jackup – ENSCO 110 – for delivery in early 2015, in view of increased customer demand.

First Quarter Segment Performance

In fourth quarter 2012, Ensco changed its reporting segments. The Floaters segment now consists of all its drillships as well as semisubmersibles. However, the Jackups and Other segments were unaffected.

Floaters: Revenues jumped 12.5% to $719.2 million in the reported quarter from the year-earlier level of $639.3 million. The outperformance was mainly backed by the addition of three newbuild floaters.

Rig utilization in this segment dropped to 83% from 85% in the year-earlier quarter. Dayrate increased to $379,801 from the year-earlier level of $349,942.

Jackups: Revenues from the Jackup fleet jumped to $410.5 million from $359.8 million in the prior-year quarter, with its average dayrate climbing 17.7% to $117,268 from $99,618. However, overall jackup utilization decreased to 88% from 91% in the year-earlier period.

Other: Revenues came in at $20.2 million, down 6.0% from $21.5 million in the first quarter of 2012.

Costs and Expenses

On the cost front, depreciation expense increased 9.6%, contract drilling expenses rose 11.7%, while general and administrative expenses dropped 1% on a year-over-year basis in the quarter.

Balance Sheet and Capex

At the end of the first quarter, Ensco had $561.8 million in cash. Long-term debt (inclusive of current maturities) was $4,830.8 million, with a debt-to-capitalization ratio of 28.6% (compared with 29.0% in the preceding quarter).

With the completion of the construction phase of its 6 additional rigs − scheduled to be delivered by the end of 2014 − Ensco is expected to achieve significant growth. Ensco has $12 billion contract revenue backlog, excluding bonus opportunities. The company’s solid backlog position provides it with excellent cash flow visibility. Additionally, the company’s impressive balance sheet and sufficient liquidity help it to address operational or corporate needs.

Zacks Rank

The company retains a Zacks Rank #3 (short-term Hold rating). However, there are certain Zacks Ranked #1 stocks – Harvest Natural Resources, Inc. (HNR), Lehigh Gas Partners LP (LGP) and EPL Oil & Gas, Inc. (EPL) – that appear more rewarding in the short term.