Ensign Energy Services

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Sound bite for Twitter and StockTwits is: Earnings are going down. Personally, I would rather a company stop increases or decrease dividends when they cannot afford the increases and/or the dividends. I know a lot of dividend investors are against this, but it can ensure the long term health of a company. See my spreadsheet at esi.htm.

I do not own this stock of Ensign Energy Services (TSX-ESI, OTC- ESVIF), but I used to. I bought this stock in June 2012. Stock was rather cheap in June of 2012. I had been following this stock for some time. I sold this stock in December 2014 to buy Mullen instead. Details of why is in a December 2014 post. I know I would be selling Ensign at a loss, but I also could buy Mullen cheaply. This is my first review of this stock after selling it.

Since this company started to pay dividends in 1995, it raised its dividend every year. The dividends started off low and have been rising, as have the Dividend Payout Ratios. This is especially true of the DPR for EPS. The DPR for EPS was not really a problem until 2014 when the DPR for EPS was 102%. It is expected to be quite a bit higher in 2015 at 252%.

The dividend increases have been slowing down recently. The 5 and 10 year growth in dividends are at 12.5% and 6.5%. The last dividend increase in 2015 was for 2.1%. They really should stop increasing dividends until they can again afford them.

The Dividend Payout Ratio for CFPS is better than for EPS. The 5 year median DPR for CFPS is 15.43, for 2014 is 16.9% and expected for 2015 is 23.5%. Because of the strong Cash Flow I do not think that the company needs to cut dividends, but I do think that they need to stop increasing dividends.

This company is in the oil services industry and with the low price for oil it is not surprising it is having problems. The 5 and 10 years total returns are losses. The total loss over the past 5 and 10 years is at 1.42% and 4.32% per year. The portion of this loss from capital losses is 4.64% and 6.60% per year. The portion of the total return from dividends is 3.22% and 2.28% per year.

The outstanding shares have not really changed over the past 5 and 10 years. Shares have increased due to stock options and decreased due to Buy Backs. Both Revenue and Cash Flow has shown good growth over the past 5 and 10 years. However, the Earnings have been declining especially over the past 2 years.

Revenue is up by 15.3% and 8.2% per year over the past 5 and 10 years. Revenue per Share is up by 15.5% and 8.1% per year over the past 5 and 10 years. Analysts are expecting a 30% drop in revenues for 2015. If you compared the 12 month period to the end of 2014 and the 12 month period to the end of the first quarter, Revenue is down by 7.5%.

EPS is down by 10.95 and 5.01% per year over the past 5 and 10 years. EPS has declined by 40% and 45% over the past 2 years. Analysts expect EPS to decline by around 59% in 2015. If you compared the 12 month period to the end of 2014 and the 12 month period to the end of the first quarter, EPS is down by 63%.

CFPS is up by 10.6% and 8.3% per year over the past 5 and 10 years. Analysts expect CFPS is be down around 31% in 2015. If you compared the 12 month period to the end of 2014 and the 12 month period to the end of the first quarter, CFPS is down by 6.4%.

The Return on Equity has been quite low lately with the ROE for 2014 at 3.5% and with a 5 year median at 7.7%. Interestingly, the ROE on comprehensive income has been a lot higher. The ROE on comprehensive income is 7.8% in 2014 with a 5 year median of 8.7%. This would suggest that earnings for this company may not be as bad as they first appear.

One of the things that I did not like about this company was the low Liquidity Ratio. This was often below 1.00 which means that the current assets could not cover current liabilities. This ratio was 0.89 in 2013. It is much better in 2014 at 1.46 and getting close to what I like as a minimum of 1.50. The first quarterly report has a Liquidity Ratio of 1.53.

The thing is if a company is in such a volatile area such as resources a strong balance sheet is a very good thing to have. A weak Liquidity Ratio can leave a company vulnerable in bad times and we are always going to have bad times. This company does have strong cash flow which can make up for a weak Liquidity Ratio, but cash flow could weaken in the bad times.

The other debt ratios are just fine. The Debt Ratio is 2.22 for 2014 and it has a 5 year median of 2.38. This is a strong Debt Ratio. The Leverage and Debt/Equity Ratios for 2014 are 1.82 and 0.82 with 5 year medians of 1.62 and 0.62.

This is the first of two parts. The second part will be posted on Thursday, June 18, 2015 and will be available here. The first part talks about the stock and the second part talks about the stock price.

Ensign Energy Services Inc. is an industry leader in the delivery of oilfield services in Canada, the United States and internationally. They are one of the world's leading land-based drilling and well servicing contractors serving crude oil, natural gas and geothermal operators. Its web site is here Ensign Energy.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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