- The Company: Ensco International, a provider of offshore contract drilling services.
- The Filing: FORM 10-Q filed with the SEC on October 23, 2008.
- The Finding: Returning an attractive 17.2% on shareholder equity, on average, over the last five years, the Board of Directors obviously felt that repurchasing its own shares on the open market was a prudent investment. Like many of its peers in the drilling sector who made similar fiduciary decisions, however, Ensco International overpaid for its own stock.
Acclaimed movie director Billy Wilder once said: "Hindsight is always twenty-twenty." At October 27, 2008, with the common stock of Ensco trading at $33.40 a share, the company had lost about $386.5 million, or almost 41 percent, of the cash invested in the repurchase programs. Pursuit of its own shares was probably not a meaningful tool in building value for Ensco stockholders.
In September 2008, the Board of Directors authorized the repurchase of an additional $500 million of Ensco common stock.
The Question: Might reinvesting the money on expanding its core offshore drilling business -- opportunistic purchases of rigs on the cheap from smaller companies unable to compete in the current environment -- be a better spend?