Dallas-based driller Ensco International said it will no longer be domiciled in the U.S. and instead will incorporate in the U.K. for tax reasons and to be closer to customers.
From the company release:
Ensco’s Board believes the proposed plan would provide many benefits, including:
• enhance management efficiencies resulting from the U.K. time zone overlap with geographies where Ensco operates;
• improve access to key customers;
• enhance access to European institutional investors;
• improve customer and investor perceptions that Ensco is a truly global offshore drilling contractor with expanding deepwater operations; and
• allow Ensco to benefit from the U.K.’s developed tax regime and extensive tax treaty network, and potentially achieve a global effective tax rate comparable to that of some of Ensco’s global competitors.
Thoughts on the move from Pritchard Capital:
“We believe the move makes sense and follows similar decisions by Transocean Ltd. (RIG-$85.40) and Noble Corp. (NE-$42.34) to domicile outside of the U.S. to Switzerland. The lower effective tax rate will be accretive to earnings, and the company will have greater visibility with its customer base, as just nine (2 of which are cold stacked) of its 45 delivered rigs are located in the GOM. ‘Neutral’, $48.00 price target.)
And here’s Tudor Pickering & Holt’s view:
“While we were unaware U.K. tax rates were something to be enamored of (corporate rate evidently lower than U.S.) and can understand ramifications of being on a time zone that is more relevant to customers, we think real attractiveness is ability to repatriate foreign cash to parent corp. ex-U.K. taxes. Look for IRS to sharpen pencils on this one.