Rowan Earnings Grow as Dayrates Rise

Zacks

Rowan Companies plc’s (RDC) adjusted second quarter 2013 earnings from continuing operations came in at 57 cents per share, beating the Zacks Consensus Estimate of 55 cents.

Quarterly earnings also improved from the adjusted year-ago profit level of 41 cents. The growth was mainly attributable to higher average dayrates, increased activity from fleet additions and higher utilization of existing rigs between periods.

Total revenue grew 16.5% year over year to $408.9 million in the reported quarter, and beat our expectation of $399.0 million.

Dayrates and Utilization

The company’s Gulf of Mexico rigs experienced a dayrate of $137,100 (versus $119,100 in the year-ago quarter), Middle East rigs saw a dayrate of $137,700 (versus $130,800 a year ago) and North Sea rigs’ dayrate was $256,800 (versus $234,500 in the year-ago quarter).

The overall dayrate of all offshore rigs was $172,800 (versus $154,000 in second-quarter 2012). Average utilization of the company’s rigs improved to 83% from 79% in the year-earlier quarter.

Financials

As of Jun 30, 2013, the cash balance was $1,005.9 million and long-term debt (including current maturities) was $2,009.2 million. The debt-to-capitalization ratio was 29.9% versus 30.4% in the prior quarter.

To Conclude

Houston, Texas-based Rowan Companies is a provider of international and domestic contract drilling and aviation services. During the quarter, the company experienced strong demand as well as solid dayrates for high-specification jackups in most of the markets.

Going forward, Rowan expects further strengthening in the jackup markets, especially demand for high-spec rigs, along with strong demand and encouraging new fixtures in the ultra-deepwater markets.  To capitalize on this, the company is focused on improving operations of newbuild drillships. Rowan expects growing demand and the resultant higher jackup day rates to lead to strong earnings growth.
 
Rowan holds a Zacks Rank #3, which is equivalent to a Hold rating for a period of 1 to 3 months. However, there are other companies in the oil and gas industry that are expected to perform well in the short term. These include Range Resources Corporation (RRC), Gulfmark Offshore, Inc. (GLF) and Dril-Quip, Inc. (DRQ) with a Zacks Rank #1 (Strong Buy).

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