Rowan Companies Inc.
's (
RDC
) adjusted third quarter 2012 earnings from continuing operations
came in at 39 cents per share, lower than the Zacks Consensus
Estimate of 48 cents. The results were hit by a number of
extraordinary items. However, quarterly earnings surpassed the
year-ago level of 25 cents.
Notably, total revenue expanded nearly 51% year over year to
$353.9 million in the reported quarter, and beat our expectation
of $342.0 million. The outperformance was mainly attributable to
increased activity from fleet additions and higher utilization of
existing rigs between periods.
Dayrates and Utilization
The company's Gulf of Mexico rigs experienced a dayrate of
$120,400 (versus $115,800 in the year-ago quarter), Middle East
rigs saw a dayrate of $129,300 (versus $125,400 a year ago) and
North Sea rigs showed $250,200 (versus $224,900 in the year-ago
quarter).
The overall dayrate of all offshore rigs was $161,500 (versus
$148,500 in the third-quarter 2011). Average utilization of the
company's rig improved to 75% from 61% in the year-earlier
quarter.
Financials
As of September 30, 2012, the cash balance was $328.3 million and
long-term debt (including current maturities) was $1,393.1
million. The debt-to-capitalization ratio was 23.7% versus 25.1%
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.
Recently, Rowan Companies exercised its option to add a fourth
ultra-deepwater drillship to its existing fleet. The company also
has another option agreement with Hyundai Heavy Industries for a
fifth drillship, to be exercised in the fourth quarter of 2012.
It is likely to be delivered in the third quarter of 2015.
With a focus on West Africa and the U.S. Gulf of Mexico, followed
by East Africa, Rowan is pursuing several prospects for its three
uncontracted drillships. Rowan is the seventh largest offshore
drilling contractor in the world, while
Transocean Ltd.
(
RIG
) leads the pack as the largest offshore drilling contractor.
Considering the volatile macro backdrop along with operational
hindrances that could put pressure on the company's performance
in the upcoming quarters, we see restricted upside potential for
Rowan's shares and expect the company to be on par with the
industry.
Rowan holds a Zacks #3 Rank, which is equivalent to a Hold rating
for a period of one to three months. Longer term, we maintain a
Neutral recommendation on the stock.
ROWAN COS PLC (RDC): Free Stock Analysis
Report
TRANSOCEAN LTD (RIG): Free Stock Analysis
Report
To read this article on Zacks.com click here.
Zacks Investment
Research