Houston-based drilling contractor
Rowan Companies plc
) has exercised its option to add a fourth ultra-deepwater
drillship to its existing fleet. Hyundai Heavy Industries Co., Ltd.
will build this GustoMSC P10,000 design drillship for Rowan.
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The new addition to Rowan's fleet will be constructed at the South
Korea shipyard and is scheduled for delivery in March 2015. The
drillship is estimated to cost about $620 million including
commissioning, project management and spares.
The drillship will have additional riser of 2,000 feet, which will
facilitate operations in water depths of about 12,000 feet. Upon
delivery, the drillship will help in curtailing the non-productive
time as a second blowout preventer (BOP) will be fitted for this
Rowan is likely to incur costs related to operational training and
personnel ramp up before the well becomes operational. Taken
together, the costs for the additional riser and BOP as well as for
workforce upgrade and training are likely to touch $75 million.
The total cost of the fourth drillship for the company is expected
to increase by approximately 6% versus the first three drillships,
mainly due to equipment price escalation and an anticipated
increase in labor cost.
Rowan 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
Rowan's first ultra-deepwater drillship, the Rowan Renaissance was
recently contracted for three-years. It is still under construction
at Hyundai Heavy Industries with delivery scheduled in late 2013.
The second and third drillships are expected to join the company's
fleet in the second and fourth quarters of 2014, respectively.
With a focus on West Africa and the U.S. Gulf of Mexico, followed
by East Africa, Rowan is pursuing about 16 prospects for its other
two uncontracted drillships. Rowan is the seventh largest offshore
drilling contractor in the world, while
) is the world's largest offshore drilling contractor.
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.