Rowan Companies Inc.
) posted better-than-expected first quarter 2012 results, owing to
greater demand and higher day rates for high specification jackups
in the majority of markets. The company's quarterly earnings from
continuing operations came in at 45 cents per share, exceeding the
Zacks Consensus Estimate of 34 cents. The quarterly results also
substantially surpassed the year-ago level of 21 cents.
Total revenue expanded almost 62% year over year to $333.5
million in the reported quarter, and beat our expectation of $317.0
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
$118,200 (level with the year-ago quarter), Middle East rigs saw a
dayrate of $145,800 (versus $128,700 a year ago) and North Sea rigs
showed $227,700 (versus $182,500 in the year-ago quarter). The
overall dayrate of all offshore rigs was $156,500 (versus $136,400
in the first-quarter 2011). Average utilization of the company's
rig improved to 75% from 65% in the year-earlier quarter.
As of March 31, 2012, cash balance was $342.5 million and
long-term debt (including current maturities) was $1,122.2 million.
Debt-to-capitalization ratio was 20.4% versus 20.8% in the prior
Houston, Texas-based Rowan Companies Inc. 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. Rowan also enhanced its Southeast Asian footprint with two
new rigs commitment bringing the total count to four in the
As a part of Rowan's effort to diversify its markets
geographically, the company has also taken the decision to move its
official headquarters to the U.K., since most of its business comes
from outside the U.S.
However, considering the volatile macro backdrop along with
operational hindrances that could put pressure on the company's
performance in the upcoming quarters, we see a restricted upside
potential for Rowan's shares and expect the company to be on par
with the industry. Therefore, we maintain our long-term Neutral
Rowan, which competes with peers such as
), also holds a Zacks #3 Rank that translates to a short-term Hold
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