Rowan Companies Beats on Earnings and Rev - Analyst Blog

Rowan Companies plc's RDC adjusted first-quarter 2014 earnings from continuing operations came in at 28 cents per share, beating the Zacks Consensus Estimate of 21 cents.

Quarterly earnings, however, decreased from the adjusted year-ago profit level of 55 cents. The year-over-year decline was due to the earlier disclosed out-of-service periods for the Gorilla VI and Gorilla VII.

Total revenue decreased 4.2% year over year to $377.6 million in the reported quarter but beat our expectation of $375.0 million.

Dayrates and Utilization

The company's Gulf of Mexico rigs experienced a dayrate of $153,600 (versus $132,500 in the year-ago quarter), the Middle East rigs saw a dayrate of $136,000 (versus $135,400 in the prior-year quarter) and North Sea rigs' dayrate was $273,600 (versus $267,200 in the year-earlier quarter).

The overall dayrate of all offshore rigs was $171,400 (versus $173,200 in first-quarter 2013). Average utilization of the company's rig remained unchanged at 80% from the year-earlier quarter.

Financials

As of Mar 31, 2014, the cash balance was $1,440.4 million and long-term debt (including current maturities) was $2,808.0 million. The debt-to-capitalization ratio was 36.2% versus 30.4% in the prior quarter.

Conclusion

Houston, TX-based Rowan Companies is a provider of international and domestic contract drilling and aviation services. During the quarter, the company experienced strong demand for its high-specification jackups and ultra deepwater drillships in most of the markets.

Going forward, Rowan Companies expects further strengthening in the jackup markets, with strong 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 its operational execution of newbuild drillships. It believes that the growing demand will lead to higher jack-up day rates, that would lead to strong earnings increase.

Currently, Rowan Companies holds a Zacks Rank #3 (Hold). However, better-ranked stocks in the oil and gas industry that are expected to perform well include Unit Corp UNT, Targa Resources Partners LP NGLS and Boardwalk Pipeline Partners LP BWP. All of these have a Zacks Rank #1 (Strong Buy).