Rowan Companies Beats Q3 Earnings on Improved Dayrates - Analyst Blog

Rowan Companies plc's (RDC) adjusted third-quarter 2014 earnings from continuing operations came in at 63 cents per share, beating the Zacks Consensus Estimate of 58 cents. Quarterly earnings also increased from the adjusted year-ago profit level of 42 cents.

Total revenue increased 22.2% year over year to $467.7 million in the reported quarter but missed the Zacks Consensus Estimate of $477.0 million.

Dayrates and Utilization

The company's Gulf of Mexico rigs experienced a dayrate of $144,300 (versus $140,200 in the year-ago quarter), the Middle East rigs saw a dayrate of $141,100 (versus $137,200 in the prior-year quarter) and North Sea rigs' dayrate was $283,600 (versus $281,100 in the year-earlier quarter).

The overall dayrate of all offshore rigs was $174,300 (versus $169,200 in third-quarter 2013). Average utilization of the company's rig was 84% versus 80% in the year-earlier quarter.

Financials

As of Sep 30, 2014, the cash balance was $707.7 million and long-term debt (including current maturities) was $2,807.5 million. The debt-to-capitalization ratio was 35.5% versus 32.9% 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 intends to gain more strength in the jackup markets, given the strong demand for high-spec rigs, along with the growing demand and encouraging new fixtures in the ultra-deepwater markets.  To capitalize on these factors, the company is focused on improving its operational execution of newbuild drillships. It believes that demand growth will lead to higher jackup day rates, which would result in earnings power.

Currently, Rowan Companies has a Zacks Rank #3 (Hold). However, better-ranked stocks in the oil and gas industry include Petrobras Argentina SA (PZE), Murphy USA Inc. (MUSA) and Braskem S.A. (BAK). Each of these has a Zacks Rank #1 (Strong Buy).