Rowan Companies (RDC) Beats Q2 Earnings, Revenues in Line

Rowan Companies plc's RDC adjusted second-quarter 2014 earnings from continuing operations came in at 33 cents per share, beating the Zacks Consensus Estimate of 24 cents.

Quarterly earnings, however, decreased from the adjusted year-ago profit level of 57 cents. The year-over-year decline was due to the earlier disclosed out-of-service periods of 13% during the quarter.

Total revenue increased 3.4% year over year to $422.9 million in the reported quarter and came in line with our expectation of $423.0 million.

Dayrates and Utilization

The company's Gulf of Mexico rigs experienced a dayrate of $156,900 (versus $137,100 in the year-ago quarter), the Middle East rigs saw a dayrate of $141,400 (versus $137,700 in the prior-year quarter) and North Sea rigs' dayrate was $290,500 (versus $256,800 in the year-earlier quarter).

The overall dayrate of all offshore rigs was $185,700 (versus $172,800 in second-quarter 2013). Average utilization of the company's rig was 79% versus 80% in the year-earlier quarter.

Financials

As of Jun 30, 2014, the cash balance was $1,247.0 million and long-term debt (including current maturities) was $2,807.8 million. The debt-to-capitalization ratio was 36.0% versus 36.2% 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 a strong demand for its high-specification jackups and ultra deepwater drillships in most of the markets.

Going forward, Rowan Companies expects to strengthen its position further 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 the increasing demand will lead to higher jack-up day rates, which would result in earnings growth.

Currently, Rowan Companies has a Zacks Rank #3 (Hold). However, better-ranked stocks in the oil and gas industry that are expected to perform well include Weatherford International plc WFT, CNOOC Ltd CEO and Natural Gas Services Group Inc. NGS. All of these have a Zacks Rank #1 (Strong Buy).

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