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Rowan narrows loss in second quarter on stronger Gulf rig use
Ray Tyson Petroleum News Houston correspondent
Rowan, first of the major contract drillers to report 2004 second-quarter earnings, narrowed its expected loss on stronger rig utilization in the Gulf of Mexico and landed a major contract on the Gulf’s continental shelf for one of the company’s specialized “ultra-deep” drilling rigs.
Rowan’s rig utilization in the U.S. Gulf during the second quarter rose to 88 percent compared to 82 percent in the prior quarter, setting the stage for a strong recovery that could pull the company out of the red later this year.
The company said its overall offshore fleet was 98 percent utilized in June and has remained near 100 percent in July, adding that rig day rates also are on the rise.
“We believe these favorable trends will continue throughout the third quarter, barring any dramatic decline in oil and natural gas prices,” Danny McNease, Rowan’s chief executive officer, said July 15.
Rowan’s average U.S. Gulf day rate of $42,200 in the 2004 second quarter increased by $2,500, or 6 percent, from the prior quarter, and by $6,500, or 18 percent, from the year-earlier period.
The company said land rig utilization was 82 percent during the second quarter of 2004 versus 73 percent in the prior quarter and 76 percent in the year-earlier period. The average land rig day rate of $11,400 during this year’s second quarter increased by $400, or 4 percent, from the previous quarter, and by $800, or 7 percent, from the year-earlier period.
“We have continued to add to our backlog of drilling commitments in the Gulf of Mexico and, in many instances, have obtained day rate increases as our contracts have turned over,” McNease said. Second-quarter loss of 2 cents per share Still, the big contract driller said it incurred a 2004 second-quarter loss of $2.1 million, or 2 cents per share, on revenues of $190.9 million, a slight improvement when compared to a loss of 3 cents per share analysts had expected. That also compared favorably to a loss of $6.6 million, or 7 cents per share, on revenues of $158.1 million, reported in last year’s second quarter. But the company stressed that all 25 of its offshore rigs were under contract for the first time in about six months, noting that two of its Gorilla rigs and one Super Gorilla class jack-up had been largely idle since January.
However, Gorilla V will conclude its current drilling assignment offshore eastern Canada within the next 30 days, the company said, adding that the rig will then be relocated to the North Sea for a one-well contract expected to span almost 11 months of drilling, mobilization and outfitting time and provide about $38 million of revenues.
McNease said Rowan would continue “to aggressively pursue overseas opportunities” for its Gorilla and Super Gorilla-class rigs.
“We expect our departure from Canada to be temporary and believe that one of our Gorilla rigs currently positioned in the Gulf of Mexico could be relocated there by the second quarter of 2005,” he said.
The company said it also is pursuing contracts for work offshore Qatar, Trinidad and Venezuela beginning later this year or in early 2005. Company has done much of ultra-deep shelf Gulf drilling Moreover, Rowan announced that it was awarded a drilling contract by an undisclosed major integrated oil and gas company to drill an ultra-deep well in the relatively shallow waters of the U.S. Gulf’s continental shelf.
Rowan, largely in pursuit of natural gas reserves, has drilled about two-thirds of all the wells drilled thus far in the U.S. Gulf in excess of 18,000 feet.
The one-well assignment is expected to begin in December 2004 or January 2005 and should last about one year, Rowan said. The company said it committed its newest rig to the project, the Tarzan Class Scooter Yeargain, subject to availability, or one of three other specialized jack-ups. Rowan expects revenues from the contract to range from $28 million to as much as $35 million, depending upon the rig utilized.
Revenues contributed by Rowan’s manufacturing division during the second quarter of 2004 were the highest in their 10-year history, the company said, adding that its manufacturing backlog of $58.5 million is up by almost $42 million in the past year.
Included in Rowan’s second quarter results were the effects of gains on helicopter sales, which reduced aviation operating expenses by $4.8 million, and a $4.3 million reduction in estimated airline revenue accruals following the introduction of a new passenger ticket tracking system. Collectively, the items had a negligible effect on the company’s per share loss during the period.
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