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Business looking up for drillers, service companies Rowan and BJ Services first to report, both turn fourth quarter profits Petroleum News
Rowan Companies and BJ Services, the first major contract driller and oilfield services company out of the earnings chute, said enough to clearly indicate these sectors are in recovery and getting stronger with every quarter following a tough couple of years.
Rowan climbed out of the red in the 2003 fourth quarter, reporting a profit of $4.4 million compared to a loss of $2.8 million in the year-ago quarter. The company did miss analysts’ expectations by 2 cents per share on revenues of $195.8 million, but has now managed to string together two consecutive profitable quarters.
BJ turned in a quarterly profit of $61.5 million or 38 cents per share on revenues of $600.8 million, up 2 percent from the prior quarter and a whopping 81 percent versus the same period a year earlier. Moreover, the company is looking for earnings to rise 15 to 20 percent in 2004, largely on improving market conditions.
“We’re getting solid feedback from our customers,” Bill Stewart, BJ’s chief executive officer, said in a Jan. 20 conference call with analysts. Rig utilization and day rates up at end of year Rowan, which posted a profit of 5 cents per share for last year’s final quarter, did lose $7.8 million for full-year 2003. However, company revenues, rig utilization and day rates in December were at or near highs for the year, Danny McNease, Rowan’s chief executive officer, told analysts in a Jan. 15 call.
McNease also said mushrooming LNG projects in the Middle East, Australia and Trinidad should provide plenty of work for its premium jackup rigs in the near-term.
“We are optimistic that 2004 will continue this trend and are confident that Rowan rigs will continue to lead deep-shelf drilling efforts in the ever-tightening Gulf of Mexico market,” McNease said, citing a recent survey of independent operators indicating exploration and production activities this year could exceed 2003 levels by nearly 25 percent.
McNease’s observations are supported by rig monitor Baker Hughes, which counted 101 rigs operating in the Gulf for the week ending Jan. 16, up by three but still down by six rigs compared to the same weekly period last year. Day rates tend to increase over time as specific rig markets tighten.
Rowan’s optimism also is fueled by declining natural gas production in the United States and increased estimates for deep gas reserves in the relatively shallow waters of the Gulf’s continental shelf, a hot bed of exploration activity and a focus for Rowan’s high-powered Gorilla rigs.
The company’s worldwide offshore rig utilization was 92 percent during the 2003 fourth quarter, compared to 94 percent in the third quarter and 88 percent in the year-ago period. Gulf day rates of $42,400 increased by $3,300 or 9 percent from the third quarter and by $6,900 or 19 percent for the same period last year.
Rowan’s land rig utilization was 80 percent during the 2003 fourth quarter versus 68 percent for the year-ago period. The average day rate of $11,200 increased by $200 or 2 percent from the 2003 third quarter and by $1,700 or 18 percent from the year-ago period, the company said.
Rowan’s lower-than-expected profit for the 2003 fourth quarter was attributed largely to the company’s aviation division in the Gulf and Alaska, which generated $2.5 million compared to $29.2 million a year earlier. BJ’s operating income margins up Meanwhile, BJ said operating income margins for its fiscal year 2004 first quarter ending in December were 15.8 percent, up from 15.5 percent in the previous quarter and up 11.4 percent a year earlier. The improvement was attributed primarily to gains in the United States, Canada and Mexico and efficiencies in its labor force and equipment utilization.
Results for BJ’s mainstay pressure pumping services outside North America were less impressive, with revenues down 2 percent quarter-over-quarter. That performance was attributed largely to slower activity in Saudi Arabia and Abu Dhabi, partly offset by increases in Africa.
Revenue from BJ’s other services — tools, fluid, tubular, pipelines and chemicals — was flat sequentially but up 16 percent from the same period a year earlier. All service lines increased except for completion fluids, which declined primarily because of less activity in the Gulf of Mexico, the company said. BJ poised to increase hiring BJ also is poised to gear up on the hiring front. Stewart told analysts he has received requests from field divisions to fill some 150 positions, another strong indication the oilfield service market is on the upswing. “We need to add personnel,” he said.
BJ also is flush with cash, which the Stewart said he would prefer to use for acquisitions but also is available to pay down debt and to buy back shares of the company. “We do have a significant amount of cash,” he said.
However, while BJ is expecting a strong performance ahead in North America, it expects continued softness in the Gulf of Mexico rig market.
Tidewater, which owns and operates the world’s largest fleet of vessels serving the global offshore industry, proves just how tough it can be in the Gulf where the company has reverted to expense-cutting to cope with operating losses.
The company recorded earnings of $18.3 million or 32 cents per share on revenues of $169.4 million for its fiscal year 2003 third quarter ending in December. That compares to earnings of $23.6 million or 42 cents per share on revenues of $163 million for the same period a year earlier.
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