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Rowan blames financial slide on idle Gulf rigs Altered drilling contract in the North Sea also cited; company incurred loss of $11.3 million on revenues of $170.5 million in first quarter Ray Tyson Petroleum News Houston Correspondent
Contract driller Rowan admits it performed poorly on the financial front during the 2004 first quarter, blaming idle rigs in the Gulf of Mexico and an altered drilling contract in the North Sea.
Rowan, first of the major drillers to report first-quarter results, said April 14 that it incurred a loss of $11.3 million or 11 cents per share on revenues of $170.5 million. That compares to a loss of $17.2 million or 18 cents per share on revenues of $131.4 million in the year-ago quarter.
While a definite improvement compared to the same period last year, the company’s loss for this year’s first quarter was more than twice the nickel-per-share loss analysts had expected.
In fact, the company’s income loss in the recent quarter was “well below what we had originally anticipated,” said Danny McNease, Rowan’s president and chief executive officer.
He said the “the primary cause of our poor financial performance” was the inadequate utilization of several Gulf of Mexico rigs, including two Gorillas and one Super Gorilla class jack-up that have been largely idle since January.
In addition, he said, the amendment of Rowan’s North Sea drilling contract for the Gorilla VII had the effect of reducing the drilling revenues by more than $2 million during the quarter. Rowan previously announced that it agreed to temporarily reduce the day rate on Gorilla VII’s drilling-production contract in the North Sea to help extend the productive life of the aged Ardmore field. On a positive note, the project could yield work beyond the contract’s minimum 18-month term, the company said. Rowan expects upward pressure on day rates to intensify Despite its performance in the first quarter, “we continue to see signs of more favorable business conditions on the horizon,” McNease said. “We believe that as the Gulf of Mexico jackup market continues to tighten, the upward pressure on day rates will intensify.”
He said the addition later this month of Rowan’s first Tarzan Class jackup, the Scooter Yeargain, will enhance the company’s position in the emerging deep gas market on the Gulf of Mexico’s continental shelf. “We are continuing to pursue overseas opportunities for our Gorilla and Super Gorilla class jack-ups and fully expect that one or more of such rigs currently positioned in the Gulf of Mexico will be relocated abroad before the end of this year,” McNease said.
He said the Gorilla V completed its most recent assignment offshore eastern Canada in late March and was expected to go back to work in the area by the end of April.
He also said the company’s prospects for its mining equipment group “have never been better,” noting that Rowan’s manufacturing backlog of $58 million is at a six-year high.
Rowan’s Gulf of Mexico rig utilization was 82 percent during the first quarter of 2004, compared to 92 percent in the fourth quarter of 2003 and 90 percent in the year-ago period. The average day rate in the Gulf of $39,700 decreased by $2,700, or 6 percent from the fourth quarter of 2003, but was up by $5,000 or 14 percent from the year-earlier period.
Land rig utilization was 73 percent during the first quarter of 2004, versus 80 percent in the fourth quarter of 2003 and 66 percent in the year-ago period. The average land rig day rate of $11,000 decreased by less than $200 or 1 percent from the fourth quarter of 2003, but was up by $1,200 or 12 percent compared to the same period last year, the company said.
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