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Rowan Companies (RDC) Incurs Narrower-Than-Expected Q3 Loss

Contract drilling service provider, Rowan Companies plc RDC reported better-than-expected third-quarter 2017 results owing to lower costs and expenses and increased average utilization, partially offset by fall in dayrates.

The company’s adjusted third-quarter 2017 loss from continuing operations was 16 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 42 cents per share. However, the bottom line deteriorated significantly from the year-ago quarter profit of 30 cents per share.

Total revenues were $291.6 million in the third quarter compared with $379.4 million in the prior-year quarter. Revenues, however, beat the Zacks Consensus Estimate of $276 million.

Rowan Companies PLC Price, Consensus and EPS Surprise

 

Rowan Companies PLC Price, Consensus and EPS Surprise | Rowan Companies PLC Quote

Dayrates and Utilization

The company's deepwater rigs had a dayrate of $476,600 compared with $490,000 in the year-ago quarter. Jackup rigs saw a dayrate of $122,100 compared with $158,800 in the prior-year quarter.

The overall dayrate of rigs was $157,700 compared with $210,100 in third-quarter 2016. Average utilization of the company's rigs was 74% compared with 69% in the comparable quarter last year.

As of Sep 30, 2017, the company had a fleet of 26 mobile offshore drilling units including 22 jack-up rigs and four ultra-deepwater drillships.

Total Costs and Expenses

In the quarter, the company’s costs and expenses were $298.6 million compared with $345.8 million in the year-ago comparable period. The decline in expenses can be attributed to 10% fall in direct operating costs.

Financials

As of Sep 30, 2017, the company's cash balance was $1,220.2 million while its long-term debt (excluding current maturities) was $2,510.2 million. The long-term debt-to-capitalization ratio was 32.2%.

About Rowan Companies

Houston, TX-based Rowan Companies provides international and domestic contract drilling and aviation services. It focuses mainly on high-specification, premium jack-up rigs and ultra-deepwater drillships. It also operates a mini-steel mill, a manufacturing facility that produces heavy equipment for mining, timber and transportation industries and a drilling products group that designs or builds about one third of all mobile offshore jackup drilling rigs. The company's fleet of 31 rigs is located worldwide, including the United States, the United Kingdom, Middle East, the North Sea, Trinidad and the Gulf of Mexico (GoM).

The ARO Drilling joint venture with Saudi Arabian Oil Company ("Saudi Aramco") is expected to provide a solid push to Rowan Companies’ earnings in the next 10 years.

Price Performance

Shares of Rowan Companies have gained 25.5% in the third quarter of 2017, outperforming the industry’s 8% rise.

Zacks Rank and Stocks to Consider

Rowan Companies presently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the oil and energy sector are Braskem S.A. BAK, Par Pacific Holdings, Inc. PARR and Northern Oil and Gas, Inc. NOG. Braskem and Par Pacific sport a Zacks Rank #1 (Strong Buy), while Northern Oil and Gas has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Braskem’s 2017 earnings are expected to grow 12.1% year over year. The company delivered a positive earnings surprise of 68.5% in the second quarter of 2017.

Par Pacific’s sales for the third quarter of 2017 are expected to increase 28.5% year over year. The company delivered an average positive earnings surprise of 195.3% in the last four quarters.

Northern Oil and Gas’s sales for the third quarter of 2017 are expected to increase 9.6% year over year. The company delivered an average positive earnings surprise of 66.7% in the last four quarters.

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