Rowan Reports Third Quarter Operating Result
For the three months ended September 30, 2006, Rowan Companies, Inc. (NYSE:RDC) generated net income of $87.0 million, or 78 cents per share, compared to $74.6 million, or 67 cents per share, in the same period of 2005. Revenues were a record $417.1 million in the third quarter of 2006, compared to $284.4 million in the third quarter of 2005.
Current quarter results included $2.3 million, or 2 cents per share, of gains on asset disposals, compared to $31.9 million, or 18 cents per share, in the third quarter of 2005. The current quarter results also included $1.3 million, or 1 cent per share, of after-tax income from discontinued operations related to the 2004 sale of the Company's aviation operations.
For the nine months ended September 30, 2006, Rowan generated net income of $255.8 million, or $2.29 per share, compared to $160.3 million, or $1.46 per share, in the same period of 2005. Revenues were $1.1 billion during the first nine months of 2006 compared to $751.4 million in the first nine months of 2005. The 2006 results included $1.3 million, or 1 cent per share, of after-tax income from discontinued operations, compared to $12.0 million, or 11 cents per share in 2005.
Rowan's offshore rig utilization was 91% during the third quarter of 2006, down from 97% in the comparable 2005 period, as two Gulf of Mexico rigs entered the shipyard in August in preparation for two-year assignments in Qatar and another was relocated to Trinidad during the period. The utilization of Rowan's 10 other available Gulf of Mexico rigs was 95% during the third quarter of 2006. The Company's average offshore day rate was a record $146,800 during the third quarter of 2006, up by $2,900, or 2%, from the second quarter and by $63,100, or 75%, from the third quarter of 2005.
Rowan's land rig utilization was 98% during the third quarter of 2006, up from 89% in the comparable 2005 period. The Company's average land rig day rate was $23,000 during the third quarter of 2006, up by $600, or 3%, from the second quarter and by $4,200, or 22%, from the third quarter of 2005.
The Company's external manufacturing backlog was a record $578 million at September 30, and included $294 million in the marine group, $193 million in the drilling products group and $52 million in the equipment group.
Danny McNease, Chairman and Chief Executive Officer, commented, "Rowan's third quarter operating results were among the best in our history, though they were hampered somewhat by rig downtime. During the period, unscheduled rig downtime resulting primarily from top-drive problems reduced expected revenues by almost $6 million. We also spent time preparing three rigs for long-term assignments overseas, which, at then-existing rates, caused a $13 million shortfall in expected revenues. Lump-sum fees related to these overseas contracts are being deferred until drilling operations commence.
"Our manufacturing division's three-month acceleration of the Hank Boswell delivery should yield at least $12 million of incremental drilling revenues to the Company in the fourth quarter, though these efforts did increase labor costs related to other marine construction projects. In addition, our third quarter manufacturing results included a charge for environmental remediation at our Longview steel mill. These two items combined to reduce manufacturing margins by approximately $8 million during the third quarter.
"Looking ahead, we expect that our fourth quarter operating results will be very similar to the third quarter. Ongoing preparations for overseas drilling assignments will continue to defer related revenues from the fourth quarter until the start of operations in 2007, and such deferred amounts will be recognized over two- to four-year contract periods. Operating costs have been impacted by higher insurance costs and general inflation in the oilfield, and we do not expect any significant changes in the near term. Our manufacturing results will continue to be heavily influenced by sales mix, though, barring any unforeseen events, our margins should return to the levels we achieved earlier in 2006. All in all, we expect that Rowan's 2006 net income will exceed $3.00 per share, easily the best in the Company's 83-year history.
"By the end of March 2007, we should have 12 of our 21 offshore rigs working in international markets, and most under long-term contracts. This is consistent with our stated plan to diversify our drilling operations away from the primarily spot drilling market of the Gulf of Mexico. We will continue to pursue term contracts at attractive rates, and expect that most such opportunities will remain outside the Gulf of Mexico. Our backlog of business continues to grow, giving us revenue and earnings visibility into 2011 and confidence in our prospects for 2007 and beyond."
Rowan Companies, Inc. is a major provider of international and domestic contract drilling services. The Company also owns and operates a manufacturing division that produces equipment for the drilling, mining and timber industries. The Company's stock is traded on the New York Stock Exchange and NYSE Arca. Common Stock trading symbol: RDC.