"Preparing for and starting up overseas drilling assignments has also increased our drilling operations costs and expenses. These rigs had been running virtually full-time for about two years when they entered the shipyard, as have most of our other offshore rigs. Thus, more extensive maintenance has often been required than in previous periods. In addition, many consumable parts and supplies cost more today and are requiring longer lead times for delivery, especially in certain foreign areas. Thus, we are ordering more of such items, which we expense upon purchase, to ensure their availability and limit rig downtime. Further, our labor costs now include not only a significant increment for expatriates working abroad but also the cost of duplicative local personnel undergoing training. We are working to reduce the expatriate complement on our overseas rigs. Finally, returning to the Middle East market after a 25-year absence and then doubling the number of rigs operating there has required a significant expenditure for infrastructure. As a result of these and other factors, we expect that our drilling operations costs will be in the range of $146-148 million for the fourth quarter of 2006, or about 40% higher than the same period of 2005. Though certain cost pressures will remain with us in early 2007 and beyond, we expect that this trend in our overall drilling operating costs will begin to reverse in the second quarter of 2007."
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. Common Stock trading symbol: RDC.
Most Popular Articles