Rowan Expects 3Q08 Operating Results to Fall Short of Estimates
Danny McNease, Rowan Chairman and Chief Executive Officer, commented, "The Gorilla V should return to service for Total next weekend following approximately 45 days of shipyard time for upgrades. Last month, the Rowan-Middletown completed a 36-day shipyard stay. In each case, we have enhanced the operational capability of the rig at a cost to current period results. Collectively, these events are expected to reduce our third quarter 2008 revenues by more than $11 million and our net income by approximately $.06 per share. We view each as an investment well worth making.
"Our loss of the Rowan-Anchorage during Hurricane Ike was a blow to our drilling operations. At its current day rate, the loss of the rig will reduce our 2008 drilling revenues by over $6.5 million, including more than $1 million during the third quarter. Insurance proceeds from the loss are expected to yield a $38 million gain upon collection, which should occur in the fourth quarter.
"The after effects of the storm have proven even more disruptive to our Houston-based manufacturing operations. Power outages and fuel shortages throughout the Houston area have interrupted our manufacturing supply chain and slowed our ability to ship completed products. Employee evacuations and mandated citywide curfews have forced reductions in plant operating hours and production, in our facility as well as those of many area vendors. Certain key suppliers have advised of minimum 30-day delays in delivery of critical components. While these are temporary circumstances that are being remedied, they have adversely impacted our 2008 operating results. We expect that our external manufacturing revenues for the third quarter will be down sequentially from the second quarter by approximately 20-25%, nearly all of which is attributable to our production and shipping delays in Houston, and over half of that amount can be directly traced to effects of the storm. We have continued to add to our backlog of orders in recent months and the long-term outlook for our manufacturing division has never been better.
"As a result of these and other factors, our third quarter 2008 net operating results (excluding gains) will fall short of current consensus estimates, and are expected to be in the range of $0.85 to $0.88 per share."