Rowan Takes a Hit in 3Q, Encouraged by New Contracting Activity


Rowan Gorilla VI
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For the three months ended September 30, 2009, Rowan Companies, Inc. generated net income of $78.4 million or $0.69 per share, compared to $114.1 million or $1.00 per share in the third quarter of 2008 and $96.6 million or $0.85 per share in the second quarter of 2009. Excluding the tax benefit described in the following paragraph, earnings in the third quarter of 2009 were $61.4 million or $0.54 per share. Revenues were $393.4 million in the third quarter of 2009, compared to $527.1 million in the third quarter of 2008 and $482.2 million in the second quarter of 2009.

Results for the third quarter of 2009 included a $17.0 million or $0.15 per share net tax benefit related to a recent third-party tax court ruling, which provided that certain foreign-source income is not taxable in the United States. This is in addition to the $8.0 million or $0.07 per share tax benefit recorded during the second quarter related to the same issue. Results for the third quarter of 2008 included gains on asset disposals of $21.4 million or $0.12 per share. There were no significant asset disposals in the second or third quarters of 2009.

Rowan's drilling operations generated revenues of $258.4 million in the third quarter of 2009, down by 28% from the prior-year quarter and by 19% from the second quarter of 2009 due primarily to lower rig utilization. The Company's gross drilling margin was 53% of revenues in the third quarter of 2009, down from 54% in the prior-year quarter and 57% in the second quarter of 2009. Income from drilling operations was $81.1 million in the third quarter of 2009, down by 51% from the prior-year quarter and by 37% from the second quarter of 2009.

Rowan's manufacturing operations generated external revenues of $135.0 million in the third quarter of 2009, down by 21% from the prior-year quarter and by 16% from the second quarter of 2009. The Company's gross manufacturing margin was 13% of revenues in the third quarter of 2009, up from 12% in the prior-year quarter and 9% in the second quarter of 2009. Income from manufacturing operations was $6.0 million in the third quarter of 2009, up by 13% from the prior-year quarter and by 122% from the second quarter of 2009.

Matt Ralls, President and Chief Executive Officer, commented, "Our third quarter results, both in drilling and manufacturing, benefitted from our contract backlog and great execution by our employees. While excess rig supply has, and will likely continue to, put pressure on day rates, we believe global demand for jackups and land rigs bottomed during the third quarter. Many drilling tenders remain highly competitive, but we are seeing a notable increase in demanding drilling projects for which our higher specification equipment and capable workforce provide a competitive advantage. We are encouraged by the increased contracting activity in the North America land and jackup drilling markets, and optimistic regarding the multiple inquiries for our Super Gorilla Class rigs, especially in the North Sea. In our manufacturing operations, a recent improvement in demand for our innovative mining equipment has been a positive development on top of our success in adding three new rig kit packages earlier this year."
 

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