Rowan Considers Accelerating Newbuild Program
Rowan Companies says that in the aftermath of Hurricane Rita and the resulting damage sustained by its offshore fleet, the Company is taking steps to accelerate the replacement of lost revenues.
As previously reported, the Company had one of its jack-up rigs, the Rowan-Louisiana, severely damaged during the storm while three other jack-ups, the Rowan-Odessa, Rowan-Halifax and Rowan-Fort Worth, are missing and have apparently sunk. The hull of the Rowan-Louisiana, with some leg section intact, survived the storm and is aground near Cameron, Louisiana. Underwater surveys conducted thus far show the detached legs of each rig at its pre-storm location, though very little other debris from the rigs has been detected in the immediate area. Weather conditions and a shortage of available marine equipment have hampered the Company's recovery efforts.
The rigs were operating under contracts that provided for total revenues of approximately $290,000 per day, and are collectively insured for approximately $26 million more than their aggregate carrying value. Damage to the Company's other Gulf of Mexico rigs is minimal.
Danny McNease, Chairman and Chief Executive Officer, commented, "Twice in a matter of weeks, Mother Nature has dealt a tremendous blow to the entire Gulf Coast region, and Rowan was not spared. We are thankful our employees remained safe throughout this ordeal. We are now moving forward with a plan, utilizing the resources of our manufacturing division, to replace our lost revenues as quickly as possible.
"First, we have increased our land rig construction budget. By the end of the second quarter of 2006, we should have nine additional land rigs working under term contracts and collectively contributing approximately $200,000 of incremental revenues per day. Second, we are reviewing the economic feasibility of accelerating the construction of our third Tarzan Class jack-up, the Hank Boswell, which is currently on schedule for delivery during the fourth quarter of next year. We are also reviewing the possibility of accelerating the construction of Tarzan IV. Third, we are expanding our steel production capacity in Longview, Texas, which should expedite the delivery of jack-up rig kits, and are reviewing options for increasing the capacity of our Vicksburg, Mississippi shipyard. Fourth, we are inspecting the hull of the Rowan-Louisiana and have begun to assess the feasibility of returning the rig to service.
"These actions would not be possible without the Company's manufacturing capability. Through our ownership of LeTourneau, LEWCO and OEM, Rowan is uniquely positioned to manage the construction schedule for our new rigs and many of their major components while ensuring the availability of parts and services. In this effort, we are able to draw upon the expertise of our drilling and manufacturing personnel.
"Market conditions in Rowan's primary businesses have never been
better, and the outlook remains very favorable. Drilling day rates in
the Gulf of Mexico have moved well beyond previous records and our
manufacturing backlog, at over $300 million, is at an all-time high.
Recent events should only increase the demand for drilling equipment
and components and the upward pressure on jack-up day rates. The
Company is poised to benefit on both fronts."