Rowan Reports Record Annual Revenues and Profits
For the year ended December 31, 2006, Rowan Companies, Inc. (NYSE:RDC) generated income from continuing operations of $317.0 million or $2.84 per share on revenues of $1,510.7 million, compared to income from continuing operations of $217.8 million or $1.97 per share on revenues of $1,068.8 million during 2005. Net income was $318.2 million or $2.85 per share in 2006, compared to $229.8 million or $2.08 per share in 2005.
For the three months ended December 31, 2006, the Company generated income from continuing operations of $62.4 million or 56 cents per share on $410.9 million of revenues, compared to income from continuing operations of $69.5 million or 63 cents per share on revenues of $317.4 million in the same period of 2005. Current quarter results included $12.8 million or 10 cents per share of charges related to environmental matters, while the prior year quarter included $24.3 million or 14 cents per share of gains on asset disposals.
Rowan's offshore rig utilization decreased to 81% during the fourth quarter of 2006, from 93% during the comparable 2005 period. The Company realized 164 net fewer operating days during the current quarter from five rigs that were either preparing for or mobilizing to overseas assignments. Rowan's overall average offshore day rate was $144,500 during the fourth quarter of 2006, up by $40,300 or 39% from the comparable 2005 period but down by $2,300 or less than 2% from the third quarter of 2006.
Rowan's land rig utilization was 95% during the fourth quarter of 2006, up from 89% in the comparable 2005 period. The Company experienced 557 more operating days between periods as a result of the eight new rigs that were completed during 2006. Rowan's average land rig day rate was $22,700 during the fourth quarter of 2006, up by $1,500 or 7% from the comparable 2005 period but down by $300 or less than 2% from the third quarter of 2006.
The Company's external manufacturing backlog was $530 million at December 31, 2006, or more than one-third higher than the prior year level, and included $264 million of rigs, kits and components in the Offshore Products group, $190 million of pumps and land rig packages in the Drilling Systems group and $23 million of motors, drives and controls in the Power Systems group.
Danny McNease, Chairman and Chief Executive Officer, commented, "Rowan's 2006 operating results were easily the best in the Company's 83-year history. During the year, we successfully diversified our drilling operations away from the Gulf of Mexico market and obtained several long-term commitments that have dramatically improved our future revenue and earnings visibility.
"These actions negatively affected our 2006 operating results, however, as rig relocations temporarily halt the recognition of contract revenues. Our fourth quarter operating results, in particular, experienced an estimated $48 million revenue shortfall associated with relocating rigs, based upon average day rates then in effect. The first quarter of 2007 will be similarly impacted.
"As previously reported, our operating costs have also increased, in large part due to more extensive rig maintenance and greater parts and supply purchases, especially for the relocating rigs, and higher rig insurance premiums. Our labor costs have included a significant increment for expatriates working in the Middle East and the cost of duplicative local personnel undergoing training. In addition, our fourth quarter 2006 operating results included $12.8 million of environmental costs, including a $9 million charge for fines and environmental fund payments that we expect to pay in connection with a previously reported Department of Justice investigation and $3.8 million of incremental remediation expenses related to our Longview, Texas steel mill. We do not anticipate further charges will be incurred relating to either of these matters.
"By the end of March 2007, we expect to have all current relocations completed and all affected rigs again producing revenues. The infrastructure added for our Middle East operations should begin to reduce our cost of rig maintenance and the reduction of expatriate rig personnel should begin to relieve related labor and travel expenses. Our insurance coverage renews on April 1st and we are unsure at this point of the impact of any rate changes. Our repositioning of rigs has reduced our exposure to Gulf of Mexico hurricanes and should reduce our cost of coverage.
"Our manufacturing operations have continued to expand our line of innovative drilling products and we are confident that we will continue to make market inroads in 2007."