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Rowan to Receive Premature Drilling Contract Compensation
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Rowan Companies plc announced that owing to the premature cancellation of one of its drilling contracts it would receive millions in compensation. The company’s drilling contract for the drillship Rowan Relentless with its customer Freeport-McMoRan Inc. (Freeport) was terminated with immediate effect. The contract was scheduled to terminate in Jun 2017.
Per the agreement, Rowan would receive $215 million in cash from Freeport to settle outstanding receivables and the early termination of the contract. The company may also receive additional contingent payments of $10 million and $20 million, respectively, depending on the average price of oil over a 12-month period. In addition, Rowan expects to reduce its costs for the Rowan Relentless by efficient warm stacking of the rig.
Rowan is a global provider of contract drilling services with a fleet of 31 mobile offshore drilling units comprising 27 jack-up rigs and four ultra-deepwater drillships. The company's fleet operates worldwide, including the United States Gulf of Mexico, the United Kingdom and Norwegian sectors of the North Sea, the Middle East, and Central & South America.
The company’s remarkable cost-control effort is a major positive in the current scenario of falling commodity prices. Rowan’s premium high-specification rig fleet enjoys greater utilization than most other shallow-water fleet. We believe that the company, with its improved rig execution level, will benefit from the high-spec jackup market and mining equipment orders.
However, in the current scenario of falling oil prices, most of the oil majors are reducing their operations and cutting expenses. Thus, we believe that even Rowan’s earnings will be adversely impacted. Any contract extension on the shelf in the Gulf of Mexico will be at significantly lower dayrates than the earlier ones and will also be for a shorter period.
Rowan carries a Zacks Rank #3 (Hold). Some better-ranked players from the same space are CVR Refining, LP , PetroChina Co. Ltd. and Braskem S.A. (BAK - Free Report) . Each of these stocks sports a Zacks Rank #1 (Strong Buy).
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Rowan to Receive Premature Drilling Contract Compensation
Rowan Companies plc announced that owing to the premature cancellation of one of its drilling contracts it would receive millions in compensation. The company’s drilling contract for the drillship Rowan Relentless with its customer Freeport-McMoRan Inc. (Freeport) was terminated with immediate effect. The contract was scheduled to terminate in Jun 2017.
Per the agreement, Rowan would receive $215 million in cash from Freeport to settle outstanding receivables and the early termination of the contract. The company may also receive additional contingent payments of $10 million and $20 million, respectively, depending on the average price of oil over a 12-month period. In addition, Rowan expects to reduce its costs for the Rowan Relentless by efficient warm stacking of the rig.
Rowan is a global provider of contract drilling services with a fleet of 31 mobile offshore drilling units comprising 27 jack-up rigs and four ultra-deepwater drillships. The company's fleet operates worldwide, including the United States Gulf of Mexico, the United Kingdom and Norwegian sectors of the North Sea, the Middle East, and Central & South America.
The company’s remarkable cost-control effort is a major positive in the current scenario of falling commodity prices. Rowan’s premium high-specification rig fleet enjoys greater utilization than most other shallow-water fleet. We believe that the company, with its improved rig execution level, will benefit from the high-spec jackup market and mining equipment orders.
However, in the current scenario of falling oil prices, most of the oil majors are reducing their operations and cutting expenses. Thus, we believe that even Rowan’s earnings will be adversely impacted. Any contract extension on the shelf in the Gulf of Mexico will be at significantly lower dayrates than the earlier ones and will also be for a shorter period.
Rowan carries a Zacks Rank #3 (Hold). Some better-ranked players from the same space are CVR Refining, LP , PetroChina Co. Ltd. and Braskem S.A. (BAK - Free Report) . Each of these stocks sports a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>