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Rowan (RDC) to Lay Off Workers on Rigs at GoM: Here's Why

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Offshore driller Rowan Companies plc is planning to lay off workers on rigs operating in the Gulf of Mexico (GoM). The news does not come as a surprise in the wake of sluggish drilling activities in the offshore fields where a number of rigs are being put out of work on loss of contracts.

As per a letter sent to Texas Workforce Commission (TWC) by Rowan, the company will reduce headcount by 60 to 85 on a jackup – Rowan EXL III – operating in the GoM for customer Arena Offshore. Rowan is expected to start retrenching workers from October after the contact from the jackup expires in September-end. The driller added that if Rowan EXL III gets fresh contract in the near term then a few of the retrenched workers will be rehired.

Along with Rowan EXL III, the company’s Gorilla IV jack-up rig will likely end its contract by October-end. Gorilla IV is working in the shallow Gulf serving Arena. Hence, workers at Gorilla IV might lose their jobs.

Investors should know that jack-up rigs are facing weak demand in the GoM. Hence, it has been difficult for the company to gain fresh contracts for Gorilla IV and Rowan EXL III jack-ups.  

Houston, TX-based Rowan is an offshore contract driller engaged in exploration and production operations all over the world. Recently, the company posted better-than-expected results in second-quarter 2017 following contract wins along with lower costs and expenses.

However, over the last year, the company’s price fell 36.8%, narrower than the broader industry’s 37.4% decline.

As a result, the company currently carries a Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S. equity market over the next one to three months.

A few better-ranked players in the energy sector are TransCanada Corporation (TRP - Free Report) , Transmontaigne Partners LP and Range Resources Corporation (RRC - Free Report) . All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.  

TransCanada posted an average positive earnings surprise of 4.06% over the last four quarters.

Transmontaigne posted an average positive earnings surprise of 6.60% over the last four quarters.

Range Resources’s 2017 earnings are estimated to grow 116.5%.

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