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Rowan Companies Inc.’s (RDC - Analyst Report) adjusted fourth quarter 2012 earnings from continuing operations came in at 82 cents per share, beating the Zacks Consensus Estimate of 49 cents.

Quarterly earnings also improved from the adjusted year-ago profit level of 32 cents. The outperformance was mainly attributable to increased activity from fleet additions and higher utilization of existing rigs between periods.

Total revenue grew 28.8% year over year to $354.2 million in the reported quarter, and missed our expectation of $357.0 million.

Dayrates and Utilization

The company’s Gulf of Mexico rigs experienced a dayrate of $127,500 (versus $114,200 in the year-ago quarter), Middle East rigs saw a dayrate of $129,600 (versus $137,600 a year ago) and North Sea rigs’ dayrate was $234,900 (versus $218,600 in the year-ago quarter).

The overall dayrate of all offshore rigs was $153,500 (versus $149,900 in the fourth-quarter 2011). Average utilization of the company’s rig improved to 79% from 68% in the year-earlier quarter.


As of Dec 31, 2012, the cash balance was $1,024.0 million and long-term debt (including current maturities) was $2,009.6 million. The debt-to-capitalization ratio was 30.7% versus 23.7% in the prior quarter.

To Conclude

Houston, Texas-based Rowan Companies is a provider of international and domestic contract drilling and aviation services. During the quarter, the company experienced strong demand as well as solid dayrates for high-specification jackups in most of the markets.

Recently, the company entered into a three-year contract for the first of the four states of the art drillships. This contributed to a record contract backlog of $3.5 billion at the end of 2012.

Rowan holds a Zacks Rank #3, which is equivalent to a Hold rating for a period of 1 to 3 months. However, there are other companies in the oil and gas industry that are expected to perform well in the coming 1 to 3 months. These include Helmerich & Payne, Inc. (HP - Analyst Report), Patterson-UTI Energy Inc. (PTEN - Analyst Report) and Total SA (TOT - Analyst Report) with Zacks Rank #2 (Buy).

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