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Rowan Companies plc’s (RDC - Analyst Report) adjusted first quarter 2013 earnings from continuing operations came in at 55 cents per share, beating the Zacks Consensus Estimate of 53 cents.

Quarterly earnings also improved from the adjusted year-ago profit level of 47 cents. The growth was mainly attributable to higher average day rates, increased activity from fleet additions and higher utilization of existing rigs between periods.

Total revenue grew 18% year over year to $394.2 million in the reported quarter, and beat our expectation of $384.0 million.

Dayrates and Utilization

The company’s Gulf of Mexico rigs experienced a dayrate of $132,500 (versus $118,200 in the year-ago quarter), Middle East rigs saw a dayrate of $135,400 (versus $145,800 a year ago) and North Sea rigs’ dayrate was $267,200 (versus $227,700 in the year-ago quarter).

The overall dayrate of all offshore rigs was $173,200 (versus $156,500 in the first-quarter 2012). Average utilization of the company’s rig improved to 80% from 75% in the year-earlier quarter.

Financials

As of Mar 31, 2013, the cash balance was $1,019.3 million and long-term debt (including current maturities) was $2,009.7 million. The debt-to-capitalization ratio was 30.4% versus 30.7% 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.

Going forward, Rowan expects further strengthening in the jack-up markets, especially demand for high-spec rigs, along with strong demand and encouraging new fixtures in the ultra-deepwater markets.  To capitalize on this, the company is focused on improving its operational execution of newbuild drillships. It believes growing demand leading to higher jack-up day rates would lead to strong earnings increase.

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 InterOil Corporation (IOC - Snapshot Report), Tesco Corporation (TESO - Snapshot Report) and EPL Oil & Gas, Inc. with Zacks Rank #1 (Strong Buy).

 

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