Rowan Companies plc’s (RDC - Free Report) Super Gorilla XL Class jack-up rig—Bob Palmer— has been leased to ARO Drilling.
ARO Drilling is jointly owned by Rowan and Saudi Aramco, each holding a 50% stake and commenced operations recently.. The jack up rig has been contracted by Saudi Aramco for a period of three years. Earlier, the Bob Palmer was placed in Saudi Arabia, operating for Saudi Aramco. Currently, it will continue to operate through ARO Drilling.
This transaction is in sync with the ARO Drilling’s strategy of participating in the growing offshore drilling market of Saudi Arabia. Moreover, Rowan has the largest number of jack up fleet among all the drillers. As of Jun 18, 2018, the company’s drilling fleet comprised 23 jack-up rigs and four ultra deepwater drillships. The new entity expects favorable earnings growth in the next 15 years. The areas where the rigs primarily operate are spread across the Middle East, Trinidad, North Sea’s Norwegian region, the Gulf of Mexico and the United Kingdom.
There are 161 rigs in the global ultra deepwater fleet but only few have the high specifications for today’s demanding requirements. The 7th Generation rigs are distinct from previous ones. Rowan’s drillships are superior among 7th Generation rigs and are capable to provide the key features preferred by the market.
Moreover, rising oil prices are anticipated to drive demand for rigs. However, dayrates are not expected to improve until 2019. Marketed utilization is required to return to 85% for pricing to improve steadily.
In the past three months, Rowan’s shares have gained 26.1% compared with the industry’s 10.4% rise.
Zacks Rank & Other Key Picks
Rowan currently sports a Zacks Rank #1 (Strong Buy).
A few other top-ranked players in the same sector are Occidental Petroleum Corporation (OXY - Free Report) , China Petroleum and Chemical Corporation (SNP - Free Report) and CVR Refining, LP (CVRR - Free Report) . These stocks sport a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Occidental Petroleum is an international oil and gas exploration and production company. It pulled off an average positive earnings surprise of 30.2% in the last four quarters.
Sinopec is one of the largest petroleum and petrochemical companies in Asia. The company delivered an average positive earnings surprise of 492.8% in the last four quarters.
Sugar Land, TX-based CVR Refining is an independent downstream energy partnership with refining and associated logistics properties in the Midcontinent United States. The company delivered an average positive earnings surprise of 7.05% in the last four quarters.
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