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Rowan Transfers Contract for Drillship to Rowan Resolute

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Rowan Companies plc (RDC - Free Report) announced that the earlier disclosed contract for Rowan Reliance with Fieldwood Energy LLC will be reassigned to the Rowan Resolute under the same terms.

The contract, announced in October 2018, was for a one-year firm term and had three 90-day options. The drillship, Rowan Reliance, was expected to start operations from Feb 15 2019, to Feb 15, 2020, at an estimated dayrate of $155,000.

The drilling contractor also announced that LLOG chose to exercise the final option on Rowan Resolute that is expected to keep the rig engaged till February 2019. Thereafter, the rig will work for Fieldwood Energy instead of Rowan Resolute, which will remain warm-stacked offshore Louisiana in the U.S. Gulf of Mexico.

The announcement bodes ill for the drilling segment as it reflects on the disturbed state of the ultra-deepwater drillship segment. With the improvement in oil prices, most analysts were hoping to see recovery in the segment during the 2019-2020 period. Rowan will now have two active drillships— Rowan Resolute and Rowan Relentless. Also, two other drillships— Rowan Reliance and Rowan Renaissance — will remain stacked.

The transfer of Rowan Reliance contract indicates that the company’s effort to find a follow-up contract for Rowan Resolute was unsuccessful. Thus, it decided to save on reactivation of Rowan Reliance and continue working with two active drillships.

Rowan primarily provides services related to contract drilling to the oil and gas industries. As of Nov 21, 2018, the fleet strength of the company comprised 25 rigs that could drill wells in the offshore oil and gas resources. The areas where the rigs primarily operate are located in the Middle East, Trinidad, North Sea’s Norwegian region, the Gulf of Mexico and the U.K. The premium fleet of Rowan comprises 21 jackups and four ultra-deepwater units.

Zacks Rank & Key Picks

Currently, Rowan has a Zacks Rank #3 (Hold).

A few better-ranked players in the same sector are Eni SpA (E - Free Report) , Enterprise Products Partners L.P. (EPD - Free Report) and Energen Corporation , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Rome-based Eni is among the leading integrated energy players in the world. The company delivered an average positive earnings surprise of 16.7% in the last four quarters.

Headquartered in Houston, TX, Enterprise Products Partners is among the leading midstream energy players in North America. It pulled off an average positive earnings surprise of 9.3% in the last four quarters.

Headquartered in Birmingham, AL, Energen is a leading oil and natural gas exploration and production company. It pulled off an average positive earnings surprise of 18.6% in the last four quarters.

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