Rowan Companies - Complete Fleet Analysis As Of April 21 And Commentary

| About: Rowan Companies (RDC)

Summary

Rowan Companies released its fleet status on April 21, 2016.

Couple contracts for the Ralph Coffman, a contract extension (blend & extend) for the Rowan Viking. Additional backlog estimated at $85 million.

I rate RDC as a buy and accumulate.

Click to enlarge

The drillship Rowan Renaissance; Source: company website.

This article is an update of my preceding article on Rowan Companies (NYSE:RDC) on February 27, 2016, regarding the 4Q'15 and fleet status.

[I] Complete fleet analysis as of April 21, 2016.

Link: Fleet status April 21, 2016.

Ultra-Deepwater Drillships

#

Name

Year

Built

Specification

K feet

Comment CC

Information

Contract

End

Current

Day rate

K$

Location

Information

1

Rowan Renaissance

2014

10/12

(Drilling 40k)

4/17

619
(Standby 98% day rate)

[REPSOL]

US GoM

2

Rowan Resolute

2014

10/12

(Drilling 40k)

10/17

608

[Anadarko]

US GOM

(5d)1Q'16

3

Rowan Reliance

Q4 2014

10/12

(Drilling 40k)

2/18

602

[Cobalt]

US GOM

4

Rowan Relentless

Q2 2015

10/12

(Drilling 40k)

6/17

596 (Standby)

[Freeport McMoRan] US GOM

Click to enlarge

RDC has 2 categories for the jackups: Premium (2) and High-Specification (3).


#

Name

Year

Built

Category

Contract

End

Current

Day rate

K $

Location

Indication

Off-rate

1

Rowan Gorilla

IV

1986 (3)

12/16

70-75

[Arena]

US GOM

2

Joe Douglas

2012 (3)

6/16

6/16-5/17

157

157

[BHP Billiton]

[BP]

Trinidad

(20d) 2Q'16

(25d)3Q'16

3

Bob Keller

2005 (3)

5/24

120/178

[Saudi Aramco] Middle East

(55d)1Q'16

(5d)2Q'16

4

Hank Boswell

2006 (3)

8/18

163/180

[Saudi Aramco] Middle East

(35d)3Q'16

5

Scooter Yeargain

2004 (3)

11/18

163/180

[Saudi Aramco] Middle East

(45d)2Q'16

6

Bob Palmer

2003 (3)

8/17 198/235 [Saudi Aramco] Middle East

(30d) 2Q'16

(30d)2Q'16

7

Arch Rowan

1981 (2)

9/18

69

[Saudi Aramco] Middle East

(5d)1Q'16

(5d)2Q'16

8

Charles Rowan

1981 (2)

9/18

69

[Saudi Aramco] Middle East

1Q'16 (26d)

2Q'16 (7d)

9

Gilbert Rowe

1981 (2)

12/15

106

[Saudi Aramco] Middle East

3Q'16 (14d)

10

Rowan Mississi

ppi

2008 (3)

12/18

195

[Saudi Aramco] Middle East

(30d)4Q'16

(5d)1Q'17

11

Rowan California

1983 (2)

9/16

144 130
(rate reduction agreed)

[Maersk]

Qatar

(14d)3Q'16
12

Rowan Middle

town

1980 (2)

9/18

69

[Saudi Aramco] Middle East (21d)3Q'16
13

Rowan Norway

2011 (3)

7/16

363

[ConocoPhillips]

Norway-North Sea

(45d)3Q'16

14

Rowan Viking

2011 (3)

1/16-2/17

2/17-11/17

-

-

362 282

275 (pending 270-day extension)

("1")

[Lundin]

Norway-North Sea

15

Rowan Gorilla V

1998 (3)

8/16

175

[Total]

North Sea

(30d)1Q'17

16

Rowan Gorilla VI

2000 (3)

3/18

362

[ConocoPhillips] Norway-North Sea

+2x1Y options

17

Rowan Gorilla VII

2002 (3)

12/16

181

("2")

[Apache]

UK-North Sea

4-month price option

(14d)2Q'16

(45d)3Q'16

18

Rowan EXL II

2011 (3)

3/17 180 [BP Trinidad] Trinidad
19

Ralph Coffman

2009

8/16

9/17

161

135

[Petronas]

Suriname

[EOG]

Trinidad

Click to enlarge

("1") The reduced rate is retroactive to January 1, 2016 pending the customer's exercise of an option to extend the contract by 270 days for $275K per day following the firm term. The strike date of the option is June 1, 2016 and the financial impact will be recognized in the period the customer exercises the option. Should the option not be exercised, the day rates under the original contract will remain effective.

("2") Awarded a contract extension to December 2016 at a 2015-2016 blended day rate of $181k. Four-month priced option at the same day rate. Expected off rate time in 3Q 2016 for repairs and inspections. Two weeks downtime in 2Q related to equipment failure.

Cold Stacked rigs.

# Name Year built Location
1 Cecil Provine 1982

Sabine Pass Texas

2 Rowan Gorilla II 1984 Malaysia
3 Rowan Gorilla III 1984 Sabine Pass Texas
Click to enlarge

Warm Stacked/Ready Stacked/ Available.

# Name Year built Location
1 Rowan Stavanger 2011 North Sea UK
2 J.P. Bussell 2008 Bahrain
3 Rowan EXL I 2010 Malaysia (To relocate in the Middle East)
4 Rowan EXL III 2011 US GoM
5 Rowan EXL IV 2011 Malaysia (To relocate in the Middle East)
Click to enlarge

The backlog is estimated at $3+ billion as of April 2016.

TB1 - Jackups per category are as follows:

Premium High-Specification Total
# of rigs 8 19 27(29)
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TB2 - Jackups by location:

Total Trinidad US GOM

Malta/Middle East

North Sea East Asia
Active Jackups 21 3 1 12 5 0
Available or cold stacked not retired 8 0 3 3 1 1
Total 29 3 4 15 6 1
Click to enlarge

TB3 - The zero dayrate out-of-service days:

1Q16 2Q16 3Q16 4Q16 1Q17
zero dayrate days 131 126 215 30 35
Click to enlarge

TB4 - Total Recap contract in month.

RDC 4/21/2016 2016 2017 2018 2019 2020 2021 2022 2023 2024 D rate + Mob.
Renaissance 8 4 0 0 0 0 0 0 0 619
Resolute 8 10 0 0 0 0 0 0 0 608
Reliance 8 12 2 0 0 0 0 0 0 602
Relentless 8 6 0 0 0 0 0 0 0 596
Drillship 33 32 2 0 0 0 0 0 0
Rowan Gorilla IV 8 0 0 0 0 0 0 0 0 73
Joe Douglas 8 6 0 0 0 0 0 0 0 160
Bob Keller 8 12 12 12 12 12 12 12 5 120
Hank Boswell 8 12 8 0 0 0 0 0 0 163
Scooter Yeargain 8 12 11 0 0 0 0 0 0 163
Bob Palmer 8 8 0 0 0 0 0 0 0 198
Arch Rowan 8 12 9 0 0 0 0 0 0 69
Charles Rowan 8 12 9 0 0 0 0 0 0 69
Gilbert Rowe 0 0 0 0 0 0 0 0 0 69
Rowan Mississippi 8 12 12 0 0 0 0 0 0 195
Rowan California 5 0 0 0 0 0 0 0 0 130
Rowan Middletown 8 12 9 0 0 0 0 0 0 69
Rowan Norway 3 0 0 0 0 0 0 0 0 363
Rowan Viking 8 11 0 0 0 0 0 0 0 280
Rowan Gorilla V 4 0 0 0 0 0 0 0 0 175
Rowan Gorilla VI 8 12 3 0 0 0 0 0 0 362
Rowan Gorilla VII 8 0 0 0 0 0 0 0 0 181
Rowan EXL II 8 3 0 0 0 0 0 0 0 180
Ralph Coffman 8 9 0 0 0 0 0 0 0 145
134 133 73 12 12 12 12 12 5
Click to enlarge

Click to enlarge

Commentary:

Rowan Companies released its fleet status on April 21, 2016. Here are the changes that I noticed:

  1. Rowan Renaissance: The drillship has been placed on standby by Repsol in the Gulf of Mexico with a day rate at 98%. This is an unfortunate trend that I see in the Gulf of Mexico with BP, Freeport McMoRan and a few others. Loss backlog negligible.
  2. The JU Rowan Viking "blend & extend": Day rate has been reduced to $282k/d ($362k/d) from 1/1/2016 to 2/2017 and Lundin is extending the contract to November 2017 (270-day) at a day rate of $275k/d. Contract extension is pending. Backlog addition is approximately $41 million.
  3. The JU Rowan Gorilla VII experienced equipment failure with 59-day at 0-rate in 2Q'16/3Q'16. Loss in Backlog $10.5 million.
  4. The 9 JUs working for Saudi Aramco got the dayrate for 2016. Please read my preceding article about it.
  5. The JU Rowan California working for Maersk in Qatar had a dayrate reduction from $144k/d to now $130k/d, however, the contract has not been extended and the rig rolls off in Sept. 2016. Backlog loss $2.2 million.
  6. The 2 JUs Rowan EXL I and Rowan EXL IV are in the process of being relocated in Middle East where they may find a contract more easily. Both rigs are available now.
  7. The JU Rowan Gorilla IV working for Arena in the GoM has been extended 1-month same rate. Est. Backlog $2.2 million.
  8. The JU Ralph Coffman Awarded an estimated three month contract which commenced in mid-April with Petronas in Suriname, and Awarded a multiple well contract for an estimated 10 months commencing in October 2016 in Trinidad with EOG $135k/d until September 2017. Est. Backlog $53 million.
  9. The JU Gilbert Rowe is now idle?
  10. A new estimate of the Off-rate indicated, total 537-day. Please see Tab3 above.

Conclusion:

Rowan Companies, is a very impressive offshore driller with a well diversify fleet and an exceptional client base, including Saudi Aramco in the middle East with 9 JUs actually contracted on a long-term contract (The situation of the JU Gilbert Rowe is not clear now, the rig may be idle or about to be).

The only serious flaw, that I have seen with the company is about the four UDW drillships in the Gulf of Mexico and their relative short-term contract.

This is undeniably an important weakness, because, assuming that the rigs will not be terminated earlier -- which is a possible event when we know that two of the rigs are actually on standby with Repsol and Freeport McMoran -- the entire Deepwater Drillship fleet will roll off contract theoretically, from 2Q'17 to 1Q'18, which is absolutly not a good time to search for a new contract or get awarded a contract extension at a reasonable day rate. Thereby, I expect some prolonged idle time starting 2Q'17 and significantly lower day rate.

However, despite this evident weakness, I find the company very solid with a sufficient contract backlog and a clear balance sheet. I rate RDC as a buy and accumulate.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I trade RDC regularly