Rowan Companies - Complete Fleet Status As Of October 18 And Commentary

by: Fun Trading

Summary

Rowan released its October 18 fleet status. The UDW Rowan Resolute and Rowan Reliance contract have been renegotiated (Blend & extend) with early termination or extension combined with cash payment.

On the Jack-up front, RDC indicated one new contract, one contract extension and one early termination for convenience (3-month). Contract backlog estimated is now $1.78 billion.

RDC is showing good resilience, strong client base and versatile fleet with a strong jack-up support, who will survive this bear cycle.

I recommend to accumulate RDC for the long-term at or below $13.25.

Click to enlarge

This article is an update of my preceding article on Rowan Companies (NYSE:RDC) on July 3, 2016, regarding the fleet status.

[I] Complete fleet analysis as of October 18, 2016.

Fleet status on October 18, 2016, click here.

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

630 (617.4)

(Standby 98% day rate)

[REPSOL]

US GoM

2

Rowan Resolute

2014

10/12

(Drilling 40k)

7/1/16 - 2/25/17 (240d)

2/25/17 - 10/17 (249d)

10/17 - 5/9/18 (312d)

180

608

580

(See note below)

[Anadarko]

US GOM

3

Rowan Reliance

Q4 2014

10/12

(Drilling 40k)

3/31/2017

3/31/17-2/18

602

260 (option)

[Cobalt]

US GOM

4

Rowan Relentless

Q2 2015

10/12

(Drilling 40k)

Available

Curacao

Click to enlarge

Note UDW Resolute:

Blend and extend amendment awarded; Dayrate reduced to $180k starting on July 1, 2016 for an estimated duration of 240 days followed by a return to the original dayrate of $608k for the remainder of the primary term which expires in late October 2017. Thereafter, the contract will be extended for approximately 312 days at $580k, calculated by multiplying 1.3 by the number of days at the $180k dayrate.

Note UDW Reliance:

Customer will pay approximately $96 million in exchange for the right to terminate the contract as early as March 31, 2017. This deferred revenue is expected to be amortized from April 1, 2017 to February 1, 2018 at the latest. If operations continue after March 31, 2017, the dayrate will be reduced to approximately $262,000.

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)

5/17

157

[BP]

Trinidad

1-well priced option
3

Bob Keller

2005 (3)

5/24

120/178

[Saudi Aramco] Middle East
4

Hank Boswell

2006 (3)

8/18

163/180

[Saudi Aramco] Middle East

(35d)4Q'16

5

Scooter Yeargain

2004 (3)

11/18

163/180

[Saudi Aramco] Middle East

(30d)4Q'16 (15d)1Q'17

6

Bob Palmer

2003 (3)

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

(30d)3Q'16 (30d)4Q'16

7

Arch Rowan

1981 (2)

9/18

69

[Saudi Aramco] Middle East

(21d)2Q'17

8

Charles Rowan

1981 (2)

9/18

69

[Saudi Aramco] Middle East

(21d)4Q'16

9

Gilbert Rowe

1981 (2)

12/16

69

[Saudi Aramco] Middle East
10

Rowan Mississi

ppi

2008 (3)

12/18

195

[Saudi Aramco] Middle East

(15d)4Q'16 (20d)1Q'17

11

Rowan Middle

town

1980 (2)

9/18

69

[Saudi Aramco] Middle East (4d)1Q'17
12

Rowan Viking

2011 (3)

1/16-2/17

2/17-11/17

-

282

275

[Lundin]

Norway-North Sea

6x90-day priced options
13

Rowan Gorilla V

1998 (3)

7/17

<100

[Total]

North Sea

6-month priced option

(30d)3Q'17

14

Rowan Gorilla VI

2000 (3)

12/17

12/17-3/18

362

250

[ConocoPhillips] Norway-North Sea

15

Rowan Gorilla VII

2002 (3)

mid 11/17

mid 11/17 - 4/17~ (60-200day)

idle

<100

[Perenco]

UK-North Sea

(21d)3Q'16

Priced option of 15 to 110 days.

16

Rowan EXL II

2011 (3)

3/17 180 [BP Trinidad] Trinidad
17

Ralph Coffman

2009

9/17

135

[EOG]

Trinidad

Click to enlarge

Cold Stacked rigs.

# Name Year built Location
1 Cecil Provine 1982

Sabine Pass Texas

2 Rowan Gorilla II (Sale pending 4Q'16 as non-drilling unit ) 1984 Malaysia
3 Rowan Gorilla III 1984 Sabine Pass Texas
Click to enlarge

Warm Stacked/Ready Stacked/ Available.

# Name Year built Location
1 Rowan Norway 2011 North Sea UK
2 Rowan Stavanger 2011 North Sea UK
3 J.P. Bussell 2008 Bahrain
4 Rowan California 1983 Bahrain
5 Rowan EXL I 2010 Bahrain
6 Rowan EXL III 2011 US GoM
7 Rowan EXL IV 2011 Bahrain
Click to enlarge

The backlog is estimated at billion as of October 18, 2016.

TB1 - Rig status per segment:

UDW Jack-up Total
Contracted 3 17 20
idle 1 9 10
Total 4 26 30
Click to enlarge

Note: excluding the Rowan Gorilla II being sold.

TB2 - The zero day rate out-of-service days (268):

3Q16 4Q16 1Q17 2Q17 3Q17
zero dayrate days 51 131 35 21 30
Click to enlarge

TB3 - Total Recap contract and Backlog Graph. Total Backlog estimated as of October 18, 2016 is $1.78 billion.

RDC 10/17/2016 2016 2017 2018 2019 2020 2021 2022 2023 2024 D rate + Mob.
Renaissance 2,4 4,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 617
Resolute 2,4 12,0 9,0 0,0 0,0 0,0 0,0 0,0 0,0 456
Reliance 2,4 12,0 2,0 0,0 0,0 0,0 0,0 0,0 0,0 9
Relentless 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0
Drillship 7,2 28,0 11,0 0,0 0,0 0,0 0,0 0,0 0,0
Rowan Gorilla IV 2,4 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 73
Joe Douglas 2,4 5,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 157
Bob Keller 2,4 12,0 12,0 12,0 12,0 12,0 12,0 12,0 5,0 120
Hank Boswell 2,4 12,0 8,0 0,0 0,0 0,0 0,0 0,0 0,0 163
Scooter Yeargain 2,4 12,0 11,0 0,0 0,0 0,0 0,0 0,0 0,0 163
Bob Palmer 2,4 8,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 198
Arch Rowan 2,4 12,0 9,0 0,0 0,0 0,0 0,0 0,0 0,0 69
Charles Rowan 2,4 12,0 9,0 0,0 0,0 0,0 0,0 0,0 0,0 69
Gilbert Rowe 2,4 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 69
Rowan Mississippi 2,4 12,0 12,0 0,0 0,0 0,0 0,0 0,0 0,0 195
Rowan Middletown 2,4 12,0 9,0 0,0 0,0 0,0 0,0 0,0 0,0 69
Rowan Viking 2,4 11,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 275
Rowan Gorilla V 2,4 7,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 95
Rowan Gorilla VI 2,4 12,0 3,0 0,0 0,0 0,0 0,0 0,0 0,0 266
Rowan Gorilla VII 1,5 4,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 95
Rowan EXL II 2,4 3,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 180
Ralph Coffman 2,4 9,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 135
Jackups 39,9 143,0 73,0 12,0 12,0 12,0 12,0 12,0 5,0
47,1 171,0 84,0 12,0 12,0 12,0 12,0 12,0 5,0
Click to enlarge

Click to enlarge

Commentary:

Rowan Companies released its fleet status on October 18, 2016. Here are the changes that I noticed or indicated by RDC:

1 - UDW Rowan Resolute and UDW Rowan Reliance.

Note UDW Resolute (Anadarko):

Blend and extend amendment awarded; Dayrate reduced to $180k starting on July 1, 2016 for an estimated duration of 240 days followed by a return to the original dayrate of $608k for the remainder of the primary term which expires in late October 2017. Thereafter, the contract will be extended for approximately 312 days at $580k, calculated by multiplying 1.3 by the number of days at the $180k dayrate.

Note UDW Reliance (Cobalt):

Customer will pay approximately $96 million in exchange for the right to terminate the contract as early as March 31, 2017. This deferred revenue is expected to be amortized from April 1, 2017 to February 1, 2018 at the latest. If operations continue after March 31, 2017, the dayrate will be reduced to approximately $262,000.

Note UDW Relentless: The rig is available in US Gulf of Mexico.

2 - The Jack-up Gorilla V was awarded a 8-month contract extension with Total in UK North Sea, at an undisclosed day rate below $100k/d (from $175k/d previously). Contract backlog approximately $22 million.

3 - The Jack-up Gorilla VI received a early termination for convenience from ConocoPhillips in Norway North Sea. The contract will end three-month earlier at the end of 2017. ConoccoPhillips will pay a day rate of $250k/d as termination fee in 2018.

4 - The Jack-up Gorilla VII was awarded a new contract with Perenco in UK North Sea. Apache paid a Standby Rate of $153,000 from mid-August until mid-October and a lump sum termination fee of approximately $9 million. Perenco Contract awarded at an undisclosed dayrate below $100K/d with an estimated duration of 60 to 200 days with a priced option of 15 to 110 days.

5 - The Jack-up Rowan Viking awarded 6 x 90-day priced options from the Swedish Lundin. Not a direct contract but a clear potential for extension.

6 - The Jack-up Rowan California is now Available in Bahrain.

7 - The Jack-up Rowan Gorilla II will be sold in 4Q'16 (sale pending as a non-drilling unit).

Conclusion:

Rowan Companies released another solid, but disappointing fleet status yesterday. Contract backlog is now $1.78 billion.

I was glad to see that the negotiations with Anadarko and Cobalt ended up with an agreement for the two drillships, which greatly strengthens the future contract backlog.

However, the company is showing a Deepwater floater business still struggling with no real recovery insight.

The situation is a little bit better with the Jack-up segment, but it is not really showing any extra positive, yet, that we were expecting with oil prices now solidly above the $50 a barrel level. The day rate in the North Sea is now below $100k/d for the Jack-up and is reaching the rock bottom or the breakeven level. The 8-month contract extension with Total is a perfect example, with a day rate now at below $100k/d from $175k/d before.

No doubt, RDC jack-up segment is solid, with 8 jack-ups contracted long-term with Saudi Aramco and a good presence in the North Sea sector. This is an important financial support for the company that will weather the downturn without any real problem, due to a clean balance sheet supported by a sizable backlog.

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Looking at the chart above, RDC is now trading above the $12.80-$13 recent support and should eventually bottom out if oil prices can give the tender boost that I am hoping for.

I recommend to accumulate RDC for the long-term at or below $13.25.

Important note: Do not forget to follow me on RDC and other offshore drillers. Thank you.

Disclosure: I am/we are long RDC.

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.