Rowan Q2 Results Show Promising Signs
Rowan Companies: Temporary Growth, Not As Cheap As It Seems
Jeffrey To • 12 Comments
Jeffrey To • 12 Comments
The Cheapest High Growth Stock In The S&P Is... Rowan Companies?!
Jeffrey Dow Jones • 27 Comments
Jeffrey Dow Jones • 27 Comments
Thu, Jun. 16, 10:02 AM
- Nearly 300 employees on oil and gas drilling rigs off Norway could go on strike unless a labor deal is agreed by June 22, the country's state-appointed mediator says.
- Rowan's (RDC -2.9%) Viking and Gorilla rigs would be affected, according to one of the unions involved in the wage talks; it is not clear if other rigs would be affected.
- The Gorilla rig works for ConocoPhillips (COP -2.8%), which says the rig is engaged in the plugging of abandoned wells on its Ekofisk field in the North Sea and that oil output would be unaffected by a strike; the Viking does work for Swedish oil firm Lundin (OTCPK:LNDNF).
Tue, May 24, 7:58 AM
- Freeport McMoRan's (NYSE:FCX) oil and gas unit agrees to pay $215M to Rowan (NYSE:RDC) to immediately terminate a drillship contract.
- The agreement releases FCX from $300M in further payments under the contract for the ultra-deepwater drillship Rowan Relentless, which has been operating in the Gulf of Mexico.
- RDC also may $30M in additional contingent payments, depending on the average crude oil price over the next 12 months.
- The contract cancellation follows FCX's agreement two weeks ago to pay Noble Corp. $540M, with up to $75M in additional contingent payments, to terminate agreements for two other drillships in the Gulf of Mexico.
- The RDC contract would have ended in June 2017, and the two contracts with Noble had been scheduled to run through July and November 2017.
- FCX +1.5% premarket.
Mon, May 2, 3:45 PM
- Diamond Offshore (DO +1.4%) is higher after Q1 earnings easily exceeded analyst estimates, but it is not helping shares of other oilfield services companies in today's trade.
- Wells Fargo views DO's report positively, although results likely included noise from the accounting of a demobilization fee and notes that another contract termination in Mexico could be viewed as a partial negative offset.
- The Zephirin Group contends that DO's do not overshadow weak fundamental conditions in the offshore industry likely to persist, hurting earnings through 2018 and beyond for the likes of Noble Corp. (NE -2%) and Ensco (ESV -3.2%), which reported earnings last week (I, II).
- Zephirin rates NE and ESV at Hold - High Risk, forecasting a 30% reduction in dayrates for NE's Sam Croft and Tom Madden drillships and rate reductions of up to 25% or termination in the near future for ESV's four rigs working in Brazil for Petrobras at a day rate range of $300K-345K.
- Also: RIG -0.7%, RDC -1.4%, ATW -0.7%.
- Now read Diamond Offshore names Youngblood as new CFO
Thu, Apr. 14, 3:30 PM
- The Obama administration announces new oil well control rules aimed at preventing the kind of blowout that happened in the 2010 Gulf of Mexico oil spill.
- The regulations announced by the Interior Department tighten requirements for blowout preventers, well design, well control casing, cementing and sub-sea containment, and call for real-time monitoring, third-party reviews of equipment, regular inspections and safe drilling margin requirements.
- The effects will be particularly acute for the Gulf’s top crude oil and gas producers, Royal Dutch Shell (RDS.A +1.1%), BP (BP -1.6%), Chevron (CVX +0.1%) and Exxon Mobil (XOM +0.4%); XOM says the new rules will cost $25B over 10 years and render many offshore discoveries worthless.
- Offshore drilling stocks are broadly lower on the news: RIG -6.1%, DO -1.4%, ESV -5.1%, RDC -7.3%, NE -5.4%, ATW -9%, SDRL -8.9%, SDLP -4%.
- ETFs: XLE, VDE, ERX, OIH, XOP, FCG, ERY, GASL, DIG, DUG, BGR, XES, IYE, IEO, FENY, IEZ, PXE, FIF, PXJ, RYE, NDP, GUSH, DRIP, DDG, FXN
Wed, Mar. 9, 3:23 PM
- Ocean Rig UDW (ORIG -22.9%) plunges after missing Q4 earnings expectations and saying "prospects for the industry remain bleak” and “are likely to remain so at least until 2018.”
- ORIG says it is in discussions with lenders of its loan agreement related to the consequences of Ocean Rig Apollo termination, and that the situation could evolve into a "significant prepayment" of the loan.
- ORIG says its fleet operated at 99.5% utilization during Q4, and FY 2015 fleet operating efficiency was ~98.2%.
- Although ORIG’s comments were more bearish than the outlook described by other offshore drillers, the company’s earnings are hurting other names in the space: DRYS -19.6%, SDRL -16.4%, RIG -2.3%, NE -5.7%, ESV -3.9%, DO -1.4%, RDC -4.4%, ATW -3.3%.
Thu, Mar. 3, 2:58 PM
- Offshore drillers are surging today, which RBC analysts at least partially attribute to Noble Corp.'s (NE +16.1%) news that it spent $200M to buy back bonds due in 2020 and 2021, greatly reducing its debt.
- RBC estimates that NE would be able to retire ~$300M of debt principal at face value for $200M with new borrowings on the revolver, which should generate annual interest savings of ~$10M or a ~$0.03 impact to EPS.
- Ben Levisohn of Barron's also notes that oil companies in general have been able to offer stock and pay down debt, which has reduced some of the fears that the entire sector could go bankrupt, and that short interest in offshore drillers has been high.
- Also: RIG +9.9%, SDRL +11.7%, ESV +13.2%, RDC +10.5%, DO +5.9%, ATW +20%, PACD +42.6%.
Tue, Mar. 1, 10:58 AM
- Moody’s cut the credit ratings of six offshore drillers late Monday, expecting the group to face an extremely challenging operating environment through at least 2018.
- Moody's cuts Ensco (ESV -7.2%) by five notches to B1 from Baa2, saying "earnings and liquidity will decline over time as the company is compelled to rationalize its fleet to adjust to reduced demand conditions."
- Falling four notches were Atwood Oceanics (ATW -8.8%), Noble Corp. (NE -2%) and Rowan (RDC -2.1%); the ratings agency expects ATW to breach a debt covenant in 2017 and says the company is at increased risk of having to restructure.
- Debt ratings falling three notches were Diamond Offshore (DO -0.5%) and Transocean (RIG -1.8%).
Thu, Feb. 4, 11:48 AM
- Offshore drillers are on the move today as rising oil prices ease concerns about the difficult market that remains apparent in earnings releases from Noble Corp. (NE +1.1%), which reported last night, and Atwood Oceanics (ATW +17.2%), which reported earlier this week.
- NE reported below consensus Q4 earnings, but Evercore ISI's James West says the company continues to perform well operationally, with YTD unpaid fleet operational downtime edging up slightly to 5% from 4.6% in Q3.
- NE also announced plans to retire two rigs, the drillship Noble Discoverer and jackup Noble Charles Copeland, bringing its total rig attrition to four floaters and one jackup during the oil downturn.
- Jefferies says ATW has the most challenged balance sheet over the longer-term among its mid-cap coverage, but it is encouraged by ATW’s prospects to better position itself for the near-term with a covenant amendment, and maintains its Buy rating with a $9 price target (Q4 earnings).
- Related peers: RIG +3.6%, DO +3.8%, ESV +5.2%, RDC +4.3%, SDRL +2.5%.
Fri, Jan. 29, 2:57 PM
- Offshore drillers such as Transocean (RIG +2.7%), Rowan (RDC +2.2%) and Noble Corp. (NE +1.6%) are "racing toward the EBITDA cliff," lacking a compelling investment purpose until there’s either confidence in crude price recovery to $65/bbl and/or the industry scraps a large share of middle aged assets, Citigroup analysts say.
- Citi foresees no improvement in dayrates until mid-2018, and even then does not anticipate a return to newbuild economics before 2020 given ample excess supply.
- The firm views Ensco (ESV +1.6%) as the premier operator but it too should struggle, thus meriting a downgrade to Neutral; Diamond Offshore (DO +3.6%) is upgraded to Neutral, as the remaining contract backlog appears at less risk vs. peers, the balance sheet is healthy, and earnings should remain positive assuming the backlog holds.
- Citi least favorite in the group is Sell-rated Transocean, saying that if RIG's fifth generation assets are completely displaced this cycle, then the enterprise value of the company is swallowed by the debt load; the firm rates ESV and NE at Neutral.
Thu, Jan. 28, 12:49 PM
- Rowan Cos. (RDC +7.3%) is upgraded to Equal Weight from Underweight and Seadrill (SDRL +2.2%) is downgraded to Equal Weight from Overweight at Morgan Stanley, which now foresees a prolonged downturn in the offshore rig market with an uptick unlikely until 2018.
- The firm notes that RDC has recently underperformed with growing concerns over its 2017 fleet exposure, but sees the company as better positioned vs. peers because its relative balance sheet strength indicates the company likely will be among offshore drillers who survive the downturn and “cross over the other side."
- While SDRL has delivered on cost savings initiatives and debt covenant amendments, Stanley says its elevated debt profile combined with the more prolonged downturn leaves the company in a “more vulnerable position than before.”
- The firm also cuts its price target for Transocean (RIG +1.1%) to $2.70 from $12, and says the stock could be worth zero if oil prices languish long enough.
Thu, Jan. 21, 10:30 AM
- Rowan (RDC +2.4%) says in its latest fleet status report that BP has awarded the company a contract in Trinidad and Tobago for a jackup rig at a dayrate of $157K.
- The 300-day contract starts Aug. 1; the rig currently is under contract with BHP Billiton in Trinidad with a dayrate of $231K until April.
- The deal follows a recent announcement by BP's local unit that it plans to continue investment in the region in 2016 despite the fall in oil prices.
Mon, Jan. 11, 3:44 PM
- Cowen analysts issue a wave of downgrades and stock price reductions among offshore drilling contractors, as they foresee further downside for the group with oversupply for offshore rigs and vessels lasting through 2018 or perhaps longer if commodities remain depressed.
- Cowen downgrades Atwood Oceanics (ATW -2.2%) and Noble Corp. (NE -4.5%) to Market Perform from Outperform with $10 price targets, both slashed from $18; the firm also cuts its price target on Diamond Offshore (DO -0.5%) to $21 from $24, on Rowan (RDC -4%) to $16 from $22, and on Seadrill (SDRL -4.4%) to $3 from $8.
- The firm says its recent annual survey forecasts a 17% Y/Y drop in 2016 global spending for the sector with a bias to the downside because of the continuing pressure in commodity prices, and expects offshore rig demand to remain anemic with further deterioration in utilization levels and dayrates.
Fri, Jan. 8, 12:59 PM
- Noble Corp. (NE -2.7%) shares are not helped by an upgrade from analysts at Societe Generale, which raises its rating on the company to Buy from Hold and thinks NE is better positioned to weather the storm than Wall Street believes.
- The firm says revenue coverage from NE's deepwater fleet stands at 28% of its forecast 2018 revenue, vs. just 7% for peer Ensco (ESV -1.9%) and 0% for Rowan (RDC -2.7%), which "provides better cash flow visibility for Noble, which we view as critical in the early stages of a recovery given the high leverage ratios drillers currently carry."
- Any positive news could spark a significant short-term short covering rally in which NE is poised to outperform, the firm adds.
Nov. 30, 2015, 2:23 PM
- The "lower for longer" consensus on crude oil prices is overly conservative, and prices will begin bouncing back next year, Guggenheim analysts say as they upgrade the oil services sector to Buy and see plenty of upside for the major players given current market conditions.
- Guggenheim is calling for oil prices to return to $100/bbl by 2018, and sees 10% upside across the board for oil services stocks in the next year resulting from the group's unique exposure to crude prices.
- Within the group, the firm prefers Rowan (RDC +1.8%) and Atwood Oceanics (ATW +1.6%), as their backlogs should help reduce near-term risk, RDC has no newbuild commitments and ATW is finalizing a contract in Brazil for one of its two uncontracted rigs, utilization in the Middle East (NYSE:RDC) and Australia (NYSE:ATW) should be resilient on a relative basis, and both have fleets that make them more interesting M&A candidates.
- Upgraded to Buy from Neutral: CAM, RIG, NE, OII, PACD, DO, ESV, CLB, OIS, HP, NBR, CRR, NOV, DRQ, FI, PTEN, SSE, FTI, CJES, FET, SPN.
Nov. 5, 2015, 2:47 PM
- Transocean (RIG -8.5%) sinks after reporting better than expected Q3 earnings, but it was "low quality beat," Citigroup’s Scott Gruber writes, as the effective tax rate and deprecation were both below forecasts.
- Reiterating his Sell rating, Gruber says RIG's Q3 operating costs came in higher than consensus expectations, unlike the other offshore drillers that beat estimates on cost control, EBITDA was roughly even with consensus, and gross margins declined 3% Q/Q to 45%.
- RIG, which previously announced plans to scrap 21 floaters, added another during Q3, the 32-year-old semi-submersible GSF Rig 135.
- CEO Jeremy Thigpen said in today's earnings conference call that tough times would continue for offshore drillers over the next year or two as weak oil and gas prices rule out new investments, but activity eventually will rebound because oil companies have to replace dwindling reserves.
- The CEO said RIG would be interested in making a bid for an entire company, but only if the value was good and the deal gave RIG a chance to upgrade its fleet.
- RIG also lowers its full year 2015 expense guidance to $415M-$420M, partly due to earlier debt retirements during the quarter.
- Related peers also are lower: RDC -4.6%, SDRL -3.7%, ATW -3%, NE -2.4%, ESV -0.9%, DO -0.2%.
Oct. 8, 2015, 11:47 AM
- Termination notices and rig stacking/disposal indications from Ocean Rig UDW (ORIG -16%) "foreshadow the difficulties facing the offshore drilling subsector as we move into 2016," say Raymond James analysts Praveen Narra and J. Marshall Adkins.
- "Though cost control and newbuild delays drove Ocean Rig to post an impressive Q2, we remain concerned about the underlying fundamentals of the business and financial leverage in an anemic market," they say, maintaining their Market Perform rating.
- Related names: Seadrill (SDRL -4.3%), Transocean (RIG -4.5%), Ensco (ESV -1.7%), Noble Group (NE -2.7%), Rowan (RDC -1.4%), Diamond Offshore (DO -0.3%), Atwood (ATW -2.2%)
- Previously: Ocean Rig -13% following fleet update (Oct. 7)
Rowan Cos. Plc engages in the business of providing international and domestic offshore oil and gas contract drilling services. The company focuses on high specification and premium jack-up rigs, which are used for exploratory and development drilling operations. It conducts offshore drilling... More
Sector: Basic Materials
Industry: Oil & Gas Drilling & Exploration
Country: United States
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