Rowan Companies - A Complete Review Of Q4 2016 Results (Including Fleet Analysis)

| About: Rowan Companies (RDC)

Summary

Rowan Companies released its 4Q'16 on February 24, 2017. It was a weak quarter with $351.8 million in revenue down 7.3% quarter over quarter.

Basically, Rowan Companies is a working business model with a solid "engine" considering the seriousness of this bear market.

Resistance is now around $19 which may be used to take some profit off the table. However, I recommend to hold, right now, and wait for "the next move".

Bildresultat för Rowan Resolute

The drillship Rowan Resolute

This article is an update of my preceding article on Rowan Companies (NYSE:RDC) on February 15, 2017, regarding the last fleet status.

February 15, 2017, fleet status. [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)

4/22/17

Available

619
(Standby 98% day rate)

[REPSOL]

US GoM

2

Rowan Resolute

2014

10/12

(Drilling 40k)

mid 11/17

mid 11/17 - 8/18 [266d]

608

580

(See note)

[Anadarko]

US GOM

3

Rowan Reliance

Q4 2014

10/12

(Drilling 40k)

3/31/17

4/1/17-2/1/18

602

262

(see note)

[Cobalt]

US GOM

4

Rowan Relentless

Q2 2015

10/12

(Drilling 40k)

Available

Curacao

Jack-Up. (9 Jack-ups contracted to Saudi Aramco).

#

Name

Year

Built

Category

Contract

End

Current

Day rate

K $

Location

Indication

Off-rate

1

Rowan Gorilla

IV

1986

10/17

65

[Arena]

US GOM

(30d)3Q17
2

Joe Douglas

2012

2/17

4-wells 11/17?

157

110(?)

[BP]

Trinidad

1 well option

3

Bob Keller

2005

5/24

120/178

[Saudi Aramco] Middle East
4

Hank Boswell

2006

10/18

163/180

[Saudi Aramco] Middle East

(16d)1Q17

5

Scooter Yeargain

2004

10/18

163/180

[Saudi Aramco] Middle East

(15d)1Q'17

6

Bob Palmer

2003

8/17 198 [Saudi Aramco] Middle East
7

Arch Rowan

1981

9/18

69

[Saudi Aramco] Middle East

(30d)2Q'17

8

Charles Rowan

1981

9/18

69

[Saudi Aramco] Middle East (30d)1Q17
9

Gilbert Rowe

1981

3/17

69

[Saudi Aramco] Middle East
10

Rowan Mississi

ppi

2008

12/18

195

[Saudi Aramco] Middle East

(15d)1Q'17

(60d)2Q17

11

Rowan Middle

town

1980

9/18

69

[Saudi Aramco] Middle East (30d)3Q17
12

Rowan Viking

2011

11/17

275

[Lundin]

Norway-North Sea

6 x priced options
13

Rowan Gorilla V

1998

7/17

<100?

[Total]

North Sea

(30d)3Q17
14

Rowan Gorilla VI

2000

3/18

255

[ConocoPhillips] Norway-North Sea

(Early termination)

15

Rowan Gorilla VII

2002

5/17

<100

[Perenco]

UK-North Sea

16

Rowan EXL II

2011

3/17 180 [BP Trinidad] Trinidad
17

Ralph Coffman

2009

6/17

3-wells 10/17

139

110(?)

[EOG]

Trinidad

(21d)2Q17
18

Rowan EXL III

2011

6/17 55

[Arena]

US GoM

("1") 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.

Cold Stacked rigs.

# Name Year built Location
1 Cecil Provine 1982

Sabine Pass Texas

2 Rowan California 1983 Middle East

Warm Stacked/Ready Stacked/ Available.

# Name Year built Location
1 Rowan Stavanger 2011 North Sea UK
2 J.P. Bussell 2008 Bahrain 5y SPS (90d)1Q17
3 Rowan EXL I 2010 Malaysia (To relocate in the Middle East)
4 Rowan EXL IV 2011 Bahrain
5

Rowan Norway

2011 North Sea UK

The backlog is estimated at $1.61 billion as of February 25, 2017. It is not sure how the 50/50 JV Rowan-Aramco will affect Rowan Backlog?


Rowan 4Q'16 results (9 consecutive quarters).

Q4 2016 Q3 2016 Q2 2016 Q1 2016 Q4 2015 Q3 2015 Q2 2015 Q1 2015 Q4 2014

Revenue in

$ Million

351.8 379.4 611.9 500.2 535.8 545.4 508.7 547.1 556.2

Net Income

in $ Million

(24.4) 5.5

216.7

94.9

122.8 124.4 111.4 84.7 123.7 111.5

Contract drilling expense

in $ million

179.9 186.0 207.5 204.8 235.8 247.6 253.9 255.7 279.5

EPS

Adj. EPS

in $

(0.19)

-

0.04

-

1.72

0.75

0.98

-

0.99

0.95

0.89

-

0.68

-

0.99

-

0.89

-

G&A

in $ million

25.6 23.5 26.2 26.9 27.4 29.7 31.2 27.6 33.8

Interest expense

in $ million

38.9 39.4 38.5 40.5 42.4 42.9 30.5 33.6 29.7

Dividend

$/Q

0 0 0 0 0.10 0.10 0.10 0.10 0.10

Shares Outstanding basic

in Million

125.4 126.7 126.3 125.8 125.8 124.8 125.4 125.1 124.3

Cash and Cash equivalent

in $ Million

1,255.5 1,037.5 761.4 595.2 484.2 290.5 198.6 56.8 339.2

Non-cash impairment charge

$ million

0 34.3 0 0 0 329.8 0 0 438.4

Long-term Debt

Total debt

$ Billion

2.5534

2.6802

2.2885

2.6456

2.6454

2.6454

2.655

2.655

2.6924

2.6924

2.8067

-

2.8069

-

2.8071

-

2.8073

-

Adj. EBITDA

$ Million

142.9 168.7 256.3 263.3 272.7 265.9 223.3 264.2 246.4

Note: CapEx for 2016 was $118 million ($29 million for 4Q16) and it is expected to be $105-$115 million in 2017.

Commentary:

Rowan Companies released its 4Q'16 on February 24, 2017. It was a weak quarter again, with $351.8 million in total revenues down 7.3% quarter over quarter.

Basically, Rowan Companies, is a working business model with a solid "engine" considering the seriousness of this bear market.

First, RDC has reduced its rig fleet significantly during the past two years turning to a "leaner, newer and cleaner" fleet. Thomas Peter Burke, CEO, said in the conference call:

During the fourth quarter, we sold two of our remaining older assets, the Gorilla II and Gorilla III. This follows the sale of three other older assets in 2015. Four of the five sold rigs are now restricted to non-drilling activities. We have only two older stacked rigs left, allowing us to more fully concentrate our support on rigs that will have a meaningful contribution to our earnings when the market recovers.

Only the Cecile Provine and the Rowan California are still cold stacked and will probably be scrapped this year.

Second, it is important to talk about the new relationship with Saudi Aramco, which was a real good move in my opinion. I advise the reader to take a look at my article about the recent created JV, please click here.

On November 21, 2016, Offshore Energy Today indicated the following:

Offshore driller Rowan Companies and the Saudi Arabian Oil Company (Saudi Aramco) have signed an agreement to create a 50/50 joint venture to own, operate, and manage offshore drilling rigs in Saudi Arabia.

M. Burke, said:

The new company will expand its fleet over time, which will help Saudi Aramco accomplish its strategic goals as well as provide a source of stability and unparalleled growth to Rowan, truly a win-win. Steven will provide more details in a moment on this important long-term value creation opportunity.

The real effect on this move will have to be evaluated later this year.

Third, RDC In the fourth quarter, the company issued $500 million of 8.5-year senior unsecured notes to yield 7.38%. Simultaneously, the company executed a tender offer focused on clearing out a substantial portion of RDC near-term debt maturities. In total, RDC extinguished approximately $590 million of debt maturities that were slated to come due between 2017 and 2022. The total debt stands at $2.68 billion at the end of December 31, 2016.

I guess everyone understands now that RDC presents a great balance sheet and has the flexibility required to maneuver through the challenging time facing our industry.

Conclusion:

The question is not to recommend RDC as a long-term investment because it is an evident one, but to find the right timing to accumulate.

I was fortunate enough to start a long position in the 13's area and recommended a buy in my preceding article about the 3Q'16. The question is now more difficult and the chart is not as clear anymore because oil prices are playing an important role and the outlook is quite blurry.

Technically, the chart is showing a widening left triangle pattern which is difficult to trade, as the continually larger moves within the formation eat into the gains that may occur from a breakout. Broadening triangles are rare and often occur at reversal points like now.

Resistance is now around $19 which may be used to take some profit off the table. However, I recommend to hold, right now, and wait for "the next move". The market is highly volatile and offshore drillers will be moving accordingly.

Looking at the market, it is really hard to be bullish for the next six months, which means that RDC may resume the negative breakout that should lead to the $14's support level again before the changing trend happens.

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

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.

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