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Rowan: Rig Extensions Show That Offshore Story Is Not Over Yet

Dec. 06, 2018 1:48 PM ETRowan Companies plc (RDC)XOM5 Comments


  • Exxon Mobil recently exercised options for a Rowan drillship, adding two months to the backlog.
  • The additional backlog is probably only about $9 million, but any revenue is good given the industry struggles.
  • Rowan is probably the best positioned company in the industry right now, but it is still being targeted for a takeover by Ensco.
  • I like this deal even less than I did earlier this year as Rowan's stock has held up a lot better than Ensco's.
  • There is unlikely to be a recovery in dayrates anytime soon, but the fact that contracts are still being exercised is good news.
  • This idea was discussed in more depth with members of my private investing community, Energy Profits in Dividends. Get started today »

On Monday, December 3, 2018, offshore drilling contractor Rowan Companies (NYSE:RDC) announced that Exxon Mobil (XOM) has exercised the first two options on the Rowan Relentless drillship. As each of the options has an expected duration of thirty days, this adds about two months to the rig's backlog, which means that it will generate more revenue for Rowan. This is a positive sign both because of that and because it tells us quite clearly that Exxon Mobil has not given up on the offshore environment despite the recent decline in oil prices.

About The Rig

The Rowan Relentless is one of the most advanced drilling rigs in operation today.

Source: ShipSpotting.com

This was the fourth and final rig in Rowan's ultra-deepwater rig construction program that was begun during the peak of the previous upcycle. As the rig left the shipyard in 2015, it is one of the newest rigs around (offshore drillers essentially shut down their new rig construction programs in 2014 in response to industry weakness, so few rigs were started after that date). The rig itself is an R-class rig using the Gusto MSC P10,000 design. Despite the name though, this rig is actually capable of operating in up to 12,000 feet of water. It is also capable of drilling wells up to 40,000 feet deep. As you might expect, this is essentially the cream of the crop as far as ultra-deepwater drilling rigs go.

About The Contract

The Rowan Relentless has been employed by oil supermajor Exxon Mobil since the middle of September 2018. Originally, this was a one-well contract that was expected to last for eighty days, which puts its expected expiration date in December. The addition of these two additional wells likely extends the contract into February.

One trend that we have been seeing frequently

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