Rowan Companies Stays Neutral - Analyst Blog

We maintain our Neutral recommendation for Rowan Companies Inc. (RDC) following better-than-expected third-quarter results. Revenue was up more than 11% year over year. The company is confident of adding backlog on several high-spec jackups in the near term. This was affirmed by the recent contract award for its first N-class jackup acquired as part of Skeie Drilling & Production ASA. 

With oil prices remaining strong and tendering activity on the rise, we expect the international jackup market to strengthen further. However, we believe that pricing will be under modest pressure in the near future as new jackups begin to enter the market.         

Houston, Texas-based Rowan is a provider of international and domestic contract drilling and aviation services. The company's operations are presently conducted in Mexico, Saudi Arabia, Egypt, West Africa, the North Sea, Eastern Canada and the U.S. Gulf of Mexico.

Rowan's premium high specification rig fleet enjoys greater utilization than most other shallow water fleets. We believe that significant earnings leverage could be achieved with increasing tendering activity.

Although deepwater fundamentals are most compelling over the long term, we expect land drillers and jackup leveraged companies such as Rowan to outperform in the near term as their recovery continues.

While the majority of Rowan's fleet is considered to be high-end premium jackups, the company is also a proven offshore driller, with a long-term strategy in place.  However, intense competition from Noble Corp (NE), Pride International (PDE) and Ensco International (ESV) remains a cause for concern.

 
ENSCO PLC (ESV): Free Stock Analysis Report
 
PRIDE INTL INC (PDE): Free Stock Analysis Report
 
ROWAN COS INC (RDC): Free Stock Analysis Report
 
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