Jefferies Reports 1Q Miss For Rowan Cos.

According to Jefferies, Rowan Cos. RDC remains one of our two best offshore drilling ideas with one of the highest spec jack-up fleets in the world and the potential for value creation from the proposed sale or spin of LTI and the land rig business. Jefferies said that in addition to the handful of recent positive contracts globally and the continued increase in tender activity, management commentary is becoming decidedly more optimistic about the broader recovery in jack-up demand that is beginning to take hold, led at the moment by the North Sea and Mexico. “RDC currently trades at 6.6x 2012 TEV/EBITDA and 88% of NAV, which compares with previous mid-cycle valuations of 6-7x NTM TEV/EBITDA and 120-130% of NAV. We are maintaining our 12-mo. PT of $52, which is based on 120% of NAV and approx. 8-8.5x our 2012 TEV/EBITDA. Risks: i) weakness in jack-up dayrates, ii) oil/gas price weakness, and iii) unexpected rig downtime.” Rowan Cos. closed yesterday at $38.71.