Offshore Driller Rowan Posts Big Earnings Beat

Rowan Companies PLC (NYSE: RDC) reported fourth-quarter and full-year 2015 results before markets opened Friday. The offshore drilling company reported quarterly adjusted diluted earnings per share (EPS) of $0.95 and $535.8 million in revenues. In the same period a year ago, Rowan reported EPS of $0.89 on revenue of $556.2 million. Fourth-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.74 and $530.2 million in revenue.

For the full year, Rowan reported adjusted EPS of $3.53 and revenues of $2.14 billion, compared with EPS of $2.14 and revenues of $1.82 billion in 2014. Analysts had estimated EPS of $3.31 and revenues of $2.13 billion.

Rowan attributed the lower full-year revenues to a significant increase in jack-up idle time that more than offset increased contributions from the company’s four newbuild ultra-deepwater drillships. The company also noted that it has signed a contract with EOG Resources for a deepwater drillship for approximately one year at a rate of $135,000 per day. The ship is expected to begin working the contract in the third quarter of this year to drill a total of five wells.

CEO Tom Burke said:

While Rowan finished 2015 with exceptional operational performance and the best safety related performance, highest EBITDA and EBITDA margins in the Company’s recent history, we are mindful of the extremely challenging market environment that lies ahead. We have strategically positioned Rowan to weather this difficult business climate through our solid liquidity position, attractive debt maturity profile, low level of capital commitments, substantial backlog, and high-specification and modern fleet. As we continue to navigate through this down cycle we will continue to focus on revenue efficiency and reducing our cost structure to further enhance our competitive position.

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Four ultra-deepwater drillships and 27 jack-up rigs comprise Rowan’s fleet. Last year the company took a non-cash, after-tax charge of $438.4 million ($3.53 per share) related to its 12 oldest jack-up rigs.

Since the summer of 2014, Rowan’s stock has dropped more than 60% of its value. In the same time frame, companies like Transocean and Seadrill have lost more than 80% and about 95%, respectively. Ensco has dropped nearly 85% in the same period. Only Diamond Offshore, which has lost about 61%, is in the same ballpark as Rowan.

Rowan’s stock closed down about 1% on Thursday at $11.64 and was inactive in Friday’s premarket. The stock’s 52-week range is $10.67 to $24.31 and the consensus price target is $17.90.