November 4, 2008
Rowan puts LeTourneau sale on hold
Rowan Companies, Inc. (NYSE: RDC) has put the sale of its manufacturing subsidiary, LeTourneau Technologies, Inc., on hold.
"The recent capital markets and commodity price weakness have adversely affected opportunities for monetizing our investment in LTI for what we believe to be adequate value for Rowan stockholders." said Chairman and CEO Danny McNease. "Therefore, at this time, we are not pursuing any further negotiations with potential partners. However, we will continue to review all strategic options, including a spin-off of LTI to our stockholders. We do not anticipate that a transaction, if any, will be completed until capital market conditions improve significantly."
LTI built the first offshore jack-up drilling rig in 1955 and has designed or built more than 200 rigs since. The sale of the unit was being pushed by investment group Steel Partners II, headed by activist investor Warren Lichtenstein.
"Continuing weakness in capital markets and commodity prices will, eventually, affect customer demand for our products and services, though we have experienced little impact thus far," noted Mr. McNease. "To the contrary, we have over the past two months added significantly to our backlog of business, including almost $300 million of term drilling contracts for our two newbuild jack-ups to be delivered later this month. We see continuing firm demand in both domestic and foreign markets for the right type of equipment having a proven drilling organization behind it.
"Thus, we remain optimistic for the prospects of our seven other jack-ups currently under construction or on order, though we are reviewing the scheduled timing of our third and fourth 240-C class jack-up rigs, currently planned for delivery in 2010 and 2011, for opportunities to preserve near-term liquidity. Of course, it's our continuing ownership of LTI that gives us the flexibility to alter these construction schedules, if that becomes necessary."
Rowan today reported third quarter results that, said Mr. McNease, saw financial performance hit by Hurricane Ike, which caused the loss of the company's oldest offshore drilling rig, the Rowan-Anchorage, and significantly disrupted Houston manufacturing operations.
For the three months ended September 30, 2008, Rowan generated net income of $114.1 million or $1.00 per share, compared to $130.8 million or $1.16 per share in the third quarter of 2007 and $120.6 million or $1.06 per share in the second quarter of 2008. Revenues were $527.1 million in the third quarter of 2008, compared to $502.2 million in the third quarter of 2007 and $587.1 million in the second quarter of 2008.
The third quarter 2008 results included $21.4 million, or $0.12 per share, of gains on asset sales, compared to $1.1 million, or less than $0.01 per share, in the third quarter of 2007 and $1.5 million, or $0.01 per share, in the second quarter of 2008.
Rowan's offshore rig utilization was 95% during the third quarter of 2008, compared to 96% in the second quarter of 2008 and 99% in the prior-year quarter, with much of the downtime in 2008 associated with rig relocations or modifications. The company's average offshore day rate was $161,100 during the third quarter of 2008, down by $500 or less than 1% from the second quarter of 2008 and up by $2,900 or 2% over the third quarter of 2007. Land rig utilization was 97% during the third quarter of 2008, unchanged from the second quarter of 2008 and up from 96% in the prior-year quarter. Average land rig day rate was $20,900 during the third quarter of 2008, down by $1,700 or 8% from the second quarter of 2008 and by $2,400 or 10% from the third quarter of 2007.
Rowan's drilling operations generated revenues of $357.1 million during the third quarter of 2008, down by 3% from both the second quarter of 2008 and the prior-year quarter. The company's income from drilling operations was $166.9 million or 47% of revenues during the third quarter of 2008, up by 6% over the second quarter of 2008, but down by 9% from the third quarter of 2007.
Rowan's manufacturing operations generated external revenues of $170.0 million during the third quarter of 2008, down by 23% from the second quarter of 2008, but up by 27% over the prior-year quarter. Income from manufacturing operations was $5.3 million during the third quarter of 2008, down by 78% from the second quarter of 2008 and by 64% from the third quarter of 2007.