Current rig quotations are for deliveries in the second half of 2008, meaning that final delivery of the complete jackups associated with these kits would be in the second half of 2009. LTI mining products produces large front-end loaders and related parts. The firm shipped three loaders in the second quarter of 2007 versus eight in the second quarter of 2006. The company expects to ship 29 total loaders in 2007 versus 30 loaders in 2006, its best performance in many years.
The market share for larger front-end loaders readied at 1,000 horsepower and above remains about 35%. The market share of loaders above 1600 horsepower is close to 100%. The company is expanding sales for relative new 950 and 50 series loaders, as both new models are performing well. The backlog totaled $24 million at June 30th and included eight front-end loaders, but increased to approximately $39 million at July 31st as the firm has sold another five loaders since June 30.
The company’s offshore rig utilization was 97% during the second quarter of 2007, up from 84% in the first quarter.
Rowan''s average offshore day rate worldwide during the second quarter of 2007 was $157,100. Rowan''s land rig utilization as 97% during the second quarter of 2007, up from 92% in the first quarter of 2007. Rowan''s average land rig rate during the second quarter of 2007 was $22,400.
Supply and Demand in the Global Market
Worldwide, the supply is 408 rigs. Demand is 375. Contracted utilizations is 92%. Average forecast of supply deficit is 25 to 31 jackups. The company’s worldwide fleet is currently contracted at 100%, both land and offshore. Rowan''s current average day rate worldwide is $159,000 a day. For the remainder of 2007 and 2008, the firm will continue to expand internationally.
In the Middle East, the supply is 93 rigs, demand is 87 contracted, utilization is 94%. The average forecast of five deficits nine to eleven jackups. Rowan''s currently operating eight jackups in the Middle East region. Four of 116-C''s two Tarzan rigs are working for Saudi Arabia and two 116-Cs are working in Qatar for Maersk.
The North Sea supplies at 35 rigs, demand is 35 rigs, utilization is 100%. Average forecast and supply deficit, currently, a supply deficit does not exist. However, there is a possible shortage of two rigs by year end 2007 and three to four rigs in 2008. The increase in demand in 2008 is largely due to project deferrals from 2007 due to jackup availability.
Trinidad supplies six rigs, demand is six rigs, 100% utilization. The Gorilla III is operating for Anadarko in a $187.5 a day. Following the Anadarko contract, Rowan will commence operations for EOG on its last option well. The work will last approximately 60 days. Day rate of $187.5. The rig will then commence operations at Petro-Canada $250 a day for approximately six months to one-year depending on the option.
South America supply is 11 rigs, demand is nine rig, utilization is 82%. Average forecast of supply deficit is one to two rigs. Although, Brazil is predominantly a deepwater environment, Petrobras is currently out to tender for two jackups and is forecast to tender for an additional two to three units in the first quarter 2007.
In the Gulf of Mexico, supply is 84 rigs, demand is 62, utilization is 74%. Nine of the 21 jack-ups are operating in the Gulf of Mexico and are fully contracted. Both are on a well-to-well and term base. Rowan''s average day rate in the region is $140,000 a day. US Gulf of Mexico jackup market continues to remain the most unstable major operating region in the world in terms of day rates and utilization and this trend is forecasted to continue for the remainder of 2007.
West Africa supply is 26 rigs, demand 26 rigs, utilization is 100%. The 26 rigs currently in the region are fully booked due to the remainder of 2007. Demand forecasted remained relatively unchanged at approximately 30 rigs through 2008 with a supply projected at 25.
In Southeast Asia, the supply is 35 rigs, demand is 35 rigs, utilization 100%. The major question in the region remains how the market will absorb the nearly 30 new builds scheduled to be delivered over the next year. Some operators in the regions are deferring projects to 2008 and hope of a decrease in day rates.
Key questions and answers from the second quarter fiscal 2007 earnings call conducted by Rowan Companies Inc. on August 2, 2007.
Robert MacKenzie (FBR Capital Markets): You talked in the past about moving the rigs out of the US Gulf of Mexico to foreign markets like Middle East, North Sea, Latin America. Can you update on the status of getting some more rigs out of the US Gulf?
Daniel F. McNease: We have currently 14 tenders in house that we''re looking at. We''re bidding in all these areas, and we''ll just have to wait and see how successful we are. But there''s a lot of demand and people are still offering long-term contract.
Robert MacKenzie: Do you think the US Gulf reached bottom yet or if there''s still further downside in demand there as hurricane season progresses?
Daniel F. McNease: It''s flattened out and it''s started up is the case, we got a higher day rate for the Juneau. We were able to renew the bigger rigs at the same price or higher than we were getting before. We believe it''s bottomed out and started up. One thing''s that''s driving our fleet is the deeper gas drilling and we''re getting the rate to drill deep well for BP which is going to be over 30,000 feet. People are talking to us about some additional opportunities like that. We believe that the deep gas is going to play a big role in Rowan''s future in Gulf of Mexico.
Collin Gerry (Raymond James and Associates): You mentioned that you have 14 tenders outstanding. Can you tell us the mix or what terms some of the operators are looking at?
Daniel F. McNease: Most of those are two to four-years.
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