* Rowan may be attractive to Norway's Seadrill
* High-spec, safe rigs bring in premium dayrates
* Drillers eye attractive assets post-BP oil spill
* Rowan seen getting more than 30 pct premium
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By Thyagaraju Adinarayan
BANGALORE, Sept 16 The damaging BP oil spill in
the Gulf of Mexico is pressuring drillers to upgrade and
modernise their equipment, and has brought drilling contractor
Rowan Cos (RDC.N) into focus as a potential bid target.
In the wake of the BP (BP.L) spill, drilling firms are
looking to buy state-of-the-art, high-end assets that have a
strong safety record and command premium dayrates.
Rowan's jack-up rigs -- drilling platforms with extendable
legs that stand on the ocean bed -- have an industry reputation
for robustness and safety, making the company attractive to the
likes of Norway's Seadrill Ltd (SDRL.OL), analysts say.
Rowan, which went public in 1967, owns about half the
world's top rigs, and more than half its rigs are less than 10
years old, against an industry average of nearer twice that.
"The bifurcation between new assets and older ones is only
widening and accelerating," said Simmons & Co analyst Ian
Macpherson. "So there was already a preference for companies to
try to consolidate the newer equipment."
Rowan's relatively young fleet could come on the radar of
Seadrill, the world's No.2 deepwater driller behind Transocean
(RIG.N) RIGN.VX, which is scouting for high-quality rigs to
compliment its own modern jack-up fleet. [ID:nLDE67T1CH]
Jack-up location Graphic: link.reuters.com/vyg83p
Rowan share price Graphic: link.reuters.com/wed83p
Rowan CEO Matt Ralls, who was chief operating officer at
GlobalSantaFe before its 2007 acquisition by Transocean has
been identified by bankers as a possible seller.
Rowan, which plans to become a pure play offshore driller
in 2-4 years, is keeping its options open over a merger to get
into the deepwater market. [ID:nWNAB5009]
With global utilization of high-specification jack-up rigs
running at more than 90 percent, Rowan recently bought Skeie
Drilling to expand its jack-up fleet. [ID:nN01114673]
"The company has aggressively added high-spec rigs, which
should enable it to outperform peers in terms of utilization
and day rates," Global Hunter Securities analyst Matthew Beeby
With a premium on rig safety in the wake of the BP spill in
April and a fire on a Mariner Energy ME.N platform, Rowan's
safety record is another plus -- and could bring it to the
attention of U.S.-based deepwater drillers Noble Corp (NE.N),
Ensco PLC (ESV.N) or Transocean, owner of the Deepwater Horizon
rig that exploded in the U.S. Gulf, triggering the worst
offshore oil spill in U.S. history.
"Rowan has a strong safety track record and highly
respected operations. This will help win awards at better than
market rates, despite new builds entering in 2010-11," UBS
analyst Angie Sedita wrote in a recent client note.
Stronger pricing power would also help earn top dayrates --
the cost that exploration and development firms pay rig owners
to use their equipment.
"Rowan's rigs are all very high end jack-ups. Pricing power
is much better for those types of rigs," said Rikard Ekstrand,
partner at First Pacific Advisors.
First Pacific Advisors recently raised its Rowan stake to
above 6.4 percent, a move Ekstrand attributed to the stock's
discount, given its highly-valued drilling assets.
Shares in Rowan, valued at $3.4 billion, have almost
trebled since their March 2009 lows, to just above $30, but are
still some way off their mid-2008 levels of around $48 each.
"If they get like $45 a share, or even $35-$40, they could
accept an offer," said Brian Uhlmer, analyst at Pritchard
But bidders are unlikely to want to take on Rowan as long
as it has its onshore and rig design and manufacture business,
LeTourneau Technologies Inc.
"The problem is they have land rigs as well as
manufacturing and I don't think in the short-term any big buyer
will look to buy it with those assets," said Pritchard's
Rowan does have plans to spin off those operations, and
that could be a starting gun for bidders.
(Reporting by Thyagaraju Adinarayan in Bangalore and Richard
Solem in Oslo; Editing by Ian Geoghegan)