* Q2 adj EPS $0.38 vs est. $0.35
* Q2 offshore drill rev down 21 pct at $223.5 mln
* May buy existing rigs or under-construction assets - CEO
* Says reviewing option to build one more drillship
* Shares up 2 percent
(Adds CEO quotes, analyst comments, updates shares)
By Krishna N Das
BANGALORE, Aug 2 Oil and natural gas driller
Rowan Cos Inc , faced with a void in its earnings power
following recent divestitures, would prefer to grow its fleet
through acquisitions of existing rigs at a time when about a
third of the world's shallow-water rigs are sitting idle.
The idle capacity is forcing drillers to avoid building new
rigs, as they take time to deliver and add to industry capacity,
hurting daily rates.
Houston-based Rowan on Tuesday posted a market-topping
second-quarter profit as costs remained under control in spite
of regulatory delays in the Gulf of Mexico and civil unrest in
the Middle East.
Rowan sold its drilling and mining equipment unit in May and
then hived off its onshore rig fleet late last month, leaving it
with a fleet of just 29 shallow water rigs, or jack-ups, and
funds to pursue a long-stated desire to expand into deepwater.
Analysts reckon that following the recent deals, Rowan could
be a good takeover target, but said the company would first look
at buying smaller peers to bulk up.
"Our preferred approach would still be to grow our presence
in both high-specification jack-ups and ultra-deepwater through
acquisitions of existing rigs or rigs already under
construction, just because it doesn't further add to the overall
capacity," Chief Executive Matt Ralls said on a conference call
In June, Rowan had ordered to build two drillships for about
$1.2 billion, and it is reviewing the option to build one more.
"We do have the ability to pay, I guess, a negotiable amount
in order to extend (the option) a little bit further and give us
more time," Rall said on the call.
Rowan's April-June profit was 38 cents a share, leaving out
one-time items, compared with analysts' average estimate of 34
cents, according to Thomson Reuters I/B/E/S. Offshore drilling
revenue fell 21 percent to $223.5 million due to lower average
UBS Investment Research analysts said Rowan's expenses were
9 percent lower than their estimates.
Calling Rowan's second-quarter show as "solid", Dahlman Rose
analyst Omar Nokta said Rowan's recent divestiture will "serve
to illuminate the value of its offshore rigs."
"The jack-up market is picking up and the company
is well positioned given its fleet quality and divestment of
non-core assets," Sanford C. Bernstein analyst Scott Gruber
Rowan shares, which have gained 12 percent in value so far
this year, were up 2 percent at $39.74 in Tuesday afternoon
trade on the New York Stock Exchange.
(Reporting by Krishna N Das and Swetha Gopinath; Editing by
Saumyadeb Chakrabarty and Gopakumar Warrier)