* Q2 EPS $0.79 vs est $0.68
* Q2 rev up 2 pct, beats Street
* Continues to see good demand for jackups * Shares up 4
(Adds analysts' comments; updates share movement)
By Thyagaraju Adinarayan
BANGALORE, Aug 3 Contract driller Rowan Cos Inc
(RDC.N) reported a quarterly profit that beat analysts'
estimates, backed by strong land rig utilization, and said
clients were shifting capital budget to onshore projects.
The shifting of focus to land drilling in the wake of the
BP (BP.L) oil spill has seen land drillers posting strong
results in the quarter and are expected to lead to more
contracts for construction of rigs.
Along with the current surge in its land drilling, the
company also continues to see good demand for its high-end
The company, which has 32 land rigs, said land-rig
utilization in the second quarter was 78 percent, up from 60
percent last year. Offshore rig utilization fell marginally to
"I think they will probably have a good third and fourth
quarter, their land rig business will be good, and the jackup
business is expected to get stronger," Jefferies & Co analyst
Judson Bailey said.
Shares of the company rose 4 percent to $27.06 Tuesday
afternoon on the New York Stock Exchange. They have fallen
about 18 percent since the Macondo well blew out in April.
Rowan said it would pursue the construction of new land
rigs against term contracts, rather than opening up their fleet
to the spot market.
The company, which had earlier outlined plans to spin off
its land drilling unit, said it would explore that option when
the "opportunity presents itself."
"We do believe at some point it will make sense to use the
land rig fleet as a source of capital for further expansion in
to the offshore side of the business," Chief Executive Matt
Ralls said on a conference call.
While regulations at the Gulf of Mexico are delaying work
on new rigs, Rowan expects its two jack-up rigs -- so called
because they stand on legs on the seabed -- awaiting permits to
return to work in a couple of weeks.
Rowan with high-end jackups is "well-positioned" in the
U.S. Gulf in a regulatory standpoint, said Bailey, a top-rated
Energy Equipment & Services analyst, according to Starmine
The company said it is "very close" to getting its XL-III
rig committed with McMoRan Exploration MMR.N in the Gulf of
Mexico. The rig's delivery is expected in March 2011.
"We expect a continued bifurcation in the offshore drilling
market, with high-end units significantly better positioned
than older ones within an environment of tighter regulation and
oversight," said Dahlman Rose and Co analysts.
Rowan reported net income of $90.9 million, or 79 cents a
share, on revenue of $490.1 million for the second quarter.
(Reporting by Thyagaraju Adinarayan in Bangalore; Editing by
Don Sebastian and Maju Samuel)