March 1, 2010 / 3:12 PM / in 8 years

UPDATE 2-Rowan shares hit yr-high on strong margin view

* Q4 beats Street

* Sees FY10 margins rising in upper teens

* Sees operators willing to hire high-spec jackups

* Marketed land rigs to be 100 pct utilized from summer

* Shares rise as much as 6 pct (Recasts; adds details, analysts’ comments, updates share movement)

By Thyagaraju Adinarayan

BANGALORE, March 1 (Reuters) - Contract driller Rowan Cos Inc’s (RDC.N) said it expects full-year margins to rise in the upper teens, helped in part by strong demand for high-specification jackup rigs and a strong utilization view for its land rigs.

The land rig market continues to gain momentum and Rowan anticipates that its marketed fleet will be 100 percent utilized beginning sometime in the early summer, said Mark Keller, executive vice-president of business development, on a conference call with analysts.

Shares of the company rose as much as 6 percent to a 52-week high of $27.69 after the outlook. They gave up some of those gains to trade up $1.39 at $27.41 on the New York Stock Exchange, outperforming a 0.89 percent rise in the Philadelphia SE Oil Service Index .OSX.

The company, which competes in the jackup market with bigger companies like Transocean Ltd (RIG.N), Noble Corp (NE.N) and Ensco International (ESV.N), said it saw increasing willingness by operators to pay higher rates for more efficient equipment.

The company said it believes there is a similar high-grading trend occurring in the global jackup market, which will allow it to obtain attractive day rates for its premium and high-spec jackups.

“They have spent a lot of money in maintaining a high-quality fleet ... and given the efficiencies that operators gain by using these rigs, they (operators) are willing to pay up,” Pritchard Capital analyst Brian Uhlmer told Reuters.

Chief Executive Matt Ralls said he was optimistic that the recent Davy Jones discovery by McMoRan Exploration Co MMR.N and its partners will lead to future increases in ultra-deep gas drilling activity in the Gulf of Mexico, requiring jackup rigs with the advanced operating capabilities that characterize the Rowan fleet.

“During the last few months, we have seen increased activity and tendering in virtually every jackup market segment worldwide, with the Middle East, North Sea and Gulf of Mexico regions being the most significant for our fleet,” Ralls added.

    Pritchard’s Uhlmer said he thinks that a large amount of capital put in to developing top quality fleet in the industry is going to pay off Rowan in 2010 and 2011.

    “It’s hard for me to see improvement in day rates really for most of this year,” Morgan Keegan analyst Matthew Beeby said.

    However, he said as far as the jackup opportunities, among peers, Rowan probably has the best as it has the highest quality jackups.

    The company’s quarterly results came in ahead of analysts’ estimates, helped by an increase in the U.S. land rig and worldwide jackup activity, and lower operating costs. [ID:nWNAB338]

    “All in the quarter was disappointing for the drilling segment and was propped up by higher turnover and lower taxes. However, as the general jackup market commentary has been positive from the sector RDC should get some legs behind it,” analyst Uhlmer wrote in a note to clients.

    For 2010, the company said it expects revenue will be flat to slightly up, compared to 2009, but expects selling, general and administrative expenses to increase.

    Rowan said it sees first-quarter drilling expenses rising sequentially on more activity. (Reporting by Thyagaraju Adinarayan; Editing by Anne Pallivathuckal and Maju Samuel)

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