Rowan Companies' CEO Discusses Q1 2012 Results - Earnings Call Transcript

Rowan Companies (RDC)

Q1 2012 Earnings Call

May 02, 2012 11:00 am ET

Executives

Suzanne M. McLeod - Director of Investor Relations

W. Matt Ralls - Chief Executive Officer, President, Director and Chairman of Executive Committee

Mark A. Keller - Executive Vice President of Business Development

William H. Wells - Chief Financial Officer, Vice President of Finance, Senior Vice President and Treasurer

Thomas P. Burke - Chief Operating Officer

Analysts

Douglas L. Becker - BofA Merrill Lynch, Research Division

David Wilson - Howard Weil Incorporated, Research Division

Ian Macpherson - Simmons & Company International, Research Division

Robin E. Shoemaker - Citigroup Inc, Research Division

Joe Hill - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

Matthew D. Conlan - Wells Fargo Securities, LLC, Research Division

Andreas Stubsrud - Pareto Securities AS, Research Division

Richard Haydon - Yield/Capital Appreciation Management

Presentation

Operator

Greetings, and welcome to the Rowan Companies, Inc. First Quarter 2012 Earnings Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Suzanne Spera, Director of Investor Relations for Rowan Companies, Inc. Thank you. Suzanne, you may begin.

Suzanne M. McLeod

Thank you, Robin, and good morning. Welcome to Rowan's first quarter 2012 earnings conference call. I'd like to take a moment to remind you that Rowan will host an Analyst and Investor Day in New York on Wednesday, May 30. The event will feature executive and management discussions on Rowan's strategy for continuing to grow the company, operational strengths and challenges, offshore drilling marketing plans and opportunities, financial overview and flexibility for growth. Complete details on the event can be found at the homepage of Rowan's website under Upcoming Events. We look forward to seeing you there.

Joining me on this call this morning are Matt Ralls, President and Chief Executive Officer; Tom Burke, Chief Operating Officer; Mark Keller, Executive Vice President, Business Development; and Bill Wells, Senior Vice President, Chief Financial Officer and Treasurer, who will have prepared comments. Also in the room to respond to questions is Kevin Bartol, Senior Vice President, Corporate Development.

Before Matt begins his remarks, I'd like to remind you that during the course of this conference call, forward-looking statements may be made within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements about the change in corporate structure, as well as statements as to the expectations, beliefs and future expected financial performance of the company that are based on current expectations and are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected by the company. Other relevant factors have been and will be disclosed in the company's filings with the SEC.

With that, I'll turn the call over to Matt.

W. Matt Ralls

Thanks, Suzanne, and good morning, everyone. I'll be brief this morning. We're pleased with our results for the first quarter and believe that these results reflect an upward trend for the company. While over the past few years, we've often rolled from high day rate contracts signed during the last peak to new lower day rates, we're now in a position where virtually all rigs moving to new contracts will be getting higher day rates.

We continue to have a few rigs in transition as we reposition our fleet into the markets where we believe they have the best longer-term opportunities, but we expect the pace of those relocations to reduce over the balance of this year. These moves have helped us add substantial contract backlog, bringing our total backlog to $3.5 billion, and we're hopeful and pretty confident that we'll be adding significant deepwater contract backlog over the coming months.

I believe that Rowan is in a great position with a growing fleet of very high quality rigs, the best people in the industry and a renewed strategic focus on excellence in both jack-up and deepwater drilling. Also, as disclosed in our filing earlier this week, we believe we're on track to complete our redomestication to the U.K. through a transaction utilizing Class A shares rather than depository receipts. I believe that if we're successful in staying in the S&P 500 Index as expected, it will have been worth the effort and expense of using the Class A structure, notwithstanding any market turbulence that may have been associated with the uncertainty around that issue.

And finally, we had an incident this morning involving the EXL-I. As she was being towed toward the entrants of the Corpus Christi Ship Channel, a passing ship lost power and collided with the rig. All hands aboard the rig are safe and the situation is stable, but the port side of the rig was damaged and will require repairs prior to being able to be mobilized to Southeast Asia as planned. We will update our mobilization plan in the next fleet status report.

With that, I'll turn it over to Mark.

Mark A. Keller

Thanks, Matt, and good morning, everyone. In the first 4 months of 2012, we are proud to have added more to our total backlog than the entire year of 2011.

With recent commitments of additional jack-up contracts in Southeast Asia, the U.S. Gulf of Mexico and extensions in the North Sea and our previously announced ConocoPhilips and BG contacts, we have exceeded $1.5 billion in additional backlog. We are encouraged by these contracts and the positive market dynamics of the jack-up sector. Worldwide utilization is the highest it's been in over 2 years, average earned day rates worldwide were up approximately 10% among our peer group over the past 6 months, and tender activity for more capable jack-ups continues to remain strong.

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