Wednesday May 17, 4:37 pm Eastern Time
R&B Falcon could return to profit in Q4 2000
By Andrew Kelly
HOUSTON, May 17 (Reuters) - In a shareholder's meeting that was briefly halted by a man wielding a grenade, offshore drilling contractor R&B Falcon Corp.(NYSE:FLC - news) said on Wednesday gradually improving markets may enable it to return to profit by the fourth quarter of 2000.
``We certainly have a chance of getting in the black by the fourth quarter,'' Chairman and CEO Paul Lloyd told the company's annual meeting of shareholders.
His remarks were consistent with First Call/Thomson Financial data that show analysts project a small profit in the final quarter of 2000 after losses in the seven preceding quarters.
As the meeting opened, a man later identified as a former company employee, 72-year-old Andre Piazza, argued with Lloyd about company finances.
Ignoring requests to save his remarks until later, Piazza rose to his feet and drew the grenade from a bag. ``Do you know what this is? This saved my life in Vietnam,'' he told Lloyd. A Reuters reporter said about 60 terrified investors immediately bolted for the doors.
Piazza then removed the safety pin but there was no explosion and he was overpowered by company officials who called police.
Bomb squad officers called to the scene said the grenade was inert and could not have exploded. No other explosive devices were found at the scene.
When the meeting resumed, Lloyd made his profits forecast and said the company was excited about the prospects for both of its main markets, international deepwater drilling for oil and domestic shallow water drilling for natural gas.
Supply and demand fundamentals for both commodities looked good and should support increased drilling expenditure by oil and gas companies, he told the meeting.
``We're seeing a pretty significant pickup in business already and we think it will continue to be strong as we go into the second half of this year and into 2001,'' he said.
Lloyd said the company's first-quarter fleet utilization rate of 42 percent should turn out to be the low point and that subsequent quarters should show an improvement.
The company currently had 13 jackup rigs ``cold-stacked'' in the Gulf of Mexico but expected three to five of them to return to work in the coming months, he said.
Lloyd said R&B Falcon's utilization rate had fallen below that of some competitors because R&B Falcon had chosen to stack rigs rather than let them work for less than their cash costs.
Daily rental rates or ``dayrates'' for some of the smaller drilling rigs operating in the Gulf of Mexico had now recovered to the mid $20,000s from around $11,000 a year ago, he said.
Lloyd attributed recent strength in R&B Falcon's stock price to waning concerns among investors, as drilling markets improved, about the high level of debt incurred by the company to finance an ambitious expansion of its deepwater drilling fleet. The company's stock rose 1/4 to 24 on Wednesday on the New York Stock Exchange, but has risen some 80 percent since the end of last year.
``Leverage is always a concern, but in an up market with a lot of cash flow -- anywhere from $1 billion to over $2 billion a year -- you can pay the debt down pretty rapidly,'' he told Reuters immediately after the stockholders' meeting.
The company's annual report shows that at the end of 1999, R&B Falcon had some $3.2 billion in long-term debt and preferred stock out of total capital of $4.9 billion.
Lloyd declined to comment on a brokerage research report issued last week that said R&B Falcon had recently discussed the possibility of a merger with another offshore driller, Transocean Sedco Forex Inc.(NYSE:RIG - news). Transocean also declined to comment.
However, Lloyd said R&B Falcon believed the industry needed to consolidate and was constantly discussing this theme with the management of other contract drilling companies.
``We're not a company that necessarily insists on having to run the company. We're looking for shareholder value and sometimes that's not the best way to get it,'' he told Reuters. |
