A little review of RDC & GLM earnings fron The Wall Street Urinal
Dow Jones Newswires -- April 14, 1998
Rowan, Global Marine 1Q Profits Up, But
Outlook Mixed
By Loren Fox
NEW YORK (Dow Jones)--First-quarter earnings at two of the
best-known companies that lease rigs for drilling offshore oil and gas wells
rose substantially from last year, essentially meeting Wall Street's
expectations.
It was a relief to investors who had worried that the drillers, Rowan Cos.
(RDC) and Global Marine Inc. (GLM), may have disappointed, given the
weakness in oil prices and the resulting likelihood that spending would be
curtailed.
Industry observers, however, said the indications from the companies mean
a mixed outlook for the next few months.
Global Marine reported Tuesday earnings of $68.2 million, or 39 cents a
share, up from operating earnings, which exclude nonrecurring items, of
$48.8 million, or 28 cents a share a year earlier. Global topped the First
Call Corp. consensus estimate by 1 cent.
Rowan Cos. reported earnings of $42.8 million, or 48 cents a share, up
from operating earnings of $7.6 million, or 9 cents, in 1997's first quarter.
Rowan's 48 cents met analysts' expectations.
The earnings were the first from offshore drillers.
"People were perhaps expecting the numbers to be worse than they were,"
said Southcoast Capital analyst Robert Trace. He said the results should
calm fears that there may be widespread earnings disappointments from
other offshore drillers when they report quarterly earnings.
On the NYSE, Rowan shares rose 9/16, or 2%, to close at 28 1/2, and
Global shares rose 1/4, or 1%, to finish at 23 5/8. The entire oil-services
sector was higher, and analysts suggested it got a boost from the strong
broader market.
Importantly, both companies reported increases in the daily rates at which
they lease rigs. Rowan's average dayrate in the first quarter rose 37% from
a year earlier to $62,000, and Global's average day rate rose 47% to
$69,800. However, the pace of growth was clearly slowing from 1997.
Rowan, however, stuck to its forecast, made last September before oil
prices started dropping, that it would earn $2.50 a share in the full year
1998.
A Global Marine spokesman said it expects its average day rate to rise to
the mid-$70,000 range in the second quarter, mostly due to rate increases
among its floating rigs.
But Global confirmed that while many dayrates were rising, rates for certain
rigs that work in 250 to 300 feet of water in the Gulf of Mexico are
dropping by 5% to 10%.
Analysts said this dip, the first one in two years, would probably hit in May,
when rigs come off current contracts, and is likely to last just two or three
months.
As a result, the impact from the low oil prices is more likely to be felt in the
second and third quarters, creating a drag on what is still likely to be robust
profit growth. "It's a pretty cloudy picture right now for what lies ahead,"
said Salomon Smith Barney analyst Mark Urness. "The second quarter may
be more challenging for these companies."
But the quarterly earnings are overshadowed by investor concerns about oil
prices, currently around $15.25 a barrel. Wheat First Union analyst Yves
Siegel said: "People are clearly focused on oil prices, and investors won't be
comfortable until they're over $17 a barrel." |
