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Rowan (RDC) Amends Cobalt International Drilling Contract


Rowan Companies plc RDC has declared an amendment to its drilling contract for the Rowan Reliance rig with upstream energy player Cobalt International Energy L.P. The drillship contract was expected to conclude by Feb 1, 2018.

As per the amendment, Rowan is anticipated to get a cash payment of roughly $96 million given that the current day rate for the rig is intact at $582,000. But the contract might get terminated by Mar 31, 2017. On top of that, if Cobalt International continues utilizing the rig without terminating the contract, the drillship’s dayrate for the remaining operating days will be lowered to $262,000 per day.

The cash proceeds from this contract will significantly strengthen Rowan’s balance sheet and help it to capitalize on opportunities especially in this down market.

Houston, TX-based Rowan provides international and domestic contract drilling and aviation services. It focuses mainly on high-specification, premium jack-up rigs and ultra-deepwater drillships. The company’s deep focus on high-spec resources, along with impending tendering activities for multi-year drilling programs in key markets including the North Sea, Southeast Asia, Australia and Saudi Arabia, will likely support the requirement for high-spec units.

However, the ongoing weak oil pricing scenario will likely remain an overhang on the stock. As per the recent reports of The Organization of the Petroleum Exporting Countries (OPEC) and The International Energy Agency (IEA), the crude market will remain oversupplied through 2017. Hence, the future of the company is also looming in uncertainty as there might be lesser drilling activities till then.

As a result, the company currently carries a Zacks Rank #3 (Hold).


Better-ranked players in the energy sector include China Petroleum & Chemical Corp. SNP, Rice Midstream Partners LP RMP and Matador Resources Company MTDR. Each of these stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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