Global Marine, Rowan say Gulf of Mexico drilling rebound is inevitable

The offshore drilling rig market in the US Gulf of Mexico has dropped sharply over the last 6 months, but service companies expect it to rebound just as sharply when natural gas demand requires it. They said weaker economic indicators may push recovery back somewhat.

Oct. 18, 2001

3 min read

By the OGJ Online Staff

HOUSTON, Oct. 18 -- The offshore drilling rig market in the US Gulf of Mexico has dropped sharply over the last 6 months or so, but service companies expect it to rebound just as sharply when natural gas demand requires it.

They said weaker economic indicators may push recovery back somewhat.

Bob Palmer, chairman and CEO of Rowan Cos. Inc., Houston, said, "The Gulf of Mexico market for offshore drilling rigs has collapsed. Five months ago, 191 rigs were under contract. Currently, there are 129 -- a decrease of 62 rigs.

"There is no question that at the current level of drilling activity, the supply of natural gas will fall as a result of depletion. At some point in the future, there will be a perceived gas shortage, at which time natural gas prices will rise, demand for drilling rigs will increase, and financial results will improve dramatically," said Palmer.

Bob Rose, Global Marine Inc. chairman, president, and CEO, said, "Although we still believe the US Gulf of Mexico natural gas market will rebound sharply, the weakening economy, exacerbated by the tragic events of Sept. 11, will push the inflection point of that recovery period further into the future. Meanwhile, it is possible day rates in the US Gulf of Mexico could reach cash breakeven levels while international markets remain strong."

For the third quarter, Rowan declared total revenues of $191.3 million, up slightly from $190.8 million for the same quarter a year ago. Revenue from drilling services was $117.7 million, essentially flat from the same quarter a year ago.

Rowan's third quarter net revenue was $20.6 million, down sharply from third quarter 2000's $25.6 million. Net income per share was 22¢, down from 27¢ for the same quarter in 2000.

Palmer said that when the inevitable rebound occurs, "Rowan will be ready with the necessary manpower, machines, and money." But, he said, "Nearer term, our outlook is uncertain. Depending upon rig utilization and day rates, our fourth quarter results could be anywhere between a 10¢/share loss and a 5¢/share profit."

Global Marine declared net income of $62.1 million, up 92% from $32.3 million in the third quarter of last year. Total revenues were $313.8 million and $272 million respectively.

Rose said, "Global Marine's financial and operating performance was strong. Despite weakening offshore drilling rig demand in the Gulf of Mexico, utilization of our fleet remained high, and average day rates for our rigs reached the highest level in the company's history."

The company said its average day rate for the quarter was $78,000, compared to $59,200 for the same quarter a year ago. For the 9 months ended Sept. 30, Global Marine's average day rate was $75,000, compared to $57,100 for the same quarter a year ago.

The company's worldwide fleet utilization for the third quarter 2001 was 95%. "In the US Gulf of Mexico, where industry jackup rig utilization was 79%, Global Marine's jackup fleet achieved utilization of 98%," said the company.

Global Marine also said the US Federal Trade Commission has cleared its pending merger with Santa Fe International Corp., and the UK Office of Fair Trading is considering the matter. Stockholders will meet to approve the merger Nov. 20, and the deal is expected to close the same day.