Contract drilling services provider Rowan Co., Inc. (RDC), Monday said it will resume construction of its fourth EXL class jack-up rig at the Keppel AmFELS, Inc. shipyard in Brownsville, Texas. The construction was suspended earlier in 2009 over liquidity concerns and a weakening jack-up drilling market, pending a decision in the third quarter as to complete or cancel the rig construction.
Rowan said the move to resume construction of the rig was based on the substantial positive changes in liquidity outlook through 2010, coupled with the expectation of generating an attractive return on the $120 million of net capital remaining to complete construction on the rig.
Rowan also added that the resumption of construction is not expected to significantly impact its 2009 capital expenditures. The capital expenditures for 2009 is not expected to change. The estimated expenditures for 2010 are are expected to increase by about $50 million to a range of about $375-400 million. Rowan anticipates funding these capital expenditures through available cash and operating cash flows.
The capital remaining to complete construction of the fourth EXL rig is $120 million, net of approximately $30 million of penalties and excess inventory that would have been incurred if the project had been canceled.
The construction of the four EXL class jack-up rigs for Keppel was started by Rowan in the late 2007. Of the four rigs, first three EXL rigs remain on schedule and on budget. The second and third 240C jack-up rigs, the Ralph Coffman and the Joe Douglas, is scheduled to be delivered in the first quarter of 2010 and third quarter of 2011, respectively.
Matt Ralls, Rowan's President and Chief Executive Officer said, "Further, we believe the recovery outlook in global oil demand and a potential re-tightening of rig markets will have gained momentum by the time this rig is delivered in 2012."
RDC is currently trading at $22.83, up $1.20 or 5.55%, on a volume of 1.75 million shares.
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