Rowan Companies Inc. (RDC) Tuesday reported a lower fourth-quarter profit, hurt mainly by higher expenses as well as a decline in income from discontinued operations. Additionally, the contract driller also plans to change its legal domicile from US to UK, where the company already has "substantial and growing operations."
Following the news, Rowan shares dropped over six percent on the New York Stock Exchange.
Revenues for the quarter surged 32 percent to $275.1 million, driven mainly by incremental activity from fleet additions, rig start-ups, and slightly higher average day rates between periods.
Day rates increased to $149.9 thousand from $142.5 thousand, while rig utilization improved to 68 percent from 65 percent last year.
However, the company's gross drilling margin dropped to 41 percent of revenues from 52 percent last year, due primarily to increased rig shipyard and other downtime together with higher labor and maintenance costs.
Rowan's profit for the quarter dropped to $45.1 million or $0.36 per share from $57.3 million or $0.45 per share a year ago.
On average, 36 analysts polled by Thomson Reuters expected earnings of $0.30 per share on revenues of $270.27 million for the quarter. Analysts' estimates typically exclude special items.
Income from discontinued operations decreased to $12.0 million or $0.09 per share for the quarter from $22.2 million or $0.17 per share in the fourth quarter last year.
Total costs and expenses for the quarter rose to $244.9 million from $159.3 million last year.
In order to shift its legal domicile, Rowan said it would merge with Rowan Mergeco LLC, a newly formed subsidiary of the company. Following the move, Rowan will be the surviving company and an indirect subsidiary of a newly formed English public limited company, which it plans to name Rowan Companies plc.
Rowan, which estimates 81 percent of its revenues to be generated from non-U.S. operations in 2012, said the structural change would help it focus more towards key global markets.
The shift is also expected to help the company improve access to key customers in the U.K., Europe and Egypt, which collectively comprise 59 percent of its contract backlog. The move would also allow it remain competitive with the effective tax rates of its global competitors, most of which are domiciled outside the US.
The plan will have no effect on employees' jobs, wages, or current benefits, the company said in an SEC filing. Rowan anticipates the transition to be completed by late spring 2012.
RDC is currently trading at $35.88, down $2.66 or 6.93%, on a volume of 5.3 million shares, above the three-month average volume of 2 million.
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