Rowan Companies has announced that it will resume construction of its fourth EXL class jackup at the Keppel AmFELS shipyard in Brownsville, Texas, with delivery expected in the first quarter of 2012.
“In early 2009, we suspended construction of this rig due to liquidity concerns and a weakening jackup drilling market, pending a decision in the third quarter about whether to complete or cancel this rig,” said Matt Ralls, Rowan president and CEO. “We have now decided to resume construction based on substantial positive changes in our liquidly outlook through 2010 and our expectation of generating an attractive return on the $120 million of net capital remaining to complete construction on this rig.”
“We are confident that there will be an increase in demand for very capable, high-specification jackups for deep, difficult wells going forward. 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,” Mr Ralls said.
In late 2007, Rowan signed construction contracts with Keppel for four EXL (enhanced LeTourneau Super 116E) class jackups. The EXL will employ the latest technology to drill high-pressure, high-temperature and extended-reach wells in jackup markets throughout the world, and will be equipped with a hook-load capacity of 2 million lbs, 70 ft of cantilever reach, 477 ft of leg length, and the mud pumping horsepower to drill up to 35,000 ft. The company’s first three EXL rigs remain on schedule and on budget, with deliveries scheduled for the second, third and fourth quarters of 2010, respectively.
The company estimates that 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 decision to resume construction is not expected to significantly impact the company’s 2009 capital expenditures, which are estimated at $630 million, but will increase expected 2010 capital expenditures by around $50 million to a range of approximately $375-400 million. The company anticipates funding these capital expenditures through available cash and operating cash flows.
Construction also continues on schedule and on budget for Rowan’s second and third 240C jackups, the Ralph Coffman and the Joe Douglas, with delivery of those rigs scheduled for the first quarter of 2010 and the third quarter of 2011, respectively.