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Rowan Companies Lowers Its 2018 Cost Guidance

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Drilling expenses and 1Q18 guidance

Rowan Companies’ (RDC) direct operating costs, excluding rebillable items, were $140 million in 1Q18, below its guidance of $150 million–$160 million. Its costs were lower than expected in 1Q18 due to lower drillship fuel purchases and reduced costs on the Gorilla IV and Ralph Coffman, which came off contract late in 4Q17.

Rowan Companies has reduced its 2Q18 expense estimate to $160 million–$170 million, and its 2018 estimate to $590 million–$610 million. Its previous cost estimate for 2018 was $600 million–$625 million.

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General and administrative costs

Rowan Companies’ SG&A (selling, general, and administrative) expenses in 1Q18 were $25.6 million—about $8 million lower than the $34 million seen in the previous quarter, and lower than the guidance of $30 million due to mark-to-market accounting on equity compensation and lower professional fees. The company expects SG&A costs in the mid-$20 million range in 2Q18 and $95 million to $100 million in fiscal 2018.

Peer comparison

Rowan Companies’ expense-to-revenue ratio rose to 74% in 1Q18 from 60% in 4Q17. Other offshore drillers (OIH) reported the following in 4Q17:

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