Rowan Companies (NYSE:RDC) doesn't fit into a neat little box like some oil and gas drilling firms, and for that reason it may be a little misunderstood. The company drills both on land and offshore, but it sticks to the shallow water, where its advanced jack-up rigs give it a leg up. Beyond drilling, which brings in the lion's share of profits, the company also engages in manufacturing, both for the drilling market and for mining and forestry applications.

Category confusions aside, there's no miscategorizing the company's latest quarter as anything short of a cash convention. Drilling revenues rose 26%, thanks to a fleet expansion, robust utilization, and a 10% increase in offshore dayrates. The company managed to bring down its operating costs per rig day by 10%, even in the face of inflationary pressure. After backing out gains on asset sales, operating income for the drilling segment jumped 31%.

The manufacturing segment saw a big jump in revenues, but operating margins weakened. The significant drop in backlog might look ominous, but management noted that orders are getting lumpier, with more sales taking the form of packages, rather than going out as individual components. That's a headache for the Wall Street analysts trying to build the perfect spreadsheet model, but I don't see it as a reason for too much investor concern. The margin trend is the thing to keep an eye on.

One nonoperational item of note is that activist hedge fund Steel Partners has taken a big stake in Rowan. While the fund hasn't publicly stated its strategic vision for the company, I'll go out on a limb and guess that Steel is thinking about breaking up the drilling and manufacturing segments. Nabors Industries (NYSE:NBR) recently mentioned that it's looking at such a move as a way to unlock value. Looking at the higher valuations of Cameron International (NYSE:CAM), Flotek Industries (AMEX:FTK), Dril-Quip (NYSE:DRQ), I probably wouldn't mind seeing Rowan follow such a course.

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Fool contributor Toby Shute doesn't own shares in any company mentioned. Neither does The Motley Fool's disclosure policy.