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
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