Global Marine beats estimates with flat Q2 earns

Offshore oil and gas driller Global Marine Inc. said 2Q earnings were flat versus a year ago but surpassed Wall Street expectations as oil companies gradually regained their appetite for drilling in response to strong oil and gas prices. Net income was $28.1 million, or 16 cents per share, virtually unchanged from $28.2 million, or 16 cents per share, in the second quarter of 1999. Analysts had expected earnings of 14 cents a share, according to First Call/Thomson Financial. CEO Bob Rose said high oil and natural gas prices were causing oil companies to overcome their initial hesitance and increase their drilling budgets for finding and producing new oil and gas reserves.

"The combination of high commodity prices and expectations for growing worldwide energy demand is yielding increased capital spending by our exploration and production customers and continued momentum for the offshore drilling recovery that began in the latter half of 1999," Rose said. Global Marine's second-quarter revenues rose 18 percent from a year earlier, to $231 million from $196 million. Second quarter earnings per share improved from 9 cents in the first quarter of 2000 and 6 cents in the last quarter of 1999. Average U.S. crude oil and natural gas prices for the second quarter were both some 60 percent higher than a year ago.

Despite the strong prices, oil companies, particularly the larger ones, have been hesitant to raise their drilling budgets, focusing instead on debt reduction, internal reorganizations and merger and acquisition activity.

But oil super major BP Amoco signaled a major change of emphasis this week when it announced plans for a big increase in exploration and production spending over the next three years. Although business has only recently started to turn around for contract drillers, their shares have risen sharply in anticipation of a gradually strengthening industry recovery. Global Marine's stock is up some 70 percent so far this year. The average utilization rate for Global Marine's fleet of 32 offshore rigs rose to 84 percent in the second quarter from 78 percent in the second quarter of 1999. The average daily rental rate or "dayrate" earned by a rig fell to $59,400 from $63,700. Second quarter fleet utilization and average dayrate were both higher than the first-quarter levels of 76 percent and $52,000 respectively.

Rose said the market for shallow-water "jackup" rigs in the U.S. Gulf of Mexico was particularly strong, with dayrates some three times higher than their levels of a year ago.

The market for jackup rigs in West Africa had also begun to tighten, he said, adding that Global Marine expected to put one of two idle rigs in that region back to work in August.