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UH BAUER COLLEGE OF BUSINESS: MARCH 30, 2006 PRESENTATION Rowan Companies, Inc.

UH BAUER COLLEGE OF BUSINESS: MARCH 30, 2006 PRESENTATION Rowan Companies, Inc. John Buvens, General Counsel Ted Gobillot, Associate General Counsel. Emma. Lindsay. Joe.

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UH BAUER COLLEGE OF BUSINESS: MARCH 30, 2006 PRESENTATION Rowan Companies, Inc.

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  1. UH BAUER COLLEGE OF BUSINESS: MARCH 30, 2006 PRESENTATION Rowan Companies, Inc. John Buvens, General Counsel Ted Gobillot, Associate General Counsel

  2. Emma Lindsay Joe

  3. Overview of Rowan Companies, Inc. • Emerging Trends in the Offshore Drilling Industry • How is an offshore well drilled? • Oilco/Drillco Relationship: Who provides what? • Risks: What can happen? • What is an indemnity agreement? • How do the parties allocate risk?

  4. Overview of Rowan Companies, Inc. • Founded in 1923 by Arch and Charlie Rowan • Two units: Drilling and Manufacturing • Total workforce: 4,500+ employees • HQ at Williams Tower (ex-Transco Tower) • On NYSE and publicly-owned since 1967 • 2005: Revenue of over $1B; $4.5B market cap

  5. DRILLING DIVISION • HQ in Houston; operations onshore in Texas, Louisiana, Mississippi and Oklahoma; offshore in the U.S. GOM, east coast of Canada, North Sea, Persian Gulf and Trinidad • 20 offshore rigs; 17 land rigs • Accounts for 75% of RCI's revenue

  6. Land Rig Locator Map Land Rig Locator Map LR-53 MISS LR-9, 29, 35 LOUISIANA LR-18 TEXAS LR-33 LR-34 LR-12 LR-15 LR-26, 30, 31, 51 LR-14 17 Land Rigs Operating Currently 100% Utilized 9- Texas 7- Louisiana 1- Oklahoma LR-41 LR-52 Current Average Well Depth: 15,980 ft. LR-54

  7. MANUFACTURING DIVISION • Acquisitions: LeTourneau (1994), Ellis Williams (1999), OEM (2001) • HQ in Longview, TX; manufacturing facilities in Vicksburg, MS and Houston, TX • Manufactures jack-up rigs, land rigs and rig component parts, equipment for the timber and mining industries • Accounts for 25% of RCI’s revenues

  8. LeTourneau Products

  9. World’s Largest Front-End Loader

  10. Manufacturing Division 3000 HP Mud Pump Drawworks Rotary Table

  11. ROWAN’S RIG CONSTRUCTION PROGRAM • Large Fixed Capital Investment • Purchase LeTourneau • Restore Vicksburg, MS Facility • Hire and Train Workers • Rig Construction Cost: $180-$500 Million • Ongoing Maintenance and Labor Cost • Volatile Revenue Stream • Dayrates Track Commodity Prices • Boom-and-Bust Business • Gorilla V Experience

  12. Worldwide Jack-up Newbuilds and Attrition 1950-2005 Average Age of Retired Rigs: 30 years Number of Retired Rigs per year (20-year average): 6 rigs 55 Rigs Under Construction 2006 - 10 2007 – 20 2008 - 20 2009 - 5 2009 Additions to the fleet Scheduled Construction / On Order Attrition Source: ODS-Petrodata

  13. Land Dayrate History 1998-2005 Current Average Dayrate $22,559 $17,242 Dayrates through March 27, 2006

  14. CONSTRUCTION OF THE HANK BOSWELL: DECEMBER 2004

  15. March 2005

  16. June 2005

  17. August 2005

  18. September 2005

  19. October 2005

  20. November 2005

  21. December 2005

  22. January 2006

  23. February 2006

  24. March 2006

  25. Following Construction, Rig Walks into Mississippi River

  26. Rig Travels Down Mississippi River

  27. Rig Crosses Under Four Bridges En Route to U.S. GOM

  28. Bob Palmer (2003) vs. Rowan-Texas (1973)

  29. Under Tow To Location

  30. Jacked Up on Open Location

  31. Jacked up on Location and Cantilevered out over Platform

  32. Heavy-Lift Rig Hauler

  33. Rig Floats Onto Submerged Deck

  34. Transport of Rigs Overseas Single-Rig Dry Tow Double-Rig Dry Tow

  35. Triple-Rig Dry Tow

  36. Rowan Fleet Migrates to Saudi Arabia • 35,000 Tons • 12,300 miles • 60 days

  37. Sharjah Roads

  38. Jacked up in Halifax Harbor, Nova Scotia, Canada

  39. Emerging Trends in the Offshore Drilling Industry • Current Status • Global Supply and Demand • Saudi Arabia as swing producer • Declining Production in GOM • The Moratorium • The Stakeholders in GOM • Extending Life of GOM • Evolving Technology • Deep Shelf and Deep Water • Royalty Relief by MMS • Emergence of Liquified Natural Gas • Law of the Sea Treaty • Fallout from Hurricanes Katrina and Rita

  40. Contracted Not Contracted Worldwide Jack-up Supply / Demand Worldwide Utilization: 92% 2 0 32 E. Canada: 100% 0 85 North Sea: 100% US GOM: 82% 19 Mexico: 100% 80 2 27 0 25 0 Middle East: 98% 14 Indian Ocean: 100% 3 31 C & S America: 82% 21 0 1 SE Asia: 97% West Africa: 100% Total Number of Jack-up Rigs Worldwide: 390 Source: ODS – Petrodata

  41. Houston Chronicle: March 23, 2006 DEEP-WATER EXPLORATION, DRILLING FLOURISH IN THE GULF NEW ORLEANS - Petroleum operators announced 10 new deep-water discoveries in the Gulf of Mexico in 2005 and the number of drilling rigs exploring in deep water has increased sevenfold in a year, a federal agency is reporting. Deep water is considered to be 1,000 feet or deeper. The deepest discovery reported last year was by BP in 9,576 feet of water. "Last year continued to be a strong year for deep-water activity in the Gulf of Mexico," said Chris Oynes, the agency's Gulf of Mexico regional director. "There is intense interest in oil and gas potential in the deep water." In March, there were 42 rigs drilling or working on development wells in deep-water areas, including 10 rigs in 5,000 feet or more, the agency said. A year ago, there were six rigs in ultradeep water. On March 15, petroleum exploration companies put $588.3 million in high bids for 405 offshore tracts off Louisiana, Mississippi and Alabama. The figure far exceeded last year's auction by the agency, when $342 million in high bids were accepted for 403 tracts that exploration firms are betting on to produce in the central Gulf of Mexico.

  42. Houston Chronicle: March 2, 2006 GLOBALSANTAFE WINS CONTRACT: DEEP-WATER RIG WILL COST $590 MILLION GlobalSantaFe Corp., the world’s second-largest offshore driller by market value, said Thursday it reached an agreement with an unidentified customer to provide a new deep-water rig that would generate about $1 billion in revenue over seven years. Keppel Fels, a unit of Keppel Corp., has been contracted to build the rig at its Singapore shipyard at a cost of about $590 million, Houston-based GlobalSantaFe said. Delivery of the rig, to be named GSF Development Driller III, is expected in early 2009, the company said. The new rig may generate an average of about $390,000 a day for GlobalSantaFe, based on the total revenue and duration of the agreement.

  43. Houston Chronicle: March 11, 2006 LOST LANGUAGE DRAINS BILLIONS: MYSTERIOUS ERROR TO COST GOVERNMENT ENERGY ROYALTIES WASHINGTON – How it happened or who’s responsible is a mystery eight years after the fact. But what may have been a simple error – or perhaps something more ominous – has given a multimillion-dollar windfall to a group of oil and natural gas companies and could cost the government billions of dollars more in the years to come. The Interior Department disclosed this week that a provision was mysteriously deleted from hundreds of federal drilling leases in the late 1990s that would have required producers to pay royalties, once prices reached a certain level, on oil or gas taken from deep waters of the Gulf of Mexico. In 1995, Congress exempted deep-water oil from royalty payments to spur development. But a price threshold was included in leases issued in 1996 and 1997 and again in leases sold in each year since 2000 that reinstates the royalties if market prices reach a certain level. For some reason the language “was inadvertently dropped” from an addendum attached to more than 1,100 leases the Interior Department’s Minerals Management Service issued for 1998 and 1999, Walter Cruickshank, the agency’s deputy director, told a House Government Reform subcommittee Wednesday. He said officials have not been able to determine who made the change. “It is clear that there is no record telling people to take the language out,” he said, and it was widely known that the department wanted the price threshold restriction in any oil and gas leases as a matter of policy. In the late 1990s, when oil prices were well below the threshold, the issue may not have attracted attention. Rep. Darrell Issa, R-Calif., the subcommittee chairman, called the whole matter “suspicious.” “This is a $7 billion word processing error,” Issa told reporters. He said some of the leases issued during those two years could remain in effect for as long as 85 years, so the government will be unable to collect royalty payments from oil and gas taken from those leases because they lacked the threshold language. If prices remain high, lost royalties “will be in the billions of dollars,” he acknowledged.

  44. Houston Chronicle: March 5, 2006 TRANSOCEAN HAS NEW DRILL SHIP IN THE WORKS TRANSOCEAN, the world's largest offshore oil and natural gas driller, has been awarded contracts from Chevron Corp. that will lead to construction of a new deep-water rig and generate as much as $1.7 billion in revenue. The contracts include a new drillship that will cost an estimated $650 million to build and will be used by Chevron for five years, Houston-based Transocean said Wednesday in a prepared statement. The drillship will be Transocean's first new deep-water rig since 2001 and will be among the most expensive ever built. Chevron also extended agreements to use two other deep-water rigs. Transocean and other drillers have been reluctant to build new rigs without first having multiyear contracts in place for their use. With the most prized deep-water rigs in short supply and producers racing to capitalize on soaring energy prices, rents have climbed to unprecedented highs. The new drillship, to be named Discoverer Clear Leader, will be built at the Daewoo Shipbuilding and Marine Engineering Co. shipyard in South Korea, Transocean said. Construction is expected to take 30 months, and the contract with Chevron is scheduled to start in the second quarter of 2009. The rig may generate revenue of $493 million for Transocean during the first three years, or an average rate of about $450,000 a day, company spokesman Guy Cantwell said. Rates during the final two years are linked to oil prices and are expected to range from $400,000 to $500,000 a day, he said. The Discoverer Clear Leader will be capable of operating in waters as deep as 12,000 feet and will be able to drill wells as deep as 40,000 feet, the company said.

  45. Less than 200m Greater than 1,000 m

  46. Treasure Prospect JB Mtn. CretaceousShelf Edge DEEPWATER FLEX TREND (Shelf Edge) SHELF S N Thunder Horse Typical Shelf ST172 Tahiti Llano Jason Conger Hickory Pleistocene Pliocene 10,000’ Miocene Mid. Miocene 20,000’ Low. Miocene Paleogene 30,000’ Mesozoic Salt Salt Basement Rock Source: Newfield Exploration

  47. How is an offshore well drilled? • The Basic Rig Systems are: • Power System • Hoisting System • Rotating System • Circulating System • Well Control System

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