How is the performance of the deep drilling rigs that the company is doing in the Gulf and are the customers happy?

The company’s clients are very happy with the rigs. The company believes that the performances actually exceed its expectations. The high pressure mud pumps have worked well, all equipment on board the rigs work well. Also, the AC system that was developed just 3 years ago has done very well. The company has got two of those AC systems on 2 of its land rigs that have been drilling for 3 years with about 5 hours of downtime.

What were the operating costs per day in the fourth quarter and the projection for 2006?

The company expects the operating costs per day to remain relatively flat for this quarter. However as the company will renew its insurance, it expects the costs of an offshore drilling rig in the Gulf of Mexico to move to around $4,000 to $5,000 a day from the present $1,500 a day. Also, Rowar expects the labor costs to go up 10% this year. These two things are expected to affect the costs going forward.

Does the 10% increase in labor costs include healthcare expenses and are you seeing inflation on your healthcare expenses as well?

The 10% increase includes healthcare. The company has put in a new health care plan this year and expects it to remain flat.

What is the projection on pension expense for 2006?

The company expects pension expense to go up a little bit in 2006. The discount rates have flattened out a little bit, but the growth of liabilities is going to drive that cost up a little bit in 2006. The company is underfunded for accounting purposes. But the company is over funded, as far as the Internal Revenue Code and its contribution to the plan are concerned.

How do you see the capital expenditure evolving over the quarter? Is that going to be front-end loaded, back-end loaded or evenly spread?

It''s going to be evenly spread through the quarter. The capital expenditure will be mostly on the 12 land rigs, which will be delivered before the end of the third quarter this year.

Is the company holding any discussions with ARAMCO for putting land rigs over there?

No. Rowan is not interested in going into the international market. ARAMCO has talked to the company about it and the company is not seeing a lot of upside there.

If you see gas prices stay below $6 for a sustained period, how would you see the day rate trajectory for the low-end commodity jack-ups vs. the high-end unfolding?

Theoretically if you look at the marginal field developments in the Gulf of Mexico gas, those would be the first rigs that would be affected if the price is same. The price has to be low for quite a period of time before people would back off. However, the smaller reservoirs will get affected first and the deeper drilling wouldn''t be affected because you have got a lot larger reservoirs with a lot higher flow rates. Therefore the cost of the gas can be lowered and still make a lot of money.

The margins should have been in the higher teens, given the level of revenues. Is there something going on the cost side that''s keeping margins below the second quarter levels?

The company went through a lot of G&A costs this year and if LeTourneau becoming 404 compliant, that was a big cost. Rowan had a lot of new research and development in each new product, which was an additional cost. While the margins on the marine side showed more effect this year as the kits are delivered, loaders were of a lot lower margin.

Given the $388 million backlog, what is the ultimate capacity in the manufacturing services division? Does the company have any plans of expanding the manufacturing service division''s capacity?

In the $468 million budget, the company has kept aside about $40 million for expansion of capacity. A couple years ago, the company could deliver about three kits a year and that Rower doubled its steel mill capacity last year and is doing it again this year. By June that will be in place and will enable the company to deliver 8 kits a year of 116Cs or Tarzan or 240C. Internally the company is investing in creating more capacity in the steel mill. Also, the company is adding additional machining capabilities, and all of that is focused on being able to deliver these kits on time.

What is the depreciation guidance for full year 2006?

It is going to be in the range of about $90 million for 2006 depending on when the rigs actually are delivered.