Filed Pursuant to Rule 424(b)(5)

Registration No. 333-160579

CALCULATION OF REGISTRATION FEE

 

 

PROSPECTUS SUPPLEMENT

(To Prospectus dated July 15, 2009)

 

 

$500,000,000

 

 

Rowan Companies, Inc.

 

77/8% Senior Notes due 2019

 

 

We are offering $500 million of our 77/8% Senior Notes due 2019. We will pay interest on the notes on February 1 and August 1 of each year, commencing on February 1, 2010. The notes will mature on August 1, 2019.

 

We may elect to redeem any or all of the notes at any time for an amount equal to 100% of the principal amount of the notes redeemed plus a make-whole premium plus accrued but unpaid interest to the redemption date.

 

The notes will be our unsecured senior obligations and will rank equal in right to all our existing and future unsecured senior indebtedness, and will be effectively junior to our existing and future secured indebtedness to the extent of collateral securing that debt. The notes will be structurally junior to the indebtedness and other liabilities of our subsidiaries.

 

We do not intend to apply for listing of the notes on any securities exchange or for inclusion of the notes in any automated quotation system. Currently, there is no public market for the notes.

 

See “Risk Factors” beginning on page S-10 to read about important factors you should consider before buying the notes.

 

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

We expect that delivery of the notes will be made to investors in book-entry form on or about July 21, 2009 through The Depository Trust Company.

 

 

Joint Book-Running Managers

 

 

 

Prospectus Supplement dated July 15, 2009

 

You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it.

 

We are not, and the underwriters are not, making an offer to sell the notes in any jurisdiction where the offer or sale is not permitted.

 

You should assume that the information appearing in this prospectus supplement and the accompanying prospectus is accurate only as of the respective dates on the front of those documents or earlier dates specified herein or therein. Our business, financial condition, results of operations and prospects may have changed since those dates.

 

 

TABLE OF CONTENTS

 

 

Prospectus Supplement

 

 

 

Prospectus

 

 

This prospectus supplement and the accompanying prospectus are part of a universal shelf registration statement on Form S-3 that we filed with the Securities and Exchange Commission, or the SEC. Under the shelf registration process, we may sell any combination of capital stock, debt securities, warrants or units in one or more offerings from time to time. In the accompanying prospectus, we provide you a general description of the securities we may offer from time to time under our shelf registration statement. This prospectus supplement describes the specific details regarding this offering, including the price, the aggregate principal amount of debt being offered and the risks of investing in our securities. This prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein and therein include important information about us, the notes being offered and other information you should know before investing.

 

Unless otherwise indicated or the context otherwise requires, in this prospectus supplement, all references to “Rowan Companies,” “Rowan,” “we,” “us” or “our” refer to Rowan Companies, Inc. and its direct and indirect subsidiaries on a consolidated basis.

 

The SEC allows us to “incorporate by reference” the information that we file with them, which means that we can disclose important information to you by referring you to other documents filed separately with the SEC. The information incorporated by reference is an important part of this prospectus supplement and the accompanying prospectus, and information that we file later with the SEC will automatically update and supersede this information. We incorporate by reference the following documents and all documents that we subsequently file with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (other than information furnished rather than filed):

 

 

This prospectus supplement includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and the Private Securities Litigation Reform Act of 1995 about us that are subject to risks and uncertainties. All statements other than statements of historical fact included in this document are forward-looking statements. Forward-looking statements may be found under “Prospectus Supplement Summary,” “Risk Factors” and elsewhere in this document regarding our financial position, business strategy, possible or assumed future results of operations, and other plans and objectives for our future operations.

 

Forward-looking statements are subject to risks and uncertainties. Although we believe that in making such statements our expectations are based on reasonable assumptions, such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected.

Except for our obligation to disclose material information under U.S. federal securities laws, we do not undertake any obligation to release publicly any revisions to any forward-looking statements, to report events or circumstances after the date of this prospectus supplement, or to report the occurrence of unanticipated events.

 

Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “will,” “would,” “should,” “plans,” “likely,” “expects,” “anticipates,” “intends,” “believes,” “estimates,” “thinks,” “may,” and similar expressions, are forward-looking statements. The following important factors, in addition to those discussed under the caption “Risk Factors” and elsewhere in this document, could affect the future results of the energy industry in general, and us in particular, and could cause those results to differ materially from those expressed in or implied by such forward-looking statements:

 

 

All written and oral forward-looking statements attributable to us are expressly qualified in their entirety by such factors. For additional information with respect to these factors, see “Incorporation by Reference.”

 

The SEC has adopted rules to regulate the use of “non-GAAP financial measures,” such as EBITDA and Adjusted EBITDA, that are derived on the basis of methodologies other than in accordance with generally accepted accounting principles, or GAAP. EBITDA is a non-GAAP financial measure that complies with the Securities Act regulations when it is defined as net income (the most directly comparable GAAP financial measure) before interest, taxes, depreciation and amortization. We define EBITDA in this prospectus supplement accordingly.

Adjusted EBITDA is another non-GAAP financial measure, which we define to be EBITDA as adjusted for (i) gain on disposals of property and equipment, (ii) material charges and other operating expenses (including in 2008, inventory valuation charges, goodwill impairment, professional fees related to the suspended monetization of LeTourneau Technologies, Inc., impairment charges due to the cancellation of construction on a jack-up rig and severance payments; in 2006, such charges included a charge in anticipation of payments made in 2007 related to a Department of Justice investigation), (iii) gain on hurricane-related events and (iv) other income (expense), which includes unrealized foreign currency translation gains and losses. We present EBITDA and Adjusted EBITDA because we believe that our lenders consider them to be important supplemental measures of our performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. We believe EBITDA and Adjusted EBITDA are appropriate supplemental measures of debt service capacity, because cash expenditures on interest are, by definition, available to pay interest, and tax expense is inversely correlated to interest expense because tax expense goes down as deductible interest expense goes up; depreciation and amortization are non-cash charges.

 

EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of our results as reported under GAAP. For example, these measures:

 

 

In addition, although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements. Other companies in our industry and in other industries may calculate EBITDA and Adjusted EBITDA differently from the way that we do, limiting their usefulness as comparative measures. Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA only supplementally.

 

We have obtained some industry and market share data from third-party sources that we believe are reliable. In many cases, however, we have made statements in this prospectus supplement (or in documents incorporated by reference in this prospectus supplement) regarding our industry and our position in the industry based on estimates made based on our experience in the industry and our own investigation of market conditions. We believe these estimates to be accurate as of the date of this prospectus supplement. However, this information may prove to be inaccurate because of the method by which we obtained some of the data for our estimates or because this information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties. As a result, you should be aware that the industry and market data included or incorporated by reference in this prospectus supplement, and estimates and beliefs based on that data, may not be reliable. We cannot, and the underwriters cannot, guarantee the accuracy or completeness of any such information.

 

PROSPECTUS SUPPLEMENT SUMMARY

		High-Specification				Premium				Conventional								Percentage of
		Jack-ups(1)				Jack-ups(2)				Jack-ups				Total				Fleet
Middle East			3				6				—				9				41	%
GOM			3	(3)			2				3				8				36	%
North Sea			2				—				—				2				9	%
Africa			1				—				—				1				5	%
Mexico			1				—				—				1				5	%
Canada			—				1				—				1				5	%
Total			10				9				3				22				100	%
Percentage of Fleet			45	%			41	%			14	%			100	%

(1)		Rigs that have at least two million pounds of hook load.
(2)		Cantilever jack-up rigs that have the ability to operate in water depths greater than 300 feet.
(3)		One high-specification jack-up rig is scheduled to mobilize from the GOM to Egypt later in 2009.

	•	total revenues of between $477 million and $482 million;
	•	operating income of between $124 million and $130 million;
	•	net income of between $83 million and $88 million;
	•	EBITDA of between $169 million and $175 million; and
	•	Adjusted EBITDA of between $166 million and $173 million.

						Three Months Ended
						June 30, 2009
						(Estimated data;
						Dollars in millions)
Net income			between			$	83.3				and			$	87.5
Interest expense, net			between				0.1				and				0.1
Income tax expense			between				42.9				and				45.1
Depreciation and amortization			between				42.6				and				42.6
EBITDA			between			$	168.7				and			$	175.2
Exclusions:
Gain on disposals of property and equipment			between			$	(0.1	)			and			$	(0.1	)
Material charges and other operating expenses			between				—				and				—
Gain on hurricane-related events			between				—				and				—
Other, net(1)			between				(2.4	)			and				(2.4	)
Adjusted EBITDA			between			$	166.3				and			$	172.8

(1)		Includes unrealized foreign currency translation gains and losses.

Issuer		Rowan Companies, Inc.
Securities		$500,000,000 aggregate principal amount of 77/8% senior notes due 2019.
Maturity date		August 1, 2019.
Interest payment dates		February 1 and August 1 of each year, beginning on February 1, 2010.
		Interest will accrue from July 21, 2009.
Mandatory redemption		We will not be required to make mandatory redemption or sinking fund payments on the notes.
Optional redemption		We may, at our option, redeem all or part of the notes at a make-whole price at any time.
Ranking		The notes will be our general unsecured, senior obligations. Accordingly, they will rank:
		•     senior in right of payment to all of our subordinated indebtedness, if any;
		•     pari passu in right of payment with any of our existing and future unsecured indebtedness that is not by its terms subordinated to the notes, including any indebtedness under our senior revolving credit facility (other than letter of credit reimbursement obligations that are secured by cash deposits);
		•     effectively junior to our existing and future secured indebtedness, including indebtedness under our secured notes issued pursuant to the MARAD Title XI program to finance several of our offshore drilling rigs, in each case, to the extent of the value of our assets constituting collateral securing that indebtedness; and
		•     effectively junior to all existing and future indebtedness and other liabilities of our subsidiaries (other than indebtedness and liabilities owed to us).
		As of June 30, 2009, we had total indebtedness of approximately $388 million, all of which was secured by liens on several of our offshore drilling rigs; this amount includes total indebtedness of our subsidiaries of approximately $131 million owed to third parties.
Covenants		The indenture governing the notes contains covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to:
		•     create liens that secure debt;

		•     engage in sale and leaseback transactions; and
		•     merge or consolidate with another company.
		These covenants are subject to a number of important limitations and exceptions that are described later in this prospectus supplement under the caption “Description of Notes — Covenants.”
Ratings		The notes have been rated BBB- by Standard & Poor’s Ratings Services and Baa3 by Moody’s Investors Service, Inc. A rating reflects only the view of a rating agency and is not a recommendation to buy, sell or hold the notes. Any rating can be revised upward or downward or withdrawn at any time by a rating agency if the rating agency decides that the circumstances warrant a revision.
Use of proceeds		We expect to receive net proceeds from this offering of approximately $492 million, after deducting the underwriting discount and estimated offering expenses. We intend to use the net proceeds from this offering for general corporate purposes.
Form		The notes will be represented by registered global securities registered in the name of Cede & Co., the nominee of the depositary, The Depository Trust Company, or DTC. Beneficial interests in the notes will be shown on, and transfers will be effected through, records maintained by DTC and its participants.
Trustee		U.S. Bank National Association.
Governing law		The notes and the indenture will be governed by New York law.
Risk factors		See “Risk Factors” for a discussion of the risk factors you should carefully consider before deciding to invest in the notes.

																						Twelve
																						Months
														Three Months Ended								Ended
		Year Ended December 31,												March 31,								March 31,
		2006				2007				2008				2008				2009				2009
		(Dollars in thousands)
Income statement data:
Revenues
Drilling services		$	1,067,448			$	1,382,571			$	1,451,623			$	340,421			$	380,370			$	1,491,572
Manufacturing sales and services			443,286				712,450				761,113				145,068				114,438				730,483
			1,510,734				2,095,021				2,212,736				485,489				494,808				2,222,055
Costs and expenses
Drilling operations			504,873				591,412				629,795				156,539				145,381				618,637
Manufacturing operations			372,219				596,541				624,815				126,164				90,808				589,459
Depreciation and amortization			89,971				118,796				141,395				33,091				40,499				148,803
Selling, general and administrative			78,243				94,905				115,226				27,399				24,576				112,403
Gain on disposals of property and equipment			(29,266	)			(40,506	)			(30,701	)			(5,375	)			(4,701	)			(30,027	)
Material charges and other operating expenses(1)			9,000				—				111,171				—				—				111,171
Gain on hurricane-related events			—				—				(37,088	)			—				—				(37,088	)
			1,025,040				1,361,148				1,554,613				337,818				296,563				1,513,358
Income from operations			485,694				733,873				658,123				147,671				198,245				708,697
Other income (expense)
Interest expense			(28,321	)			(25,913	)			(18,624	)			(5,566	)			(3,143	)			(16,201	)
Less interest capitalized			7,756				9,977				17,426				4,839				2,764				15,351
Interest income			28,023				20,923				6,295				3,175				331				3,451
Other, net(2)			202				226				(9,129	)			335				1,414				(8,050	)
Other income (expense), net			7,660				5,213				(4,032	)			2,783				1,366				(5,449	)
Income before income taxes			493,354				739,086				654,091				150,454				199,611				703,248
Provision for income taxes			176,377				255,286				226,463				51,829				67,911				242,545
Net income		$	318,246	(3)		$	483,800			$	427,628			$	98,625			$	131,700			$	460,703

		December 31,												March 31,
		2006				2007				2008				2008				2009
		(Dollars in thousands, except ratios)
Balance sheet data:
Cash and cash equivalents		$	258,041			$	284,458			$	222,428			$	288,926			$	192,792
Total assets			3,435,398				3,875,305				4,548,892				3,966,508				4,568,606
Total liabilities			1,561,352				1,526,867				1,889,076				1,513,007				1,774,293
Total equity			1,874,046				2,348,438				2,659,816				2,453,501				2,794,313
Total debt			550,326				485,404				420,482				466,697				401,775

																						Twelve
																						Months
														Three Months Ended								Ended
		Year Ended December 31,												March 31,								March 31,
		2006				2007				2008				2008				2009				2009
		(Dollars in thousands, except ratios)
Other financial data and key credit statistics:
Net cash provided by operating activities		$	292,069			$	432,543			$	694,469			$	108,646			$	77,276			$	663,099
Net cash used in investing activities			(596,077	)			(310,757	)			(681,498	)			(89,500	)			(88,321	)			(680,319	)
Net cash used in financing activities			(113,854	)			(95,369	)			(75,001	)			(14,678	)			(18,591	)			(78,914	)
EBITDA(4)		$	577,136			$	852,895			$	790,389			$	181,097			$	240,158			$	849,450
Adjusted EBITDA(4)		$	556,668			$	812,163			$	842,900			$	175,387			$	234,043			$	901,556
Ratio of total debt to Adjusted EBITDA			0.99				0.60				0.50				2.66				1.72				0.45
Ratio of Adjusted EBITDA to total interest			19.66				31.34				45.26				31.51				74.46				55.65
Ratio of earnings to fixed charges(5)			15.3				23.8				28.4				22.7				50.1				34.5

(1)		The 2008 amount includes: $62.4 million of inventory valuation charges, a $13.6 million charge for goodwill impairment, $12.7 million for professional fees related to the suspended LTI monetization, an $11.8 million impairment charge due to the cancellation of construction of a jack-up rig and $10.7 million for severance payments. The 2006 amount reflects a $9.0 million charge in anticipation of payments made in 2007 related to a Department of Justice investigation.
(2)		Includes unrealized foreign currency translation gains and losses.
(3)		Net income in 2006 includes approximately $1.3 million from discontinued operations, net of taxes.
(4)		“EBITDA” is a non-GAAP financial measure that we define as net income before interest, taxes, depreciation and amortization. Adjusted EBITDA is another non-GAAP financial measure, which we define as EBITDA as adjusted for (i) gain on disposals of property and equipment, (ii) material charges and other operating expenses (including in 2008, inventory valuation charges, goodwill impairment, professional fees related to the suspended monetization of LeTourneau Technologies, Inc., impairment charges due to the cancellation of construction of a jack-up rig and severance payments; in 2006, such charges included a charge in anticipation of payments made in 2007 related to a Department of Justice investigation), (iii) gain on hurricane-related events and (iv) other income (expense), which includes unrealized foreign currency translation gains and losses. As used and defined by us, EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with GAAP. EBITDA and Adjusted EBITDA should not be considered in isolation or as substitutes for operating income, net income or loss, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP. However, our management believes EBITDA and Adjusted EBITDA are useful to an investor in evaluating our operating performance because these measures:

	•	are widely used by investors in the energy industry to measure a company’s operating performance without regard to items excluded from the calculation of such terms, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired, among other factors;
	•	help investors more meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our capital structure and asset base from our operating structure; and
	•	are used by our management for various purposes, including as measures of operating performance, in presentations to our board of directors, as a basis for strategic planning and forecasting and as components for setting incentive compensation.

																						Twelve
																						Months
																						Ended
		Year Ended December 31,												Three Months Ended March 31,								March 31,
		2006				2007				2008				2008				2009				2009
Net income		$	318,246			$	483,800			$	427,628			$	98,625			$	131,700			$	460,703
Interest, net			(7,458	)			(4,987	)			(5,097	)			(2,448	)			48				(2,601	)
Income tax expense			176,377				255,286				226,463				51,829				67,911				242,545
Depreciation and amortization			89,971				118,796				141,395				33,091				40,499				148,803
EBITDA		$	577,136			$	852,895			$	790,389			$	181,097			$	240,158			$	849,450
Exclusions:
Gain on disposals of property		$	(29,266	)		$	(40,506	)		$	(30,701	)		$	(5,375	)		$	(4,701	)		$	(30,027	)
Material charges and other operating expenses(a)			9,000				—				111,171				—				—				111,171
Gain on hurricane- related events			—				—				(37,088	)			—				—				(37,088	)
Other — net(b)			(202	)			(226	)			9,129				(335	)			(1,414	)			8,050
Adjusted EBITDA		$	556,668			$	812,163			$	842,900			$	175,387			$	234,043			$	901,556

(a)		See footnote (1) above.
(b)		See footnote (2) above.

(5)		For each of the periods presented there were no outstanding shares of preferred stock.

 

An investment in the notes involves risks. You should consider carefully the risk factors included below and under the caption “Risk Factors” in our Quarterly Report on Form 10-Q for the three months ended March 31, 2009, together with all of the other information included in, or incorporated by reference into, this prospectus supplement and the accompanying prospectus, when evaluating an investment in the notes.

 

Risks relating to the notes

 

We may not be able to generate enough cash flow to meet our debt obligations.

 

We expect our earnings and cash flow to vary significantly from year to year due to the cyclical nature of our industry. As a result, the amount of debt that we can manage in some periods may not be appropriate for us in other periods. In addition, our future cash flow may be insufficient to meet our debt obligations and commitments, including the notes. Any insufficiency could adversely affect our business. A range of economic, competitive, business and industry factors will affect our future financial performance, and, as a result, our ability to generate cash flow from operations and to pay our debt, including the notes. Many of these factors, such as oil and gas prices, economic and financial conditions in our industry and the global economy or initiatives of our competitors, are beyond our control.

 

As of June 30, 2009, our total indebtedness was approximately $388 million (all of which was secured indebtedness in the form of secured notes issued pursuant to the MARAD Title XI program to finance several of our offshore rigs), and we had $155 million in additional borrowing capacity under our senior revolving credit facility, which if borrowed would rank equal in right of payment to the notes.

 

If we do not generate enough cash flow from operations to satisfy our debt obligations, we may have to undertake alternative financing plans, such as:

 

 

However, any alternative financing plans that we undertake, if necessary, may not allow us to meet our debt obligations. Our inability to generate sufficient cash flow to satisfy our debt obligations, including our obligations under the notes, or to obtain alternative financing, could materially and adversely affect our business, financial condition, results of operations and prospects.

 

Our debt could have important consequences to you. For example, it could:

 

 

In addition, if we fail to comply with the covenants or other terms of any agreements governing our debt, our lenders will have the right to accelerate the maturity of that debt and foreclose upon the collateral, if any, securing that debt. Realization of any of these factors could adversely affect our financial condition.

 

The notes will be unsecured and effectively subordinated to our existing and future secured indebtedness and structurally subordinated to any existing or future indebtedness and other liabilities of our subsidiaries.

 

The notes will be general unsecured senior obligations ranking effectively junior in right of payment to all our existing and future secured debt to the extent of the value of the collateral securing the debt. As of June 30, 2009, we had approximately $388 million in secured debt outstanding.

 

If we are declared bankrupt, become insolvent or are liquidated or reorganized, any secured debt of ours will be entitled to be paid in full from our assets securing that debt, before any payment may be made with respect to the notes. Holders of the notes will participate ratably in our remaining assets with all holders of our unsecured indebtedness that does not rank junior to the notes, including all of our other general creditors, based upon the respective amounts owed to each holder or creditor. In any of the foregoing events, there may not be sufficient assets to pay amounts due on the notes. As a result, holders of the notes would likely receive less, ratably, than holders of secured indebtedness.

 

In addition, creditors of current and future subsidiaries will have claims, with respect to the assets of those subsidiaries, that rank structurally senior to the notes. In the event of any distribution or payment of assets of such subsidiaries in any dissolution, winding up, liquidation, reorganization, or other bankruptcy proceeding, the claims of those creditors must be satisfied prior to making any such distribution or payment to us in respect of our direct or indirect equity interests in such subsidiaries. As of June 30, 2009, our subsidiaries had approximately $131 million in debt owed to third parties.

 

We may be able to incur substantially more debt. This could exacerbate the risks associated with our indebtedness.

 

We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of our indenture do not prohibit us or our subsidiaries from doing so. As of June 30, 2009, we had $155 million in additional borrowing capacity under our senior revolving credit facility. Any additional borrowings under our senior revolving credit facility (other than secured reimbursement obligations in respect of letters of credit) would rank equal in right of payment with the notes. Creditors under this facility, as well as the holders of any other future debt we may incur that ranks equally in right of payment with the notes, will be entitled to share ratably with the holders of the notes in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding-up of our company. In addition, the holders of our previously issued Title XI notes (of which approximately $388 million in aggregate principal amount was outstanding, in multiple series, at June 30, 2009) would be entitled to foreclose on the assets constituting collateral securing such indebtedness and thereafter, to the extent of any remaining obligations, share ratably with the holders of the notes in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding-up of our company. Consequently, such secured indebtedness ranks effectively senior to the notes to the extent of the value of the collateral securing the secured indebtedness. These circumstances may have the effect of reducing the amount of funds available for payment to you in respect of our obligations under the notes.

 

If we increase our debt levels, the related risks that we and our subsidiaries now face could intensify. Our level of indebtedness may prevent us from engaging in certain transactions that might otherwise be beneficial to us by limiting our ability to obtain additional financing, limiting our flexibility in operating our business or otherwise. In addition, we could be at a competitive disadvantage against other less leveraged competitors that have more cash flow to devote to their

business. Any of these factors could result in a material adverse effect on our business, financial condition, results of operations, business prospects and ability to satisfy our obligations under the notes.

 

A financial failure by us or our subsidiaries may result in the assets of any or all of those entities becoming subject to the claims of all creditors of those entities.

 

A financial failure by us or our subsidiaries could affect payment of the notes if a bankruptcy court were to substantively consolidate us and our subsidiaries. If a bankruptcy court substantively consolidated us and our subsidiaries, the assets of each entity would be subject to the claims of creditors of all entities. This would expose you not only to the usual impairments arising from bankruptcy, but also to potential dilution of the amount ultimately recoverable because of the larger creditor base. Furthermore, forced restructuring of the notes could occur through the cram-down provision of the bankruptcy code. Under this provision, the notes could be restructured over your objections as to their general terms, primarily interest rate and maturity.

 

Your ability to transfer the notes may be limited by the absence of an active trading market, and an active trading market may not develop for the notes.

 

The notes are a new issue of securities for which there is no established trading market. An active trading market may not develop for the notes. Subsequent to their initial issuance, the notes may trade at a discount from their initial offering price, depending upon prevailing interest rates, the market for similar notes, our operating performance and financial condition and other factors.

 

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

 

Borrowings under our senior revolving credit facility bear interest at variable rates and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase although the amount borrowed remained the same, and our net income and cash available for servicing our indebtedness would decrease.

 

We may dispose of our investment in LTI or our land rig drilling business to the detriment of the noteholders.

 

In 2008 we made a decision to attempt to monetize our investment in our manufacturing subsidiary, LTI. In November 2008, we announced that recent capital markets and commodity price weakness had adversely affected opportunities for monetizing or otherwise disposing of our investment in our manufacturing operations for adequate value, and that we were not pursuing any further negotiations with potential partners at that time. However, we will continue to evaluate on an ongoing basis any and all strategic options, including the possible sale, spin-off, merger or other means of disposing of our interests in LTI or our land rig drilling operations, which, if consummated, could adversely affect our creditors depending on the nature of the transaction and how much of our overall business is attributable to these operations at the time of its monetization or disposition. For example, under certain circumstances, if we were to spin-off LTI or our land rig operations in the form of a stock dividend or other distribution, our stockholders might be benefited by such transaction to the detriment of our creditors, including investors in the notes.

 

We will receive net proceeds from this offering of approximately $492 million, after deducting the underwriting discount and estimated offering expenses. We intend to use the net proceeds from this offering for general corporate purposes.

 

The following table sets forth our capitalization and cash balance as of March 31, 2009:

 

 

This table is unaudited and should be read together with our historical financial statements and the accompanying notes incorporated by reference into this prospectus supplement and the accompanying prospectus.

 

 

 

 

The following table sets forth our ratio of earnings to fixed charges for the periods indicated on a consolidated historical basis.

 

 

 

 

The following description of our business does not purport to be comprehensive. You should read the documents incorporated by reference in this document prior to making an investment decision. For additional information concerning our business, operations and affairs, you should refer to the incorporated documents, including, but not limited to, our Annual Report on Form 10-K for the year ended December 31, 2008.

 

We are a leading international provider of contract drilling services with a focus on high-specification, premium marine jack-up rigs, which we use for both exploratory and development drilling. Depending on the particular rig and location, we are capable of drilling to depths of up to 35,000 feet in water up to 550 feet deep. Today, our offshore fleet includes 22 self-elevating mobile jack-up rigs, with nine rigs located in the Middle East, eight in the U.S. Gulf of Mexico, or GOM, two in the North Sea, one in West Africa, one in Eastern Canada and one in Mexico. One of our GOM rigs will begin operating offshore Egypt later in 2009. By the end of 2009, approximately 68% of our offshore fleet will be located in markets outside the United States. We have five additional high-specification jack-up rigs under construction with deliveries expected in 2010 and 2011. We also own and operate 32 deep-well land rigs in Texas, Louisiana, Oklahoma and Alaska.

 

Our manufacturing division, LeTourneau Technologies, Inc., or LTI, is an industry leader in the design and construction of jack-up rigs and has designed and built all our jack-up rigs. LTI designed all, and is building two, of our high-specification rigs under construction. LTI also designs and manufactures innovative products and systems such as premium oil and gas drilling equipment.

 

For the twelve months ended March 31, 2009, we had total revenues of $2,222 million, net income of $461 million, EBITDA of $849 million and Adjusted EBITDA of $902 million. Our offshore drilling services segment generated approximately 81% of our Adjusted EBITDA over the same period.

 

The following table summarizes our offshore jack-up rig assets:

 

 

 

 

Competitive Strengths

 

High-Specification Jack-up Fleet Allows for Premium Day Rates and Utilization.  We believe our offshore fleet of 22 jack-up rigs, including ten high-specification rigs, is one of the youngest and most capable jack-up rig fleets in our industry. These rigs typically command higher day rates and maintain higher utilization rates compared to other lower specification jack-up rigs. Each of our ten high-specification jack-up rigs has two million pounds or greater hook load, which allows us to drill deeper and more difficult wells than conventional jack-up rigs. Currently, our high-specification rigs constitute approximately 40% of the total world-wide number of 26 rigs with similar capabilities. We also have nine premium cantilever rigs capable of drilling in water depths of up to 450 feet.

Geographic Diversity.  We are a global company with offshore operations in the Middle East, GOM, North Sea, West Africa, Eastern Canada and Mexico. After one of our high-specification rigs moves to Egypt later in 2009, approximately 68% of our fleet will be in markets outside the United States. We believe our geographic diversity helps reduce our exposure to regional downturns, enabling us to take advantage of changing market conditions, and provides access to new and emerging markets.

 

Robust Contract Backlog.  As of May 31, 2009, our contract backlog was approximately $2.3 billion, which included $1.35 billion in offshore drilling, $300 million in onshore drilling and $630 million from LTI. Approximately 90% of our offshore drilling contract backlog is with national oil companies, major international oil companies and large investment-grade exploration and production companies.

 

Conservative Financial Profile.  We operate with relatively conservative levels of leverage and strong capitalization ratios. As of March 31, 2009, our ratio of total debt to total capitalization was 12.6%, and our total debt to Adjusted EBITDA ratio was 0.4x for the twelve-month period ended on that date. In line with our financial strategy of funding capital expenditures with operating cash flow, we believe cash flow from our contract backlog will allow us to continue to fund the remaining costs of our five high-specification jack-up rigs under construction.

 

Experienced Management Team.  We are led by a management team with substantial experience in the offshore drilling sector as well as with our company. Matt Ralls, our President and Chief Executive Officer, spent ten years with GlobalSantaFe serving as Treasurer, Chief Financial Officer, and Chief Operating Officer until the merger of GlobalSantaFe and Transocean in November 2007. The top five members of our senior management team have on average 23 years of experience in the offshore contract drilling industry and 17 years with Rowan.

 

Business Strategy

 

International Diversification.

 

We are committed to offering the highest jack-up rig drilling capabilities in the toughest operating environments throughout the world. Over the last five years, we have expanded our rig operations from primarily the GOM to the Middle East, North Sea, West Africa, Eastern Canada and Mexico. We will continue to evaluate opportunities to redeploy offshore rigs to regions around the world with strong demand for our drilling services.

 

Position Ourselves as the Operator of Choice for High-Specification Jack-Up Drilling Rigs.

 

With a focus on high-specification, premium jack-up rigs, we offer our customers the ability to drill deep, difficult wells that are beyond the capabilities of conventional jack-up rigs. We believe we will continue to enjoy strong demand for our high-specification equipment in jack-up markets where difficult drilling conditions prevail. Our newbuild jack-up rigs will further enhance our leadership in the high-specification jack-up markets.

 

Focus on Financially Strong Customers With Stable Drilling Needs.

 

As of June 22, 2009, approximately 90% of our offshore drilling backlog was contracted with national oil companies, major international oil companies and large investment-grade exploration and production companies. We believe these customers tend to have a longer-term view on their drilling plans and capital budgets, and are therefore less likely to react to short-term fluctuations in the price of crude oil and natural gas.

 

Strong Emphasis on Safety and Environmental Compliance.

 

We are committed to keeping our employees safe and protecting the environment. As national oil companies and major international oil companies increasingly scrutinize the safety and

environmental compliance records of their vendors, we believe our focus and commitment to excellence in these areas will continue to attract and retain customers.

 

Drilling Segment

 

Offshore Operations

 

Rowan operates large, high-specification type jack-up rigs capable of drilling to depths of up to 35,000 feet in maximum water depths ranging from 250 to 550 feet, depending on the size of the rig and its location. Our jack-ups are designed with a floating hull that is fully equipped to serve as a drilling platform supported by three independently elevating legs. The rig is towed to the drilling site where the legs are lowered until they penetrate the ocean floor, and the hull is jacked up to the elevation required to drill the well. Each of our jack-ups was designed and built by LTI.

 

We have significantly upgraded our jack-up fleet over the past decade to better serve the needs of the industry for drilling in harsher environments and we are particularly well positioned to serve the niche market for high-pressure/high-temperature (HPHT) offshore gas wells. All of our rigs feature top-drive drilling systems, solids control equipment, AC power and mud pumps that greatly accelerate the drilling process, and most have been designed or upgraded to handle the toughest environmental criteria. At June 22, 2009, Rowan’s offshore drilling fleet included the following:

 

 

Cantilever jack-ups can extend a portion of the sub-structure containing the drilling equipment over fixed production platforms to perform drilling operations with a minimum of interruption to production. The “skid-off” technology employed by our conventional jack-ups allows the rig-floor drilling equipment to be “skidded” out over the top of a fixed platform, enabling these slot type jack-up rigs to be used on drilling assignments that would otherwise require a cantilever jack-up or platform rig.

 

Our Gorilla class rigs, designed in the early 1980s as a heavier-duty class of jack-up rig, are capable of operating in water depths up to 450 feet in benign environments and up to 328 feet in extremely hostile environments (winds up to 100 miles per hour and seas up to 90 feet) such as in the North Sea and offshore eastern Canada. Gorillas II and III can drill to 30,000 feet, and Gorilla IV is equipped to reach 35,000 feet.

 

Our four Super Gorilla class rigs were built from 1998 to 2003 and are enhanced versions of our Gorilla class rigs featuring simultaneous drilling and production capabilities. These rigs can operate in water depths up to 475 feet in benign environments and up to 400 feet in extremely hostile environments. The Bob Palmer (formerly the Gorilla VIII) is an enhanced version of the Super Gorilla class jack-up designated a Super Gorilla XL. With 713 feet of leg, 139 feet more than the Super Gorillas, and 30% larger spud cans, this rig can operate in water depths up to 550 feet in relatively benign environments like the Gulf of Mexico or in water depths up to 400 feet in the hostile environments of the North Sea, offshore eastern Canada and West Africa.

 

Our Tarzan class rigs were specifically designed for deep-well drilling in up to 300 feet of water in benign environments. The first Tarzan class rig, the Scooter Yeargain, was completed in 2004, and was followed by the Bob Keller in 2005 and the Hank Boswell in 2006. Our fourth Tarzan class rig, the J.P. Bussell, was completed in the fourth quarter of 2008.

 

In late 2005, our Board of Directors approved the design and construction of a new class of jack-up rig to be built by LTI at its Vicksburg, Mississippi shipyard. The 240C class was designed specifically to target the market for high-pressure/high-temperature drilling in water depths up to 400 feet, and was envisioned to be the replacement for the industry’s current fleet of 116C class rigs, which have been the “workhorse” of the global drilling industry for almost 30 years. Construction of the first 240C, the Rowan-Mississippi, was completed in the fourth quarter of 2008, and the second rig, the Ralph Coffman, is scheduled to be delivered in the first quarter of 2010. Two additional 240C jack-ups were initially approved but were postponed indefinitely due to market conditions. On June 25, 2009, we announced that we would re-commence construction on the third 240C rig with delivery expected in the third quarter of 2011.

 

Keppel AmFELS, Inc., or Keppel, is currently constructing three EXL (formerly Super 116E) class rigs at its Brownsville, Texas shipyard, with delivery expected in 2010 and 2011. The EXL will employ the latest technology to enable drilling of high-pressure/high-temperature and extended-reach wells in most prominent jack-up markets throughout the world, and will be equipped with the hook load and horsepower required to efficiently drill beyond 30,000 feet.

Onshore Operations

 

Rowan has drilling equipment and personnel available on a contract basis for exploration and development of onshore areas. At June 22, 2009, our fleet consisted of 32 deep-well land rigs, located in Texas, Louisiana, Oklahoma, and Alaska. Specifically, 26 of our land rigs are 2,000 HP or greater and capable of drilling wells to 35,000 feet; 19 are AC drive.

 

Our drilling contracts generally receive a fixed day rate and are typically well-to-well, multiple-well or for a fixed term generally ranging from one month to four years — currently, 16 of the 28 marketed rigs are on term contracts.

 

This segment has consistently generated positive earnings, and management anticipates that it will manage the business to remain cash flow positive with minimal capital investment.

 

Manufacturing Operations

 

LTI, which conducts the Manufacturing operations for Rowan, has two operating segments: Drilling Products and Systems and Mining, Forestry and Steel Products, each of which serve markets that require large-scale, steel-intensive, high-load bearing products and related parts and services.

 

Drilling Products and Systems

 

Our Drilling Products and Systems segment built the first jack-up drilling rig in 1955, and has since designed or built more than 200 units, including all 22 of our jack-up rigs. This segment completed construction of our first 240C class jack-up rig and our fourth Tarzan class jack-up rig in November 2008; it is currently constructing two additional 240C class jack-up rigs at LTI’s Vicksburg, Mississippi shipyard for delivery in the first quarter of 2010 and third quarter of 2011, respectively, and will provide the rig kit (design, legs, jacking system, cranes and other equipment) and drilling equipment for each of the EXL class jack-ups being built for Rowan by Keppel.

 

Drilling Products and Systems also designs and manufactures primary drilling equipment in a wide range of sizes, including mud pumps, top drives, drawworks and rotary tables, as well as variable-speed motors, variable-frequency drive systems and other electrical components for the oil and gas, marine, mining and dredging industries. In 2006, we began providing complete land rigs and related drilling equipment packages.

 

Mining, Forestry and Steel Products

 

Our Mining, Forestry and Steel Products segment manufactures heavy equipment such as large wheeled front-end loaders, diesel-electric powered log stackers and steel plate products. Our mining loaders feature bucket capacities up to 53 cubic yards, which are the largest in the industry. LTI loaders are generally used in coal, copper, and iron ore mines, and utilize a proprietary diesel-electric drive system with digital controls. This system allows large, mobile equipment to stop, start and reverse direction without gear shifting and high-maintenance braking. LTI’s wheeled loaders can load rear-dump trucks in the 85-ton to 400-ton range. Our log stackers offer either two- or four-wheel drive configurations and load capacities ranging from 35 to 55 tons.

 

From our mini-mill in Longview, Texas, we recycle scrap metal and produce carbon, alloy and tool steel plate products for internal needs as well as external customers. We concentrate on niche markets that require higher-end steel grades, including mold steels, aircraft-quality steels and steels resistant to hydrogen-induced cracking.

 

Customers

 

Our customers consist of national oil companies, major international oil companies and large investment-grade exploration and production companies. During 2008, one customer of our Drilling segment, Saudi Aramco, accounted for 15% of our consolidated revenues, an increase from 13% in 2007.

 

Directors, executive officers and key management of the company

 

The following table sets forth certain information with respect to the members of our board of directors and our executive officers.

 

 

 

 

Board of Directors

 

The following provides brief biographical information of members of our board of directors.

 

R.G. Croyle was formerly Vice Chairman and Chief Administrative Officer of the Company from August 2002 until his retirement in December 2006. Mr. Croyle also serves on the boards of Boots & Coots, Inc. and Magellan Midstream Holdings GP, LLC.

 

William T. Fox III was formerly Managing Director responsible for the global energy and mining businesses of Citigroup, a corporate banking firm, from 1994 until his retirement in 2003.

 

Sir Graham Hearne was formerly Chairman of Enterprise Oil plc, an oil and gas exploration and production company, from 1991 until his retirement in 2002, and prior to that Chief Executive Officer of Enterprise Oil from 1984 to 1991. He also serves as the non-executive chair of Catlin Group

Limited, Braemar Shipping Services Group plc and Stratic Energy Corporation. He is a non-executive director of N. M. Rothschilds & Sons Ltd. and Wellstream Holdings plc.

 

Thomas R. Hix has been a business consultant since January 2003. Mr. Hix was Senior Vice President of Finance and Chief Financial Officer of Cooper Cameron Corporation, an oil and gas products and services company, from 1995 to 2003 and prior to that, Senior Vice President of Finance, Treasurer and Chief Financial Officer of The Western Company of North America, an oil and gas services company, from 1993 to 1995. He serves on the boards of El Paso Corporation and Health Care Service Corporation.

 

Robert E. Kramek was formerly President of the Society of Naval Architects and Marine Engineers from 2006 to 2008, and prior to that, was President, Chief Operating Officer and Director of the American Bureau of Shipping, or ABS, from 2003 through 2006. Mr. Kramek joined ABS in 1998 after serving as Commandant of the United States Coast Guard, from which he retired as a Four Star Admiral.

 

Frederick R. Lausen was formerly Vice President of Davis Petroleum, Inc., an oil and gas exploration and production company, and retired in 2002.

 

H.E. Lentz has been Chairman of the Board since January 2009 and has been a Managing Director at Lazard Ltd., a financial advisory and asset management firm, since June 2009. From September 2008 to March 2009, he served as Managing Director of Barclays Capital, an investment banking firm and successor to Lehman Brothers. Mr. Lentz was previously Managing Director of Lehman Brothers from 1993 to 2002 and a consultant to Lehman in 2003 and Advisory Director of Lehman from 2004 to September 2008. He also serves on the boards of Peabody Energy Corp. and CARBO Ceramics, Inc.

 

Lord Moynihan has been Executive Chairman of Pelamis Wave Energy since August 2005 and has been Senior Partner of London-based CMA, an energy advisory firm, since 1993. Lord Moynihan also served as Executive Director of Clipper Windpower Inc. and Chairman of Clipper Windpower Europe Limited, a wind turbine technology company, from 2004 to 2007. He has been an active member of the House of Lords since 1997 and is currently the Chairman of the British Olympic Association.

 

P. Dexter Peacock was formerly Managing Partner of Andrews Kurth LLP, a law firm, from which he retired as a Partner in 1997. Mr. Peacock has served Of Counsel to Andrews Kurth since 1997. He serves on the board of Cabot Oil & Gas Corporation.

 

John J. Quicke has been Managing Director and operating partner of Steel Partners LLC, a global management firm, since September 2005. Prior to this, Mr. Quicke was Vice Chairman and Executive Officer (March 2004 to March 2005) and director (1993 to March 2005) of Sequa Corporation, a diversified industrial company. Previously, he served as President and Chief Operating Officer of Sequa from 1993 to February 2004. Mr. Quicke also serves on the boards of Adaptec, Inc. and WHX Corporation.

 

W. Matt Ralls has been President and Chief Executive Officer of the Company since January 2009. From June 2005 until his retirement in November 2007, Mr. Ralls served as Executive Vice President and Chief Operating Officer of GlobalSantaFe Corporation. Prior to that time, Mr. Ralls served as Senior Vice President and Chief Financial Officer of GlobalSantaFe Corporation. He also serves on the board of directors of Complete Production Services.

 

Lawrence J. Ruisi has been a private investor and consultant since 2002. Mr. Ruisi was formerly President and Chief Executive Officer of Loews Cineplex Entertainment from 1998 to 2002 and Executive Vice President of Sony Pictures Entertainment from 1991 to 1998. He also serves on the boards of Adaptec, Inc. and Hughes Communications, Inc.

Executive Officers

 

The following provides brief biographical information of our executive officers and certain key management personnel.

 

John L. Buvens has been Executive Vice President, Legal since January 2007. From April 2003 to January 2007, Mr. Buvens served as Senior Vice President, Legal.

 

Mark A. Keller has been Executive Vice President, Business Development since January 2007. Prior to that time, Mr. Keller served as Senior Vice President, Marketing.

 

David P. Russell has been Executive Vice President, Drilling Operations since January 2007. From January 2005 to January 2007, Mr. Russell served as Vice President, Drilling. Prior to that time, Mr. Russell served as Vice President, Rowan Drilling Company, Inc., a Rowan subsidiary.

 

J. Kevin Bartol has been Vice President, Strategic Planning since June 2007. From January 2007 to June 2007, Mr. Bartol served as a consultant to the Company on strategic initiatives. Prior to that time, Mr. Bartol was Chief Financial Officer of Jindal United Steel Corp (from June 2004 to August 2006), worked on various consulting projects from March 2003 to June 2004 and was Chief Operating Officer of Network International (from September 1999 to March 2003).

 

Barbara A. Carroll has been Vice President, Health, Safety and Environmental Affairs since May 2008. From October 2007 to May 2008, Ms. Carroll served as Vice President, Environmental Affairs. From July 2006 to October 2007, Ms. Carroll served as a consultant to the Company. Prior to that time, Ms. Carroll was Vice President of Environmental, Health and Safety for TEPPCO Partners, LLP.

 

Michael J. Dowdy has been Vice President, Engineering since April 2006. Prior to that time, Mr. Dowdy was Chief Engineer, Marine Group for LTI.

 

Daniel C. Eckermann has been Vice President, Manufacturing since 1996. Mr. Eckermann also serves as President of our manufacturing subsidiary, LTI.

 

William H. Wells has been Vice President, Finance and Chief Financial Officer since January 2007. From May 2005 to January 2007, Mr. Wells served as Vice President, Finance and Treasurer. For more than five years prior to that time, Mr. Wells served as the Company’s Controller.

 

Terry D. Woodall has been Vice President, Human Resources since July 2005. Prior to that time, Mr. Woodall was Manager, U.S. Employee Services for Schlumberger.

 

George C. Jones has been Compliance Officer since July 2007. From July 2006 to July 2007, Mr. Jones served as Senior Corporate Counsel. Prior to that time, Mr. Jones practiced corporate law at Andrews Kurth LLP.

 

Gregory M. Hatfield has been Controller since May 2005. Prior to that time, Mr. Hatfield served as Corporate Accountant.

 

Melanie M. Trent has been Corporate Secretary since January 2007. From January 2007 to January 2009, Ms. Trent also served as Special Assistant to the CEO. From October 2005 to January 2007, Ms. Trent served as Corporate Secretary and Compliance Officer. From 2004 to September 2005, Ms. Trent performed contract legal services, primarily for Jindal United Steel Corp., a Baytown, Texas steel mill company. From 1998 to September 2002, Ms. Trent worked at Reliant Energy, Incorporated, as the Senior Aide to the CEO (1999-2001) and then as Vice President — Investor Relations.

 

Senior Revolving Credit Facility

 

On June 23, 2008, we entered into a three-year $155 million senior revolving credit facility, which we intend to use, as necessary, for general corporate purposes, including capital expenditures and debt service requirements. We may, subject to lender consent, increase the size of the facility up to $250 million. The underlying credit agreement limits new borrowings, requires minimum cash flows, provides that the facility will not be available in the event of a material adverse change in the Company’s condition, operations, business, assets, liabilities or ability to perform, and otherwise contains restrictions as detailed below. Certain of our subsidiaries agreed to act as guarantors of our obligations under the credit agreement. On July 7, 2008, Rowan borrowed $80 million under the credit facility to complete the Cecil Provine purchase, and repaid such amount in full on August 4, 2008. The Company had no borrowings outstanding under the credit facility at June 30, 2009.

 

Pursuant to this credit facility, we will be required to deposit into a cash collateral account an amount of cash equal to 103% of the aggregate outstanding undrawn amount of any letters of credit issued by a lender under the credit agreement plus the aggregate unpaid amount of all of Rowan’s payment obligations under drawn letters of credit issued under the credit agreement

 

 

We assume all risks of the acts or omissions of any beneficiary or transferee of any letter of credit with respect to its or any credit party’s use of such letter of credit. To the extent any such cash collateral account is established, we have promised to pledge to the administrative agent a first priority security interest in such account, the funds within such account and the proceeds from such account as security for the payment of the letter of credit obligations under the credit agreement. With certain exceptions for surplus amounts above our letter of credit exposure when no event of default exists under the credit agreement, we will have no access and no rights to withdrawal from such cash collateral accounts. We are obligated to reimburse each lender for any and all drawings under letters of credit issued under the credit agreement, whether for our benefit or the benefit of a subsidiary.

 

We were in compliance with each of our debt covenants at June 30, 2009 and, based on projections, we do not expect to encounter difficulty complying in the following twelve-month period. Our most onerous financial covenant is the requirement to maintain at least $25 million of unrestricted cash. At June 30, 2009, we had $189 million of cash in excess of that requirement and another $155 million available for borrowings under our revolving credit facility.

 

The senior revolving credit facility, as amended, contains negative covenants that limit our ability, as well as the ability of our subsidiaries, among other things, to incur additional debt, guarantee other indebtedness, create or assume liens on its property, make acquisitions, enter into agreements that restrict or bar the ability to create or incur liens to secure obligations or otherwise interfere with the ability of subsidiaries to make payments under the credit agreement, use of proceeds and letters of credit under the credit agreement, merge or consolidate, sell all or substantial parts of the assets of material subsidiaries, as defined in the credit agreement (with carve outs for the potential sale or disposition of LTI), sale of assets, transactions with affiliates, make certain distributions of cash or property, change the nature of our business or operations, change any accounting policies or fiscal periods, or enter into hedging arrangements. In addition, we are required to maintain a Funded Leverage Ratio at the end of each fiscal quarter of less than or equal to 35%, where the Funded Leverage Ratio is defined as the ratio of most types of our and our subsidiaries’

debt to the sum of such debt plus our consolidated shareholders’ equity as of the date of determination, determined in accordance with GAAP. We are also required to maintain an Interest Coverage Ratio of greater than or equal to 3.00 to 1.00, where the Interest Coverage Ratio is defined as the ratio of our consolidated EBITDA (as defined within the credit agreement) for the four quarterly fiscal periods then ended to our consolidated interest for the four quarterly fiscal periods then ended.

 

Rowan’s $1.0 million of Series C Floating Rate Subordinated Convertible Debentures outstanding at December 31, 2008 are ultimately convertible into common stock at the rate of $28.25 per share for each $1,000 principal amount of debenture through April 27, 2010. The Company’s outstanding subordinated convertible debentures were originally issued in exchange for promissory notes containing provisions for setoff, protecting Rowan against any credit risk. Accordingly, the debentures and notes, and the related interest amounts, have been offset in the consolidated financial statements pursuant to Financial Accounting Standards Board Interpretation No. 39.

 

Title XI Secured Notes

 

Rowan’s first two Tarzan class jack-up rigs and each of our four Super Gorilla class rigs were substantially financed through long-term bank loans guaranteed by the U.S. Department of Transportation’s Maritime Administration, or MARAD, pursuant to the provisions of Title XI of the Merchant Marine Act of 1936, as amended. Under the MARAD Title XI program, we obtained financing as a reimbursement for qualifying expenditures up to a pre-approved limit and based upon actual construction progress. Outstanding borrowings initially bear a floating rate of interest but must become fixed-rate obligations, and the notes require semi-annual payments of principal and accrued interest. The unpaid interest and principal under each Title XI note is guaranteed by the U.S. government, and in return the notes are secured by a preferred mortgage on certain rigs, the charter hire and contract drilling revenues from these rigs, proceeds from insurance with respect to these rigs, and other types of collateral related to these rigs.

 

Our debt agreements contain provisions that require minimum levels of working capital and stockholders’ equity and limit the amount of long-term debt and, in the event of noncompliance, restrict investment activities, asset purchases and sales, lease obligations, borrowings and mergers or acquisitions. Our debt agreements also specify the minimum insurance coverage for our financed rigs. The extent of hurricane damage sustained throughout the Gulf Coast area in recent years has dramatically increased the cost and reduced the availability of insurance coverage for windstorm losses. During our April 2006 policy renewal, we determined that windstorm coverage meeting the requirements of our existing debt agreements was cost-prohibitive. We obtained from MARAD a waiver of the original insurance requirements in return for providing additional security. In 2008, the additional security provisions were modified and our restricted cash requirement was eliminated. In addition, our unrestricted cash requirement was reduced from $31 million to $25 million. We remain subject to restrictions on the use of certain insurance proceeds should we experience further losses. Each of these security provisions will be released by MARAD if we are able to obtain windstorm coverage that satisfies the original terms of our debt agreements.

 

Our outstanding debt at June 30, 2009 was comprised as follows: $192.2 million of fixed-rate notes bearing a weighted average annual interest rate of 4.34%, and $195.8 million of floating-rate notes bearing a weighted average annual interest rate of 0.62%. The floating-rate notes consist of outstanding Bob Palmer and Bob Keller borrowings, which bear interest at a short-term commercial paper rate plus .25% and .15%, respectively. Rowan may fix these interest rates at any time and must fix them by July 15, 2011 and August 31, 2009, respectively. Thus, Rowan believes that its exposure to risk of earnings loss due to changes in market interest rates is limited.

 

The following summarizes the material terms of each of our Title XI borrowings at June 30, 2009.

6.94% Title XI note and 6.15% Title XI note

 

Rowan financed $153.1 million of the cost of the Gorilla V through a floating-rate bank loan guaranteed by MARAD under its Title XI program. On July 1, 1997, the Company fixed $67.0 million of outstanding borrowings at 6.94%. On July 1, 1998, Rowan fixed the remaining $86.1 million principal amount at 6.15%. Principal and accrued interest on each note are payable semi-annually on each January 1 and July 1 through 2010. The Gorilla V is pledged as security for the government guarantees. Our 6.94% Title XI note, with an outstanding principal balance of $8.4 million at June 30, 2009, and our 6.15% Title XI note, with an outstanding principal balance of $10.8 million at that date, will mature on July 1, 2010.

 

5.88% Title XI note

 

Rowan financed $171.0 million of the cost of the Gorilla VI through a floating-rate bank loan guaranteed under MARAD’s Title XI program. On March 15, 2001, the Company fixed the $156.8 million of outstanding borrowings at 5.88%. Principal and accrued interest are payable semi-annually on each March 15 and September 15 through March 2012. The Gorilla VI is pledged as security for the government guarantee. Our 5.88% Title XI note, with an outstanding principal balance of $42.7 million at June 30, 2009, will mature on March 15, 2012.

 

2.80% Title XI note

 

Rowan financed $185.4 million of the cost of the Gorilla VII through a floating-rate bank loan guaranteed under MARAD’s Title XI program. On June 30, 2003, the Company fixed the $162.2 million of outstanding borrowings at 2.80%. Principal and accrued interest are payable semi-annually on each April 20 and October 20 through 2013. The Gorilla VII is pledged as security for the government guarantee. Our 2.80% Title XI note, with an outstanding principal balance of $69.5 million at June 30, 2009, will mature on October 20, 2013.

 

4.33% Title XI note

 

Rowan financed $91.2 million of the cost of the Scooter Yeargain through a 15-year floating-rate bank loan guaranteed under MARAD’s Title XI program. On June 15, 2005, the Company fixed the $85.1 million of outstanding borrowings at 4.33%. Principal and accrued interest are payable semi-annually on each May 1 and November 1 through May 2019. The Scooter Yeargain is pledged as security for the government guarantee. Our 4.33% Title XI note, with an outstanding principal balance of $60.8 million at June 30, 2009, will mature on May 1, 2019.

 

Floating-rate Title XI note secured by the Bob Palmer

 

Rowan financed $187.3 million of the cost of the Bob Palmer through a floating-rate bank loan guaranteed under MARAD’s Title XI program. The Company may fix the interest rate at any time and must fix the rate on all outstanding principal amounts by July 15, 2011. Principal and accrued interest are payable semi-annually on each January 15 and July 15 through 2021. The Bob Palmer is pledged as security for the government guarantee. At June 30, 2009, our $130.1 million of outstanding floating-rate Title XI notes secured by the Bob Palmer bore interest at an annual rate of 0.65%. Once the floating interest rate is fixed, these fixed-rate notes will mature on July 15, 2021.

 

Floating-rate Title XI note secured by the Bob Keller

 

Rowan financed $89.7 million of the cost of the Bob Keller through a 15-year floating-rate bank loan guaranteed under MARAD’s Title XI program. Rowan may fix the interest rate at any time and must fix the rate on all outstanding principal by August 31, 2009. Principal and accrued interest are payable semi-annually on each May 10 and November 10 through May 2020. The Bob Keller is pledged as security for the government guarantee. At June 30, 2009, our $65.7 million of outstanding floating-rate Title XI notes secured by the Bob Keller bore interest at an annual rate of 0.55%. Once the floating interest rate is fixed, these fixed-rate notes will mature on May 10, 2020.

 

The following description of the particular terms of the notes supplements the general description of the debt securities included in the accompanying prospectus. You should review this description together with the description of the debt securities included in the accompanying prospectus. To the extent this description is inconsistent with the description in the accompanying prospectus, this description will control and replace the inconsistent description in the accompanying prospectus.

 

You can find the definitions of certain terms used in this description of notes under the subheading “Definitions.” As used in this description, the words “Rowan,” “we,” “us” and “our” refer to Rowan Companies, Inc., and not to any of its subsidiaries or affiliates.

 

At the closing of this offering, we will enter into an indenture between us and U.S. Bank National Association, as trustee, pursuant to which we may issue multiple series of debt securities from time to time. We will issue the notes under this indenture, as amended and supplemented by a supplemental indenture setting forth the specific terms of the notes. In this description, when we refer to the “indenture,” we mean that indenture as so amended and supplemented by that supplemental indenture.

 

We have summarized some of the material provisions of the notes and the indenture below. The summary supplements the description of the indenture contained in the accompanying prospectus, and we encourage you to read that description for additional material provisions that may be important to you. We also urge you to read the indenture because it, and not this description, defines your rights as a holder of notes. You may request copies of the indenture from us as set forth under “— Additional Information.” Capitalized terms defined in the accompanying prospectus and the indenture have the same meanings when used in this prospectus supplement. The terms of the notes include those expressly set forth in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, as amended.

 

The registered holder of a note will be treated as the owner of it for all purposes. Only registered holders will have rights under the indenture.

 

Brief Description of the Notes

 

The notes will be:

 

 

Principal, Maturity and Interest

 

Initially, we will issue $500 million aggregate principal amount of notes. The indenture will provide for the issuance of additional notes (the “additional notes”), without limitation as to aggregate principal amount. If issued, the additional notes would have terms and conditions identical to the notes issued in this offering. Any additional notes will be part of the same issue as the notes offered

hereby and will vote on all matters with the notes offered in this offering. The notes will mature on August 1, 2019.

 

Interest on the notes will accrue at the rate of 77/8% per annum and will be payable semi-annually in arrears on February 1 and August 1, commencing on February 1, 2010. Interest on overdue principal and interest on overdue interest, if any, will accrue at the applicable interest rate on the notes. We will make each interest payment to the holders of record of the notes as of the immediately preceding January 15 and July 15. Interest on the notes will accrue from the date of original issuance or, if interest has already been paid, from the date it was most recently paid. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.

 

Form, Denomination and Registration of Notes

 

The notes will be issued in registered form, without interest coupons, in denominations of $2,000 and integral multiples of $1,000 in excess thereof. The notes will be represented by a global note.

 

Transfer and Exchange

 

A holder may transfer or exchange notes in accordance with the indenture. The registrar and the trustee may require such holder, among other things, to furnish appropriate endorsements and transfer documents and we may require such holder to pay any taxes and fees required by law or permitted by the indenture. We are not required to transfer or exchange any notes selected for redemption. Also, we are not required to transfer or exchange any notes in respect of which a notice of redemption has been given or for a period of 15 days before a selection of the notes to be redeemed.

 

No service charge will be imposed in connection with any transfer or exchange of any note, but Rowan may in general require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith.

 

Paying Agent and Registrar

 

The trustee will initially act as paying agent and registrar for the notes. We may change the paying agent or registrar without prior notice to the holders of the notes, and we or any of our Subsidiaries may act as paying agent or registrar.

 

Optional Redemption

 

The notes will be redeemable, in whole or in part, at our option at any time. The redemption price for the notes to be redeemed will equal the greater of the following amounts, plus, in each case, accrued and unpaid interest to the redemption date:

 

 

The redemption price will be calculated assuming a 360-day year consisting of twelve 30-day months.

 

“Adjusted Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of the principal amount) equal to

the Comparable Treasury Price for that redemption date. The Adjusted Treasury Rate will be calculated on the third business day preceding the redemption date.

 

“Comparable Treasury Issue” means the U.S. Treasury security selected by the applicable Quotation Agent as having a maturity comparable to the remaining term of the notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of those notes.

 

“Comparable Treasury Price” means, with respect to any redemption date, (A) the average of four Reference Treasury Dealer Quotations for that redemption date, after excluding the highest and lowest of those Reference Treasury Dealer Quotations, or (B) if Rowan obtains fewer than four such Reference Treasury Dealer Quotations, the average of all of those quotations.

 

“Quotation Agent” means the Reference Treasury Dealer appointed by us for the notes.

 

“Reference Treasury Dealer” means:

 

 

“Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. (New York City time) on the third business day preceding that redemption date.

 

We will mail notice of any redemption at least 30 days but not more than 60 days before the redemption date to each holder of the notes to be redeemed. If we elect to partially redeem the notes, the Trustee may select the notes to be redeemed by such method the Trustee considers fair and appropriate; provided however that no notes of a principal amount of $2,000 or less shall be redeemed in part.

 

Unless we default in payment of the redemption price, on and after the redemption date, interest will cease to accrue on the notes or portions of the notes called for redemption.

 

Open Market Purchases; No Mandatory Redemption or Sinking Fund

 

We may at any time and from time to time purchase notes in the open market or otherwise, in each case without any restriction under the indenture. We are not required to make mandatory redemption or sinking fund payments with respect to the notes.

 

Selection and Notice

 

If less than all of the notes are to be redeemed at any time, selection of such notes for redemption will be made by the trustee in compliance with the requirements of the principal national securities exchange, if any, on which the notes are listed, or, if the notes are not so listed, on a pro rata basis, by lot or by such method as the trustee shall deem fair and appropriate; provided that no notes of $2,000 or less shall be redeemed in part. Notices of redemption with respect to the notes shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each holder of notes to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the notes or a satisfaction and discharge of the Indenture.

 

If any note is to be redeemed in part only, the notice of redemption that relates to such note shall state the portion of the principal amount thereof to be redeemed. A new note in principal

amount equal to the unredeemed portion thereof will be issued in the name of the holder thereof upon cancellation of the original note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on the notes or portions of the notes called for redemption. Any redemption or notice of redemption may, at Rowan’s discretion, be subject to one or more conditions precedent.

 

Additional Covenants

 

With respect to the notes, the indenture will contain the following covenants, in addition to the covenants and other provisions described in the accompanying prospectus under the captions “Description of Debt Securities — Covenants” and “Description of Debt Securities — Merger and Sale of Assets.”

 

Limitation on Liens

 

We have agreed that we or any Subsidiary will issue, assume or guarantee Indebtedness for borrowed money secured by a lien upon a Principal Property only if we secure the notes equally and ratably with or prior to the Indebtedness secured by that lien. If we so secure the notes, we have the option to secure any of our other Indebtedness or obligations equally and ratably with or prior to the Indebtedness secured by the lien and, accordingly, equally and ratably with the notes. This covenant has exceptions that permit:

 

(1) liens existing on the date the notes are first issued;

 

(2) liens on any entity’s property or assets existing at the time we acquire such entity or its property or assets, or at the time such entity becomes a Subsidiary;

 

(3) intercompany liens in favor of us or any Subsidiary;

 

(4) liens on assets either:

 

(a) securing all or part of the cost of acquiring, constructing, improving, developing or repairing the assets; or

 

(b) securing Indebtedness incurred to finance the acquisition of the assets or the cost of constructing, improving, developing, expanding or repairing the assets and commencing commercial operation of the assets if the applicable Indebtedness was incurred prior to, at the time of or within 24 months after the acquisition, or completion of construction, improvement, development, expansion or repair of the assets or their commencing commercial operation;

 

(5) liens in favor of governmental entities to secure (a) payments under any contract or statute to secure progress or advance payments or (b) industrial development, pollution control or similar indebtedness;

 

(6) governmental liens under contracts for the sale of products or services;

 

(7) liens imposed by law, such as mechanic’s or workmen’s liens;

 

(8) liens under workers’ compensation laws or similar legislation;

 

(9) liens in connection with legal proceedings or securing taxes or other assessments;

 

(10) statutory or other liens arising in the ordinary course of our business and relating to amounts that are not yet delinquent or that we are contesting in good faith;

 

(11) liens on stock, partnership or other equity interests in any Joint Venture or any Subsidiary that owns an equity interest in a Joint Venture to secure Indebtedness contributed or advanced solely to that Joint Venture;

 

(12) good faith deposits in connection with bids, tenders, contracts or leases;

(13) deposits made in connection with maintaining self-insurance, to obtain the benefits of laws, regulations or arrangements relating to unemployment insurance, old age pensions, social security or similar matters or to secure surety, appeal or customs bonds; and

 

(14) any extensions, substitutions, renewals or replacements of the above-described liens.

 

In addition, without securing the notes as described above, we or any Subsidiary may issue, assume or guarantee Indebtedness that this covenant would otherwise restrict in a total principal amount that, when added to all of our and our Subsidiaries’ other outstanding Indebtedness that this covenant would otherwise restrict and the total amount of Attributable Indebtedness outstanding for Sales and Leaseback Transactions, does not exceed a “basket” equal to 15% of our Consolidated Net Tangible Assets. When calculating this total principal amount, we exclude from the calculation Attributable Indebtedness from Sale and Leaseback Transactions in connection with which we have voluntarily retired debt securities issued under the indenture, Indebtedness of equal rank or Funded Indebtedness, in each case as described in clause (3) below under “Limitation on Sale and Leaseback Transactions.”

 

Limitation on Sale and Leaseback Transactions

 

We have agreed that we or any Subsidiary will not enter into a Sale and Leaseback Transaction, unless one of the following applies:

 

(1) we or that Subsidiary could incur Indebtedness in a principal amount equal to the Attributable Indebtedness for that Sale and Leaseback Transaction and, without violating the “Limitation on Liens” covenant, could secure that Indebtedness by a lien on the property to be leased without equally or ratably securing the notes;

 

(2) after the issuance of the notes and within the period beginning nine months before the closing of the Sale and Leaseback Transaction and ending nine months after such closing, we or any Subsidiaries have expended for property used or to be used in the ordinary course of business an amount equal to all or a portion of the net proceeds of the transaction, and we have elected to designate that amount as a credit against that transaction (with any amount not so designated to be applied as set forth in (3) below or as otherwise permitted); or

 

(3) during the nine-month period after the effective date of the Sale and Leaseback Transaction, we have applied to the voluntary defeasance or retirement of any debt securities under the indenture, any Indebtedness of equal rank to the notes or any Funded Indebtedness, an amount equal to the net proceeds of the sale or transfer of the property leased in the Sale and Leaseback Transaction (or, if greater, the fair value of that property at the time of the Sale and Leaseback Transaction as determined by our board of directors) adjusted to reflect the remaining term of the lease and any amount expended as set forth in clause (2) above.

 

Additional Event of Default

 

With respect to the notes, the occurrence of any of the following events shall, in addition to the other events or circumstances described as Events of Default under the caption “Description of Debt Securities — Events of Default” in the accompanying prospectus, constitute an Event of Default: default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness of us or any of our Significant Subsidiaries (or the payment of which is guaranteed by us or any of our Significant Subsidiaries), whether such Indebtedness or guarantee now exists or is created after the date of issuance of the notes, if (a) that default (x) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a “Payment Default”), or (y) results in the acceleration of such Indebtedness prior to its express maturity, and (b) in each case described in clauses (x) or (y) above, the principal amount of

any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $35.0 million or more.

 

Definitions

 

“Attributable Indebtedness” means the present value of the rental payments during the remaining term of the lease included in the Sale and Leaseback Transaction. To determine that present value, we use a discount rate equal to the lease rate of the Sale and Leaseback Transaction. For these purposes, rental payments do not include any amounts we are required to pay for taxes, maintenance, repairs, insurance, assessments, utilities, operating and labor costs and other items that do not constitute payments for property rights. In the case of any lease that we may terminate by paying a penalty, if the net amount would be reduced if we terminated the lease on the first date that it could be terminated, then this lower net amount will be used, in which case, the net amount shall also include the amount of the penalty, but no rent shall be considered as required to be paid under such lease subsequent to the final date upon which it may be so terminated.

 

“Capital Lease Obligation” means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP, and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be prepaid by the lessee without payment of a penalty.

 

“Capital Stock” means:

 

(1) in the case of a corporation, corporate stock;

 

(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

 

(3) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and

 

(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

 

“Consolidated Net Tangible Assets” of any Person means the total amount of assets (after deducting applicable reserves and other properly deductible items) of such Person and its consolidated Subsidiaries less:

 

 

Consolidated Net Tangible Assets of any Person shall be based on the most recently available consolidated quarterly balance sheet of such Person, and shall be calculated in accordance with GAAP.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Funded Indebtedness” means all Indebtedness that matures on or is renewable to a date more than one year after the date the Indebtedness is incurred.

 

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, the opinions and pronouncements of the Public Company Accounting Oversight Board and in the statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the

accounting profession, which are in effect from time to time. All computations based on GAAP contained in the indenture will be computed in conformity with GAAP.

 

“Indebtedness” means:

 

 

“Joint Venture” means any partnership, corporation or other entity in which up to and including 50% of the partnership interests, outstanding voting stock or other equity interests is owned, directly or indirectly, by Rowan and/or one or more Subsidiaries of Rowan. A Joint Venture is not treated as a Subsidiary.

 

“Person” means any individual, corporation, partnership, joint venture, association, joint stock company, trust, limited liability company, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

 

“Principal Property” means any drilling rig, or integral portion thereof, owned or leased by us or any Subsidiary and used for drilling offshore oil and gas wells, which, in the opinion of our board of directors, is of material importance to the business of us and our Subsidiaries taken as a whole, but no such drilling rig, or portion thereof, shall be deemed of material importance if its net book value (after deducting accumulated depreciation) is less than 2% of our Consolidated Net Tangible Assets.

 

“Sale and Leaseback Transaction” means any arrangement with anyone under which we or any Subsidiary leases any Principal Property that we or that Subsidiary has or will sell or transfer to that person. This term excludes the following:

 

 

“Subsidiary” means, with respect to any Person,

 

(1) any corporation, association or other business entity of which more than 50% of the total voting power of the Voting Stock thereof is at the time owned or controlled, directly or indirectly, by such Person; and

(2) any partnership (a) the sole general partner or the managing general partner of which is such Person or an entity described in clause (1) and related to such Person or (b) the only general partners of which are such Person or of one or more entities described in clause (1) and related to such Person (or any combination thereof).

 

“Voting Stock” of any specified Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the board of directors (or similar governing body) of such Person.

 

Defeasance

 

The defeasance provisions of the indenture described in the accompanying prospectus will apply to the notes. In particular, Rowan may, at its option and at any time, elect to have its obligations released with respect to the provisions of the indenture described above under “— Additional Covenants,” and thereafter any omission to comply with such obligations or provisions will not constitute a Default or Event of Default. In the event Covenant Defeasance occurs in accordance with the indenture, the Events of Default described under clauses (3) and (4) under the caption “Description of Debt Securities — Events of Default” in the accompanying prospectus and the additional Event of Default described above under the caption “ — Additional Event of Default,” in each case, will no longer constitute an Event of Default with respect to the notes.

 

Concerning the Trustee

 

U.S. Bank National Association is the trustee under the indenture and has been appointed by Rowan as initial registrar and paying agent with regard to the notes.

 

Notices

 

Notices to holders of notes will be given by mail to the holder’s address as it appears in the notes register.

 

Governing Law

 

The Indenture and the notes will be governed by, and construed in accordance with, the laws of the State of New York.

 

Additional Information

 

Anyone who receives this prospectus supplement may obtain a copy of the indenture without charge by writing to Rowan Companies, Inc., 2800 Post Oak Boulevard, Suite 5450, Houston, Texas 77056, Attention: Director — Investor Relations.

 

Book-Entry Delivery and Settlement

 

Global Notes

 

We will issue the notes in the form of one or more permanent global notes in definitive, fully registered, book-entry form. The global notes will be deposited with or on behalf of The Depository Trust Company (“DTC”) and registered in the name of Cede & Co., as nominee of DTC, or will remain in the custody of the trustee.

 

DTC, Clearstream and Euroclear

 

Beneficial interests in the global notes will be represented through book-entry accounts of financial institutions acting on behalf of beneficial owners as direct and indirect participants in DTC. Investors may hold interests in the global notes through either DTC (in the United States), Clearstream Banking, société anonyme, Luxembourg (“Clearstream”), or Euroclear Bank S.A./N.V. (the “Euroclear Operator”), as operator of the Euroclear System (in Europe) (“Euroclear”), either directly if they are

participants of such systems or indirectly through organizations that are participants in such systems. Clearstream and Euroclear will hold interests on behalf of their participants through customers’ securities accounts in Clearstream’s and Euroclear’s names on the books of their U.S. depositaries, which in turn will hold such interests in customers’ securities accounts in the U.S. depositaries’ names on the books of DTC.

 

DTC has advised us as follows:

 

 

We have provided the descriptions of the operations and procedures of DTC, Clearstream and Euroclear in this prospectus supplement solely as a matter of convenience. These operations and procedures are solely within the control of those organizations and are subject to change by them from time to time. None of us, the underwriters nor the trustee takes any responsibility for these operations or procedures, and you are urged to contact DTC, Clearstream and Euroclear or their participants directly to discuss these matters.

 

We expect that under procedures established by DTC:

 

 

The laws of some jurisdictions may require that purchasers of securities take physical delivery of those securities in definitive form. Accordingly, the ability to transfer interests in the notes represented by a global note to those persons may be limited. In addition, because DTC can act only on behalf of its participants, who in turn act on behalf of persons who hold interests through participants, the ability of a person having an interest in notes represented by a global note to pledge or transfer those interests to persons or entities that do not participate in DTC’s system, or otherwise

to take actions in respect of such interest, may be affected by the lack of a physical definitive security in respect of such interest.

 

So long as DTC or its nominee is the registered owner of a global note, DTC or that nominee will be considered the sole owner or holder of the notes represented by that global note for all purposes under the indenture and under the notes. Except as provided below, owners of beneficial interests in a global note will not be entitled to have notes represented by that global note registered in their names, will not receive or be entitled to receive physical delivery of certificated notes and will not be considered the owners or holders thereof under the indenture or under the notes for any purpose, including with respect to the giving of any direction, instruction or approval to the trustee. Accordingly, each holder owning a beneficial interest in a global note must rely on the procedures of DTC and, if that holder is not a direct or indirect participant, on the procedures of the participant through which that holder owns its interest, to exercise any rights of a holder of notes under the indenture or the global note.

 

None of us, the underwriters nor the trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of notes by DTC, Clearstream or Euroclear, or for maintaining, supervising or reviewing any records of those organizations relating to the notes.

 

Payments on the notes represented by the global notes will be made to DTC or its nominee, as the case may be, as the registered owner thereof. We expect that DTC or its nominee, upon receipt of any payment on the notes represented by a global note, will credit participants’ accounts with payments in amounts proportionate to their respective beneficial interests in the global note as shown in the records of DTC or its nominee. We also expect that payments by participants to owners of beneficial interests in the global note held through such participants will be governed by standing instructions and customary practice as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. The participants will be responsible for those payments.

 

Distributions on the notes held beneficially through Clearstream will be credited to cash accounts of its customers in accordance with its rules and procedures, to the extent received by the U.S. depositary for Clearstream.

 

Securities clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System, and applicable Belgian law (collectively, the “Terms and Conditions”). The Terms and Conditions govern transfers of securities and cash within Euroclear, withdrawals of securities and cash from Euroclear, and receipts of payments with respect to securities in Euroclear. All securities in Euroclear are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear Operator acts under the Terms and Conditions only on behalf of Euroclear participants and has no record of or relationship with persons holding through Euroclear participants.

 

Distributions on the notes held beneficially through Euroclear will be credited to the cash accounts of its participants in accordance with the Terms and Conditions, to the extent received by the U.S. depositary for Euroclear.

 

Clearance and Settlement Procedures

 

Initial settlement for the notes will be made in immediately available funds. Secondary market trading between DTC participants will occur in the ordinary way in accordance with DTC rules and will be settled in immediately available funds. Secondary market trading between Clearstream customers and/or Euroclear participants will occur in the ordinary way in accordance with the applicable rules and operating procedures of Clearstream and Euroclear and will be settled using the procedures applicable to conventional eurobonds in immediately available funds.

Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Clearstream customers or Euroclear participants, on the other, will be effected in DTC in accordance with DTC rules on behalf of the relevant European international clearing system by the U.S. depositary; however, such cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in such system in accordance with its rules and procedures and within its established deadlines (European time). The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to the U.S. depositary to take action to effect final settlement on its behalf by delivering or receiving the notes in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC.

 

Clearstream customers and Euroclear participants may not deliver instructions directly to their U.S. depositaries.

 

Because of time-zone differences, credits of the notes received in Clearstream or Euroclear as a result of a transaction with a DTC participant will be made during subsequent securities settlement processing and dated the business day following the DTC settlement date. Such credits or any transactions in the notes settled during such processing will be reported to the relevant Clearstream customers or Euroclear participants on such business day. Cash received in Clearstream or Euroclear as a result of sales of the notes by or through a Clearstream customer or a Euroclear participant to a DTC participant will be received with value on the DTC settlement date but will be available in the relevant Clearstream or Euroclear cash account only as of the business day following settlement in DTC.

 

Although DTC, Clearstream and Euroclear have agreed to the foregoing procedures to facilitate transfers of the notes among participants of DTC, Clearstream and Euroclear, they are under no obligation to perform or continue to perform such procedures and such procedures may be changed or discontinued at any time.

 

Certificated Notes

 

We will issue certificated notes to each person that DTC identifies as the beneficial owner of the notes represented by the global notes upon surrender by DTC of the global notes if:

 

 

Neither we nor the trustee will be liable for any delay by DTC, its nominee or any direct or indirect participant in identifying the beneficial owners of the related notes. We and the trustee may conclusively rely on, and will be protected in relying on, instructions from DTC or its nominee for all purposes, including with respect to the registration and delivery, and the respective principal amounts, of the notes to be issued.

 

The following discussion summarizes certain U.S. federal income tax considerations, and in the case of a non-U.S. holder (as defined below), certain U.S. federal estate tax considerations, that may be relevant to the acquisition, ownership and disposition of the notes. This discussion is based upon the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), applicable Treasury Regulations promulgated thereunder, judicial authority and administrative interpretations, as of the date of this document, all of which are subject to change, possibly with retroactive effect, or are subject to different interpretations. We cannot assure you that the Internal Revenue Service, or IRS, will not challenge one or more of the tax consequences described in this discussion, and we have not obtained, nor do we intend to obtain, a ruling from the IRS or an opinion of counsel with respect to the U.S. federal tax consequences of acquiring, holding or disposing of the notes.

 

In this discussion, we do not purport to address all tax considerations that may be important to a particular holder in light of the holder’s circumstances, or to certain categories of investors that may be subject to special rules, such as financial institutions, insurance companies, regulated investment companies, tax-exempt organizations, dealers in securities or currencies, U.S. holders whose functional currency is not the U.S. dollar, U.S. expatriates, or persons who hold the notes as part of a hedge, conversion transaction, straddle or other risk reduction transaction. This discussion is limited to holders who purchase the notes in this offering for a price equal to the issue price of the notes (i.e., the first price at which a substantial amount of the notes is sold other than to bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers) and who hold the notes as capital assets (generally, property held for investment). This discussion also does not address the tax considerations arising under the laws of any foreign, state, local, or other jurisdiction.

 

Investors considering the purchase of notes are urged to consult their own tax advisors regarding the application of the U.S. federal income tax laws to their particular situations and the applicability and effect of state, local or foreign tax laws and tax treaties.

 

Tax Consequences to U.S. Holders

 

You are a “U.S. holder” for purposes of this discussion if you are a beneficial owner of a note and you are for U.S. federal income tax purposes:

 

 

If a partnership (including an entity treated as a partnership for U.S. federal income tax purposes) holds notes, the tax treatment of a partner of the partnership generally will depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership acquiring the notes, you are urged to consult your own tax advisor about the U.S. federal income tax consequences of acquiring, holding and disposing of the notes.

Interest on the Notes

 

You will generally be required to recognize as ordinary income any stated interest paid or accrued on the notes, in accordance with your regular method of accounting for U.S. federal income tax purposes.

 

Certain Additional Payments

 

We do not intend to treat the possibility of payment of additional amounts described in “Description of Notes — Optional Redemption” as (i) affecting the determination of the yield to maturity of the notes or giving rise to any accrual of original issue discount or recognition of ordinary income upon redemption, sale, or exchange of the notes, or (ii) resulting in the notes being treated as contingent payment debt instruments under the applicable Treasury Regulations. However, additional income will be recognized if any such additional payment is made. It is possible that the IRS may take a different position, in which case the timing, character and amount of income attributable to the notes may be different.

 

Disposition of the Notes

 

You will generally recognize capital gain or loss on the sale, redemption, exchange, retirement or other taxable disposition of a note. This gain or loss will equal the difference between your adjusted tax basis in the note and the proceeds you receive, excluding any proceeds attributable to accrued interest which will be recognized as ordinary interest income to the extent you have not previously included the accrued interest in income. The proceeds you receive will include the amount of any cash and the fair market value of any other property received for the note. Your adjusted tax basis in the note will generally equal the amount you paid for the note. The gain or loss will be long-term capital gain or loss if you held the note for more than one year at the time of the sale, redemption, exchange, retirement or other taxable disposition. Long-term capital gains of individuals, estates and trusts currently are taxed at a maximum rate of 15%. The deductibility of capital losses may be subject to limitation.

 

Information Reporting and Backup Withholding

 

Information reporting will apply to payments of interest on the notes and to the proceeds from the sale or other disposition of a note paid to you, and backup withholding (currently at a rate of 28%) may apply to payments of interest and sales proceeds unless you provide the appropriate intermediary with a taxpayer identification number, certified under penalties of perjury, as well as certain other information or otherwise establish an exemption from backup withholding. Any amount withheld under the backup withholding rules is allowable as a credit against your U.S. federal income tax liability, if any, and a refund may be obtained if the amounts withheld exceed your actual U.S. federal income tax liability and you timely provide the required information or appropriate claim form to the IRS.

 

Tax Consequences to Non-U.S. Holders

 

You are a “non-U.S. holder” for purposes of this discussion if you are a beneficial owner of notes and for U.S. federal income tax purposes you are not a U.S. holder or a partnership (including an entity treated as a partnership for such purposes).

 

Interest on the Notes

 

Payments to you of interest on the notes generally will be exempt from withholding of U.S. federal income tax under the “portfolio interest” exemption if the interest is not effectively connected with your conduct of a U.S. trade or business, you properly certify as to your foreign status as described below, and:

 

 

 

The portfolio interest exemption and several of the special rules for non-U.S. holders described below generally apply only if you appropriately certify as to your foreign status. You can generally meet this certification requirement by providing a properly executed IRS Form W-8BEN or appropriate substitute form to us, or our paying agent. If you hold the notes through a financial institution or other agent acting on your behalf, you may be required to provide appropriate certifications to the agent. Your agent will then generally be required to provide appropriate certifications to us or our paying agent, either directly or through other intermediaries. Special rules apply to foreign partnerships, estates and trusts, and in certain circumstances certifications as to foreign status of partners, trust owners or beneficiaries may have to be provided to us or our paying agent. In addition, special rules apply to qualified intermediaries that enter into withholding agreements with the IRS.

 

If you cannot satisfy the requirements described above, payments of interest made to you will be subject to U.S. federal withholding tax at a 30% rate, unless you provide us with a properly executed IRS Form W-8BEN (or successor form) claiming an exemption from (or a reduction of) withholding under the benefit of an income tax treaty, or the payments of interest are effectively connected with your conduct of a trade or business in the United States and you meet the certification requirements described below. Please read “— Income or gain effectively connected with a U.S. trade or business.”

 

Disposition of Notes

 

You generally will not be subject to U.S. federal income tax on any gain realized on the sale, redemption, exchange, retirement or other taxable disposition of a note unless:

 

 

Income or Gain Effectively Connected with a U.S. Trade or Business

 

The preceding discussion of the tax consequences of the purchase, ownership and disposition of notes by you generally assumes that you are not engaged in a U.S. trade or business. If any interest on the notes or gain from the sale, exchange or other taxable disposition of the notes is effectively connected with a U.S. trade or business conducted by you (and, if required by an income tax treaty, is treated as attributable to a permanent establishment in the United States), then the income or gain will be subject to U.S. federal income tax at regular graduated income tax rates, but will not be subject to withholding tax if certain certification requirements are satisfied. You can generally meet the certification requirements by providing a properly executed IRS Form W-8ECI or appropriate substitute form to us, or our paying agent. If you are a corporation, that portion of your earnings and profits that is effectively connected with your U.S. trade or business also may be subject to a “branch profits tax” at a 30% rate, although an applicable income tax treaty may provide for a lower rate.

 

U.S. Federal Estate Tax

 

If you are an individual and are not a resident of the United States (as specially defined for U.S. federal estate tax purposes) at the time of your death, the notes will not be included in your estate for U.S. federal estate tax purposes provided that, at the time of your death, interest on the

notes qualifies for the portfolio interest exemption under the rules described above (without regard to the certification requirement).

 

Information Reporting and Backup Withholding

 

Payments to you of interest on a note, and amounts withheld from such payments, if any, generally will be required to be reported to the IRS and to you.

 

United States backup withholding tax generally will not apply to payments of interest and principal on a note to a non-U.S. holder if the statement described in “Tax consequences to non-U.S. holders — Interest on the notes” is duly provided by the holder or the holder otherwise establishes an exemption, provided that we do not have actual knowledge or reason to know that the holder is a United States person.

 

Payment of the proceeds of a disposition of a note effected by the U.S. office of a U.S. or foreign broker will be subject to information reporting requirements and backup withholding unless you properly certify under penalties of perjury as to your foreign status and certain other conditions are met or you otherwise establish an exemption. Information reporting requirements and backup withholding generally will not apply to any payment of the proceeds of the disposition of a note effected outside the United States by a foreign office of a broker. However, unless such a broker has documentary evidence in its records that you are a non-U.S. holder and certain other conditions are met, or you otherwise establish an exemption, information reporting will apply to a payment of the proceeds of the disposition of a note effected outside the United States by such a broker if it:

 

 

Any amount withheld under the backup withholding rules may be credited against your U.S. federal income tax liability and any excess may be refundable if the proper information is timely provided to the IRS.

 

The preceding discussion of material U.S. federal income and estate tax considerations is for general information only and is not tax advice. We urge each prospective investor to consult its own tax advisor regarding the particular federal, state, local and foreign tax consequences of purchasing, holding, and disposing of our notes, including the consequences of any proposed change in applicable laws.

 

Subject to the terms and conditions in the underwriting agreement between us and the underwriters, we have agreed to sell to each underwriter, and each underwriter has severally agreed to purchase from us, the principal amount of notes that appears opposite its name in the table below:

 

 

The obligations of the underwriters under the underwriting agreement, including their agreement to purchase notes from us, are several and not joint. The underwriting agreement provides that the underwriters will purchase all the notes if any of them are purchased.

 

The underwriters initially propose to offer and sell the notes at the price set forth on the cover page of this prospectus supplement. The underwriters may offer the notes to selected dealers at the public offering price minus a concession of up to 0.40% of the principal amount. In addition, the underwriters may allow, and those selected dealers may reallow, a concession of up to 0.25% of the principal amount to certain other dealers. The underwriters may change such offering price and any other selling terms at any time without notice. The underwriters may offer and sell notes through certain of their affiliates. The offering of the notes by the underwriters is subject to receipt and acceptance and subject to the underwriters’ right to reject any order in whole or in part.

 

In the underwriting agreement, we have agreed to indemnify each underwriter, its affiliates, directors, officers, employees, representatives, agents and controlling persons against certain liabilities in connection with this offering, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make in respect thereof.

 

The notes are a new issue of securities for which there currently is no market. The underwriters have advised us that following the completion of this offering, they presently intend to make a market in the notes. They are not obligated to do so, however, and any market-making activities with respect to the notes may be discontinued at any time at their sole discretion without notice. In addition, such market-making activity will be subject to the limits imposed by the Securities Act and the Exchange Act. Accordingly, we cannot give any assurance as to the development of any market or the liquidity of any market for the notes.

 

In connection with this offering, the underwriters may engage in over-allotment, stabilizing transactions, syndicate covering transactions and penalty bids. Over-allotment involves sales in excess of the offering size, which creates a short position for the underwriters. Stabilizing transactions involve bids to purchase the notes in the open market for the purpose of pegging, fixing or maintaining the price of the notes. Syndicate covering transactions involve purchases of the notes in the open market after the distribution has been completed in order to cover short positions. Penalty bids permit the underwriters to reclaim a selling concession from a broker/dealer when the notes originally sold by such broker/dealer are purchased in a stabilizing or syndicate covering transaction to cover short positions. These activities by the underwriters, as well as other purchases by the underwriters for their own accounts, may stabilize, maintain or otherwise affect the market price of the notes. Any of these activities may prevent a decline in the market price of the notes, and may also cause the price of the notes to be higher than it would otherwise be in the absence of these transactions. The underwriters may conduct these transactions in the over-the-counter market or otherwise. If the underwriters commence any of these transactions, they may discontinue them at any time.