10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2006

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM_____TO_____

þ1-5491

Commission File

Number

ROWAN COMPANIES, INC.

(Exact name of registrant as specified in its charter)

Delaware	75-0759420
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

2800 Post Oak Boulevard, Suite 5450 Houston, Texas	77056-6127
(Address of principal executive offices)	(Zip Code)

(713) 621-7800

Registrant's telephone number, including area code

Inapplicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.   Large accelerated filer þ Accelerated filer o Non-accelerated filer o 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)  Yes o   Noþ

The number of shares of common stock, $.125 par value, outstanding at April 30, 2006 was 110,221,350.

ROWAN COMPANIES, INC.

INDEX

		Page No.
PART I.	Financial Information:
Item 1.	Financial Statements (Unaudited):
	Consolidated Balance Sheets -- March 31, 2006 and December 31, 2005	2
	Consolidated Statements of Operations -- Three Months Ended March 31, 2006 and 2005	4
	Consolidated Statements of Cash Flows -- Three Months Ended March 31, 2006 and 2005	5
	Notes to Unaudited Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21
PART II.	Other Information:
Item 1.	Legal Proceedings	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 4.	Submission of Matters to a Vote of Security Holders	23
Item 6.	Exhibits	24
SIGNATURES		24

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ROWAN COMPANIES, INC. AND SUBSIDIARIES

 CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

	March 31,		December 31,
	2006		2005
ASSETS	(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents	$	553,219	$	675,903
Receivables - trade and other		336,922		253,194
Inventories - at cost:
Raw materials and supplies		192,585		169,361
Work-in-progress		43,009		26,172
Finished goods		593		477
Prepaid expenses		17,867		17,041
Deferred tax assets - net		47,200		65,984
Total current assets		1,191,395		1,208,132
PROPERTY, PLANT AND EQUIPMENT - at cost:
Drilling equipment		2,271,421		2,251,714
Manufacturing plant and equipment		178,579		165,185
Construction in progress		187,077		112,939
Other property and equipment		85,995		92,992
Total		2,723,072		2,622,830
Less accumulated depreciation and amortization		904,134		902,096
Property, plant and equipment - net		1,818,938		1,720,734
GOODWILL AND OTHER ASSETS		37,044		46,317
TOTAL	$	3,047,377	$	2,975,183

                             See Notes to Unaudited Consolidated Financial Statements.

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ROWAN COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

	March 31,			December 31,
	2006			2005
LIABILITIES AND STOCKHOLDERS' EQUITY	(Unaudited)
CURRENT LIABILITIES:
Current maturities of long-term debt	$	64,922		$	64,922
Accounts payable - trade		104,791			82,935
Deferred revenues		92,192			74,490
Billings in excess of uncompleted contract costs and estimated profit		81,788			56,821
Other current liabilities		56,171			61,445
Total current liabilities		399,864			340,613
LONG-TERM DEBT - less current maturities		531,619			550,326
OTHER LIABILITIES		131,211			149,782
DEFERRED INCOME TAXES - net		324,281			314,723
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value:
Authorized 5,000,000 shares issuable in series:
Series A Preferred Stock, authorized 4,800 shares, none outstanding
Series B Preferred Stock, authorized 4,800 shares, none outstanding
Series C Preferred Stock, authorized 9,606 shares, none outstanding
Series D Preferred Stock, authorized 9,600 shares, none outstanding
Series E Preferred Stock, authorized 1,194 shares, none outstanding
Series A Junior Preferred Stock, authorized 1,500,000 shares,
none issued
Common stock, $.125 par value:
Authorized 150,000,000 shares; issued 110,115,845 shares at
March 31, 2006 and 109,776,426 shares at December 31, 2005		13,764			13,722
Additional paid-in capital		974,615			970,256
Retained earnings		755,683			724,096
Unearned equity compensation		-			(4,675	)
Accumulated other comprehensive loss		(83,660	)		(83,660	)
Total stockholders' equity		1,660,402			1,619,739
TOTAL	$	3,047,377		$	2,975,183
See Notes to Unaudited Consolidated Financial Statements.

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ROWAN COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

	For The Three Months
	Ended March 31,
		2006			2005
		(Unaudited)
REVENUES:
Drilling services	$	217,102		$	160,279
Manufacturing sales and services		82,685			62,113
Total		299,787			222,392
COSTS AND EXPENSES:
Drilling services		108,795			89,425
Manufacturing sales and services		65,387			56,674
Depreciation and amortization		20,111			19,854
Selling, general and administrative		18,509			13,260
Gain on disposals of property and equipment		(2,544	)		(590	)
Total		210,258			178,623
INCOME FROM OPERATIONS		89,529			43,769
OTHER INCOME (EXPENSE):
Interest expense		(6,997	)		(5,856	)
Less interest capitalized		1,359			771
Interest income		8,329			2,546
Gain on sale of investments		-			7,701
Other - net		132			336
Other income - net		2,823			5,498
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		92,352			49,267
Provision for income taxes		33,247			18,728
INCOME FROM CONTINUING OPERATIONS		59,105			30,539
Income from discontinued operations, net of tax		-			12,883
NET INCOME	$	59,105		$	43,422
PER SHARE AMOUNTS (Note 2):
Income from continuing operations - basic	$	.54		$	.28
Income from continuing operations - diluted	$	.53		$	.28
Income from discontinued operations - basic	$	-		$	.12
Income from discontinued operations - diluted	$	-		$	.12
Net income - basic	$	.54		$	.40
Net income - diluted	$	.53		$	.40
See Notes to Unaudited Consolidated Financial Statements.

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ROWAN COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

	For The Three Months
	Ended March 31,
	2006			2005
	(Unaudited)
CASH PROVIDED BY (USED IN):
Operations:
Net income	$	59,105		$	43,422
Adjustments to reconcile net income to net cash provided by (used in) operations:
Deferred income taxes		28,342			23,094
Depreciation and amortization		20,111			19,913
Provision for pension and postretirement benefits		7,669			6,797
Compensation expense		3,190			1,009
Contributions to pension plans		(154	)		(60,931	)
Postretirement benefit claims paid		(1,100	)		(829	)
Gain on disposals of property, plant and equipment		(2,544	)		(590	)
Gain on sale of boat purchase options		-			(20,866	)
Gain on sales of investments		-			(7,701	)
Changes in current assets and liabilities:
Receivables- trade and other		(52,866	)		(22,027	)
Inventories		(40,177	)		(5,925	)
Other current assets		(20,219	)		(7,078	)
Current liabilities		18,810			(2,244	)
Net changes in other noncurrent assets and liabilities		(2,229	)		35
Net cash provided by (used in) operations		17,938			(33,921	)
Investing activities:
Capital expenditures		(108,988	)		(32,274	)
Proceeds from disposals of property, plant and equipment		8,622			816
Proceeds from sale of boat purchase options		-			20,866
Proceeds from sales of investments		-			7,701
Net cash used in investing activities		(100,366	)		(2,891	)
Financing activities:
Payment of cash dividend		(27,435	)		(26,935	)
Repayments of borrowings		(18,707	)		(18,707	)
Proceeds from stock option and convertible debenture plans		5,285			12,466
Proceeds from borrowings		-			12,589
Excess tax benefits from stock-based compensation		601			-
Net cash used in financing activities		(40,256	)		(20,587	)
DECREASE IN CASH AND CASH EQUIVALENTS		(122,684	)		(57,399	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		675,903			465,977
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	553,219		$	408,578
See Notes to Unaudited Consolidated Financial Statements.

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ROWAN COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   The consolidated financial statements of Rowan included in this Form 10-Q have been prepared without audit in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission. Certain information and notes have been condensed or omitted as permitted by those rules and regulations. The Company believes that the disclosures included herein are adequate, but suggests that you read these consolidated financial statements in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2005.

Rowan believes the accompanying unaudited consolidated financial statements contain all adjustments, which are of a normal recurring nature, necessary to present fairly its financial position as of March 31, 2006 and the results of its operations and cash flows for the three months ended March 31, 2006 and 2005.

Rowan’s results of operations and cash flows for the three months ended March 31, 2006 are not necessarily indicative of results to be expected for the full year.

2.   Rowan’s computations of basic and diluted income per share for the three months ended March 31, 2006 and 2005 are as follows (in thousands except per share amounts):

	2006		2005
Weighted average shares of common stock outstanding		109,944		107,812
Dilutive securities:
Stock options		1,377		1,215
Convertible debentures		454		225
Weighted average shares for diluted calculations		111,775		109,252
Income from continuing operations	$	59,105	$	30,539
Income from continuing operations per share:
Basic	$	.54	$	.28
Diluted	$	.53	$	.28
Income from discontinued operations	$	-	$	12,883
Income from discontinued operations per share:
Basic	$	-	$	.12
Diluted	$	-	$	.12
Net income	$	59,105	$	43,422
Net income per share:
Basic	$	.54	$	.40
Diluted	$	.53	$	.40

  Rowan had 3,197,305 and 4,678,006 stock options outstanding at March 31, 2006 and 2005, respectively. Another 1,141,274 and 1,212,386 shares, respectively, were issuable at those dates through the conversion of debentures.

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3.   Rowan has two principal operating segments: contract drilling of oil and gas wells, both onshore and offshore (“Drilling”) and the manufacture and sale of heavy equipment for the mining and timber industries, alloy steel and steel plate and drilling products (“Manufacturing”). Drilling services are provided in domestic and foreign areas. Manufacturing operations are primarily conducted in Longview and Houston, Texas and Vicksburg, Mississippi, though products are shipped throughout the United States and to many foreign locations.

The following table presents certain financial information of Rowan by operating segment as of March 31, 2006 and 2005 and for the three month periods then ended (in thousands). See Note 8 for further information regarding Rowan’s discontinued operations.

						Discontinued
		Drilling		Manufacturing			Operations		Consolidated
2006
Total assets	$	2,628,509	$	418,868		$	-	$	3,047,377
Goodwill		1,493		10,863			-		12,356
Revenues		217,102		82,685			-		299,787
Income from operations		79,639		9,890			-		89,529
2005
Total assets	$	2,147,919	$	310,119		$	7,665	$	2,465,703
Goodwill		1,493		10,863			-		12,356
Revenues		160,279		62,113			-		222,392
Income from operations		45,371		(1,602	)		-		43,769

Excluded from the preceding table are the effects of transactions between segments. During the three months ended March 31, 2006 and 2005, Rowan’s manufacturing division provided approximately $43 million and $17 million, respectively, of products and services to its drilling division.

Assets are ascribed to a segment based upon their direct use. Rowan classifies its drilling rigs as domestic or foreign based upon the rig’s operating location. Accordingly, drilling rigs operating in or offshore the United States are considered domestic assets and rigs operating in other areas are deemed foreign assets. At March 31, 2006, the Company had 13 offshore rigs and 17 land rigs located in domestic areas and seven offshore rigs located in foreign areas.

Foreign source revenues for the three months ended March 31, 2006 and 2005 were as follows (in thousands):

		2006		2005
Drilling services:
Europe	$	26,860	$	16,925
Canada		12,579		-
Manufacturing sales and services		7,027		3,056
Total	$	46,466	$	19,981

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4.   Rowan had no items of other comprehensive income during the three months ended March 31, 2006 and 2005. Interest payments (net of amounts capitalized) were $7.0 million and $6.8 million for the three months ended March 31, 2006 and 2005, respectively. Tax payments (net of refunds) were $5.1 million and $0.1 million for the three months ended March 31, 2006 and 2005, respectively. During the three months ended March 31, 2005, Rowan received approximately $7.7 million from the sale of marketable investment securities that had a nominal carrying cost.

5.   Rowan generally recognizes manufacturing sales and related costs when title passes as products are shipped. Revenues from long-term manufacturing projects such as rigs and rig kits are recognized on the percentage-of-completion basis using costs incurred relative to total estimated costs. The Company does not recognize any estimated profit until such projects are at least 10% complete, though a full provision is made immediately for any anticipated losses.

The following table summarizes the status of Rowan’s long-term construction projects in process at March 31, 2006 and December 31, 2005 (in millions):

		March 31,		December 31,
		2006		2005
Total contract value of long-term projects in process	$	333.1	$	261.4
Payments received		126.0		90.2
Revenues recognized		44.2		36.1
Costs recognized		36.6		29.8
Payments received in excess of revenues recognized		81.8		54.1
Billings in excess of uncompleted contract costs
and estimated profit	$	81.8	$	56.8
Uncompleted contract costs and estimated profit
in excess of billings	$	-	$	2.7

During the three months ended March 31, 2006, Rowan recognized approximately $8.1 million of manufacturing revenues and $6.8 million of costs related to long-term construction projects on the percentage-of-completion basis.

6.   Rowan’s 2005 Long-Term Incentive Plan (“LTIP”) authorizes the Company’s Board of Directors to issue, through April 22, 2015, up to 3,400,000 shares of Rowan common stock in a variety of forms, including stock options, restricted stock, restricted stock units, performance shares, stock appreciation rights and common stock grants, whose terms are governed by the LTIP. The LTIP replaced and superseded previous Rowan plans under which nonqualified stock options had been issued and remained outstanding. At March 31, 2006, awards covering 529,300 shares had been made under the LTIP, all of which occurred during 2005.

-8-

Restricted Stock Awards and Units

Restricted stock represents a full share of Rowan common stock issued with a restrictive legend that prevents its sale until the restriction is later removed. The restrictions will generally lapse over a four-year service period to the extent of 25% per year. The Company measures total compensation related to each share based upon the market value of the common stock on the date of the award and recognizes the resulting expense on a straight-line basis over the service period. During 2005, Rowan issued 242,100 shares of restricted stock to 77 key employees, with an average fair value of $25.09 per share. The total related compensation was measured at $6.1 million, of which $1.9 million had been recognized at March 31, 2006.

Restricted stock units are awards that may be settled through the issuance of Rowan common stock or the payment of cash where vesting generally occurs over a defined service period but the restriction lapses only upon termination of service. The Company measures compensation related to each unit based upon the fair market value of the underlying common stock on the date of the award and recognizes the resulting expense and liability on a straight-line basis over the service period. During 2005, Rowan issued 36,900 restricted stock units to its nonemployee directors, with an average fair value of $25.12 per unit. At March 31, 2006, Rowan had accrued $0.8 million toward future settlement of restricted stock units.

Performance Shares

Performance shares are shares of Rowan common stock whose future issuance is contingent upon the achievement of certain performance criteria. During 2005, the Company awarded 99,500 performance shares to 12 key employees, under which as many as 199,000 (and as few as zero) shares of Rowan common stock will be issued in May 2008 depending upon the Company’s total shareholder return (TSR) versus a selected industry peer group over the three-year period then ended. The Company measures and recognizes compensation expense at each period-end using the market value of the common stock on the date of the award and the expected number of shares to be issued based upon Rowan’s relative TSR performance. At March 31, 2006, Rowan had recognized $0.2 million of compensation expense related to performance shares.

Stock Options

Stock options generally become exercisable in four equal annual installments and all options not exercised expire ten years after the date of grant. Stock option activity for the three months ended March 31, 2006 was as follows:

			Weighted		Weighted
				Average		Average	Weighted
	Number of			Exercise		Fair	Average
	Options			Price		Value	Life (Yrs)
Outstanding at January 1, 2006	3,466,393		$	18.93
Granted	-			-
Exercised	(268,307	)		16.93
Forfeited	(781	)		10.14
Outstanding at March 31, 2006	3,197,305		$	19.10	$	11.70	6.0
Exercisable at March 31, 2006	2,131,601		$	19.06

 At March 31, 2006, Rowan had $7.1 million of unrecognized future compensation expense related to stock options.

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On January 1, 2006, Rowan adopted Statement of Financial Accounting Standards No. 123 (revised 2004) “Share-Based Payment”, as amended, which requires recognition as expense over future service or vesting periods of stock-based compensation cost measured based upon grant date fair value. Prior to 2006, Rowan accounted for stock-based compensation in accordance with Accounting Principles Board (APB) Opinion No. 25, whereby cost was measured based upon intrinsic value, or the difference, if any, between the quoted market price on the date of grant and the amount the employee was required to pay for the common stock. Accordingly, Rowan did not recognize compensation expense for stock options having an exercise price equal to the market price on the date of grant. The provisions of the original Statement 123 required a fair value measurement for all option awards, and disclosure of the effects of any stock-based compensation cost not recognized on that basis.

Rowan selected the modified prospective method of adoption, whereby the provisions of Statement 123R are applied to all stock-based awards made on or after January 1, 2006 and any outstanding but unvested awards as of that date. Accordingly, the Company’s consolidated financial statements as of and for the three months ended March 31, 2005 have not been restated to give effect to Statement 123R. In addition, there was no material cumulative effect to be recognized upon adoption of Statement 123R. The adoption of Statement 123R did impact the Company’s Stockholders’ equity components as the $4.7 million balance of Unearned equity compensation, which originated in connection with the 2005 restricted stock awards, was reclassified to, and reduced the balance of, Additional paid-in capital effective January 1, 2006.

For the three months ended March 31, 2006, Rowan recognized stock-based compensation expense of $3.1 million, including $2.4 million related to stock options, $0.5 million related to restricted stock and $0.2 million related to performance shares. As the Company made no stock-based awards during the period, these amounts reflect compensation cost for all unvested awards outstanding as of January 1, 2006, based upon original grant date fair value measurements made under Statement 123. Thus, the provisions of Statement 123R reduced the Company’s first quarter 2006 net income by approximately $1.2 million or $.01 per share. The following table illustrates the estimated effects of Statement 123R on results for the comparable period of the 2005.

	For the Three
	Months Ended
		March 31, 2005
Net income as reported	$	43,422
Stock-based compensation, net of tax effects:
As recorded under APB 25		629
Pro forma under SFAS 123		(1,791	)
Pro forma net income	$	42,260
Net income per share:
Basic - as reported	$	0.40
Diluted - as reported	$	0.39
Basic - pro forma	$	0.40
Diluted - pro forma	$	0.39

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7.   Since 1952, Rowan has sponsored defined benefit pension plans covering substantially all of its employees. In addition, Rowan provides certain health care and life insurance benefits for retired drilling and aviation employees.

Net periodic pension cost for the three months ended March 31, 2006 and 2005 included the following components (in thousands):

	2006			2005
Service cost	$	2,970		$	2,774
Interest cost		6,047			5,337
Expected return on plan assets		(6,077	)		(5,658	)
Recognized actuarial loss		3,004			2,884
Amortization of prior service cost		42			42
Total	$	5,986		$	5,379

Other benefits cost for the three months ended March 31, 2006 and 2005 included the following components (in thousands):

	2006			2005
Service cost	$	486		$	432
Interest cost		933			838
Recognized actuarial loss		151			35
Amortization of transition obligation		163			163
Amortization of prior service cost		(50	)		(50	)
Total	$	1,683		$	1,418

During the first quarter of 2006, Rowan contributed $1.3 million toward its pension and other benefit plans. Rowan currently expects to make additional payments totaling approximately $6 million during the remainder of 2006.

8.   In February 2005, Rowan sold the purchase options it held on four leased anchor-handling boats for approximately $21 million in cash. The leases covering the Company’s two remaining boats expired during the second quarter of 2005, when they were returned to the lessor and Rowan exited the marine vessel business. During the first three months of 2005, Rowan recognized $9.4 million of revenues and $7.9 million of expenses related to the marine vessel operations, and a $20.9 million gain on the sale of the purchase options. The aggregate effect of these items was reduced by an $8.3 million provision for income taxes.

On December 31, 2004, Rowan completed the sale of its aviation operations, conducted by Era Aviation, Inc. During the first three months of 2005, the Company recorded an incremental loss on the sale of $1.8 million, net of a related tax benefit of $0.6 million, which resulted from post-closing working capital adjustments pursuant to the sale agreement.

The revenues and expenses resulting from Rowan’s discontinued aviation and marine vessel operations for the three months ended March 31, 2005, including the gain recognized upon sale of the boat purchase options, are shown collectively and net of tax as Income from discontinued operations in the Consolidated Statements of Operations.

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9.   In October 2005, Rowan sold its only semi-submersible rig for approximately $60 million in cash. Payment for the rig is expected to occur over a 15-month period ending in January 2007, at which point the title to the rig will transfer to the buyer. Rowan retained ownership of much of the drilling equipment on the rig and has continued to provide a number of operating personnel under a separate services agreement. The transaction is being accounted for as a sales-type lease with the expected gain on the sale and imputed interest income deferred until the $14 million net book value of the rig had been recovered. At March 31, 2006, Rowan had received payments totaling $15.3 million and included in Receivables the present value of expected future collections of $43.1 million. During the three months ended March 31, 2006, Rowan recognized $0.2 million of gain on the sale and $1.1 million of interest income related to this agreement.

10.   During the third quarter of 2005, Rowan lost four offshore rigs, including the Rowan-Halifax, and incurred significant damage on a fifth as a result of Hurricanes Katrina and Rita. At March 31, 2006, the Company included in Receivables $36.1 million of costs incurred to locate or recover the remains of those rigs for which Rowan expects full reimbursement from its insurance carriers. The Company has been notified that its carriers are reserving their right to deny reimbursement for any costs incurred in wreck and debris removal activities that they believe are outside the scope of Rowan’s coverage. Thus, it is possible that a portion of such costs will not be reimbursed, requiring a charge to operations.

The Company leased the Rowan-Halifax under a charter agreement that commenced in 1984 and was scheduled to expire in March 2008. The rig was insured for $43.4 million, a value that Rowan believes satisfied the requirements of the charter agreement, and by a margin sufficient to cover the $6.3 million carrying value of Rowan equipment installed on the rig. However, the owner of the rig has claimed that the rig should have been insured for its fair market value and may seek recovery from Rowan for compensation above the insured value. Thus, we have assumed no insurance proceeds related to the Rowan-Halifax and recorded a charge during 2005 for the full carrying value of our equipment. On November 3, 2005, the Company filed a declaratory judgment action in Texas State Court to resolve the disagreement among the parties. Recent appraisals obtained by the owner indicate a fair market value of the rig in the range of $75-91 million.

During 2005, the Company learned that a unit of the U. S. Department of Justice (DOJ) is conducting an investigation of potential antitrust violations among helicopter transportation providers in the Gulf of Mexico. Rowan’s former aviation subsidiary, which was sold effective December 31, 2004, has received a subpoena in connection with the investigation. The Company has not been contacted by the DOJ, but the purchaser has made a claim that Rowan is responsible for any exposure it may have. The Company has disputed that claim.

During 2004, the Company learned that a unit of the DOJ is conducting a criminal investigation of environmental matters involving several of Rowan’s offshore drilling rigs. Rowan is cooperating with the investigation, including responding to the DOJ’s subpoenas for certain documentation regarding our operations. The Company does not have sufficient information at this time to comment on the possible outcome of the investigation.

The Company is involved in various other legal proceedings incidental to its businesses and is vigorously defending its position in all such matters. We believe that there are no known contingencies, claims or lawsuits that will have a material adverse effect on Rowan’s financial position, results of operations or cash flows.

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ROWAN COMPANIES, INC. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

RESULTS OF OPERATIONS

Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005

Rowan generated net income of $59.1 million in the first quarter of 2006 compared to $43.4 million in the same period of 2005. Income from continuing operations was $59.1 million in the first quarter of 2006 compared to $30.5 million in the same period of 2005. This improvement was largely due to effects of increased average drilling day rates and higher manufacturing sales.

A comparison of the revenues and income from drilling, manufacturing and consolidated operations for the first quarters of 2006 and 2005, respectively, is reflected below (dollars in thousands):

		Drilling						Manufacturing						Consolidated
		2006			2005			2006			2005			2006			2005
Revenues	$	217,102		$	160,279		$	82,685		$	62,113		$	299,787		$	222,392
Percent of Consolidated Revenues		72	%		72	%		28	%		28	%		100	%		100	%
Income (loss) from operations	$	79,639		$	45,371		$	9,890		$	(1,602	)	$	89,529		$	43,769
Percent of Revenues		37	%		28	%		12	%		-3	%		30	%		20	%
Net interest and other income (expense)													$	2,823		$	5,498
Income from continuing operations													$	59,105		$	30,539

As shown in the preceding table, our consolidated income from operations improved by $45.8 million or 105% when comparing the first quarters of 2006 and 2005. Our drilling operations generated a $56.8 million or 35% increase in revenues and a $34.3 million or 76% improvement in operating income between periods. Our average offshore day rate was $128,600 during the first quarter of 2006, compared to $61,200 in the first quarter of 2005. Our offshore fleet was 78% utilized during the first quarter of 2006, compared to 98% in the first quarter of 2005, with much of the variance associated with the mobilization of four rigs to Saudi Arabia. This coupled with our loss of four rigs during Hurricanes Katrina and Rita caused overall rig operating days to decrease by 865 or 39% between periods. Our fleet of 17 land rigs was 98% utilized during the first quarter of 2006, compared to 95% in the first quarter of 2005, and achieved a 36% increase in average day rates between periods.

Drilling expenses increased by $19.4 million or 22% between periods. Rebillable expenses were $7.9 million higher during the first quarter of 2006 primarily due to incremental towing costs. The addition of our second Tarzan Class jack-up in September 2005 and the reactivation of one land rig in each of February 2005 and January 2006 resulted in a $4.2 million increase in expenses between periods. Repairs and maintenance and rig insurance expenses each increased by $1.9 million between periods.

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Selling, general and administrative expenses incurred by our drilling division increased by $4.6 million or 52% between periods due primarily to incremental incentive-based compensation associated with the division’s improved operating results and increased professional services costs related to Sarbanes-Oxley compliance.

Our manufacturing operations generated a $20.6 million or 33% increase in revenues and an $11.5 million increase in operating income between periods. Marine group revenues increased by $14.4 million or 322% between periods and included $8.1 million related to long-term rig and rig kit construction projects during the first quarter of 2006. Drilling products group revenues increased by $12.5 million or 374% between periods and included shipments of 19 mud pumps during the first quarter of 2006, compared to two units in the same period of 2005. Equipment group revenues, though up only $1.0 million or 3% between periods, featured a more profitable mix of sales during the first quarter of 2006, with five of the six machines delivered during the period being our larger L-1850 model mining loader. The first quarter of 2005 included a $2.7 million estimated loss recognized on the drilling products group’s dredge barge project. As a result, our average margin on direct costs increased to 21% of revenues in 2006 from 9% in 2005. Manufacturing selling, general and administration expenses increased by $0.6 million or 14% between periods, primarily due to higher professional services costs.

Our manufacturing operating results exclude the effects of approximately $43 million of products and services provided to our drilling division during the first quarter of 2006, most of which was attributable to construction progress on the third Tarzan Class jack-up rig, the Hank Boswell, compared to about $17 million in the same period of 2005.

During the first quarter of 2005, we realized a $7.7 million gain on the sale of marketable investment securities that had a nominal carrying cost. This gain more than offset the effects of rising short-term investment rates applied to a growing balance of cash and cash equivalents resulting in the $2.7 million decrease between periods in Net interest and other income (expense).

In February 2005, we sold the purchase options we held on four leased anchor-handling boats for approximately $21 million in cash. The leases covering our two remaining boats expired during the second quarter of 2005, when the boats were returned to the lessor and we exited the marine vessel business. During the first quarter of 2005, we recognized $9.4 million of revenues and $7.9 million of expenses related to the marine vessel operations, and a $20.9 million gain on the sale of the purchase options. The aggregate effect of these items was reduced by an $8.3 million provision for income taxes.

On December 31, 2004, we completed the sale of our aviation operations, conducted by Era Aviation, Inc. During the first quarter of 2005, we recorded an incremental loss on the sale of $1.8 million, net of a related tax benefit of $0.6 million, which resulted from post-closing working capital adjustments pursuant to the sale agreement.

The revenues and expenses resulting from our discontinued aviation and marine vessel operations for the three months ended March 31, 2005, including the gain recognized upon the sale of the boat purchase options, are shown collectively and net of tax as Income from discontinued operations in the Consolidated Statements of Operations.

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Outlook

Worldwide rig demand is inherently volatile and has historically varied from one market to the next, as has the supply of competitive equipment. Exploration and development expenditures are affected by many local factors, such as political and regulatory policies, seasonal weather patterns, lease expirations, and new oil and gas discoveries. In the end, however, the level and expected direction of oil and natural gas prices are what most impact drilling activity. With consistently high prices in recent years, energy companies have realized substantial cash flows which we believe should, over time, lead to additional drilling projects.

Currently, the outlook for most worldwide drilling markets appears to be strong or improving. Expected demand for jack-ups exceeds the supply of rigs in the Middle East, West Africa, India and most other foreign locations. Thus, energy companies in markets like the Gulf of Mexico and North Sea may be forced to aggressively compete for drilling equipment. Assuming these events occur, our drilling operations should continue to benefit. The volatility inherent in this business, however, makes any prediction of future market conditions speculative. Thus, we can offer no assurance that existing market conditions will continue beyond the near term, or that expected improvements will materialize.

Hurricanes Katrina and Rita caused tremendous damage to drilling and production equipment and facilities throughout the Gulf Coast during the third quarter of 2005, and we suffered a significant loss of current and prospective revenues. These storms also had the effect of further reducing the supply of available drilling equipment in the Gulf of Mexico, which has thus far greatly improved market conditions for our remaining rigs. The cost of doing business there, however, is also rising, especially for insurance coverage. Though we have obtained coverage for our offshore operations and fleet beyond the end of 2006, our annual insurance cost will be about four times the pre-storm level and we have assumed more of the risk of certain losses.

Our drilling operations are currently benefiting from predominantly favorable market conditions worldwide and are profitable. There is no assurance, however, that such conditions will be sustained beyond the near-term or that our drilling operations will remain profitable. Our drilling operations will be adversely affected if market conditions deteriorate.

Though considerably less volatile than our drilling operations, our manufacturing operations, especially the equipment group, are impacted by world commodities prices; in particular, prices for copper, iron ore, coal and gold. In addition, the prospects for our marine and drilling products groups are closely tied to the condition of the overall drilling industry and its demand for equipment, parts and services.

Many commodity prices are at or near historically high levels due to growth in worldwide demand. Our external manufacturing backlog at March 31, 2006, of approximately $442 million, was our largest ever and more than five times the prior-year level. The backlog included $251 million related to the long-term marine construction projects that are expected to run through April 2008 and $99 million associated with 18 loaders and stackers and 83 mud pumps that should be shipped during the next twelve months. Thus far, we have been able to pass along the effects of cost increases to our customers in the form of higher sales prices.

We are optimistic that prices will remain firm, sustaining the demand for the types of equipment that we provide, and that our increased volumes will yield improved profitability. We cannot, however, accurately predict the duration of current business conditions or their impact on our operations. Our manufacturing operations will be adversely affected if conditions deteriorate.

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LIQUIDITY AND CAPITAL RESOURCES

A comparison of key balance sheet figures and ratios as of March 31, 2006 and December 31, 2005 is as follows (dollars in thousands):

	March 31,	December 31,
	2006	2005
Cash and cash equivalents	$553,219	$675,903
Current assets	$1,191,395	$1,208,132
Current liabilities	$399,864	$340,613
Current ratio	2.98	3.54
Long-term debt - less current maturities	$531,619	$550,326
Stockholders' equity	$1,660,402	$1,619,739
Long-term debt/total capitalization	.24	.25

Reflected in the comparison above are the effects in the first quarter of 2006 of:

·   net cash provided by operations of $17.9 million

·   proceeds from disposals of property, plant and equipment of $8.6 million

·   proceeds from stock option and convertible debenture plans of $5.3 million

·   capital expenditures of $109.0 million

·   cash dividend payments of $27.4 million

·   debt repayments of $18.7 million

Operating cash flows during the first quarter of 2006 were after a $94.5 million net investment in working capital during the period. Receivables increased by $52.9 million due primarily to recoverable hurricane-related survey and salvage costs and the impact of revenue growth. Inventories increased by $40.2 million due primarily to growing manufacturing backlog. Non-cash or non-operating adjustments to net income during the first quarter of 2006 totaled $55.5 million and included deferred income taxes of $28.3 million and depreciation of $20.1 million.

Capital expenditures during the first quarter of 2006 included $19.9 million related to the construction of our third Tarzan Class jack-up rig, the Hank Boswell, $11.8 million related to construction of our fourth Tarzan Class jack-up rig and $42.4 million related to the construction of 12 new 2000 horsepower land rigs.

The Hank Boswell is being constructed at our Vicksburg, Mississippi facility with delivery expected during the third quarter of 2006. Another shipyard is constructing the hull of our fourth Tarzan Class jack-up and the rig should be completed during the third quarter of 2007. We have applied to MARAD for Title XI government-guaranteed financing for up to $176 million of the cost of the third and fourth Tarzan Class rigs on terms and conditions similar to those in our outstanding debt agreements. If we are unable to obtain this or any other outside financing, we could be forced to continue using working capital, if available, or postpone construction.

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In December 2005, our Board of Directors approved the construction of two of a new class of jack-up rig. The 240C will be equipped for high pressure/high temperature drilling in water depths of up to 400 feet. We believe the 240C design will set a new standard as a replacement for the 116-C, which has been the "workhorse" of the global drilling industry for the past 25 years. The 240C will have more deck space, higher variable load, more drilling capacity (two million pound hook-load capability), more cantilever reach (up to 100 feet) and greater personnel capacity (108 man) than the 116-C. Each rig will cost approximately $165 million and will be constructed in Vicksburg, Mississippi with delivery expected in mid 2008 and early 2009. We currently anticipate funding construction with available cash, but will consider attractive financing alternatives.

We currently estimate that remaining 2006 capital expenditures will be between $350 million and $400 million, including approximately $41 million towards the completion of the Hank Boswell, $65-75 million towards the construction of our fourth Tarzan Class jack-up, $60-75 million towards the construction of our first 240C class jack-up and approximately $95 million towards the completion of the 12 new land rigs.

In October 2005, we sold our only semi-submersible rig for approximately $60 million in cash. Payment for the rig is expected to occur over a 15-month period ending in January 2007, at which point the title to the rig will transfer to the buyer. We retained ownership of much of the drilling equipment on the rig and will continue to provide a number of operating personnel under a separate services agreement. The transaction is being accounted for as a sales-type lease with the expected gain on the sale and imputed interest income deferred until the $14 million net book value of the rig had been recovered. At March 31, 2006, we had received payments totaling $15.3 million and included in assets the present value of expected future collections of $43.1 million. During the three months ended March 31, 2006, we recognized $0.2 million of gain on the sale and $1.1 million of interest income related to this agreement.

Our debt agreements contain provisions that require minimum levels of working capital and stockholders’ equity, 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. We were in compliance with each of our debt covenants at March 31, 2006.

On February 25, 2005, in conjunction with the sale of our aviation operations, we paid a special cash dividend of $.25 per common share to stockholders of record on February 9, 2005. On September 1, 2005, in conjunction with the sale of several non-core assets, we paid a special cash dividend of $.25 per common share to stockholders of record on August 17, 2005. On February 24, 2006, we paid a special cash dividend of $.25 per common share to stockholders of record on February 8, 2006. At March 31, 2006, we had approximately $446 million of retained earnings available for distribution to stockholders under the most restrictive provisions of our debt agreements. On May 2, 2006, we announced our intention to pay a regular quarterly dividend of $.10 per common share, the first of which will be paid on May 26, 2006 to stockholders of record on May 12, 2006.

We contributed $137.4 million to our defined benefit pension plans over the 2003-2005 period, including almost $90 million during 2005. Minimum contribution amounts are determined based upon actuarial calculations of pension assets and liabilities that involve, among other things, assumptions about long-term asset returns and interest rates. Similar calculations were used to estimate pension costs and obligations as reflected in our consolidated financial statements, which showed an accumulated other comprehensive loss resulting from unfunded pension liabilities of $83.7 million at December 31, 2005. We expect to make additional pension contributions over the next several years even if plan assets perform as expected, though our funding requirement during the remainder of 2006 is expected to be less than $3 million. Pending federal legislation aimed at strengthening underfunded pension plans could significantly increase and accelerate our future funding requirements. We currently estimate that our 2006 pension expense will increase by approximately $5 million or about 25% over the 2005 amount.

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Based on current and anticipated near-term operating levels, we believe that operating cash flows together with existing working capital will be adequate to sustain planned capital expenditures and debt service and other requirements at least through the remainder of 2006. We currently have no other available credit facilities, but believe financing could be obtained if deemed necessary.

During the third quarter of 2005, Rowan lost four offshore rigs, including the Rowan-Halifax, and incurred significant damage on a fifth as a result of Hurricanes Katrina and Rita. At March 31, 2006, the Company included in Receivables $36.1 million of costs incurred to locate or recover the remains of those rigs for which we expect full reimbursement from our insurance carriers. We have been notified that our carriers are reserving their right to deny reimbursement for any costs incurred in wreck and debris removal activities that they believe are outside the scope of our coverage. Thus, it is possible that a portion of such costs will not be reimbursed, requiring a charge to operations.

We leased the Rowan-Halifax under a charter agreement that commenced in 1984 and was scheduled to expire in March 2008. The rig was insured for $43.4 million, a value that we believe satisfied the requirements of the charter agreement, and by a margin sufficient to cover the $6.3 million carrying value of our equipment installed on the rig. However, the owner of the rig has claimed that the rig should have been insured for its fair market value and may seek recovery from us for compensation above the insured value. Thus, we have assumed no insurance proceeds related to the Rowan-Halifax and recorded a charge during 2005 for the full carrying value of our equipment. On November 3, 2005, we filed a declaratory judgment action in Texas State Court to resolve the disagreement among the parties. Recent appraisals obtained by the owner indicate a fair market value of the rig in the range of $75-91 million.

During 2005, we learned that a unit of the U. S. Department of Justice (DOJ) is conducting an investigation of potential antitrust violations among helicopter transportation providers in the Gulf of Mexico. Our former aviation subsidiary, which was sold effective December 31, 2004, has received a subpoena in connection with the investigation. We have not been contacted by the DOJ, but the purchaser has made a claim that we are responsible for any exposure it may have. We have disputed that claim.

During 2004, we learned that a unit of the DOJ is conducting a criminal investigation of environmental matters involving several of our offshore drilling rigs. We are cooperating with the investigation, including responding to the DOJ’s subpoenas for certain documentation regarding our operations. We do not have sufficient information at this time to comment on the possible outcome of the investigation.

We are involved in various other legal proceedings incidental to our businesses and are vigorously defending our position in all such matters. We believe that there are no known contingencies, claims or lawsuits that will have a material adverse effect on our financial position, results of operations or cash flows.

Critical Accounting Policies and Management Estimates.

Our significant accounting policies are outlined in Note 1 of the Notes to Consolidated Financial Statements included in our Form 10-K for the year ended December 31, 2005. These policies, and management judgments, assumptions and estimates made in their application, underlie reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. We believe that our most critical accounting policies and management estimates involve revenue recognition (primarily upfront service fees for equipment moves and modifications and long-term manufacturing projects), property and depreciation (particularly capitalizable costs, useful lives and salvage values) and pension and other postretirement benefit liabilities and costs (specifically assumptions used in actuarial calculations), as changes in such policies and/or estimates would produce significantly different amounts from those reported herein.

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Revenue recognition. Our drilling contracts generally provide for payment on a day rate basis, and revenues are recognized as the work progresses with the passage of time. We frequently receive lump-sum payments at the outset of a drilling assignment as upfront service fees for equipment moves or modifications, and such payments (and related costs) are recognized as drilling revenues (and expenses) over the contract period. At March 31, 2006, we had deferred $1.0 million of revenues and $29.6 million of costs related to such upfront service fees, with the latter amount primarily reflecting mobilization and modification expenses incurred in connection with our four-rig Saudi Arabia contract.

We generally recognize manufacturing sales and related costs when title passes as products are shipped. Revenues from long-term manufacturing projects such as rigs and rig kits are recognized on the percentage-of-completion basis using costs incurred relative to total estimated costs. We do not recognize any estimated profit until such projects are at least 10% complete, though a full provision is made immediately for any anticipated losses. Total estimated costs are critical to this process and are therefore reviewed on a regular basis. At March 31, 2006, we had received $126.0 million of progress payments toward long-term manufacturing projects and had recognized $44.2 million of manufacturing revenues and $36.6 million of costs related to such projects on the percentage-of-completion basis.

Property and depreciation. We provide depreciation under the straight-line method from the date an asset is placed into service based upon estimated service lives ranging up to 40 years and salvage values ranging up to 20%. We continue to operate 14 offshore rigs that were placed into service during 1971-1986 and assigned lives ranging from 12 to 15 years. Our newest and most significant assets, the Super Gorilla and Tarzan Class rigs, which collectively comprise almost two-thirds of our property, plant and equipment carrying value, carry a 25-year service life.

Expenditures for new property or enhancements to existing property are capitalized and expenditures for maintenance and repairs are charged to operations as incurred. Capitalized cost includes labor expended during installation and, on newly constructed assets, a portion of interest cost incurred during the construction period. Long-lived assets are reviewed for impairment whenever circumstances indicate their carrying amounts may not be recoverable, such as following a sustained deficit in operating cash flows caused by a prominent decline in overall rig activity and average day rates.

Pension and other postretirement benefit liabilities and costs. As previously mentioned, our pension and other postretirement benefit liabilities and costs are based upon actuarial computations that reflect our assumptions about future events, including long-term asset returns, interest rates, annual compensation increases, mortality rates and other factors. Key assumptions for 2006 include discount rates ranging from 5.56% to 5.68%, an expected long-term rate of return on pension plan assets of 8% and annual healthcare cost increases ranging from 10% in 2006 to 5% in 2011 and beyond. The assumed discount rate is based upon the average yield for Moody’s Aa-rated corporate bonds and the rate of return assumption reflects a probability distribution of expected long-term returns that is weighted based upon plan asset allocations. A 1-percentage-point decrease in the assumed discount rate would increase our recorded pension and other postretirement benefit liabilities by approximately $60 million, while a 1% change in the expected long-term rate of return on plan assets would change annual net benefits cost by approximately $2.8 million. A 1-percentage-point increase in the assumed healthcare cost trend rate would increase 2006 other benefits costs by $0.5 million.

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Our adoption, effective January 1, 2006, of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment”, as amended, which requires the measurement and recognition of stock-based compensation expense based upon grant date fair value, reduced our net income during the three months ended March 31, 2006 by approximately $1.2 million or $.01 per share. Prior to 2006, we used the intrinsic value method of accounting for stock-based employee compensation pursuant to Accounting Principles Board Opinion No. 25. We estimate that use of the fair value method would have reduced reported amounts of net income and net income per share by approximately $1.2 million, or $.01 per share for the three months ended March 31, 2005.

Our adoption, effective January 1, 2006, of Statement of Financial Accounting Standards No. 151, “Inventory Costs”, which clarifies the distinction between costs that are allocable to inventory and those that are expensed as incurred, did not materially impact our financial position or results of operations.

This report contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements as to the expectations, beliefs and future expected financial performance of Rowan that are based on current expectations and are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected by us. Among the factors that could cause actual results to differ materially are the following: oil, natural gas and other commodity prices; the level of offshore expenditures by energy companies; energy demand; the general economy, including interest rates and inflation; weather conditions in our principal operating areas; and environmental and other laws and regulations. Details of these and other risks have been disclosed in Rowan’s filings with the U. S. Securities and Exchange Commission.

 

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Rowan believes that its exposure to risk of earnings loss due to changes in market interest rates is not significant. The Company’s outstanding debt at March 31, 2006 was comprised as follows: $348.6 million of fixed-rate notes bearing a weighted average annual interest rate of 4.52% and $247.9 million of floating-rate notes bearing a weighted average annual interest rate of 4.88%. In addition, virtually all of the Company’s transactions are carried out in U. S. dollars. Thus, Rowan’s foreign currency exposure is not material. Fluctuating commodity prices materially affect Rowan’s future earnings only to the extent that they influence demand for the Company’s products and services. Rowan does not hold or issue derivative financial instruments.

Item 4. Controls and Procedures

The Company’s management has evaluated, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures, as of the end of the period covered by this report, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Company’s Chief Executive Officer, along with the Company’s Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2006.

Our management is responsible for establishing and maintaining internal control over financial reporting (ICFR). Our internal control system was designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations, and therefore can only provide reasonable assurance with respect to financial statement preparation and presentation.

Our management’s assessment is that the Company did maintain effective ICFR as of March 31, 2006 within the context of the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

During the third quarter of 2005, Rowan lost four offshore rigs, including the Rowan-Halifax, and incurred significant damage on a fifth as a result of Hurricanes Katrina and Rita. The Company leased the Rowan-Halifax under a charter agreement that commenced in 1984 and was scheduled to expire in March 2008. The rig was insured for $43.4 million, a value that Rowan believes satisfied the requirements of the charter agreement, and by a margin sufficient to cover the $6.3 million carrying value of Rowan equipment installed on the rig. However, the owner of the rig has claimed that the rig should have been insured for its fair market value and may seek recovery from Rowan for compensation above the insured value. Thus, we have assumed no insurance proceeds related to the Rowan-Halifax and recorded a charge during 2005 for the full carrying value of our equipment. On November 3, 2005, the Company filed a declaratory judgment action in Texas State Court to resolve the disagreement among the parties. Recent appraisals obtained by the owner indicate a fair market value of the rig in the range of $75-91 million.

During 2005, the Company learned that a unit of the U. S. Department of Justice (DOJ) is conducting an investigation of potential antitrust violations among helicopter transportation providers in the Gulf of Mexico. Rowan’s former aviation subsidiary, which was sold effective December 31, 2004, has received a subpoena in connection with the investigation. The Company has not been contacted by the DOJ, but the purchaser has made a claim that Rowan is responsible for any exposure it may have. The Company has disputed that claim.

During 2004, the Company learned that a unit of the DOJ is conducting a criminal investigation of environmental matters involving several of Rowan’s offshore drilling rigs. Rowan is cooperating with the investigation, including responding to the DOJ’s subpoenas for certain documentation regarding our operations. The Company does not have sufficient information at this time to comment on the possible outcome of the investigation.

The Company is involved in various other legal proceedings incidental to its businesses and is vigorously defending its position in all such matters. We believe that there are no known contingencies, claims or lawsuits that will have a material adverse effect on Rowan’s financial position, results of operations or cash flows.

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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

The Company did not repurchase any shares of its outstanding common stock during the first quarters of 2006 or 2005. Under the terms of a Share Repurchase Program begun in June 1998, the Company was authorized, at March 31, 2006, to buy back up to approximately 1.5 million shares of its common stock.

On February 25, 2005, in conjunction with the sale of our aviation operations, we paid a special cash dividend of $.25 per common share to stockholders of record on February 9, 2005. On September 1, 2005, in conjunction with the sale of several non-core assets, we paid a special cash dividend of $.25 per common share to stockholders of record on August 17, 2005. On February 24, 2006, we paid a special cash dividend of $.25 per common share to stockholders of record on February 8, 2006.

At March 31, 2006, Rowan had approximately $446 million of retained earnings available for distribution to stockholders under the most restrictive provisions of our debt agreements. On May 2, 2006, we announced our intention to pay a regular quarterly dividend of $.10 per common share, the first of which will be paid on May 26, 2006 to stockholders of record on May 12, 2006.

Item 4.Submission of Matters to a Vote of Security Holders

At the Annual Meeting of Stockholders on April 28, 2006, stockholders elected the two nominees for Class III Director as set forth in Rowan’s Proxy Statement relating to the meeting. With respect to such election, proxies were solicited pursuant to Regulation 14 under the Securities Exchange Act of 1934 and there was no solicitation in opposition to such nominees. Of Rowan’s 109,975,782 shares of record, 89,493,426 were represented at the meeting in person or by proxy. The following numbers of votes were cast as to the Class III Director nominees: John R. Huff, 86,800,578 votes for and 2,692,848 votes withheld and Frederick R. Lausen, 86,801,203 votes for and 2,692,223 votes withheld. Also at the meeting, stockholders ratified the appointment of Deloitte & Touche LLP as the Company’s independent auditors for 2006, as follows: 88,326,998 votes for, 633,411 votes against and 533,015 shares abstaining.

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Item 6.Exhibits

The following is a list of Exhibits filed with this Form 10-Q:

10.1         Form of Non-Employee Director 2007 Restricted Stock Unit Grant Pursuant to the Terms of the Rowan Companies, Inc. 2005 Long-Term Incentive Plan

10.2 Form of 2005 Rowan Companies, Inc. Long-Term Incentive Plan 2006 Restricted Stock Grant Agreement

10.3 Form of 2005 Rowan Companies, Inc. Long-Term Incentive Plan 2006 Nonqualified Stock Option Agreement

10.4 Form of 2005 Rowan Companies, Inc. Long-Term Incentive Plan 2006 Performance Share Award Agreement

31Rule 13a-14(a)/15d-14(a) Certifications (Section 302 of the Sarbanes-Oxley Act of 2002)

32Section 1350 Certifications (Section 906 of the Sarbanes-Oxley Act of 2002)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ROWAN COMPANIES, INC.
	(Registrant)
Date: May 10, 2006	/s/ W. H. WELLS
	W. H. Wells
	Vice President - Finance
	and Treasurer
	(Chief Financial Officer)
Date: May 10, 2006	/s/ GREGORY M. HATFIELD
	Gregory M. Hatfield
	Controller
	(Chief Accounting Officer)

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EX-10.1

Exhibit 10.1

NON-EMPLOYEE DIRECTOR 2006 RESTRICTED STOCK UNIT GRANT

PURSUANT TO THE TERMS OF THE

ROWAN COMPANIES, INC. 2005 LONG-TERM INCENTIVE PLAN

1.Grant of Restricted Stock Units. Pursuant to the Rowan Companies, Inc. 2005 Long-Term Incentive Plan (the “Plan”) Rowan Companies, Inc. (“Company”) hereby grants to ________________________ (“Non-Employee Director”) 2,700 Restricted Stock Units (“RSUs”) with respect to Non-Employee Director’s annual service period that began April 22, 2005 (the “2006 Grant”). Such RSUs shall be (i) credited to the RSU Account (described in Paragraph 3) and (ii) subject to the terms of the Plan (which is incorporated herein by reference) and this document. By acceptance of this RSU Grant, Non-Employee Director agrees to be bound by all of the terms, provisions, conditions and limitations of the Plan as implemented by the RSU Grant. All capitalized terms in the RSU Grant have the meanings set forth in the Plan unless otherwise specifically provided.

2.Vesting. The 2006 Grant shall be fully vested and nonforfeitable as of April 28, 2006; provided, however, that if Non-Employee Director resigns or is removed from the Board prior to such date, such 2006 Grant shall be forfeited.

3.Establishment of Accounts. Company shall maintain an appropriate bookkeeping record (the “RSU Account”) that from time to time will reflect the Non-Employee Director’s name, the number of vested and unvested RSUs credited to Non-Employee Director and the Fair Market Value of the RSUs credited to the Non-Employee Director. Fair Market Value of a RSU shall be deemed to be equal to the Fair Market Value of one share of Common Stock. The 2006 Grant shall be credited to the Non-Employee Director’s RSU Account effective as of April 22, 2004.

4.Cash Dividends. As of each date on or after April 22, 2005 that cash dividends are paid with respect to Common Stock, to the extent that Non-Employee Director has any outstanding RSUs credited to his or her RSU Account, the Non-Employee Director shall have an additional amount credited to his or her RSU Account equal to the number of RSUs (rounded up to the nearest whole number) having a Fair Market Value equal to the dollar amount of dividends paid per share of Common Stock multiplied by the number of RSUs credited to Non-Employee Director’s RSU Account as of the payment date of such dividend.

5.Adjustments.

(a)Exercise of Corporate Powers. The existence of this Plan and any outstanding RSUs credited hereunder shall not affect in any manner the right or power of Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the capital stock of Company or its business or any merger or consolidation of Company, or any issue of bonds, debentures, preferred or prior preference stock (whether or not such issue is prior to, on a parity with or junior to the Common Stock) or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding of any kind, whether or not of a character similar to that of the acts or proceedings enumerated above.

(b)Recapitalizations, Reorganizations and Other Activities. In the event of any subdivision or consolidation of outstanding shares of Common Stock, declaration of a dividend payable in shares of Common Stock or other stock split, then (i) the number of RSUs and (ii) the appropriate Fair Market Value and other price determinations for such RSUs shall each be proportionately adjusted by the Committee or the Board to reflect such transaction. In the event of any other recapitalization or capital reorganization of the Company, any consolidation or merger of the Company with another corporation or entity, the adoption by the Company of any plan of exchange affecting the Common Stock or any distribution to holders of Common Stock of securities or property (other than normal cash dividends or dividends payable in Common Stock), the Committee or the Board shall, it its sole discretion make appropriate adjustments to (i) the number of RSUs and (ii) the appropriate Fair Market Value and other price determinations for such RSUs to give effect to such transaction; provided that such adjustments shall only be such as are necessary to preserve, without increasing or decreasing, the value of such units. In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Committee or the Board shall be authorized to issue or assume units by means of substitution of new units, as appropriate, for previously issued units or an assumption of previously issued units as part of such adjustment.

6.Payment of Amounts in the RSU Account. As of the final termination date of Non-Employee Director’s service on the Board, the aggregate Fair Market Value of all vested RSUs then credited to Non-Employee Director’s RSU Account shall be calculated by multiplying the Fair Market Value of a share of Common Stock on such date times the number of RSUs then credited to the Non-Employee Director’s RSU Account. Notwithstanding the foregoing, no amount shall be paid prior to the earliest date that such amount may be paid upon “separation from service” within the meaning of Code section 409A, without imposition of an excise tax.

7.Form of Payment. Payment to Non-Employee Director of amounts due hereunder shall be made in Common Stock, or at the discretion of the Committee in cash in a lump sum as soon as administratively feasible, but no later than sixty (60) days following the date Non-Employee Director becomes entitled to payment.

8.Death Prior to Payment. In the event that Non-Employee Director dies prior to payment, all RSUs shall become fully vested and immediately payable to Non-Employee Director’s designated beneficiary, or if none, to his or her estate.

9.Change in Control.

(a)Change in Control. In the event of a Change in Control the Committee may waive all restrictions, conditions and/or limitations on payment in full under the RSU Grant; provided, however, that payment shall not be accelerated unless such Change of Control also constitutes a change of control event under section 409A of the Code and such acceleration of payment would not cause Non-Employee Director to be subject to excise tax pursuant to section 409A of the Code.

(b)Right of Cash-Out. If approved by the Board prior to or within thirty (30) days after such time as a Change in Control (described above) shall be deemed to have occurred, the Board shall have the right for a forty-five (45) day period immediately following the date that the Change in Control is deemed to have occurred to require Non-Employee Director to transfer and deliver to Company the RSU Grant in exchange for an amount equal to the “cash value” (defined below) of the RSU Grant; provided, however, that the Board shall not have the right to accelerate payment or cash-out any RSU Grant if the exercise of such right would cause Non-employee Director to be subject to excise tax pursuant to section 409A of the Code. Such right shall be exercised by written notice to Non-Employee Director. The cash value of RSU Grant shall equal all cash to which Non-Employee Director would be entitled upon settlement of the RSU Grant as of the date of the Change in Control. The amount payable to Non-Employee Director by Company pursuant to this Paragraph 16(b) shall be in cash or by certified check.

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10.Unfunded Arrangement. Nothing contained herein shall be deemed to create a trust of any kind or create any fiduciary relationship. This RSU Grant shall be unfunded. Any funds invested hereunder shall continue for all purposes to be part of the general funds of Company. To the extent that Non-Employee Director has a right to receive payments from Company under the RSU Grant, such right shall not be greater than the right of any unsecured general creditor of Company and such right shall be an unsecured claim against the general assets of Company. Although bookkeeping accounts may be established with respect to Non-Employee Director, any such accounts shall be used merely as a bookkeeping convenience. Company shall not be required to segregate any assets that may at any time be represented by cash or rights thereto, nor shall this RSU Grant be construed as providing for such segregation, nor shall Company, the Board or the Committee be deemed to be a trustee of any cash or rights thereto to be granted under this Plan. Any liability or obligation of Company to any Non-Employee Director with respect to cash or rights thereto under this RSU Grant shall be based solely upon any contractual obligations that may be created by this RSU Grant, and no such liability or obligation of Company shall be deemed to be secured by any pledge or other encumbrance on any property of Company. Neither Company nor the Board nor the Committee shall be required to give any security or bond for the performance of any obligation that may be created by this RSU Grant.

11.Title to Funds Remains with Company. Amounts credited to Non-Employee Director’s Account shall not be specifically set aside or otherwise segregated, but will be combined with corporate assets. Title to such funds will remain with the Company and the Company’s only obligation will be to make timely payments to Non-Employee Director in accordance with the RSU Grant.

12.Assignability. No right to receive payment hereunder shall be transferable or assignable by Non-Employee Director except by will or the laws of descent and distribution or pursuant to a domestic relations order. Notwithstanding the foregoing, RSUs granted hereunder may be transferred with Committee approval, and with such restrictions as the Committee may impose to any of (i) the spouse, children or grandchildren (“immediate family members”); (ii) a trust or trusts for the exclusive benefit of one of more immediate family members; (iii) a partnership or limited liability company whose only partners, shareholders or member are Participant’s immediate family members or (iv) an organization that has been determined by the Internal Revenue Service to be exempt under Section 501(c)(3) of the Code. Following any transfer of RSUs by the Non-Employee Director, such RSUs shall remain subject to the same terms and conditions set forth in the Plan and this Agreement. Any attempted assignment of any benefit under this RSU Grant in violation of this Paragraph shall be null and void.

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13.Amendment and Termination. No amendment or termination of the RSU Grant shall be made by the Board or the Committee at any time without the written consent of Non-Employee Director. No amendment or termination of the Plan will adversely affect the rights, privileges and option of Non-Employee Director under the RSU Grant without the written consent of Non-Employee Director except as the Committee may deem necessary or advisable to prevent adverse tax consequences to the Non-Employee Director under Section 409A of the Code.

14.No Guarantee of Tax Consequences. Neither Company nor any Parent or Subsidiary nor the Board or Committee makes any commitment or guarantee that any federal or state tax treatment will apply or be available to any person eligible for the benefits under the RSU Grant.

15.Severability. In the event that any provision of the RSU Grant shall be held illegal, invalid, or unenforceable for any reason, such provision shall be fully severable, but shall not affect the remaining provisions of the RSU Grant, and the RSU Grant shall be construed and enforced as if the illegal, invalid, or unenforceable provision had never been included herein.

16.Governing Law. The RSU Grant shall be construed in accordance with the laws of the State of Texas to the extent federal law does not supersede and preempt Texas law.

Executed this ____ day of ______________, 2005.

“COMPANY”

ROWAN COMPANIES, INC.

By: __________________________________

Printed Name:___________________________

Title:__________________________________

Accepted this ____ day of ______________, 2005.

“NON-EMPLOYEE DIRECTOR”

By: __________________________________

Printed Name:___________________________

Title:__________________________________

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EX-10.2

Exhibit 10.2

2005 ROWAN COMPANIES, INC. LONG-TERM INCENTIVE PLAN

2006 RESTRICTED STOCK GRANT AGREEMENT

THIS RESTRICTED STOCK GRANT AGREEMENT (this “Agreement”) is made as of the 28th day of April, 2006 (the “Grant Date”), between Rowan Companies, Inc., a Delaware corporation (the “Company”), and _______________ (“Participant”).

1.Grant of Restricted Shares.   To carry out the purposes of the 2005 Rowan Companies, Inc. Long-Term Incentive Plan (the “Plan”), and subject to the conditions described in this agreement (the “Agreement”) and the Plan, Rowan Companies, Inc., a Delaware corporation (the “Company”), hereby grants to Participant all rights, title and interest in the record and beneficial ownership of ______ shares (the “Restricted Shares”) of common stock, $0.125 par value per share, of the Company (“Stock”). The grant of such Restricted Shares shall be effective as of the Grant Date. All capitalized terms not otherwise defined herein shall have the meanings set forth in the Plan, the terms of which are incorporated herein by reference. The Plan and this Agreement shall be administered by the Compensation Committee of the Board of Directors of the Company (the “Committee”).

2.Issuance and Transferability.   The Restricted Shares may be evidenced in such a manner as the Committee shall deem appropriate. Any certificates representing the Restricted Shares granted hereunder shall be issued in the name of the Participant pursuant to the terms of the Plan as of the Grant Date and shall be marked with the following legend:

“The shares represented by this certificate have been issued pursuant to the terms of the 2005 Rowan Companies, Inc. Long-Term Incentive Plan and may not be sold, pledged, transferred, assigned or otherwise encumbered in any manner except as is set forth in the terms of the Restricted Stock Grant Agreement dated ___________.”

Until restrictions lapse, the Restricted Share certificates shall be left on deposit with the Company along with a stock power (substantially in the form attached thereto as Exhibit A) endorsed in blank and shall not be transferable except by will or the laws of descent and distribution or pursuant to a domestic relations order. No right or benefit hereunder shall in any manner be liable for or subject to any debts, contracts, liabilities, or torts of Participant. Any purported assignment, alienation, pledge, attachment, sale, transfer or other encumbrance of the Restricted Shares, prior to the lapse of restrictions that does not satisfy the requirements hereunder shall be void and unenforceable against the Company. Notwithstanding the foregoing, in the case of Participant’s Disability or death, Participant’s rights under this Agreement may be exercised by Participant’s guardian or legal representative.

3.Vesting/Forfeiture.Participant shall vest in his rights under the Restricted Shares and any accumulated dividends described in Paragraph 5 hereof, and the Company’s right to reclaim such shares or dividends shall lapse with respect to one-third of the Restricted Shares, on each of the first, second and third anniversaries of the Grant Date (the “Vesting Dates”), provided that Participant remains continuously employed by the Company from the Grant Date to such Vesting Date. Notwithstanding the foregoing, however, all Restricted Shares not then vested shall vest immediately if Participant’s employment with the Company terminates due to Participant’s Disability or death. In the event of a Change of Control or Participant’s Retirement prior to vesting, the Committee may, in its sole discretion, accelerate vesting. If Participant’s employment with the Company terminates other than by reason of Retirement (as defined in Paragraph 4 below), Disability or death, the Restricted Shares (to the extent not then vested) shall be forfeited as of the date Participant’s employment so terminates. As soon as administratively feasible following the vesting of the Restricted Shares, a Stock certificate evidencing the vested Restricted Shares, less the amount of Stock withheld pursuant to paragraph 7 hereof, shall be delivered without charge to the Participant, or his designated representative, free of all restrictions.

4.Retirement. For purposes of this Agreement, Retirement by an Employee shall have occurred if:

(a)in the case of an Employee who is an employee of Rowan Companies, Inc. or an employee of an Employing Company, as defined in the Rowan Pension Plan (the “Rowan Plan”), the Employee: (1) has satisfied the requirements for normal retirement pursuant to the rules of the Rowan Plan which, in terms of age, is a minimum of 60, and (2) has requested and received authorization from the administrative committee appointed by the Company’s Board of Directors to administer the Rowan Plan to commence receiving pension benefits; or

(b)in the case of an Employee who is an employee of LeTourneau, Inc. or an employee of an Employing Company, as defined in the LeTourneau Pension Plan (the “LeTourneau Plan”), the Employee: (1) has satisfied the requirements for either normal or late retirement pursuant to the rules of the LeTourneau Plan, (2) has requested and received authorization from the administrative committee appointed by the Board of Directors of LeTourneau, Inc. to administer the LeTourneau Plan to commence receiving pension benefits, and (3) would have satisfied the requirements for normal retirement pursuant to the rules of the Rowan Plan if he or she was an employee of Rowan Companies, Inc. or an employee of an Employing Company under the Rowan Plan.

Determination of the date of termination of employment by reason of Retirement shall be based on such evidence as the Committee may require and a determination by the Committee of such date of termination shall be final and controlling on all interested parties.

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5.Ownership Rights/Dividends.Participant shall be entitled to all voting rights applicable to the Restricted Shares. Any cash dividends that may be paid on the Restricted Shares after the Grant Date shall be accumulated and held in an account or in escrow and held by the Company until such time as Participant shall vest in the Restricted Shares as described in paragraph 3 above. Participant shall receive a cash payment equal to the portion of the dividends paid (reduced by the amount of any taxes required to be withheld with respect to such payment) with respect to the Restricted Shares as they become vested. All accumulated dividends attributable to unvested Restricted Shares shall be forfeited, if and to the extent that the underlying Restricted Shares are forfeited.

6.Employment Relationship. For purposes of this Agreement, Participant shall be considered to be in the employment of the Company as long as Participant remains an Employee of either the Company, a parent or subsidiary corporation (as defined in section 424 of the Code) of the Company, or a corporation or a parent or subsidiary of such corporation assuming this Agreement. Any question as to whether and when there has been a termination of such employment, and the cause of such termination, shall be determined by the Committee in its sole discretion, and its determination shall be final.

7.Withholding of Taxes. The Company shall have the right to take any action as may be necessary or appropriate to satisfy any federal, state or local tax withholding obligations, including, but not limited to, the right to withhold cash or shares of Stock sufficient to pay the amount required to be withheld and to cause such Stock to be sold and the proceeds remitted to the Company. In the event that the proceeds of such sale shall exceed the legally required withholding amount, the Company shall remit the difference in cash to Participant. In the event that the proceeds of such sale are less than the legally required withholding amount, the Company may withhold the difference from any cash or Stock then or thereafter payable to Participant. Participant agrees that, if he makes an election under Section 83(b) of the Code with regard to the Restricted Shares, he will so notify the Company in writing within two (2) days after making such election, so as to enable the Company to timely comply with any applicable governmental reporting requirements.

8.Reorganization of the Company.The existence of this Agreement shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business; any merger or consolidation of the Company; any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Stock or the rights thereof; the dissolution or liquidation of the Company; any sale or transfer of all or any part of its assets or business; or any other corporate act or proceeding, whether of a similar character or otherwise.

9.Recapitalization Events.In the event of stock dividends, spin-offs of assets or other extraordinary dividends, stock splits, combinations of shares, recapitalizations, mergers, consolidations, reorganizations, liquidations, issuances of rights or warrants and similar transactions or events involving the Company (“Recapitalization Events”), then for all purposes references herein to Stock or to Restricted Shares shall mean and include all securities or other property (other than cash) that holders of Stock of the Company are entitled to receive in respect of Stock by reason of each successive Recapitalization Event, which securities or other property (other than cash) shall be treated in the same manner and shall be subject to the same restrictions as the underlying Restricted Shares.

10.Status of Stock. If required, the Company will register for issuance under the Securities Act of 1933, as amended (the “Act”), the shares of Stock acquired pursuant to this Agreement and to keep such registration effective. In the absence of such effective registration or an available exemption from registration under the Act, issuance of shares of Stock acquired pursuant to this Agreement will be delayed until registration of such shares is effective or an exemption from registration under the Act is available. The Company intends to use its reasonable efforts to ensure that no such delay will occur. In the event exemption from registration under the Act is available, Participant (or the person permitted to receive Participant’s shares in the event of Participant’s incapacity or death), if requested by the Company to do so, will execute and deliver to the Company in writing an agreement containing such provisions as the Company may requireassuring compliance with applicable securities laws. The Company shall incur no liability to Participant for failure to register the Stock or maintain the registration.

Participant agrees that the shares of Stock, which Participant may acquire pursuant to this Agreement, will not be sold or otherwise disposed of in any manner that would constitute a violation of any applicable securities laws, whether federal or state. Participant also agrees (i) that the certificates representing such shares of Stock may bear such legend or legends as the Committee deems appropriate in order to assure compliance with applicable securities laws, (ii) that the Company may refuse to register the transfer of the shares of Stock acquired pursuant to this Agreement on the stock transfer records of the Company if such proposed transfer would in the opinion of counsel satisfactory to the Company constitute a violation of any applicable securities law and (iii) that the Company may give related instructions to its transfer agent, if any, to stop registration of the transfer of such shares.

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11.Severability.In the event that any provision of this Agreement shall be held illegal, invalid, or unenforceable for any reason, such provision shall be fully severable and shall not affect the remaining provisions of this Agreement, and the Agreement shall be construed and enforced as if the illegal, invalid, or unenforceable provision had never been included herein.

12.Certain Restrictions.By executing this Agreement, Participant acknowledges that he will enter into such written representations, warranties and agreements and execute such documents as the Company may reasonably request in order to comply with the terms of this Agreement or the Plan, or securities laws or any other applicable laws, rules or regulations.

13.Amendment and Termination. Except as otherwise provided in the Plan or this Agreement, no amendment or termination of this Agreement shall be made by the Company without the written consent of the Participant.

14.No Guarantee of Tax Consequences.The Company makes no commitment or guarantee to Participant that any federal or state tax treatment will apply or be available to any person eligible for benefits under this Agreement.

15.Binding Effect. This Agreement shall be binding upon and inure to the benefit of any successors to the Company and all persons lawfully claiming under Participant.

16.Governing Law and Venue. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas. The courts in Harris County, Texas shall be the exclusive venue for any dispute regarding the Plan or this Agreement.

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IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its officer thereunto duly authorized, and Participant has executed this Agreement, all as of the day and year first above written.

ROWAN COMPANIES, INC.

By:_____________________________________________       Date:___________________________

Robert G. Croyle,

Vice Chairman and Chief Administrative Officer

PARTICIPANT:

________________________________________________       Date:___________________________

Address:

__________________________________________

__________________________________________

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Exhibit A

STOCK POWER

FOR VALUE RECEIVED, ___________ (“Transferor”) hereby sells, assigns and transfers unto Rowan Companies, Inc., ____________ shares of the common stock, $.125 par value (“Common Stock”), of Rowan Companies, Inc., a Delaware corporation (the “Company”), which shares of Common Stock are represented by certificate no(s).____________, and hereby irrevocably appoints W. H. Wells as attorney-in-fact to transfer such shares of Common Stock on the books of the Company, with full power of substitution on the premises.

Dated:

TRANSFEROR:

Printed Name:

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EX-10.3

Exhibit 10.3

2005 ROWAN COMPANIES, INC. LONG-TERM INCENTIVE PLAN

2006 NONQUALIFIED STOCK OPTION AGREEMENT

THIS NONQUALIFIED STOCK OPTION AGREEMENT (this “Agreement”) is made as of the 28th day of April, 2006 (“Grant Date”), between Rowan Companies, Inc., a Delaware corporation (the “Company”) and ____________ (“Participant”).

1.   Grant of Option. To carry out the purposes of the 2005 Rowan Companies, Inc. Long-Term Incentive Plan (the “Plan”), by affording Participant the opportunity to purchase shares of common stock, $0.125 par value per share of the Company (“Stock”), and in consideration of the mutual agreements and other matters set forth herein and in the Plan, the Company hereby irrevocably grants to Participant the right and option (“Option”) to purchase all or any part of an aggregate of ______ shares of Stock, effective as of the Grant Date on the terms and conditions set forth herein and in the Plan, which Plan is incorporated herein by reference as a part of this Agreement. All capitalized terms not otherwise defined herein shall have the meanings set forth in the Plan. The Plan and this Option shall be administered by the Compensation Committee (the “Committee”) of the Board of Directors of the Company. This Option shall not be treated as an incentive stock option within the meaning of section 422(b) of the Internal Revenue Code of 1986, as amended (the “Code”).

2.   Purchase Price. The purchase price of Stock purchased pursuant to the exercise of this Option shall be $43.85 per share.

3.   Exercise of Option. This Option shall be exercisable in the manner described below for one-third of the aggregate number of shares offered by this Option on and after each of the first, second and third anniversaries of the Grant Date; provided, however, this Option may be exercised only prior to its expiration date and, except as otherwise provided below, only while Participant remains an Employee of the Company. The Option will terminate and cease to be exercisable upon Participant’s termination of employment with the Company, except that:

(a)   If Participant’s employment with the Company terminates by reason of Retirement, Participant may exercise this Option at any time during the period of five years following the date of such termination, but only as to the number of shares that Participant was entitled to purchase hereunder as of the date his employment so terminates, plus such additional number of shares, if any, that the Committee, in its sole discretion, determines to be exercisable as of such Retirement.

(b)   If Participant dies within the five-year period following the date of Participant’s termination of employment by reason of Retirement, Participant’s estate, or the person who acquires this Option by bequest or inheritance or otherwise by reason of the death of Participant, may exercise this Option at any time during the period of two years following the date of Participant’s death, but only as to the number of shares Participant was entitled to purchase hereunder as of the date Participant’s employment terminated by reason of Retirement.

(c)   If Participant’s employment with the Company terminates by reason of Disability, Participant may exercise this Option in full at any time during the period of five years following the date of such termination.

(d)   If Participant dies while in the employ of the Company or within the five-year period following the date of Participant’s termination of employment by reason of Disability, Participant’s estate, or the person who acquires this Option by bequest or inheritance or by reason of the death of Participant, may exercise this Option in full at any time during the period of two years following the date of Participant’s death.

If Participant’s employment with the Company terminates other than by reason of Retirement, Disability or death, this Option (to the extent not exercised prior thereto) shall terminate as of the date Participant’s employment so terminates. This Option shall not be exercisable in any event after the expiration of ten years from the Grant Date hereof.

4.   Manner of Exercise. In order to exercise this Option, the Participant shall deliver to the Chief Financial Officer or other designated officer of the Company payment in full for (i) the shares being purchased and (ii) unless other arrangements have been made with the Committee, any required withholding taxes. The payment of the exercise price for each Option shall be either in cash or by check payable and acceptable to the Company; provided, however, with the consent of the Committee, which consent may be granted or withheld in the Committee’s sole discretion and subject to any instructions or conditions as the Committee may impose, payment of the exercise price and/or withholding may be made by (x) tendering to the Company shares of Stock having an aggregate Fair Market Value as of the date of exercise that is not greater than the full exercise price for the shares with respect to which the Option is being exercised and the amount required to be withheld, or (y) the Company may deliver certificates for the shares of Stock for which the Option is being exercised to a broker for sale on behalf of Participant, provided that Participant has irrevocably instructed such broker to remit directly to the Company on Participant’s behalf from the proceeds of such sale the full amount of the exercise price, plus all required withholding taxes. In the event that Participant, with the consent of the Committee, elects to make payment as allowed under clause (x) above, the Committee may, upon confirming that Participant owns the number of shares being tendered, authorize the issuance of a new certificate for the number of shares being acquired pursuant to the exercise of the Option, less the number of shares being tendered upon the exercise, and return to Participant (or not require surrender of) the certificate for the shares being tendered upon the exercise.

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5.   Retirement. For purposes of the Agreement and pursuant to the terms of the Plan, Retirement of an employee shall have occurred if:

(a)   in the case of an Employee who is an employee of Rowan Companies, Inc. or an employee of an Employing Company, as defined in the Rowan Pension Plan (the “Rowan Plan”), the Employee: (1) has satisfied the requirements for normal retirement pursuant to the rules of the Rowan Plan which, in terms of age, is a minimum of 60 and (2) has requested and received authorization from the administrative committee appointed by the Company’s Board of Directors to administer the Rowan Plan to commence receiving pension benefits; or

(b)   in the case of an Employee who is an employee of LeTourneau, Inc. or an employee of an Employing Company, as defined in the LeTourneau Pension Plan (the “LeTourneau Plan”), the Employee: (1) has satisfied the requirements for either normal or late retirement pursuant to the rules of the LeTourneau Plan, (2) has requested and received authorization from the administrative committee appointed by the Board of Directors of LeTourneau, Inc. to administer the LeTourneau Plan to commence receiving pension benefits, and (3) would have satisfied the requirements for normal retirement pursuant to the rules of the Rowan Plan if he or she was an employee of Rowan Companies, Inc. or an employee of an Employing Company under the Rowan Plan.

Determination of the date of termination of employment by reason of Retirement shall be based on such evidence as the Committee may require, and a determination by the Committee of such date of termination shall be final and controlling on all interested parties.

6.   Status of Stock. The Company intends to register for issuance under the Securities Act of 1933, as amended (the “Act”), the shares of Stock acquirable upon exercise of this Option and to keep such registration effective throughout the period that this Option is exercisable. In the absence of such effective registration or an available exemption from registration under the Act, issuance of shares of Stock acquirable upon exercise of the Option will be delayed until registration of such shares is effective or an exemption from registration under the Act is available. The Company intends to use its reasonable efforts to ensure that no such delay will occur. In the event exemption from registration under the Act is available upon an exercise of this Option, Participant (or the person permitted to exercise this Option in the event of Participant’s incapacity or death), if requested by the Company to do so, will execute and deliver to the Company in writing an agreement containing such provisions as the Company may requireassuring compliance with applicable securities laws. The Company shall incur no liability to Participant for failure to register the Stock or maintain the registration.

Participant agrees that the shares of Stock, which Participant may acquire by exercising this Option, will not be sold or otherwise disposed of in any manner that would constitute a violation of any applicable securities laws, whether federal or state. Participant also agrees (i) that the certificates representing the shares of Stock purchased under this Option may bear such legend or legends as the Committee deems appropriate in order to assure compliance with applicable securities laws, (ii) that the Company may refuse to register the transfer of the shares of Stock purchased under this Option on the stock transfer records of the Company if such proposed transfer would in the opinion of counsel satisfactory to the Company constitute a violation of any applicable securities law and (iii) that the Company may give related instructions to its transfer agent, if any, to stop registration of the transfer of the shares of Stock purchased under this Option.

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7.   Employment Relationship. For purposes of this Agreement, Participant shall be considered to be in the employment of the Company as long as Participant remains an Employee of eitherthe Company, a parent or subsidiary corporation (as defined in section 424 of the Code) of the Company,or a corporation or a parent or subsidiary of such corporation assuming or substituting a new option for this Option. Any question as to whether and when there has been a termination of such employment, and the cause of such termination, shall be determined by the Committee in its sole discretion, and its determination shall be final.

8.   Withholding of Tax. To the extent that the exercise of this Option or the disposition of shares of Stock acquired by exercise of this Option results in compensation income to Participant for federal or state income tax purposes, Participant shall deliver to the Company at the time of such exercise or disposition such amount of money as the Company may require to meet its obligation under applicable tax laws or regulations, and if Participant fails to do so, the Company is authorized to withhold from any cash or Stock remuneration then or thereafter payable to Participant any tax required to be withheld by reason of such resulting compensation income. Upon an exercise of this Option, the Company is further authorized in its discretion to satisfy any withholding requirement out of any cash or shares of Stock distributable to Participant upon such exercise.

9.   Reorganization of the Company.The existence of this Agreement shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business; any merger or consolidation of the Company; any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Stock or the rights thereof; the dissolution or liquidation of the Company; any sale or transfer of all or any part of its assets or business; or any other corporate act or proceeding, whether of a similar character or otherwise.

10.   Recapitalization Events.In the event of stock dividends, spin-offs of assets or other extraordinary dividends, stock splits, combinations of shares, recapitalizations, mergers, consolidations, reorganizations, liquidations, issuances of rights or warrants and similar transactions or events involving the Company (“Recapitalization Events”), then for all purposes references herein to Stock shall mean and include all securities or other property (other than cash) that holders of Stock of the Company are entitled to receive in respect of Stock by reason of each successive Recapitalization Event, and the exercise price of the Option shall be adjusted as deemed necessary or appropriate in the sole discretion of the Committee to prevent enlargement or dilution of Participant’s rights under this Agreement.

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11.   Transfer of Option. Except as provided herein, all rights granted hereunder shall not be transferable other than by will or the laws of descent and distribution and shall be exercisable during the Participant’s lifetime only by the Participant or, in the case of the Participant’s death or incapacity, by the Participant’s guardian or legal representative. Participant (hereinafter the “Initial Optionee”) for the purposes of this Paragraph 11 may transfer this Option (in whole or in part) subject to Committee approval, and such conditions and limitations, if any, as the Committee may impose with respect to such transfer to any of (i) the spouse, children or grandchildren (“Immediate Family Members”) of the Initial Optionee, (ii) a trust or trusts for the exclusive benefit of one or more of the Immediate Family Members and, if applicable, the Initial Optionee, (iii) a partnership or limited liability company whose only partners, shareholders or members are the Initial Optionee and/or one or more Immediate Family Members or (iv) an organization that has been determined by the Internal Revenue Service to be exempt under Section 501 (c)(3) of the Code. Following any transfer by the Initial Optionee, this Option may not be transferred except back to the Initial Optionee, unless the Committee approves otherwise on such terms as it shall establish in its sole discretion. A transfer of this Option must be for no consideration, unless the Committee otherwise agrees to a transfer for consideration. The terms and conditions of the Plan and this Agreement shall continue to be subject to the same limitation, vesting and expiration provisions of (a), (b), (c) and (d) of Paragraph 3 above, which shall be applied “as if” Participant continued to be the holder of the Option. If transferred, this Option shall not be exercisable unless arrangements satisfactory to the Company have been madeto satisfy any tax withholding obligations the Company may have with respect to thetransferee’s exercise of the Option. Further, the Company shall have no obligation to provide any notices to an Option transferee of any event, term or provision with respect to the Option, including, without limitation, the early termination of the Option on account of termination of Participant’s employment. No transfer of this Option shall be effective unless the Committee receives prior written notice of the terms and conditions of any intended transfer, determines that the transfer complies with the requirements imposed hereunder with respect to Optiontransfers and approves the transfer. Any purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance of this Option that does not satisfy the requirements set forth hereunder shall be void and unenforceable against the Company.

12.   Severability.In the event that any provision of this Agreement shall be held illegal, invalid, or unenforceable for any reason, such provision shall be fully severable and shall not affect the remaining provisions of this Agreement, and the Agreement shall be construed and enforced as if the illegal, invalid or unenforceable provision had never been included herein.

13.   Certain Restrictions.By executing this Agreement, Participant acknowledges that he will enter into such written representations, warranties and agreements and execute such documents as the Company may reasonably request in order to comply with this Agreement, the securities laws or any other applicable laws, rules or regulations, or the terms of the Plan.

14.   Amendment and Termination. Except as otherwise provided in the Plan or this Agreement, no amendment or termination of this Agreement shall be made by the Company without the written consent of the Participant.

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15.   No Guarantee of Tax Consequences.The Company makes no commitment or guarantee to Participant that any federal or state tax treatment will apply or be available to any person eligible for benefits under this Agreement.

16.   Binding Effect. This Agreement shall be binding upon and inure to the benefit of any successors to the Company and all persons lawfully claiming under Participant.

17.   Governing Law and Venue. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas. The courts in Harris County, Texas shall be the exclusive venue for any dispute regarding the Plan or this Agreement.

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its officer thereunto duly authorized, and Participant has executed this Agreement, all as of the day and year first above written.

ROWAN COMPANIES, INC.

By:_____________________________________________       Date:___________________________

Robert G. Croyle,

Vice Chairman and Chief Administrative Officer

PARTICIPANT:

________________________________________________       Date:___________________________  ;

Address:

__________________________________________

__________________________________________

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EX-10.4

Exhibit 10d

2005 ROWAN COMPANIES, INC. LONG-TERM INCENTIVE PLAN

2006 PERFORMANCE SHARE AWARD AGREEMENT

THIS PERFORMANCE SHARE AWARD AGREEMENT (this “Agreement”) is made as of the 28th day of April, 2006 (“Award Date”) between Rowan Companies, Inc., a Delaware corporation (the “Company”) and ____________(“Participant”).

1.Agreement to Grant Performance Shares.   Subject to the conditions described in this Agreement and the 2005 Rowan Companies, Inc. Long-Term Incentive Plan (the “Plan”), the Company hereby agrees to grant shares of common stock, $0.125 par value per share, of the Company (“Stock”) to Participant in consideration for services to be performed and contingent upon the occurrence of certain events as set forth herein. Prior to the actual issuance of such shares, Participant shall have no rights as a shareholder pursuant to this Agreement including but not limited to any rights to receive or accrue dividends with respect to such shares or the right to vote such shares.

2.Definitions. For purposes of this Agreement, the following terms shall have the following meaning:

“Average Stock Price” means the average of the closing prices for the Stock or the common stock of each of the Peer Group Companies on each of the twenty-five (25) trading days immediately preceding the date of the determination.

“Committee” means the Compensation Committee of the Board of Directors of the Company.

“Peer Group Companies” means the companies listed on Appendix A attached hereto.

“Performance Period” means a period of three years beginning on the Award Date and ending on the third anniversary thereof.

“Relative ROI Rank” means the Return on Investment of the Company and the Return on Investment of each of the Peer Group Companies ranked in descending order. Relative ROI Rank shall be expressed as a number from one to seven with the number one (1) representing the highest Relative ROI Rank and seven (7) the lowest.

“Relative TSR Rank” means the Total Shareholder Return of the Stock and the Total Shareholder Return of the common stock of each of the Peer Group Companies ranked in descending order. Relative TSR Rank shall be expressed as a number from one to seven with the number one (1) representing the highest Relative TSR Rank and seven (7) the lowest.

“Return on Investment” or “ROI” means ^x∕_y where:

x = the sum of operating income (loss) for each fiscal year that ends during the Performance Period; and

y = the average of the net total of total assets less current liabilities as of the beginning and end of each fiscal year that ends during the Performance Period.

“Retirement”by an Employee shall have occurred if:

(a)in the case of an Employee who is an employee of Rowan Companies, Inc. or an employee of an Employing Company, as defined in the Rowan Pension Plan (the “Rowan Plan”), the Employee: (1) has satisfied the requirements for normal retirement pursuant to the rules of the Rowan Plan which, in terms of age, is a minimum of 60 and (2) has requested and received authorization from the administrative committee appointed by the Company’s Board of Directors to administer the Rowan Plan to commence receiving pension benefits; or

(b)in the case of an Employee who is an employee of LeTourneau, Inc. or an employee of an Employing Company, as defined in the LeTourneau Pension Plan (the “LeTourneau Plan”), the Employee: (1) has satisfied the requirements for either normal or late retirement pursuant to the rules of the LeTourneau Plan, (2) has requested and received authorization from the administrative committee appointed by the Board of Directors of LeTourneau, Inc. to administer the LeTourneau Plan to commence receiving pension benefits, and (3) would have satisfied the requirements for normal retirement pursuant to the rules of the Rowan Plan if he or she was an employee of Rowan Companies, Inc. or an employee of an Employing Company under the Rowan Plan.

Determination of the date of termination of employment by reason of Retirement shall be based on such evidence as the Committee may require and a determination by the Committee of such date of termination shall be final and controlling on all interested parties.

“Target Shares” means the number of shares of Stock that will be transferred to Participant if both (i) the Relative ROI Rank of the Company is four (4) and Return on Investment is equal to zero (0) or greater and (ii) the Relative TSR Rank of the Stock is four (4) and Total Shareholder Return is equal to one (1) or greater. Participant’s Target Shares shall be set forth in paragraph 3 below.

“Total Shareholder Return” or “TSR” means ^x∕_y where:

x = the sum of (i) the difference between the Average Stock Price as of the last trading day of the Performance Period and the Average Stock Price as of the first day of the Performance Period; and (ii) all dividends paid on the Stock during the Performance Period; and

y = the Average Stock Price as of the first day of the Performance Period.

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All capitalized terms not otherwise defined herein shall have the meanings set forth in the Plan, the terms of which are incorporated herein by reference.

3.Determination of Performance Shares. Provided that Participant is continuously employed by the Company throughout the Performance Period as soon as administratively feasible, but not later than seventy-five (75) days after the last day of the Performance Period, the Company shall transfer to Participant a number of shares of Stock to be determined as follows:

(a) 50% of the Target Shares multiplied by the percentage shown in the following chart that corresponds to the Relative ROI Rank.

Rowan Relative ROI Rank	1	2	3	4	5	6	7
Target Share Payout if ROI ³ 0	200%	167%	133%	100%	25%	0%	0%
Target Share Payout if ROI < 0	150%	125%	100%	75%	20%	0%	0%

(b) 50% of the Target Shares multiplied by the percentage shown in the following chart that corresponds to the Relative TSR Rank.

Rowan Relative TSR Rank	1	2	3	4	5	6	7
Target Share Payout if TSR ³ 1	200%	167%	133%	100%	25%	0%	0%
Target Share Payout if TSR < 1	150%	125%	100%	75%	20%	0%	0%

Participant’s Target Shares = ______.

4.Retirement, Disability, Death, or Change of Control. Except as otherwise provided below, in the event that Participant’s employment with the Company terminates prior to the last day of the Performance Period for any reason other than Retirement, Disability or death, this Agreement shall terminate and all rights of Participant to receive Stock under this Agreement shall be forfeited. In the event of Participant’s termination of employment by reason of Retirement, Disability or death, Participant shall receive at the conclusion of the Performance Period a prorated portion of the Target Shares based on the period of employment during the Performance Period prior to such termination. In the event of Participant’s termination of employment following a Change of Control or Retirement, the Committee, in its sole discretion, may grant Stock to Participant in an amount in excess of the amount that would be otherwise granted to Participant; provided, however, that the maximum number of shares of Stock awarded Participant pursuant to this Agreement shall not exceed 200% of the Target Shares.

5.Status of Stock. The Company intends to register for issuance under the Securities Act of 1933, as amended (the “Act”), the shares of Stock acquired pursuant to this Agreement. In the absence of such effective registration or an available exemption from registration under the Act, issuance of shares of Stock pursuant to this Agreement will be delayed until registration of such shares is effective or an exemption from registration under the Act is available. The Company intends to use its reasonable efforts to ensure that no such delay will occur. In the event exemption from registration under the Act is available, Participant (or the person entitled to receive Participant’s shares in the event of Participant’s incapacity or death), if requested by the Company to do so, will execute and deliver to the Company in writing an agreement containing such provisions as the Company may requireassuring compliance with applicable securities laws. The Company shall incur no liability to Participant for failure to register the Stock or maintain the registration.

Participant agrees that the shares of Stock, which Participant may acquire pursuant to this Agreement, will not be sold or otherwise disposed of in any manner that would constitute a violation of any applicable securities laws, whether federal or state. Participant also agrees (i) that the certificates representing such shares of Stock may bear such legend or legends as the Committee deems appropriate in order to assure compliance with applicable securities laws, (ii) that the Company may refuse to register the transfer of the shares of Stock acquired pursuant to this Agreement on the stock transfer records of the Company if such proposed transfer would in the opinion of counsel satisfactory to the Company constitute a violation of any applicable securities law and (iii) that the Company may give related instructions to its transfer agent, if any, to stop registration of the transfer of such shares.

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6.Employment Relationship. For purposes of this Agreement, Participant shall be considered to be in the employment of the Company as long as Participant remains an Employee of either the Company, a parent or subsidiary corporation (as defined in section 424 of the Code) of the Company, or a corporation or a parent or subsidiary of such corporation assuming this Agreement. Any question as to whether and when there has been a termination of such employment, and the cause of such termination, shall be determined by the Committee in its sole discretion, and its determination shall be final.

7.Withholding of Taxes.    The Company shall have the right to take any action as may be necessary or appropriate to satisfy any federal, state or local tax withholding obligations, including, but not limited to, the right to withhold shares of Stock sufficient to pay the amount required to be withheld and to cause such Stock to be sold and the proceeds remitted to the Company. In the event that the proceeds of such sale shall exceed the legally required withholding amount, the Company shall remit the difference in cash to Participant. In the event that the proceeds of such sale are less than the legally required withholding amount, the Company may withhold the difference from any cash or Stock then or thereafter payable to Participant.

8.Reorganization of the Company.   The existence of this Agreement shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business; any merger or consolidation of the Company; any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Stock or the rights thereof; the dissolution or liquidation of the Company; any sale or transfer of all or any part of its assets or business; or any other corporate act or proceeding, whether of a similar character or otherwise.

9.Recapitalization Events.   In the event of stock dividends, spin-offs of assets or other extraordinary dividends, stock splits, combinations of shares, recapitalizations, mergers, consolidations, reorganizations, liquidations, issuances of rights or warrants and similar transactions or events involving the Company (“Recapitalization Events”), for all purposes references herein to Stock shall mean and include all securities or other property (other than cash) that holders of Stock of the Company are entitled to receive in respect of Stock by reason of each successive Recapitalization Event and the number of Target Shares and the Average Stock Price may be adjusted as deemed necessary or appropriate in the sole discretion of the Committee to prevent enlargement or diminution in Participant’s rights under this Agreement.

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10.Severability.   In the event that any provision of this Agreement shall be held illegal, invalid, or unenforceable for any reason, such provision shall be fully severable and shall not affect the remaining provisions of this Agreement, and the Agreement shall be construed and enforced as if the illegal, invalid or unenforceable provision had never been included herein.

11.Certain Restrictions. By executing this Agreement, Participant acknowledges that he will enter into such written representations, warranties and agreements and execute such documents as the Company may reasonably request in order to comply the terms of the Plan or this Agreement, or the securities law or any other applicable laws, rules or regulations.

12.Amendment and Termination.   In the event that the common stock of any Peer Group Company ceases to be publicly traded during the Performance Period, the Committee shall have the authority to substitute the common stock of any successor in interest to the stock or assets of such Peer Group Company, provided that the common stock of such successor is publicly traded and provided further that such successor is determined by the Committee to be an appropriate Peer Group Company. If the Committee substitutes the common stock of a successor, the Total Shareholder Return of such successor common stock shall determine its Relative TSR Rank. If the Committee determines that the common stock of a successor cannot or should not be substituted for the common stock of a Peer Group Company that has ceased to be publicly traded, then Relative TSR Rank of such Peer Group Company shall be based on Total Sharehold Return of such common stock as of the date that such common stock ceases to be publicly traded. Except as otherwise provided in the Plan or this Agreement, no amendment or termination of this Agreement shall be made by the Company without the written consent of Participant.

13.Binding Effect. This Agreement shall be binding upon and inure to the benefit of any successors to the Company and all persons lawfully claiming under Participant.

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14.Governing Law and Venue. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas. The courts in Harris County, Texas shall be the exclusive venue for any dispute regarding the Plan or this Agreement.

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its officer thereunto duly authorized, and Participant has executed this Agreement, all as of the day and year first above written.

ROWAN COMPANIES INC.

By:_____________________________________________       Date:___________________________

Robert G. Croyle,

Vice Chairman and Chief Administrative Officer

PARTICIPANT:

________________________________________________       Date:___________________________  ;

Address:

__________________________________________

__________________________________________

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Appendix A

Diamond Offshore Drilling, Inc.

ENSCO International Incorporated

GlobalSantaFe Corporation

Noble Corporation

TODCO

Transocean Inc.

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EX-31

EXHIBIT 31

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, D. F. McNease, Chief Executive Officer of Rowan Companies, Inc., certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Rowan Companies, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:May 10, 2006	/s/ D. F. MCNEASE
	D. F. McNease
	Chairman, President and Chief Executive Officer

EXHIBIT 31

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, W. H. Wells, Chief Financial Officer of Rowan Companies, Inc., certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Rowan Companies, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:May 10, 2006	/s/ W. H. WELLS
	W. H. Wells
	Vice President - Finance and Treasurer (Chief Financial Officer)

EX-32

EXHIBIT 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U. S. C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Rowan Companies, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, D. F. McNease, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented.

Date:May 10, 2006	/s/ D. F. MCNEASE
	D. F. McNease
	Chairman, President and Chief Executive Officer

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U. S. C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Rowan Companies, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, W. H. Wells, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented.

Date:May 10, 2006	/s/ W. H. WELLS
	W. H. Wells
	Vice President - Finance and Treasurer (Chief Financial Officer)