Friday, May 3, 2013

ATW Q2 Earnings Release

Atwood Oceanics, Inc. reported Q2 earnings after the close on Wednesday, 5/1.  The company reported diluted EPS of $1.28 per share on revenues of $253.2 million.  This beat consensus EPS of $1.23 and met consensus revenue estimates for the quarter.  The stock reacted positively on Thursday, ending up 3.2%.  On Friday, the stock was up another 2.6% to close at $51.44. 

Going forward, management believes that the company is in good shape.  It believes in the strength of its improved jackup fleet, and is in advanced talks for contract extensions for two of its jackup rigs, whose contracts are coming due in the next few months.  Atwood has secured 5 years of contract backlog on its three newbuild jackup rigs, all in Thailand.  This can be attributed to the fact that Thailand is the fastest growing country in Southeast Asia, and companies are actively pursuing expansion.  These contracts should also work to give Atwood Oceanics a better reputation within that region, leading to more future successes. 
The Atwood Advantage is the company’s second drillship, expected for delivery in June 2014.  Currently the drilling vessel is on par with its construction schedule, and Atwood has been actively marketing it.  There have been discussions about a possible two year contract for its services with a number of un-named companies.  Management currently believes that the rig will end up operating in either the Gulf of Mexico or off of the West African Coastline. 

In the quarter, many of its rigs experienced lower than expected downtime and more efficient upgrades and maintenance.  We should not expect the company to undertake more than one overhauling project in the rest of this fiscal year, so revenues should continue to grow as downtime will be at a minimum.

My projections and price target, for the moment, remain exactly the same with a twelve month target of $62.05.  For this past quarter, I had projected diluted EPS of exactly that of the company’s operations, $1.28, on $252.7 million in revenue, just 500 thousand dollars below reported amounts.

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