Monday, August 12, 2013

Atwood Oceanics, Inc. Q3 Earnings Release


Sorry that this was not posted to our blog sooner.  It was written up, but not posted.

On July 31, Atwood Oceanics, Inc. (ATW) reported Quarter 3 Diluted EPS of $1.37 on Sales of about $273 million.  This represents outperformance in Earnings per Share of $0.03 and Revenue of $1.5 million. 

Overall, it was an extremely positive quarter for the company.  It was also a very busy one.  Atwood Oceanics successfully secured contract extensions for four of its current rigs, all at price levels above current contracts.  A new contract was also secured for the second (at the time) newbuild drillship, also at a higher day rate than the contract secured for a comparable rig.  Also relating to its fleet, the company placed an order for a fourth drillship at the same price of its current three orders, the first of which is expected to be delivered in the first quarter of 2014 (October 1, 2013 – December 31, 2013).  In order to continue its aggressive newbuild program, Atwood offered an additional $200 million worth of senior notes to its current debt level.  These senior notes carry with them the same terms and interest rate (6.5%) as the notes already outstanding.  Finally, Atwood was able to repurchase 2,000,000 shares from one of its investors in the third quarter at a discount to market value.  These shares were terminated shortly thereafter. 

The outlook is positive for Atwood Oceanics, Inc.  The company is expected to continue aggressively pursuing contract extensions for its rigs currently in operation and for the remaining rigs in its ultra deepwater drillship newbuild program.  So far, management has had much success with this endeavor, and this is expected to continue.  Oil prices have remained elevated, and this has been just one contributing factor to the high dayrates specified in the company’s newly completed contracts.  It is important to note that decreasing commodity prices may have a negative impact on the stock price, but this is only one factor of the company’s operations and should not have a substantial negative effect on Atwood’s financial standing. 

I will continue my ongoing valuation of the company, and have a full recommendation and price target during our first meeting.

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