Atwood Arm Wins Drilling Contract - Analyst Blog

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Texas-based offshore drilling contractor Atwood Oceanics Inc. ( ATW ) recently announced that its subsidiary has won a drilling services contract for the semisubmersible rig Atwood Eagle.

The rig has been contracted at a dayrate of $460,000 for a period of 24 months. Atwood Eagle will be deployed offshore Australia. The contract is likely to start in Jun 2014.

The contract signifies Atwood Oceanics' emphasis on expanding its overseas offshore exploration programs. We believe the company's strategy of optimizing its global oil and natural gas drilling assets will generate favorable returns.

Recently, a subsidiary of Atwood Oceanics was awarded a 1-year contract from Addax Petroleum Cameroon Limited for the jack-up drilling unit Atwood Aurora.  The rig was contracted at a dayrate of $193,000.

Founded in 1968, Atwood Oceanics is a global offshore drilling contractor focusing on the drilling and completion of exploratory and developmental oil and gas wells. The company currently owns 13 mobile offshore drilling units and is constructing three ultra-deepwater drillships.

We see Atwood Oceanics' leverage to the global drilling market rather than the domestic market as its biggest advantage over most of its peers. The international drilling outlook has been strong versus the muted fundamentals in the U.S. In our view, the company presents investors growth opportunity from any global deepwater drilling recovery.

However, certain factors remain that are likely to keep near-to-medium-term earnings under pressure. The termination of any contract for tender-assist rigs are bound to affect the earnings and cash flow to the company. Also, downtime in any of the company's rigs currently under contract will be an additional blow to the bottom line.

Atwood Oceanics currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next 1 to 3 months.

Meanwhile, investors can consider other energy firms like Enerplus Corporation ( ERF ), Newpark Resources Inc. ( NR ) and Abraxas Petroleum Corporation ( AXAS ) as attractive investments. All these firms sport a Zacks Rank #1 (Strong Buy).

ATWOOD OCEANICS (ATW): Free Stock Analysis Report

ABRAXAS PETE/NV (AXAS): Free Stock Analysis Report

ENERPLUS CORP (ERF): Free Stock Analysis Report

NEWPARK RESOUR (NR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Symbols: ATW , AXAS , ERF , NR

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