Texas-based offshore drilling contractor
Atwood Oceanics Inc.
) recently announced that its subsidiary has won a drilling
services contract for the semisubmersible rig Atwood Eagle.
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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
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
Newpark Resources Inc.
Abraxas Petroleum Corporation
) as attractive investments. All these firms sport a Zacks Rank
#1 (Strong Buy).