Atwood Oceanics, Inc.
) announced the pricing of senior notes worth $200 million due to
mature in 2020. The Texas-based offshore drilling contractor also
declared that the notes will carry a yearly interest of 6.5%. The
offering is expected to close on Jun 21, 2013.
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Atwood plans to use the net proceeds from the offering for
general corporate purposes, including funding its newbuild
program. A consortium of banking giants such as Barclays Capital
Wells Fargo & Company
Credit Suisse Group
The Goldman Sachs Group, Inc.
) are acting as the joint book-running managers for the offering.
The company has recently increased its external borrowings to
fund its expansion plans. Earlier in Jan 2012, the company issued
$450 million worth of senior notes with a coupon rate of 6.5%.
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 is strong
versus the muted fundamentals in the U.S. In our view, the
company presents investors with growth opportunity from any
global deepwater drilling recovery.
However, there are certain factors that are likely to keep
near-to-medium term earnings under pressure. The termination of
any contract for tender-assist rigs is 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.