Texas-based offshore drilling contractor
Atwood Oceanics, Inc.
) recently announced that it would repurchase 2 million shares of
its common stock from
Helmerich & Payne Inc.
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Atwood's move comes in the wake of Helmerich & Payne
offloading a substantial portion of its equity portfolio in line
with its strategy of monetizing its investments. Helmerich is
also selling another 2 million shares of Atwood to a financial
institution. This would reduce the equity portfolio of Helmerich
to only 4 million shares of Atwood and close to a million shares
Atwood would repurchase the shares at a discount to the closing
price of $55.28 on May 23. The company expects to close the
transaction on Jun 13. Subsequent to the transaction, Atwood
plans to cancel the shares with a focus to improve its
Founded in 1968, Atwood Oceanics is a global offshore drilling
contractor mainly 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's leverage to the global drilling market rather
than the domestic market as its biggest advantage over most of
its peers. The drilling outlook internationally 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 which 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 result in an
additional blow to the bottomline, going forward.
Atwood Oceanics carries a Zacks #3 Rank, which is equivalent to a
Hold rating for a period of one to three months. There are other
stocks in the sector that however appear more rewarding like
Abraxas Petroleum Corp.
) which is expected to perform impressively over the next few
months and carries a Zacks Rank #1 (Strong Buy).