Texas-based offshore drilling contractor
Atwood Oceanics Inc.
) recently announced that its subsidiary has won a drilling
services contract for its rig - Atwood Beacon. The rig has been
contracted by Italian explorer,
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The 2-year rig contract - following the end of the current deal
in Israel by July 2013 - can be extended by another year and adds
approximately $128 million in revenue backlog. Atwood Beacon will
be deployed in Italy and will bear some charges related to
compliance with local laws and regulations.
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, Atwood Oceanics was awarded a 39-months contract for
the semisubmersible drilling unit Atwood Condor, by Shell
Offshore Inc, a subsidiary of
Royal Dutch Shell plc
). The rig was contracted at a dayrate of $555,000.
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 is bound to affect the
earnings and cash flow to the company. Also, downtime in any of
the Atwood Oceanics' 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 another energy firm like
Newpark Resources Inc.
), carrying Zacks Rank #1 (Strong Buy), as an attractive