Texas-based offshore drilling contractor
Atwood Oceanics, Inc
) subsidiary has inked a contract with Daewoo Shipbuilding and
Marine Engineering Co. Ltd. (DSME) for the construction of fourth
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The total cost of the new drillship - Atwood Archer -is estimated
at $635 million. This includes the required expenditure on two
blowout preventers, project management, drilling and handling
tools and spares.
The drillship is expected to be delivered by Dec 2015 and will be
deployed at the DSME yard in South Korea. Atwood Archer will be
capable of functioning at a water depth of 12,000 feet and drill
to a depth of 40,000 feet.
The design of Atwood Archer is similar to the formerly ordered
Atwood Advantage, Atwood Achiever and Atwood Admiral. All four
drillships will be capable of functioning at a water depth of
12,000 feet and drill to a depth of 40,000 feet.
The latest order received by Atwood Oceanics is the execution of
an option that was set to expire on Jun 30, 2013. The company
also secured an option to build a fifth ultra-deepwater drillship
at the same cost of Atwood Archer with delivery expected in Sep
2016. The option will expire on Mar 31, 2014.
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 of the company. Also, downtime in any of
the company's rigs currently under contract will be an additional
blow to its 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.
Sanchez Energy Corporation
) as attractive investments. All these firms sport a Zacks Rank
#1 (Strong Buy).