Atwood Oceanics Announces Transfer Backlog From The Atwood Eagle To The Atwood Osprey

| About: Atwood Oceanics (ATW)

Summary

ATW announced that a backlog transfer of 165 days from the Atwood Eagle to the Atwood Osprey working for Woodside in Australia.

The Atwood Eagle will be ready stacked and the Atwood Osprey will work now until September.

ATW backlog is quite weak after 2016 and is the subject of concern. I recommend ATW as a hold.

Image: the semisubmersible Atwood Osprey.

This article is an update of my preceding article on Atwood Oceanics (NYSE:ATW) published on February 19, 2016.

Today, March 22, 2016, Atwood Oceanics announced the following:

Its Australia subsidiary's drilling services contract with Woodside Energy Ltd. ("Woodside") for the semisubmersible Atwood Eagle has been suspended by mutual agreement effective March 19, 2016, and the remaining term of 165 days has been transferred to the semisubmersible Atwood Osprey for Woodside's utilization upon completion of the Atwood Osprey's current drilling program. The material contractual terms and conditions, including dayrate of the Woodside drilling services contract remain unchanged after this assignment to the Atwood Osprey.

The Atwood Eagle will temporarily remain in Australia until plans are finalized for its mobilization to Singapore, where the rig will be available for hire.

Quick snapshot of the fleet status after this change:

ATW 3/22/2016 2016 2017 2018 2019 2020 day rate
Atwood Achiever 9 11 0 0 0 495,5
Atwood Archer 0 3 12 12 9 385
Atwood Admiral 0 0 0 0 0 0
Atwood Advantage 9 8 0 0 0 420
Total Drillship 18 22 12 12 9
Atwood Condor 8 0 0 0 0 555
Atwood Osprey 9 0 0 0 0 445
Atwood Eagle 0 0 0 0 0 445
Atwood Falcon 0 0 0 0 0 430
Total SemiSub 17 0 0 0 0
Atwood Aurora 7 0 0 0 0 170
Atwood Beacon 4 0 0 0 0 125
Atwood Mako 0 0 0 0 0 0
Atwood Manta 0 0 0 0 0 0
Atwood Orca 8 0 0 0 0 85
Total Jackups 19 0 0 0 0
Click to enlarge

The situation has not changed and the 165 days remaining from the Atwood Eagle contract has been reported to the Semisubmersible Atwood Osprey. However, the Semisubmersible Atwood Eagle is now classified as ready stacked.

A further analysis of the fleet shows that Atwood Oceanics will have all its semisubmersibles and jackups idle before the end of 2016, which is quite worrisome, due to the fact that it will be extremely challenging to find a new contract soon.

Recent 1Q'16 results:

Q1 2016 Q4 2015
Revenue in $ Million 307.819 363.18
Net Income $ Million 39.081 150.69
Earnings per share in $ 0.60 2.32
Adjusted Earnings in $ (1 time gain/costs) 1.32 -
Operating income $ Million 46.076 178.63
Shares Outstanding basic in Million 64.765 64.654
Cash and Cash equivalent in $ Million 115.669 113.98
Long-term Net Debt $ Billion 1.6084 1.686
Drilling cost in $ Million 139 127
Dividend (eliminated on Feb.18, 2016) 0.075(1/4/16) 0.25
Enterprise Value $ Billion 1.94 2.78
EBITDA $ Million ("TTM") per Yahoo 777 785.96
EV/EBITDA 2.50 3.54
Capital expenditure $ Million 131.547 448.02/1Y
Click to enlarge

The two graphs above are showing the situation clearly. Atwood shows a yearly revenue of $1.19 billion in 2016, based on the remaining backlog for 2016 ($571 million). However, starting 2017 the backlog will provide only $299 million, assuming no new contract.

This is a difficult situation, because the company will have its entire fleet of semi-sub and jackup rolling off contract at the worst time and will surely experienced idle time, and a dramatic drop in day rate if the company is lucky enough to contract its rigs in 2017-2018.

ATW officially slashed its dividend by 70% on November 19, 2015, and I commented on the move in a preceding article, and on February 18, 2016, finally eliminated the dividend.

Of course, it is not as simple as that! Atwood Oceanics will probably find new contracts even if it is at a low day rate. The company has a very professional management, a good client base, reputation, and a modern fleet that will be able to compete. As always, oil prices are of a paramount importance. If oil prices can find their way to the $50s again, the tendering activity will resume and ATW will be able to survive. However, it is hard to be over-optimistic right now.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I trade ATW