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Atwood Oceanics Inc. beats by $0.20, misses on revenue

  • Atwood Oceanics Inc. (ATW): FQ2 EPS of $1.13 beats by $0.20.
  • Revenue of $273.09M (+7.9% Y/Y) misses by $8.99M.
  • Press Release
Comments (9)
  • Investing Doc
    , contributor
    Comments (444) | Send Message
     
    I guessed $1.07 and $280.56. So yeah, go Atwood!
    30 Apr, 06:17 PM Reply Like
  • Thewaltzy
    , contributor
    Comments (200) | Send Message
     
    Looks like a positive result. Plus mako contract was extended (higher rates).
    Hopefully remaining (unfinished) new-builds get contracted soon too!
    30 Apr, 06:27 PM Reply Like
  • Thewaltzy
    , contributor
    Comments (200) | Send Message
     
    Anyone else surprised by mkt reaction to ATW today?
    1 May, 02:21 PM Reply Like
  • Investing Doc
    , contributor
    Comments (444) | Send Message
     
    Relatively in-line on revenue, crushing EPS, of COURSE it's down 5%. Because efficient market hypothesis.

     

    I wasn't able to hear the conference call and can't find a transcript yet, so I'm guessing guidance must have confirmed a significant decrease in dayrates or utilization. 21 zero-rate days for the Advantage sucks; considering how close they came to beating revenue estimates as it was, the loss of about $10 million hurt. But still, a solid quarter, and the stock gets punished like this.

     

    I understand that there certainly will be some near-term softness in rig day-rates moving forward, but I'm not certain how that will affect ATW considering how much of their current fleet is already contracted out. Maybe somebody smarter than me can explain what's happening.
    1 May, 04:03 PM Reply Like
  • Thewaltzy
    , contributor
    Comments (200) | Send Message
     
    Falcon got a year extra,at good rates.
    Expectation is hunter will not work for a while, and then at lower than current rates.
    Plus the 2 un-contracted UDWs haven't been placed, and no update there.
    I still think its a good company. I think it was hit by general apprehension/fear in the market.
    1 May, 04:57 PM Reply Like
  • Investing Doc
    , contributor
    Comments (444) | Send Message
     
    As I posted elsewhere, the math regarding today's price action doesn't make sense. Given how their fleet is contracted for the remainder of the fiscal year (without the Southern Cross and Seahawk, which are cold-stacked, and the Admiral and Archer, which are still pending delivery), rates seem pretty locked in. Going by their most recent update, the 3 UDW vessels garner an average $578k / day, the 5 DW semisubs operate at an average $467k/d, and the 5 jackup rigs operate at $163k / day. If we assume only 72 operating days per vessel per quarter we get revenues of $513.3 million for the rest of 2014 and yearlong revenues of $1.07 billion. Assuming net margin of 26%, we get net income of $278.5 million, or $4.28 per diluted share. Even at that EPS, reverse DCF (using BVPS $36) suggests that EPS growth would have to be at -25% for the next 5 years to justify today's price.

     

    Day rates are going to be soft in the near term, but -25% for the next 5 years? When we have earnings visibility for almost 60% of the time for the next 2.5 years? Is that right?
    1 May, 05:21 PM Reply Like
  • Thewaltzy
    , contributor
    Comments (200) | Send Message
     
    I agree it doesn't make sense. One thing about your expense assumptions; rigs not earning incur significant costs. So I think your margin assumption above is too high.
    I'm new to looking at this sector however.
    I also like Rowan. Hopefully it doesn't follow atwood down!
    1 May, 05:48 PM Reply Like
  • Investing Doc
    , contributor
    Comments (444) | Send Message
     
    Agree that cold stacked and warm stacked rigs incur costs. But I think my net margin assumption is pretty conservative as is; ATW's net margins haven't fallen below 30% since 2005. My point is that margins shouldn't compress too much further from warm stacking rigs; ATW already has most of its vessels contracted out until 2016. They have earnings visibility with current day rates until that time for about 60% of the fleet. It would take a catastrophic collapse in day rates, combined with stacking rigs, to force that kind of revenue and earnings decline. And even if it did decline by that much, that's reflected in the current share price. Basically, the market is offering an unheard-of margin of safety at current prices, if my math is right.
    1 May, 07:12 PM Reply Like
  • Thewaltzy
    , contributor
    Comments (200) | Send Message
     
    Investing, I agree with your math, really! ATW added a $1 EPS in one quarter. I think that's the base case for it, over the next while. At $50 a share, it pays you back over 12 years. Assuming no growth.
    On the call they mentioned that while they expect contracts for the new deliveries, they don't know what rates to expect yet. But you'd have to imagine they'll still be somewhat above the break-even rate.
    They also were quite bullish on investing in ships in the future, just not in the next 12 months. Which is a great sign of where they think the market for these ships is really heading.
    2 May, 08:07 AM Reply Like
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