Atwood Oceanics Cheap Due To Unrelated Weakness
Illuminati Investments • 13 Comments
Illuminati Investments • 13 Comments
Market Is Overlooking Atwood Oceanics' Future Cash Flow
Casey Hoerth • 15 Comments
Casey Hoerth • 15 Comments
Yesterday, 3:45 PM
- Diamond Offshore (DO +1.4%) is higher after Q1 earnings easily exceeded analyst estimates, but it is not helping shares of other oilfield services companies in today's trade.
- Wells Fargo views DO's report positively, although results likely included noise from the accounting of a demobilization fee and notes that another contract termination in Mexico could be viewed as a partial negative offset.
- The Zephirin Group contends that DO's do not overshadow weak fundamental conditions in the offshore industry likely to persist, hurting earnings through 2018 and beyond for the likes of Noble Corp. (NE -2%) and Ensco (ESV -3.2%), which reported earnings last week (I, II).
- Zephirin rates NE and ESV at Hold - High Risk, forecasting a 30% reduction in dayrates for NE's Sam Croft and Tom Madden drillships and rate reductions of up to 25% or termination in the near future for ESV's four rigs working in Brazil for Petrobras at a day rate range of $300K-345K.
- Also: RIG -0.7%, RDC -1.4%, ATW -0.7%.
- Now read Diamond Offshore names Youngblood as new CFO
Thu, Apr. 14, 3:30 PM
- The Obama administration announces new oil well control rules aimed at preventing the kind of blowout that happened in the 2010 Gulf of Mexico oil spill.
- The regulations announced by the Interior Department tighten requirements for blowout preventers, well design, well control casing, cementing and sub-sea containment, and call for real-time monitoring, third-party reviews of equipment, regular inspections and safe drilling margin requirements.
- The effects will be particularly acute for the Gulf’s top crude oil and gas producers, Royal Dutch Shell (RDS.A +1.1%), BP (BP -1.6%), Chevron (CVX +0.1%) and Exxon Mobil (XOM +0.4%); XOM says the new rules will cost $25B over 10 years and render many offshore discoveries worthless.
- Offshore drilling stocks are broadly lower on the news: RIG -6.1%, DO -1.4%, ESV -5.1%, RDC -7.3%, NE -5.4%, ATW -9%, SDRL -8.9%, SDLP -4%.
- ETFs: XLE, VDE, ERX, OIH, XOP, FCG, ERY, GASL, DIG, DUG, BGR, XES, IYE, IEO, FENY, IEZ, PXE, FIF, PXJ, RYE, NDP, GUSH, DRIP, DDG, FXN
Wed, Mar. 30, 5:58 PM
- For Atwood Oceanics (NYSE:ATW), the recent changes to its loan agreements provide a "necessary lifeline" by alleviating its 2017 covenant concerns, but risk lingers until its backlog improves, Citigroup's Scott Gruber says.
- ATW's leverage ratio requirement was eliminated in the new agreement, while the interest coverage ratio requirement was lowered to 1.15x from 3x; in exchange for relief, the spread on the used portion of the revolver rises to 250-325 bps and the total commitment was lowered by $152M.
- But Gruber notes that ATW has one of the weakest backlogs, with only one contract in 2018, so "the onus is now on Atwood to secure a better backlog under the more lenient revolver agreement."
Mon, Mar. 28, 3:19 PM
- Ensco (ESV +1.2%) and Atwood Oceanics (ATW +3.3%) are both downgraded to Underweight from Equal Weight at Barclays, which now does not expect the offshore oil drilling market to recover until early 2018, pushing out recovery assumptions from its previous estimate of early 2017.
- Even if oil prices increase to $50/bbl by year-end, large oil companies will concentrate on improving their balance sheet and will avoid undertaking new offshore projects for several quarters, Barclays believes.
- The firm sees only 25% of rigs being recontracted over the next 18 months, predicting that ESV shares will tumble to $7 and ATW to $6 from current levels; Transocean also is rated Underweight (RIG -0.7%).
- ESV also was cut to Sell at Susquehanna, but shares have remained higher for most of the day.
Mon, Mar. 21, 2:48 PM
- Atwood Oceanics (ATW +3.3%) says its Australia subsidiary's drilling services contract with Woodside Energy (OTCPK:WOPEF, OTCPK:WOPEY) for the semisubmersible Atwood Eagle has been suspended.
- ATW says the remaining 165-day term is transferred to the semisubmersible Atwood Osprey for Woodside's utilization upon completion of the Atwood Osprey's current drilling program.
- Alterations of oil and gas offshore drilling contracts has been a recurring theme as low oil prices continues to cause producers to cut back.
Mon, Mar. 14, 2:20 PM
- Don't throw in the towel on the entire group of offshore drillers, Seaport Global says, as the firm sees “deep value” in Diamond Offshore (DO -0.9%), Noble Corp. (NE -1.6%) and Rowan (RDC +0.8%).
- DO, NE and RDC boast capital structures that are sustainable into the next decade, with fleets well suited to meet future needs or that can be upgraded through distressed asset acquisitions, Seaport says; even assuming minimal new rig demand in 2018, the firm says the companies can manage through the downturn and emerge unscathed against wounded competition when offshore drilling resumes.
- However, Seaport withdraws its previous Neutral ratings on Hercules Offshore, Ocean Rig UDW (ORIG -2.5%), Pacific Drilling and Seadrill (SDRL -2.7%), and reiterates Reduce ratings on Atwood Oceanics (ATW +2.2%), Ensco (ESV -1.5%) and Transocean (RIG +0.6%) to reflect their uncertain liquidity in a downturn likely to extend into 2018.
Fri, Mar. 11, 3:27 PM
- Goldman Sachs sees “green shoots [appearing] in the distance” for the oilfield services sector but not offshore drillers, as the firm downgrades Atwood Oceanics (ATW +2.9%) and Noble Corp. (NE +0.7%) to Sell, where they join Transocean (RIG +3.1%).
- Goldman says offshore drilling is the only group where it expects EPS/EBITDA to continue to fall through 2018; offshore driller EBITDA for 2016 is being supported by legacy contracts that are almost 2x current spot rates, which should fall sharply as the contracts expire in 2016-17 and rigs roll over to spot rates.
- Even if oil prices recover, Goldman thinks deepwater drilling activity growth would lag growth in U.S. shale activity, since project economics generally are better in U.S. shales and E&Ps involved in U.S. shales are quicker to react; deepwater activity is largely comprised of a few big companies such as BP, Shell, Chevron and Petrobras, who are not likely to meaningfully increase their rig demand in a short period of time to absorb the current oversupply.
Wed, Mar. 9, 3:23 PM
- Ocean Rig UDW (ORIG -22.9%) plunges after missing Q4 earnings expectations and saying "prospects for the industry remain bleak” and “are likely to remain so at least until 2018.”
- ORIG says it is in discussions with lenders of its loan agreement related to the consequences of Ocean Rig Apollo termination, and that the situation could evolve into a "significant prepayment" of the loan.
- ORIG says its fleet operated at 99.5% utilization during Q4, and FY 2015 fleet operating efficiency was ~98.2%.
- Although ORIG’s comments were more bearish than the outlook described by other offshore drillers, the company’s earnings are hurting other names in the space: DRYS -19.6%, SDRL -16.4%, RIG -2.3%, NE -5.7%, ESV -3.9%, DO -1.4%, RDC -4.4%, ATW -3.3%.
Fri, Mar. 4, 6:35 PM
- Chesapeake Energy (NYSE:CHK) was the largest gainer on the S&P 500 for the third day in a row, soaring 19% in today's trade to cap an 89% surge for the week - thanks in no small part to the big short squeeze in the energy sector following the bounce in crude oil prices.
- Short interest in CHK rose to 234.7M shares during February's H1, ~40.5% of the public float and more than triple the short interest of a year ago (Briefing.com).
- Many energy names have high short interest, so short-covering is certain to be playing a part in the momentum behind some of this week's movers, including Atwood Oceanics (ATW, with short interest at 42% of the float), Transocean (RIG, short interest 38.6% of float), Hornbeck Offshore (HOS, 36.5%), Bonanza Creek Energy (BCEI, 32.4%), SM Energy (SM, 26.6%), Tidewater (TDW, 22.3%), Noble Corp. (NE, 21.1%), Whiting Petroleum (WLL, 19.9%), Lucas Energy (LEI, 19%), Denbury Resources (DNR, 18.8%), Seadrill (SDRL, 17%).
Thu, Mar. 3, 2:58 PM
- Offshore drillers are surging today, which RBC analysts at least partially attribute to Noble Corp.'s (NE +16.1%) news that it spent $200M to buy back bonds due in 2020 and 2021, greatly reducing its debt.
- RBC estimates that NE would be able to retire ~$300M of debt principal at face value for $200M with new borrowings on the revolver, which should generate annual interest savings of ~$10M or a ~$0.03 impact to EPS.
- Ben Levisohn of Barron's also notes that oil companies in general have been able to offer stock and pay down debt, which has reduced some of the fears that the entire sector could go bankrupt, and that short interest in offshore drillers has been high.
- Also: RIG +9.9%, SDRL +11.7%, ESV +13.2%, RDC +10.5%, DO +5.9%, ATW +20%, PACD +42.6%.
Tue, Mar. 1, 10:58 AM
- Moody’s cut the credit ratings of six offshore drillers late Monday, expecting the group to face an extremely challenging operating environment through at least 2018.
- Moody's cuts Ensco (ESV -7.2%) by five notches to B1 from Baa2, saying "earnings and liquidity will decline over time as the company is compelled to rationalize its fleet to adjust to reduced demand conditions."
- Falling four notches were Atwood Oceanics (ATW -8.8%), Noble Corp. (NE -2%) and Rowan (RDC -2.1%); the ratings agency expects ATW to breach a debt covenant in 2017 and says the company is at increased risk of having to restructure.
- Debt ratings falling three notches were Diamond Offshore (DO -0.5%) and Transocean (RIG -1.8%).
Fri, Feb. 26, 6:57 PM
- Shares of offshore drillers gained across the board today, even as Ensco (NYSE:ESV) was downgraded to Underperform at Wells Fargo and Transocean (NYSE:RIG) was maintained with a Sell rating at Evercore ISI.
- Wells Fargo says ESV improved its liquidity by cutting its dividend, and has $1.3B of cash and full availability on its $2.25B revolver, but backlogs were down 40% Y/Y as offshore activity fell and competition intensified, and the industry expects 70 new jackups to come out of shipyards in 2017.
- Evercore ISI’s James West says RIG leads the industry in rig retirements but continues to have the largest fleet of the offshore drillers, and thus still has a lot of work to do before he removes his Sell rating.
- Rowan (NYSE:RDC) offered two nice surprises in its Q4 results, securing a one-year contract for the Ralph Coffman HS Jackup at a $135 dayrate, and reporting a gain on the sale of Rowan Louisiana, which had been impaired to scrap value.
- In today's trade: ESV +6.7%, RIG +5.1%, RDC +9.9%, DO +4.2%, SDRL +3.8%, ATW +4.2%, NE +9%.
Thu, Feb. 18, 4:30 PM
- Atwood Oceanics (NYSE:ATW) -2.9% AH after eliminating its quarterly dividend, a move it says will provide "greater flexibility to weather the current downturn."
- ATW paid a dividend of $0.075/share in the previous quarter, which was cut from a prior $0.25/share payout.
- ATW says the elimination will save the company nearly $5M/quarter.
Thu, Feb. 4, 12:48 PM
Thu, Feb. 4, 11:48 AM
- Offshore drillers are on the move today as rising oil prices ease concerns about the difficult market that remains apparent in earnings releases from Noble Corp. (NE +1.1%), which reported last night, and Atwood Oceanics (ATW +17.2%), which reported earlier this week.
- NE reported below consensus Q4 earnings, but Evercore ISI's James West says the company continues to perform well operationally, with YTD unpaid fleet operational downtime edging up slightly to 5% from 4.6% in Q3.
- NE also announced plans to retire two rigs, the drillship Noble Discoverer and jackup Noble Charles Copeland, bringing its total rig attrition to four floaters and one jackup during the oil downturn.
- Jefferies says ATW has the most challenged balance sheet over the longer-term among its mid-cap coverage, but it is encouraged by ATW’s prospects to better position itself for the near-term with a covenant amendment, and maintains its Buy rating with a $9 price target (Q4 earnings).
- Related peers: RIG +3.6%, DO +3.8%, ESV +5.2%, RDC +4.3%, SDRL +2.5%.
Tue, Feb. 2, 5:38 PM
Atwood Oceanics, Inc. is a global offshore drilling contractor engaged in the drilling and completion of exploratory and developmental oil and gas wells. It owns mobile offshore drilling units and is constructing ultra-deepwater drillships and high-specification jackups. The company was founded... More
Sector: Basic Materials
Industry: Oil & Gas Drilling & Exploration
Country: United States
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