Atwood Oceanics: Why This Small Cap Has 60% Upside
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PR Newswire (Mar 10, 2014)
at CNBC.com (Apr 1, 2011)
at MarketWatch.com (Jan 3, 2011)
at CNBC.com (Oct 11, 2010)
at CNBC.com (Sep 23, 2010)
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Atwood Oceanics, Inc. is an offshore drilling contractor, engaged in drilling and completion of exploratory and developmental oil and gas wells. The Company owns 13 mobile offshore drilling units and is constructing three ultra-deepwater drillships.
Tuesday, Apr 82:38 PM
Tuesday, Apr 82:38 PM| 30 Comments
- Offshore drillers Atwood Oceanics (ATW +0.5%), Diamond Offshore (DO +2.4%), Rowan (RDC +0.9%), Ensco (ESV +0.8%) and Transocean (RIG +1.5%) are higher today even as Barclays cuts its price targets on the stocks.
- The firm thinks near-term risk is skewed to the downside following a series of negative fleet status reports from the offshore drillers recently and concern for dayrate pressure in most offshore markets; if conditions deteriorate further, the firm would expect underlying asset values to decline further (NAVs declined 16%-plus following the financial crisis and 8% after Macondo), suggesting potential 40% downside before ultimate NAV support takes hold.
Monday, Apr 73:33 PM
Monday, Apr 73:33 PM| 10 Comments
- Things could get worse before they get better for offshore drillers, and even market favorite Rowan (RDC -3.6%) could get hit, Morgan Stanley says as it cuts its rating on the stock to Underweight.
- RDC has fallen less than companies with exposure to the floater market thanks to its greater exposure to jackups, but Stanley sees a surge in jackup orders, driven largely by speculative drillers at Chinese shipyards; the jackup orderbook now stands at a record 140 units, of which only ~20 have been contracted.
- In the sector, the firm recommends yield plays such as Seadrill (SDRL), Seadrill Partners (SDLP) and North Atlantic Drilling (NADL), and prefers premium asset exposure through Atwood Oceanics (ATW), Ensco (ESV) and Pacific Drilling (PACD) over lower-end fleets via Diamond Offshore (DO), Noble (NE) and Transocean (RIG).
Wednesday, Mar 1911:59 AM
Wednesday, Mar 1911:59 AM| 11 Comments
- Shares of offshore drillers have been sinking, but Citigroup is calling a bottom, at least for Transocean (RIG +1.4%), which the firm upgrades to Neutral from Sell.
- The firm believes the fall in deepwater rig rates amid a softening of rig demand in 2014 will transition to stability and eventual recovery over the next 12 months; against a backdrop of strong oil prices and improving economic conditions, along with the large inventory of deepwater oil discoveries awaiting development, the firm thinks the current pain in the rig market will be short lived.
- Drillers likely will be forced to settle for short-term contracts at dayrates of $400K-$450K for rigs that once commanded $600K, the firm says, but RIG shares should be able shrug off the bad news, as they did yesterday.
- Other offshore drillers also are higher: DO +1.1%, NE +1.6%, ESV +1.2%, ATW +1.6%, SDRL +2.1%, HERO +2.4%, RDC +1.2%.
Tuesday, Mar 1812:55 PM
Tuesday, Mar 1812:55 PM| 6 Comments
- Shares of offshore drillers Transocean (RIG +0.8%) and Diamond Offshore (DO +1.6%) are holding up well despite lukewarm updates for the status of their fleets.
- RIG said one rig had signed a nearly three-month extension but another floater is now idle, which puts the total number of idle rigs in the fleet at four; RBC analysts think 2014 will continue to be characterized by dayrate pressure for all floaters and downtime between contracts, and RIG could stack some older rigs if demand does not materialize.
- DO signed a contract for one of its rigs, but Cowen cut its price target to $47 from $50 and earnings estimates to $4.50 from $4.60 as it increases the expected idle time on one rig to three months from one month and expecting another to be stacked next year.
- Also: NE +1.3%, ESV +1.4%, ATW +1.1%.
Monday, Mar 172:24 PM
Monday, Mar 172:24 PM| Comment!
- While Goldman Sachs offers a bright outlook for land drillers such as Baker Hughes and Patterson-UTI (I, II), the firm thinks things may get worse before they get better at offshore drillers such as Atwood Oceanics (ATW -0.5%).
- Goldman removes ATW from its Conviction Buy List, citing the recent sharp drop in the industry's offshore rig utilization and dayrates; however, it continues to like ATW's high quality rig fleet, track record of superior operating performance and high contract coverage, and believes investors eventually will be rewarded for ATW's ability to generate EPS growth in a difficult macro environment.
- Meanwhile, Credit Suisse thinks Transocean (RIG -0.2%), Ensco (ESV -0.7%) and Diamond Offshore (DO -0.9%) could be forced to take some of their rigs out of service.
- Average daily rates for deepwater rigs have slipped back to ~$500K after peaking near $600K toward the end of 2012, and ISI Group sees rates on even the most modern ultradeep-water rigs slipping to $440K within a year, down from north of $500K, as weakening demand meets increasing supply.
Monday, Mar 32:23 PM
Monday, Mar 32:23 PM| 5 Comments
- The Barron's bounce is alive and well even amid today's broad stock market losses, as Atwood Oceanics (ATW +2.1%) benefits from a weekend article that says the midcap offshore driller should rise 40% in the next year.
- The vast majority of ATW's rigs are on contract through 2015, meaning ATW is less exposed to the recent dip in day rates than rivals, and ATW is more efficient than peers, making it more resilient in a weaker market; its 40% operating profit margin is 11 percentage points above the average offshore oil driller's and tops rivals' like Transocean (RIG), at 26%, and Rowan (RDC), at 21%.
- ATW's free cash flow has been negative since 2011 because of its shipbuilding program, but some analysts think cash should gush again starting in 2015, and the company could start issuing a dividend or buying back shares.
Wednesday, Feb 1912:19 PM
Wednesday, Feb 1912:19 PM| 24 Comments
- Speculation over a potential dividend cut has helped send Seadrill (SDRL +2.6%) shares down 20% during the past three months, but Morgan Stanley analysts say there's little reason for so much worry.
- Although SDRL has sold off as investors hone in on its high leverage and ability to bridge a large funding gap amid near-term industry headwinds, the firm says it is confident in SDRL's ability to bridge the funding gap through asset backed financing while contract backlog continues to provide near-term cash flow visibility.
- The Stanley analysts see an attractive entry point with SDRL trading at a compelling ~11% yield.
- Other deepwater drillers also are higher: ESV +1%, ATW +1.3%, RDC +1.2%.
Thursday, Feb 63:19 PM
Thursday, Feb 63:19 PM| 9 Comments
- Recent bearish views on offshore drillers are forgotten for at least a day, as Diamond Offshore's (DO +2%) solid Q4 earnings and revenue beats help lift the entire sector.
- Cowen analysts especially like DO's increased dayrates: Q4 ultra-deepwater average dayrates rose to $350K/day from $284K, deepwater dayrates increased to $402K/day from $380K, and mid-water floater rates rose to $277K/day from $258K.
- However, Wunderlich notes that while the contracts and extensions are a positive, the low duration of the contracts may be the new norm for many of DO’s older lower specification rigs, which will translate to a lower backlog and less revenue visibility.
- ESV +3.4%, SDRL +2.1%, ATW +2.1%, RIG +2%, HP +2%, NBL +1.9%, RDC +1.9%, PKD +1.8%, HERO +1.3%.
Wednesday, Feb 55:37 PM
Wednesday, Feb 55:37 PM| 9 Comments
- Bearish talk about offshore drillers has abounded recently (I, II, III, IV), and Atwood Oceanics (ATW) latest quarterly results won’t ease those concerns, Morgan Stanley says.
- The firm is now modeling a rollover at $400K/day on ATW’s next rig to rollover in Equatorial Guinea in Aug. 2014, down substantially from the rig’s current dayrate of $516K/day (fixed in July 2013), as it sees increased competition in securing new work.
- ATW does remain positioned to deliver steady earnings growth, the firm says, and beyond well-documented near-term floater market choppiness it still forecasts marketed utilization to pick up in 2015.
- ATW (-2.1%) results pulled down other offshore players: HERO -7.9%, DO -3.2%, NE -2%, RIG -1.9%, SDRL -1.8%, ESV -1.6%, RDC -0.9%.
Tuesday, Feb 44:39 PM|Tuesday, Feb 44:39 PM| 3 Comments
Tuesday, Feb 412:10 AM|Tuesday, Feb 412:10 AM| Comment!
Monday, Feb 35:35 PM|Monday, Feb 35:35 PM| Comment!
Monday, Feb 33:39 PM
Monday, Feb 33:39 PM| 2 Comments
- Raymond James maintains its bearish stance on offshore drillers and cuts its estimated 2015 sector EPS by ~18% while noting that this a typical cyclical slowdown and not permanent.
- The firm estimates the industry needs to cold stack ~6% of both the floater and jackup fleet over the next three years to maintain 90% utilization; assuming the pace of newbuilds slows, this should improve the supply/demand dynamics by 2017.
- Rowan Cos. (RDC +0.2%) earns an upgrade to Outperform, joining Pacific Drilling (PACD -1.9%) and Ocean Rig UDW (ORIG -2.1%) as drillers who would rank atop the list of any would-be acquirer given the high spec nature of the fleets.
- Atwood Oceanics (ATW -4.1%), Ensco (ESV -2.4%) and Noble Corp. (NE -0.3%) are downgraded to Market Perform, as offshore stocks are in “full-blown meltdown mode."
- The firm maintains Transocean (RIG -1.9%), Diamond Offshore (DO -1.6%) and Hercules Offshore (HERO +0.4%) at Market Perform, noting that “lower quality assets are too risky as we head into a sloppy market."
Tuesday, Jan 283:56 PM
Tuesday, Jan 283:56 PM| 37 Comments
- The past 12 months have been tough for deeepwater drillers, and the stocks don’t look likely to find a bottom soon, Barclays believes.
- Barclays' base case assumes dayrates continue to slide with UDW dayrates dropping to $475K and total average rates dropping 16% from its bull case - the most likely outcome as the firm continues to believe the market still needs to work through excess capacity and that conditions will get worse before they get better; under this scenario, Barclays says all companies in its coverage universe (except Rowan) are subject to an average share price drop of 35%.
- Under this scenario, the firm thinks Seadrill (SDRL -1.6%) could plunge 52%, Diamond Offshore (DO -1.5%) could sink 45%, Transocean (RIG -0.6%) 24% and Atwood Oceanics (ATW -0.7%) 15%; of the majors in the sector, Rowan (RDC -0.7%) would hold up best, gaining 2%.
Thursday, Jan 232:18 PM
Thursday, Jan 232:18 PM| 12 Comments
- Noble Corp. (NE -9.7%) leads a drop in deepwater drilling contractors after saying it is seeing fewer contract opportunities than a year ago and the industry may be experiencing a “pause in the cycle” after years of growth fueled by oil and natural gas discoveries.
- The pace of customer spending growth is expected to be lower this year compared with last year, NE says in its earnings call, and that's with 38 ultra-deepwater rigs around the world looking for work vs. 22 a year ago.
- The market for shallow-water rigs also looks wobbly, as Hercules Offshore (HERO -16.3%) said yesterday in a fleet status report that it suspended plans to reactivate a shallow-water rig in the Gulf of Mexico.
- Also: DO -5.3%, ESV -4.8%, RDC -3.8%, ATW -3.9%, RIG -3.5%, SDRL -2.8%, HP -1.1%, VTG -4.3%, PKD -1.9%.
Friday, Jan 1711:59 AM
Friday, Jan 1711:59 AM| 9 Comments
- Credit Suisse reviews “beaten, battered and bruised” offshore drillers, noting the sector has continued to disappoint YTD after underperforming by ~15% in 2013.
- As lower dayrates and slowing offshore capital spending keeps the drillers "in the penalty box," the firm says stock selection is key in this environment and prefers Noble Energy (NBL +0.4%), which a de-risked NAV of $32, and Rowan (RDC -1.2%), whose premium fleet trades at a discount.
- The firm cuts Atwood Oceanics (ATW +0.2%) to Neutral from Outperform, explaining that ATW and Seadrill (SDRL +0.4%) “are playing a different game - paying out all of their cash flow as a dividend and shifting assets to SDLP (financial arbitrage).”