Is Atwood Oceanics An Opportunity In Disguise?
Summary Of Atwood Analysis
- The oil and gas drilling services industry is under acute pressure due to low crude oil prices, sluggish demand, and an excess supply of rigs.
- Drillers are facing contracting backlogs, difficulty locking in new contracts, and declining utilization and day rates.
- Atwood is no exception, with contracted days falling from 61% for 2H FY 2016 to 23%, and 10% over the next two fiscal years.
- Liquidity is key, and, I believe – despite the uncertainty in revenue flow – that ATW can comfortably service its obligatory payments and capital expenditure plan.
- A fundamental valuation indicates a further downside for equity. I believe that yields on the senior note will tighten and will offer an opportunity for bond holders.
This blog article presents an investment view of Atwood Oceanics Inc., from an equity and credit perspective, based on ValueAdd’s proprietary financial model. This model helps portfolio managers/research analysts generate multiple investment ideas across the capital structure (equity and credit/debt), thus enhancing their probability to outperform the market. This article was first published on Seeking Alpha on September 6, 2016.
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