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Atwood Oceanics' CEO Discusses Q1 2012 Results - Earnings Call Transcript

The downtime that occurred last quarter on the Osprey and the Hunter was related primarily to subsea equipment maintenance and testing. The root causes of these incidents have been addressed through equipment modifications and/or refinement of our BOP maintenance and testing procedures. While many of our competitors have commented extensively on their issues with BOP reliability, Atwood has largely avoided significant BOP performance issues.

As part of our operations' integrity initiative, we've been working continuously since the Macondo incident to bring greater transparency and consistency to our BOP maintenance and testing. Three things are worth sharing in this regard. First, all maintenance performed on Atwood BOPs is planned well in advance by the collaboration between our headquarters subsea specialists and our rigs subsea engineering teams. The work scope, parts requirements and testing protocols are all agreed upfront. Second, execution of all agreed tasks occurs under continuous supervision that follows a prescribed plan. There are no decisions about work scope that are left to the authority of an individual subsea engineer. Also, there is no pressure to work fast, only to do it thoroughly and according to the plan. And third, the BOP stack is not approved for deployment on a well until both our headquarters' team and our rigs offshore and onshore management teams have given the go ahead. Like all of our major competitors, we assess competency of our subsea personnel and invest significantly in training. But we believe the rigor of our management process will provide a key differentiation in our performance.

I mentioned at the outset of the call that our drilling services for the quarter were higher than expected. This is primarily a timing issue as we expected drilling costs for the full fiscal year will come in at the low end of the guidance that we provided on the last earnings call. Mark will provide further color on our cost outlook in his remarks.

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