Atwood Oceanics (ATW)

Q4 2011 Earnings Call

November 18, 2011 10:00 am ET

Executives

Mark L. Mey - Chief Financial Officer, Chief Accounting Officer and Senior Vice President

Robert J. Saltiel - Chief Executive Officer, President, Director and Member of Executive Committee

Analysts

Matthew H. Beeby - Global Hunter Securities, LLC, Research Division

Andreas Stubsrud - Pareto Securities AS, Research Division

Darren Gacicia - Vertical Research Partners Inc.

Christopher W. Wicklund - Wells Fargo Securities, LLC, Research Division

Truls Olsen - Fearnley Fonds ASA, Research Division

David Wilson - Howard Weil Incorporated, Research Division

Douglas Garber - Dahlman Rose & Company, LLC, Research Division

David C. Smith - Johnson Rice & Company, L.L.C., Research Division

G. Scott Burk - Canaccord Genuity, Research Division

Judson E. Bailey - Jefferies & Company, Inc., Research Division

Stewart Glickman - S&P Equity Research

Rhett Carter

Presentation

Operator

And welcome to today's program. [Operator Instructions] Please note today's call is being recorded. It's now my pleasure to turn the program over to Mark Mey, Senior Vice President and CFO of Atwood Oceanics. Please begin, sir.

Mark L. Mey

Thanks, Kevin, and good morning. Welcome to Atwood Oceanics' conference call and webcast to review the company's operating results for the year ended September 30, 2011. The speakers today will be Rob Saltiel, President and CEO; and myself, Mark Mey, Senior Vice President and CFO.

Before we begin, let me remind everyone that during the course of this conference call, we may make forward-looking statements which are not historical facts and are based upon management’s current plans, expectations, estimates, assumptions and beliefs concerning future events impacting us. These statements involve a number of risks and uncertainties, including the risks which are described in the company's most recent Form 10-K and other filings with the U.S. Securities and Exchange Commission. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements if one of these risks or uncertainties would occur or our assumptions are proved incorrect. Undue reliance should not be placed on these forward-looking statements, which are applicable only as of the date hereof. Now let me turn the call over to Rob for opening remarks.

Robert J. Saltiel

Thank you, Mark, and good morning to all of you joining today's call. I will make a few comments on the highlights from the fourth quarter and the key developments for Atwood and our industry since our last earnings call. Mark will then provide the details on the quarter's numbers and offer cost guidance for the fiscal year ahead.

I'm pleased to report that our company enjoyed another solid quarter of financial results. In fact, our quarterly revenue of nearly $178 million was the best in our company's 43-year history. Earnings were very strong as well at just under $73 million or $1.12 per diluted share. These results allowed us to achieve record high earnings for the 2011 fiscal year of $272 million or $4.15 per diluted share. Our fiscal year revenue of $645 million was just shy of last year's record of $651 million. These excellent results are once again due to delivering reliable drilling services to our clients, while managing our costs prudently. Our rig operations teams continue to drill our wells, maintain our equipment and respond to our clients' needs in accordance with our expectations as a top-performing drilling company. This is how we achieved a fleet-wide reliability factor of 97% for the fourth quarter. I will add that the Atwood Osprey concluded its first complete quarter of operation, with a 94% uptime.

Our asset management team in Houston is spending significant time with our rig teams to identify and scope maintenance projects well in advance of their due dates to ensure that potential supply chain issues do not jeopardize our fleet reliability down the road. Reliability and revenue recognition depend on solid execution, and our people continue to execute very well.

On the cost side, we are working to manage both onshore and offshore costs, even as we expand the Atwood team to accommodate our rig fleet growth over the next few years. We are adding some very talented people to Atwood who bring skills, experience and fresh ideas to our organization, however, we are very protective of our efficient structure and streamlined decision-making processes, and this is helping us to keep the costs in line.

Turning to our fleet operations for the quarter. We completed our planned regulatory work and associated maintenance on the Atwood Hunter in less than our expected out-of-service time prior to the rig's move from Ghana to Equatorial Guinea. We also completed maintenance work on the Vicksburg without incurring any lost revenue due to some good planning by the rig and our Houston technical team.

The regulatory work that we anticipated completing on the Atwood Beacon in the fourth quarter has now been delayed until at least this current quarter, owing to the extended duration of the drilling program in Suriname.

This past quarter and the month of October, we're very busy for our marketing team as we achieve 3 significant fixtures, which I will discuss in more detail. Altogether, these 3 agreements added more than $890 million to our contract backlog.

Our revenue backlog stands at approximately $1.8 billion as of November 1, which is approximately 50% higher than it was on this date a year ago. The first 2 significant fixtures were for the Atwood Eagle and Atwood Falcon, as both rigs committed to drill for Apache offshore in northwest Australia. The Eagle's program is for 18 months and will commence upon conclusion of our 6-month contract with Chevron next year. We anticipate this to occur around September of 2012, meaning the Eagle will be busy with Apache until March 2014.

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