Atwood Oceanics (ATW)

Q2 2012 Earnings Call

May 02, 2012 9:00 am ET


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


Collin Gerry - Raymond James & Associates, Inc., Research Division

John D. Lawrence - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

David Wilson - Howard Weil Incorporated, Research Division

Matthew D. Conlan - Wells Fargo Securities, LLC, Research Division

Nigel Browne - Macquarie Research

Michael Breard



Good day, and welcome to the second quarter results for fiscal year 2012. [Operator Instructions] Please note this call may be recorded. I would now like to introduce our speakers: Mr. Rob Saltiel, President and CEO; and Mark Mey, Senior Vice President and CFO. Please go ahead, Mr. Mey.

Mark L. Mey

Thanks, Clint. Good morning, and welcome to Atwood Oceanics conference call and webcast to review the company's updated results for the second quarter ended March 31, 2012. As Clint mentioned, the speakers today would be Rob Saltiel, President and CEO; and me, 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 were to occur or assumptions prove 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. Good morning to all of you joining our call today to discuss Atwood Oceanics' fiscal year 2012 second quarter results. I will make a few brief comments on our second quarter performance, provide an update on our rig projects and discuss our recent contracting success and our market outlook.

For the second quarter, we achieved revenue of $171.6 million, resulting in earnings of $59.5 million or $0.90 per diluted share. Our results were driven by 3 positive factors that Mark will cover in greater detail: better revenue efficiency this quarter than the previous quarter, operating expenses that were marginally lower than our previous guidance and resolution of a foreign jurisdiction tax examination that lowered our effective tax rate for the quarter significantly.

These positives were offset to some degree by our planned Atwood Falcon upgrade project that commenced in mid-February and is still ongoing, which resulted in no revenues and higher OpEx for the Falcon for approximately half of the second quarter. All in all, we were pleased with the quarter's results and the more reliable operating performance versus our first quarter.

Turning now to current operations, we've had some changes in rig operation since our last earnings call. As mentioned, the Atwood Falcon is undergoing an upgrade project in Singapore, and I'm happy to report that the project remains on schedule. We expect the Falcon to depart the shipyard by the middle of this month for Australia and the inception of our 2.5-year drilling program with Apache.

The Atwood Eagle has concluded its short program with BHP and has now commenced the 6-month campaign with Chevron, also in Australia. Following this, the Eagle will undergo regulatory maintenance work for a period of approximately 25 days prior to commencing its 18-month contract with Apache, again, in Australia.

The Atwood Hunter has moved from Equatorial Guinea to Ghana and is now drilling for Kosmos Energy there. The Hunter will remain in Ghana until it concludes its current contract in October, after which, it will undergo approximately 30 days of 0-rate time for regulatory and maintenance work before commencing a new 3-well program for Noble Energy in Cameroon and Equatorial Guinea.

The Atwood Aurora is nearing completion of its current drilling program also for Noble Energy and will be moving to its next program in West Africa later this month.

There's been no change in drilling status for the Atwood Osprey, Atwood Beacon or Vicksburg, since our last call.

Our 6 new build projects continue to make excellent progress. Our near-term focus is squarely on the Atwood Condor. We are commissioning the rig's major systems and advancing our crew's familiarity with the rig, its equipment and our safety and operations protocols. Barring any adverse developments, we now expect the Condor to be delivered within a month of its original June 30 delivery date.

The Atwood Mako continues to proceed ahead of schedule, so we should be ready for operations approximately 2 weeks earlier than our original September 30 delivery date.

The Atwood Manta, originally scheduled for delivery by year end, is also trending toward an earlier delivery. And while it is early days for the Atwood Advantage and the Atwood Achiever, both drillships are making good progress in the DSME shipyard.

On the subject of new build, I'll remind that we retain one drillship option with the DSME shipyard that expires July 31 of this year. Although I fully expect that some of you will try to get us divulge our thinking on this, we haven't made a decision yet so we won't have much to add on today's call.

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