Atwood Oceanics Management Discusses Q3 2012 Results - Earnings Call Transcript

Atwood Oceanics (ATW)

Q3 2012 Earnings Call

August 02, 2012 9:00 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

Todd P. Scholl - Clarkson Capital Markets, Research Division

David Wilson - Howard Weil Incorporated, Research Division

Ian Macpherson - Simmons & Company International, Research Division

Waqar Syed - Macquarie Research

Brian Uhlmer - Global Hunter Securities, LLC, Research Division

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

Nigel Browne - Macquarie Research

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

Matthew H. Beeby - Williams Financial Group, Inc., Research Division

Presentation

Operator

Good day. [Operator Instructions] Please note this call is being recorded. At this time, I would like to turn the call over to our moderator, Mark Mey. Go ahead, please.

Mark L. Mey

Thanks, Ty. Good Morning, and welcome to Atwood Oceanics Conference Call and Webcast to review the company's operating results for the third quarter ended June 30, 2012. The speakers today will 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 the 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 and 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 his opening remarks.

Robert J. Saltiel

Thanks, Mark, and good morning to all of you joining on this morning's call. I'll discuss Atwood's principal accomplishments from the third quarter, which was indeed a good one for us and provide an overview of the offshore drilling market and our marketing priorities.

We definitely had a strong third quarter, financially and operationally, as we achieve revenue of $178.6 million and earnings of $51.7 million or $0.79 per diluted share. The revenue result was our third highest quarter ever, despite the fact that the Atwood Falcon missed 43 operating days due to completion of a shipyard project, and experienced a further 29 days at a reduced standby rate after the work was completed. Much of the credit for our good performance goes to our rig operations teams as we improve our overall fleet revenue efficiency by 100 basis points versus the second quarter to nearly 95%. It is worth noting that the Atwood Osprey achieved nearly 97% revenue efficiency, while our 3 jackups were at a collective 98%.

I also want to comment on the fine performance of our project teams. As we transform and expand Atwood's rig fleet, delivering new build rigs on time and on budget is critical to our success. At the same time, we must also maintain our legacy fleet to a high standard, sometimes with extensive shaking shipyard projects to maintain our quality service and achieve higher revenue recognition on our contracts. In the third quarter, we demonstrated that our project planning and execution remains outstanding for both new build rigs and our existing fleet, and is definitely a core competency for our company.

Let me start with a discussion of our new build projects. Clearly, our most significant project achievement in the third quarter was the delivery of the Atwood Condor, our 10,000-foot water depth Dynamically Positioned Semisubmersible, a full 2 days ahead of schedule on June 28. Our project management team did a fantastic job in delivering the Condor early without compromising on the thoroughness of system commissioning or the quality of the finishing work. Excellent collaboration between our projects and operations teams, the Jurong Shipyard and our client, Hess Corporation, made this milestone possible.

Our success in delivering the Atwood Osprey in 2011 was leveraged as we replicated our crew indoctrination process for the Condor team to ensure full understanding of, and commitment to, safety and operations excellence. With each new build rig that Atwood delivers, our project team applies the lessons learned to improve our future rig deliveries.

Our first 2 new build Pacific Class 400 jack ups, the Atwood Mako and Atwood Manta, continue to trend approximately 1 month ahead of their original project schedules. Our crewing [ph] of these 2 rigs is keeping pace with the expected earlier rig deliveries, so we should go to work with each rig earlier as well.

Although not due until June 2013, the Atwood Orca is also ahead of its construction schedule.

The Atwood Advantage and Atwood Achiever drillships continue to make excellent progress in the DSME shipyard in South Korea, with no changes in schedule or budget from our previous guidance. Since our last earnings call, we have extended our 1 remaining drillship option with the DSME shipyard by 2 months until the end of September. The construction cost and delivery schedule associated with this option expansion remain unchanged. We remain hopeful that we will exercise this option and add a third drillship to our fleet.

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