Stocks of oilfield services companies have been badly beaten down during the oil and gas downturn. One that has been especially bruised is Atwood Oceanics (ATW) , which could make it a tasty takeover target.

The Houston company's stock price has been cut in half over the last 12 months versus a 33% drop for its industry. The reasons? According to a note from Tudor, Pickering, Holt on Monday, it has a relative lack of near-term contract coverage - four of its rigs are either idled or stacked and three more are rolling off contract by the end of the year, joining two new, uncontracted floating rigs it has in its inventory. Those numbers matter given that Atwood's total marketed fleet is only made up of a dozen rigs.

There are also concerns over its shrinking funds. According to TPH analyst Taylor Zurcher, Byron Pope and George O'Leary, the company has a liquidity profile of $715 million -- $160 million in cash plus a $555 million revolving credit facility. It plans to spend $94 million next year and $306 million in 2018 on rig payments. But after that, it will have $840 million due under its revolver May 2019 and $449 million in senior notes due in 2020.

However, Atwood recently secured waivers that effectively eliminate the implementation of any restrictive debt covenants until the third quarter of 2018. Factoring in the company's contract backlog and maintenance capex requirements, TPH sees Atwood as still having a couple more years of liquidity runway -- likely until mid-2018 -- before any notable funding hurdles come into play.

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TPH noted that the company has a relatively young, high-spec rig fleet, with seven floaters and five jackups with an average age of around seven years, including the two newbuild drillships. It also has nearly 50 years' experience drilling shallow-to-ultra-deepwater wells for explorers and producers, particularly internationally. For those reasons, TPH has put the company on its short list of attractive take-out candidates.

Atwood was rumored to be acquisition fodder in 2009, which the company denied, and again in the summer of 2014 - before oil prices began to slide. It's been on The Deal's potential activist target list for two years.

Possible buyers include Noble (NE) , although its stock has been dragging recently; Diamond Offshore  (DO) , which is partially owned by Loews (L) , whose CEO James Tisch has bought oilfield services equipment during previous downturns ("Trouble is opportunity," he said last year); and Nabors Industries (NBR) , which is looking better now that the overhang of bankrupt affiliate C&J Energy Services (CJES) is behind it and it has plans to introduce a new rig platform technology in November.

Transocean (RIG) is another strong possibility, given that its former COO, Rob Saltiel, is Atwood's CEO. Last month it agreed to buy all of the outstanding units of offshore rig affiliate Transocean Partners (RIGP) for $250 million in stock, which will simplify its structure and bring in more cash.

So when might the oilfield services industry turn around? TPH thinks offshore rig demand likely finds its cyclical trough sometime in mid- to late 2017 before starting a gradual recovery through year-end 2018. In the meantime, expect consolidation in the sector as a way for companies to pick up assets on the cheap and eliminate some of the competition, although any strategic deals will probably be stock-for-stock as many potential acquirers are already saddled with heavy debt loads, TPH said.

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