Thursday, May 7, 2009

Bookkeeping: Restarting Atwood Oceanics (ATW)

I am going to restart a former position in deep sea (mostly) driller Atwood Oceanics (ATW)... this is a very small version of Transocean (RIG) or Diamond Offshore (DO). One can throw a dart at this group, as the student body buys them all or sells them all in concert. Deep sea drilling is sort of the chicken's way to play any commodity resurgence; although it doesn't matter to the market, it still matters to me to buy good value. Atwood, despite a large run trades at 6x 2009 estimates (their year ends in September not December) but again - valuation and things like this don't matter in our current era. It's just buy the big secular theme. I could go and buy a small cap natural gas stock driller, or copper stock and they will perform similarly.

Diamond Offshore had nice earnings a week or two back, Transocean and Atwood reported in the past 24 hours... the stock is down 11% but nothing to do with earnings. The entire oil service space is getting hit as it is their turn to "rotate out" as student body moves over to healthcare. Flavor of the day changes often in these parts. I am going to use these dips to begin to broaden the portfolio into different spaces because it is now impossible to tell what the thesis of the day will be; one day it's consumer, one day it's reflation, one day (rarely of late) it's fear.

We last sold out of Atwood in early September 2008 [Sep 9, 2008: Bookkeeping- Closing Atwood Oceanics] - it imploded further along with the entire commodity space, and has since made a huge rebound with the rest of the market.

The stock opened up north of $28 post earnings but has since retrenched to $23s where I'm starting about a 1.5% stake.

If I'm correct we get a more sizeable correction I'll begin buying or adding to some names I've been waiting to pull the trigger on. But if I am wrong and this is "it" for the correction, I'll have some coverage on the long side. Today's drop, puts ATW below the 200 day moving average but this herd has moved so strongly, moving averages have meant nothing. If the "oil trade" is back on in the next few weeks, the horde will move all the stocks without regard for squiggly lines on charts. That said, I still am leaning to more downside - just providing "insurance" in case we reverse right back up.

6:30 PM EDIT
Atwood is notorious for the shortest earnings report I have in my watch list universe; along with a tiny P&L and that's all the fun without heading to the SEC website
  • Atwood Oceanics, Inc., (NYSE: ATW - News) Houston-based International Drilling Contractor, announced today that the Company earned net income of $56,427,000 or $0.88 per diluted share, on revenues of $140,652,000 for the quarter ended March 31, 2009 compared to net income of $41,755,000 or $0.65 per diluted share, on revenues of $113,530,000 for the quarter ended March 31, 2008.
  • For the six months ended March 31, 2009, the Company earned net income of $134,790,000 or $2.10 per diluted share, on revenues of $306,156,000 compared to net income of $80,304,000 or $1.25 per diluted share, on revenues of $224,578,000 for the six months ended March 31, 2008.
Here is a look at the much larger (and much broader portfolio) that are the earnings of Transocean (RIG)
  • Offshore drilling contractor Transocean Ltd. on Wednesday said its first-quarter profit slid 18 percent, driven by one-time charges, including a $221 write-down on rigs held for sale. Quarterly earnings fell to $942 million, or $2.93 per share, from $1.15 billion, or $3.58 per share, during the same period last year. The charges hurt earnings by 82 cents per share.
  • Revenue inched up to $3.12 billion from $3.11 billion in the prior-year period. Analysts forecast an average revenue of $3.10 billion.
  • Utilization during the first quarter remained flat at 91 percent, the Switzerland-based company said, while average day rates rose 12 percent from last year.
This comment is why I prefer deep sea - even though all these commodity names move together in one huge horde
  • Chief Executive Bob Long said the company is well positioned with nearly $36 billion of contracts in hand and a firm stake in the still-healthy deepwater market, though he forecast more weakness for shallow-water rigs.
  • "It would be very difficult to build a compelling case for recovery in jackups as early as 2010," Long told analysts on a conference call. "There is just too much new capacity coming on without contract."
[Aug 8, 2008: Atwood Oceanics - Steady as She Goes]
[Jun 25, 2008: Atwood Oceanics Announces a New Contract for Atwood Hunter]
[May 8, 2008: Atwood Oceanics Short and Sweet Beat]
[Feb 7, 2008: Earnings Update on Our 2 Drillers: Atwood Oceanics and Diamond Offshore Drilling]
[Nov 29, 2007: Deep Sea Driller Atwood Oceanics Earnings Surge]

Long Atwood Oceanics in fund; no personal position

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