ATW - Atwood Oceanics Inc. Message Board

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Gold/Mining/Energy : ATW - Atwood Oceanics Inc.

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From: Dennis Roth	5/9/2007 10:10:42 PM
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First take: Higher-than-expected costs drive miss May 09, 2007 Goldman Sachs' Rating/Coverage View is Neutral/Neutral News Atwood’s recurring 2QFY07 EPS of $1.00 was below our $1.09 estimate and consensus of $1.08. EBITDA was 8% below our estimate, driven by 7% higher-than-expected operating costs and slightly higher SG&A (-$0.10 EPS variance) and partially offset by slightly lower taxes. Analysis Drilling costs were 7% higher than our estimate (-$0.08 EPS variance) and the primary reason for Atwood’s miss. Key sources of variance relative to our estimates included (1) higher contract drilling expense (-$0.08), (2) slightly lower contract drilling revenue (-$0.02), (3) higher SG&A (-$0.01), and (4) a lower tax rate (+$0.01). Implications The latest fleet status released last night (May 8) guided to (1) approximately 15-30 additional shipyard days in 2007, (2) a slightly lower 2007 tax rate of 13%-16% from 13%-18%, and (3) higher March daily opex for select rigs, which may indicate higher normalized opex going forward, although we will look for more color on the conference call. We believe management’s comments regarding cost control will be key for near-term sentiment for Atwood’s shares given the company’s high contract coverage and recent track record of cost overruns. With that said, we continue to believe Atwood screens as an attractive M&A target, which is likely to provide a floor for the stock.

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