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Gold/Mining/Energy : ATW - Atwood Oceanics Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Dennis Roth who wrote (9)	2/11/2008 8:50:59 AM
From: Dennis Roth	Read Replies (1) \| Respond to of 11

Atwood Oceanics, Inc. (ATW): Lowered near term estimates; but fundamentals remain strong - Goldman Sachs - February 11, 2008 What's changed FY1Q08 EPS of $1.20 was above our $1.17 estimate and consensus of $1.15. We lowered our 2008 EPS estimate to $6.77 from $7.24 and raised our 2009/2010 EPS estimates to $10.79/$12.03 from $10.54/$10.77 to reflect adjustments to contract drilling income and the tax rate. Implications (1) Deepwater fundamentals remain overwhelmingly positive and near-term availability is likely to receive a premium. This view was supported on Friday when a competitor’s 5th generation semi received a 3 year contract at over $600,000/day beginning in early 2009. ATW’s fleet is well positioned with two floaters available in 2008; we expect strong contracts to support the stock’s current valuation. Management remains bullish on the deepwater market and is willing to enter shorter term contracts to maximize rate. (2) ATW reported a second consecutive quarter of strong execution and maintained FY2008 cost inflation guidance of 10-12% yoy. Continued cost control is important to support the company’s current valuation in our view – especially since cost overruns challenged the company since early 2006. (3) We expect ATW to exercise the outstanding option for the second newbuild semi given management’s bullish view of the market and desire to growth the company. However, we do not expect the option to be exercised without a contract. Valuation ATW trades at 9.1X/8.2X CY2008 EV-DACF/EV-EBITDA (a 6%/27% premium DO) and 6.7X/6.0X CY 2009E EV-DACF/EV-EBITDA (-9%/+9% relative to DO). Our $91 12-month price target remains unchanged (9.5X CY2008E EV-DACF). Key risks Key risks include: (1) Cost inflation; (2) a severe correction in commodity prices.