Atwood Oceanics, Inc. (NYSE:ATW) is widely seen as a potential takeover target. A recent note by Tudor, Pickering, Holt (TPH) sought to highlight aspects of Atwood that make it make it tasty buyout candidate.
Atwood Oceanics, Inc. (NYSE:ATW) stock has declined more than 60% over the last one year. The downward in the stock can be linked to the fallout in oil and gas prices, which continues to rattle the energy sector.
Shortage of contracts
It turns out that a large number of Atwood’s rigs are out of contracts or will soon be out of contracts. The shortage of near-term contract coverage amid a downturn in crude prices point to a grim picture for Atwood.
Shortage of funds
Besides shrinking contracts as explorers and drillers cool their activities amid fallout in crude prices, Atwood Oceanics, Inc. (NYSE:ATW) is also shaken by dwindling funds. Though the company has a liquidity position of $715 million, the amount won’t be enough to cover its cash need. For instance, the company plans to spend close to $400 million in rig payments in 2017 and 2018. The company has $840 million worth of notes coming due in 2019 and $449 million coming due in 2020.
50 years of experience
Besides its many challenges, Atwood boasts a relatively young rig fleet and nearly five decades of experience in in shallow and deepwater drilling.
If you look at Atwood’s deteriorating financial profile and its unique capabilities and experience, you a see a company that makes the short list of attractive buyout candidates.
But acquisition of Atwood Oceanics, Inc. (NYSE:ATW) won’t come as a surprise. Back in 2009 the company was rumored to be a buyout target, but the management denied it. Those rumors were to return again in 2014, just shortly before crude prices began to fall.
If Atwood were to put itself on the block, companies such as Noble Corporation (NYSE:NE), Diamond Offshore Drilling Inc (NYSE:DO) and Nabors Industries Ltd. (NYSE:NBR) are being cited as potential acquirers. These companies have shown an appetite for grabbing attractive assets on the cheap and Atwood meets the bill.