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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------------
Form 10-Q
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED DECEMBER 31, 2005
COMMISSION FILE NUMBER 1-13167
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
ATWOOD OCEANICS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-1611874
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
15835 Park Ten Place Drive 77084
Houston, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code:
281-749-7800
---------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filings
requirements for the past 90 days. Yes X No___
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act (Check
One):
Large accelerated filer X Accelerated filer ___ Non-accelerated filer ___
---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of January 31, 2006: 15,439,801 shares of common stock, $1
par value
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ATWOOD OCEANICS, INC.
FORM 10-Q
For the Quarter Ended December 31, 2005
INDEX
Part I. Financial Information
Item 1. Unaudited Condensed Consolidated Financial Statements Page
a) Condensed Consolidated Statements of Operations
For the Three Months Ended December 31, 2005 and 2004.........6
b) Condensed Consolidated Balance Sheets
As of December 31, 2005 and September 30, 2005................7
c) Condensed Consolidated Statements of Cash Flows
For the Three Months Ended December 31, 2005 and 2004.........8
d) Condensed Consolidated Statement of Changes in Shareholders'
Equity for the Three Months Ended December 31, 2005...........9
e) Notes to Condensed Consolidated Financial Statements.........10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................17
Item 3. Quantitative and Qualitative Disclosures about Market Risk...24
Item 4. Controls and Procedures......................................25
Part II. Other Information
Item 6. Exhibits ....................................................26
Signature...............................................................27
Certifications..........................................................29
2
PART I. FINANCIAL INFORMATION
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
This Form 10-Q for the quarterly period ended December 31, 2005 includes
statements about Atwood Oceanics, Inc. (which together with its subsidiaries is
identified as the "Company," "we" or "our," unless the context requires
otherwise) which are not historical facts (including any statements concerning
plans and objectives of management for future operations or economic
performance, or assumptions related thereto) which are forward-looking
statements. In addition, we and our representatives may from to time to time
make other oral or written statements which are also forward-looking statements.
These forward-looking statements are made based upon management's current
plans, expectations, estimates, assumptions and beliefs concerning future events
impacting us and therefore involve a number of risks and uncertainties. We
caution that forward-looking statements are not guarantees and that actual
results could differ materially from those expressed or implied in the
forward-looking statements.
Important factors that could cause our actual results of operations or our
actual financial conditions to differ include, but are not necessarily limited
to:
- our dependence on the oil and gas industry;
- the operational risks involved in drilling for oil and gas;
- changes in rig utilization and dayrates in response to the level of
activity in the oil and natural gas industry, which is significantly
affected by indications and expectations regarding the level and
volatility of oil and natural gas prices, which in turn are affected by
such things as political, economic and weather conditions affecting or
potentially affecting regional or worldwide demand for oil and natural
gas, actions or anticipated actions by OPEC, inventory levels,
deliverability constraints, and future market activity;
- the extent to which customers and potential customers continue to pursue
deepwater drilling;
- exploration success or lack of exploration success by our customers and
potential customers;
- the highly competitive and cyclical nature of our business, with periods
of low demand and excess rig availability;
- the impact of the war with Iraq or other military operations,
terrorist acts or embargoes elsewhere;
- our ability to enter into and the terms of future drilling contracts;
- the availability of qualified personnel;
- our failure to retain the business of one or more significant customers;
- the termination or renegotiation of contracts by customers;
3
- the availability of adequate insurance at a reasonable cost;
- the occurrence of an uninsured loss;
- the risks of international operations, including possible economic,
political, social or monetary instability, and compliance with foreign
laws;
- the effect public health concerns could have on our international
operations and financial results;
- compliance with or breach of environmental laws;
- the incurrence of secured debt or additional unsecured indebtedness or
other obligations by us or our subsidiaries;
- the adequacy of sources of liquidity;
- currently unknown rig repair needs and/or additional opportunities to
accelerate planned maintenance expenditures due to presently
unanticipated rig downtime;
- higher than anticipated accruals for performance-based compensation due
to better than anticipated performance by us, higher than anticipated
severance expenses due to unanticipated employee terminations, higher
than anticipated legal and accounting fees due to unanticipated
financing or other corporate transactions and other factors that could
increase general and administrative expenses;
- the actions of our competitors in the oil and gas drilling industry,
which could significantly influence rig dayrates and utilization;
- changes in the geographic areas in which our customers plan to operate,
which in turn could change our expected effective tax rate;
- changes in oil and natural gas drilling technology or in our competitors'
drilling rig fleets that could make our drilling rigs less competitive or
require major capital investments to keep them competitive;
- rig availability;
- the effects and uncertainties of legal and administrative proceedings
and other contingencies;
- the impact of governmental laws and regulations and the uncertainties
involved in their administration, particularly in some foreign
jurisdictions;
- changes in accepted interpretations of accounting guidelines and other
accounting pronouncements and tax laws; and
- the risks involved in the construction and upgrade of our drilling units.
4
You should also read the risk factors set forth in our Form 10K for the
year ended September 30, 2005 filed with the Securities and Exchange Commission,
or SEC. Undue reliance should not be placed on these forward-looking statements,
which are applicable only on the date hereof. Neither we nor our representatives
have a general obligation to revise or update these forward-looking statements
to reflect events or circumstances that arise after the date hereof or to
reflect the occurrence of unanticipated events.
5
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended
December 31,
--------------------------
2005 2004
REVENUES:
Contract drilling $55,414 $38,986
Business interruption proceeds - 6,440
------- -------
55,414 45,426
------- -------
COSTS AND EXPENSES:
Contract drilling 33,770 25,203
Depreciation 6,390 6,526
General and administrative 5,993 3,571
Gain on sale of equipment (9,275) -
------- -------
36,878 35,300
------- -------
OPERATING INCOME 18,536 10,126
------- -------
OTHER INCOME (EXPENSE)
Interest expense (1,740) (2,018)
Interest income 231 35
------- -------
(1,509) (1,983)
------- -------
INCOME BEFORE INCOME TAXES 17,027 8,143
PROVISION (BENEFIT) FOR INCOME TAXES 2,504 (507)
------- -------
NET INCOME $14,523 $8,650
======= =======
EARNINGS PER COMMON SHARE:
Basic $ 0.94 $ 0.57
Diluted 0.93 0.56
AVERAGE COMMON SHARES OUTSTANDING:
Basic 15,369 15,079
Diluted 15,604 15,422
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, September 30,
2005 2005
------------ -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 43,709 $ 18,982
Accounts receivable 43,020 39,865
Insurance receivable 550 550
Income tax receivable 3,684 3,278
Inventories of materials and supplies 15,184 15,640
Deferred tax assets 1,910 3,080
Prepaid expenses and other 9,928 10,658
--------- --------
Total Current Assets 117,985 92,053
--------- --------
NET PROPERTY AND EQUIPMENT 384,047 390,778
--------- --------
ASSET HELD FOR SALE - 9,017
--------- --------
DEFERRED COSTS AND OTHER ASSETS 4,044 3,846
--------- --------
$ 506,076 $495,694
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of notes payable $ 36,000 $ 36,000
Accounts payable 6,647 6,473
Accrued liabilities 12,662 11,088
Deferred Credits 1,132 2,598
--------- --------
Total Current Liabilities 56,441 56,159
--------- --------
LONG-TERM DEBT,
net of current maturities: 45,000 54,000
--------- --------
45,000 54,000
--------- --------
OTHER LONG TERM LIABILITIES:
Deferred income taxes 18,920 20,140
Deferred credits and other 5,786 3,258
--------- --------
24,706 23,398
--------- --------
SHAREHOLDERS' EQUITY:
Preferred stock, no par value;
1,000 shares authorized, none outstanding - -
Common stock, $1 par value, 20,000 shares
authorized with 15,403 and 15,341 issued
and outstanding at December 31, 2005 and
September 30, 2005, respectively 15,403 15,341
Paid-in capital 124,193 120,986
Retained earnings 240,333 225,810
--------- --------
Total Shareholders' Equity 379,929 362,137
--------- --------
$ 506,076 $495,694
========= ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
7
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
UNAUDTIED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended December 31,
-----------------------------------------
2005 2004
---------------- -------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 14,523 $ 8,650
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 6,390 6,526
Amortization of debt issuance costs 201 201
Amortization of deferred items 139 158
Deferred income tax benefit (50) (50)
Stock option compensation expense 885 -
Gain on disposal of assets (9,275) -
Changes in assets and liabilities:
Collection of insurance receivable - 4,233
Decrease (increase) in accounts receivable (3,155) 2,916
Increase in income tax receivable (406) -
Decrease (increase) in inventory 456 (858)
Decrease (increase) in prepaids (722) 1,116
Decrease (increase) in deferred costs and other assets (453) 967
Increase (decrease) in accounts payable 174 (2,893)
Increase (decrease) in accrued liabilities 1,574 (2,453)
Decrease in deferred credits and other liabilities 1,660 474
Net mobilization fees and credits 771 (263)
Other increases 45 -
-------- --------
Net cash provided by operating activities 12,757 18,724
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (6,591) (12,988)
Collection of insurance receivable - 11,380
Proceeds from sale of assets 25,177 -
Other - 13
-------- -------
Net cash provided (used) by investing activities 18,586 (1,595)
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from stock offering - 53,607
Proceeds from exercise of stock options 1,809 1,728
Tax benefit from the exercise of stock options 575 -
Principal payments on debt (9,000) (64,000)
-------- -------
Net cash used by financing activities (6,616) (8,665)
-------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 24,727 $ 8,464
CASH AND CASH EQUIVALENTS, at beginning of period $ 18,982 $ 16,416
-------- --------
CASH AND CASH EQUIVALENTS, at end of period $ 43,709 $ 24,880
======== ========
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The accompanying notes are an integral part of these condensed consolidated
financial statements.
8
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
--------------------------------------------------------------------------------------------------------------------
Total
Common Stock Paid-in Retained Stockholders'
(In thousands) Shares Amount Capital Earnings Equity
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
September 30, 2005 15,341 $15,341 $120,986 $225,810 $362,137
Net income - - - 14,523 14,523
Exercise of employee stock options 62 62 1,747 - 1,809
Tax benefit from the exercise of
employee stock options - - 575 - 575
Stock option compensation expense - - 885 - 885
------ ------- -------- -------- --------
December 31, 2005 15,403 $15,403 $124,193 $240,333 $379,929
====== ======= ======== ======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
9
PART I. ITEM 1 - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. UNAUDITED INTERIM INFORMATION
The unaudited interim condensed consolidated financial statements as of
December 31, 2005 and for each of the three month periods ended December 31,
2005 and 2004, included herein, have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and with the instructions for Form 10-Q and Article 10 of
Regulation S-X. The year end condensed consolidated balance sheet data was
derived from the audited financial statements as of September 30, 2005. Although
these financial statements and related information have been prepared without
audit, and certain information and note disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted, we believe that the note disclosures
are adequate to make the information not misleading. The interim financial
results may not be indicative of results that could be expected for a full year.
It is suggested that these condensed consolidated financial statements be read
in conjunction with the consolidated financial statements and the notes thereto
included in our Annual Report to Shareholders for the year ended September 30,
2005. In our opinion, the unaudited interim financial statements reflect all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair statement of our financial position and results of operations for the
periods presented.
2. SHARE-BASED COMPENSATION
Effective October 1, 2005, we adopted Statement of Financial Accounting
Standards No. 123(R), "Share-Based Payment" ("SFAS 123(R)"), using the modified
prospective application transition method. Under this method, stock-based
compensation cost is measured at the grant date, based on the calculated fair
value of the award, and is recognized as an expense over the requisite service
period (generally the vesting period of the equity grant). In addition,
stock-based compensation cost recognized includes compensation cost for unvested
stock-based awards as of October 1, 2005. Prior to October 1, 2005, we accounted
for share-based compensation in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25"). No
share-based employee compensation cost has been reflected in net income prior to
October 1, 2005. Before that date, we reported the entire tax benefit related to
the exercise of stock options as an operating cash flow. SFAS 123(R) requires us
to report the tax benefit from the tax deduction that is in excess of recognized
compensation costs (excess tax benefits) as a financing cash flow rather than as
an operating cash flow. The cumulative effect of the change in accounting
principle from APB No. 25 to FAS 123(R) was not material.
10
We have a stock incentive plan, the 2001 Plan, whereby 1,000,000 shares of
common stock may be issued to eligible participants in the form of restricted
stock awards or upon exercise of stock options granted pursuant to the 2001
Plan. Awards of restricted stock and grants of stock options may be made under
the 2001 Plan through September 5, 2011. As of December 31, 2005, 624,750 shares
are available under the 2001 Plan for future restricted stock awards or stock
option grants. Options to purchase 517,550 shares are currently outstanding
under the 2001 Plan and 41,000 shares of restricted stock have been issued under
the 2001 Plan. Our board of directors has approved certain amendments to our
2001 Plan, subject to shareholder approval. We have submitted an amended and
restated version of our 2001 Plan to our shareholders for approval which was
obtained at our annual shareholders meeting to be held on February 9, 2006.
We have two other stock incentive plans under which there are outstanding
stock options. There are outstanding options to purchase 323,525 shares under
our 1996 Plan and 2,000 shares under a 1990 Plan; however, no additional options
or restricted stock will be awarded under either of these plans. Only awards of
restricted stock or stock options had been granted under any of our stock
incentive plans as of December 31, 2005. We deliver newly issued shares of
common stock for restricted stock awards and upon exercise of stock options. All
stock incentive plans currently in effect have been approved by the shareholders
of our outstanding common stock.
During the three months ended December 31, 2005, we recognized
approximately $0.9 million in share-based compensation expense which has been
included in our statement of operations in contract drilling expenses ($0.2
million) and in general and administrative expenses ($0.7 million). The total
income tax benefit recognized related to share-based compensation for the three
months ended December 31, 2005 was approximately $0.2 million. The tax benefit
realized from stock options exercised during the first quarter of fiscal year
2006 was $0.6 million. The impact of adopting FAS 123(R) had the effect of
decreasing our net income and earnings per share by $0.7 million and $0.04 per
basic and diluted share for the quarter ended December 31, 2005. In addition,
the adoption had the effect of decreasing cash flows from operations by $0.6
million and increasing cash flows from financing activities by $0.6 million for
the current quarter from that which would have been otherwise reported. We
recognize compensation expense on grants of share-based compensation awards on a
straight-line basis over the required service period for each award. As of
December 31, 2005, total unrecognized compensation cost related to share-based
compensation awards was approximately $9.9 million, net of estimated
forfeitures, which we expect to recognize over a weighted average period of
approximately 2.7 years.
Stock Options
Under all stock incentive plans, the exercise price of each stock option
equals the fair market value of one share of our common stock on the date of
grant, with all outstanding options having a maximum term of 10 years. Options
vest ratably over a period from the end of the first to the fourth year from the
date of grant under the 2001 Plan and from the end of the second to the fifth
year from the date of grant under the 1996 and 1990 Plans. Each option is for
the purchase of one share of our common stock.
11
The per share weighted average fair value of stock options granted during
the three months ended December 31, 2005 and 2004 was $35.39 and $20.44,
respectively. We estimated the fair value of each stock option on the date of
grant using the Black-Scholes pricing model and the following assumptions:
Three Months Ended
December 31
-------------------
2005 2004
-------------------
Risk-Free Interest Rate 4.46% 4.27%
Expected Volatility 42% 35%
Expected Life (Years) 6 6
Dividend Yield None None
The average risk-free interest rate is based on the five-year U.S. treasury
security rate in effect as of the grant date. We determined expected volatility
using a 6-year historical volatility figure and determined the expected term of
the stock options using 15 years of historical data. The expected dividend yield
is based on the expected annual dividend as a percentage of the market value of
our common stock as of the grant date.
A summary of stock option activity during the three months ended December
31, 2005 is as follows:
Wtd. Avg.
Wtd. Avg. Remaining Aggregate
Number of Exercise Contractual Intrinsic
Options Price Life (Years) Value (000s)
---------- ---------- ------------- ------------
Outstanding at October 1, 2005 851,650 $ 35.28
Granted 53,000 $ 74.30
Exercised (61,575) $ 29.38 $ 1,809
Forfeited - -
Expired - -
-------
Outstanding at December 31, 2005 843,075 $ 38.17 6.7 $ 33,608
=======
Exercisable at December 31, 2005 508,063 $ 33.70 5.6 $ 22,524
=======
Restricted Stock
We have also granted restricted stock awards to certain employees.
Restrictions lapse at the end of the third year from the date of grant. We value
restricted stock awards at the closing market value of our common stock on the
date of grant.
12
A summary of restricted stock activity for the three months ended December
31, 2005 is as follows:
Aggregate
Number of Wtd. Avg. Intrinsic
Shares Fair Value Value (000s)
---------- ---------- -------------
Outstanding at October 1, 2005 - $ -
Granted 41,000 $ 74.30
Exercised - -
Forfeited - -
Expired - -
Outstanding at December 31, 2005 41,000 $ 74.30 $ 153
As of December 31, 2005, none of the restrictions have lapsed on these
stock awards. Pursuant to the amended and restated version of our 2001 Plan
approved by our shareholders on February 9, 2006, non-employee directors will be
automatically granted restricted stock awards as detailed in our definitive
proxy statement sent to our shareholders relating to our annual shareholders
meeting and filed with the SEC on January 13, 2006.
Prior Year Pro Forma Expense
The following table illustrates the effect on net income and earnings per
share as if the fair value-based method provided by SFAS 123 had been applied
for all outstanding and unvested awards for periods prior to our adoption of
SFAS 123(R) as of October 1, 2005 (in thousands, expect per share amounts):
Three Months Ended
December 31, 2004
------------------
Net income, as reported $ 8,650
Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all
awards, net of related tax effects (648)
-------
Pro Forma, net income $ 8,002
=======
Earnings per share:
Basic - as reported $ 0.57
Basic - pro forma 0.53
Diluted - as reported $ 0.56
Diluted - pro forma 0.52
13
3. EARNINGS (LOSS) PER COMMON SHARE
The computation of basic and diluted earnings (loss) per share is as
follows (in thousands, except per share amounts):
Three Months Ended
-------------------------------------
Net Per Share
Income Shares Amount
------- ------ -------
December 31, 2005:
Basic earnings per share $14,523 15,369 $ 0.94
Effect of dilutive securities -
Stock options --- 235 $ 0.01
------- ------ ------
Diluted earnings per share $14,523 15,604 $ 0.93
======= ====== ======
December 31, 2004:
Basic earnings per share $ 8,650 15,079 $ 0.57
Effect of dilutive securities -
Stock options --- 343 $ (0.01)
------- ------ -------
Diluted earnings per share $ 8,650 15,422 $ 0.56
======= ====== =======
The calculation of diluted earnings per share for the three month period
ending December, 2005 excludes consideration of potential common shares related
to 63,000 stock options because such options were anti-dilutive. These options
could potentially dilute basic EPS in the future.
14
4. PROPERTY AND EQUIPMENT
A summary of property and equipment by classification is as follows (in
thousands):
December 31, September 30,
2005 2005
------------- ------------
Drilling vessels and related equipment
Cost $ 623,561 $ 624,118
Accumulated depreciation (242,773) (236,736)
--------- --------
380,788 387,382
--------- -------
Drill pipe
Cost 10,791 10,742
Accumulated depreciation (8,730) (8,407)
--------- ------
Net book value 2,061 2,335
--------- -----
Furniture and other
Cost 7,561 7,395
Accumulated depreciation (6,363) (6,334)
--------- ------
Net book value 1,198 1,061
--------- -----
NET PROPERTY AND EQUIPMENT $ 384,047 $ 390,778
========= =========
In October 2005, we sold our semisubmersible hull, SEASCOUT, for $10.0
million (net after certain expenses) and our spare 15,000 P.S.I. BOP Stack for
$15.0 million, resulting in an aggregate gain of approximately $9.3 million for
both of these assets. We had no operations or revenues associated with these
assets prior to their sale.
5. COMMITMENTS AND CONTINGENCIES
We are party to a number of lawsuits which are ordinary, routine litigation
incidental to our business, the outcome of which, individually, or in the
aggregate, is not expected to have a material adverse effect on our financial
position, results of operations, or cash flows.
6. INCOME TAXES
Virtually all of our tax provision for each of the three months ended
December 31, 2005 and 2004 relates to taxes in foreign jurisdictions.
Accordingly, due to the high level of operating income earned in certain
nontaxable and deemed profit tax jurisdictions during the three months ended
December 31, 2005, our effective tax rate for the first quarter of fiscal year
2006 is significantly less than the U.S. statutory rate.
15
During the first quarter of fiscal year 2005, we received a $1.7
million tax refund in Malaysia related to a previously reserved tax receivable.
In addition, we earned revenue from our loss of hire insurance coverage on the
ATWOOD BEACON in a zero tax jurisdiction. As a result, our effective tax rate
for the first quarter of fiscal year 2005 was significantly less than the U.S.
statutory rate.
16
PART I. ITEM 2
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
All non-historical information set forth herein is based upon expectations
and assumptions we deem reasonable. We can give no assurance that such
expectations and assumptions will prove to be correct, and actual results could
differ materially from the information presented herein. Our periodic reports
filed with the SEC should be consulted for a description of risk factors
associated with an investment in our common stock.
RECENT EVENT
Subsequent to filing our Form 8-K on January 30, 2006 announcing our
earnings for the first quarter of the fiscal year 2006 of $0.97 and $0.94 per
basic and diluted share, respectively, we determined that the tax provision
needed to be increased for the quarter ended December 31, 2005 by approximately
$370,000 which decreased basic earnings per share by $0.03. Diluted earning per
share, however, only decreased by $0.01 as the effect of the tax provision
increase was partially offset by an update in the number of shares used in the
diluted earnings per share calculation. These changes reduced basic and diluted
earnings per share for the first quarter of fiscal year 2006 to $0.94 and $0.93,
respectively.
MARKET OUTLOOK
There continues to be very strong demand for offshore drilling equipment,
with all of our eight drilling units having contractual dayrate commitments that
are the highest in their respective histories. Currently, we have 100% of
available rig days for the remainder of fiscal year 2006 contracted, with
contracted rig days for fiscal year 2007 and 2008 at 80% and 53%, respectively.
A comparison of the average per day revenues for fiscal year 2005 and for the
first quarter of fiscal year 2006 for each of our eight drilling units to their
current highest contracted dayrate commitment is as follows:
Average Per Day Revenues for
--------------------------------
Percentage
Current Highest Change from
Fiscal First Quarter Contracted First Quarter
Year Fiscal Year Dayrate Commitment Fiscal Year 2006
2005 2006
------------- -------------- ------------------- ------------------
ATWOOD HUNTER $61,000 $112,000 $245,000 119%
ATWOOD EAGLE 95,000 87,000 420,000 383%
ATWOOD FALCON 82,000 74,000 200,000 170%
ATWOOD SOUTHERN CROSS 42,000 65,000 125,000 92%
ATWOOD BEACON 66,000 64,000 133,500 109%
VICKSBURG 65,000 73,000 94,500 29%
SEAHAWK 45,000 50,000 68,430 37%
RICHMOND 33,000 42,000 80,000 90%
17
The ATWOOD HUNTER is currently working offshore Egypt at a dayrate of
$125,000 on a drilling program that is expected to be completed in April or May
2006. Immediately upon the rig completing its current drilling program, it will
commence a two year drilling program at dayrates of $240,000 to $245,000. The
ATWOOD EAGLE is currently working offshore Australia at a dayrate of $160,000.
It has contractual commitments offshore Australia at dayrates ranging from
$150,000 to $420,000 (except for a one-well commitment remaining at a dayrate of
$89,000) that could keep the rig employed through fiscal year 2008. The ATWOOD
FALCON is currently working offshore Malaysia at a dayrate of $93,000. It has a
contractual commitment offshore Malaysia at dayrates ranging from $93,000 to
$200,000 (except for a one-well commitment remaining at a dayrate of $53,000)
which could extend through the first half of fiscal year 2009. This contractual
commitment requires the rig to undergo an upgrade to extend its water depth
drilling capabilities from 3,700 feet to 5,000 feet. The customer will pay $24
million of the cost of the upgrade along with payment of a $90,000 dayrate
during the upgrade period. We expect to pay the balance of $6 million of the
upgrade out of cash flow. The ATWOOD SOUTHERN CROSS has completed its
approximate $7 million equipment upgrade and has commenced drilling offshore
Italy at a dayrate of $70,000. The rig has drilling commitments at dayrates
ranging from $70,000 to $125,000 that should extend to the end of calendar year
2006. Currently, the ATWOOD BEACON is working offshore Vietnam at a dayrate of
$77,000 on a drilling program that could extend into the fourth quarter of
fiscal year 2006. Immediately upon completion of its current drilling program,
the rig will make a brief stop in Singapore to have its final section of legs
installed and will then be relocated to India to commence a 25-month contract at
dayrates ranging from $113,000 to $133,500. The VICKSBURG is currently working
offshore Southeast Asia at a dayrate of $87,000. It has contract commitments
offshore Southeast Asia at dayrates ranging from $82,000 to $94,500 that should
extend into the third quarter of fiscal year 2007. The SEAHAWK, with a current
dayrate of $50,000, is scheduled to enter a shipyard in Southeast Asia during
the second quarter of fiscal year 2006 to undergo a $16 million upgrade.
Following the upgrade, the rig will be relocated to offshore West Africa to
commence a 730 day (plus four six-month options) drilling program at a dayrate
of $68,430. The rig could be off dayrate for approximately five months while
undergoing the upgrade and relocation to offshore Africa. Our only rig in the
U.S. Gulf of Mexico, the RICHMOND, has a current contract commitment at dayrates
ranging from $45,000 to $80,000 which could extend to May/June 2007. Its current
dayrate is $45,000.
With the current strong market environment supporting high equipment
utilization and historical high dayrates for all of our eight drilling units, we
expect significantly improved cash flows and operating results in fiscal year
2006 compared to fiscal year 2005. Our current total debt to capitalization
ratio (debt/(debt + equity)) is 18% as of December 31, 2005 compared to 20% as
of September 30, 2005. As we pay off the term portion of our Credit Facility,
this ratio will continue to decline unless we have borrowings under the
revolving portion of our Credit Facility which exceed the amounts we pay down
under the term portion of our Credit Facility. We do not expect to borrow under
the revolving portion of our Credit Facility unless we identify an acceptable
growth opportunity, and only to the extent we do not fund any required amounts
out of cash flow.
We continue to evaluate growth opportunities, and on January 31, 2006, our
wholly-owned subsidiary, AOPL, executed a letter of intent with Keppel AmFELS,
Inc. for the construction of a mobile self-elevating LeTourneau SUPER 116
Jack-up. In conjunction therewith, AOPL has also secured an option to purchase
from Letourneau, Inc. a SUPER 116 KIT which will be required for the
construction of the new rig. If constructed, the new rig will be an
ultra-premium class jack-up, suited for operations throughout most of the world.
18
The new rig would be constructed at the Keppel AmFELS yard in Brownsville,
Texas, and delivery is expected to occur no later than September 30, 2008. AOPL
estimates the total cost of construction (including administrative and overhead
costs and capitalized interest) would be between $150 million to $160 million,
depending upon the possible enhancements, and subject to any additional
modifications which would be addressed via change orders. We expect to finance
the new rig from expected cash on hand balances and, if necessary, from the
revolving portion of our Credit Facility.
The construction of the new rig is subject to execution of customary
definitive agreements with Keppel AmFELS and LeTourneau. The new rig is not
presently under contract and upon delivery, would be our ninth owned mobile
offshore drilling unit.
RESULTS OF OPERATIONS
Revenues for the three months ended December 31, 2005 increased 22%
compared to the three months ended December 31, 2004. A comparative analysis of
revenues is as follows:
REVENUES
(In millions)
------------------------------------------------------
Three Months Ended December 31,
------------------------------------------------------
2005 2004 Variance
----------- ----------- ------------
ATWOOD HUNTER $ 10.3 $ 5.6 $ 4.7
ATWOOD SOUTHERN CROSS 6.0 3.6 2.4
RICHMOND 3.9 2.7 1.2
VICKSBURG 6.7 5.9 0.8
SEAHAWK 4.6 4.4 0.2
ATWOOD EAGLE 8.0 8.5 (0.5)
ATWOOD BEACON 5.9 6.4 (0.5)
ATWOOD FALCON 6.8 7.7 (0.9)
MANAGEMENT CONTRACTS 3.2 0.6 2.6
------ ------ ------
$ 55.4 $ 45.4 $ 10.0
====== ====== ======
19
The increase in revenue for the ATWOOD HUNTER was due to starting a new
contract offshore of Egypt approximately November 1, 2005 at a dayrate of
$125,000 while earning a dayrate of $62,000 for the first month of fiscal year
2006 and all of the last quarter of fiscal year 2005. The ATWOOD SOUTHERN CROSS
earned $2.9 million of mobilization revenue amortization during the current
quarter compared to none in the prior year quarter. This increase was partially
offset by approximately 50% utilization at $60,000 per day during the first
quarter of fiscal year 2006 compared to 100% utilization at $40,000 per day
during the first quarter of fiscal year 2005. The increase in revenue for the
RICHMOND was due to an increase in average dayrate from $29,000 in the prior
year quarter to $42,000 in the current year quarter. The average dayrate for the
VICKSBURG for the first quarter of fiscal year 2006 was $73,000 as the rig
started a new contract offshore Myanmar at $92,000 per day compared to an
average dayrate of $64,000 during the first quarter of fiscal year 2005. First
quarter of fiscal year 2006 revenues for the SEAHAWK, ATWOOD EAGLE and ATWOOD
BEACON were comparable to the same period for in the prior year. Revenues for
the ATWOOD FALCON decreased in the first quarter of fiscal year 2006 due to a
decrease in the average dayrate from $84,000 to $74,000 as the rig was, and
still is, drilling the final well of a prior contractual commitment at a reduced
dayrate offshore Malaysia. As one of our managed platform rigs in Australia is
scheduled to commence a new drilling program during calendar year 2006, service
activities for our management contracts have increased accordingly.
Contract drilling costs for the three months ended December 31, 2005
increased 34% compared to the three months ended December 31, 2004. An analysis
of contract drilling costs by rig is as follows:
CONTRACT DRILLING COSTS
(In millions)
------------------------------------------------
Three Months Ended December 31,
------------------------------------------------
2005 2004 Variance
-------- --------- ---------
ATWOOD SOUTHERN CROSS $ 5.5 $ 3.0 $ 2.5
VICKSBURG 3.5 2.5 1.0
ATWOOD HUNTER 3.7 2.9 0.8
ATWOOD EAGLE 6.0 5.3 0.7
ATWOOD FALCON 3.8 3.3 0.5
RICHMOND 2.4 2.0 0.4
SEAHAWK 2.4 2.4 -
ATWOOD BEACON 2.4 2.4 -
MANAGEMENT CONTRACTS 2.8 0.7 2.1
OTHER 1.3 0.7 0.6
------ ------ -----
$ 33.8 $ 25.2 $ 8.6
====== ====== =====
20
The increase in drilling costs for the ATWOOD SOUTHERN CROSS resulted from
$2.8 million of mobilization expense amortization in the first quarter of fiscal
year 2006, while there was none during the first quarter of fiscal year 2005.
Before relocating to its next contract, the VICKSBURG entered a shipyard for
approximately 5 days during the current quarter to undergo planned inspections
and maintenance, which accounts for its increase in drilling costs. The increase
in drilling costs for the ATWOOD HUNTER, ATWOOD EAGLE, ATWOOD FALCON and
RICHMOND are primarily attributable to 3 areas: rising personnel costs due to
wage increases, rising insurance costs due to increased premiums and increase
repairs and maintenance expenses due to the amount and timing of various repairs
and maintenance projects. The SEAHAWK and ATWOOD BEACON also experienced
increased personnel and insurance costs, but these costs were offset by
decreased repairs and maintenance expenses when compared to the prior year
quarter. As previously mentioned, one of our managed platform rigs in Australia
is scheduled to commence a new drilling program during calendar year 2006, and
service activities for our management contracts have increased accordingly.
Other drilling costs have increased due to the recording of $0.2 million of
stock option compensation expense for field personnel during the current quarter
compared to none in the prior year quarter.
An analysis of depreciation expense by rig for the three months ended
December 31, 2005 compared to the three months ended December 31, 2005 is as
follows:
DEPRECIATION EXPENSE
(In millions)
------------------------------------------------
Three Months Ended December 31,
------------------------------------------------
2005 2004 Variance
----------- --------- ----------
ATWOOD BEACON $ 1.3 $ 1.2 $ 0.1
SEAHAWK 0.2 0.1 0.1
ATWOOD FALCON 0.7 0.7 -
VICKSBURG 0.7 0.7 -
ATWOOD HUNTER 1.3 1.3 -
RICHMOND 0.2 0.2 -
ATWOOD EAGLE 1.2 1.2 -
ATWOOD SOUTHERN CROSS 0.7 1.1 (0.4)
OTHER 0.1 0.0 0.1
----- ------ ------
$ 6.4 $ 6.5 $ (0.1)
===== ====== ======
In accordance with our company policy, no depreciation expense was recorded
during the month of December for the SOUTHERN CROSS as the rig was undergoing a
life enhancing upgrade whereby the useful life of the rig will be extended from
approximately 2 to 5 years in early calendar year 2006.
21
General and administrative expenses for the first quarter of fiscal year
2006 increased compared to the first quarter of the prior fiscal year primarily
due recording approximately $0.7 million of stock option compensation expense,
an approximate $0.6 million increase in annual bonus compensation, and $0.8
million higher professional fees primarily related to Sarbanes-Oxley Act
compliance fees. We expect our general and administrative expenses to remain at
a higher level than reported in prior periods due to stock option compensation
expense (refer to Note 2). Although the level of our outstanding debt has been
reduced significantly from the prior fiscal year, interest expense has only
decreased slightly due to rising interest rates.
Virtually all of our tax provision for each of the three months ended
December 31, 2005 and 2004 relates to taxes in foreign jurisdictions.
Accordingly, due to the high level of operating income earned in certain
nontaxable and deemed profit tax jurisdictions during the three months ended
December 31, 2005, our effective tax rate for the first quarter of fiscal year
2006 is significantly less than the U.S. statutory rate. However this rate is
higher when compared to the prior year quarter as we received a $1.7 million tax
refund in Malaysia related to a previously reserved tax receivable during the
first quarter of fiscal year 2005. Excluding any discrete items that may be
incurred, we expect our effective tax rate to be approximately 10-15% for fiscal
year 2006.
Looking forward, we expect to reverse a $1.8 million tax contingent
liability in the third quarter of fiscal year 2006 due to the expiration of a
statute of limitations in a foreign jurisdiction. If this occurs, it will reduce
our tax provision in that quarterly period.
LIQUIDITY AND CAPITAL RESOURCES
Since we operate in a very cyclical industry, maintaining high equipment
utilization in up, as well as down, cycles is a key factor in generating cash to
satisfy current and future obligations. For fiscal years 2000 through 2005, net
cash provided by operating activities ranged from a low of approximately $13.7
million in fiscal year 2003 to a high of approximately $62.3 million in fiscal
year 2001. Our operating cash flows are primarily driven by our operating
income, which reflects dayrates and rig utilization. With currently having 100%
and 80% of our available operating rig days committed for fiscal years 2006 and
2007, respectively, at historically high dayrates, we anticipate significant
improvement in cash flows and earnings during fiscal years 2006 and 2007. Other
than our expected capital expenditures of $60 million to $65 million for fiscal
year 2006, the only additional firm cash commitment for fiscal year 2006,
outside of funding current rig operations, is our required quarterly repayments
under the term portion of our senior secured Credit Facility which will total
$36 million for fiscal year 2006. We expect to generate sufficient cash flows
from operations to satisfy these obligations.
If AOPL enters into a definitive agreement to construct the newbuild mobile
self-elevating LeTourneau SUPER 116 Jack-up, our capital expenditures for fiscal
year 2006 will increase by approximately $9 million in connection with the
exercise of the option to purchase the related SUPER 116 KIT and by any
additional amounts owed under the definitive construction agreement, which will
not be determined if and until AOPL enters into the definitive construction
agreement. We expect to finance the new rig from expected cash flows from
operations and, if necessary, from the revolving portion of our Credit Facility.
22
As of December 31, 2005, we only have $81 million outstanding under the
term portion of our Credit Facility, with approximately $99 million of available
borrowing capacity under the $100 million revolving portion of our Credit
Facility. We are in compliance with all financial covenants at December 31,
2005, and expect to remain in compliance with all financial covenants during
fiscal year 2006. Aside from the financial covenants, no other provisions exist
in the Credit Facility that could result in acceleration of the April 1, 2008
maturity date.
At December 31, 2005, the collateral for our Credit Facility consists
primarily of preferred mortgages on all eight of our active drilling units (with
an aggregate net book value at December 31, 2005 totaling approximately $380
million). We are not required to maintain compensating balances; however, we are
required to pay a fee of approximately 0.70% per annum on the unused portion of
the revolving loan facility and certain other administrative costs.
In October 2005, we sold our semisubmersible hull, SEASCOUT, for $10
million (net after certain expenses) and our spare 15,000 P.S.I. BOP Stack for
approximately $15 million. The gain on the sales of these assets totaled
approximately $9.3 million in the aggregate. The $25.2 million in cash from
these sales has increased our current cash and cash equivalents on hand to
approximately $43.7 million as of December 31, 2005.
Our portfolio of accounts receivable is comprised of major international
corporate entities with stable payment experience. Historically, we have not
encountered significant difficulty in collecting receivables and typically do
not require collateral for our receivables. The insurance receivable of $0.6
million at December 31, 2005 relates to repairs to be made to the ATWOOD BEACON.
During fiscal year 2006, we plan to complete the remaining work to restore the
rig to its pre-incident condition at which time we expect to collect the
associated remaining $0.6 million insurance receivable. We have a $0.1 million
allowance for doubtful accounts at December 31, 2005 due to a delinquent account
with one specific client.
23
PART I. ITEM 3
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk, including adverse changes in interest rates
and foreign currency exchange rates as discussed below.
INTEREST RATE RISK
With the interest rate on our long-term debt under our Credit Facility at a
floating rate, the outstanding long-term debt of $81 million at December 31,
2005 approximates its fair value. The impact on annual cash flow of a 10% change
in the floating rate (approximately 60 basis points) would be approximately $0.5
million, which we do not believe to be material. We did not have any open
derivative contracts relating to our floating rate debt at December 31, 2005.
FOREIGN CURRENCY RISK
Certain of our subsidiaries have monetary assets and liabilities that are
denominated in a currency other than their functional currencies. Based on
December 31, 2005 amounts, a decrease in the value of 10% in the foreign
currencies relative to the U.S. dollar from the year-end exchange rates would
result in a foreign currency transaction loss of approximately $0.4 million.
Thus, we consider our current risk exposure to foreign currency exchange rate
movements, based on net cash flows, to be immaterial. We did not have any open
derivative contracts relating to foreign currencies at December 31, 2005.
24
PART I. ITEM 4
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer
and Chief Financial Officer, evaluated the effectiveness of our
disclosure controls and procedures as of the end of the period covered
by this report. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and
procedures as of the end of the period covered by this report have been
designed and are functioning effectively to provide reasonable
assurance that the information required to be disclosed by us in our
periodic SEC filings is recorded, process, summarized and reported
within the time periods specified in the SEC's rules, regulations and
forms. We believe that a controls system, no matter how well designed
and operated, cannot provide absolute assurance that the objectives of
the controls system are met, and no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if
any, within a company have been detected.
(b) Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting occurred
during the fiscal quarter covered by this report that has materially
affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
25
PART II. OTHER INFORMATION
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS
(a) Exhibits
3.1.1 Restated Articles of Incorporation dated January 1972
(Incorporated herein by reference to Exhibit 3.1.1 of our Form
10-K for the year ended September 30, 2002).
3.1.2 Articles of Amendment dated March 1975 (Incorporated herein
by reference to Exhibit 3.1.2 of our Form 10-K for the
year ended September 30, 2002).
3.1.3 Articles of Amendment dated March 1992 (Incorporated herein by
reference to Exhibit 3.1.3 of our Form 10-K for the year ended
September 30, 2002).
3.1.4 Articles of Amendment dated November 1997 (Incorporated herein
by reference to Exhibit 3.1.4 of our Form 10-K for
the year ended September 30, 2002).
3.1.5 Certificate of Designations of Series A Junior Participating
Preferred Stock of Atwood Oceanics, Inc. dated October 17,
2002 (Incorporated herein by reference to Exhibit 3.1.5 of our
Form 10-K for the year ended September 30, 2002).
3.2 Bylaws, as amended and restated, dated January 1993
(Incorporated herein by reference to Exhibit 3.2 of our Form
10-K for the year ended September 30, 1993).
4.1 Rights Agreement dated effective October 18, 2002 between the
Company and Continental Stock & Transfer & Trust Company
(Incorporated herein by reference to Exhibit 4.1 of our Form
8-A filed October 21, 2002).
*31.1 Certification of Chief Executive Officer
*31.2 Certification of Chief Financial Officer
*32.1 Certificate of Chief Executive Officer pursuant to Section
906 of Sarbanes - Oxley Act of 2002.
*32.2 Certificate of Chief Financial Officer pursuant to Section
906 of Sarbanes - Oxley Act of 2002.
*Filed herewith
26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATWOOD OCEANICS, INC.
(Registrant)
Date: February 9, 2006 /s/JAMES M. HOLLAND_
------------------
James M. Holland
Senior Vice President, Chief
Financial Officer, Chief
Accounting Officer and Secretary
27
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
3.1.1 Restated Articles of Incorporation dated January 1972
(Incorporated herein by reference to Exhibit 3.1.1 of our Form
10-K for the year ended September 30, 2002).
3.1.2 Articles of Amendment dated March 1975 (Incorporated herein
by reference to Exhibit 3.1.2 of our Form 10-K for the
year ended September 30, 2002).
3.1.3 Articles of Amendment dated March 1992 (Incorporated herein by
reference to Exhibit 3.1.3 of our Form 10-K for the year ended
September 30, 2002).
3.1.4 Articles of Amendment dated November 1997 (Incorporated herein
by reference to Exhibit 3.1.4 of our Form 10-K for
the year ended September 30, 2002).
3.1.5 Certificate of Designations of Series A Junior Participating
Preferred Stock of Atwood Oceanics, Inc. dated October 17,
2002 (Incorporated herein by reference to Exhibit 3.1.5 of our
Form 10-K for the year ended September 30, 2002).
3.2 Bylaws, as amended and restated, dated January 1, 1993
(Incorporated herein by reference to Exhibit 3.2 of our Form
10-K for the year ended September 30, 1993).
4.1 Rights Agreement dated effective October 18, 2002 between the
Company and Continental Stock & Transfer & Trust Company
(Incorporated herein by reference to Exhibit 4.1 of our Form
8-A filed October 21, 2002).
*31.1 Certification of Chief Executive Officer
*31.2 Certification of Chief Financial Officer
*32.1 Certificate of Chief Executive Officer pursuant to Section
906 of Sarbanes - Oxley Act of 2002.
*32.2 Certificate of Chief Financial Officer pursuant to Section
906 of Sarbanes - Oxley Act of 2002.
*Filed herewith
28
EXHIBIT 31.1
CERTIFICATIONS
I, John R. Irwin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Atwood
Oceanics, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for,
the periods presented in this report;
4. The registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report
is being prepared;
(b) Designed such internal control over financial reporting to
be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles;
and
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors
and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions):
29
(a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal control over financial reporting.
Date: February 9, 2006
/s/ JOHN R. IRWIN
John R. Irwin
Chief Executive Officer
30
EXHIBIT 31.2
CERTIFICATIONS
I, James M. Holland, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Atwood
Oceanics, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report
is being prepared;
(b) Designed such internal control over financial reporting to
be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles;
and
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors
and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions):
31
(a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal control over financial reporting.
Date: February 9, 2006
/s/ JAMES M. HOLLAND
James M. Holland
Chief Financial Officer
32
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Atwood Oceanics, Inc. (the
"Company") on Form 10-Q for the period ended December 31, 2005, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
John R. Irwin, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company for the periods presented.
Date: February 9, 2006 /s/ JOHN R. IRWIN
John R. Irwin
President and Chief Executive Officer
33
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Atwood Oceanics, Inc. (the
"Company") on Form 10-Q for the period ended December 31, 2005, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
James M. Holland, Chief Financial Officer of the Company, certify, pursuant to
18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company for the periods presented.
Date: February 9, 2006 /s/JAMES M. HOLLAND
James M. Holland
Senior Vice President and
Chief Financial Officer
34