Midcap Energy Stocks To Buy #1: Atwood Oceanics (ATW)
The offshore contract drilling sector is dominated by larger firms like Transocean (RIG) and Noble (NE). However, with a market cap of just $3 billion, Atwood Oceanics (ATW) could be in the sweet spot for investors looking at midcap energy stocks.
ATW is a much smaller offshore driller than its rivals — owning a fleet of just 14 rigs and drillships. However, Atwood’s small fleet is actually pretty modern and features four ultra-deepwater drillships and two ultra-deepwater semisubmersibles.
While day rates for ultra-deepwater rigs have taken a breather as of late, these ships still command a hefty price tag. ATW’s most advanced and newest rig — the Atwood Hunter — is under contract with a cost to rent of $515,500 per day. That rate is 75% higher than the average day rate of similar rigs ($294,000).
An added benefit is that the bulk of ATW’s rigs are actually working rather being cold-stacked. Its rigs have been booked for 92% of all the days remaining in 2014, while 2015 is currently booked at 80%. Those high rates should help boost ATW’s profits down the road.
Meanwhile, ATW currently trades for a dirt-cheap forward P/E of less than 7. That’s significantly lower than its chief rivals.