On December 18, Atwood Oceanics (ATW) announced its agreement to delay the delivery of its two newbuild ultra-deepwater drillships, the Atwood Admiral and the Atwood Archer. Delivery of the newbuilds has been postponed to September 2017 and June 2018, respectively, from the prior delivery months of September 2016 and June 2017.
Benefits of the postponement
In addition to postponing delivery of the rigs, Atwood Oceanics has postponed the associated capital expenditure, or capex. According to the agreement, the company will pay $50 million for each drillship on December 31, 2015. The remaining payments of $93 million for the Admiral and $305 million for the Archer will be postponed until delivery. During the current downturn, it’s extremely important for companies to preserve cash, and this delay in capex will be a relief to Atwood Oceanics.
Downside of the postponement
Last month, Atwood Oceanics announced that one of its two newbuilds will be contracted for a drilling program in Brazil commencing in the third quarter of 2017. The postponement of the delivery suggests the program has been either canceled or postponed. In the next part of this series, we’ll see why a new contract, especially in 2017, was of utmost importance to the company.