-------------------------------------------------------------------------------

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D. C. 20549
                                ----------------
                                    Form 10-Q

       |X|        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                    FOR QUARTERLY PERIOD ENDED JUNE 30, 2007

              |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                         COMMISSION FILE NUMBER 1-13167

                              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)

                                  281-749-7800
               Registrant's telephone number, including area code:
                                 ---------------

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 by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act.)  Yes___ No  X
                                            ---

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of July 31, 2007: 31,671,627 shares of common stock, $1 par
value
-------------------------------------------------------------------------------




                              ATWOOD OCEANICS, INC.

                                    FORM 10-Q

                       For the Quarter Ended June 30, 2007


                                      INDEX


Part I. Financial Information
                                                                                      

         Item 1.  Unaudited Condensed Consolidated Financial Statements                   Page

a)       Condensed Consolidated Statements of Operations
                  For the Three and Nine Months Ended June 30, 2007 and 2006...............3

b)       Condensed Consolidated Balance Sheets
                  As of June 30, 2007 and September 30, 2006...............................4

c)       Condensed Consolidated Statements of Cash Flows
                        For the Nine Months Ended June 30, 2007 and 2006...................5

d)       Condensed Consolidated Statement of Changes in Shareholders'
                  Equity for the Nine Months Ended June 30, 2007...........................6

e)                Notes to Condensed Consolidated Financial
                  Statements...............................................................7


         Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations.....................................14

         Item 3.  Quantitative and Qualitative Disclosures about Market Risk..............25

         Item 4.  Controls and Procedures.................................................26

Part II. Other Information

         Item 6.  Exhibits ............................................................. .27

Signatures................................................................................28




                                       2






                      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                   Nine Months Ended
                                                      June 30,                             June 30,
                                                -------------------------            -------------------------
                                                   2007             2006                2007             2006
                                                   ----             ----                ----             ----

REVENUES:
                                                                                          
Contract drilling                                  $ 98,371        $ 71,865            $ 278,875      $ 194,808
Business interruption proceeds                            -               -                2,558              -
                                                   --------        --------            ---------      ---------
                                                     98,371          71,865              281,433        194,808
                                                   --------        --------            ---------      ---------

COSTS AND EXPENSES:
Contract drilling                                    47,484          32,136              140,211        103,176
Depreciation                                          8,438           6,192               24,782         18,789
General and administrative                            5,949           4,830               17,991         15,428
Gain on sale of equipment                              (157)         (1,075)                (341)       (10,350)
                                                   --------        --------            ---------      ---------
                                                     61,714          42,083              182,643        127,043
                                                   --------        --------            ---------      ---------
OPERATING INCOME                                     36,657          29,782               98,790         67,765
                                                   --------        --------            ---------      ---------

OTHER INCOME (EXPENSE)
Interest expense, net of capitalized interest          (392)         (1,435)              (1,317)        (4,642)
Interest income                                         304             259                1,177            828
                                                   --------        --------            ---------      ---------
                                                        (88)         (1,176)                (140)        (3,814)
                                                   --------        --------            ---------      ---------
INCOME BEFORE INCOME TAXES                           36,569          28,606               98,650         63,951
PROVISION (BENEFIT) FOR INCOME TAXES                  4,536          (4,185)              13,775          1,008
                                                   --------        --------            ---------      ---------
NET INCOME                                         $ 32,033        $ 32,791            $  84,875      $  62,943
                                                   ========        ========            =========      =========

EARNINGS PER COMMON SHARE (SEE NOTE 3):
            Basic                                    $ 1.02          $ 1.06               $ 2.72         $ 2.04
            Diluted                                    1.00            1.04                 2.68           2.00
AVERAGE COMMON SHARES OUTSTANDING
    (SEE NOTE 3):
            Basic                                    31,491          31,037               31,233         30,900
            Diluted                                  31,964          31,580               31,718         31,411





The accompanying notes are an integral part of these condensed consolidated
financial statements.

                                       3




                      PART I. ITEM I - FINANCIAL STATEMENTS
                     ATWOOD OCEANICS, INC. AND SUBSIDIARIES
                 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

                                                           June 30,       September 30,
                                                             2007             2006
                                                          ---------       ------------
ASSETS

CURRENT ASSETS:
                                                                       
    Cash and cash equivalents                               $ 73,106         $ 32,276
    Accounts receivable, net of an allowance of               71,570           80,222
        $600 and $750 at June 30, 2007 and
        September 30, 2006, respectively
    Income tax receivable                                      2,854               65
    Insurance receivable                                           -              550
    Inventories of materials and supplies                     24,650           22,124
    Deferred tax assets                                          942            2,563
    Prepaid expenses and other                                 2,667            9,873
                                                           ----------       ----------
      Total Current Assets                                   175,789          147,673
                                                           ----------       ----------

NET PROPERTY AND EQUIPMENT                                   482,062          436,166
                                                           ----------       ----------

DEFERRED COSTS AND OTHER ASSETS                                8,430            9,990
                                                           ----------       ----------
                                                           $ 666,281        $ 593,829
                                                           ==========       ==========

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Current maturities of notes payable                      $ 27,000         $ 36,000
   Accounts payable                                            9,574           11,760
   Accrued liabilities                                        22,633           13,201
   Deferred Credits                                              177              404
                                                           ----------       ----------
       Total Current Liabilities                              59,384           61,365
                                                           ----------       ----------

LONG-TERM DEBT,
   net of current maturities:                                      -           28,000
                                                           ----------       ----------
                                                                   -           28,000
                                                           ----------       ----------
OTHER LONG TERM LIABILITIES:
     Deferred income taxes                                    16,521           18,591
     Deferred credits                                         28,332           23,284
     Other                                                     5,202            3,695
                                                           ----------       ----------
                                                              50,055           45,570
                                                           ----------       ----------
SHAREHOLDERS' EQUITY:
    Preferred stock, no par value;
         1,000 shares authorized,  none outstanding                -                -
    Common stock, $1 par value, 50,000 shares
          authorized with 31,506 and 31,046 issued
          and outstanding at June 30, 2007 and
          September 30, 2006, respectively                    31,506           31,046
    Paid-in capital                                          128,529          115,916
    Retained earnings                                        396,807          311,932
                                                           ----------       ----------
        Total Shareholders' Equity                           556,842          458,894
                                                           ----------       ----------
                                                           $ 666,281        $ 593,829
                                                           ==========       ==========


The accompanying notes are an integral part of these condensed consolidated
financial statements.

                                       4



                      PART I. ITEM I - FINANCIAL STATEMENTS
                     ATWOOD OCEANICS, INC. AND SUBSIDIARIES
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

                                                                        Nine Months Ended June 30,
                                                                     -------------------------------
                                                                        2007                 2006
                                                                     ------------       -----------

CASH FLOW FROM OPERATING ACTIVITIES:
                                                                                   
       Net Income                                                     $ 84,875           $ 62,943
         Adjustments to reconcile net income to net cash
         provided (used) by operating activities:
              Depreciation                                              24,782             18,789
              Amortization of debt issuance costs                          603                603
              Amortization of deferred items                           (22,856)             9,275
              Provision for doubtful accounts                              (37)               618
              Deferred income tax benefit                               (1,154)            (1,581)
              Stock-based compensation expense                           3,750              3,400
              Gain on sale of equipment                                   (341)           (10,350)
         Changes in assets and liabilities:
              Decrease (increase) in accounts receivable                 8,689            (12,762)
              Decrease in insurance receivable                             550                  -
              Decrease (increase) in income tax receivable              (2,789)             1,496
              Increase in inventory                                     (2,526)            (3,276)
              Decrease in prepaid expenses and other                     6,119              1,717
              Increase in deferred costs and other assets               (3,498)            (5,716)
              Decrease in accounts payable                              (2,186)            (1,203)
              Increase in accrued liabilities                            9,432              6,041
              Increase in deferred credits and other liabilities        34,726              4,873
              Other                                                         (3)                 8
                                                                       -------            -------
                Net cash provided by operating activities              138,136             74,875
                                                                       -------            -------

CASH FLOW FROM INVESTING ACTIVITIES:
        Capital expenditures                                           (70,930)           (62,357)
        Proceeds from sale of equipment                                    596             25,520
                                                                       -------            -------
               Net cash used by investing activities                   (70,334)           (36,837)
                                                                       -------            -------

CASH FLOW FROM FINANCING ACTIVITIES:
        Proceeds from exercise of stock options                          7,188              6,014
        Excess tax benefit from the exercise of stock options            2,840                  -
        Proceeds from debt                                                   -             10,000
        Principal payments on debt                                     (37,000)           (27,000)
                                                                       -------           --------
                       Net cash used by financing activities           (26,972)           (10,986)
                                                                       -------           --------

NET INCREASE IN CASH AND CASH EQUIVALENTS                               40,830             27,052
CASH AND CASH EQUIVALENTS, at beginning of period                     $ 32,276           $ 18,982
                                                                      --------           --------
CASH AND CASH EQUIVALENTS, at end of period                           $ 73,106           $ 46,034
                                                                      ========           ========
----------------------------------------------------------------------------

The accompanying notes are an integral part of these condensed consolidated
financial statements.


                                       5




                      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, 2006                              31,046      $ 31,046       $ 115,916       $ 311,932    $ 458,894
   Net income                                       -              -               -          84,875       84,875
   Restricted stock awards                           7             7              (7)              -            -
   Exercise of employee stock options              453           453           6,735               -        7,188
   Stock option and restricted stock
        award compensation expense                   -             -           3,750               -        3,750
   Excess tax benefit from exercise of
       employee stock options                        -             -           2,135               -        2,135
                                                ------      --------       ---------       ---------    ---------
June 30, 2007                                   31,506      $ 31,506       $ 128,529       $ 396,807    $ 556,842
                                                ======      ========       =========       =========    =========



The accompanying notes are an integral part of these condensed consolidated
financial statements.

                                       6




                      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
June 30,  2007 and for each of the three and nine month  periods  ended June 30,
2007 and 2006, 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, 2006. 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,
2006. In our opinion,  the unaudited  interim financial  statements  reflect all
adjustments  considered necessary for a fair statement of our financial position
and results of operations for the periods presented.


2. SHARE-BASED COMPENSATION

     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  June  30,  2007,  unrecognized   compensation  cost,  net  of  estimated
forfeitures,   related  to  stock  options  and  restricted   stock  awards  was
approximately  $4.5 million and $4.7 million,  respectively,  which we expect to
recognize  over a  weighted  average  period of  approximately  2.3  years.  The
recognition of share-based  compensation expense had the following effect on our
consolidated statements of operations (in thousands, except per share amounts):

                                       7




                                                         Three Months Ended           Nine Months Ended
                                                         ------------------           -----------------
June 30, 2007:
                                                                                      
Increase in contract drilling expenses                           $ 362                      $  953
Increase in general and administrative expenses                    895                       2,797
Decrease in income tax provision                                  (313)                       (979)
                                                                 -----                      ------
Decrease of net income                                           $ 944                      $2,771
                                                                 ======                     ======

Decrease in earnings per share:
     Basic                                                       $0.03                       $0.09
     Diluted                                                     $0.03                       $0.09


June 30, 2006:
Increase in contract drilling expenses                           $ 350                       $  650
Increase in general and administrative expenses                    775                        2,750
Decrease in income tax provision                                  (271)                        (963)
                                                                 -----                       ------
Decrease of net income                                           $ 854                       $2,437
                                                                 =====                       ======

Decrease in earnings per share:
     Basic                                                       $0.03                        $0.08
     Diluted                                                     $0.03                        $0.08



     Awards of  restricted  stock and stock options have both been granted under
our stock  incentive  plans  during the current  fiscal year.  We deliver  newly
issued shares of common stock for restricted  stock awards upon vesting and upon
exercise of stock options.  All stock  incentive  plans currently in effect have
been approved by the shareholders of our outstanding common stock.

     Stock Options

     Under our 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. Each option is for the purchase of one share of our common stock.

     The per share weighted  average fair value of stock options  granted during
the nine months ended June 30, 2007 was $23.64.  We estimated  the fair value of
each stock option then outstanding using the Black-Scholes pricing model and the
following assumptions for the nine months ended June 30, 2007:

        Risk-Free Interest Rate           4.5%
        Expected Volatility                46%
        Expected Life (Years)             5.25
        Dividend Yield                    None



                                       8




     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 10 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 nine months ended June
30, 2007 is as follows:



                                                                      Wtd. Avg.
                                                     Wtd. Avg.        Remaining        Aggregate
                                     Number of        Exercise       Contractual       Intrinsic
                                  Options (000s)       Price         Life (Years)     Value (000s)
                                  --------------     ---------       ------------     ------------
                                                                        
Outstanding at October 1, 2006         1,437          $ 19.56
Granted                                   79          $ 49.97
Exercised                               (450)         $ 15.90                          $ 18,526
Forfeited                                (13)         $ 31.20
                                      ------
Outstanding at June 30, 2007           1,053          $ 23.27              6.4         $ 47,774
                                     =======
Exercisable at June 30, 2007             644          $ 18.57              5.4         $ 32,234
                                     =======


         Restricted Stock

     We have also  awarded  restricted  stock to  certain  employees  and to our
non-employee directors.  The awards of restricted stock to employees are subject
to three year vesting.  Awards of  restricted  stock to  non-employee  directors
prior to March 2007 vested  immediately  while awards  granted in March 2007 are
subject to three year vesting.  All restricted  stock awards granted to date are
restricted from transfer for three years from the date of grant,  whether vested
or unvested. We value restricted stock awards at fair market value of our common
stock on the date of grant.

     A summary of restricted  stock  activity for the nine months ended June 30,
2007, is as follows:

                                            Number of       Wtd. Avg.
                                          Shares (000s)     Fair Value
                                          -------------    ------------
Unvested at September 30, 2006                 93            $ 38.07
Granted                                        78            $ 49.99
Vested                                         (7)           $ 45.58
Forfeited                                      (2)           $ 49.97
                                              ---
Unvested at June 30, 2007                     162            $ 43.38
                                              ===


                                       9





3.   EARNINGS (LOSS) PER COMMON SHARE

     The  computation  of basic  and  diluted  earnings  per share is as
follows (in thousands, except per share amounts):


                                                   Three Months Ended                           Nine Months Ended
                                                   ------------------                           -----------------

                                             Net                    Per Share            Net                     Per Share
                                            Income       Shares       Amount           Income        Shares        Amount
                                            ------       ------     ---------          ------        ------      ---------
June 30, 2007:
                                                                                                   
      Basic earnings per share              $ 32,033       31,491       $ 1.02          $ 84,875        31,233       $ 2.72
      Effect of dilutive securities:
           Stock options                         ---          473       $(0.02)              ---           485       $(0.04)
                                            --------       ------       ------          --------        ------       ------

      Diluted earnings per share            $ 32,033       31,964       $ 1.00          $ 84,875        31,718       $ 2.68
                                            ========       ======       ======          ========        ======       ======

June 30, 2006:
      Basic earnings per share              $ 32,791       31,037       $ 1.06          $ 62,943        30,900       $ 2.04
      Effect of dilutive securities:
           Stock options                         ---          543       $(0.02)              ---           511       $ (0.04)
                                            --------       ------       ------          --------        ------       -------

      Diluted earnings per share            $ 32,791       31,580       $ 1.04          $ 62,943        31,411       $ 2.00
                                            ========       ======       ======          ========        ======       =======



     The calculation of diluted  earnings per share for the three and nine month
periods  ending June 30, 2007 excludes  consideration  of shares of common stock
related  to  77,000   outstanding   stock  options  because  such  options  were
anti-dilutive.  These options could potentially  dilute basic earnings per share
in the future.


                                       10



4.  PROPERTY AND EQUIPMENT

     A summary of property  and  equipment by  classification  is as follows (in
thousands):

                                                  June 30,        September 30,
                                                   2007               2006
                                               ------------       ------------

Drilling vessels and related equipment
    Cost                                         $ 679,331         $ 661,321
    Accumulated depreciation                      (284,949)         (261,682)
                                                 ---------         ---------
    Net book value                                 394,382           399,639
                                                 ---------         ---------

Drill pipe
    Cost                                            15,370            13,271
    Accumulated depreciation                        (9,410)           (8,257)
                                                 ---------         ---------
    Net book value                                   5,960             5,014
                                                 ---------         --------

Furniture and other
    Cost                                             8,736             7,920
    Accumulated depreciation                        (6,523)           (6,375)
                                                 ---------         ---------
    Net book value                                   2,213             1,545
                                                 ---------         ---------

Construction in progress                            79,507            29,968
                                                 ---------         ---------

     NET PROPERTY AND EQUIPMENT                  $ 482,062         $ 436,166
                                                 =========         =========



     ATWOOD BEACON

     During the first quarter of the current  fiscal year, we completed the work
to restore the ATWOOD  BEACON to its original  condition  prior to the July 2004
incident  offshore of Indonesia  whereby all three legs and the derrick incurred
damage while  positioning for a well. The majority of the  restoration  work was
completed  in early  calendar  year 2005,  at which time the rig was placed back
into  service.  The more  recent  repairs  were  needed to finish  the final leg
extensions  to  restore  the rig to its  original  condition.  We had  insurance
coverage to reimburse  the costs of repairs and loss of hire coverage of $70,000
per day.  $2.6  million of  revenue  recognized  from the loss of hire  coverage
during the quarter ended December 31, 2006 is reflected as business interruption
proceeds in our Consolidated  Statement of Operations.  As of June 30, 2007, all
costs incurred to date and business interruption proceeds earned related to this
incident have been reimbursed by the insurance carrier.

                                       11




     SALE OF EQUIPMENT

     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 for a gain of approximately  $10.1 million.  We had no
operations or revenues associated with these assets prior to their sale.


5.  INCOME TAXES

     Virtually  all of our tax  provision  for each of the three and nine months
ended  June 30,  2007  and 2006  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 and nine months
ended June 30,  2007 and 2006,  our  effective  tax rate for these  periods  was
significantly  less than the United States federal  statutory rate. In addition,
during the third  quarter of the prior fiscal  year,  we reversed a $1.8 million
tax contingent  liability due to the expiration of the statute of limitations in
a foreign jurisdiction and also recognized a $4.6 million tax benefit due to the
acceptance of certain amended prior year tax returns by a foreign tax authority,
both of which  contributed  to the low  effective  tax rates in the prior fiscal
year periods.

     On July  20,  2007,  we were  notified  by the  Malaysian  tax  authorities
regarding a potential proposed adjustment relating to fiscal years 2000 to 2003.
Although we believe we are in compliance,  we are currently evaluating the merit
of the  assertions  by the  Malaysian  tax  authorities  and plan to  vigorously
contest these assertions. While we cannot predict or provide assurance as to the
final  outcome of these  allegations,  we do not expect  them to have a material
adverse effect on our consolidated financial position,  results of operations or
cash flows.


6.   RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In February  2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial  Liabilities",  which provides  companies with an
option to report  selected  financial  assets and  liabilities at fair value and
establishes  presentation and disclosure  requirements to facilitate comparisons
between companies that choose different measurement attributes for similar types
of assets and liabilities.  GAAP has required different  measurement  attributes
for different  assets and liabilities that can create  artificial  volatility in
earnings.  The  objective  of SFAS  No.  159 is to help  mitigate  this  type of
volatility in the earnings by enabling  companies to report  related  assets and
liabilities  at fair value,  which would likely reduce the need for companies to
comply with complex hedge accounting  provisions.  SFAS No. 159 is effective for
fiscal years beginning  after November 15, 2007. We are currently  analyzing the
provisions  of SFAS  No.  159 and  determining  how it  will  affect  accounting
policies and procedures,  but we have not yet made a determination of the impact
the  adoption  will have on our  consolidated  financial  position,  results  of
operations and cash flows.

     In June 2006,  the  Financial  Accounting  Standards  Board  issued FIN 48,
"Accounting  for  Uncertainty  in  Income  Taxes  - an  Interpretation  of  FASB
Statement  109."  FIN 48  prescribes  a  comprehensive  model  for  recognizing,
measuring,  presenting,  and  disclosing  uncertain  tax  positions  within  the
financial  statements.  The  provisions of FIN 48 are effective for fiscal years
beginning  after December 15, 2006. We are evaluating the impact of the adoption
of FIN 48 on our consolidated financial position.

                                       12


     In September 2005, the FASB issued SFAS No. 157, "Fair Value Measurements",
which  defines  fair value,  establishes  methods used to measure fair value and
expands disclosure  requirements about fair value measurements.  SFAS No. 157 is
effective  for  financial  statements  issued for fiscal years  beginning  after
November 15, 2007,  and interim  periods  within  those fiscal  periods.  We are
currently  analyzing the provisions of SFAS No. 157 and  determining how it will
affect  accounting  policies  and  procedures,  but  we  have  not  yet  made  a
determination of the impact the adoption will have on our consolidated financial
position, results of operations and cash flows.


7.   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.


                                       13




                                 PART I. ITEM 2
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


     This  Form 10-Q for the  quarterly  period  ended  June 30,  2007  includes
statements about Atwood Oceanics,  Inc. (which together with its subsidiaries is
identified  as the  "Company,"  "we" or  "our,"  unless  the  context  indicates
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 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,
financial  conditions or cash flows 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 gas industry, which is significantly affected by
       indications and expectations regarding the level and volatility of oil
       and 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 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;

                                       14


     - 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 offshore 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 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;

     - the risks involved in the construction, upgrade and repair of our
       drilling units; and

                                       15


     - such other factors as may be discussed in this report and our other
       reports filed with the Securities and Exchange Commission, or SEC.


     These factors are not necessarily  all of the important  factors that could
cause actual  results to differ  materially  from those  expressed in any of our
forward-looking  statements.  Other unknown or unpredictable  factors could also
have material adverse effects on future results.  The words "believe," "impact,"
"intend,"  "estimate,"  "anticipate,"  "plan," and similar expressions  identify
forward-looking  statements.  These  forward-looking  statements  are  found  at
various places  throughout the  Management's  Discussion and Analysis in Part I,
Item 2 hereof and elsewhere in this report. When considering any forward-looking
statement,  you should  also keep in mind the risk  factors  described  in other
reports or filings  we make with the SEC from time to time,  including  our Form
10K for the year ended  September 30, 2006.  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.

                                       16




MARKET OUTLOOK

     We have 100% of  available  rig days for the  remainder of fiscal year 2007
contracted,  with  contracted  rig  days  for  fiscal  years  2008  and  2009 at
approximately  77% and 32%,  respectively.  A comparison  of the average per day
revenues  for fiscal year 2006 and for the first nine months of fiscal year 2007
for each of our eight drilling units to their current highest contracted dayrate
commitments is as follows:



                          Average Per Day Revenues  (1)
                        -----------------------------
                                                          Current Highest        Percentage Change from
                          Fiscal          Fiscal            Contracted          Fiscal Year-to-Date 2007
                           Year        Year-to-Date           Dayrate            to Highest Contracted
                           2006            2007             Commitment             Dayrate Commitment
                        -----------    --------------     ----------------     ---------------------------

                                                                                
ATWOOD EAGLE              $129,000        $160,000           $405,000                       153%
ATWOOD HUNTER              172,000         221,000            245,000                        11%
ATWOOD FALCON               83,000         124,000            200,000                        61%
ATWOOD SOUTHERN CROSS       82,000         134,000            380,000                       184%
ATWOOD BEACON               88,000         108,000            133,500                        24%
VICKSBURG                   82,000          96,000            154,000                        60%
SEAHAWK                     32,000          85,000(2)          72,000                       ---
RICHMOND                    55,000          81,000             80,000                       ---


(1) Includes dayrate and service revenues and amortized deferred fees.
(2) Includes amortized deferred fees of approximately $18,000 per day.



     The ATWOOD EAGLE is currently  working offshore  Australia for BHP Billiton
Petroleum  ("BHPB")  on a drilling  program  currently  expected  to extend into
January 2008. Immediately following the completion of the BHPB work, the rig has
a one-well  commitment at a dayrate of $360,000 and a two-year  commitment  with
Woodside Energy Limited  ("Woodside")  (expected to commence in March 2008) at a
dayrate of $405,000.  The ATWOOD HUNTER is currently  working offshore Libya for
Woodside at a dayrate of  $245,000.  The current  Woodside  contract  extends to
June/July  2008;  however,  Woodside  has  advised  that they have  interest  in
farming-out  the rig for a period of four to six months which could increase the
ATWOOD  HUNTER's  dayrate  during the  farm-out  period and extend the  Woodside
contract  commitment  beyond the current  June/July 2008 date. The ATWOOD FALCON
has  contractual  commitments  offshore  Malaysia with Sarawak Shell Berhad that
extend to July 2009,  with a current  operating  dayrate of $160,000 to $200,000
(depending  upon water depth of each well  drilled).  We expect that most of the
wells  drilled  will be at the  $160,000  dayrate.  The  ATWOOD  SOUTHERN  CROSS
currently has  contractual  commitments  in the Black Sea with dayrates  ranging
from $145,000 to $380,000. These commitments could extend into the third quarter
of fiscal year 2008 if all option  wells are  exercised.  Currently,  the ATWOOD
BEACON is working  under a long-term  contract  commitment  offshore  India that
extends to January  2009.  The dayrate  for the  contract is $113,000 to January
2008 and $133,500 for one year  thereafter.  The VICKSBURG is currently  working
offshore  Thailand under a contract  commitment for Chevron  Overseas  Petroleum
which  provides a dayrate of $154,000  to June 2009.  The SEAHAWK has a contract
commitment  offshore  Equatorial  Guinea which  extends to  September  2008 at a
dayrate of approximately  $72,000 plus amortized  deferred fees of approximately
$18,000 per day. The RICHMOND,  our only rig in the U.S.  Gulf of Mexico,  has a
current contract  commitment which should extend to October 2007 at a dayrate of
$80,000.

                                       17


Our contract drilling costs increased 36% for the first nine months of fiscal
year 2007 compared to the same period in fiscal year 2006. A comparative
analysis of per day contract drilling costs is as follows:



                                                Average Per Day Contract Drilling Costs
                              -------------------------------------------------------------------------------
                                                                                                Percentage
                                                                                                Change from
                                                                                                Fiscal Year
                                                                                                   2006
                                                                                               Compared to
                                                    First           Second          Third         Third
                                  Fiscal           Quarter         Quarter of      Quarter of    Quarter
                                   Year           of Fiscal         Fiscal          Fiscal      Fiscal Year
                                   2006           Year 2007        Year 2007       Year 2007        2007
                              ------------       ------------ -- ------------ -- ------------- --------------

                                                                                     
ATWOOD EAGLE                     $74,000          $86,000          $94,000         $108,000         46%
ATWOOD HUNTER                     51,000           65,000           65,000           80,000         57%
ATWOOD FALCON                     45,000           95,000(1)        50,000           53,000         18%
ATWOOD SOUTHERN CROSS             66,000 (2)       57,000           48,000           59,000         (11%)(2)
ATWOOD BEACON                     29,000           44,000           39,000           41,000         41%
VICKSBURG                         33,000           41,000           33,000           38,000         15%
SEAHAWK(3)                        23,000           74,000           77,000           81,000         252%
RICHMOND                          28,000           33,000           38,000           37,000         32%
OTHER                             17,000           12,000           26,000           14,000        (18%)


  (1)   Daily average operating costs were high due to planned maintenance
        during the period the rig was in a shipyard undergoing its water depth
        upgrade.
  (2)   The daily average operating costs of the ATWOOD SOUTHERN CROSS was high
        during fiscal year 2006 due to $8.6 million of mobilization expense
        amortization resulting from the rig being relocated from Southeast Asia
        to the Mediterranean during the fourth quarter of fiscal year 2005.
  (3)   During fiscal year 2006, the SEAHAWK worked the first half of the year
        in a relatively low operating cost area of Southeast Asia compared to
        its current operating area of West Africa. This rig was upgraded and
        relocated to West Africa during the second half of
        fiscal year 2006 which also contributed to the rig incurring
        significantly lower operating costs during fiscal year 2006.
        Daily operating costs for fiscal year 2007 also include amortized
        deferred costs of approximately $14,000 per day.


     Thus far, fiscal year 2007 factors impacting operating cost increases,  are
as follows:  (1) end of calendar year bonuses paid to rig shorebased  personnel;
(2) general  salary  increases to all rig-based  personnel;  (3) start-up  costs
associated with rigs commencing  operations in new drilling areas  (VICKSBURG in
Thailand), (ATWOOD BEACON in India), (SEAHAWK in West Africa) and (ATWOOD HUNTER
in Libya); (4) costs associated with maintenance during shipyard periods (ATWOOD
FALCON and ATWOOD BEACON);  (5) higher than normal maintenance costs incurred on
the ATWOOD  HUNTER and ATWOOD  EAGLE;  and (6) higher than normal  payroll costs
incurred  by the ATWOOD  EAGLE due to extra  personnel  assigned  to the rig for
training  purposes.  Operating  costs will vary for all rigs depending upon each
rig's specific operating activities.

     During the last  quarter of fiscal  year 2007 and first half of fiscal year
2008,  some of our rigs are  expected to incur some zero rate days for  required
regulatory  inspections  and planned  maintenance.  Our goal is to maintain  our
fleet  and plan our  downtime  maintenance  periods  with a focus on  minimizing
downtime and achieving  longer term  returns.  The VICKSBURG was off dayrate for
two days in July 2007.  The ATWOOD  EAGLE could incur ten to fourteen  zero rate

                                       18

days during the first or second  quarter of fiscal  year 2008,  while the ATWOOD
HUNTER  could incur  three to five zero rate days  during the fourth  quarter of
fiscal  year 2007 and fifteen to twenty zero rate days  sometime  during  fiscal
year 2008.  The ATWOOD  SOUTHERN  CROSS  could incur seven to ten zero rate days
during the fourth  quarter of fiscal year 2007;  while the RICHMOND  could incur
thirty to sixty zero rate days during the first  quarter of fiscal year 2008 for
a life enhancing  upgrade.  In addition to our planned  downtime,  we would also
expect  to  incur  some  unplanned   downtime  for   maintenance   and  repairs.
Historically,  we have  experienced  approximately  1% to 1 1/2%  of  zero  rate
downtime days for our fleet as a percentage of all available days.

     With a  skilled  labor  shortage  continuing  to  develop  in the  offshore
drilling  industry  coupled with our continuing focus on developing and training
personnel,  we expect our personnel related costs will continue to increase.  We
currently  estimate that daily  operating  costs for our eight  operating  units
during the last quarter of fiscal year 2007 could range as follows:

         ATWOOD EAGLE                            $100,000 to $110,000
         ATWOOD HUNTER                             $70,000 to $75,000
         ATWOOD FALCON                             $60,000 to $65,000
         ATWOOD SOUTHERN CROSS                     $60,000 to $65,000
         SEAHAWK                                   $70,000 to $75,000(1)
         ATWOOD BEACON                             $35,000 to $45,000
         VICKSBURG                                 $35,000 to $45,000
         RICHMOND                                  $35,000 to $45,000

        (1) Includes amortized deferred costs of approximately $14,000 per day.


     Our ninth mobile offshore drilling unit, an ultra-premium  class jack-up to
be named the ATWOOD AURORA,  is currently  under  construction  in  Brownsville,
Texas, with delivery expected by September 30, 2008. We estimate the total costs
of construction  (including  capitalized  interest) will be  approximately  $160
million.  We intend to finance the  construction  of the new rig from  operating
cash  flows  and  cash  on hand  balances.  As of  August  7,  2007,  we have no
outstanding  borrowing  under the $100 million  revolving  credit portion of our
senior secured credit facility.

     We will continue to explore opportunities for growth.  Revenues,  operating
cash flows and  earnings  for fiscal year 2006 were the highest in our  history.
With our backlog of contracted  days at  historically  high  dayrates  providing
increasing revenue expectations, we anticipate that operating results for fiscal
years 2007 and 2008 will reflect  significant  improvement over fiscal year 2006
operating results.


                                       19



RESULTS OF OPERATIONS

         Revenues for the three and nine months ended June 30, 2007 increased
37% and 44%, respectively, compared to the three and nine months ended June 30,
2006. A comparative analysis of revenues is as follows:


                                                                  REVENUES
                                                               (In millions)
                                    ----------------------------------------------------------------------------
                                        Three Months Ended June 30,             Nine Months Ended June 30,
                                    ------------------------------------   -------------------------------------
                                       2007         2006      Variance        2007         2006       Variance
                                    -----------   ---------  -----------   ------------  ----------   ----------

                                                                                    
SEAHAWK                              $  7.4        $ 0.1        $ 7.3         $ 23.3     $  7.6       $  15.7
ATWOOD SOUTHERN CROSS                  13.1          6.6          6.5           36.5       23.3          13.2
ATWOOD FALCON                          12.8          8.4          4.4           33.8       21.8          12.0
ATWOOD EAGLE                           15.2         11.9          3.3           43.7       33.3          10.4
RICHMOND                                7.3          4.7          2.6           22.0       12.8           9.2
ATWOOD BEACON                          10.3          8.4          1.9           29.3       21.4           7.9
VICKSBURG                               9.2          7.9          1.3           26.2       22.3           3.9
ATWOOD HUNTER                          21.6         21.0          0.6           60.3       43.4          16.9
AUSTRALIA MANAGEMENT
  CONTRACTS                             1.5          2.9         (1.4)           6.3        8.9          (2.6)
                                     ------        -----       ------         ------     ------        ------
                                     $ 98.4        $71.9       $ 26.5         $281.4     $194.8        $ 86.6
                                     ======        =====       ======         ======     ======        ======



     The increase in fleetwide revenues for the current quarter and year-to-date
periods is primarily  attributable  to the  increase in average  dayrates due to
improving market conditions and strong demand for offshore drilling equipment as
previously  discussed in "Market Outlook".  Increases in revenues for the ATWOOD
HUNTER, ATWOOD FALCON, SEAHAWK, ATWOOD BEACON, RICHMOND,  ATWOOD SOUTHERN CROSS,
VICKSBURG  and the ATWOOD  EAGLE were  related to each of these  drilling  units
working under higher  dayrate  contracts  during the current  quarter and fiscal
year-to-date  period  compared to the same periods in the prior fiscal year.  In
addition,  during the third  quarter of fiscal  year 2006,  the SEAHAWK was in a
shipyard  undergoing a life-enhancing  upgrade for the entire quarter and earned
virtually  no revenue  during this time.  Revenue for the  AUSTRALIA  MANAGEMENT
CONTRACTS  was lower for the three and nine month  periods  ended June 30,  2007
when compared to the prior fiscal year periods due to decreased  activity as the
most recent  drilling  program was  completed at the end of the first quarter of
fiscal year 2007.


                                       20



         Contract drilling costs for the three and nine months ended June 30,
2007 increased 48% and 36%, respectively compared to the three and nine months
ended June 30, 2006. An analysis of contract drilling costs by rig is as
follows:


                                                           CONTRACT DRILLING COSTS
                                                               (In millions)
                                    --------------------------------------------------------------------------
                                        Three Months Ended June 30,            Nine Months Ended June 30,
                                    ------------------------------------   -----------------------------------
                                       2007         2006      Variance        2007        2006      Variance
                                    -----------   ---------  -----------   -----------  ---------  -----------

                                                                                    
SEAHAWK                                $  7.4      $  0.3      $ 7.1        $ 21.1      $  4.4        $ 16.7
ATWOOD EAGLE                              9.8         6.8        3.0          26.2        19.0           7.2
ATWOOD HUNTER                             7.3         5.2        2.1          19.1        12.9           6.2
ATWOOD SOUTHERN CROSS                     5.3         4.1        1.2          14.9        20.2          (5.3)
ATWOOD BEACON                             3.8         2.6        1.2          11.3         7.8           3.5
RICHMOND                                  3.4         2.5        0.9           9.8         7.4           2.4
VICKSBURG                                 3.4         2.6        0.8          10.1         8.6           1.5
ATWOOD FALCON                             4.8         4.1        0.7          18.1        11.3           6.8
AUSTRALIA MANAGEMENT
  CONTRACTS                               1.0         2.1       (1.1)          4.9         7.3          (2.4)
OTHER                                     1.3         1.8       (0.5)          4.7         4.3           0.4
                                       ------      ------      -----        ------      ------        ------
                                       $ 47.5      $ 32.1      $15.4        $140.2      $103.2        $ 37.0
                                       ======      ======      =====        ======      ======        ======




     On a fleetwide  basis,  wage increases and extra personnel for training and
development  have resulted in higher  personnel  costs during the three and nine
months ended June 30, 2007 for  virtually  every rig when  compared to the prior
fiscal  year  periods.  With the  SEAHAWK and ATWOOD  HUNTER  currently  working
offshore  West and  North  Africa,  respectively,  both  rigs  have  experienced
increased travel,  freight and shorebase costs due to higher  transportation and
living  expenses  in West and  North  Africa.  Contract  drilling  costs for the
SEAHAWK also reflect amortization of approximately $1.2 million and $3.9 million
of deferred  expenses in the second  quarter and  year-to-date  period of fiscal
year 2007, respectively, compared to none in for the same periods of fiscal year
2006. In addition, as previously noted, the SEAHAWK incurred  significantly less
operating costs during the third quarter of the prior fiscal year as the rig was
in a shipyard  undergoing a life enhancing  upgrade.  The ATWOOD HUNTER incurred
additional  maintenance costs during a planned  regulatory  inspection period in
December 2006. In addition to the rising  personnel costs mentioned  above,  the
ATWOOD EAGLE and RICHMOND  incurred higher  maintenance costs during fiscal year
2007 due to the amount and timing of certain maintenance  projects when compared
to the same periods in the prior fiscal year.  Year-to-date  drilling  costs for
the  ATWOOD  SOUTHERN  CROSS have  decreased  primarily  due to $8.6  million of
mobilization  expense amortization during the prior fiscal year compared to none
during the current  fiscal year. The ATWOOD BEACON has also  experienced  higher
year-to-date maintenance costs while in a Singapore shipyard having its last leg
sections reattached during the first quarter of fiscal year 2007. While drilling
costs for the VICKSBURG have remained  relatively  consistent  other than higher
personnel  costs,  the  year-to-date  increase in drilling  costs for the ATWOOD
FALCON is primarily  attributable to planned  maintenance during its water depth
upgrade which was completed during the first quarter of the current fiscal year.
AUSTRALIA  MANAGEMENT  CONTRACTS  costs  have  decreased  due to  the  decreased
activity  resulting from the completion of the current  drilling  program at the
end of the first quarter of the current  fiscal year.  Other drilling costs have
also increased due to rising personnel costs.

                                       21

     Depreciation  expense  for the three and nine  months  ended June 30,  2007
increased 35% and 32% compared to the three and nine months ended June 30, 2006.
An analysis of depreciation expense by rig is as follows:


                                                      DEPRECIATION EXPENSE
                                                         (In millions)
                            ----------------------------------------------------------------------
                               Three Months Ended June 30,          Nine Months Ended June 30,
                            ----------------------------------   ---------------------------------
                              2007        2006      Variance       2007        2006     Variance
                            ----------  ---------  -----------   ---------   ---------  ----------

                                                                       
SEAHAWK                       $  1.6      $   -       $  1.6     $  4.6       $  0.2     $  4.4
ATWOOD FALCON                    1.1        0.7          0.4        3.1          2.1        1.0
ATWOOD SOUTHERN CROSS            0.9        0.8          0.1        2.5          2.1        0.4
ATWOOD HUNTER                    1.4        1.4            -        4.3          4.0        0.3
ATWOOD BEACON                    1.3        1.3            -        3.8          4.0       (0.2)
VICKSBURG                        0.7        0.7            -        2.2          2.1        0.1
ATWOOD EAGLE                     1.1        1.1            -        3.4          3.5       (0.1)
RICHMOND                         0.2        0.2            -        0.7          0.7          -
OTHER                            0.1          -          0.1        0.2          0.1        0.1
                              ------      -----       ------     ------       ------     ------
                              $  8.4      $ 6.2       $  2.2     $ 24.8       $ 18.8     $  6.0
                              ======      =====       ======     ======       ======     ======




     Depreciation  expense has  increased  for the  SEAHAWK,  ATWOOD  FALCON and
ATWOOD SOUTHERN CROSS as these rigs have recently  undergone upgrades within the
past year, while depreciation expense for all other rigs has remained relatively
consistent  with the prior  fiscal year  periods.  The SEAHAWK was almost  fully
depreciated prior to its upgrade;  accordingly,  ongoing quarterly  depreciation
expense will approximate quarterly fiscal year 2007 levels.

     General  and  administrative  expenses  for the current  quarter  increased
compared to the prior  fiscal year  quarter  primarily  due to rising  personnel
costs.  The  year-to-date  increase  also includes an  approximate  $0.7 million
increase in annual bonus  compensation  over the prior fiscal year. The decrease
in the  year-to-date  gain  of  sale  of  equipment  is due to the  sale  of 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 for a gain of
approximately  $10.1  million in the prior  fiscal  year.  Interest  expense has
decreased for both the current quarter and year-to-date  period primarily due to
the reduction of our  outstanding  debt and due to $0.6 million and $2.2 million
of capitalized interest charges related to the construction of the ATWOOD AURORA
during the three and nine months ended June 30, 2007, respectively. Year-to-date
interest  income has  increased  when  compared to the prior  fiscal year due to
interest earned on higher cash balances.


                                       22



     Virtually  all of our tax  provision  for each of the three and nine months
ended  June 30,  2007  and 2006  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 and nine months
ended June 30,  2007 and 2006,  our  effective  tax rate for these  periods  was
significantly  less than the United States federal  statutory rate. In addition,
during the third  quarter of the prior fiscal  year,  we reversed a $1.8 million
tax contingent  liability due to the expiration of the statute of limitations in
a foreign jurisdiction and also recognized a $4.6 million tax benefit due to the
acceptance of certain amended prior year tax returns by a foreign tax authority,
both of which  contributed  to the low  effective  tax rates in the prior fiscal
year periods.  Excluding any discrete items that may be incurred,  we expect our
effective tax rate to be between 13% and 15% for fiscal year 2007.

     On July  20,  2007,  we were  notified  by the  Malaysian  tax  authorities
regarding a potential proposed adjustment relating to fiscal years 2000 to 2003.
Although we believe we are in compliance,  we are currently evaluating the merit
of the  assertions  by the  Malaysian  tax  authorities  and plan to  vigorously
contest these assertions. While we cannot predict or provide assurance as to the
final  outcome of these  allegations,  we do not expect  them to have a material
adverse effect on our consolidated financial position,  results of operations or
cash flows.


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 2001 through 2006, net
cash provided by operating  activities ranged from a low of approximately  $13.7
million in fiscal year 2003 to a high of  approximately  $85.5 million in fiscal
year  2006.  For the nine  months  ended June 30,  2007,  net cash  provided  by
operating  activities totaled  approximately  $138.1 million. Our operating cash
flows are primarily driven by our operating income,  which reflects dayrates and
rig  utilization.  With 100% of our available  operating rig days  committed for
fiscal  year  2007 and  approximately  77%  committed  for  fiscal  year 2008 at
historically high dayrates,  we anticipate  significant  increases in cash flows
and  earnings  during  fiscal  years 2007 and 2008 when  compared to fiscal year
2006. Other than our expected capital expenditures of approximately $110 million
(including  funding  for the  construction  of our new  jack-up  rig),  the only
additional firm cash commitment for fiscal year 2007, 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
2007.  We expect to generate  sufficient  cash flows from  operations to satisfy
these obligations.

     As of June 30, 2007, we had $27 million  outstanding under the term portion
of our senior  secured  credit  facility  and no funds  borrowed  under the $100
million  revolving  portion of our senior  secured  credit  facility.  We are in
compliance with all financial covenants under our senior secured credit facility
at June 30,  2007,  and  expect  to  remain  in  compliance  with all  financial
covenants  during  the  remainder  of fiscal  year 2007.  Aside from  unforeseen
noncompliance  with the financial  covenants,  no other  provisions exist in our
senior secured credit facility that could result in acceleration of the April 1,
2008 maturity date.

                                       23




     At June 30, 2007, the  collateral  for our senior  secured credit  facility
consists  primarily of preferred  mortgages on all eight of our active  drilling
units (with an aggregate net book value at June 30, 2007 totaling  approximately
$386 million). We are not required to maintain compensating  balances;  however,
we are  required  to pay a fee of  approximately  0.60% per annum on the  unused
portion of the  revolving  portion of our senior  secured  credit  facility  and
certain other administrative costs.

     During  the first  nine  months of fiscal  year  2007,  we used  internally
generated cash to expend  approximately  $53 million toward the  construction of
the  ATWOOD  AURORA,  approximately  $9 million on  completing  the water  depth
upgrade and  equipment  maintenance  of the ATWOOD FALCON and  approximately  $9
million  in other  capital  expenditures.  We  estimate  that our total  capital
expenditures  for the fourth  quarter of fiscal year 2007 will be  approximately
$40  million,  with  most all of these  estimated  expenditures  related  to the
construction  of the ATWOOD  AURORA.  In fiscal  year 2008,  we expect to expend
approximately  $45 million in completing the  construction of the ATWOOD AURORA.
We anticipate using internally generated funds to satisfy these obligations.

     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.

     Prepaid  expenses and other deferred  assets have decreased $7.2 million at
current quarter end when compared to September 30, 2006 due to the  amortization
of rig insurance  premiums  which are generally  renewed and paid for during the
fourth quarter of each fiscal year.

     Accrued  liabilities have increased by $9.4 million from September 30, 2006
primarily  due to the  increase of accrued,  but unpaid,  agent fees and current
income tax liabilities.

     Long-term  deferred  credits have increased by  approximately $5 million at
June 30, 2007  compared to September  30, 2006  primarily  due to deferred  fees
associated  with the upgrade of the ATWOOD  FALCON.  Lump sum fees  received for
upgrade costs  reimbursed  by our customers are reported as deferred  credits in
the accompanying  Consolidated  Balance Sheets and are recognized as earned on a
straight-line method over the term of the related drilling contract.

                                       24



                                 PART I. ITEM 3
           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

     All of our $27 million of long-term debt  outstanding at June 30, 2007, was
floating rate debt. As a result,  our annual  interest costs in fiscal year 2007
will fluctuate based on interest rate changes.  Because the interest rate on our
long-term debt is a floating rate and due to our debt maturing in 2008, the fair
value of our long-term debt approximated carrying value as of June 30, 2007. The
impact on annual cash flow of a 10% change in the floating  rate  (approximately
70 basis points)  would be  approximately  $0.2 million,  which we believe to be
immaterial.  We did not have  any  open  derivative  contracts  relating  to our
floating rate debt at June 30, 2007.


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 June
30,  2007  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  gain of  approximately  $0.5  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 June 30, 2007.


                                       25




                                 PART I. ITEM 4
                             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 effective at the reasonable assurance level so 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.




                                       26



                           PART II. OTHER INFORMATION


ITEM 6.   EXHIBITS

(a)      Exhibits

         3.1           Amended and Restated Certificate of Formation dated
                       February 9, 2006 (Incorporated herein by reference to
                       Exhibit 3.1 of our Form 8-K filed February 14, 2006).

         3.2           Second Amended and Restated By-Laws, dated May 5, 2006
                       (Incorporated herein by reference to Exhibit 3.2 of our
                       Form 10-Q filed May 10, 2006).

         3.3           Amendment No. 1 to Second Amended and Restated By-Laws,
                       dated June 7, 2007 (Incorporated herein by reference to
                       Exhibit 3.1 of our Form 8-K filed June 12, 2007).

         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).

         4.2           Certificate of Adjustment of Atwood Oceanics, Inc. dated
                       as of March 17, 2006 (Incorporated herein by reference
                       to Exhibit 4.1 of our Form 8-K filed March 23, 2006).

         4.3           See Exhibit Nos. 3.1, 3.2, and 3.3 for provisions of our
                       Amended and Restated Certificate of Formation and Second
                       Amended and Restated By-Laws (as amended) defining the
                       rights of our shareholders (Incorporated herein by
                       reference to Exhibit 3.1 of our Form 8-K filed
                       February 14, 2006, Exhibit 3.2 of our Form 10-Q filed
                       May 10, 2006, and Exhibit 3.1 of our Form 8-K filed June
                       12, 2007).

         *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

                                       27



                                   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:  August 8, 2007          /s/JAMES M. HOLLAND_
                               ------------------
                              James M. Holland
                              Senior Vice President, Chief Financial Officer,
                              Chief Accounting Officer and Secretary


                                       28




                                  EXHIBIT INDEX

EXHIBIT NO.                                 DESCRIPTION


         3.1           Amended and Restated Certificate of Formation dated
                       February 9, 2006 (Incorporated herein by reference to
                       Exhibit 3.1 of our Form 8-K filed February 14, 2006).

         3.2           Second Amended and Restated By-Laws, dated May 5, 2006
                       (Incorporated herein by reference to Exhibit 3.2 of our
                       Form 10-Q filed May 10, 2006).

         3.3           Amendment No. 1 to Second Amended and Restated By-Laws,
                       dated June 7, 2007 (Incorporated herein by reference to
                       Exhibit 3.1 of our Form 8-K filed June 12, 2007).

         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).

         4.2           Certificate of Adjustment of Atwood Oceanics, Inc.
                       dated as of March 17, 2006 (Incorporated herein by
                       reference to Exhibit 4.1 of our Form 8-K filed
                       March 23, 2006).

         4.3           See Exhibit Nos. 3.1, 3.2, and 3.3 for provisions of our
                       Amended and Restated Certificate of Formation and Second
                       Amended and Restated By-Laws (as amended) defining the
                       rights of our shareholders (Incorporated herein by
                       reference to Exhibit 3.1 of our Form 8-K filed
                       February 14, 2006, Exhibit 3.2 of our Form 10-Q
                       filed May 10, 2006, and Exhibit 3.1 of our Form 8-K
                       filed June 12, 2007).

         *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


                                       29