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What: Atwood Oceanics (NYSE:ATW) stock got crushed last month, in another ugly month for companies involved in oil and gas production. Almost every stock in the sector fell sharply last month, but Atwood's shares were one of only a few that fell much more than 10%. 

ATW Chart

ATW data by YCharts.

So what: The biggest catalysts behind last month's sharp decline were oil prices, which fell more than 11%. U.S. onshore production has remained high, global demand is still sluggish, and concerns about China's economy were recently confirmed when China devalued its currency to boost exports. These are fueling the drop in oil prices, and all compound the cyclical downturn in offshore drilling that some worry could last another couple of years. 

The big fear for the entire industry is that 2016 is shaping up to be even weaker than 2015, and there's a lot of economic pressure that could continue to weigh on oil demand and prices, which would further drag out the downturn in offshore drilling. If that happens, Atwood could face even rougher seas ahead. This is especially true when you consider the company's backlog. 

Atwood has a relatively small fleet of 14 vessels -- two of which are under construction and one is being scrapped. Of the 11 in the water and working, only two have contracts beyond November 2016. So that's nine vessels -- plus one of the newbuilds scheduled for delivery late next year -- that are coming off contract without new work lined up. This can't be ignored as a very real risk for the company. 

Now what: Atwood Oceanics is one of the best-operated offshore drillers, and also has relatively low debt leverage as compared to others. 

ATW Total Long Term Debt (Quarterly) Chart

ATW Total Long Term Debt (Quarterly) data by YCharts.

And that's good, because it will make it easier for the company to ride out the worst of the downturn. But I think it's still too early to call this a buying opportunity -- at least not yet. Atwood has high-quality assets and low debt for its size, but the reality is, it's probably better to wait for the offshore market to begin showing signs of a turnaround before investing. In other words, Atwood isn't sinking, but there are some serious pressures on the entire industry, and it's way too early to call a turnaround now. 

Demand will eventually recover, but it's probably worth paying a little more and waiting for the recovery, versus buying too soon, only to see the market worsen. 

Jason Hall has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Atwood Oceanics. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.