UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended: March 31,September 30, 2021
OR
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-36211
Noble Corporation
(Exact name of registrant as specified in its charter)
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Cayman Islands | | 98-1575532 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. employer identification number) |
13135 Dairy Ashford, Suite 800, Sugar Land, Texas, 77478
(Address of principal executive offices) (Zip Code)
Registrant’s Telephone Number, Including Area Code: (281) 276-6100
Commission file number: 001-31306
Noble Finance Company
(Exact name of registrant as specified in its charter)
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Cayman Islands | | 98-0366361 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. employer identification number) |
13135 Dairy Ashford, Suite 800, Sugar Land, Texas, 77478
(Address of principal executive offices) (Zip Code)
Registrant’s Telephone Number, Including Area Code: (281) 276-6100
Securities registered pursuant to Section 12(b) of the Act: None
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Ordinary Shares, par value $0.00001 per share | NE | New York Stock Exchange |
Indicate by check mark whether each 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether each registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Noble Corporation: | Large accelerated filer | ☐ | Accelerated filer | ☑ | Non-accelerated filer | ☐ | Smaller reporting company | ☑ | Emerging growth company | ☐ |
Noble Finance Company: | Large accelerated filer | ☐ | Accelerated filer | ☐ | Non-accelerated filer | ☑ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☑ No ☐
Number of shares outstanding at May 5,November 3, 2021: Noble Corporation - 60,137,08460,172,178
Number of shares outstanding: Noble Finance Company - 261,245,693261,246,093
This Quarterly Report on Form 10-Q is a combined report being filed separately by two registrants: Noble Corporation, an exempted company incorporated in the Cayman Islands with limited liability, and its wholly-owned subsidiary, Noble Finance Company, an exempted company incorporated in the Cayman Islands.
TABLE OF CONTENTS
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PART I | | | | |
Item 1 | | | | |
| | Noble Corporation (Noble) Financial Statements: | | |
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| | Noble Finance Company (Finco) Financial Statements: | | |
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Item 2 | | | | |
Item 3 | | | | |
Item 4 | | | | |
PART II | | | | |
Item 1 | | | | |
Item 1A | | | | |
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Item 6 | | | | |
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This combined Quarterly Report on Form 10-Q is separately filed by Noble Corporation, an exempted company incorporated in the Cayman Islands with limited liability (“Noble” or “Successor”), and Noble Finance Company (formerly known as Noble Corporation), an exempted company incorporated in the Cayman Islands with limited liability and a wholly-owned subsidiary of Noble (“Finco”).Information. Information in this filing relating to Finco is filed by Noble and separately by Finco on its own behalf. Finco makes no representation as to information relating to Noble (except as it may relate to Finco) or any other affiliate or subsidiary of Noble.
This report should be read in its entirety as it pertains to each Registrant. Except where indicated, the Condensed Consolidated Financial Statements and related Notes are combined. References in this Quarterly Report on Form 10-Q to “Noble,” the “Company,” “we,” “us,” “our” and words of similar meaning refer collectively to Noble and its condensed consolidated subsidiaries, including Finco.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
| | | Successor | | | Predecessor | | Successor | | | Predecessor |
| | March 31, 2021 | | | December 31, 2020 | | September 30, 2021 | | | December 31, 2020 |
ASSETS | ASSETS | | | | | | ASSETS | | | | | |
Current assets | Current assets | | | | Current assets | | | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 116,326 | | | | $ | 343,332 | | Cash and cash equivalents | | $ | 112,225 | | | | $ | 343,332 | |
Accounts receivable, net of allowance for credit losses of $0 and $1,069, respectively | | 178,942 | | | | 147,863 | | |
Accounts receivable, net of allowance for credit losses of zero and $1,069, respectively | | Accounts receivable, net of allowance for credit losses of zero and $1,069, respectively | | 227,644 | | | | 147,863 | |
Taxes receivable | Taxes receivable | | 31,487 | | | | 30,767 | | Taxes receivable | | 29,565 | | | | 30,767 | |
Prepaid expenses and other current assets | Prepaid expenses and other current assets | | 27,840 | | | | 80,322 | | Prepaid expenses and other current assets | | 51,476 | | | | 80,322 | |
Total current assets | Total current assets | | 354,595 | | | | 602,284 | | Total current assets | | 420,910 | | | | 602,284 | |
Intangible assets | Intangible assets | | 104,930 | | | | 0 | | Intangible assets | | 76,262 | | | | — | |
Property and equipment, at cost | Property and equipment, at cost | | 1,178,688 | | | | 4,777,697 | | Property and equipment, at cost | | 1,518,663 | | | | 4,777,697 | |
Accumulated depreciation | Accumulated depreciation | | (13,873) | | | | (1,200,628) | | Accumulated depreciation | | (56,588) | | | | (1,200,628) | |
Property and equipment, net | Property and equipment, net | | 1,164,815 | | | | 3,577,069 | | Property and equipment, net | | 1,462,075 | | | | 3,577,069 | |
Property and equipment held for sale | | Property and equipment held for sale | | 88,639 | | | | — | |
Other assets | Other assets | | 70,528 | | | | 84,584 | | Other assets | | 46,882 | | | | 84,584 | |
Total assets | Total assets | | $ | 1,694,868 | | | | $ | 4,263,937 | | Total assets | | $ | 2,094,768 | | | | $ | 4,263,937 | |
LIABILITIES AND EQUITY | LIABILITIES AND EQUITY | | | | | | LIABILITIES AND EQUITY | | | | | |
Current liabilities | Current liabilities | | | | Current liabilities | | | |
| Accounts payable | Accounts payable | | $ | 96,223 | | | | $ | 95,159 | | Accounts payable | | $ | 106,429 | | | | $ | 95,159 | |
Accrued payroll and related costs | Accrued payroll and related costs | | 36,615 | | | | 36,553 | | Accrued payroll and related costs | | 56,442 | | | | 36,553 | |
Taxes payable | Taxes payable | | 32,901 | | | | 36,819 | | Taxes payable | | 39,312 | | | | 36,819 | |
Interest payable | Interest payable | | 6,587 | | | | 0 | | Interest payable | | 4,293 | | | | — | |
Other current liabilities | Other current liabilities | | 30,689 | | | | 49,820 | | Other current liabilities | | 35,031 | | | | 49,820 | |
Total current liabilities | Total current liabilities | | 203,015 | | | | 218,351 | | Total current liabilities | | 241,507 | | | | 218,351 | |
Long-term debt | Long-term debt | | 393,500 | | | | 0 | | Long-term debt | | 406,000 | | | | — | |
Deferred income taxes | Deferred income taxes | | 17,929 | | | | 9,292 | | Deferred income taxes | | 13,568 | | | | 9,292 | |
Other liabilities | Other liabilities | | 77,862 | | | | 108,039 | | Other liabilities | | 67,025 | | | | 108,039 | |
Liabilities subject to compromise | Liabilities subject to compromise | | 0 | | | | 4,239,643 | | Liabilities subject to compromise | | — | | | | 4,239,643 | |
Total liabilities | Total liabilities | | 692,306 | | | | 4,575,325 | | Total liabilities | | 728,100 | | | | 4,575,325 | |
Commitments and contingencies (Note 14) | | 0 | | | 0 | |
Commitments and contingencies (Note 15) | | Commitments and contingencies (Note 15) | | 0 | | | 0 |
Shareholders’ equity | Shareholders’ equity | | | | Shareholders’ equity | | | |
Predecessor common stock, $0.01 par value, ordinary shares; 251,084 shares outstanding as of December 31, 2020 | Predecessor common stock, $0.01 par value, ordinary shares; 251,084 shares outstanding as of December 31, 2020 | | — | | | | 2,511 | | Predecessor common stock, $0.01 par value, ordinary shares; 251,084 shares outstanding as of December 31, 2020 | | — | | | | 2,511 | |
Successor common stock, $0.00001 par value, ordinary shares; 43,537 shares outstanding as of March 31, 2021 | | 1 | | | | — | | |
Successor common stock, $0.00001 par value, ordinary shares; 60,168 shares outstanding as of September 30, 2021 | | Successor common stock, $0.00001 par value, ordinary shares; 60,168 shares outstanding as of September 30, 2021 | | 1 | | | | — | |
Additional paid-in capital | Additional paid-in capital | | 1,020,785 | | | | 814,796 | | Additional paid-in capital | | 1,388,388 | | | | 814,796 | |
Accumulated deficit | Accumulated deficit | | (18,224) | | | | (1,070,683) | | Accumulated deficit | | (21,454) | | | | (1,070,683) | |
Accumulated other comprehensive loss | | 0 | | | | (58,012) | | |
Accumulated other comprehensive income (loss) | | Accumulated other comprehensive income (loss) | | (267) | | | | (58,012) | |
Total shareholders’ equity | Total shareholders’ equity | | 1,002,562 | | | | (311,388) | | Total shareholders’ equity | | 1,366,668 | | | | (311,388) | |
| Total liabilities and equity | Total liabilities and equity | | $ | 1,694,868 | | | | $ | 4,263,937 | | Total liabilities and equity | | $ | 2,094,768 | | | | $ | 4,263,937 | |
See accompanying notes to the unaudited condensed consolidated financial statements.
NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
(Unaudited)
| | | | | Successor | | | Predecessor | | | | Successor | | | Predecessor | |
| | Period From February 6, 2021 through March 31, 2021 | | | Period From January 1, 2021 through February 5, 2021 | | Three Months Ended March 31, 2020 | | | | Three Months Ended September 30, 2021 | | | Three Months Ended September 30, 2020 | |
Operating revenues | Operating revenues | | | | | | | | | Operating revenues | | | | | | | |
Contract drilling services | Contract drilling services | | $ | 84,629 | | | | $ | 74,051 | | | $ | 267,364 | | | Contract drilling services | | | $ | 231,154 | | | | $ | 227,050 | | |
Reimbursables and other | Reimbursables and other | | 7,804 | | | | 3,430 | | | 13,947 | | | Reimbursables and other | | | 19,217 | | | | 14,786 | | |
| | 92,433 | | | | 77,481 | | | 281,311 | | | | | 250,371 | | | | 241,836 | | |
Operating costs and expenses | Operating costs and expenses | | | | | | | | | Operating costs and expenses | | | | | | | |
Contract drilling services | Contract drilling services | | 79,981 | | | | 46,965 | | | 161,145 | | | Contract drilling services | | | 188,552 | | | | 137,180 | | |
Reimbursables | Reimbursables | | 7,044 | | | | 2,737 | | | 11,684 | | | Reimbursables | | | 16,462 | | | | 13,369 | | |
Depreciation and amortization | Depreciation and amortization | | 14,244 | | | | 20,622 | | | 103,681 | | | Depreciation and amortization | | | 25,248 | | | | 90,606 | | |
General and administrative | General and administrative | | 9,548 | | | | 5,727 | | | 17,839 | | | General and administrative | | | 14,982 | | | | 15,662 | | |
| Loss on impairment | | 0 | | | | 0 | | | 1,119,517 | | | |
Merger and integration costs | | Merger and integration costs | | | 5,033 | | | | — | | |
Transaction costs on sale of operating assets | | Transaction costs on sale of operating assets | | | 3,146 | | | | — | | |
Hurricane losses | | Hurricane losses | | | 10,441 | | | | — | | |
Pre-petition charges | | Pre-petition charges | | | — | | | | 3,894 | | |
| | | 110,817 | | | | 76,051 | | | 1,413,866 | | | |
Operating income (loss) | | (18,384) | | | | 1,430 | | | (1,132,555) | | | |
| | | | 263,864 | | | | 260,711 | | |
Operating loss | | Operating loss | | | (13,493) | | | | (18,875) | | |
Other income (expense) | Other income (expense) | | | | | Other income (expense) | | | | | | |
Interest expense, net of amounts capitalized | Interest expense, net of amounts capitalized | | (6,895) | | | | (229) | | | (70,880) | | | Interest expense, net of amounts capitalized | | | (8,870) | | | | (23,427) | | |
| Gain on extinguishment of debt, net | | Gain on extinguishment of debt, net | | | — | | | | 17,847 | | |
Interest income and other, net | Interest income and other, net | | 8 | | | | 399 | | | (2,282) | | | Interest income and other, net | | | 973 | | | | 7,872 | | |
Reorganization items, net | Reorganization items, net | | 0 | | | | 252,051 | | | 0 | | | Reorganization items, net | | | — | | | | (9,014) | | |
Income (loss) before income taxes | | (25,271) | | | | 253,651 | | | (1,205,717) | | | |
Income tax benefit (provision) | | 7,047 | | | | (3,423) | | | 143,040 | | | |
Loss before income taxes | | Loss before income taxes | | | (21,390) | | | | (25,597) | | |
Income tax provision | | Income tax provision | | | (2,275) | | | | (25,271) | | |
| Net income (loss) | | $ | (18,224) | | | | $ | 250,228 | | | $ | (1,062,677) | | | |
Net loss | | Net loss | | | $ | (23,665) | | | | $ | (50,868) | | |
| Per share data | Per share data | | | | | | | | | Per share data | | | | | | | |
Basic: | Basic: | | | | | Basic: | | | | | | |
| Net income (loss) | | $ | (0.36) | | | | $ | 1.00 | | | $ | (4.25) | | | |
Net loss | | Net loss | | | $ | (0.36) | | | | $ | (0.20) | | |
| Diluted: | Diluted: | | | | | Diluted: | | | | | | |
| Net income (loss) | | $ | (0.36) | | | | $ | 0.98 | | | $ | (4.25) | | | |
Net loss | | Net loss | | | $ | (0.36) | | | | $ | (0.20) | | |
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See accompanying notes to the unaudited condensed consolidated financial statements.
NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)OPERATIONS - CONTINUED
(In thousands)
(Unaudited)thousands, except per share amounts)
(Unaudited)
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| | Successor | | | Predecessor | | | |
| | Period From February 6, 2021 through March 31, 2021 | | | Period From January 1, 2021 through February 5, 2021 | | Three Months Ended March 31, 2020 | | | |
Net income (loss) | | $ | (18,224) | | | | $ | 250,228 | | | $ | (1,062,677) | | | | |
Other comprehensive income (loss) | | | | | | | | | | |
Foreign currency translation adjustments | | 0 | | | | (116) | | | (2,136) | | | | |
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Amortization of deferred pension plan amounts (net of tax provision of $0, $59 and $150 for the period from February 6, 2021 through March 31, 2021, period from January 1, 2021 through February 5, 2021 and three months ended March 31, 2020, respectively.) | | 0 | | | | 224 | | | 568 | | | | |
Other comprehensive income (loss), net | | 0 | | | | 108 | | | (1,568) | | | | |
Comprehensive income (loss) | | $ | (18,224) | | | | $ | 250,336 | | | $ | (1,064,245) | | | | |
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| | Successor | | | Predecessor |
| | Period From | | | Period From | | | | | | |
| | February 6, 2021 | | | January 1, 2021 | | | | | | |
| | through | | | through | | | | | | Nine Months Ended |
| | September 30, 2021 | | | February 5, 2021 | | | | | | September 30, 2020 |
Operating revenues | | | | | | | | | | | |
Contract drilling services | | $ | 515,680 | | | | $ | 74,051 | | | | | | | $ | 714,555 | |
Reimbursables and other | | 46,467 | | | | 3,430 | | | | | | | 46,510 | |
| | 562,147 | | | | 77,481 | | | | | | | 761,065 | |
Operating costs and expenses | | | | | | | | | | | |
Contract drilling services | | 456,853 | | | | 46,965 | | | | | | | 442,479 | |
Reimbursables | | 41,577 | | | | 2,737 | | | | | | | 41,387 | |
Depreciation and amortization | | 64,831 | | | | 20,622 | | | | | | | 283,652 | |
General and administrative | | 47,939 | | | | 5,727 | | | | | | | 106,504 | |
Merger and integration costs | | 13,786 | | | | — | | | | | | | — | |
Transaction costs on sale of operating assets | | 3,146 | | | | — | | | | | | | — | |
Hurricane losses | | 10,441 | | | | — | | | | | | | — | |
Pre-petition charges | | — | | | | — | | | | | | | 14,409 | |
Loss on impairment | | — | | | | — | | | | | | | 1,119,517 | |
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| | 638,573 | | | | 76,051 | | | | | | | 2,007,948 | |
Operating income (loss) | | (76,426) | | | | 1,430 | | | | | | | (1,246,883) | |
Other income (expense) | | | | | | | | | | | |
Interest expense, net of amounts capitalized | | (23,628) | | | | (229) | | | | | | | (164,586) | |
Gain on bargain purchase | | 64,479 | | | | — | | | | | | | — | |
Gain on extinguishment of debt, net | | — | | | | — | | | | | | | 17,254 | |
Interest income and other, net | | 7,490 | | | | 399 | | | | | | | 8,546 | |
Reorganization items, net | | — | | | | 252,051 | | | | | | | (9,014) | |
Income (loss) before income taxes | | (28,085) | | | | 253,651 | | | | | | | (1,394,683) | |
Income tax benefit (provision) | | 6,631 | | | | (3,423) | | | | | | | 238,944 | |
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Net income (loss) | | $ | (21,454) | | | | $ | 250,228 | | | | | | | (1,155,739) | |
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Per share data | | | | | | | | | | | |
Basic: | | | | | | | | | | | |
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Net income (loss) | | $ | (0.35) | | | | $ | 1.00 | | | | | | | $ | (4.61) | |
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Diluted: | | | | | | | | | | | |
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Net income (loss) | | $ | (0.35) | | | | $ | 0.98 | | | | | | | $ | (4.61) | |
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See accompanying notes to the unaudited condensed consolidated financial statements.
NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSCOMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
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| | Successor | | | Predecessor |
| | Period from February 6, 2021 through March 31, 2021 | | | Period from January 1, 2021 through February 5, 2021 | | Three Months Ended March 31, 2020 |
Cash flows from operating activities | | | | | | | |
Net income (loss) | | $ | (18,224) | | | | $ | 250,228 | | | $ | (1,062,677) | |
Adjustments to reconcile net loss to net cash flow from operating activities: | | | | | | | |
Depreciation and amortization | | 14,244 | | | | 20,622 | | | 103,681 | |
Loss on impairment | | 0 | | | | 0 | | | 1,119,517 | |
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Amortization of intangible asset | | 8,459 | | | | 0 | | | 0 | |
Reorganization items, net | | 0 | | | | (280,790) | | | 0 | |
Deferred income taxes | | (4,285) | | | | 2,501 | | | 6,014 | |
Amortization of share-based compensation | | 2,018 | | | | 710 | | | 3,245 | |
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Other costs, net | | (1,660) | | | | (10,754) | | | (3,195) | |
Changes in components of working capital: | | | | | | | |
Change in taxes receivable | | 1,069 | | | | (1,789) | | | (120,838) | |
Net changes in other operating assets and liabilities | | 16,563 | | | | (26,176) | | | (46,557) | |
Net cash provided by (used in) operating activities | | 18,184 | | | | (45,448) | | | (810) | |
Cash flows from investing activities | | | | | | | |
Capital expenditures | | (15,332) | | | | (14,629) | | | (36,461) | |
Proceeds from disposal of assets, net | | 231 | | | | 194 | | | 0 | |
Net cash used in investing activities | | (15,101) | | | | (14,435) | | | (36,461) | |
Cash flows from financing activities | | | | | | | |
Issuance of second lien notes | | 0 | | | | 200,000 | | | 0 | |
Borrowings on credit facilities | | 0 | | | | 177,500 | | | 110,000 | |
Repayments of credit facilities | | 0 | | | | (545,000) | | | 0 | |
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Debt issuance costs | | 0 | | | | (23,664) | | | 0 | |
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Cash paid to settle equity compensation awards | | 0 | | | | 0 | | | (1,010) | |
Taxes withheld on employee stock transactions | | 0 | | | | (1) | | | (413) | |
Net cash provided by (used in) financing activities | | 0 | | | | (191,165) | | | 108,577 | |
Net increase (decrease) in cash, cash equivalents and restricted cash | | 3,083 | | | | (251,048) | | | 71,306 | |
Cash, cash equivalents and restricted cash, beginning of period | | 113,993 | | | | 365,041 | | | 105,924 | |
Cash, cash equivalents and restricted cash, end of period | | $ | 117,076 | | | | $ | 113,993 | | | $ | 177,230 | |
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| | Successor | | | Predecessor | | | |
| | Three Months | | | Three Months | | | |
| | Ended | | | Ended | | | |
| | September 30, 2021 | | | September 30, 2020 | | | |
Net loss | | $ | (23,665) | | | | $ | (50,868) | | | | |
Other comprehensive income (loss) | | | | | | | | |
Foreign currency translation adjustments | | — | | | | 863 | | | | |
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Net changes in pension and other postretirement plan assets and benefit obligations recognized in other comprehensive loss, net of tax provision of zero and $150 for the three months ended September 30, 2021 and 2020, respectively | | (435) | | | | 569 | | | | |
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Other comprehensive income (loss), net | | (435) | | | | 1,432 | | | | |
Comprehensive loss | | $ | (24,100) | | | | $ | (49,436) | | | | |
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| | Successor | | | Predecessor |
| | Period From | | | Period From | | |
| | February 6, 2021 | | | January 1, 2021 | | |
| | through | | | through | | Nine Months Ended |
| | September 30, 2021 | | | February 5, 2021 | | September 30, 2020 |
Net income (loss) | | $ | (21,454) | | | | $ | 250,228 | | | $ | (1,155,739) | |
Other comprehensive income (loss) | | | | | | | |
Foreign currency translation adjustments | | — | | | | (116) | | | (1,812) | |
| | | | | | | |
Net changes in pension and other postretirement plan assets and benefit obligations recognized in other comprehensive loss, net of tax provision of zero, $59 and $450 for the period from February 6, 2021 through September 30, 2021, period from January 1, 2021 through February 5, 2021 and nine months ended September 30, 2020, respectively | | (267) | | | | 224 | | | 1,705 | |
| | | | | | | |
Other comprehensive income (loss), net | | (267) | | | | 108 | | | (107) | |
Comprehensive income (loss) | | $ | (21,721) | | | | $ | 250,336 | | | $ | (1,155,846) | |
See accompanying notes to the unaudited condensed consolidated financial statements.
NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| | | | | | | |
| | Successor | | | Predecessor |
| | Period From | | | Period From | | |
| | February 6, 2021 | | | January 1, 2021 | | |
| | through | | | through | | Nine Months Ended |
| | September 30, 2021 | | | February 5, 2021 | | September 30, 2020 |
Cash flows from operating activities | | | | | | | |
Net income (loss) | | $ | (21,454) | | | | $ | 250,228 | | | $ | (1,155,739) | |
Adjustments to reconcile net loss to net cash flow from operating activities: | | | | | | | |
Depreciation and amortization | | 64,831 | | | | 20,622 | | | 283,652 | |
Loss on impairment | | — | | | | — | | | 1,119,517 | |
Gain on extinguishment of debt, net | | — | | | | — | | | (17,254) | |
Gain on bargain purchase | | (64,479) | | | | — | | | — | |
Amortization of intangible asset | | 37,127 | | | | — | | | — | |
Reorganization items, net | | — | | | | (280,790) | | | (11,531) | |
Deferred income taxes | | (9,170) | | | | 2,501 | | | 6,825 | |
Amortization of share-based compensation | | 11,624 | | | | 710 | | | 7,352 | |
| | | | | | | |
| | | | | | | |
Other costs, net | | 1,912 | | | | (10,754) | | | (53,179) | |
Changes in components of working capital: | | | | | | | |
Change in taxes receivable | | 13,810 | | | | (1,789) | | | 29,581 | |
Net changes in other operating assets and liabilities | | (10,173) | | | | (26,176) | | | 27,442 | |
Net cash provided by (used in) operating activities | | 24,028 | | | | (45,448) | | | 236,666 | |
Cash flows from investing activities | | | | | | | |
Capital expenditures | | (117,750) | | | | (14,629) | | | (112,603) | |
Cash acquired in stock-based business combination | | 54,970 | | | | — | | | — | |
Proceeds from disposal of assets, net | | 31,247 | | | | 194 | | | 1,428 | |
Net cash used in investing activities | | (31,533) | | | | (14,435) | | | (111,175) | |
Cash flows from financing activities | | | | | | | |
Issuance of second lien notes | | — | | | | 200,000 | | | — | |
Borrowings on credit facilities | | 40,000 | | | | 177,500 | | | 210,000 | |
Repayments of credit facilities | | (27,500) | | | | (545,000) | | | — | |
Repayments of debt | | — | | | | — | | | (101,132) | |
Debt issuance costs | | — | | | | (23,664) | | | — | |
Warrants exercised | | 647 | | | | — | | | — | |
Cash paid to settle equity compensation awards | | — | | | | — | | | (1,010) | |
Taxes withheld on employee stock transactions | | — | | | | (1) | | | (417) | |
Net cash provided by (used in) financing activities | | 13,147 | | | | (191,165) | | | 107,441 | |
Net increase (decrease) in cash, cash equivalents and restricted cash | | 5,642 | | | | (251,048) | | | 232,932 | |
Cash, cash equivalents and restricted cash, beginning of period | | 113,993 | | | | 365,041 | | | 105,924 | |
Cash, cash equivalents and restricted cash, end of period | | $ | 119,635 | | | | $ | 113,993 | | | $ | 338,856 | |
See accompanying notes to the unaudited condensed consolidated financial statements.
NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
(Unaudited)
| | | Shares | | Additional Paid-in Capital | | Retained Earnings (Accumulated Deficit) | | Accumulated Other Comprehensive Loss | | | Total Equity | | Shares | | Additional Paid-in Capital | | Retained Earnings (Accumulated Deficit) | | Accumulated Other Comprehensive Income (Loss) | | | Total Equity |
| | Balance | | Par Value | | | Total Equity | | Balance | | Par Value | | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss) | | Total Equity |
Balance at 12/31/2019 (Predecessor) | | 249,200 | | | $ | 2,492 | | | $ | 807,093 | | | $ | 2,907,776 | | | $ | (58,389) | | | | $ | 3,658,972 | | |
Balance at 6/30/2020 (Predecessor) | | Balance at 6/30/2020 (Predecessor) | | 251,041 | | | $ | 2,510 | | | $ | 811,483 | | | $ | 1,802,905 | | | $ | (59,928) | | | | $ | 2,556,970 | |
Employee related equity activity | Employee related equity activity | | | | Employee related equity activity | | | |
Amortization of share-based compensation | Amortization of share-based compensation | | — | | | — | | | 2,235 | | | — | | | — | | | | 2,235 | | Amortization of share-based compensation | | — | | | — | | | 1,500 | | | — | | | — | | | | 1,500 | |
Issuance of share-based compensation shares | Issuance of share-based compensation shares | | 1,752 | | | 17 | | | (17) | | | — | | | — | | | | 0 | | Issuance of share-based compensation shares | | 21 | | | — | | | — | | | — | | | — | | | | — | |
Shares withheld for taxes on equity transactions | | — | | | — | | | (430) | | | — | | | — | | | | (430) | | |
| Net loss | Net loss | | — | | | — | | | — | | | (1,062,677) | | | — | | | | (1,062,677) | | Net loss | | — | | | — | | | — | | | (50,868) | | | — | | | | (50,868) | |
Other comprehensive income, net | | Other comprehensive income, net | | — | | | — | | | — | | | — | | | 1,432 | | | | 1,432 | |
Balance at 9/30/2020 (Predecessor) | | Balance at 9/30/2020 (Predecessor) | | 251,062 | | | $ | 2,510 | | | $ | 812,983 | | | $ | 1,752,037 | | | $ | (58,496) | | | | $ | 2,509,034 | |
| Other comprehensive loss, net | | (1,568) | | | | (1,568) | | |
Balance at 3/31/2020 (Predecessor) | | 250,952 | | | $ | 2,509 | | | $ | 808,881 | | | $ | 1,845,099 | | | $ | (59,957) | | | | $ | 2,596,532 | | |
| Balance at 12/31/2020 (Predecessor) | | 251,084 | | | $ | 2,511 | | | $ | 814,796 | | | $ | (1,070,683) | | | $ | (58,012) | | | | $ | (311,388) | | |
Balance at 6/30/2021 (Successor) | | Balance at 6/30/2021 (Successor) | | 60,150 | | | $ | 1 | | | $ | 1,383,344 | | | $ | 2,211 | | | $ | 168 | | | | $ | 1,385,724 | |
Employee related equity activity | Employee related equity activity | | | | Employee related equity activity | | | |
Amortization of share-based compensation | Amortization of share-based compensation | | — | | | — | | | 710 | | | — | | | — | | | | 710 | | Amortization of share-based compensation | | — | | | — | | | 4,668 | | | — | | | — | | | | 4,668 | |
Issuance of share-based compensation shares | | 43 | | | — | | | — | | | — | | | — | | | | — | | |
Shares withheld for taxes on equity transactions | | — | | | — | | | (1) | | | — | | | — | | | | (1) | | |
Net income | | — | | | — | | | — | | | 250,228 | | | — | | | | 250,228 | | |
Other comprehensive income, net | | — | | | — | | | — | | | — | | | 108 | | | | 108 | | |
Cancellation of Predecessor equity | | (251,127) | | | (2,511) | | | (815,505) | | | 820,455 | | | 57,904 | | | | 60,343 | | |
Issuance of Successor common stock and warrants | | 50,000 | | | 1 | | | 1,018,767 | | | — | | | — | | | | 1,018,768 | | |
Balance at 2/5/2021 (Predecessor) | | 50,000 | | | $ | 1 | | | $ | 1,018,767 | | | $ | 0 | | | $ | 0 | | | | $ | 1,018,768 | | |
| | Balance at 2/6/2021 (Successor) | | 50,000 | | | $ | 1 | | | $ | 1,018,767 | | | $ | 0 | | | $ | 0 | | | | 1,018,768 | | |
Employee related equity activity | | . | | | | |
Amortization of share-based compensation | | — | | | — | | | 2,018 | | | — | | | — | | | | 2,018 | | |
Exchange of common stock for penny warrants | | (6,463) | | | — | | | — | | | — | | | — | | | | — | | |
Exercise of common stock warrants | | Exercise of common stock warrants | | 18 | | | — | | | 376 | | | — | | | — | | | | 376 | |
| | Net loss | Net loss | | — | | | — | | | — | | | (18,224) | | | — | | | | (18,224) | | Net loss | | — | | | — | | | — | | | (23,665) | | | — | | | | (23,665) | |
Other comprehensive loss, net | | Other comprehensive loss, net | | — | | | — | | | — | | | — | | | (435) | | | | (435) | |
Balance at 9/30/2021 (Successor) | | Balance at 9/30/2021 (Successor) | | 60,168 | | | $ | 1 | | | $ | 1,388,388 | | | $ | (21,454) | | | $ | (267) | | | | $ | 1,366,668 | |
| Balance at 3/31/21 (Successor) | | 43,537 | | | $ | 1 | | | $ | 1,020,785 | | | $ | (18,224) | | | $ | 0 | | | | $ | 1,002,562 | | |
|
See accompanying notes to the unaudited condensed consolidated financial statements.
NOBLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY - CONTINUED
(In thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Shares | | Additional Paid-in Capital | | Retained Earnings (Accumulated Deficit) | | Accumulated Other Comprehensive Income (Loss) | | | | Total Equity |
| | Balance | | Par Value | | | | | |
Balance at 12/31/2019 (Predecessor) | | 249,200 | | | $ | 2,492 | | | $ | 807,093 | | | $ | 2,907,776 | | | $ | (58,389) | | | | | $ | 3,658,972 | |
Employee related equity activity | | | | | | | | | | | | | | |
Amortization of share-based compensation | | — | | | — | | | 6,342 | | | — | | | — | | | | | 6,342 | |
Issuance of share-based compensation shares | | 1,862 | | | 18 | | | (17) | | | — | | | — | | | | | 1 | |
Shares withheld for taxes on equity transactions | | — | | | — | | | (435) | | | — | | | — | | | | | (435) | |
Net loss | | — | | | — | | | — | | | (1,155,739) | | | — | | | | | (1,155,739) | |
Other comprehensive loss, net | | — | | | — | | | — | | | — | | | (107) | | | | | (107) | |
Balance at 9/30/2020 (Predecessor) | | 251,062 | | | $ | 2,510 | | | $ | 812,983 | | | $ | 1,752,037 | | | $ | (58,496) | | | | | $ | 2,509,034 | |
| | | | | | | | | | | | | | |
Balance at 12/31/2020 (Predecessor) | | 251,084 | | | $ | 2,511 | | | $ | 814,796 | | | $ | (1,070,683) | | | $ | (58,012) | | | | | $ | (311,388) | |
Employee related equity activity | | | | | | | | | | | | | | |
Amortization of share-based compensation | | — | | | — | | | 710 | | | — | | | — | | | | | 710 | |
Issuance of share-based compensation shares | | 43 | | | — | | | — | | | — | | | — | | | | | — | |
Shares withheld for taxes on equity transactions | | — | | | — | | | (1) | | | — | | | — | | | | | (1) | |
Net income | | — | | | — | | | — | | | 250,228 | | | — | | | | | 250,228 | |
Other comprehensive income, net | | — | | | — | | | — | | | — | | | 108 | | | | | 108 | |
Cancellation of Predecessor equity | | (251,127) | | | (2,511) | | | (815,505) | | | 820,455 | | | 57,904 | | | | | 60,343 | |
Issuance of Successor common stock and warrants | | 50,000 | | | 1 | | | 1,018,767 | | | — | | | — | | | | | 1,018,768 | |
Balance at 2/5/2021 (Predecessor) | | 50,000 | | | $ | 1 | | | $ | 1,018,767 | | | $ | — | | | $ | — | | | | | $ | 1,018,768 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Balance at 2/6/2021 (Successor) | | 50,000 | | | $ | 1 | | | $ | 1,018,767 | | | $ | — | | | $ | — | | | | | 1,018,768 | |
Employee related equity activity | | | | | | | | | | | | | | |
Amortization of share-based compensation | | — | | | — | | | 11,312 | | | — | | | — | | | | | 11,312 | |
Exchange of common stock for penny warrants | | (6,463) | | | — | | | — | | | — | | | — | | | | | — | |
| | | | | | | | | | | | | | |
Exercise of common stock warrants | | 31 | | | — | | | 647 | | | — | | | — | | | | | 647 | |
Issuance of common stock for Pacific Drilling merger | | 16,600 | | | — | | | 357,662 | | | — | | | — | | | | | 357,662 | |
| | | | | | | | | | | | | | |
Net loss | | — | | | — | | | — | | | (21,454) | | | — | | | | | (21,454) | |
Other comprehensive loss, net | | — | | | — | | | — | | | — | | | (267) | | | | | (267) | |
Balance at 9/30/21 (Successor) | | 60,168 | | | $ | 1 | | | $ | 1,388,388 | | | $ | (21,454) | | | $ | (267) | | | | | $ | 1,366,668 | |
| | | | | | | | | | | | | | |
NOBLE FINANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
| | | Successor | | | Predecessor | | Successor | | | Predecessor |
| | March 31, 2021 | | | December 31, 2020 | | September 30, 2021 | | | December 31, 2020 |
ASSETS | ASSETS | | | | | | ASSETS | | | | | |
Current assets | Current assets | | | | Current assets | | | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 116,326 | | | | $ | 343,332 | | Cash and cash equivalents | | $ | 111,990 | | | | $ | 343,332 | |
| Accounts receivable, net of allowance for credit losses of $0 and $1,069, respectively | | 178,942 | | | | 147,863 | | |
Accounts receivable, net of allowance for credit losses of zero and $1,069, respectively | | Accounts receivable, net of allowance for credit losses of zero and $1,069, respectively | | 227,644 | | | | 147,863 | |
Accounts receivable from affiliates | Accounts receivable from affiliates | | 0 | | | | 31,214 | | Accounts receivable from affiliates | | — | | | | 31,214 | |
Taxes receivable | Taxes receivable | | 31,487 | | | | 30,767 | | Taxes receivable | | 29,565 | | | | 30,767 | |
Prepaid expenses and other current assets | Prepaid expenses and other current assets | | 19,486 | | | | 50,469 | | Prepaid expenses and other current assets | | 40,317 | | | | 50,469 | |
Total current assets | Total current assets | | 346,241 | | | | 603,645 | | Total current assets | | 409,516 | | | | 603,645 | |
Intangible assets | Intangible assets | | 104,930 | | | | 0 | | Intangible assets | | 76,262 | | | | — | |
Property and equipment, at cost | Property and equipment, at cost | | 1,178,688 | | | | 4,777,697 | | Property and equipment, at cost | | 1,518,663 | | | | 4,777,697 | |
Accumulated depreciation | Accumulated depreciation | | (13,873) | | | | (1,200,628) | | Accumulated depreciation | | (56,588) | | | | (1,200,628) | |
Property and equipment, net | Property and equipment, net | | 1,164,815 | | | | 3,577,069 | | Property and equipment, net | | 1,462,075 | | | | 3,577,069 | |
Property and equipment held for sale | | Property and equipment held for sale | | 88,639 | | | | — | |
Other assets | Other assets | | 70,528 | | | | 84,584 | | Other assets | | 46,882 | | | | 84,584 | |
Total assets | Total assets | | $ | 1,686,514 | | | | $ | 4,265,298 | | Total assets | | $ | 2,083,374 | | | | $ | 4,265,298 | |
LIABILITIES AND EQUITY | LIABILITIES AND EQUITY | | | | | | LIABILITIES AND EQUITY | | | | | |
Current liabilities | Current liabilities | | | | Current liabilities | | | |
| Accounts payable | Accounts payable | | $ | 87,712 | | | | $ | 83,649 | | Accounts payable | | $ | 100,691 | | | | $ | 83,649 | |
Accrued payroll and related costs | Accrued payroll and related costs | | 36,615 | | | | 36,516 | | Accrued payroll and related costs | | 56,442 | | | | 36,516 | |
Taxes payable | Taxes payable | | 32,901 | | | | 36,819 | | Taxes payable | | 39,312 | | | | 36,819 | |
Interest payable | Interest payable | | 6,587 | | | | 0 | | Interest payable | | 4,293 | | | | — | |
Other current liabilities | Other current liabilities | | 30,690 | | | | 49,820 | | Other current liabilities | | 34,894 | | | | 49,820 | |
Total current liabilities | Total current liabilities | | 194,505 | | | | 206,804 | | Total current liabilities | | 235,632 | | | | 206,804 | |
Long-term debt | Long-term debt | | 393,500 | | | | 0 | | Long-term debt | | 406,000 | | | | — | |
Deferred income taxes | Deferred income taxes | | 17,929 | | | | 9,292 | | Deferred income taxes | | 13,568 | | | | 9,292 | |
Other liabilities | Other liabilities | | 77,837 | | | | 108,039 | | Other liabilities | | 66,851 | | | | 108,039 | |
Liabilities subject to compromise | Liabilities subject to compromise | | 0 | | | | 4,154,555 | | Liabilities subject to compromise | | — | | | | 4,154,555 | |
Total liabilities | Total liabilities | | 683,771 | | | | 4,478,690 | | Total liabilities | | 722,051 | | | | 4,478,690 | |
Commitments and contingencies (Note 14) | | 0 | | | 0 | |
Commitments and contingencies (Note 15) | | Commitments and contingencies (Note 15) | | 0 | | | 0 |
Shareholders’ equity | Shareholders’ equity | | | | Shareholders’ equity | | | |
Predecessor common stock, $0.10 par value, 261,246 ordinary shares outstanding as of December 31, 2020. | | — | | | | 26,125 | | |
Successor common stock, $0.10 par value, 261,246 ordinary shares outstanding as of March 31, 2021. | | 26,125 | | | | — | | |
Predecessor common stock, $0.10 par value, 261,246 ordinary shares outstanding as of December 31, 2020 | | Predecessor common stock, $0.10 par value, 261,246 ordinary shares outstanding as of December 31, 2020 | | — | | | | 26,125 | |
Successor common stock, $0.10 par value, 261,246 ordinary shares outstanding as of September 30, 2021 | | Successor common stock, $0.10 par value, 261,246 ordinary shares outstanding as of September 30, 2021 | | 26,125 | | | | — | |
Capital in excess of par value | Capital in excess of par value | | 989,284 | | | | 766,714 | | Capital in excess of par value | | 1,390,801 | | | | 766,714 | |
Accumulated deficit | Accumulated deficit | | (12,666) | | | | (948,219) | | Accumulated deficit | | (55,336) | | | | (948,219) | |
Accumulated other comprehensive loss | | 0 | | | | (58,012) | | |
Accumulated other comprehensive income (loss) | | Accumulated other comprehensive income (loss) | | (267) | | | | (58,012) | |
Total shareholders’ equity | Total shareholders’ equity | | 1,002,743 | | | | (213,392) | | Total shareholders’ equity | | 1,361,323 | | | | (213,392) | |
| Total liabilities and equity | Total liabilities and equity | | $ | 1,686,514 | | | | $ | 4,265,298 | | Total liabilities and equity | | $ | 2,083,374 | | | | $ | 4,265,298 | |
See accompanying notes to the unaudited condensed consolidated financial statements.
NOBLE FINANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
| | | | | Successor | | | Predecessor | | | | Successor | | | Predecessor | |
| | Period From February 6, 2021 through March 31, 2021 | | | Period From January 1, 2021 through February 5, 2021 | | Three Months Ended March 31, 2020 | | | | Three Months Ended September 30, 2021 | | | Three Months Ended September 30, 2020 | |
Operating revenues | Operating revenues | | | | | | | | | Operating revenues | | | | | | | |
Contract drilling services | Contract drilling services | | $ | 84,629 | | | | $ | 74,051 | | | $ | 267,364 | | | Contract drilling services | | | $ | 231,154 | | | | $ | 227,050 | | |
Reimbursables and other | Reimbursables and other | | 7,804 | | | | 3,430 | | | 13,947 | | | Reimbursables and other | | | 19,217 | | | | 14,786 | | |
| | 92,433 | | | | 77,481 | | | 281,311 | | | | | 250,371 | | | | 241,836 | | |
Operating costs and expenses | Operating costs and expenses | | | | | | | | | Operating costs and expenses | | | | | | | |
Contract drilling services | Contract drilling services | | 79,361 | | | | 46,703 | | | 160,841 | | | Contract drilling services | | | 187,886 | | | | 136,975 | | |
Reimbursables | Reimbursables | | 7,044 | | | | 2,737 | | | 11,684 | | | Reimbursables | | | 16,462 | | | | 13,369 | | |
Depreciation and amortization | Depreciation and amortization | | 14,243 | | | | 20,631 | | | 103,109 | | | Depreciation and amortization | | | 25,241 | | | | 90,236 | | |
General and administrative | General and administrative | | 4,611 | | | | 5,729 | | | 6,751 | | | General and administrative | | | 7,772 | | | | 6,503 | | |
Loss on impairment | | 0 | | | | 0 | | | 1,119,517 | | | |
Merger and integration costs | | Merger and integration costs | | | 4,149 | | | | — | | |
Transaction costs on sale of operating assets | | Transaction costs on sale of operating assets | | | 2,230 | | | | — | | |
Hurricane losses | | Hurricane losses | | | 10,441 | | | | — | | |
| | 105,259 | | | | 75,800 | | | 1,401,902 | | | |
Operating income (loss) | | (12,826) | | | | 1,681 | | | (1,120,591) | | | |
| | | | 254,181 | | | | 247,083 | | |
Operating loss | | Operating loss | | | (3,810) | | | | (5,247) | | |
Other income (expense) | Other income (expense) | | | | | Other income (expense) | | | | | | | |
Interest expense, net of amounts capitalized | Interest expense, net of amounts capitalized | | (6,895) | | | | (229) | | | (70,880) | | | Interest expense, net of amounts capitalized | | | (8,870) | | | | (23,427) | | |
| Gain on extinguishment of debt, net | | Gain on extinguishment of debt, net | | | — | | | | 17,847 | | |
Interest income and other, net | Interest income and other, net | | 8 | | | | 400 | | | (2,294) | | | Interest income and other, net | | | 975 | | | | 7,871 | | |
Reorganization items, net | Reorganization items, net | | 0 | | | | 195,395 | | | 0 | | | Reorganization items, net | | | — | | | | (49,974) | | |
Income (loss) before income taxes | | (19,713) | | | | 197,247 | | | (1,193,765) | | | |
Income tax benefit (provision) | | 7,047 | | | | (3,422) | | | 143,040 | | | |
Loss before income taxes | | Loss before income taxes | | | (11,705) | | | | (52,930) | | |
Income tax provision | | Income tax provision | | | (2,275) | | | | (25,272) | | |
| Net income (loss) | | $ | (12,666) | | | | $ | 193,825 | | | $ | (1,050,725) | | | |
Net loss | | Net loss | | | $ | (13,980) | | | | $ | (78,202) | | |
|
See accompanying notes to the unaudited condensed consolidated financial statements.
NOBLE FINANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
(In thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| | | | | | | | | | | |
| | Successor | | | Predecessor | | | | |
| | Period From | | | Period From | | | | | | |
| | February 6, 2021 | | | January 1, 2021 | | | | | | |
| | through | | | through | | Nine Months Ended | | | | |
| | September 30, 2021 | | | February 5, 2021 | | September 30, 2020 | | | | |
Operating revenues | | | | | | | | | | | |
Contract drilling services | | $ | 515,680 | | | | $ | 74,051 | | | $ | 714,555 | | | | | |
Reimbursables and other | | 46,467 | | | | 3,430 | | | 46,510 | | | | | |
| | 562,147 | | | | 77,481 | | | 761,065 | | | | | |
Operating costs and expenses | | | | | | | | | | | |
Contract drilling services | | 455,124 | | | | 46,703 | | | 441,485 | | | | | |
Reimbursables | | 41,577 | | | | 2,737 | | | 41,387 | | | | | |
Depreciation and amortization | | 64,814 | | | | 20,631 | | | 282,385 | | | | | |
General and administrative | | 26,690 | | | | 5,729 | | | 30,806 | | | | | |
Merger and integration costs | | 7,099 | | | | — | | | — | | | | | |
Transaction costs on sale of operating assets | | 2,230 | | | | — | | | — | | | | | |
Hurricane losses | | 10,441 | | | | — | | | — | | | | | |
Loss on impairment | | — | | | | — | | | 1,119,517 | | | | | |
| | 607,975 | | | | 75,800 | | | 1,915,580 | | | | | |
Operating income (loss) | | (45,828) | | | | 1,681 | | | (1,154,515) | | | | | |
Other income (expense) | | | | | | | | | | | |
Interest expense, net of amounts capitalized | | (23,628) | | | | (229) | | | (164,586) | | | | | |
Gain on extinguishment of debt, net | | — | | | | — | | | 17,254 | | | | | |
Interest income and other, net | | 7,489 | | | | 400 | | | 8,536 | | | | | |
Reorganization items, net | | — | | | | 195,395 | | | (49,974) | | | | | |
Income (loss) before income taxes | | (61,967) | | | | 197,247 | | | (1,343,285) | | | | | |
Income tax benefit (provision) | | 6,631 | | | | (3,422) | | | 238,944 | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Net income (loss) | | $ | (55,336) | | | | $ | 193,825 | | | $ | (1,104,341) | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
See accompanying notes to the unaudited condensed consolidated financial statements.
NOBLE FINANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
| | | | | Successor | | | Predecessor | | | Successor | | | Predecessor |
| | Period From February 6, 2021 through March 31, 2021 | | | Period From January 1, 2021 through February 5, 2021 | | Three Months Ended March 31, 2020 | | | Three Months | | | Three Months |
Net income (loss) | | $ | (12,666) | | | | $ | 193,825 | | | $ | (1,050,725) | | | |
| | | Ended | | | Ended |
| | | September 30, 2021 | | | September 30, 2020 |
Net loss | | Net loss | | $ | (13,980) | | | | $ | (78,202) | |
Other comprehensive income (loss) | Other comprehensive income (loss) | | | | | Other comprehensive income (loss) | | | |
Foreign currency translation adjustments | Foreign currency translation adjustments | | 0 | | | | (116) | | | (2,136) | | | Foreign currency translation adjustments | | — | | | | 863 | |
| Amortization of deferred pension plan amounts (net of tax provision of $0, $59 and $150 for the period from February 6, 2021 through March 31, 2021, period from January 1, 2021 through February 5, 2021 and three months ended March 30, 2020, respectively.) | | 0 | | | | 224 | | | 568 | | | |
Net changes in pension and other postretirement plan assets and benefit obligations recognized in other comprehensive loss, net of tax provision of zero and $150 for the three months ended September 30, 2021 and 2020, respectively | | Net changes in pension and other postretirement plan assets and benefit obligations recognized in other comprehensive loss, net of tax provision of zero and $150 for the three months ended September 30, 2021 and 2020, respectively | | (435) | | | | 569 | |
| Other comprehensive income (loss), net | Other comprehensive income (loss), net | | 0 | | | | 108 | | | (1,568) | | | Other comprehensive income (loss), net | | (435) | | | | 1,432 | |
Comprehensive income (loss) | | $ | (12,666) | | | | $ | 193,933 | | | $ | (1,052,293) | | | |
Comprehensive (loss) | | Comprehensive (loss) | | $ | (14,415) | | | | $ | (76,770) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| | | | | | | |
| | Successor | | | Predecessor |
| | Period From | | | Period From | | |
| | February 6, 2021 | | | January 1, 2021 | | |
| | through | | | through | | Nine Months Ended |
| | September 30, 2021 | | | February 5, 2021 | | September 30, 2020 |
Net income (loss) | | $ | (55,336) | | | | $ | 193,825 | | | $ | (1,104,341) | |
Other comprehensive income (loss) | | | | | | | |
Foreign currency translation adjustments | | — | | | | (116) | | | (1,812) | |
| | | | | | | |
Net changes in pension and other postretirement plan assets and benefit obligations recognized in other comprehensive loss, net of tax provision of zero, $59 and $450 for the period from February 6, 2021 through September 30, 2021, period from January 1, 2021 through February 5, 2021 and nine months ended September 30, 2020, respectively | | (267) | | | | 224 | | | 1,705 | |
| | | | | | | |
Other comprehensive income (loss), net | | (267) | | | | 108 | | | (107) | |
Comprehensive income (loss) | | $ | (55,603) | | | | $ | 193,933 | | | $ | (1,104,448) | |
See accompanying notes to the unaudited condensed consolidated financial statements.
NOBLE FINANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | Successor | | | Predecessor |
| | | Period From | | | Period From | | |
| | | February 6, 2021 | | | January 1, 2021 | | |
| | Successor | | | Predecessor | | through | | | through | | Nine Months Ended |
| | Period from February 6, 2021 through March 31, 2021 | | | Period from January 1, 2021 through February 5, 2021 | | Three Months Ended March 31, 2020 | | September 30, 2021 | | | February 5, 2021 | | September 30, 2020 |
Cash flows from operating activities | Cash flows from operating activities | | | | | | | | Cash flows from operating activities | | | | | | | |
Net income (loss) | Net income (loss) | | $ | (12,666) | | | | $ | 193,825 | | | $ | (1,050,725) | | Net income (loss) | | $ | (55,336) | | | | $ | 193,825 | | | $ | (1,104,341) | |
Adjustments to reconcile net loss to net cash flow from operating activities: | Adjustments to reconcile net loss to net cash flow from operating activities: | | | | Adjustments to reconcile net loss to net cash flow from operating activities: | | | |
Depreciation and amortization | Depreciation and amortization | | 14,243 | | | | 20,631 | | | 103,109 | | Depreciation and amortization | | 64,814 | | | | 20,631 | | | 282,385 | |
Loss on impairment | Loss on impairment | | 0 | | | | 0 | | | 1,119,517 | | Loss on impairment | | — | | | | — | | | 1,119,517 | |
| Gain on extinguishment of debt, net | | Gain on extinguishment of debt, net | | — | | | | — | | | (17,254) | |
Amortization of intangible asset | Amortization of intangible asset | | 8,459 | | | | 0 | | | 0 | | Amortization of intangible asset | | 37,127 | | | | — | | | — | |
Reorganization items, net | Reorganization items, net | | 0 | | | | (203,490) | | | 0 | | Reorganization items, net | | — | | | | (203,490) | | | 49,969 | |
Deferred income taxes | Deferred income taxes | | (4,285) | | | | 2,501 | | | 6,014 | | Deferred income taxes | | (9,170) | | | | 2,501 | | | 6,825 | |
Amortization of share-based compensation | Amortization of share-based compensation | | 2,018 | | | | 710 | | | 3,245 | | Amortization of share-based compensation | | 11,624 | | | | 710 | | | 7,352 | |
Other costs, net | Other costs, net | | (1,660) | | | | (3,054) | | | 1,427 | | Other costs, net | | 1,912 | | | | (3,054) | | | (99,679) | |
Changes in components of working capital: | Changes in components of working capital: | | | | Changes in components of working capital: | | | |
Change in taxes receivable | Change in taxes receivable | | 1,069 | | | | (1,789) | | | (120,838) | | Change in taxes receivable | | 13,810 | | | | (1,789) | | | 29,581 | |
Net changes in other operating assets and liabilities | Net changes in other operating assets and liabilities | | 13,766 | | | | (21,808) | | | (51,328) | | Net changes in other operating assets and liabilities | | (7,664) | | | | (21,808) | | | (2,258) | |
Net cash provided by (used in) operating activities | Net cash provided by (used in) operating activities | | 20,944 | | | | (12,474) | | | 10,421 | | Net cash provided by (used in) operating activities | | 57,117 | | | | (12,474) | | | 272,097 | |
Cash flows from investing activities | Cash flows from investing activities | | | | | | | | Cash flows from investing activities | | | | | | | |
Capital expenditures | Capital expenditures | | (15,332) | | | | (14,629) | | | (36,461) | | Capital expenditures | | (117,750) | | | | (14,629) | | | (112,603) | |
Proceeds from disposal of assets, net | Proceeds from disposal of assets, net | | 231 | | | | 194 | | | 0 | | Proceeds from disposal of assets, net | | 31,247 | | | | 194 | | | 1,428 | |
Net cash used in investing activities | Net cash used in investing activities | | (15,101) | | | | (14,435) | | | (36,461) | | Net cash used in investing activities | | (86,503) | | | | (14,435) | | | (111,175) | |
Cash flows from financing activities | Cash flows from financing activities | | | | | | | | Cash flows from financing activities | | | | | | | |
| Issuance of second lien notes | Issuance of second lien notes | | 0 | | | | 200,000 | | | 0 | | Issuance of second lien notes | | — | | | | 200,000 | | | — | |
Borrowings on credit facilities | Borrowings on credit facilities | | 0 | | | | 177,500 | | | 110,000 | | Borrowings on credit facilities | | 40,000 | | | | 177,500 | | | 210,000 | |
Repayments of credit facilities | Repayments of credit facilities | | 0 | | | | (545,000) | | | 0 | | Repayments of credit facilities | | (27,500) | | | | (545,000) | | | — | |
| Repayments of debt | | Repayments of debt | | — | | | | — | | | (101,132) | |
Debt issuance costs | Debt issuance costs | | 0 | | | | (10,139) | | | 0 | | Debt issuance costs | | — | | | | (10,139) | | | — | |
| Cash contributed by parent in connection with Pacific Drilling merger | | Cash contributed by parent in connection with Pacific Drilling merger | | 54,970 | | | | — | | | — | |
| Distributions to parent company, net | Distributions to parent company, net | | (2,760) | | | | (26,503) | | | (12,644) | | Distributions to parent company, net | | (32,677) | | | | (26,503) | | | (49,829) | |
Net cash provided by (used in) financing activities | Net cash provided by (used in) financing activities | | (2,760) | | | | (204,142) | | | 97,356 | | Net cash provided by (used in) financing activities | | 34,793 | | | | (204,142) | | | 59,039 | |
Net increase (decrease) in cash, cash equivalents and restricted cash | Net increase (decrease) in cash, cash equivalents and restricted cash | | 3,083 | | | | (231,051) | | | 71,316 | | Net increase (decrease) in cash, cash equivalents and restricted cash | | 5,407 | | | | (231,051) | | | 219,961 | |
Cash, cash equivalents and restricted cash, beginning of period | Cash, cash equivalents and restricted cash, beginning of period | | 113,993 | | | | 345,044 | | | 105,878 | | Cash, cash equivalents and restricted cash, beginning of period | | 113,993 | | | | 345,044 | | | 105,878 | |
Cash, cash equivalents and restricted cash, end of period | Cash, cash equivalents and restricted cash, end of period | | $ | 117,076 | | | | $ | 113,993 | | | $ | 177,194 | | Cash, cash equivalents and restricted cash, end of period | | $ | 119,400 | | | | $ | 113,993 | | | $ | 325,839 | |
See accompanying notes to the unaudited condensed consolidated financial statements.
NOBLE FINANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
(Unaudited)
| | | Shares | | Additional Paid-in Capital | | Retained Earnings (Accumulated Deficit) | | Accumulated Other Comprehensive Loss | | | Total Equity | | Shares | | Additional Paid-in Capital | | Retained Earnings (Accumulated Deficit) | | Accumulated Other Comprehensive Income (Loss) | | Total Equity |
| | Balance | | Par Value | | | Total Equity | | Balance | | Par Value | | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss) | Total Equity |
Balance at 12/31/2019 (Predecessor) | | 261,246 | | | $ | 26,125 | | | $ | 757,545 | | | $ | 3,032,699 | | | $ | (58,389) | | | | $ | 3,757,980 | | |
Distributions to parent company, net | | — | | | — | | | — | | | (12,644) | | | — | | | | (12,644) | | |
Capital contribution by parent - share-based compensation | | — | | | — | | | 3,245 | | | — | | | — | | | | 3,245 | | |
Net loss | | — | | | — | | | — | | | (1,050,725) | | | — | | | | (1,050,725) | | |
| Other comprehensive loss, net | | — | | | — | | | — | | | — | | | (1,568) | | | | (1,568) | | |
Balance at 3/31/2020 (Predecessor) | | 261,246 | | | $ | 26,125 | | | $ | 760,790 | | | $ | 1,969,330 | | | $ | (59,957) | | | | $ | 2,696,288 | | |
| Balance at 12/31/2020 (Predecessor) | | 261,246 | | | $ | 26,125 | | | $ | 766,714 | | | $ | (948,219) | | | $ | (58,012) | | | | $ | (213,392) | | |
Distributions to parent company, net | | — | | | — | | | — | | | (26,503) | | | — | | | | (26,503) | | |
Capital contribution by parent - share-based compensation | | — | | | — | | | 710 | | | — | | | — | | | | 710 | | |
Net income | | — | | | — | | | — | | | 193,825 | | | — | | | | 193,825 | | |
Other comprehensive income, net | | — | | | — | | | — | | | — | | | 108 | | | | 108 | | |
Elimination of Predecessor equity | | — | | | — | | | 222,601 | | | 780,897 | | | 57,904 | | | | 1,061,402 | | |
Balance at 2/5/2021 (Predecessor) | | 261,246 | | | $ | 26,125 | | | $ | 990,025 | | | $ | 0 | | | $ | 0 | | | | $ | 1,016,150 | | |
| | Balance at 2/6/2021 (Successor) | | 261,246 | | | $ | 26,125 | | | $ | 990,025 | | | $ | 0 | | | $ | 0 | | | | $ | 1,016,150 | | |
Balance at 6/30/2020 (Predecessor) | | Balance at 6/30/2020 (Predecessor) | | 261,246 | | | $ | 26,125 | | | $ | 763,397 | | | $ | 1,970,710 | | | $ | (59,928) | | | $ | 2,700,304 | |
Distributions to parent company, net | Distributions to parent company, net | | — | | | — | | | (2,759) | | | — | | | — | | | | (2,759) | | Distributions to parent company, net | | — | | | — | | | — | | | (13,978) | | | — | | | (13,978) | |
Capital contribution by parent - share-based compensation | Capital contribution by parent - share-based compensation | | — | | | — | | | 2,018 | | | — | | | — | | | | 2,018 | | Capital contribution by parent - share-based compensation | | — | | | — | | | 1,500 | | | — | | | — | | | 1,500 | |
Net loss | Net loss | | — | | | — | | | (12,666) | | | — | | | | (12,666) | | Net loss | | — | | | — | | | — | | | (78,202) | | | — | | | (78,202) | |
Other comprehensive income, net | Other comprehensive income, net | | — | | | — | | | — | | | — | | | 0 | | | | 0 | | Other comprehensive income, net | | — | | | — | | | — | | | — | | | 1,432 | | | 1,432 | |
Balance at 3/31/2021 (Successor) | | 261,246 | | | $ | 26,125 | | | $ | 989,284 | | | $ | (12,666) | | | $ | 0 | | | | $ | 1,002,743 | | |
Balance at 9/30/2020 (Predecessor) | | Balance at 9/30/2020 (Predecessor) | | 261,246 | | | $ | 26,125 | | | $ | 764,897 | | | $ | 1,878,530 | | | $ | (58,496) | | | $ | 2,611,056 | |
| | Balance at 6/30/2021 (Successor) | | Balance at 6/30/2021 (Successor) | | 261,246 | | | $ | 26,125 | | | $ | 1,399,905 | | | $ | (41,356) | | | $ | 168 | | | $ | 1,384,842 | |
Distributions to parent company, net | | Distributions to parent company, net | | — | | | — | | | (13,772) | | | — | | | — | | | (13,772) | |
Capital contribution by parent - share-based compensation | | Capital contribution by parent - share-based compensation | | — | | | — | | | 4,668 | | | — | | | — | | | 4,668 | |
| Net loss | | Net loss | | — | | | — | | | — | | | (13,980) | | | — | | | (13,980) | |
Other comprehensive loss, net | | Other comprehensive loss, net | | — | | | — | | | — | | | — | | | (435) | | | (435) | |
Balance at 9/30/2021 (Successor) | | Balance at 9/30/2021 (Successor) | | 261,246 | | | $ | 26,125 | | | $ | 1,390,801 | | | $ | (55,336) | | | $ | (267) | | | $ | 1,361,323 | |
See accompanying notes to the unaudited condensed consolidated financial statements.
NOBLE FINANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY - CONTINUED
(In thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Shares | | Additional Paid-in Capital | | Retained Earnings (Accumulated Deficit) | | Accumulated Other Comprehensive Income (Loss) | | | | Total Equity |
| | Balance | | Par Value | | | | | |
Balance at 12/31/2019 (Predecessor) | | 261,246 | | | $ | 26,125 | | | $ | 757,545 | | | $ | 3,032,699 | | | $ | (58,389) | | | | | $ | 3,757,980 | |
Distributions to parent company, net | | — | | | — | | | — | | | (49,828) | | | — | | | | | (49,828) | |
Capital contribution by parent - share-based compensation | | — | | | — | | | 7,352 | | | — | | | — | | | | | 7,352 | |
Net loss | | — | | | — | | | — | | | (1,104,341) | | | — | | | | | (1,104,341) | |
Other comprehensive loss, net | | — | | | — | | | — | | | — | | | (107) | | | | | (107) | |
Balance at 9/30/2020 (Predecessor) | | 261,246 | | | $ | 26,125 | | | $ | 764,897 | | | $ | 1,878,530 | | | $ | (58,496) | | | | | $ | 2,611,056 | |
| | | | | | | | | | | | | | |
Balance at 12/31/2020 (Predecessor) | | 261,246 | | | $ | 26,125 | | | $ | 766,714 | | | $ | (948,219) | | | $ | (58,012) | | | | | $ | (213,392) | |
Distributions to parent company, net | | — | | | — | | | — | | | (26,503) | | | — | | | | | (26,503) | |
Capital contribution by parent - share-based compensation | | — | | | — | | | 710 | | | — | | | — | | | | | 710 | |
Net income | | — | | | — | | | — | | | 193,825 | | | — | | | | | 193,825 | |
Other comprehensive income, net | | — | | | — | | | — | | | — | | | 108 | | | | | 108 | |
Elimination of Predecessor equity | | — | | | — | | | 222,601 | | | 780,897 | | | 57,904 | | | | | 1,061,402 | |
Balance at 2/5/2021 (Predecessor) | | 261,246 | | | $ | 26,125 | | | $ | 990,025 | | | $ | — | | | $ | — | | | | | $ | 1,016,150 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Balance at 2/6/2021 (Successor) | | 261,246 | | | $ | 26,125 | | | $ | 990,025 | | | $ | — | | | $ | — | | | | | $ | 1,016,150 | |
Distributions to parent company, net | | — | | | — | | | (32,677) | | | — | | | — | | | | | (32,677) | |
Capital contribution by parent - share-based compensation | | — | | | — | | | 11,312 | | | — | | | — | | | | | 11,312 | |
Capital contribution by parent - Pacific Drilling merger | | — | | | — | | | 422,141 | | | — | | | — | | | | | 422,141 | |
Net loss | | — | | | — | | | — | | | (55,336) | | | — | | | | | (55,336) | |
Other comprehensive loss, net | | — | | | — | | | — | | | — | | | (267) | | | | | (267) | |
Balance at 9/30/2021 (Successor) | | 261,246 | | | $ | 26,125 | | | $ | 1,390,801 | | | $ | (55,336) | | | $ | (267) | | | | | $ | 1,361,323 | |
See accompanying notes to the unaudited condensed consolidated financial statements.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
Note 1— Organization and Basis of Presentation
Noble Corporation, an exempted company incorporated in the Cayman Islands with limited liability, collectively with its consolidated subsidiaries (“Noble” or “Successor”), is a leading offshore drilling contractor for the oil and gas industry. We provide contract drilling services to the international oil and gas industry with our global fleet of mobile offshore drilling units. Noble and its predecessors have been engaged in the contract drilling of oil and gas wells since 1921. As of March 31,September 30, 2021, our fleet of 1924 drilling rigs consisted of 712 floaters and 12 jackups.jackups (including the 4 drilling rigs that are subject to an agreement to sell, see “Note 7— Property and Equipment”).
We report our contract drilling operations as a single reportable segment, Contract Drilling Services, which reflects how we manage our business. The mobile offshore drilling units comprising our offshore rig fleet operate in a global market for contract drilling services and are often redeployed to different regions due to changing demands of our customers, which consist primarily of large, integrated, independent and government-owned or controlled oil and gas companies throughout the world.
On July 31, 2020 (the “Petition Date”), our former parent company, Noble Holding Corporation plc (formerly known as Noble Corporation plc), a public limited company incorporated under the laws of England and Wales (“Legacy Noble” or the “Predecessor”), and certain of its subsidiaries, including Noble Finance Company (formerly known as Noble Corporation), a Cayman Islands company (“Finco”), filed voluntary petitions in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) seeking relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”). On September 4, 2020, the Debtors (as defined herein) filed with the Bankruptcy Court the Joint Plan of Reorganization of Noble Corporation plc and its Debtor Affiliates, which was subsequently amended on October 8, 2020 and October 13, 2020 and modified on November 18, 2020 (as amended, modified or supplemented, the “Plan”), and the related disclosure statement. On September 24, 2020, 6 additional subsidiaries of Legacy Noble (together with Legacy Noble and its subsidiaries that filed on the Petition Date, as the context requires, the “Debtors”) filed voluntary petitions in the Bankruptcy Court. The chapter 11 proceedings were jointly administered under the caption Noble Corporation plc, et al. (Case No. 20-33826) (the “Chapter 11 Cases”). On November 20, 2020, the Bankruptcy Court entered an order confirming the Plan. In connection with the Chapter 11 Cases and the Plan, on and prior to the Effective Date (as defined herein), Legacy Noble and certain of its subsidiaries effectuated certain restructuring transactions pursuant to which Legacy Noble formed Noble as an indirect wholly-owned subsidiary of Legacy Noble and transferred to Noble substantially all of the subsidiaries and other assets of Legacy Noble. On February 5, 2021 (the “Effective Date”), the Plan became effective in accordance with its terms, the Debtors emerged from the Chapter 11 Cases and Noble became the new parent company. In accordance with the Plan, Legacy Noble and its remaining subsidiary will in due course be wound down and dissolved in accordance with applicable law. The Bankruptcy Court closed the chapterChapter 11 caseCases with respect to all Debtors other than Legacy Noble, pending its wind down.
Noble is the successor issuer to Legacy Noble for purposes of and pursuant to Rule 15d-5 of the Exchange Act. References to the “Company,” “we,” “us” or “our” in this Quarterly Report are to Noble, together with its consolidated subsidiaries, when referring to periods following the Effective Date, and to Legacy Noble, together with its consolidated subsidiaries, when referring to periods prior to and including the Effective Date.
Upon emergence, the Company applied fresh start accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 852 – Reorganizations (“ASC 852”). The application of fresh start accounting resulted in a new basis of accounting and the Company becoming a new entity for financial reporting purposes. Accordingly, our financial statements and notes after the Effective Date are not comparable to our financial statements and notes on and prior to that date. See “Note 3— Reorganization and Fresh Start Accounting” for additional information.
Finco was an indirect, wholly-owned subsidiary of Legacy Noble prior to the Effective Date and has been a direct, wholly-owned subsidiary of Noble since the Effective Date. Noble’s principal asset is all of the shares of Finco. Finco has no public equity outstanding. The consolidated financial statements of Noble include the accounts of Finco, and Noble conducts substantially all of its business through Finco and its subsidiaries. As such, the terms “Predecessor” and “Successor” also refers to Finco, as the context requires.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
The accompanying unaudited condensed consolidated financial statements of Noble and Finco have been prepared pursuant to the rules and regulations of the US Securities and Exchange Commission (“SEC”) as they pertain to Quarterly Reports on Form 10-Q. Accordingly, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The unaudited financial statements are prepared on a going concern basis and reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the financial position and results of operations for the interim periods, on a basis consistent with the annual audited consolidated financial statements. All such adjustments are of a recurring nature. The December 31, 2020 Condensed Consolidated Balance Sheets presented herein are derived from the December 31, 2020 audited consolidated financial statements. These interim financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2020, filed by both Noble and Finco. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.
Note 2— Chapter 11 Emergence
On the Petition Date, Legacy Noble and certain of its subsidiaries, including Finco, filed voluntary petitions in the Bankruptcy Court seeking relief under chapter 11 of the Bankruptcy Code. The Plan was confirmed by the Bankruptcy Court on November 20, 2020, and the Debtors emerged from the bankruptcy proceedings on the Effective Date.
On the Effective Date, and pursuant to the terms of the Plan, the Company:
•Appointed 5 new members to the Successor’s board of directors to replace all of the directors of the Predecessor, other than the director also serving as President and Chief Executive Officer, who was re-appointed pursuant to the Plan. Subsequent to the Effective Date, an additional director was appointed.
•Terminated and cancelled all ordinary shares and equity-based awards of Legacy Noble that were outstanding immediately prior to the Effective Date;
•Transferred approximately 31.7 million ordinary shares of Noble with a nominal value of $0.00001 per share (“Ordinary Shares”) to holders of Legacy Noble’s Senior Notes due 2026 (the “Guaranteed Notes”) in the cancellation of the Guaranteed Notes;
•Transferred approximately 2.1 million Ordinary Shares, approximately 8.3 million seven-year warrants with Black-Scholes protection (the “Tranche 1 Warrants”) with an exercise price of $19.27 and approximately 8.3 million seven-year warrants with Black-Scholes protection (the “Tranche 2 Warrants”) with an exercise price of $23.13 to holders of Legacy Noble’s then outstanding senior notes (other than the Guaranteed Notes) (the “Legacy Notes”) in cancellation of the Legacy Notes;
•Issued approximately 7.7 million Ordinary Shares and $216.0 million principal amount of our senior secured second lien notes (the “Second Lien Notes”) to participants in a rights offering (the “Rights Offering”) at an aggregate subscription price of $200.0 million;
•Issued approximately 5.6 million Ordinary Shares to the backstop parties (the “Backstop Parties”) to a Backstop Commitment Agreement, dated October 12, 2020 (the “Backstop Commitment Agreement”), among the Debtors and the Backstop Parties as Holdback Securities (as defined in the Backstop Commitment Agreement);
•Issued approximately 1.7 million Ordinary Shares to the Backstop Parties in respect of their backstop commitment to subscribe for Unsubscribed Securities (as defined in the Backstop Commitment Agreement);
•Issued approximately 1.2 million Ordinary Shares to the Backstop Parties in connection with the payment of the Backstop Premiums (as defined in the Backstop Commitment Agreement);
•Issued 2.8 million five-year warrants with no Black-Scholes protection (the “Tranche 3 Warrants”) with an exercise price of $124.40 to the holders of Legacy Noble’s ordinary shares outstanding prior to the Effective Date;
•Entered into a senior secured revolving credit agreement (the “Revolving Credit Agreement”) that provides for a $675.0 million senior secured revolving credit facility (with a $67.5 million sublimit for the issuance of letters of credit thereunder) (the “Revolving Credit Facility”);
•Entered into an indenture governing the Second Lien Notes;
•Entered into a registration rights agreement with certain parties who received Ordinary Shares under the Plan (the “Equity Registration Rights Agreement”); and
•Entered into a registration rights agreement with certain parties who received Second Lien Notes under the Plan.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
In addition, Noble entered into an exchange agreement with certain Backstop Parties which provided that, as soon as reasonably practicable after the Effective Date, the other parties to such agreement would deliver to the Company an aggregate of approximately 6.5 million Ordinary Shares issued pursuant to the Plan in exchange for the issuance of penny warrants to purchase up to approximately 6.5 million Ordinary Shares, with an exercise price of $0.01 per share (“Penny Warrants”). This exchange was completed in late February 2021.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
Management Incentive Plan. The Plan contemplated that on or after the Effective Date, the Company would adopt a long-term incentive plan and authorize and reserve 7.7 million Ordinary Shares for issuance pursuant to equity incentive awards to be granted under such plan. On February 18, 2021, the Company adopted the long-term incentive plan and authorized and reserved 7.7 million Ordinary Shares for awards to be granted under such plan. As of March 31, 2021, 1,721,821 shares of time-based vesting awards were granted and vest over a three-year period and 1,409,562 shares of performance-based vesting awards were granted and vest over a three-year period. The total award-date fair value of the time-based awards was $28.3 million and the total award-date fair value of the performance-based awards was $28.4 million.
Sources of Cash for Plan Distribution. All cash payments made by the Company under the Plan on the Effective Date were funded from cash on hand, proceeds of the Rights Offering, and proceeds of the Revolving Credit Facility.
Reorganization Items, Net
In accordance with ASC 852, any incremental expenses, gains and losses that are realized or incurred as of or subsequent to the Petition Date and before the Effective Date that are a direct result of the Chapter 11 Cases are recorded under “Reorganization items, net.” The following table summarizes the components of reorganization items included in our Condensed Consolidated Statements of Operations for the period January 1, 2021 through February 5, 2021:
| | | | | Predecessor |
| | | Noble | | Finco |
| | | | | | | | | | | | | | Period From | | Period From |
| | | Predecessor | | January 1, 2021 | | January 1, 2021 |
| | Noble | | Finco | | through | | through |
| | January 1, 2021 through February 5, 2021 | | January 1, 2021 through February 5, 2021 | | February 5, 2021 | | February 5, 2021 |
| Professional fees (1) | Professional fees (1) | | $ | (28,739) | | | $ | (8,095) | | Professional fees (1) | | $ | (28,739) | | | $ | (8,095) | |
Adjustments for estimated allowed litigation claims | Adjustments for estimated allowed litigation claims | | 77,300 | | | 0 | | Adjustments for estimated allowed litigation claims | | 77,300 | | | — | |
Write-off of unrecognized share-based compensation | Write-off of unrecognized share-based compensation | | (4,406) | | | (4,406) | | Write-off of unrecognized share-based compensation | | (4,406) | | | (4,406) | |
| Gain on settlement of liabilities subject to compromise | Gain on settlement of liabilities subject to compromise | | 2,556,147 | | | 2,556,147 | | Gain on settlement of liabilities subject to compromise | | 2,556,147 | | | 2,556,147 | |
Loss on fresh start adjustments | Loss on fresh start adjustments | | (2,348,251) | | | (2,348,251) | | Loss on fresh start adjustments | | (2,348,251) | | | (2,348,251) | |
Total Reorganization items, net | Total Reorganization items, net | | $ | 252,051 | | | $ | 195,395 | | Total Reorganization items, net | | $ | 252,051 | | | $ | 195,395 | |
(1)Payments of $44.2 million and $7.2 million related to professional fees have been presented as cash outflows from operating activities in our Condensed Consolidated Statements of Cash Flows for the period January 1, 2021 through February 5, 2021 for Noble and Finco, respectively.
Liabilities Subject to Compromise
SinceFrom the Petition Date until the Effective Date, the Company operated as a debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with provisions of the Bankruptcy Code. In accordance with ASC 852, on our Condensed Consolidated Balance Sheets prior to the Effective Date, the caption “Liabilities subject to compromise” reflects the expected allowed amount of the pre-petition claims that are not fully secured and that have at least a possibility of not being repaid at the full claim amount. The Company has considered the chapter 11 motions approved by the Bankruptcy Court with respect to the amount and classification of its pre-petition liabilities. The Company evaluated and adjusted the amount and classification of its pre-petition liabilities through the Effective Date.
Note 3— Reorganization and Fresh Start Accounting
In connection with our emergence from bankruptcy and in accordance with ASC 852, Noble and Finco qualified for and applied fresh start accounting on the Effective Date. Noble and Finco were required to apply fresh start accounting because (i) the holders of existing Legacy Noble voting shares received less than 50% of the voting shares of the Successor, and (ii) the reorganization value of Noble's and Finco's assets, each of which approximated $1.7 billion, immediately prior to confirmation of the Plan was less than the corresponding post-petition liabilities and allowed claims, each of which approximated $4.0 billion. Applying fresh start accounting resulted in new reporting entities with
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
no beginning retained earnings or accumulated deficit. Accordingly, our financial statements and notes after the Effective Date are not comparable to our financial statements and notes on and to prior to that date.
With the application of fresh start accounting, we allocated the reorganization value to our individual assets and liabilities (except for deferred income taxes) based on their estimated fair values in conformity with ASC Topic 805, Business Combinations. The amount of deferred taxes was determined in accordance with ASC Topic 740, Income Taxes and ASC 852. The Effective Date fair values of our assets and liabilities differed materially from their recorded values as reflected on the historical balance sheets.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
As described in "Note“Note 1— Organization and Basis of Presentation,"” Noble and Finco are referred to as Successor, as the context requires, and includes the financial position and results of operations of the reorganized Noble and Finco subsequent to February 5, 2021. References to Predecessor relate to the financial position and results of operations of Legacy Noble and Finco prior to, and including, February 5, 2021.
Reorganization Value and Valuation of Assets
The reorganization value represents the fair value of the Successor’s and Finco’s total assets and was derived from the enterprise value, which represents the estimated fair value of an entity’s long-term debt and equity. As set forth in the Plan, the enterprise value of the reorganized Debtors was estimated to be in the range of $1.1 billion to $1.6 billion with a midpoint of $1.3 billion. The enterprise value range was determined by using a discounted cash flow analysis and a peer group trading analysis, excluding unrestricted cash at emergence. Based on the estimates and assumptions discussed above, we estimated the enterprise value to be the midpoint of the range of estimated enterprise value of $1.3 billion.
The following table reconciles the enterprise value to the Successor common stockequity as of the Effective Date:
| | | | | | | | |
| | February 5, 2021 |
Enterprise Value | | $ | 1,300,300 | |
Plus: Cash and cash equivalents | | 111,968 | |
Less: Fair value of debt | | (393,500) | |
| | |
Fair Value of Successor Common StockEquity | | $ | 1,018,768 | |
Shares issued upon emergence | | 50,000 | |
Per share value | | $ | 20.38 | |
The following table reconciles the enterprise value to the reorganization value as of the Effective Date:
| | | | | | | | |
| | February 5, 2021 |
Enterprise Value | | $ | 1,300,300 | |
Plus: Cash and cash equivalents | | 111,968 | |
Plus: Non-interest bearing current liabilities | | 185,410 | |
Plus: Non-interest bearing non-current liabilities | | 108,268 | |
Reorganization value of Successor assets | | $ | 1,705,946 | |
With the assistance of financial advisors, we determined the enterprise and corresponding equity value of the Successor by calculating the present value of future cash flows based on our financial projections. The enterprise value and corresponding equity value are dependent upon achieving future financial results set forth in our valuations, as well as the realization of certain other assumptions. All estimates, assumptions, valuations and financial projections, including the fair value adjustments, the enterprise value and equity value projections, are inherently subject to significant uncertainties and the resolution of contingencies beyond our control. Accordingly, the estimates, assumptions, valuations or financial projections may not be realized and actual results could vary materially.
Valuation Process
Under the application of fresh start accounting and with the assistance of valuation experts, we conducted an analysis of the Condensed Consolidated Balance Sheet to determine if any of the Company’s net assets would require a fair value adjustment as of the Effective Date. The results of our analysis indicated that our principal assets, which include mobile offshore drilling units, certain intangibles and debt issued at emergence would require a fair value adjustment on the Effective Date. The rest of the Company’s net assets were determined to have carrying values that approximated fair value on the Effective Date. Further details regarding the valuation process is described further below.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
Property, Plant and Equipment
The valuation of the Company’s mobile offshore drilling units and other related tangible assets was determined by using a combination of (1) the discounted cash flows expected to be generated from our drilling assets over their remaining useful lives and (2) the cost to replace our drilling assets, as adjusted by the current market for similar offshore drilling assets. Assumptions used in our assessment included, but were not limited to, future marketability of each unit in light of the current market conditions and its current technical specifications, timing of future contract awards and expected operating dayrates, operating costs, utilization rates, tax rates, discount rates, capital expenditures, market values, weighting of market values, reactivation costs, estimated economic useful lives and, in certain cases, our belief that a drilling unit is no longer marketable and is unlikely to return to service in the near to medium term. We included an allocation for corporate overhead when calculating the discounted cash flows expected to be generated from our drilling assets over their remaining useful lives. The cash flows were discounted at our weighted average cost of capital (“WACC”), which was derived from a blend of our after-tax cost of debt and our cost of equity, and computed using public share price information for similar offshore drilling market participants, certain U.S.US Treasury rates, and certain risk premiums specific to the Company.
The valuation of our remaining property and equipment, including owned real estate, construction in progress assets, and other equipment essential to our operations, was determined utilizing a combination of replacement cost and market valuation approaches. Specifically, the land was valued using a sales comparison method of the market approach, in which we utilized recent sales of comparable properties to estimate the fair value on a U.S.US Dollar per acre basis. The remaining property and equipment were valued using a cost approach, in which we estimated the replacement cost of the assets and applied adjustments for physical depreciation and obsolescence, where applicable, to arrive at a fair value.
Intangible Assets
At emergence, we held contracts for drilling services related to certain long-term contracts. Given the contract dayrates relative to market dayrates at the Effective Date, we determined the contracts represent favorable contract intangible assets. Based on a discounted cash flow analysis utilizing the dayrate differential between current market dayrates and the contract dayrates, and a risk-adjusted discount rate of 17%, we determined the aggregate fair value of our contracts for these certain contracts to be $113.4 million above the fair value of the contracts if they were priced at current market dayrates on the Effective Date. The dayrate differential on these contracts as compared to prior years was primarily driven by the combination of continued market oversupply of offshore drilling units, the volatility in oil and gas price and the unprecedented crude product consumption levels experienced in 2020.
Debt
The valuations of the Company’s Revolving Credit Facility and Second Lien Notes were based on relevant market data as of the Effective Date and the terms of each of the respective instruments. Considering the interest rates and implied yields for the Revolving Credit Facility and Second Lien Notes were within a range of comparable market yields (with considerations for term and seniority), fair value adjustments were recorded relating to each of the instruments .instruments.
Successor Warrants
On the Effective Date, the Company issued Tranche 1 Warrants and Tranche 2 Warrants to certain former bondholders as part of the settlement of their pre-petition claims. The Company also issued Tranche 3 Warrants to holders of the Predecessor’s ordinary shares. The fair values of the warrants on the Effective Date were determined using an options pricing model while considering the contractual terms for each respective tranche, including the mandatory exercise provisions related to Tranche 1 Warrants and Tranche 2 Warrants. The key market data assumptions for the options pricing model are the estimated volatility and the risk-free rate. The volatility assumption was estimated using market data for similar offshore drilling market participants with consideration for differences in size and leverage. The risk-free rate assumption was based on US Constant Maturity Treasury rates as of the Effective Date.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
Condensed Consolidated Balance Sheet at Emergence
The adjustments set forth in the following Condensed Consolidated Balance Sheet as of February 5, 2021 reflect the consummation of the transactions contemplated by the Plan and carried out by the Company ("(“Reorganization Adjustments"Adjustments”) and the fair value adjustments as a result of the application of fresh start accounting ("(“Fresh Start Adjustments"Adjustments”). The explanatory notes provide additional information with regard to the adjustments recorded, the methods used to determine fair values and significant assumptions or inputs.
The following table reflects the reorganization and application of ASC 852 on our condensed consolidated balance sheet as of February 5, 2021:
| | | Predecessor | | Reorganization Adjustments | | Fresh Start Adjustments | | Successor | | Predecessor | | Reorganization Adjustments | | Fresh Start Adjustments | | Successor |
ASSETS | ASSETS | | | | | | | | | ASSETS | | | | | | | | |
Current assets | Current assets | | Current assets | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 317,962 | | | $ | (205,994) | | (a) | $ | 0 | | | $ | 111,968 | | Cash and cash equivalents | | $ | 317,962 | | | $ | (205,994) | | (a) | $ | — | | | $ | 111,968 | |
Accounts receivable, net | Accounts receivable, net | | 189,207 | | | 0 | | | 0 | | | 189,207 | | Accounts receivable, net | | 189,207 | | | — | | | — | | | 189,207 | |
Taxes receivable | Taxes receivable | | 32,556 | | | 0 | | | 0 | | | 32,556 | | Taxes receivable | | 32,556 | | | — | | | — | | | 32,556 | |
Prepaid expenses and other current assets | Prepaid expenses and other current assets | | 63,056 | | | (20,302) | | (b) | (10,073) | | (m) | 32,681 | | Prepaid expenses and other current assets | | 63,056 | | | (20,302) | | (b) | (10,073) | | (m) | 32,681 | |
Total current assets | Total current assets | | 602,781 | | | (226,296) | | | (10,073) | | | 366,412 | | Total current assets | | 602,781 | | | (226,296) | | | (10,073) | | | 366,412 | |
Intangible assets | Intangible assets | | 0 | | | 0 | | | 113,389 | | (n) | 113,389 | | Intangible assets | | — | | | — | | | 113,389 | | (n) | 113,389 | |
Property and equipment, at cost | Property and equipment, at cost | | 4,787,661 | | | 0 | | | (3,631,936) | | (o) | 1,155,725 | | Property and equipment, at cost | | 4,787,661 | | | — | | | (3,631,936) | | (o) | 1,155,725 | |
Accumulated depreciation | Accumulated depreciation | | (1,221,033) | | | 0 | | | 1,221,033 | | (o) | 0 | | Accumulated depreciation | | (1,221,033) | | | — | | | 1,221,033 | | (o) | — | |
Property and equipment, net | Property and equipment, net | | 3,566,628 | | | 0 | | | (2,410,903) | | | 1,155,725 | | Property and equipment, net | | 3,566,628 | | | — | | | (2,410,903) | | | 1,155,725 | |
Other assets | Other assets | | 69,940 | | | 10,983 | | (c) | (10,503) | | (m) | 70,420 | | Other assets | | 69,940 | | | 10,983 | | (c) | (10,503) | | (m) | 70,420 | |
Total assets | Total assets | | $ | 4,239,349 | | | $ | (215,313) | | | $ | (2,318,090) | | | $ | 1,705,946 | | Total assets | | $ | 4,239,349 | | | $ | (215,313) | | | $ | (2,318,090) | | | $ | 1,705,946 | |
LIABILITIES AND EQUITY | LIABILITIES AND EQUITY | | | | | | | | | LIABILITIES AND EQUITY | | | | | | | | |
Current liabilities | Current liabilities | | Current liabilities | |
Accounts payable | Accounts payable | | $ | 89,215 | | | $ | (7,266) | | (d) | $ | 0 | | | $ | 81,949 | | Accounts payable | | $ | 89,215 | | | $ | (7,266) | | (d) | $ | — | | | $ | 81,949 | |
Accrued payroll and related costs | Accrued payroll and related costs | | 35,615 | | | 0 | | | 0 | | | 35,615 | | Accrued payroll and related costs | | 35,615 | | | — | | | — | | | 35,615 | |
Taxes payable | Taxes payable | | 34,211 | | | 0 | | | 0 | | | 34,211 | | Taxes payable | | 34,211 | | | — | | | — | | | 34,211 | |
| Other current liabilities | Other current liabilities | | 64,943 | | | 21,305 | | (e) | (52,613) | | (m) | 33,635 | | Other current liabilities | | 64,943 | | | 21,305 | | (e) | (52,613) | | (m) | 33,635 | |
Total current liabilities | Total current liabilities | | 223,984 | | | 14,039 | | | (52,613) | | | 185,410 | | Total current liabilities | | 223,984 | | | 14,039 | | | (52,613) | | | 185,410 | |
Long-term debt | Long-term debt | | 0 | | | 352,054 | | (f) | 41,446 | | (p) | 393,500 | | Long-term debt | | — | | | 352,054 | | (f) | 41,446 | | (p) | 393,500 | |
Deferred income taxes | Deferred income taxes | | 9,303 | | | (17,328) | | (g) | 29,550 | | (q) | 21,525 | | Deferred income taxes | | 9,303 | | | (17,328) | | (g) | 29,550 | | (q) | 21,525 | |
Other liabilities | Other liabilities | | 108,489 | | | 4,659 | | (h) | (26,405) | | (m) | 86,743 | | Other liabilities | | 108,489 | | | 4,659 | | (h) | (26,405) | | (m) | 86,743 | |
Liabilities subject to compromise | Liabilities subject to compromise | | 4,143,812 | | | (4,143,812) | | (i) | 0 | | | 0 | | Liabilities subject to compromise | | 4,143,812 | | | (4,143,812) | | (i) | — | | | — | |
Total liabilities | Total liabilities | | 4,485,588 | | | (3,790,388) | | | (8,022) | | | 687,178 | | Total liabilities | | 4,485,588 | | | (3,790,388) | | | (8,022) | | | 687,178 | |
Shareholders’ equity | Shareholders’ equity | | Shareholders’ equity | |
Common stock (Predecessor) | Common stock (Predecessor) | | 2,511 | | | (2,511) | | (j) | — | | | — | | Common stock (Predecessor) | | 2,511 | | | (2,511) | | (j) | — | | | — | |
Common stock (Successor) | Common stock (Successor) | | — | | | 1 | | (k) | — | | | 1 | | Common stock (Successor) | | — | | | 1 | | (k) | — | | | 1 | |
Additional paid-in capital (Predecessor) | Additional paid-in capital (Predecessor) | | 815,505 | | | (815,505) | | (j) | — | | | — | | Additional paid-in capital (Predecessor) | | 815,505 | | | (815,505) | | (j) | — | | | — | |
Additional paid-in capital (Successor) | Additional paid-in capital (Successor) | | — | | | 1,018,767 | | (k) | — | | | 1,018,767 | | Additional paid-in capital (Successor) | | — | | | 1,018,767 | | (k) | — | | | 1,018,767 | |
Accumulated deficit | Accumulated deficit | | (1,006,351) | | | 3,374,323 | | (l) | (2,367,972) | | (r) | 0 | | Accumulated deficit | | (1,006,351) | | | 3,374,323 | | (l) | (2,367,972) | | (r) | — | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | | (57,904) | | | 0 | | | 57,904 | | (s) | 0 | | Accumulated other comprehensive loss | | (57,904) | | | — | | | 57,904 | | (s) | — | |
Total shareholders’ equity | Total shareholders’ equity | | (246,239) | | | 3,575,075 | | | (2,310,068) | | | 1,018,768 | | Total shareholders’ equity | | (246,239) | | | 3,575,075 | | | (2,310,068) | | | 1,018,768 | |
Total liabilities and equity | Total liabilities and equity | | $ | 4,239,349 | | | $ | (215,313) | | | $ | (2,318,090) | | | $ | 1,705,946 | | Total liabilities and equity | | $ | 4,239,349 | | | $ | (215,313) | | | $ | (2,318,090) | | | $ | 1,705,946 | |
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
Reorganization Adjustments
(a)Represents the reorganization adjustment to cash and cash equivalentsequivalents:
| | | | | | | | |
Proceeds from Rights Offering | | $ | 200,000 | |
Proceeds from the Revolving Credit Facility, net of issuance costs | | 167,361 | |
Transfer of cash from restricted cash | | 300 | |
Payment of professional service fees | | (23,261) | |
Payment of the pre-petition revolving credit facility principal and accrued interest | | (550,019) | |
Deconsolidation of NHUK | | (300) | |
Payment of recurring debt fees | | (75) | |
Change in cash and cash equivalents | | $ | (205,994) | |
(b)Represents the reorganization adjustment for the following:
| | | | | | | | |
Payment of professional service fees from escrow | | $ | (12,380) | |
Payment of Paragon litigation settlement form escrow | | (7,700) | |
Transfer of restricted cash to cash | | (300) | |
Adjustment to miscellaneous receivables related to the deconsolidation of NHUK upon emergence | | 78 | |
Change in prepaid expenses and other current assets | | $ | (20,302) | |
(c)Adjustments to other assets relates to capitalization of long-term debt issuance costs related to the Revolving Credit Facility of $11.1 million and the impact of reorganization adjustments on deferred tax assets of $(0.1) million.
(d)Adjustments to accounts payable related to the payment of professional fees $(15.2) million and the reinstatement of trade payables from liabilities subject to compromise of $8.0 million.
(e)Adjustment of $21.3 million to other current liabilities related to the reinstatement of liabilities subject to compromise.
(f)Represents $352.1 million of outstanding borrowings, net of financing costs, under the Second Lien Notes and Revolving Credit Facility.
(g)Represents the write-off of $(17.3) million deferred income taxes as the result of the Company’s taxinternal restructuring.
(h)Represents cancellation of $(0.1) million cash-based compensation plans and the reinstatement of $4.7 million right-of-use lease liabilities.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
(i)Liabilities subject to compromise settled or reinstated in accordance with the Plan and the resulting gain were determined as follows:
| | | | | | | | |
4.900% senior notes due Aug. 2020 | | $ | 62,535 | |
4.625% senior notes due Mar. 2021 | | 79,937 | |
3.950% senior notes due Mar. 2022 | | 21,213 | |
7.750% senior notes due Jan. 2024 | | 397,025 | |
7.950% senior notes due Apr. 2025 | | 450,000 | |
7.875% senior notes due Feb. 2026 | | 750,000 | |
6.200% senior notes due Aug. 2040 | | 393,597 | |
6.050% senior notes due Mar. 2041 | | 395,000 | |
5.250% senior notes due Mar. 2042 | | 483,619 | |
8.950% senior notes due Apr. 2045 | | 400,000 | |
5.958% revolving credit facility maturing Jan. 2023 | | 545,000 | |
Accrued and unpaid interest | | 110,300 | |
Protection and indemnity insurance liabilities | | 25,669 | |
Accounts payable and other payables | | 8,163 | |
Estimated loss on litigation | | 15,700 | |
Lease liabilities | | 6,054 | |
Total consolidated liabilities subject to compromise | | 4,143,812 | |
Issuance of Successor common stock | | (854,909) | |
Issuance of Successor warrants to certain Predecessor creditors | | (141,029) | |
Payment of the pre-petition revolving credit facility principal and accrued interest | | (550,020) | |
Payment of Paragon litigation settlement from escrow | | (7,700) | |
Reinstatement of Transocean litigation liability | | (8,000) | |
Reinstatement of protection and indemnity insurance liabilities | | (11,791) | |
Reinstatement of trade payables and right-of-use lease liabilities | | (14,216) | |
Gain on settlement of liabilities subject to compromise | | $ | 2,556,147 | |
(j)Represents the cancellation of the Predecessor’s common stock of $(2.5) million and Additional paid-in capital of $(815.5) million.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
(k)Represents the reorganization adjustments to common stock and additional paid in capitalcapital:
| | | | | | | | |
Par value of 50 million shares of new common stock issued | | $ | 1 | |
Capital in excess of par value of 50 million issued and authorized shares of new common stock issued | | 875,931 | |
Fair value of new warrants issued | | 142,836 | |
Total Successor equity issued on the Effective Date | | $ | 1,018,768 | |
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
(l)Represents the reorganization adjustments to accumulated deficit:
| | | | | | | | |
Gain on settlement of liabilities subject to compromise | | $ | 2,556,147 | |
Professional fees and success fees | | (15,017) | |
Write-off of unrecognized share-based compensation | | (4,406) | |
Reorganization items, net | | 2,536,724 | |
Cancellation of Predecessor common stock and additional paid-in capital | | 820,299 | |
Cancellation of Predecessor cash and equity compensation plans | | 2,183 | |
Issuance of Successor warrants to Predecessor equity holders | | (1,807) | |
Deconsolidation of NHUK | | (222) | |
Recognition of recurring debt fees | | (75) | |
Tax impacts of reorganization | | 17,221 | |
Net impact to Accumulated Deficit | | $ | 3,374,323 | |
Fresh Start Adjustments
(m)Reflects adjustments to capitalized deferred costs, deferred revenue and pension balances due to the application of fresh start accounting as follows:
| | | Prepaid expenses and other current assets | | Other assets | | Other current liabilities | | Other liabilities | | Prepaid expenses and other current assets | | Other assets | | Other current liabilities | | Other liabilities |
Deferred contract assets and revenues | Deferred contract assets and revenues | $ | (10,073) | | | $ | (2,616) | | | $ | (52,616) | | | $ | (20,320) | | Deferred contract assets and revenues | $ | (10,073) | | | $ | (2,616) | | | $ | (52,616) | | | $ | (20,320) | |
Write-off of certain financing costs | Write-off of certain financing costs | 0 | | | (6,238) | | | 0 | | | 0 | | Write-off of certain financing costs | — | | | (6,238) | | | — | | | — | |
Pension assets and obligations | Pension assets and obligations | 0 | | | (1,010) | | | 3 | | | (6,085) | | Pension assets and obligations | — | | | (1,010) | | | 3 | | | (6,085) | |
Fair value adjustments to other assets | Fair value adjustments to other assets | 0 | | | (639) | | | 0 | | | 0 | | Fair value adjustments to other assets | — | | | (639) | | | — | | | — | |
| | $ | (10,073) | | | $ | (10,503) | | | $ | (52,613) | | | $ | (26,405) | | | $ | (10,073) | | | $ | (10,503) | | | $ | (52,613) | | | $ | (26,405) | |
(n)Reflects the fair value adjustment of $113.4 million to record an intangible asset for favorable contracts with customers.
(o)Reflects the fair value adjustment of $2.4 billion to property and equipment of the Predecessor. The following table presents a comparison of the historical and new fair values upon emergence:
| | | Historical Value | | Fair Value | | Historical Value | | Fair Value |
Drilling equipment and facilities | Drilling equipment and facilities | | $ | 4,355,384 | | | $ | 1,070,931 | | Drilling equipment and facilities | | $ | 4,355,384 | | | $ | 1,070,931 | |
Construction in progress | Construction in progress | | 231,626 | | | 75,159 | | Construction in progress | | 231,626 | | | 75,159 | |
Other | Other | | 200,651 | | | 9,635 | | Other | | 200,651 | | | 9,635 | |
Less: accumulated depreciation | Less: accumulated depreciation | | (1,221,033) | | | 0 | | Less: accumulated depreciation | | (1,221,033) | | | — | |
Property and equipment, at cost | Property and equipment, at cost | | $ | 3,566,628 | | | $ | 1,155,725 | | Property and equipment, at cost | | $ | 3,566,628 | | | $ | 1,155,725 | |
(p)Reflects a fair value adjustment of $41.4 million to the carrying value of the Second Lien Notes due to application of fresh start accounting.
(q)New deferred tax balances of $29.6 million were established for favorable contracts with customers due to application of fresh start accounting.
(r)The following table summarizes the cumulative impact of the fresh start adjustments, as discussed above, the elimination of the Predecessor’s accumulated other comprehensive loss, and the adjustments required to eliminate accumulated deficit:
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
(r)The following table summarizes the cumulative impact of the fresh start adjustments, as discussed above, the elimination of the Predecessor’s accumulated other comprehensive loss, and the adjustments required to eliminate accumulated deficit:
| | | | | | | | |
Fair value adjustment to Prepaid and other current assets | | $ | (10,073) | |
Fair value adjustment to Intangible assets | | 113,389 | |
Fair value adjustment to Property and equipment, net | | (2,410,903) | |
Fair value adjustment to Other assets | | (10,503) | |
Fair value adjustment to Other current liabilities | | 52,613 | |
Fair value adjustment to Long-term debt | | (41,446) | |
Fair value adjustment to Deferred income taxes | | (9,829) | |
Fair value adjustment to Other liabilities | | 26,405 | |
Derecognition of Predecessor Accumulated other comprehensive loss | | (57,904) | |
Total fresh start adjustments included in Reorganization items, net | | (2,348,251) | |
Tax impact of fresh start adjustments | | (19,721) | |
Net change in accumulated deficit | | $ | (2,367,972) | |
(s)Reflects $57.9 million for the derecognition of Predecessor Accumulated other comprehensive loss through Reorganization items, net.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
Note 4— Acquisitions
On April 15, 2021, Noble purchased Pacific Drilling Company LLC (“Pacific Drilling”), an international offshore drilling contractor, in an all-stock transaction (the “Pacific Drilling Merger”). Pursuant to the terms and conditions set forth in an Agreement and Plan of Merger dated March 25, 2021, (a) each membership interest in Pacific Drilling was converted into the right to receive 6.366 Ordinary Shares and (b) each of Pacific Drilling’s warrants outstanding immediately prior to the effective time of the Pacific Drilling Merger was converted into the right to receive 1.553 Ordinary Shares. As part of the transaction, Pacific Drilling’s equity holders received 16.6 million Ordinary Shares, or approximately 24.9% of the outstanding Ordinary Shares and Penny Warrants at closing. The results of Pacific Drilling’s operations are included in the Company’s results of operations effective April 15, 2021. In connection with this acquisition, the Company acquired 7 floaters and subsequently sold 2 floaters in June 2021 for net proceeds of $29.7 million. In connection with this acquisition, the Company incurred $13.8 million and $5.0 million of acquisition related costs during the period from February 6 through September 30, 2021 and the three months ended September 30, 2021, respectively.
Purchase Price Allocation
The transaction has been accounted for using the acquisition method of accounting under ASC Topic 805, Business Combinations, with Noble being treated as the accounting acquirer. Under the acquisition method of accounting, the assets and liabilities of Pacific Drilling and its subsidiaries have been recorded at their respective fair values as of the date of completion of the Pacific Drilling Merger and added to Noble’s. The preliminary purchase price assessment remains an ongoing process and is subject to change for up to one year subsequent to the closing date of the Pacific Drilling Merger.
Determining the fair values of the assets and liabilities of Pacific Drilling and the consideration paid requires judgment and certain assumptions to be made, the most significant of these being related to the valuation of Pacific Drilling’s mobile offshore drilling units and other related tangible assets and the fair value of the Ordinary Shares issued by Noble. The valuation of the Pacific Drilling’s mobile offshore drilling units was determined by using a combination of (1) the discounted cash flows expected to be generated from the drilling assets over their remaining useful lives and (2) the cost to replace the drilling assets, as adjusted by the current market for similar offshore drilling assets. Assumptions used in our assessment included, but were not limited to, future marketability of each unit in light of the current market conditions and its current technical specifications, timing of future contract awards and expected operating dayrates, operating costs, utilization rates, tax rates, discount rates, capital expenditures, market values, weighting of market values, reactivation costs, estimated economic useful lives and, in certain cases, our belief that a drilling unit is no longer marketable and is unlikely to return to service in the near to medium term. We included an allocation for corporate overhead when calculating the discounted cash flows expected to be generated from our drilling assets over their remaining useful lives. The cash flows were discounted at our weighted average cost of capital (“WACC”), which was derived from a blend of our after-tax cost of debt and our cost of equity, and computed using public share price information for similar offshore drilling market participants, certain US Treasury rates, and certain risk premiums specific to the Company. The inputs and assumptions related to these assets are categorized as Level 3 in the fair value hierarchy.
As Noble was not yet trading on the New York Stock Exchange at the time of the Pacific Drilling Merger, the valuation of our Ordinary Shares issued by Noble as consideration required an analysis of the discounted cash flows expected to be generated by the drilling assets of the combined entity. These discounted cash flows were derived utilizing many of the same types of assumptions as were used in the valuation of the Noble drilling assets at emergence as well the Pacific Drilling assets. In addition, the discounted cash flows of the combined entity considered annual cost saving synergies from the operation of the Noble and Pacific Drilling assets as a single fleet, and were accordingly discounted at a market participant WACC for the combined entity. Lastly, the valuation of the Ordinary Shares considered the fair value of debt, warrants and the management incentive plan of the combined entity to arrive at the fair value of common equity. The inputs and assumptions related to the value of Noble’s Ordinary Shares are also categorized as Level 3 in the fair value hierarchy.
The Pacific Drilling Merger resulted in a gain on bargain purchase due to the estimated fair value of the identifiable net assets acquired exceeding the purchase consideration transferred by $64.5 million and is shown as a gain on bargain purchase on Noble’s consolidated statement of operations. Management reviewed the Pacific Drilling assets acquired and liabilities assumed as well as the assumptions utilized in estimating their fair values. Upon completion of our assessment, the Company concluded that recording a gain on bargain purchase was appropriate and required under US GAAP. The bargain purchase was a result of a combination of factors, including a prolonged downturn in the drilling industry which led to challenging fundamentals for many competitors in the offshore drilling sector. The Company believes the seller was motivated to complete the transaction as the emerging market dynamics do not appear to be favorable to smaller rig fleets which operate across multiple regions.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
The following table represents the preliminary allocation of the total purchase price of Pacific Drilling to the identifiable assets acquired and the liabilities assumed based on the fair values as of the acquisition date.
| | | | | | | | | | | | | | |
Consideration: | | | | |
Pacific Drilling membership interests outstanding | | 2,500 | | | |
Exchange Ratio | | 6.366 | | | 15,915 | |
Pacific Drilling warrants outstanding | | 441 | | | |
Exchange Ratio | | 1.553 | | | 685 | |
Noble Ordinary Shares issued | | | | 16,600 | |
Fair value of Noble Ordinary Shares on April 15, 2021 | | | | $ | 21.55 | |
Total consideration | | | | $ | 357,662 | |
| | | | |
Assets acquired: | | | | |
Cash and cash equivalents | | | | $ | 54,970 | |
Accounts receivable | | | | 17,457 | |
Taxes receivable | | | | 1,585 | |
Prepaid expenses and other current assets | | | | 14,081 | |
Total current assets | | | | 88,093 | |
Property and equipment, net | | | | 346,167 | |
Assets held for sale | | | | 30,063 | |
Other assets | | | | 2,631 | |
Total assets acquired | | | | 466,954 | |
Liabilities assumed: | | | | |
Accounts payable | | | | 18,603 | |
Other current liabilities | | | | 2,900 | |
Accrued payroll and related costs | | | | 16,128 | |
Taxes payable | | | | 1,951 | |
Total current liabilities | | | | 39,582 | |
Deferred income taxes | | | | 798 | |
Other liabilities | | | | 4,433 | |
Total liabilities assumed | | | | 44,813 | |
Net assets acquired | | | | $ | 422,141 | |
Gain on bargain purchase | | | | 64,479 | |
Purchase price consideration | | | | $ | 357,662 | |
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
Pacific Drilling Revenue and Net Income
The following table represents Pacific Drilling’s revenue and earnings included in Noble’s consolidated statement of operations subsequent to the closing of the Pacific Drilling Merger. | | | | | | | | | | | | | | | | | |
| | Successor | | | |
| | | | Period From | | | |
| | Three Months | | February 6, 2021 | | | |
| | Ended | | through | | | |
| | September 30, 2021 | | September 30, 2021 | | | |
Revenue | | $ | 35,682 | | | $ | 65,629 | | | | |
Net loss | | $ | (12,533) | | | $ | (28,865) | | | | |
Pro Forma Financial Information
The following unaudited pro forma summary presents the results of operations as if the Pacific Drilling Merger had occurred on February 6, 2021. The pro forma summary uses estimates and assumptions based on information available at the time. Management believes the estimates and assumptions to be reasonable; however, actual results may have differed significantly from this pro forma financial information. The pro forma information does not reflect any synergy savings that might have been achieved from combining the operations and is not intended to reflect the actual results that would have occurred had the companies actually been combined during the periods presented.
| | | | | | | | | | | | | | |
| | Successor |
| | | | Period From |
| | Three Months | | February 6, 2021 |
| | Ended | | through |
| | September 30, 2021 | | September 30, 2021 |
Revenue | | $ | 250,371 | | | $ | 584,821 | |
Net loss | | $ | (23,665) | | | $ | (53,470) | |
Net loss per share | | | | |
Basic | | $ | (0.36) | | | $ | (0.80) | |
Diluted | | $ | (0.36) | | | $ | (0.80) | |
The pro forma results include, among others, (i) a reduction in Pacific Drilling’s historically reported depreciation expense for adjustments to property and equipment and (ii) an adjustment to reflect the gain on bargain purchase as if the Pacific Drilling Merger had occurred on February 6, 2021.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
Note 4—5— Accounting Pronouncements
Accounting Standards Adopted
In December 2019, the FASB issued Accounting Standards Update (“ASU”) No. 2019-12, which amends ASC Topic 740, Income Taxes. This update simplifies the accounting for income taxes by removing certain exceptions to general principles. The amendment is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, and is required to be adopted on a retrospective basis for all periods presented.
We adopted ASU No. 2019-12, effective January 1, 2021. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements.
Recently Issued Accounting Standards
WithIn October 2021, the exceptionFASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, in order to provide clarity on how to account for acquired revenue contracts with customers in a business combination. This guidance is effective for public business entities for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The amendments should be applied prospectively to business combinations occurring on or after the effective date. Early adoption is permitted. The Company is currently evaluating the impact the standard will have on our financial statements.
Note 6— Income (Loss) Per Share
The following table presents the computation of the updated standards discussed above, there have been no new accounting pronouncements not yet effective that have significance, or potential significance, to our condensed consolidated financial statements.basic and diluted loss per share for Noble:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | |
| | Successor | | | Predecessor |
| | | | Period From | | | Period From | | | | |
| | Three Months | | February 6, 2021 | | | January 1, 2021 | | Three Months | | Nine Months |
| | Ended | | through | | | through | | Ended | | Ended |
| | September 30, 2021 | | September 30, 2021 | | | February 5, 2021 | | September 30, 2020 | | September 30, 2020 |
Numerator: | | | | | | | | | | | |
Basic | | | | | | | | | | | |
Net income (loss) from continuing operations | | $ | (23,665) | | | $ | (21,454) | | | | $ | 250,228 | | | $ | (50,868) | | | $ | (1,155,739) | |
Net loss from discontinued operations, net of tax | | — | | | — | | | | — | | | — | | | — | |
Net income (loss) | | $ | (23,665) | | | $ | (21,454) | | | | $ | 250,228 | | | $ | (50,868) | | | $ | (1,155,739) | |
Diluted | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Net income (loss) | | $ | (23,665) | | | $ | (21,454) | | | | $ | 250,228 | | | $ | (50,868) | | | $ | (1,155,739) | |
Denominator: | | | | | | | | | | | |
Weighted average shares outstanding - basic | | 66,623 | | | 61,847 | | | | 251,115 | | | 251,058 | | | 250,696 | |
Dilutive effect of share-based awards | | — | | | — | | | | 5,456 | | | — | | | — | |
| | | | | | | | | | | |
Weighted average shares outstanding - diluted | | 66,623 | | | 61,847 | | | | 256,571 | | | 251,058 | | | 250,696 | |
Per share data | | | | | | | | | | | |
Basic: | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Net income (loss) | | $ | (0.36) | | | $ | (0.35) | | | | $ | 1.00 | | | $ | (0.20) | | | $ | (4.61) | |
Diluted: | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Net income (loss) | | $ | (0.36) | | | $ | (0.35) | | | | $ | 0.98 | | | $ | (0.20) | | | $ | (4.61) | |
| | | | | | | | | | | |
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
Note 5— Income (Loss) Per Share
The following table presents the computation of basic and diluted loss per share for Noble:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| | | | | | | | | | | |
| | Successor | | | Predecessor | | | | |
| | Period From February 6, 2021 through March 31, 2021 | | | Period From January 1, 2021 through February 5, 2021 | | Three Months Ended March 31, 2020 | | | | |
Numerator: | | | | | | | | | | | |
Basic | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Net income (loss) | | $ | (18,224) | | | | $ | 250,228 | | | $ | (1,062,677) | | | | | |
Diluted | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Net income (loss) | | $ | (18,224) | | | | $ | 250,228 | | | $ | (1,062,677) | | | | | |
Denominator: | | | | | | | | | | | |
Weighted average shares outstanding - basic | | 50,000 | | | | 251,115 | | | 250,047 | | | | | |
| | | | | | | | | | | |
Weighted average shares outstanding - diluted | | 50,000 | | | | 256,571 | | | 250,047 | | | | | |
Per share data | | | | | | | | | | | |
Basic: | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Net income (loss) | | $ | (0.36) | | | | $ | 1.00 | | | $ | (4.25) | | | | | |
Diluted: | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Net income (loss) | | $ | (0.36) | | | | $ | 0.98 | | | $ | (4.25) | | | | | |
| | | | | | | | | | | |
Only those items having a dilutive impact on our basic loss per share are included in diluted loss per share. ForThe following table displays the period from February 6, 2021 through March 31, 2021, the period from January 1, 2021 through February 5, 2021, and the three months ended March 31, 2020, approximately 22.6 million, 0.6 million, and 12.4 million share-based awards, respectively, wereinstruments that have been excluded from diluted income or loss per share since the effect would have been anti-dilutive.anti-dilutive:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Successor | | | Predecessor |
| | | | Period From | | | Period From | | | | |
| | | | February 6, 2021 | | | January 1, 2021 | | | | |
| | Three Months Ended | | through | | | through | | Three Months Ended | | Nine Months Ended |
| | September 30, 2021 | | September 30, 2021 | | | February 5, 2021 | | September 30, 2020 | | September 30, 2020 |
Share-based awards | | 3,124 | | | 3,124 | | | | 556 | | | 6,431 | | | 6,431 | |
Warrants (1) | | 19,412 | | | 19,412 | | | | — | | | — | | | — | |
| | | | | | | | | | | |
(1) Represents the total number of warrants outstanding which did not have a dilutive effect. In periods where the warrants are determined to be dilutive, the number of shares which will be included in the computation of diluted shares is determined using the treasury stock method, adjusted for mandatory exercise provisions under the warrant agreements if applicable.
Share capital
Successor Share capital
On the Effective Date, pursuant to the Plan, Noble issued 50 million Ordinary Shares. Subsequent to the Effective Date, approximately 6.5 million Ordinary Shares were exchanged for Penny Warrants to purchase up to approximately 6.5 million Ordinary shares, with an exercise price of $0.01 per share. Ordinary Shares issuable upon the exercise of Penny Warrants were included in the number of outstanding shares used for the computation of basic net loss per share prior to the exercise of those warrants. As of March 31,September 30, 2021, Noble had approximately 43.560.2 million Ordinary Shares outstanding as compared to approximately 251.1 million Legacy Noble ordinary shares outstanding and trading at December 31, 2020. Pursuant to the Memorandum of Association of Noble Corporation, the share capital of Noble is $6,000 divided into 500,000,000 ordinary shares of a par value of $0.00001 each and 100,000,000 shares of a par value of $0.00001, each of such class or classes having the rights as the board of directors of Noble (the “Board”) may determine from time to time.
Predecessor Share capital
As discussed in “Note 2— Chapter 11 Emergence,” on the Effective Date and pursuant to the terms of the Plan, all of the Predecessor’s ordinary shares were cancelled. In accordance with the Plan, all agreements, instruments and other documents evidencing, relating to or otherwise connected with any of Legacy Noble’s equity interests outstanding prior to the Effective Date, including all equity-based awards, were cancelled and all such equity interests have no further force or effect after the Effective Date. Pursuant to the Plan, the holders of Legacy Noble’s ordinary shares outstanding prior to the Effective Date received their pro rata share of the Tranche 3 Warrants to acquire Ordinary Shares.
Note 7— Property and Equipment
Property and equipment, at cost consisted of the following:
| | | | | | | | | | | | | | | | | |
| | Successor | | | Predecessor |
| | September 30, 2021 | | | December 31, 2020 |
Drilling equipment and facilities | | $ | 1,396,570 | | | | $ | 4,476,960 | |
Construction in progress | | 110,972 | | | | 99,812 | |
Other | | 11,121 | | | | 200,925 | |
Property and equipment, at cost | | $ | 1,518,663 | | | | $ | 4,777,697 | |
During the period from February 6 through September 30, 2021 and the period from January 1 through February 5, 2021, we recognized no impairment charges to our long-lived assets. During the nine months ended September 30, 2020, we recognized a non-cash loss on impairment of $1.1 billion, related to our long-lived assets. See “Note 11— Loss on Impairment” for additional information.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
Note 6— PropertyIn preparation for Hurricane Ida in the US Gulf of Mexico, the Noble Globetrotter II successfully secured the well it was drilling and Equipment
Propertydetached from the blowout preventer without incident. However, during transit, the lower marine riser package, which is a series of controls that sits above the blowout preventer, and equipment, at cost consisteda number of riser joints separated from the rig, and certain other damage occurred. Due to the environmental conditions, a number of crew members were treated for minor injuries and released from medical care. The Company has given force majeure notice to the customer of the following:
| | | | | | | | | | | | | | | | | |
| | Successor | | | Predecessor |
| | March 31, 2021 | | | December 31, 2020 |
Drilling equipment and facilities | | $ | 1,085,292 | | | | $ | 4,476,960 | |
Construction in progress | | 83,591 | | | | 99,812 | |
Other | | 9,805 | | | | 200,925 | |
Property and equipment, at cost | | $ | 1,178,688 | | | | $ | 4,777,697 | |
DuringNoble Globetrotter II in accordance with the governing drilling services contract. The Company has insurance coverage for property damage to rigs due to named storms in the US Gulf of Mexico with a $10.0 million deductible per occurrence and a $50.0 million annual limit; however, our insurance policies may not adequately cover our losses, which could adversely affect our business. Timing differences are likely to exist between the damage costs, capital expenditures made to repair or restore properties and recognition and receipt of insurance proceeds reflected in the Company’s financial statements. The Company assessed the damage sustained on the Noble Globetrotter II, which resulted in $5.4 million of assets written off during the three months ended September 30, 2021 and the period from February 6 through March 31,September 30, 2021. The majority of the remaining costs are costs related to the equipment recovery efforts and legal fees and are presented in “Hurricane losses” on the Condensed Consolidated Statement of Operations.
On August 25, 2021, the Company and certain subsidiaries of the Company entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) to sell the jackup rigs operated by the Company in Saudi Arabia to ADES International Holding Limited (“ADES”) for a purchase price of $292.4 million in cash. Pursuant to the terms of the Purchase and Sale Agreement, the jackups, Noble Roger Lewis, Noble Scott Marks, Noble Joe Knight, and Noble Johnny Whitstine, together with certain related assets, were sold to ADES. The closing of the sale occurred in November 2021, and the period from January 1 through February 5,Company expects to recognize a gain, net of transaction costs, in the fourth quarter of 2021 associated with the disposal of these assets. The Company believes these rigs qualify for the held for sale classification on our balance sheet.
The net income before income taxes for the 4 rigs classified as held for sale was:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Successor | | | Predecessor |
| | | | Period From | | | Period From | | | | |
| | | | February 6, 2021 | | | January 1, 2021 | | | | |
| | Three Months Ended | | through | | | through | | Three Months Ended | | Nine Months Ended |
| | September 30, 2021 | | September 30, 2021 | | | February 5, 2021 | | September 30, 2020 | | September 30, 2020 |
Net income before income taxes (1) | | $ | 9,768 | | | $ | 15,176 | | | | $ | 3,128 | | | $ | 741 | | | $ | 20,061 | |
| | | | | | | | | | | |
(1) , we recognized 0 impairment chargesExcludes Reorganization items, net
The Purchase and Sale Agreement also included certain covenants that the Company has agreed to our long-lived assets. Duringnot carry on or be engaged in the three months ended March 31, 2020, we recognizedoperation of jackup drilling rigs in the territorial waters of the Kingdom of Saudi Arabia in the Arabian Gulf for a non-cash loss on impairmentterm after the closing date of $1.1 billion, related to our long-lived assets. See “Note 10— Loss on Impairment”(i) one year for additional information.purposes of drilling gas wells and (ii) two years for the purposes of drilling oil wells.
Note 7—8— Debt
Post-emergence Debt
Senior Secured Revolving Credit Facility
On the Effective Date, Finco and Noble International Finance Company (“NIFCO”) entered into the Revolving Credit Agreement providing for the $675.0 million Revolving Credit Facility and canceled all debt that existed immediately prior to the Effective Date. The Revolving Credit Facility matures on July 31, 2025. Subject to the satisfaction of certain conditions, Finco may from time to time designate one or more of Finco’s other wholly-owned subsidiaries as additional borrowers under the Revolving Credit Agreement (collectively with Finco and NIFCO, the “Borrowers”). As of the Effective Date, $177.5 million of loans were outstanding, and $8.8 million of letters of credit were issued, under the Revolving Credit Facility. As of September 30, 2021, we had $190.0 million of loans outstanding and $8.7 million of letters of credit issued under the Revolving Credit Facility and an additional $11.7 million in letters of credit and surety bonds issued under bilateral arrangements.
All obligations of the Borrowers under the Revolving Credit Agreement, certain cash management obligations and certain swap obligations are unconditionally guaranteed, on a joint and several basis, by Finco and certain of its direct and indirect subsidiaries (collectively with the Borrowers, the “Credit Parties”), including a guarantee by each Borrower of the obligations of each other Borrower under the Revolving Credit Agreement. All such obligations, including the guarantees of the Revolving Credit Facility, are secured by senior priority liens on substantially all assets of, and the equity interests in, each Credit Party, including all of the rigs owned by the Company as of the Effective Date or acquired thereafter and certain assets related thereto, in each case, subject to certain exceptions and limitations described in the Revolving Credit Agreement. Neither Pacific Drilling nor any of its subsidiaries is a subsidiary guarantor of the Revolving Credit Facility, and none of their assets secure the Revolving Credit Facility.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
The loans outstanding under the Revolving Credit Facility bear interest at a rate per annum equal to the applicable margin plus, at Finco’s option, either: (i) the reserve-adjusted LIBOR or (ii) a base rate, determined as the greatest of (x) the prime loan rate as published in the Wall Street Journal, (y) the federal funds effective rate plus ½ of 1%, and (z) the reserve-adjusted one-month LIBOR plus 1%. The applicable margin is initially 4.75% per annum for LIBOR loans and 3.75% per annum for base rate loans and will be increased by 50 basis points after July 31, 2024, and may be increased by an additional 50 basis points under certain conditions described in the Revolving Credit Agreement.
The Borrowers are required to pay acustomary quarterly commitment fee to each lender under the Revolving Credit Agreement, which accrues at a rate per annum equal to 0.50% on the average daily unused portion of such lender’s commitments under the Revolving Credit Facility. The Borrowers are also required to pay customaryfees and letter of credit and fronting fees.
Borrowings under the Revolving Credit Agreement may be used for working capital and other general corporate purposes. Availability of borrowings under the Revolving Credit Agreement is subject to the satisfaction of certain conditions, including restrictions on borrowings if, after giving effect to any such borrowings and the application of the proceeds thereof, (i) the aggregate amount of Available Cash (as defined in the Revolving Credit Agreement) would exceed $100$100.0 million, (ii) the Consolidated First Lien Net Leverage Ratio (as defined in the Revolving Credit Agreement) would be greater than 5.50 to 1.00 and the aggregate principal amount outstanding under the Revolving Credit Facility would exceed $610$610.0 million, or (iii) the Asset Coverage Ratio (as described below) would be less than 2.00 to 1.00.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
Mandatory prepayments and, under certain circumstances, commitment reductions are required under the Revolving Credit Facility in connection with (i) certain asset sales, asset swaps and events of loss (subject to reinvestment rights if no event of default exists) and (ii) certain debt issuances. Available Cash in excess of $150$150.0 million is also required to be applied periodically to prepay loans (without a commitment reduction). The loans under the Revolving Credit Facility may be voluntarily prepaid, and the commitments thereunder voluntarily terminated or reduced, by the Borrowers at any time without premium or penalty, other than customary breakage costs.
The Revolving Credit Agreement obligates Finco and its restricted subsidiaries to comply with the following financial maintenance covenants:
•as of the last day of each fiscal quarter in 2021, Adjusted EBITDA (as defined in the Revolving Credit Agreement) is not permitted to be lower than (i) $70 million for the four fiscal quarter period ending March 31, 2021, (ii) $40 million for the four fiscal quarter period ending June 30, 2021 and (iii) $25$25.0 million for the four fiscal quarter periods ending on each of September 30, 2021 and December 31, 2021;
•as of the last day of each fiscal quarter ending on or after March 31, 2022, the ratio of Adjusted EBITDA to Cash Interest Expense (as defined in the Revolving Credit Agreement) is not permitted to be less than (i) 2.00 to 1.00 for each four fiscal quarter period ending on or after March 31, 2022 until June 30, 2024, and (ii) 2.25 to 1.00 for each four fiscal quarter period ending thereafter; and
•for each fiscal quarter ending on or after June 30, 2021, the ratio of (x) Asset Coverage Aggregate Rig Value (as defined in the Revolving Credit Agreement) to (y) the aggregate principal amount of loans and letters of credit outstanding under the Revolving Credit Facility (the “Asset Coverage Ratio”) as of the last day of any such fiscal quarter is not permitted to be less than 2.00 to 1.00.
The Revolving Credit Facility contains affirmative and negative covenants, representations and warranties and events of default that the Company considers customary for facilities of this type.
Second Lien Notes Indenture
On the Effective Date, pursuant to the Backstop Commitment Agreement and in accordance with the Plan, Noble and Finco consummated the Rights Offering of Second Lien Notes and associated Ordinary Shares at an aggregate subscription price of $200.0 million.
An aggregate principal amount of $216$216.0 million of Second Lien Notes was issued in the Rights Offering, which includes the aggregate subscription price of $200.0 million plus a backstop fee of $16.0 million which was paid in kind. The Second Lien Notes mature on February 15, 2028. The Second Lien Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured second-priority basis, by the direct and indirect subsidiaries of Finco that are Credit Parties under the Revolving Credit Facility. Neither Pacific Drilling nor any of its subsidiaries is a subsidiary guarantor of the Second Lien Notes, and none of their assets secure the Second Lien Notes.
The Second Lien Notes and such guarantees are secured by senior priority liens on the assets subject to liens securing the Revolving Credit Facility, including the equity interests in Finco and each guarantor of the Second Lien Notes, all of the rigs owned by the Company as of the Effective Date or acquired thereafter, certain assets related thereto, and substantially all other assets of Finco and such guarantors, in each case, subject to certain exceptions and limitations. Such collateral does not include any assets of, or equity interests in, Pacific Drilling or any of its subsidiaries.
Interest on the Second Lien Notes accrues, at Finco’s option, at a rate of: (i) 11% per annum, payable in cash; (ii) 13% per annum, with 50% of such interest to be payable in cash and 50% of such interest to be payable by issuing additional Second Lien Notes (“PIK Notes”); or (iii) 15% per annum, with the entirety of such interest to be payable by issuing PIK Notes. Finco shall pay interest semi-annually in arrears on
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
February 15 and August 15 of each year, commencing August 15, 2021. For the period ended March 31, 2021,accrual purposes, we have assumed we will make the next interest payment by issuing PIK Notesin cash and have accrued interest at a rate of 15%.11%; however, the actual interest election will be made no later than the record date for such interest payment.
On or after February 15, 2024, Finco may redeem all or part of the Second Lien Notes at fixed redemption prices (expressed as percentages of the principal amount), plus accrued and unpaid interest, if any, to, but excluding, the redemption date. Finco may also redeem the Second Lien Notes, in whole or in part, at any time and from time to time on or before February 14, 20252024 at a redemption price equal to 106% of the principal amount plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date, plus a “make-whole” premium. Notwithstanding the foregoing, if a Change of Control (as defined in the Second Lien Notes Indenture) occurs prior to (but not including) February 15, 2024, then, within 120 days of such Change of Control, Finco may elect to purchase all remaining outstanding Second Lien Notes at a redemption price equal to 106% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.
The Second Lien Notes contain covenants and events of default that the Company considers customary for notes of this type.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
Pre-emergence Debt
2017 Credit Facility
In December 2017, Noble Cayman Limited, a Cayman Islands company and a wholly-owned indirect subsidiary of Finco; Noble International Finance Company, a Cayman Islands company and a wholly-owned indirect subsidiary of Finco; and Noble Holding UK Limited, a company incorporated under the laws of England and Wales and a wholly-owned direct subsidiary of Legacy Noble (“NHUK”), as parent guarantor, entered into a senior unsecured credit agreement (as amended, the “2017 Credit Facility”). In July 2019, we executed a first amendment to our 2017 Credit Facility, which, among other things, reduced the maximum aggregate amount of commitments thereunder from $1.5 billion to $1.3 billion.
Prior to the filing of the Chapter 11 Cases, the 2017 Credit Facility was scheduled to mature in January 2023. Borrowings were available for working capital and other general corporate purposes.The 2017 Credit Facility provided for a letter of credit sub-facility in the amount of $15.0 million, with the ability to increase such amount up to $500.0 million with the approval of the lenders. The 2017 Credit Facility had provisions that varied the applicable interest rates for borrowings based upon our debt ratings. Borrowings under the 2017 Credit Facility bore interest at LIBOR plus an applicable margin. NHUK guaranteed the obligations of the borrowers under the 2017 Credit Facility. In addition, certain indirect subsidiaries of Legacy Noble that owned rigs were guarantors under the 2017 Credit Facility.
The filing of the Chapter 11 Cases constituted events of default that accelerated the Company’s obligations under the indentures governing our outstanding senior notes and under our 2017 Credit Facility. In addition, the unpaid principal and interest due under our indentures and the 2017 Credit Facility became immediately due and payable. However, any efforts to enforce such payment obligations with respect to our senior notes and 2017 Credit Facility were automatically stayed as a result of the filing of the Chapter 11 Cases, and the creditors’ rights of enforcement were subject to the applicable provisions of the Bankruptcy Code. See “Note 1— Organization and Basis of Presentation” for additional information.
The Company had $545.0 million outstanding under the 2017 Credit Facility prior to the Effective Date. On the Effective Date, all outstanding obligations under the 2017 Credit Facility were terminated and the holders of claims under the 2017 Credit Facility had such obligations repaid using cash on hand, repaid using proceeds from the Rights Offering, or refinanced through the Revolving Credit Facility. On the Effective Date, all liens and security interests granted to secure such obligations were terminated and are of no further force and effect.
Seller Loans
In February 2019, we purchased the Noble Joe Knight for $83.8 million with a $53.6 million seller-financed secured loan (the “2019 Seller Loan”). In September 2018, we purchased the Noble Johnny Whitstine for $93.8 million with a $60.0 million seller-financed secured loan (the “2018 Seller Loan” and, together with the 2019 Seller Loan, the “Seller Loans”).
In April 2020, the Company agreed with the lender under the Seller Loans to pay off 85% of the outstanding principal amount of the Seller Loans in exchange for a discount to the outstanding loan balance. On April 20, 2020, the Company made a payment of $48.1 million under the 2019 Seller Loan and $53.6 million under the 2018 Seller Loan, and, upon the lender’s receipt of such payment, interest ceased accruing, and the financial covenants set forth in the agreements relating to the Seller Loans ceased to apply. On July 20, 2020, at the conclusion of the 90-day period following the payment date, all outstanding amounts were reduced to 0,zero, all security was released, and the Seller Loans were terminated.
Senior Notes
On the Effective Date, in accordance with the Plan, all outstanding obligations under our senior notes were cancelled and the indentures governing such obligations were cancelled, except to the limited extent expressly set forth in the Plan. See “Note 2— Chapter 11 Emergence” for additional information.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
Fair Value of Debt
Fair value represents the amount at which an instrument could be exchanged in a current transaction between willing parties. The estimated fair value of our debt instruments was based on the quoted market prices for similar issues or on the current rates offered to us for debt of similar remaining maturities (Level 2 measurement). The carrying amount of the Revolving Credit Facility approximates fair value as the interest rate is variable and reflective of market rates. All remaining fair value disclosures are presented in “Note 13—14— Fair Value of Financial Instruments.”
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
The following table presents the carrying value, net of unamortized debt issuance costs and discounts or premiums, and the estimated fair value of our total debt, not including the effect of unamortized debt issuance costs, respectively:
| | | Successor | | | Predecessor | | Successor | | | Predecessor |
| | March 31, 2021 (1) | | | December 31, 2020 (1) | | September 30, 2021 | | | December 31, 2020 |
| | Carrying Value | | Estimated Fair Value | | | Carrying Value | | Estimated Fair Value | | Carrying Value | | Estimated Fair Value | | | Carrying Value | | Estimated Fair Value |
Senior secured notes: | Senior secured notes: | | | | | | | | Senior secured notes: | | | | | | | |
11.000% Second Lien Notes due February 2028 | 11.000% Second Lien Notes due February 2028 | | $ | 216,000 | | | $ | 226,260 | | | | $ | 0 | | | $ | 0 | | 11.000% Second Lien Notes due February 2028 | | $ | 216,000 | | | $ | 239,071 | | | | $ | — | | | $ | — | |
Senior unsecured notes: | Senior unsecured notes: | | | | Senior unsecured notes: | | | |
4.900% Senior Notes due August 2020 | 4.900% Senior Notes due August 2020 | | 0 | | | 0 | | | | 62,535 | | | 1,366 | | 4.900% Senior Notes due August 2020 | | — | | | — | | | | 62,535 | | | 1,366 | |
4.625% Senior Notes due March 2021 | 4.625% Senior Notes due March 2021 | | 0 | | | 0 | | | | 79,936 | | | 1,596 | | 4.625% Senior Notes due March 2021 | | — | | | — | | | | 79,936 | | | 1,596 | |
3.950% Senior Notes due March 2022 | 3.950% Senior Notes due March 2022 | | 0 | | | 0 | | | | 21,213 | | | 354 | | 3.950% Senior Notes due March 2022 | | — | | | — | | | | 21,213 | | | 354 | |
7.750% Senior Notes due January 2024 | 7.750% Senior Notes due January 2024 | | 0 | | | 0 | | | | 397,025 | | | 7,925 | | 7.750% Senior Notes due January 2024 | | — | | | — | | | | 397,025 | | | 7,925 | |
7.950% Senior Notes due April 2025 | 7.950% Senior Notes due April 2025 | | 0 | | | 0 | | | | 450,000 | | | 8,348 | | 7.950% Senior Notes due April 2025 | | — | | | — | | | | 450,000 | | | 8,348 | |
7.875% Senior Notes due February 2026 | 7.875% Senior Notes due February 2026 | | 0 | | | 0 | | | | 750,000 | | | 301,935 | | 7.875% Senior Notes due February 2026 | | — | | | — | | | | 750,000 | | | 301,935 | |
6.200% Senior Notes due August 2040 | 6.200% Senior Notes due August 2040 | | 0 | | | 0 | | | | 393,596 | | | 7,966 | | 6.200% Senior Notes due August 2040 | | — | | | — | | | | 393,596 | | | 7,966 | |
6.050% Senior Notes due March 2041 | 6.050% Senior Notes due March 2041 | | 0 | | | 0 | | | | 395,002 | | | 7,327 | | 6.050% Senior Notes due March 2041 | | — | | | — | | | | 395,002 | | | 7,327 | |
5.250% Senior Notes due March 2042 | 5.250% Senior Notes due March 2042 | | 0 | | | 0 | | | | 483,619 | | | 9,701 | | 5.250% Senior Notes due March 2042 | | — | | | — | | | | 483,619 | | | 9,701 | |
8.950% Senior Notes due April 2045 | 8.950% Senior Notes due April 2045 | | 0 | | | 0 | | | | 400,000 | | | 7,420 | | 8.950% Senior Notes due April 2045 | | — | | | — | | | | 400,000 | | | 7,420 | |
Credit facility: | Credit facility: | | | | Credit facility: | | | |
Senior Secured Revolving Credit Facility matures July 2025 | Senior Secured Revolving Credit Facility matures July 2025 | | 177,500 | | | 177,500 | | | | 0 | | | 0 | | Senior Secured Revolving Credit Facility matures July 2025 | | 190,000 | | | 190,000 | | | | — | | | — | |
2017 Credit Facility matures January 2023 | 2017 Credit Facility matures January 2023 | | 0 | | | 0 | | | | 545,000 | | | 545,000 | | 2017 Credit Facility matures January 2023 | | — | | | — | | | | 545,000 | | | 545,000 | |
| Total debt | Total debt | | 393,500 | | | 403,760 | | | | 3,977,926 | | | 898,938 | | Total debt | | 406,000 | | | 429,071 | | | | 3,977,926 | | | 898,938 | |
| Less: Current maturities of long-term debt | Less: Current maturities of long-term debt | | 0 | | | 0 | | | | 0 | | | 0 | | Less: Current maturities of long-term debt | | — | | | — | | | | — | | | — | |
Long-term debt | Long-term debt | | $ | 393,500 | | | $ | 403,760 | | | | $ | 0 | | | $ | 0 | | Long-term debt | | $ | 406,000 | | | $ | 429,071 | | | | $ | — | | | $ | — | |
(1) At March 31,September 30, 2021, there were 0no unamortized debt issuance costs and discounts or premiums associated with the Second Lien Notes, and $12.5and $11.1 million of unamortizedunamortized debt issuance costs associated with the Revolving Credit Facility. At December 31, 2020, all unamortized debt issuance costs and discounts or premiums associated with Predecessor debt had been written off.
As discussed in “Note 1— Organization and Basis of Presentation,” sincefrom the Petition Date until the Effective Date, the Company operated as a debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with provisions of the Bankruptcy Code. Accordingly, all of our long-term debt obligations were presented as “Liabilities subject to compromise” on our Condensed Consolidated Balance Sheet at December 31, 2020.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
Note 8— Accumulated Other Comprehensive Income (Loss)
The following table presents the changes in the accumulated balances for each component of “Accumulated other comprehensive income (loss)” (“AOCI”) for the period from February 6 through March 31, 2021, the period from January 1 through February 5, 2021 and the three months ended March 31, 2020. All amounts within the table are shown net of tax.
| | | | | | | | | | | | | | | | | | | | |
| | Defined Benefit Pension Items (1) | | Foreign Currency Items | | Total |
Balance at 12/31/2019 (Predecessor) | | $ | (40,635) | | | $ | (17,754) | | | $ | (58,389) | |
Activity during period: | | | | | | |
Other comprehensive income (loss) before reclassifications | | 0 | | | (2,136) | | | (2,136) | |
Amounts reclassified from AOCI | | 568 | | | 0 | | | 568 | |
Net other comprehensive income (loss) | | 568 | | | (2,136) | | | (1,568) | |
Balance at 3/31/2020 (Predecessor) | | $ | (40,067) | | | $ | (19,890) | | | $ | (59,957) | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Balance at 12/31/2020 (Predecessor) | | $ | (39,737) | | | $ | (18,275) | | | $ | (58,012) | |
Activity during period: | | | | | | |
Other comprehensive income (loss) before reclassifications | | 0 | | | (116) | | | (116) | |
Amounts reclassified from AOCI | | 224 | | | 0 | | | 224 | |
Net other comprehensive income (loss) | | 224 | | | (116) | | | 108 | |
Cancellation of Predecessor equity | | 39,513 | | | 18,391 | | | 57,904 | |
Balance at 2/5/2021 (Predecessor) | | $ | 0 | | | $ | 0 | | | $ | 0 | |
| | | | | | |
| | | | | | |
Balance at 2/6/2021 (Successor) | | $ | 0 | | | $ | 0 | | | $ | 0 | |
Activity during period: | | | | | | |
Other comprehensive income (loss) before reclassifications | | 0 | | | 0 | | | 0 | |
Amounts reclassified from AOCI | | 0 | | | 0 | | | 0 | |
Net other comprehensive income (loss) | | 0 | | | 0 | | | 0 | |
Balance at 3/31/2021 (Successor) | | $ | 0 | | | $ | 0 | | | $ | 0 | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
(1)Defined benefit pension items relate to actuarial changes and the amortization of prior service costs. Reclassifications from AOCI are recognized as expense on our Condensed Consolidated Statements of Operations through “Other income (expense).” See “Note 12— Employee Benefit Plans” for additional information.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
Note 9— Accumulated Other Comprehensive Income (Loss)
The following table presents the changes in the accumulated balances for each component of “Accumulated other comprehensive income (loss)” (“AOCI”) for the period from February 6 through September 30, 2021, the period from January 1 through February 5, 2021 and the three and nine months ended September 30, 2020. All amounts within the table are shown net of tax.
| | | | | | | | | | | | | | | | | | | | |
| | Defined Benefit Pension Items (1) | | Foreign Currency Items | | Total |
Balance at 12/31/2019 (Predecessor) | | $ | (40,635) | | | $ | (17,754) | | | $ | (58,389) | |
Activity during period: | | | | | | |
Other comprehensive loss before reclassifications | | — | | | (2,136) | | | (2,136) | |
Amounts reclassified from AOCI | | 568 | | | — | | | 568 | |
Net other comprehensive income (loss) | | 568 | | | (2,136) | | | (1,568) | |
Balance at 3/31/2020 (Predecessor) | | $ | (40,067) | | | $ | (19,890) | | | $ | (59,957) | |
Activity during period: | | | | | | |
Other comprehensive loss before reclassifications | | — | | | (539) | | | (539) | |
Amounts reclassified from AOCI | | 568 | | | — | | | 568 | |
Net other comprehensive income (loss) | | 568 | | | (539) | | | 29 | |
Balance at 6/30/2020 (Predecessor) | | $ | (39,499) | | | $ | (20,429) | | | $ | (59,928) | |
Activity during period: | | | | | | |
Other comprehensive income (loss) before reclassifications | | — | | | 863 | | | 863 | |
Amounts reclassified from AOCI | | 569 | | | — | | | 569 | |
Net other comprehensive income | | 569 | | | 863 | | | 1,432 | |
Balance at 9/30/20 (Predecessor) | | $ | (38,930) | | | $ | (19,566) | | | $ | (58,496) | |
| | | | | | |
Balance at 12/31/2020 (Predecessor) | | $ | (39,737) | | | $ | (18,275) | | | $ | (58,012) | |
Activity during period: | | | | | | |
Other comprehensive loss before reclassifications | | — | | | (116) | | | (116) | |
Amounts reclassified from AOCI | | 224 | | | — | | | 224 | |
Net other comprehensive income (loss) | | 224 | | | (116) | | | 108 | |
Cancellation of Predecessor equity | | 39,513 | | | 18,391 | | | 57,904 | |
Balance at 2/5/2021 (Predecessor) | | $ | — | | | $ | — | | | $ | — | |
| | | | | | |
| | | | | | |
Balance at 2/6/2021 (Successor) | | $ | — | | | $ | — | | | $ | — | |
Activity during period: | | | | | | |
Other comprehensive income before reclassifications | | — | | | — | | | — | |
Amounts reclassified from AOCI | | — | | | — | | | — | |
Net other comprehensive income | | — | | | — | | | — | |
Balance at 3/31/2021 (Successor) | | $ | — | | | $ | — | | | $ | — | |
Activity during period: | | | | | | |
Other comprehensive income before reclassifications | | 168 | | | — | | | 168 | |
Amounts reclassified from AOCI | | — | | | — | | | — | |
Net other comprehensive income | | 168 | | | — | | | 168 | |
Balance at 6/30/2021 (Successor) | | $ | 168 | | | $ | — | | | $ | 168 | |
Activity during period: | | | | | | |
Other comprehensive loss before reclassifications | | (435) | | | — | | | (435) | |
Amounts reclassified from AOCI | | — | | | — | | | — | |
Net other comprehensive loss | | (435) | | | — | | | (435) | |
Balance at 9/30/2021 (Successor) | | $ | (267) | | | $ | — | | | $ | (267) | |
(1)Defined benefit pension items relate to actuarial changes, the amortization of prior service costs and the unrealized gain (loss) on foreign exchange on pension assets. Reclassifications from AOCI are recognized as expense on our Condensed Consolidated Statements of Operations through “Other income (expense).” See “Note 13— Employee Benefit Plans” for additional information.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
Note 10— Revenue and Customers
Contract Balances
Accounts receivable are recognized when the right to consideration becomes unconditional based upon contractual billing schedules. Payment terms on invoiced amounts are typically range from 30 to 60 days. Current contract asset and liability balances are included in “Prepaid expenses and other current assets” and “Other current liabilities,” respectively, and noncurrent contract assets and liabilities are included in “Other assets” and “Other liabilities,” respectively, on our Condensed Consolidated Balance Sheets.
The following table provides information about contract assets and contract liabilities from contracts with customers:
| | | Successor | | | Predecessor | | Successor | | | Predecessor |
| | March 31, 2021 | | | December 31, 2020 | | September 30, 2021 | | | December 31, 2020 |
Current contract assets | Current contract assets | | $ | 846 | | | | $ | 10,687 | | Current contract assets | | $ | 4,143 | | | | $ | 10,687 | |
Noncurrent contract assets | Noncurrent contract assets | | 0 | | | | 3,174 | | Noncurrent contract assets | | — | | | | 3,174 | |
Total contract assets | Total contract assets | | 846 | | | | 13,861 | | Total contract assets | | 4,143 | | | | 13,861 | |
| Current contract liabilities (deferred revenue) | Current contract liabilities (deferred revenue) | | (2,845) | | | | (34,990) | | Current contract liabilities (deferred revenue) | | (13,025) | | | | (34,990) | |
Noncurrent contract liabilities (deferred revenue) | Noncurrent contract liabilities (deferred revenue) | | (8,571) | | | | (24,896) | | Noncurrent contract liabilities (deferred revenue) | | (4,466) | | | | (24,896) | |
Total contract liabilities | Total contract liabilities | | $ | (11,416) | | | | $ | (59,886) | | Total contract liabilities | | $ | (17,491) | | | | $ | (59,886) | |
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
Significant changes in the remaining performance obligation contract assets and the contract liabilities balances for the threenine months ended March 31,September 30, 2021 and 2020 are as follows:
| | | | | | | | | | | | | | |
| | Contract Assets | | Contract Liabilities |
Net balance at 12/31/2019 (Predecessor) | | $ | 30,800 | | | $ | (65,055) | |
| | | | |
Amortization of deferred costs | | (8,799) | | | — | |
Additions to deferred costs | | 2,578 | | | — | |
Amortization of deferred revenue | | — | | | 15,828 | |
Additions to deferred revenue | | — | | | (19,479) | |
Total | | (6,221) | | | (3,651) | |
| | | | |
Net balance at 3/31/2020 (Predecessor) | | $ | 24,579 | | | $ | (68,706) | |
| | | | |
Net balance at 12/31/2020 (Predecessor) | | $ | 13,861 | | | $ | (59,886) | |
| | | | |
Amortization of deferred costs | | (1,607) | | | — | |
Additions to deferred costs | | 432 | | | — | |
Amortization of deferred revenue | | — | | | 4,142 | |
Additions to deferred revenue | | — | | | (25,479) | |
Fresh start accounting revaluation | | (12,686) | | | 72,936 | |
Total | | $ | (13,861) | | | $ | 51,599 | |
| | | | |
Net balance at 2/5/21 (Predecessor) | | $ | 0 | | | $ | (8,287) | |
| | | | |
| | | | |
Net balance at 2/6/21 (Successor) | | $ | 0 | | | $ | (8,287) | |
| | | | |
Additions to deferred costs | | 888 | | | — | |
Amortization of deferred costs | | (42) | | | — | |
Amortization of deferred revenue | | — | | | 0 | |
Additions to deferred revenue | | — | | | (3,129) | |
Total | | 846 | | | (3,129) | |
| | | | |
Net balance at 3/31/2021 (Successor) | | $ | 846 | | | $ | (11,416) | |
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
| | | | | | | | | | | | | | |
| | Contract Assets | | Contract Liabilities |
Net balance at 12/31/2019 (Predecessor) | | $ | 30,800 | | | $ | (65,055) | |
| | | | |
Amortization of deferred costs | | (22,736) | | | — | |
Additions to deferred costs | | 7,365 | | | — | |
Amortization of deferred revenue | | — | | | 46,523 | |
Additions to deferred revenue | | — | | | (41,515) | |
Total | | (15,371) | | | 5,008 | |
| | | | |
Net balance at 9/30/2020 (Predecessor) | | $ | 15,429 | | | $ | (60,047) | |
| | | | |
Net balance at 12/31/2020 (Predecessor) | | $ | 13,861 | | | $ | (59,886) | |
| | | | |
Amortization of deferred costs | | (1,607) | | | — | |
Additions to deferred costs | | 432 | | | — | |
Amortization of deferred revenue | | — | | | 4,142 | |
Additions to deferred revenue | | — | | | (25,479) | |
Fresh start accounting revaluation | | (12,686) | | | 72,936 | |
Total | | $ | (13,861) | | | $ | 51,599 | |
| | | | |
Net balance at 2/5/21 (Predecessor) | | $ | — | | | $ | (8,287) | |
| | | | |
| | | | |
Net balance at 2/6/21 (Successor) | | $ | — | | | $ | (8,287) | |
| | | | |
Amortization of deferred costs | | (1,293) | | | — | |
Additions to deferred costs | | 5,436 | | | — | |
Amortization of deferred revenue | | — | | | 5,962 | |
Additions to deferred revenue | | — | | | (15,166) | |
Total | | 4,143 | | | (9,204) | |
| | | | |
Net balance at 9/30/2021 (Successor) | | $ | 4,143 | | | $ | (17,491) | |
Customer Contract Intangible Assets
Upon emergence from the Chapter 11 Cases, the Company recognized a fair value adjustment of $113.4 million related to intangible assets for certain favorable customer contracts. These intangible assets will be amortized as a reduction of contract drilling services revenue forfrom the Effective Date through the remainder of the contracts, approximately 18 months and 32 months, respectively. As of March 31,September 30, 2021, the net carrying amount was $104.9$76.3 million, $113.4 million gross less $8.5$37.1 million accumulated amortization. The expected remaining amortization is as follows: $43.1$14.4 million for the nine-monththree-month period ending December 31, 2021 and $43.5 million and $18.3$18.4 million for the years ending December 31, 2022 and 2023, respectively.Werespectively. We assess the recoverability of the unamortized balance when indicators of impairment are present. Should the review indicate that the carrying value is not fully recoverable, the portion not fully recoverable would be recognized as an impairment loss.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
We considered the events surrounding Hurricane Ida and the Noble Globetrotter II, including the associated force majeure notice and the need for the rig to go into the shipyard, to be a triggering event. After the Company’s review, we determined the carrying value of the related customer contract intangible was recoverable and no impairment loss was recognized.
Transaction Price Allocated to the Remaining Performance Obligations
The following table reflects revenue expected to be recognized in the future related to unsatisfied performance obligations, by rig type, as of March 31,September 30, 2021:
| | | For the Years Ended December 31, | | For the Years Ended December 31, |
| | 2021 (1) | | 2022 | | 2023 | | 2024 | | 2025 and beyond | | Total | | 2021 (1) | | 2022 | | 2023 | | 2024 | | 2025 and beyond | | Total |
Floaters | Floaters | | $ | 56 | | | $ | 11,309 | | | $ | 51 | | | $ | 0 | | | $ | 0 | | | $ | 11,416 | | Floaters | | $ | 2,371 | | | $ | 14,804 | | | $ | 316 | | | $ | — | | | $ | — | | | $ | 17,491 | |
Jackups | Jackups | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | Jackups | | — | | | — | | | — | | | — | | | — | | | — | |
Total | Total | | $ | 56 | | | $ | 11,309 | | | $ | 51 | | | $ | 0 | | | $ | 0 | | | $ | 11,416 | | Total | | $ | 2,371 | | | $ | 14,804 | | | $ | 316 | | | $ | — | | | $ | — | | | $ | 17,491 | |
(1) Represents a nine-monththree-month period beginning AprilOctober 1, 2021.
The revenue included above consists of expected mobilization, demobilization, and upgrade revenue for unsatisfied performance obligations. The amounts are derived from the specific terms within drilling contracts that contain such provisions, and the expected timing for recognition of such revenue is based on the estimated start date and duration of each respective contract based on information known at March 31,September 30, 2021. The actual timing of recognition of such amounts may vary due to factors outside of our control. We have taken the optional exemption, permitted by accounting standards, to exclude disclosure of the estimated transaction price related to the variable portion of unsatisfied performance obligations at the end of the reporting period, as our transaction price is based on a single performance obligation consisting of a series of distinct hourly, or more frequent, periods, the variability of which will be resolved at the time of the future services.
Disaggregation of Revenue
The following table provides information about contract drilling revenue by rig types:
| | | | | | | | | | | | | | | | | | | | | | | | Successor | | | Predecessor |
| | Successor | | | | Predecessor | | Three Months Ended | | | Three Months Ended |
| | Period From February 6, 2021 through March 31, 2021 | | | | Period From January 1, 2021 through February 5, 2021 | | Three Months Ended March 31, 2020 | | September 30, 2021 | | | September 30, 2020 |
| | Floaters | Floaters | | $ | 56,048 | | | | | $ | 50,057 | | | $ | 125,336 | | Floaters | | $ | 158,313 | | | | $ | 127,286 | |
Jackups | Jackups | | 28,581 | | | | | 23,994 | | | 142,028 | | Jackups | | 72,841 | | | | 99,764 | |
Total | Total | | $ | 84,629 | | | | | $ | 74,051 | | | $ | 267,364 | | Total | | $ | 231,154 | | | | $ | 227,050 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Successor | | | Predecessor |
| | Period From | | | Period From | | |
| | February 6, 2021 | | | January 1, 2021 | | |
| | through | | | through | | Nine Months Ended |
| | September 30, 2021 | | | February 5, 2021 | | September 30, 2020 |
Floaters | | $ | 349,634 | | | | $ | 50,057 | | | $ | 367,304 | |
Jackups | | 166,046 | | | | 23,994 | | | 347,251 | |
Total | | $ | 515,680 | | | | $ | 74,051 | | | $ | 714,555 | |
Note 10—11— Loss on Impairment
Asset Impairments
We evaluate our property and equipment for impairment whenever there are changes in facts that suggest that the value of the asset is not recoverable. During the period from February 6 through March 31,September 30, 2021 and the period from January 1 through February 5, 2021, 0no impairment was recognized on our fleet.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
In connection with the preparation of our financial statements for the first quarter of 2020, we conducted a review of our fleet to determine recoverability and recognized approximately $1.1 billion in impairment charges for 4 floaters, and $5.5 millionof impairment charges related to certain capital spare equipment. For our impaired floaters, we estimated the fair value by applying the income valuation approach utilizing significant unobservable inputs, representative of a Level 3 fair value measurement. The review included an assessment of certain assumptions, including future marketability of each unit in light of the then-current market conditions and their current technical specifications. Assumptions used in our assessment included, but were not limited to, timing of future contract awards and expected operating
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
dayrates, operating costs, utilization rates, discount rates, capital expenditures, reactivation costs, estimated economic useful lives and, in certain cases, our belief that a drilling unit is no longer marketable and is unlikely to return to service in the near to medium term.
The impact ofWhile we have experienced favorable trends in 2021, the current global economic turmoil that began in 2020 continues to evolve and its duration and ultimate disruption to our customers’ and our business cannot be estimated at this time. We could recognize further impairment charges should such disruption continue.The worldwide supply of rigs still exceeds current demand from customers in both the floater and jackup markets. If we experience prolonged unfavorable changes to current market conditions, reactivation costs or dayrates or if we are unable to secure new or extended contracts for our active rigs at favorable rates, it is reasonably possible that the estimate of undiscounted cash flows may change in the near term, resulting in the need to write down the affected assets to their corresponding estimated fair values.
Note 11—12— Income Taxes
As described in “Note 2— Chapter 11 Emergence,” in accordance with the Plan, the Predecessor’s Legacy Notes were cancelled and exchanged for Successor’s Ordinary Shares and Warrants. The cancellation of indebtedness income resulting from such restructuring transactions has significantly reduced the Company’s US tax attributes, including but not limited to NOLnet operating loss carryforwards. As a result of the emergence from bankruptcy, on the Effective Date, the Company experienced an ownership change under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), which is anticipated to subject certain remaining tax attributes to an annual limitation under Section 382 of the Code.
On the Effective Date, the Company had net deferred tax liabilities in total of $21.5 million inclusive of a valuation allowance of $4.7 million. Because of the impact the cumulative operating losses have on the determination of the recoverability of deferred tax assets through future earnings and the negative evidence associated with the bankruptcy reorganization, the Company assessed the realizability of its deferred tax assets based on the future reversals of existing deferred tax liabilities. Accordingly, the Company established a new valuation allowance upon emergence of $4.7 million for a portion of its deferred tax assets.
At March 31,September 30, 2021, the Company had a deferred tax asset of $0.7$8.7 million net of valuation allowance. Additionally, the Company also had deferred tax liabilities of $17.9$13.6 million inclusive of a valuation allowance of $5.3$4.5 million.
At March 31,September 30, 2021, the reserves for uncertain tax positions totaled $34.0$50.9 million (net of related tax benefits of $0.3 million). At December 31, 2020, the reserves for uncertain tax positions totaled $42.5 million (net of related tax benefits of $0.4 million).
It is reasonably possible that our existing liabilities related to our reserve for uncertain tax positions may fluctuate in the next 12 months primarily due to the completion of open audits or the expiration of statutes of limitation.
During the period ended on February 5, 2021, our income tax provision included a tax benefit of $1.7 million related to non-US reserve release.release, tax expense of $2.5 million related to fresh start and reorganization adjustments, and other recurring tax expenses of approximately $2.6 million.
On the Effective Date, our income tax provision included tax expenses of $2.5 million associated with reorganization and fresh start adjustments.
As a result of the Pacific Drilling Merger, the Company recorded a net decrease of $18.4 million to Pacific Drilling’s historical tax reserve balance and a net adjustment of $2.9 million to other tax balances.
During the period from February 6, 2021 to March 31,September 30, 2021, our tax provision included tax benefits of $10.1$24.2 million related to US and non-US reserve releases.releases, $12.6 million related to a US tax refund, and $1.2 million related primarily to deferred tax adjustments. Such tax benefits were partially offset by tax expenses of $12.6 million related to various recurring items and $18.6 million related to non-US tax reserves.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
Note 12—13— Employee Benefit Plans
Pension costs include the following components for the period from February 6 through March 31,September 30, 2021, the period from January 1 through February 5, 2021, the three months ended September 30, 2021 and the three and nine months ended September 30, 2020: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Successor | | | Predecessor |
| | Three Months Ended | | | Three Months Ended |
| | September 30, 2021 | | | September 30, 2020 |
| | Non-US | | US | | | Non-US | | US |
| | | | | | | | | |
Interest cost | | $ | 344 | | | $ | 1,634 | | | | $ | 450 | | | $ | 1,892 | |
Return on plan assets | | (229) | | | (3,177) | | | | (517) | | | (2,919) | |
| | | | | | | | | |
Recognized net actuarial loss | | — | | | — | | | | 3 | | | 716 | |
| | | | | | | | | |
Net pension benefit cost (gain) | | $ | 115 | | | $ | (1,543) | | | | $ | (64) | | | $ | (311) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Successor | | | Predecessor |
| | Period From February 6, 2021 through September 30, 2021 | | | Period From January 1, 2021 through February 5, 2021 | | Nine Months Ended September 30, 2020 |
| | Non-US | | US | | | Non-US | | US | | Non-US | | US |
| | | | | | | | | | | | | |
Interest cost | | $ | 926 | | | $ | 4,358 | | | | $ | 99 | | | $ | 621 | | | $ | 1,313 | | | $ | 5,676 | |
Return on plan assets | | (616) | | | (8,471) | | | | (69) | | | (1,250) | | | (1,510) | | | (8,757) | |
| | | | | | | | | | | | | |
Recognized net actuarial loss | | — | | | — | | | | 1 | | | 282 | | | 7 | | | 2,149 | |
| | | | | | | | | | | | | |
Net pension benefit cost (gain) | | $ | 310 | | | $ | (4,113) | | | | $ | 31 | | | $ | (347) | | | $ | (190) | | | $ | (932) | |
During the period from February 6 through September 30, 2021, the period from January 1 through February 5, 2021 and the three and nine months ended March 31, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Successor | | | Predecessor |
| | Period From February 6, 2021 through March 31, 2021 | | | Period From January 1, 2021 through February 5, 2021 | | Three Months Ended March 31, 2020 |
| | Non-US | | US | | | Non-US | | US | | Non-US | | US |
| | | | | | | | | | | | | |
Interest cost | | $ | 233 | | | $ | 1,090 | | | | $ | 99 | | | $ | 621 | | | $ | 433 | | | $ | 1,892 | |
Return on plan assets | | (155) | | | (2,118) | | | | (69) | | | (1,250) | | | (499) | | | (2,919) | |
| | | | | | | | | | | | | |
Recognized net actuarial loss | | 0 | | | 0 | | | | 1 | | | 282 | | | 3 | | | 716 | |
| | | | | | | | | | | | | |
Net pension benefit cost (gain) | | $ | 78 | | | $ | (1,028) | | | | $ | 31 | | | $ | (347) | | | $ | (63) | | | $ | (311) | |
During the period from February 6 through March 31, 2021, the period from January 1 through February 5, 2021 and the three months ended March 31,September 30, 2020, we made 0no contributions to our pension plans. Effective December 31, 2016, employees and alternate payees accrue no future benefits under the US plans and, as such, Noble recognized 0no service costs with the plans for the period from February 6 through March 31,September 30, 2021, the period from January 1 through February 5, 2021 and the three and nine months ended March 31,September 30, 2020.
Note 13—14— Fair Value of Financial Instruments
The following tables present the carrying amount and estimated fair value of our financial instruments recognized at fair value on a recurring basis:
| Successor: | Successor: | | March 31, 2021 | Successor: | | September 30, 2021 |
| | | Estimated Fair Value Measurements | | | Estimated Fair Value Measurements |
| | Carrying Amount | | Quoted Prices in Active Markets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Carrying Amount | | Quoted Prices in Active Markets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Assets - | Assets - | | | | | | | | | Assets - | | | | | | | | |
Marketable securities | Marketable securities | | $ | 6,742 | | | $ | 6,742 | | | $ | 0 | | | $ | 0 | | Marketable securities | | $ | 7,205 | | | $ | 7,205 | | | $ | — | | | $ | — | |
|
| Predecessor: | Predecessor: | | December 31, 2020 | Predecessor: | | December 31, 2020 |
| | | Estimated Fair Value Measurements | | | Estimated Fair Value Measurements |
| | Carrying Amount | | Quoted Prices in Active Markets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Carrying Amount | | Quoted Prices in Active Markets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Assets - | Assets - | | | | | | | | | Assets - | | | | | | | | |
Marketable securities | Marketable securities | | $ | 12,326 | | | $ | 12,326 | | | $ | 0 | | | $ | 0 | | Marketable securities | | $ | 12,326 | | | $ | 12,326 | | | $ | — | | | $ | — | |
Our cash, cash equivalents and restricted cash, accounts receivable, marketable securities and accounts payable are by their nature short-term. As a result, the carrying values included in our Condensed Consolidated Balance Sheets approximate fair value. See “Note 7—8— Debt” for information regarding the fair value of our debt.
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
Note 14—15— Commitments and Contingencies
Tax matters
Subsequent to our filing of an Application for Tentative Refund with the Internal Revenue Service (“IRS”) under the CARES Act in the months of April and August 2020, the IRS informed us that it would be conducting a limited scope examination of the taxable years ended December 31, 2012, 2013, 2014, 2018 and 2019. In June 2021, the IRS completed its limited scope examination and did not propose any adjustments to the taxable years ended December 31, 2012, 2013, 2014, 2018 and 2019. In September 2021, the Congressional Joint Committee approved our remaining outstanding CARES Act refund of $15.0 million. We expect to receive this refund plus interest in the last quarter of 2021. In the first quarter of 2020, we filed a foreign tax credit refund claim for taxable year 2009. TheIn June 2021, the IRS is currently auditingcompleted its audit of taxable year 2009 in relation to our refund claim. In August 2021, we received the foreign tax credit refund of $24.5 million plus interest. No other taxable years are currently under audit in the US. We believe that we have accurately reported all amounts in our returns.
Audit claims of approximately $95.2$632.9 million attributable to income and other business taxes were assessed against Noble entities in Mexico related to tax years 2007, 2009 and 2010, in Australia related to tax years 2013 to 2016, in Guyana related to tax years 2019 and 2020,
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
and in Saudi Arabia related to tax years 2015 to 2019 and against Pacific Drilling entities in Nigeria related to tax years 2010 to 2018. We intend to vigorously defend our reported positions and currently believe the ultimate resolution of the audit claims will not have a material adverse effect on our consolidated financial statements.
We operate in a number of countries throughout the world and our tax returns filed in those jurisdictions are subject to review and examination by tax authorities within those jurisdictions. We recognize uncertain tax positions that we believe have a greater than 50 percent likelihood of being sustained upon challenge by a tax authority. We cannot predict or provide assurance as to the ultimate outcome of any existing or future assessments.
Other contingencies
Legacy Noble entered into agreements with certain of our executive officers. These agreements became effective upon a change of control of Noble (within the meaning set forth in the agreements) or a termination of employment in connection with or in anticipation of a change of control and were effective for three years thereafter. These agreements provided for compensation and certain other benefits under such circumstances. On the Effective Date of our emergence from the Chapter 11 Cases, the Legacy Noble agreements were superseded by new employment agreements with substantially similar terms except that the new agreements provide for certain severance benefits upon termination without cause or resignation for good reason.
We are a defendant in certain claims and litigation arising out of operations in the ordinary course of business, including personal injury claims, the resolution of which, in the opinion of management, will not be material to our financial position, results of operations or cash flows. There is inherent risk in any litigation or dispute and no assurance can be given as to the outcome of these claims.
Note 15—16— Supplemental Financial Information
Condensed Consolidated Balance Sheets Information
Our Noble restricted cash balance as of March 31,September 30, 2021, February 5, 2021 and December 31, 2020 consisted of $0.8$7.4 million, $2.0 million, and $21.7 million, respectively. Our Finco restricted cash balance as of March 31,September 30, 2021, February 5, 2021 and December 31, 2020 consisted of $0.8$7.4 million, $2.0 million and $1.7 million, respectively. All restricted cash is recorded in “Prepaid expenses and other current assets.”
Condensed Consolidated Statements of Cash Flows Information
Operating cash activities
The net effect of changes in other assets and liabilities on cash flows from operating activities is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Noble |
| | Successor | | | Predecessor |
| | Period From February 6, 2021 through March 31, 2021 | | | Period From January 1, 2021 through February 5, 2021 | | Three Months Ended March 31, 2020 |
| | | | | |
| | | | | | | |
Accounts receivable | | $ | 10,265 | | | | $ | (41,344) | | | $ | (10,152) | |
Other current assets | | 3,566 | | | | 17,884 | | | 15,164 | |
Other assets | | (8,169) | | | | 8,521 | | | 2,235 | |
Accounts payable | | 6,642 | | | | (16,819) | | | (9,001) | |
Other current liabilities | | 3,192 | | | | 11,428 | | | (36,097) | |
Other liabilities | | 1,067 | | | | (5,846) | | | (8,706) | |
Total net change in assets and liabilities | | $ | 16,563 | | | | $ | (26,176) | | | $ | (46,557) | |
NOBLE CORPORATION AND SUBSIDIARIES
NOBLE FINANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar and share amounts in tables are in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | |
| | Finco |
| | Successor | | | Predecessor |
| | Period From February 6, 2021 through March 31, 2021 | | | Period From January 1, 2021 through February 5, 2021 | | Three Months Ended March 31, 2020 |
| | | | | |
| | | | | | | |
Accounts receivable | | $ | 10,265 | | | | $ | (41,344) | | | $ | (10,152) | |
Other current assets | | 550 | | | | 19,398 | | | 14,667 | |
Other assets | | (8,168) | | | | 8,512 | | | 2,807 | |
Accounts payable | | 6,883 | | | | (14,061) | | | (9,194) | |
Other current liabilities | | 3,193 | | | | 11,623 | | | (36,128) | |
Other liabilities | | 1,043 | | | | (5,936) | | | (13,328) | |
Total net change in assets and liabilities | | $ | 13,766 | | | | $ | (21,808) | | | $ | (51,328) | |
Condensed Consolidated Statements of Cash Flows InformationOperating cash activities
The net effect of changes in other assets and liabilities on cash flows from operating activities is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Noble |
| | Successor | | | Predecessor |
| | Period From | | | Period From | | |
| | February 6, 2021 | | | January 1, 2021 | | |
| | through | | | through | | Nine Months Ended |
| | September 30, 2021 | | | February 5, 2021 | | September 30, 2020 |
| | | | | |
| | | | | | | |
Accounts receivable | | $ | (20,980) | | | | $ | (41,344) | | | $ | 31,230 | |
Other current assets | | 671 | | | | 17,884 | | | (4,950) | |
Other assets | | (11,891) | | | | 8,521 | | | 1,483 | |
Accounts payable | | 3,570 | | | | (16,819) | | | (1,485) | |
Other current liabilities | | 12,888 | | | | 11,428 | | | 9,033 | |
Other liabilities | | 5,569 | | | | (5,846) | | | (7,869) | |
Total net change in assets and liabilities | | $ | (10,173) | | | | $ | (26,176) | | | $ | 27,442 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Finco |
| | Successor | | | Predecessor |
| | Period From February 6, 2021 through September 30, 2021 | | | Period From January 1, 2021 through February 5, 2021 | | Nine Months Ended September 30, 2020 |
| | | | | |
| | | | | | | |
Accounts receivable | | $ | (20,980) | | | | $ | (41,344) | | | $ | 299 | |
Other current assets | | 460 | | | | 19,398 | | | 8,124 | |
Other assets | | (11,874) | | | | 8,512 | | | 2,750 | |
Accounts payable | | 6,584 | | | | (14,061) | | | (14,564) | |
Other current liabilities | | 12,751 | | | | 11,623 | | | 9,002 | |
Other liabilities | | 5,395 | | | | (5,936) | | | (7,869) | |
Total net change in assets and liabilities | | $ | (7,664) | | | | $ | (21,808) | | | $ | (2,258) | |
Non-cash investing and financing activities
Additions to property and equipment, at cost for which we had accrued a corresponding liability in accounts payable as of September 30, 2021, February 5, 2021, March 31, 2021 and December 31, 2020 were $31.0$30.4 million, $38.6$31.0 million and $35.3 million, respectively.
Additions to property and equipment, at cost for which we had accrued a corresponding liability in accounts payable as of March 31,September 30, 2020 and December 31, 2019 were $24.7$26.4 million and $36.0 million, respectively.
On the Effective Date, an aggregate principal amount of $216.0 million of Second Lien Notes was issued, which includes the aggregate subscription price of $200.0 million, plus a backstop fee of $16.0 million which was paid in kind.
On April 15, 2021, Noble completed the Pacific Drilling Merger, issuing 16.6 million Ordinary Shares valued at $357.7 million, in exchange for $422.1 million net assets acquired. See “Note 4— Acquisitions” for additional information.
Note 16—17— Subsequent Events
On March 25, 2021, Noble entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Pacific Drilling Company LLC (“Pacific Drilling”), pursuant to which Noble acquired Pacific Drilling in an all-stock transaction (the “Merger”) on April 15, 2021. Pursuant to the terms and conditions set forth in the Merger Agreement, (a) each membership interest in Pacific Drilling was converted into the right to receive 6.366 Ordinary Shares and (b) each of Pacific Drilling’s warrants outstanding immediately prior to the effective time of the Merger was converted into the right to receive 1.553 Ordinary Shares. As part of the transaction, Pacific Drilling’s equity holders received 16.6 million Ordinary Shares, or approximately 24.9% of the outstanding Ordinary Shares and Penny Warrants at closing.
On April 15, 2021, in connection with theThe closing of the Merger, Noble entered into a Registration Rights Agreement (the “Merger Registration Rights Agreement”) with eachsale of the holders identified therein (the “Merger RRA Holders”)jackup rigs operated by the Company in Saudi Arabia, the Noble Roger Lewis, pursuantNoble Scott Marks, Noble Joe Knight, and Noble Johnny Whitstine, to which, among other things, Noble will be required to file with the SEC a registration statement registering for resale the Ordinary Shares issuable to the Merger RRA Holders upon consummation of the Merger, and subject to certain limitations set forth therein, certain Merger RRA Holders have customary shelf, demand and piggyback registration rights. In addition,ADES pursuant to the Merger Registration RightsPurchase and Sale Agreement certain Merger RRA Holders have the right to require Noble, subject to certain limitations set forth therein, to effect a distribution of any or all of their Ordinary Shares by means of an underwritten offering. Noble is not obligated to effect any underwritten offering unless the dollar amount of the registrable securities of the Merger RRA Holder(s) demanding such underwritten offering to be included therein is reasonably likely to resultoccurred in gross sale proceeds of at least $20 million.
November 2021. For additional information, see “Note 7— Property and Equipment.”
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion is intended to assist you in understanding our financial position at March 31,September 30, 2021, and our results of operations for the period from February 6 through March 31,September 30, 2021, the period from January 1 through February 5, 2021 and three and nine months ended March 31,September 30, 2020. The following discussion should be read in conjunction with the condensed consolidated financial statements and related notes contained in this Quarterly Report on Form 10-Q, and the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2020 filed by Noble Corporation, an exempted company incorporated in the Cayman Islands with limited liability (“Noble” or “Successor”), and Noble Finance Company (formerly known as Noble Corporation), a Cayman Islands company (“Finco”), and our other filings with the US Securities and Exchange Commission (“SEC”).
On July 31, 2020 (the “Petition Date”), our former parent company, Noble Holding Corporation plc (formerly known as Noble Corporation plc), a public limited company incorporated under the laws of England and Wales (“Legacy Noble” or the “Predecessor”), and certain of its subsidiaries, including Finco, filed voluntary petitions in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) seeking relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”). On September 4, 2020, the Debtors (as defined herein) filed with the Bankruptcy Court the Joint Plan of Reorganization of Noble Corporation plc and its Debtor Affiliates, which was subsequently amended on October 8, 2020 and October 13, 2020 and modified on November 18, 2020 (as amended, modified or supplemented, the “Plan”), and the related disclosure statement. On September 24, 2020, six additional subsidiaries of Legacy Noble (together with Legacy Noble and its subsidiaries that filed on the Petition Date, as the context requires, the “Debtors”) filed voluntary petitions in the Bankruptcy Court. The chapter 11 proceedings were jointly administered under the caption Noble Corporation plc, et al. (Case No. 20-33826) (the “Chapter 11 Cases”). On November 20, 2020, the Bankruptcy Court entered an order confirming the Plan. In connection with the Chapter 11 Cases and the Plan, on and prior to the Effective Date (as defined herein), Legacy Noble and certain of its subsidiaries effectuated certain restructuring transactions pursuant to which Legacy Noble formed Noble as an indirect wholly-owned subsidiary of Legacy Noble and transferred to Noble substantially all of the subsidiaries and other assets of Legacy Noble. On February 5, 2021 (the “Effective Date”), the Plan became effective in accordance with its terms, the Debtors emerged from the Chapter 11 Cases and Noble became the new parent company. In accordance with the Plan, Legacy Noble and its remaining subsidiary will in due course be wound down and dissolved in accordance with applicable law. The Bankruptcy Court closed the chapterChapter 11 caseCases with respect to all Debtors other than Legacy Noble, pending its wind down.
Noble is the successor issuer to Legacy Noble for purposes of and pursuant to Rule 15d-5 of the Exchange Act. References to the “Company,” “we,” “us” or “our” in this Annual Report are to Noble, together with its consolidated subsidiaries, when referring to periods following the Effective Date, and to Legacy Noble, together with its consolidated subsidiaries, when referring to periods prior to the Effective Date.
Finco was an indirect, wholly-owned subsidiary of Legacy Noble prior to the Effective Date and has been a direct, wholly-owned subsidiary of Noble since the Effective Date. Noble’s principal asset is all of the shares of Finco. Finco has no public equity outstanding. The consolidated financial statements of Noble include the accounts of Finco, and Noble conducts substantially all of its business through Finco and its subsidiaries. As such, the terms “Predecessor” and “Successor” also refers to Finco, as the context requires.
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the US Securities Act of 1933, as amended, and Section 21E of the US Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this report or in the documents incorporated by reference, including those regarding the impact of our emergence from bankruptcy on our business and relationships, our plan to list our equity on a national securities exchange, the global novel strain of coronavirus (“COVID-19”) pandemic and agreements regarding production levels among members of the Organization of Petroleum Exporting Countries (“OPEC”) and other oil and gas producing nations (together with OPEC, “OPEC+”), and any expectations we may have with respect thereto, and those regarding rig demand, peak oil, the offshore drilling market, oil prices, contract backlog, fleet status, our future financial position, business strategy (including our business strategy post-emergence from bankruptcy), impairments, repayment of debt, credit ratings, liquidity, borrowings under any credit facilities or other instruments, sources of funds, future capital expenditures, contract commitments, dayrates, contract commencements, extension or renewals, contract tenders, the outcome of any dispute, litigation, audit or investigation, plans and objectives of management for future operations, foreign currency requirements, results of joint ventures, indemnity and other contract claims, reactivation, refurbishment, conversion and upgrade of rigs, rig acquisitions and dispositions, industry conditions, access to financing, impact of competition, governmental regulations and permitting, availability of labor, worldwide economic conditions, taxes and tax rates, indebtedness covenant compliance, dividends and distributable reserves, timing, benefits or results of acquisitions or dispositions (including the benefits of the Pacific Drilling Merger (as defined below), and our plans, objectives, expectations and intentions related to the Pacific Drilling Merger), and timing for compliance with any new regulations are forward-looking statements. When used in this report or in the documents incorporated by reference, the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “shall,” “will,” “would” and similar expressions are intended to be among the statements that identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot assure you that such expectations will prove to be correct. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and we undertake no obligation to revise or update any forward-looking statement for any reason, except as required by law. We have identified factors, including but not limited to risks and uncertainties relating to our emergence from bankruptcy (including but not limited to our ability to improve our operating structure, financial results and profitability and to maintain relationships with suppliers, customers, employees and other third parties following emergence from bankruptcy), the Pacific Drilling Merger (including the risk that the Pacific Drilling Merger disrupts the parties’ current plans and operations as a result of the consummation of the transactions contemplated by the Pacific Drilling Merger Agreement, the ability to recognize the anticipated benefits of the Pacific Drilling Merger, which may be affected by, among other things, competition, the ability of the combined company to grow and manage growth profitably, maintain relationships with customers and suppliers and retain its management and key employees, costs related to the Pacific Drilling Merger, changes in applicable laws or regulations, the possibility that the combined company may be adversely affected by other economic, business, and/or competitive factors and the ability of the combined company to improve its operating structure, financial results and profitability and to maintain relationships with suppliers, customers, employees and other third parties), the effects of public health threats, pandemics and epidemics, such as the ongoing outbreak of COVID-19, and the adverse impact thereof on our business, financial condition and results of operations (including but not limited to our growth, operating costs, supply chain, availability of labor, logistical capabilities, customer demand for our services and industry demand generally, our liquidity, the price of our securities and trading markets with respect thereto, our ability to access capital markets, and the global economy and financial markets generally), the effects of actions by or disputes among OPEC+ members with respect to production levels or other matters related to the price of oil, market conditions, factors affecting the level of activity in the oil and gas industry, supply and demand of drilling rigs, factors affecting the duration of contracts, the actual amount of downtime, factors that reduce applicable dayrates, operating hazards and delays, risks associated with operations outside the US, actions by regulatory authorities, credit rating agencies, customers, joint venture partners, contractors, lenders and other third parties, legislation and regulations affecting drilling operations (including as a result of the change in the US presidential administration), compliance with or changes in regulatoryenvironmental, health, safety, tax and other regulations or requirements or initiatives (including those addressing the impact of global climate change or air emissions), violations of anti-corruption laws, shipyard risk and timing, delays in mobilization of rigs, hurricanes and other weather conditions, and the future price of oil and gas, that could cause actual plans or results to differ materially from those included in any forward-looking statements. These factors include those referenced or described in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020, in Part II, Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q and in our other filings with the US Securities and Exchange Commission (“SEC”).SEC. We cannot control such risk factors and other uncertainties, and in many cases, we cannot predict the risks and uncertainties that could cause our actual results to differ materially from those indicated by the forward-looking statements. You should consider these risks and uncertainties when you are evaluating us.
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge at our website. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.
Our website address is http://www.noblecorp.com. Investors should also note that we announce material financial information in SEC filings, press releases and public conference calls. Based on guidance from the SEC, we may use the investor relations section of our website to communicate with our investors. It is possible that the financial and other information (including fleet status reports) posted there could be deemed to be material information. Except to the extent explicitly stated herein, documents and information on our website are not incorporated by reference herein.
Executive Overview
We provide contractNoble is a leading offshore drilling services tocontractor for the international oil and gas industry with our global fleet of mobile offshore drilling units.industry. As of the filing date of this Quarterly Report on Form 10-Q, Noble performs, through its subsidiaries, contract drilling services with the addition of five floaters from our acquisition of Pacific Drilling Company LLC, oura fleet of 2420 mobile offshore drilling rigs consistedunits, consisting of 12 floaters and 12eight jackups strategically deployed worldwidefocused largely on ultra-deepwater and high-specification jackup drilling opportunities in both ultra-deepwaterestablished and shallow water locations.emerging regions worldwide. We typically employ each drilling unit under an individual contract, and many contracts are awarded based upon a competitive bidding process.
We report our contract drilling operations as a single reportable segment, Contract Drilling Services, which reflects how we manage our business. The mobile offshore drilling units comprising our offshore rig fleet operate in a global market for contract drilling services and are often redeployed to different regions due to changing demands of our customers, which consist primarily of large, integrated, independent and government-owned or controlled oil and gas companies throughout the world.
Recent Events
Emergence from Chapter 11. On February 5, 2021 (the “Effective Date”), Legacy Noble successfully completed its financial restructuring and Legacy Noble and its debtor affiliates emerged from the Chapter 11 Cases. As a result, Noble emerged from bankruptcy on the Effective Date with a substantially delevered balance sheet and less than $400.0 million of debt. Noble’s capital structure as of the Effective Date includes a $675.0 million revolving credit facility, of which $150.0$190.0 million is drawn as of May 5,September 30, 2021, and $216.0 million of our senior secured second lien notes (the “Second Lien Notes”). On the Effective Date, Legacy Noble’s ordinary shares were cancelled and ordinary shares of Noble with a nominal value of $0.00001 per share (“Ordinary Shares”) were issued to Legacy Noble’s former bondholders. Certain former bondholders and former equity holders of Legacy Noble were also issued warrants to purchase shares of the Company. All cash payments made by the Company under the Plan on the Effective Date were funded from cash on hand, proceeds of the Rights Offering,our rights offering (the “Rights Offering”), and proceeds from the new revolving credit facility. For additional information regarding the Chapter 11 Cases, the Rights Offering and our emergence, see “Note 2— Chapter 11 Emergence” to our condensed consolidated financial statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q.
Fresh Start Accounting. In connection with our emergence from bankruptcy, Noble and Finco qualified for and applied fresh start accounting on the Effective Date. With the application of fresh start accounting, we allocated the reorganization value to our individual assets and liabilities based on their estimated fair values. The Effective Date fair values of our assets and liabilities differed materially from their recorded values as reflected on the historical balance sheets. The application of fresh start accounting resulted in new reporting entities with no beginning retained earnings or accumulated deficit. Accordingly, our financial statements and notes thereto after the Effective Date are not comparable to our financial statements and notes to prior to that date. To facilitate our discussion and analysis of our financial condition and results of operations herein, we refer to the reorganized company as the “Successor” for periods subsequent to the Effective Date, and “Predecessor” for periods prior to the Effective Date. Furthermore, our presentations herein include a “black line” division to delineate the lack of comparability between the Predecessor and Successor. To facilitate our discussion herein, we have addressed the Successor and Predecessor periods discretely and have provided comparative analysis, to the extent that it is practical, where appropriate.
Merger with Pacific Drilling. On March 25, 2021, Noble entered into an Agreement and Plan of Merger (the “Merger“Pacific Drilling Merger Agreement”) with Pacific Drilling Company LLC (“Pacific Drilling”), pursuant to which Noble acquired Pacific Drilling in an all-stock transaction (the “Merger”“Pacific Drilling Merger”) on April 15, 2021. Pursuant to the terms and conditions set forth in the Pacific Drilling Merger Agreement, (a) each membership interest in Pacific Drilling was converted into the right to receive 6.366 Ordinary Shares and (b) each of Pacific Drilling’s warrants outstanding immediately prior to the effective time of the Pacific Drilling Merger was converted into the right to receive 1.553 Ordinary Shares. As part of the transaction, Pacific Drilling’s equity holders received 16.6 million Ordinary Shares, or approximately 24.9% of the outstanding Ordinary Shares and Penny Warrants (as defined herein) at closing.In connection with this acquisition, the Company acquired seven floaters and subsequently sold two floaters, the Pacific Bora and Pacific Mistral, in June 2021 for net proceeds of $29.7 million.
The Pacific Drilling Merger facilitatesprovided incremental capacity to serve existing customers in the floater market, broadening our customer relationships and facilitating Noble's reentry into the growing West Africa and Mexico regions, and broadensregions. For additional information, see “Note 4— Acquisitions” to our customer relationships. Noble expects to dispose ofcondensed consolidated financial statements.
NYSE Listing. On June 9, 2021, our Ordinary Shares began trading on the New York Stock Exchange under the symbol “NE.”
Hurricane Ida. During the Pacific Boraperiod from February 6 through and Pacific Mistral rigs expeditiously. SubsequentSeptember 30, 2021, costs related to those dispositions, Noble will own and operate a high specification fleet of 24 rigs, with 12 floaters and 12 jackups.
Appointment of new director. On April 19, 2021, the board of directors of Noble, appointed Paul Aronzon to serve as a director. Mr. Aronzon will serve as a director until the next shareholder vote at the annual general meeting of shareholders of the Company in 2022. At the time of his appointment, Mr. Aronzon was named to servedamages sustained on the AuditNoble Globetrotter II during Hurricane Ida in the US Gulf of Mexico totaled $10.4 million. In preparation for Hurricane Ida, the rig successfully secured the well it was drilling and Finance Committeesdetached from the blowout preventer without incident. However, during transit, the lower marine riser package, which is a series of controls that sits above the Board.blowout preventer, and a number of riser joints separated from the rig, and certain other damage occurred. Due to the environmental conditions, a number of crew members were treated for minor injuries and released from
medical care. The Company has given force majeure notice to the customer of the Noble Globetrotter II in accordance with the governing drilling services contract. The Company has insurance coverage for property damage to rigs due to named storms in the US Gulf of Mexico with a $10.0 million deductible per occurrence and a $50.0 million annual limit; however, our insurance policies may not adequately cover our losses, which could adversely affect our business.
Saudi Purchase and Sale Agreement. On August 25, 2021, the Company and certain subsidiaries of the Company entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) to sell the jackup rigs operated by the Company in Saudi Arabia to ADES International Holding Limited (“ADES”) for a purchase price of $292.4 million in cash. Pursuant to the terms of the Purchase and Sale Agreement, the jackups, Noble Roger Lewis, Noble Scott Marks, Noble Joe Knight, and Noble Johnny Whitstine, together with certain related assets, were sold to ADES. The closing of the sale occurred in November 2021, and the Company expects to recognize a gain, net of transaction costs, in the fourth quarter of 2021 associated with the disposal of these assets. The Purchase and Sale Agreement also included certain covenants that the Company has agreed to not carry on or be engaged in the operation of jackup drilling rigs in the territorial waters of the Kingdom of Saudi Arabia in the Arabian Gulf for a term after the closing date of (i) one year for purposes of drilling gas wells and (ii) two years for the purposes of drilling oil wells.
Market Outlook
Our business is significantly impacted by spending on upstream exploration, development and production programs by our customers. The level of spending by our customers is heavily influenced by the current and expected demand and future prices of oil and natural gas. Since early 2020, the ongoing COVID-19 pandemic has reduced the global demand for oil and led to worldwide disruptions to business and economic activity, which slowed an already challenging recovery in our industry. The worldwide vaccine rollouts in 2021 have allowed governments to ease COVID-19 restrictions and lockdown protocols, and business activity has improved. However, such improvements have also caused disruptions in supply chains and distribution channels and appear to be leading to higher than normal general inflation. We expect our business opportunities and results to improve as the global economy continues to stabilize, resulting in higher global oil demand. Prices for oil, along with other commodities, have moderately increased this year, which is favorable for our customers. While OPEC+ has remained disciplined in its policies to stabilize oil prices, member states have spare capacity, which is expected to return to the market in the future. Beyond uncertainties in the demand and supply of oil which could affect our business, energy transition trends have accelerated in recent years as evidenced by promulgated or proposed government policies and commitments by many of our customers to further invest in sustainable energy sources. Our industry could be further challenged as our customers rebalance their capital investments to include more sustainable energy sources. Nonetheless, the global energy demand is predicted to increase over the coming decades, and we expect that offshore oil and gas will continue to play an important and sustainable role in meeting this demand.
The offshore drilling industry remains highly competitive.competitive, and the worldwide supply of rigs still exceeds current demand from customers in both the floater and jackup markets. As of the end of September 2021, total utilization for floater rigs was 68% and marketed utilization was 80%. For jackups, total utilization was 72% and marketed utilization was 82%. The difference between total and marketed percentages for each rig type highlights the idle assets which contractors continue to hold in anticipation of an improved market environment. In our view, this supply of existing idle rigs will further deter the majority of stranded newbuild assets from entering the market in the near term.
The market outlook in our business varies by geographical region and water depth. We believe the convergence of events in 2020 and 2021, includingare encouraged by the ongoing impacts from the COVID-19 pandemic, have lengthened an already challenging and slowindications of recovery in the ultra-deepwater floater market in the US Gulf of Mexico, South America, and Africa. Harsh environment shallow water jackup markets show stable opportunities and remain an important portion of our industry. Despite thesebusiness. Contracting activity with our customer base has increased in 2021 as compared to 2020’s lows. We welcome the improvements in dayrates that have accompanied this increase and will continue to remain disciplined market participants.
While we are cautiously optimistic about recent positive trends, our industry continues to face challenges and demand projections, we believe that oiluncertainties and gas demand will rebalance and oil and gas will remain a significant portion of the world’s energy mix. We expect that theis unlikely to return to stable oil demand and prices coupled with the continued attrition of rigsactivity levels experienced in the global offshore fleet will bring improved market conditions for our services.
After completing the Merger with Pacific Drilling, Noble has a fleet of 24 rigs, consisting of 12 jackups and 12 floaters. Our fleet is among the youngest, most technically advanced, and versatile fleets in the industry and is well positioned to compete as market dynamics improve. Our fleet consists predominantly of technologically advanced units, equipped with sophisticated systems and components prepared to execute our customers’ increasingly complicated offshore drilling programs safely and with greater efficiency, contributing to an overall reduction of our carbon footprint. We remain committed to safely and efficiently serving the needs of our customers globally.historical cycle peaks.
Contract Drilling Services Backlog
We maintain a backlog of commitments for contract drilling services. Our contract drilling services backlog reflects estimated future revenues attributable to signed drilling contracts. While backlog did not include any letters of intent as of March 31,September 30, 2021, in the past we have included in backlog certain letters of intent that we expect to result in binding drilling contracts.
We calculate backlog for any given unit and period by multiplying the full contractual operating dayrate for such unit by the number of days remaining in the period, and include certain assumptions based on the terms of certain contractual arrangements, discussed in the notes to the table below. For the four rigs contracted with Exxon Mobil Corporation (“ExxonMobil”) mentioned below, we utilize the current market rate, adjusted for a moderate discount rate, as described in footnote (3) to the backlog table below. The reported contract drilling services backlog does not include amounts representing revenues for mobilization, demobilization and contract preparation, which are not expected to be significant to our contract drilling services revenues, amounts constituting reimbursables from customers or amounts attributable to uncommitted option periods under drilling contracts or letters of intent.
Backlog herein also has not been adjusted for the non-cash amortization related to favorable customer contract intangibles which were recognized on the Effective Date.
The table below presents the amount of our contract drilling services backlog as of March 31,September 30, 2021, and the percent of available operating days committed for the periods indicated:
| | | Year Ending December 31, (6) | | Year Ending December 31, |
| | Total | | 2021 (1) | | 2022 | | 2023 | | 2024 | | 2025 - 2027 | | Total | | 2021 (1) | | 2022 | | 2023 | | 2024 | | 2025 - 2027 |
| | (In thousands) | | (In thousands) |
Contract Drilling Services Backlog | Contract Drilling Services Backlog | | Contract Drilling Services Backlog | |
Floaters (2)(3) | Floaters (2)(3) | | $ | 1,150,452 | | | $ | 360,074 | | | $ | 367,526 | | | $ | 140,659 | | | $ | 71,279 | | | $ | 210,914 | | Floaters (2)(3) | | $ | 1,202,092 | | | $ | 159,159 | | | $ | 593,410 | | | $ | 164,238 | | | $ | 94,922 | | | $ | 190,363 | |
Jackups (4)(6) | Jackups (4)(6) | | 392,278 | | | 208,125 | | | 148,414 | | | 35,739 | | | — | | | — | | Jackups (4)(6) | | 327,876 | | | 77,884 | | | 216,002 | | | 33,990 | | | — | | | — | |
Total | Total | | $ | 1,542,730 | | | $ | 568,199 | | | $ | 515,940 | | | $ | 176,398 | | | $ | 71,279 | | | $ | 210,914 | | Total | | $ | 1,529,968 | | | $ | 237,043 | | | $ | 809,412 | | | $ | 198,228 | | | $ | 94,922 | | | $ | 190,363 | |
Percent of Available Days Committed (5)(4) | Percent of Available Days Committed (5)(4) | | | | | | | | | | | | | Percent of Available Days Committed (5)(4) | | | | | | | | | | | | |
Floaters | Floaters | | 91 | % | | 65 | % | | 24 | % | | 14 | % | | 14 | % | Floaters | | 69 | % | | 55 | % | | 14 | % | | 8 | % | | 6 | % |
Jackups | Jackups | | 68 | % | | 32 | % | | 6 | % | | — | % | | — | % | Jackups | | 75 | % | | 47 | % | | 6 | % | | — | % | | — | % |
Total | Total | | 77 | % | | 44 | % | | 13 | % | | 5 | % | | 5 | % | Total | | 72 | % | | 51 | % | | 10 | % | | 4 | % | | 3 | % |
(1)Represents a nine-monththree-month period beginning AprilOctober 1, 2021. Some of our drilling contracts provide customers with certain early termination rights and, in limited cases, those termination rights require minimal or no notice and minimal financial penalties.
(2)Two of our long-term drilling contracts with Royal Dutch Shell plc (“Shell”), the Noble Globetrotter I and Noble Globetrotter II, contain a dayrate adjustment mechanism that utilizes an average of market rates that match a set of distinct technical attributes and is subject to a modest discount, beginning on the fifth-year anniversary of the contract and continuing every six months thereafter. On December 12, 2016, we amended those drilling contracts with Shell. As a result of the amendments, eachEach of the contracts now has a contractual dayrate floor of $275,000 per day. Once the dayrate adjustment mechanism becomes effective and following any idle periods, the dayrate for these rigs will not be lower than the higher of (i) the contractual dayrate floor or (ii) the market rate as calculated under the adjustment mechanism. The impact to contract backlog from these amendments has been reflected in the table above and the backlog calculation assumes that, after any idle period at the contractual stacking rate, each rig will work at its respective dayrate floor for the remaining contract term.
(3)Noble entered into a multi-year Commercial Enabling Agreement (the “CEA”) with ExxonMobilExxon Mobil Corporation (“ExxonMobil”) in February 2020. Under the CEA, dayrates earned by each rig will be updated at least twice per year to the prevailingprojected market rate at the time the new rate goes into effect, subject to a scale-based discount and a performance bonus that appropriately aligns the interests of Noble and ExxonMobil. Under the CEA, the table above includes awarded and remaining term of sevenfive years and three months related to the Noble Tom Madden, two years and one year and three months to each of the Noble Bob Douglas, andNoble Don Taylor and eight months to the Noble Sam Croft. Under the CEA, ExxonMobil may reassign term among rigs. The aforementioned additional backlog included in the table above wasfor periods where the rate is yet to be determined is estimated by using the current market rate, adjusted for a moderate discountmost recently negotiated CEA rate.
(4)In April 2020, we received notice from Saudi Arabian Oil Company (“Saudi Aramco”) to suspend operations on the Noble Scott Marks for a period of up to 12 months. Beginning in early May 2020, we idled the Noble Scott Marks at a rate of $0 per day. The impact to contract backlog has been reflected in the table above and the backlog calculation assumes that, upon completion of the suspension period, the rig will resume operations at the contracted dayrate for the remaining contract term.
(5)Percent of available days committed is calculated by dividing the total number of days our rigs are operating under contract for such period by the product of the number of our rigs and the number of calendar days in such period.
(5)Includes backlog for the Noble Tom Prosser for a contract signed in July 2021 with Santos for three firm wells to begin in direct continuation of its current contract, but is still subject to project sanctioning.
(6)This table does not include $125.4Includes backlog related to the four jackups divested to ADES in November 2021 of approximately $29.4 million for the remainder of backlog associated with assets acquired in2021 and $95.5 million and $29.4 million for the Merger.years ended 2022 and 2023, respectively. See “—Executive Overview—Recent Events” above for further detail.
The amount of actual revenues earned and the actual periods during which revenues are earned may be materially different than the backlog amounts and backlog periods presented in the table above due to various factors, including, but not limited to, the impactevolution of the COVID-19 pandemic, and related mitigation efforts on the demand for oil, current oversupply of oil, shipyard and maintenance projects, unplanned downtime, the operation of market benchmarks for dayrate resets, achievement of bonuses, weather conditions, reduced standby or mobilization rates and other factors that result in applicable dayrates lower than the full contractual operating dayrate. In addition, amounts included in the backlog may change because drilling contracts may be varied or modified by mutual consent or customers may exercise early termination rights contained in some of our drilling contracts or decline to enter
into a drilling contract after executing a letter of intent. As a result, our backlog as of any particular date may not be indicative of our actual operating results for the periods for which the backlog is calculated. See Part I, Item 1A, “Risk Factors – Our current backlog of contract drilling revenue may not be ultimately realized” in our Annual Report on Form 10-K for the year ended December 31, 2020.
As of March 31,September 30, 2021, ExxonMobil, Shell and Saudi AramcoArabian Oil Company represented approximately 49.453.3 percent, 24.317.9 percent and 13.810.1 percent of our backlog, respectively. Excluding the four jackups being divested to ADES, as of September 30, 2021, ExxonMobil and Shell would represent approximately 59.3 percent and 19.9 percent of our backlog, respectively.
Strategy and Results of Operations
Our business strategy focuses on a high-specification fleet of both floating and jackup rigs and the deployment of our drilling rigs in established and emerging offshore oil and gas basins around the world. We emphasize safe operations, environmental stewardship, and superior performance through a structured management system, the employment of qualified and well-trained crews and onshore support staff, the care of our surroundings and the neighboring communities where we operate, and other activities advancing our environmental sustainability, social responsibility, and good governance. We also manage rig operating costs through the implementation and continuous improvement of innovative systems and processes, which includes the use of data analytics and predictive maintenance technology.
Our floating and jackup drilling fleet is among the youngest, most modern and versatile in the industry, with the majority of our rigs having been delivered since 2011. Our fleet consists predominately of technologically advanced units, equipped with sophisticated systems and components prepared to execute our customers’ increasingly complicated offshore drilling programs safely and with greater efficiency, contributing to an overall reduction of our carbon footprint. footprint. We do not have any newbuild rigs under construction and we have also retired, sold or otherwise fully impaired 1824 drilling rigs since late 2014, due in part to advanced service lives, high cost of operation and limited customer appeal. Current marketMarket conditions could lead to us stacking, retiring or retiringotherwise disposing of additional rigs.
We continue to prioritize capital preservationOur organization prioritizes financial discipline and liquidity in light of the challenging market conditions. However, wecash flow generation and management will also continue to evaluate opportunitiesour balance sheet, and focus on returning cash to enhanceshareholders, and improving our fleet of floating and jackup rigs, particularly focusing on higher specification rigs, to meet the demands of increasingly complex drilling programs required by our customers.
Climate change is an environmental, social and economic challenge. We are committed to continuous improvement and a sustainable energy future, supported by our efforts to protect the environment throughout our operations and safely provide reliable and efficient services to allow access to essential resources. Oversight of our sustainability is at the Board level, with the Nominating, Governance and Sustainability Committee assisting in that oversight role with respect to the Corporation’s sustainability policies and practices.
Results of Operations
Results for the Three Months Ended September 30, 2021 and 2020
Net loss for the three months ended September 30, 2021 was $23.7 million or $(0.36) per diluted share, on operating revenues of $250.4 million compared to a net loss for the three months ended September 30, 2020 of $50.9 million, or $(0.20) per diluted share, on operating revenues of $241.8 million.
As a result of Noble conducting substantially all of its business through Finco and its subsidiaries, the financial position and results of operations for Finco, and the reasons for material changes in the amount of revenue and expense items for the three months ended September 30, 2021 and September 30, 2020, would be the same as the information presented below regarding Noble in all material respects, with the exception of operating income (loss) and the gain on bargain purchase. For the three months ended September 30, 2021 and September 30, 2020, Finco’s operating loss was $9.7 million and $13.6 million lower, respectively, than that of Noble. The operating loss difference is primarily a result of expenses related to corporate legal costs and administration charges attributable to Noble for operations support and stewardship-related services. The predecessor period had a $61.5 million gain related to litigation, which has been settled, in Reorganization items, net.
Key Operating Metrics
Operating results for our contract drilling services segment are dependent on three primary metrics: operating days, dayrates and operating costs. We also track rig utilization, which is a function of operating days and the number of rigs in our fleet. For more information on operating costs, see “—Contract Drilling Services” below.
The following table presents the average rig utilization, operating days and average dayrates for our rig fleet for the periods indicated:
| | | Average Rig Utilization (1) | | Operating Days (2) | | | Average Dayrates (2) | | | Average Rig Utilization (1) | | Operating Days (2) | | | Average Dayrates (2) | |
| | | | Successor | | | Predecessor | | Successor | | | Predecessor | | | Successor | | | Predecessor | | | Successor | | | Predecessor | | Successor | | | Predecessor | | | Successor | | | Predecessor | |
| | Period From February 6, 2021 through March 31, 2021 | | | Period From January 1, 2021 through February 5, 2021 | | Three Months Ended March 31, 2020 | | Period From February 6, 2021 through March 31, 2021 | | | Period From January 1, 2021 through February 5, 2021 | | Three Months Ended March 31, 2020 | | | Period From February 6, 2021 through March 31, 2021 | | | Period From January 1, 2021 through February 5, 2021 | | Three Months Ended March 31, 2020 | | | Three Months Ended September 30, 2021 | | | Three Months Ended September 30, 2020 | | Three Months Ended September 30, 2021 | | | Three Months Ended September 30, 2020 | | | Three Months Ended September 30, 2021 | | | Three Months Ended September 30, 2020 | |
Floaters | | Floaters | | 73 | % | | | 53 | % | | 806 | | | | 582 | | | | 214,304 | | | | 218,821 | | |
Jackups | Jackups | | 53 | % | | | 58 | % | | 94 | % | | 342 | | | | 252 | | | 1,082 | | | | $ | 83,472 | | | | $ | 95,212 | | | $ | 131,253 | | | Jackups | | 75 | % | | | 62 | % | | 828 | | | | 680 | | | | 87,972 | | | | 146,625 | | |
Floaters | | 83 | % | | | 86 | % | | 58 | % | | 314 | | | | 216 | | | 637 | | | | 205,242 | | | | 231,745 | | | 196,759 | | | |
Total | Total | | 64 | % | | | 68 | % | | 77 | % | | 656 | | | | 468 | | | 1,719 | | | | $ | 141,752 | | | | $ | 158,228 | | | $ | 155,526 | | | Total | | 74 | % | | | 57 | % | | 1,634 | | | | 1,262 | | | | $ | 150,287 | | | | $ | 179,900 | | |
(1)We define utilization for a specific period as the total number of days our rigs are operating under contract, divided by the product of the total number of our rigs, including cold stacked rigs, and the number of calendar days in such period. Information reflects our policy of reporting on the basis of the number of available rigs in our fleet, excluding newbuild rigs under construction.
(2)An operating day is defined as a calendar day during which a rig operated under a drilling contract. We define average dayrates as revenue from contract drilling services earned per operating day. Average dayrates have not been adjusted for the non-cash amortization related to favorable customer contract intangibles.
Results for the period from February 6 through March 31, 2021, the period from January 1 through February 5, 2021 and the three months ended March 31, 2020
Net loss for the for the period from February 6 through March 31, 2021 was $18.2 million or $0.36 per diluted share, on operating revenues of $92.4 million. Net income for the period from January 1 through February 5, 2021 was $250.2 million, or $0.98 per diluted share, on operating revenues of $77.5 million, compared to net loss for the three months ended March 31, 2020 of $1.1 billion, or $4.25 per diluted share, on operating revenues of $281.3 million.
As a result of Noble conducting substantially all of its business through Finco and its subsidiaries, the financial position and results of operations for Finco, and the reasons for material changes in the amount of revenue and expense items for the period from February 6 through March 31, 2021, the period from January 1 through February 5, 2021 and three months ended March 31, 2020, would be the same as the information presented below regarding Noble in all material respects, with the exception of operating income (loss). For the period from February 6 through March 31, 2021, the period from January 1 through February 5, 2021 and three months ended March 31, 2020, Finco’s operating loss was $5.6 million lower, operating income was $0.3 million higher and operating loss was $12.0 million lower, respectively, than that of Noble. The operating income (loss) difference is primarily a result of expenses related to corporate legal costs, administration, and chapter 11 bankruptcy charges directly attributable to Noble for operations support and stewardship-related services.
Contract Drilling Services
The following table presents the operating results for our contract drilling services segment for the periods indicated (dollars in thousands):
| | | | | Successor | | | Predecessor | | | Successor | | | Predecessor | |
| | Period From February 6, 2021 through March 31, 2021 | | | Period From January 1, 2021 through February 5, 2021 | | Three Months Ended March 31, 2020 | | | Three Months Ended September 30, 2021 | | | Three Months Ended September 30, 2020 | |
Operating revenues: | Operating revenues: | | | | | | | | | Operating revenues: | | | | |
Contract drilling services | Contract drilling services | | $ | 84,629 | | | | $ | 74,051 | | | $ | 267,364 | | | Contract drilling services | | $ | 231,154 | | | | $ | 227,050 | | |
Reimbursables and other (1) | Reimbursables and other (1) | | 7,804 | | | | 3,430 | | | 13,947 | | | Reimbursables and other (1) | | 19,217 | | | | 14,786 | | |
| | 92,433 | | | | 77,481 | | | 281,311 | | | | 250,371 | | | | 241,836 | | |
Operating costs and expenses: | Operating costs and expenses: | | | | | | | | | Operating costs and expenses: | | | | | | |
Contract drilling services | Contract drilling services | | 79,981 | | | | 46,965 | | | 161,145 | | | Contract drilling services | | 188,552 | | | | 137,180 | | |
Reimbursables (1) | Reimbursables (1) | | 7,044 | | | | 2,737 | | | 11,684 | | | Reimbursables (1) | | 16,462 | | | | 13,369 | | |
Depreciation and amortization | Depreciation and amortization | | 14,244 | | | | 20,622 | | | 101,108 | | | Depreciation and amortization | | 25,248 | | | | 90,606 | | |
General and administrative | General and administrative | | 9,548 | | | | 5,727 | | | 17,839 | | | General and administrative | | 14,982 | | | | 15,662 | | |
Loss on impairments | | — | | | | — | | | 1,119,517 | | | |
Merger and integration costs | | Merger and integration costs | | 5,033 | | | | — | | |
Transaction costs on sale of operating assets | | Transaction costs on sale of operating assets | | 3,146 | | | | — | | |
Hurricane losses | | Hurricane losses | | 10,441 | | | | — | | |
Pre-petition charges | | Pre-petition charges | | — | | | | 3,894 | | |
| | | 110,817 | | | | 76,051 | | | 1,411,293 | | | | 263,864 | | | | 260,711 | | |
Operating loss | Operating loss | | $ | (18,384) | | | | $ | 1,430 | | | $ | (1,129,982) | | | Operating loss | | $ | (13,493) | | | | $ | (18,875) | | |
(1)We record reimbursements from customers for out-of-pocket expenses as operating revenues and the related direct costs as operating expenses. Changes in the amount of these reimbursables generally do not have a material effect on our financial position, results of operations or cash flows.
Operating Revenues.
During the period from February 6 through March 31,three months ended September 30, 2021, contract drilling services revenues totaled $56.0$158.3 million for our floaters and $28.6$72.8 million for our jackups. SixThe 12 floaters had a total of our seven floaters were contracted and806 operating days, including eight that operated for the majorityfull quarter, two that operated part of the periodquarter and ninetwo that were stacked for the full quarter. The two floaters that operated for part of our 12 jackups were contractedthe quarter consisted of which eight operated the entire period. One contracted rig, the Noble Scott Marks,Gerry de Souza did not operate(formerly the entire period asPacific Santa Ana), which completed the contract in Mauritania mid-August and then mobilized to Las Palmas to commence shipyard projects, and the Noble Faye Kozak (formerly the Pacific Khamsin), which commenced its contract in Mexico in early September. The Pacific Meltem and Pacific Scirocco remained stacked in Las Palmas for the quarter. The 12 jackups had a resulttotal of 828 operating days, including nine that operated for the full quarter, one that was in shipyard for part of the work suspension which began in May 2020; the suspension is expected to end with the rig returning to operations in May 2021. The other contracted rigs not operatingquarter and two that were stacked for the full period included thequarter. The Noble Lloyd Noble, which completed continued shipyard projects in preparation for its contract in Norway that commenced in late February 2021 and subsequently moved to the shipyard to prepare for its upcoming work in Norway, and the Noble Roger Lewis, which completed regulatory shipyard maintenance during the period. This was offset by theOctober. The Noble Sam TurnerHartley and Noble Houston Colbert remained commencing a new contractwarm stacked in early March 2021.the North Sea for the quarter. Additionally, contract drilling revenueservices revenues for the period included: (i) a reduction of $8.5$14.4 million of related to the non-cash amortization related to customer contract intangibles which were recognized on the Effective Date and (ii) lower amortizations for mobilization, pre-contract and capital recovery revenues.
During the period from January 1 through February 5, 2021, contract drilling services revenues totaled $50.1 million for our floaters and $24.0 million for our jackups. All six contracted floaters and seven of our eight contracted jackups operated the entire period. This was offset by one contracted jackup not operating the full period, the Noble Scott Marks, which was on suspension, as previously described.
During the three months ended March 31,September 30, 2020, contract drilling services revenues totaled $125.3$127.3 million for our floaters with seven of our 12 floaters contracted and operating the entire period and $142.1$99.8 million for our jackups. The seven floaters, excluding five stacked rigs, had a total of 582 operating days, including six that operated for the full quarter and the Noble Clyde Boudreaux, which completed its contract in Vietnam towards the end of July. The 12 jackups with all 12 rigs contractedhad a total of 680 operating days, including six that operated for the full quarter, three that operated for part of the quarter and operating a majoritythree that were warm stacked for the period.full quarter. The three jackups that operated for part of the quarter included the Noble Regina Allen, which completed its contract in Canada in mid-August, the Noble Sam Hartley, which commenced its contract in the North Sea in mid-August and the Noble Sam Turner, which commenced its contract in the North Sea at the end of August. The Noble Hans Duel,Noble Houston Colbert and Noble Scott Marks (contract suspension) were warm stacked the full quarter.
Operating Costs and Expenses.Expenses
During the period from February 6 through March 31,three months ended September 30, 2021, contract drilling services costs, which includes our local administrative and operations support, totaled $80.0$188.6 million. Reduced operatingTen of our 12 floaters were contracted, of which eight operated for the full period, and 10 of our 12 jackups were contracted, of which nine operated for the full period. Operating costs inincreased within the period, wasprimarily as a result of the new rigs stacked during the entire period includingthat were acquired in the Noble Clyde BoudreauxPacific Drilling , Noble Houston Colbert, Noble Hans Deul and Noble Tom Prosser. Merger. The period also included lower amortizationscosts for mobilization and pre-contract costs and lower insurance costs.
During the period from January 1 through February 5, 2021, contract drilling services costs totaled $47.0 million. Reduced operating costs in the period was a result of rigs stacked during the entire period including the Noble Clyde BoudreauxLloyd Noble, preparing for its new contract in Norway that commenced in late October.Thefloaters Pacific Meltem and Pacific Scirocco and the jackups Noble Houston ColberColbert t, Noble Hans Deuland andNoble Sam Hartley Noble Tom Prosser.remained warm stacked for the entire period.
During the three months ended March 31,September 30, 2020, contract drilling services costs totaled $161.1$137.2 million. Elevated operatingOperating costs for this period was a resultwere generated by 12 rigs that operated for the full quarter, four rigs that operated for part of 19the quarter and three rigs contracted and operating a majority ofthat were warm stacked the full quarter. In addition, this quarter included costs related to rigsfive cold stacked floaters that were operating or stacked and ultimately retired and sold in the second half of 2020fourth quarter, including the Noble Bully I, Noble Bully II, Noble Danny Adkins, Noble Jim Day, Noble Joe Beall and Noble Paul Romano.Romano.
Depreciation and Amortization.Depreciation and amortization totaled $14.2 million, $20.6$25.2 million and $101.1$90.6 million during the period from February 6 through March 31, 2021, the period from January 1 through February 5,three months ended September 30, 2021 and the three months ended March 31,September 30, 2020, respectively. The decline in depreciation and amortization over these periods were due to impairments of assets recognizedDepreciation during 2020 and tothe Successor period was impacted by the fair value remeasurement of our rigs as a result of the implementation of fresh start accounting on the Effective Date.
Loss on Impairments.Date and has increased due to the rigs acquired from the We recorded no loss on impairmentsPacific Drilling Merger. Depreciation during the Predecessor period from February 6 through March 31, 2021 ordeclined due to impairments of assets recognized during the period from January 1 through February 5, 2021. We recorded a loss on impairmentfirst quarter of $1.1 billion for2020.
General and Administrative Expenses. General and administrative expenses totaled $15.0 million and $15.7 million during the three months ended March 31,September 30, 2021 and the three months ended September 30, 2020, respectively. The Successor period included $1.8 million of professional fees incurred in connection with various corporate projects.
Pre-Petition Charges. Noble incurred $3.9 million of pre-petition charges during the three months ended September 30, 2020. These costs relate to attorneys, financial advisors and other professional fees incurred in connection with the Chapter 11 Cases.
Merger and Integration Costs. Noble incurred $5.0 million of merger and integration costs in connection with the Pacific Drilling Merger during the three months ended September 30, 2021. Finco incurred $4.1 million of merger and integration costs in connection with the Pacific Drilling Merger during the three months ended September 30, 2021. For additional information, see “Note 10— Loss on Impairment” “Note 4— Acquisitions” to our condensed consolidated financial statements.
Transaction Costs on Sale of Operating Assets. Noble incurred $3.1 million of charges in connection with the ADES divestiture during the three months ended September 30, 2021. Finco incurred $2.2 million of charges in connection with the ADES divestiture during the three months ended September 30, 2021. Costs incurred were related to severance charges required in the local jurisdiction and professional fees. The closing of the sale occurred in November 2021, and the Company expects to recognize a gain, net of transaction costs, in the fourth quarter
of 2021 associated with the disposal of these assets. For additional information, see “Note 7— Property and Equipment” to our condensed consolidated financial statements.
Hurricane Losses. Noble incurred $10.4 million of costs in connection to damages sustained from Hurricane Ida during the three months ended September 30, 2021. The damage assessment resulted in a write-off of assets of $5.4 million and the majority of the remaining costs relate to costs related to the equipment recovery efforts and legal fees. For additional information, see “Note 7— Property and Equipment” to our condensed consolidated financial statements.
Other Income and Expenses
GeneralInterest Expense. Interest expense totaled $8.9 million and Administrative Expenses.$23.4 million during the three months ended September 30, 2021 and the three months ended September 30, 2020, respectively. The three months ended September 30, 2021 included interest expense on our Second Lien Notes as well as borrowings under our Revolving Credit Facility. The Predecessor period of 2020 included reduced expenses due to the Bankruptcy Court order of a stay on all interest expense during the pendency of the Chapter 11 Cases. For additional information, see General“Note 2— Chapter 11 Emergence” and administrative expenses totaled $9.5“Note 8— Debt” to our condensed consolidated financial statements.
Income Tax Provision. We recorded an income tax provision of $2.3 million and $25.3 million during the three months ended September 30, 2021 and the three months ended September 30, 2020, respectively. During the three months ended September 30, 2021, our tax provision included tax benefits of $2.1 million related to a US reserve release, offset primarily by approximately $3.8 million of various recurring tax expenses.
During the three months ended September 30, 2020, our tax provision included a $21.2 million US return-to-provision adjustment, $31.1 million impact of UK tax rate and valuation allowance increases, a $5.7 million Guyana withholding tax reserve and $17.8$1.0 million duringof other tax adjustments. Such tax expenses are offset by tax benefits of $2.5 million related to a litigation settlement and $31.2 million related to a US valuation allowance adjustment and other recurring tax items.
Results for the period from February 6 through March 31,September 30, 2021, the period from January 1 through February 5, 2021 and the threenine months ended September 30, 2020
Net loss for the period from February 6 through September 30, 2021 was $21.5 million, or $(0.35) per diluted share, on operating revenues of $562.1 million. Net income for the period from January 1 through February 5, 2021 was $250.2 million, or $0.98 per diluted share, on operating revenues of $77.5 million, compared to a net loss for the nine months ended September 30, 2020 of $1,155.7 million, or $(4.61) per diluted share, on operating revenues of $761.1 million.
As a result of Noble conducting all of its business through Finco and its subsidiaries, the financial position and results of operations for Finco, and the reasons for material changes in the amount of revenue and expense items between the period from February 6 through September 30, 2021, the period from January 1 through February 5, 2021 and the nine months ended September 30, 2020, would be the same as the information presented below regarding Noble in all material respects, with the exception of operating loss and the gain on bargain purchase. For the period from February 6 through September 30, 2021 and the nine months ended September 30, 2020, Finco’s operating losses were $30.6 million and $92.4 million lower, respectively, than that of Noble. The operating loss difference is primarily a result of expenses related to corporate legal costs and administration attributable to Noble for operations support and stewardship-related services. The Predecessor period had a $15.0 million gain related to litigation, which has been settled, in Reorganization cost, net. During the period from January 1 through February 5, 2021, Finco’s operating income was $0.3 million lower than that of Noble.
Key Operating Metrics
Operating results for our contract drilling services segment are dependent on three primary metrics: operating days, dayrates and operating costs. We also track rig utilization, which is a function of operating days and the number of rigs in our fleet. For more information on operating costs, see “—Contract Drilling Services” below.
The following table presents the average rig utilization, operating days and average dayrates for our rig fleet for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Average Rig Utilization (1) | | Operating Days (2) | | | | Average Dayrates (2) | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Successor | | | Predecessor | | Successor | | | Predecessor | | | | Successor | | | Predecessor | | |
| | Period From February 6, 2021 through September 30, 2021 | | | Period From January 1, 2021 through February 5, 2021 | | Nine Months Ended September 30, 2020 | | Period From February 6, 2021 through September 30, 2021 | | | Period From January 1, 2021 through February 5, 2021 | | Nine Months Ended September 30, 2020 | | | | Period From February 6, 2021 through September 30, 2021 | | | Period From January 1, 2021 through February 5, 2021 | | Nine Months Ended September 30, 2020 | | |
Floaters | | 72 | % | | | 86 | % | | 55 | % | | 1,810 | | | | 216 | | | 1,802 | | | | | 213,680 | | | | 231,745 | | | 203,792 | | | |
Jackups | | 68 | % | | | 58 | % | | 74 | % | | 1,922 | | | | 252 | | | 2,472 | | | | | 86,392 | | | | 95,212 | | | 140,512 | | | |
Total | | 70 | % | | | 68 | % | | 64 | % | | 3,732 | | | | 468 | | | 4,274 | | | | | $ | 148,126 | | | | $ | 158,228 | | | $ | 167,199 | | | |
(1)We define utilization for a specific period as the total number of days our rigs are operating under contract, divided by the product of the total number of our rigs, including cold stacked rigs, and the number of calendar days in such period. Information reflects our policy of reporting on the basis of the number of available rigs in our fleet, excluding newbuild rigs under construction.
(2)An operating day is defined as a calendar day during which a rig operated under a drilling contract. We define average dayrates as revenue from contract drilling services earned per operating day. Average dayrates have not been adjusted for the non-cash amortization related to favorable customer contract intangibles.
Contract Drilling Services
The following table presents the operating results for our contract drilling services segment for the periods indicated (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| | | | | | | | | | | |
| | Successor | | | Predecessor | | | | |
| | Period From | | | Period From | | | | | | |
| | February 6, 2021 | | | January 1, 2021 | | | | | | |
| | through | | | through | | Nine Months Ended | | | | |
| | September 30, 2021 | | | February 5, 2021 | | September 30, 2020 | | | | |
Operating revenues: | | | | | | | | | | | |
Contract drilling services | | $ | 515,680 | | | | $ | 74,051 | | | $ | 714,555 | | | | | |
Reimbursables and other (1) | | 46,467 | | | | 3,430 | | | 46,510 | | | | | |
| | 562,147 | | | | 77,481 | | | 761,065 | | | | | |
Operating costs and expenses: | | | | | | | | | | | |
Contract drilling services | | 456,853 | | | | 46,965 | | | 442,479 | | | | | |
Reimbursables (1) | | 41,577 | | | | 2,737 | | | 41,387 | | | | | |
Depreciation and amortization | | 64,831 | | | | 20,622 | | | 283,652 | | | | | |
General and administrative | | 47,939 | | | | 5,727 | | | 106,504 | | | | | |
Merger and integration costs | | 13,786 | | | | — | | | — | | | | | |
Transaction costs on sale of operating assets | | 3,146 | | | | — | | | — | | | | | |
Hurricane losses | | 10,441 | | | | — | | | — | | | | | |
Pre-petition charges | | — | | | | — | | | 14,409 | | | | | |
Loss on impairments | | — | | | | — | | | 1,119,517 | | | | | |
| | 638,573 | | | | 76,051 | | | 2,007,948 | | | | | |
Operating income (loss) | | $ | (76,426) | | | | $ | 1,430 | | | $ | (1,246,883) | | | | | |
(1)We record reimbursements from customers for out-of-pocket expenses as operating revenues and the related direct costs as operating expenses. Changes in the amount of these reimbursables generally do not have a material effect on our financial position, results of operations or cash flows.
Operating Revenues
During the period from February 6 through September 30, 2021, contract drilling services revenues totaled $349.6 million for our floaters and $166.0 million for our jackups. Ten of our 12 floaters were contracted and operated during the period, five of which were contracted and operated for the full period. Eleven of our 12 jackups were contracted and operated during the period, four of which were contracted and operated for the full period. Three of the five floaters acquired in the Pacific Drilling Merger operated during the period; the Noble Stanley Lafosse (formerly the Pacific Sharav) operated throughout the period from the Pacific Drilling Merger date in the Gulf of Mexico, the Noble Gerry de Souza (formerly the Pacific Santa Ana) completed its contract in Mauritania in mid-August and the Noble Faye Kozack (formerly the Pacific Khamsin) commenced its contract in Mexico in early September. The Noble Scott Marks returned to operations in early June 2021 following the end of its suspension, which began in May 2020. In April 2021, the Noble Sam Croft began its contract in Guyana, bringing our presence there to four rigs. The other contracted rigs not operating for the full period included the Noble Clyde Boudreaux, Noble Tom Prosser, NobleHans Deul and Noble Sam Turner, which commenced new contracts in late June 2021, early May 2021, early April 2021 and early March 31,2021, respectively. The Noble Lloyd Noble completed its contract in late February 2021 and, after completing shipyard projects, commenced operations in Norway in late October. The Noble Roger Lewis completed regulatory shipyard maintenance during the period and the Noble Sam Hartley was warm stacked in early May 2021. Additionally, contract drilling revenue for the period included: (i) a reduction of $37.1 million of non-cash amortization related to customer contract intangibles which were recognized on the Effective Date and (ii) amortizations for mobilization, pre-contract and capital recovery revenues.
During the period from January 1 through February 5, 2021, contract drilling services revenues totaled $50.1 million for our floaters and $24.0 million for our jackups. All six contracted floaters and seven of our eight contracted jackups operated for the entire period. This was offset by one contracted jackup not operating for the full period, the Noble Scott Marks, which was on suspension, as previously described.
During the nine months ended September 30, 2020, contract drilling services revenues totaled $367.3 million for our floaters, with seven floaters contracted and operating a majority of the period and $347.3 million for our jackups with 13 jackups operating in the period, five for the full period. The Noble Tom Prosser and Noble Tom Madden were placed on special standby rates during this period due to the effects of the COVID-19 pandemic. Rigs that were warm stacked for a part of or the entire nine months included the Noble Hans Duel, Noble Houston Colbert, Noble Sam Hartley,Noble Sam Turner and Noble Scott Marks. The Noble Joe Beall was stacked after completing its final contract and was retired during the first quarter of 2020.
Operating Costs and Expenses
During the period from February 6 through September 30, 2021, contract drilling services costs, which includes our local administrative and operations support, totaled $456.9 million. Ten of our 12 floaters were contracted and operated during the period, five of which were contracted and operated for the full period. Eleven of our 12 jackups were contracted and operated during the period, four of which were contracted and operated for the full period. Operating costs within the period increased due to the new rigs that were acquired in the Pacific Drilling Merger and the Noble Lloyd Noble continued shipyard projects in preparation for its contract in Norway, which commenced in late October.This was partially offset by decreased operating costs as a result of the Noble Sam Hartley being warm stacked in early May 2021.
During the period from January 1 through February 5, 2021, contract drilling services costs totaled $47.0 million. Reduced operating costs in the period was a result of rigs stacked during the entire period including the Noble Clyde Boudreaux, Noble Houston Colbert, Noble Hans Deul and Noble Tom Prosser.
During the nine months ended September 30, 2020, contract drilling services costs totaled $442.5 million. Operating costs for this period included costs related to 15 rigs which were contracted and operating the majority of the period. In addition, the period also included costs related to the jackup Noble Joe Beall sold in the first quarter of 2020 and five floaters that were stacked and ultimately retired and sold in the fourth quarter of 2020, including the Noble Bully I, Noble Bully II, Noble Danny Adkins, Noble Jim Day, and Noble Paul Romano. The Noble Tom Prosser and Noble Tom Madden were placed on special standby rates during this period due to the effects of the COVID-19 pandemic. The Noble Hans Duel and Noble Houston Colbert were warm stacked for the majority of the period, contributing to a reduction in costs.
Depreciation and Amortization. Depreciation and amortization totaled $64.8 million, $20.6 million, and $283.7 million during the period from February 6 through September 30, 2021, the period from January 1 through February 5, 2021 and the nine months ended September 30, 2020, respectively. BothDepreciation during February 6 through September 30, 2021 was impacted by the Predecessorfair value remeasurement of our rigs as a result of the implementation of fresh start accounting on the Effective Date and Successor periodshas increased due to the rigs acquired from the Pacific Drilling Merger. Depreciation during the nine months ended September 30, 2020 declined due to impairments of assets recognized during the first quarter of 2020.
Loss on Impairments. We recorded no loss on impairments during the period from February 6 through September 30, 2021 or the period from January 1 through February 5, 2021. We recorded a loss on impairment of $1.1 billion for the nine months ended September 30, 2020. For additional information, see “Note 11— Loss on Impairment” to our condensed consolidated financial statements.
General and Administrative Expenses. General and administrative expenses totaled $47.9 million, $5.7 million and $106.5 million during the period from February 6 through September 30, 2021, the period from January 1 through February 5, 2021 and the nine months ended September 30, 2020, respectively. The nine months ended September 30, 2020 included $54.0 million of charges related to litigation that has been settled.
Pre-Petition Charges. Noble incurred $14.4 million of pre-petition charges during the nine months ended September 30, 2020. These costs relate to attorneys’ and financial advisors’ fees and other professional fees incurred in 2021 include reduced legalconnection with the Chapter 11 Cases.
Merger and Integration Costs. Noble incurred $13.8 million of merger and integration costs in connection with the Pacific Drilling Merger during the period from February 6 through September 30, 2021. Finco incurred $7.1 million of merger and integration costs in connection with the Pacific Drilling Merger during the period from February 6 through September 30, 2021. For additional information, see “Note 4— Acquisitions” to our condensed consolidated financial statements.
Transaction Costs on Sale of Operating Assets. Noble incurred $3.1 million of charges in connection with the ADES divestiture during the period from February 6 through September 30, 2021. Finco incurred $2.2 million of charges in connection with the ADES divestiture during the period from February 6 through September 30, 2021. Costs incurred were related to severance charges that were required in the local jurisdiction and professional fees not otherwise classifiedfees. The closing of the sale occurred in Reorganization items, net.November 2021, and the Company expects to recognize a gain, net of transaction costs, in the fourth quarter of 2021 associated with the disposal of these assets. For additional information, see “Note 7— Property and Equipment” to our condensed consolidated financial statements.
Hurricane Losses. Noble incurred $10.4 million of costs in connection to damages sustained from Hurricane Ida during the period from February 6 through September 30, 2021. The damage assessment resulted in a write-off of assets of $5.4 million and the majority of the remaining costs relate to costs related to the equipment recovery efforts and legal fees. For additional information, see “Note 7— Property and Equipment” to our condensed consolidated financial statements.
Other Income and Expenses
Reorganization Items, Net. Noble incurred a net gain of $252.1 million for reorganization items during the period from January 1 through February 5, 2021. Finco incurred a net gain of $195.4 million for reorganization items during the period from January 1 through February 5, 2021. The gain was primarily the result of gains on the settlement of Liabilities subject to compromise exceeding other net reorganization charges and net charges related to fresh start accounting. No reorganization charges or income were recorded during the threenine months ended March 31,September 30, 2020. For additional information, see “Note“Note 2— Chapter 11 Emergence” to our condensed consolidated financial statements.
Interest Expense. Interest expense totaled $6.9$23.6 million, $0.2 million and $70.9$164.6 million during the period from February 6 through March 31,September 30, 2021, the period from January 1 through February 5, 2021 and the threenine months ended March 31,September 30, 2020, respectively. The Predecessor period of 2021 and 2020 included reduced expenses due to the Bankruptcy Court order of a stay on all interest expense during the pendency of the Chapter 11 Cases. The Successor period of 2021 includes interest expense on our newly issued Second Lien Notes as well as drawings onborrowings under our Revolving Credit Facility. For additional information, see “Note“Note 2— Chapter 11 Emergence” and “Note 7—8— Debt” to our condensed consolidated financial statements.
Gain on Bargain Purchase. Noble recognized a $64.5 million gain on the bargain purchase of Pacific Drilling during the period from February 6 through September 30, 2021. For additional information, see “Note 4— Acquisitions” to our condensed consolidated financial statements.
Income Tax Provision.Benefit. We recorded an income tax benefit of $7.0$6.6 million, income tax expense of $3.4 million and income tax benefit $143.0$238.9 million during the period from February 6 through March 31,September 30, 2021, the period from January 1 through February 5, 2021 and the threenine months ended March 31,September 30, 2020, respectively.
During the period from February 6, 2021 to March 31,September 30, 2021, our tax provision included tax benefits of $10.1$24.2 million related to US and non-US reserve releases. releases, $12.6 million related to a US tax refund, and $1.2 million related primarily to deferred tax adjustments. Such tax benefits were partially offset by tax expenses of $12.6 million related to various recurring items and $18.6 million related to non-US tax reserves.
During the period ended on February 5, 2021, our income tax provision included a tax benefit of $1.7 million related to non-US reserve release and tax expense of $2.5 million related to fresh start and reorganization adjustments. adjustments, and other recurring tax expenses of approximately $2.6 million.
During the threenine months ended on March 31,September 30, 2020, our tax benefit included the tax impact ofeffect from asset impairmentimpairments of $95.6 million, the tax impact of the application of the CARES Act of $42.6$41.7 million, and a non-US reserve release due to a statute expiration of $4.6 million, a reduction of US tax reserves of $111.9 million, the tax impact of $2.5 million related to a litigation settlement, and other recurring tax benefits of approximately $41.6 million. These tax benefits were partially offset by a 2019 US return-to-provision adjustment of $21.2 million, the impact of UK tax rate and valuation allowance increase of $31.1 million, a Guyana withholding tax reserve of $5.7 million and other tax adjustments of $1.0 million.
Liquidity and Capital Resources
As a result of the financial restructuring through the Chapter 11 Cases, Noble emerged with a new $675.0 million revolving credit facility and $216.0 million of Second Lien Notes. At emergence, Legacy Noble’s ordinary shares were cancelled and Ordinary Shares were issued to Legacy Noble’s former bondholders. Certain former bondholders and former equity holders of Legacy Noble were also issued warrants to purchase shares of the Company.
Post-emergence Debt
Senior Secured Revolving Credit Facility
On the Effective Date, Finco and Noble International Finance Company (“NIFCO”) entered into the Revolving Credit Agreement providing for the $675.0 million Revolving Credit Facility and canceled all debt that existed immediately prior to the Effective Date. The Revolving Credit Facility matures on July 31, 2025. Subject to the satisfaction of certain conditions, Finco may from time to time designate one or more of Finco’s other wholly-owned subsidiaries as additional borrowers under the Revolving Credit Agreement (collectively with Finco and NIFCO, the “Borrowers”). As of the Effective Date, $177.5 million of loans were outstanding, and $8.8 million of letters of credit were issued, under the Revolving Credit Facility. As of September 30, 2021, we had $190.0 million of loans outstanding and $8.7 million of letters of credit issued under the Revolving Credit Facility and an additional $11.7 million in letters of credit and surety bonds issued under bilateral arrangements.
All obligations of the Borrowers under the Revolving Credit Agreement, certain cash management obligations and certain swap obligations are unconditionally guaranteed, on a joint and several basis, by Finco and certain of its direct and indirect subsidiaries (collectively with the Borrowers, the “Credit Parties”), including a guarantee by each Borrower of the obligations of each other Borrower under the Revolving Credit Agreement. All such obligations, including the guarantees of the Revolving Credit Facility, are secured by senior priority liens on substantially all assets of, and the equity interests in, each Credit Party, including all of the rigs owned by the Company as of the Effective Date or acquired thereafter and certain assets related thereto, in each case, subject to certain exceptions and limitations described in the Revolving Credit Agreement. Neither Pacific Drilling nor any of its subsidiaries is a subsidiary guarantor of the Revolving Credit Facility, and none of their assets secure the Revolving Credit Facility.
The loans outstanding under the Revolving Credit Facility bear interest at a rate per annum equal to the applicable margin plus, at Finco’s option, either: (i) the reserve-adjusted LIBOR or (ii) a base rate, determined as the greatest of (x) the prime loan rate as published in the Wall Street Journal, (y) the federal funds effective rate plus 1⁄2½ of 1%, and (z) the reserve-adjusted one-month LIBOR plus 1%. The applicable margin is initially 4.75% per annum for LIBOR loans and 3.75% per annum for base rate loans and will be increased by 50 basis points after July 31, 2024, and may be increased by an additional 50 basis points under certain conditions described in the Revolving Credit Agreement.
The Borrowers are required to pay acustomary quarterly commitment fee to each lender under the Revolving Credit Agreement, which accrues at a rate per annum equal to 0.50% on the average daily unused portion of such lender’s commitments under the Revolving Credit Facility. The Borrowers are also required to pay customaryfees and letter of credit and fronting fees.
Borrowings under the Revolving Credit Agreement may be used for working capital and other general corporate purposes. Availability of borrowings under the Revolving Credit Agreement is subject to the satisfaction of certain conditions, including restrictions on borrowings if, after giving effect to any such borrowings and the application of the proceeds thereof, (i) the aggregate amount of Available Cash (as defined in the Revolving Credit Agreement) would exceed $100.0 million, (ii) the Consolidated First Lien Net Leverage Ratio (as defined in the Revolving Credit Agreement) would be greater than 5.50 to 1.00 and the aggregate principal amount outstanding under the Revolving Credit Facility would exceed $610.0 million, or (iii) the Asset Coverage Ratio (as described below) would be less than 2.00 to 1.00.
Mandatory prepayments and, under certain circumstances, commitment reductions are required under the Revolving Credit Facility in connection with (i) certain asset sales, asset swaps and events of loss (subject to reinvestment rights if no event of default exists) and (ii) certain debt issuances. Available Cash in excess of $150.0 million is also required to be applied periodically to prepay loans (without a commitment reduction). The loans under the Revolving Credit Facility may be voluntarily prepaid, and the commitments thereunder voluntarily terminated or reduced, by the Borrowers at any time without premium or penalty, other than customary breakage costs.
The Revolving Credit Agreement obligates Finco and its restricted subsidiaries to comply with the following financial maintenance covenants:
•as of the last day of each fiscal quarter in 2021, Adjusted EBITDA (as defined in the Revolving Credit Agreement) is not permitted to be lower than (i) $70.0 million for the four fiscal quarter period ending March 31, 2021, (ii) $40.0 million for the four fiscal quarter period ending June 30, 2021 and (iii) $25.0 million for the four fiscal quarter periods ending on each of September 30, 2021 and December 31, 2021;
•as of the last day of each fiscal quarter ending on or after March 31, 2022, the ratio of Adjusted EBITDA to Cash Interest Expense (as defined in the Revolving Credit Agreement) is not permitted to be less than (i) 2.00 to 1.00 for each four fiscal quarter period ending on or after March 31, 2022 until June 30, 2024, and (ii) 2.25 to 1.00 for each four fiscal quarter period ending thereafter; and
•for each fiscal quarter ending on or after June 30, 2021, the ratio of (x) Asset Coverage Aggregate Rig Value (as defined in the Revolving Credit Agreement) to (y) the aggregate principal amount of loans and letters of credit outstanding under the Revolving Credit Facility (the “Asset Coverage Ratio”) as of the last day of any such fiscal quarter is not permitted to be less than 2.00 to 1.00.
The Revolving Credit Facility contains affirmative and negative covenants, representations and warranties and events of default that the Company considers customary for facilities of this type.
Second Lien Notes Indenture
On the Effective Date, pursuant to the Backstop Commitment Agreement and in accordance with the Plan, Noble and Finco consummated the Rights Offering of Second Lien Notes and associated Ordinary Shares at an aggregate subscription price of $200.0 million.
An aggregate principal amount of $216.0 million of Second Lien Notes was issued in the Rights Offering, which includes the aggregate subscription price of $200.0 million plus a backstop fee of $16.0 million which was paid in kind. The Second Lien Notes mature on February 15, 2028. The Second Lien Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured second-priority basis, by the direct and indirect subsidiaries of Finco that are Credit Parties under the Revolving Credit Facility. Neither Pacific Drilling nor any of its subsidiaries is a subsidiary guarantor of the Second Lien Notes, and none of their assets secure the Second Lien Notes.
The Second Lien Notes and such guarantees are secured by senior priority liens on the assets subject to liens securing the Revolving Credit Facility, including the equity interests in Finco and each guarantor of the Second Lien Notes, all of the rigs owned by the Company as of the Effective Date or acquired thereafter, certain assets related thereto, and substantially all other assets of Finco and such guarantors, in each case, subject to certain exceptions and limitations. Such collateral does not include any assets of, or equity interests in, Pacific Drilling or any of its subsidiaries.
Interest on the Second Lien Notes accrues, at Finco’s option, at a rate of: (i) 11% per annum, payable in cash; (ii) 13% per annum, with 50% of such interest to be payable in cash and 50% of such interest to be payable by issuing additional Second Lien Notes (“PIK Notes”); or (iii) 15% per annum, with the entirety of such interest to be payable by issuing PIK Notes. Finco shall pay interest semi-annually in arrears on February 15 and August 15 of each year, commencing August 15, 2021. For the period ended March 31, 2021,accrual purposes, we have assumed we will make the next interest payment by issuing PIK notes.in cash and have accrued at a rate of 11%; however, the actual interest election will be made no later than the record date for such interest payment.
On or after February 15, 2024, Finco may redeem all or part of the Second Lien Notes at fixed redemption prices (expressed as percentages of the principal amount), plus accrued and unpaid interest, if any, to, but excluding, the redemption date. Finco may also redeem the Second Lien Notes, in whole or in part, at any time and from time to time on or before February 14, 20252024 at a redemption price equal to 106% of the principal amount plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date, plus a “make-whole” premium. Notwithstanding the foregoing, if a Change of Control (as defined in the Second Lien Notes Indenture) occurs prior to (but not including) February 15, 2024, then, within 120 days of such Change of Control, Finco may elect to purchase all remaining outstanding Second Lien Notes at a redemption price equal to 106% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.
The Second Lien Notes contain covenants and events of default that the Company considers customary for notes of this type.
Sources and Uses of Cash Overview
Our principal sources of capital in the current period were cash generated from operating activities and funding from our Revolving Credit Facility and Second Lien Notes. Cash on hand during the current period was primarily used for the following:
•normal recurring operating expenses;
•fees and expenses related to the Chapter 11 Cases; and
•capital expenditures.
Net cash provided by operating activities was $18.2$24.0 million during the period from February 6 through March 31,September 30, 2021, and net cash used in operating activities was $45.4 million for the period from January 1 through February 5, 2021 and $0.8net cash provided by operating activities was $236.7 million for the threenine months ended March 31,September 30, 2020. The Successor periodand prior year Predecessor periods benefited from a cash flow inflow from operating assets and liabilities, while the Predecessor had a cash outflow from operating assets and liabilities. We had working capital of $151.6$179.4 million at March 31,September 30, 2021 and $383.9 million at December 31, 2020.
Net cash used in investing activities was $31.5 million during the period from February 6 through March 31,September 30, 2021, $14.4 million during the period from January 1 through February 5, 2021 and $111.2 million during the threenine months ended March 31, 2020 were $15.1 million, $14.4 million and $36.5 million, respectively.September 30, 2020. The Predecessor and Successor periods include shipyard work on the Noble Lloyd Noble and the managed pressure drilling upgrade on the Noble Don Taylor and Noble Tom Madden. The Successor period also includes cash acquired from the Pacific Drilling Merger and proceeds from the sale of the Pacific Bora and Pacific Mistral in late June 2021.
Net cash provided by financing activities was zero$13.1 million during the period from February 6 through March 31,September 30, 2021, net cash used in financing activities was $191.2 million during the period from January 1 through February 5, 2021 and net cash provided by financing activities was $108.6$107.4 million for the threenine months ended March 31,September 30, 2020. The Predecessor period included the repayment of the 2017 Credit Facility, issuances of the Second Lien Notes and borrowings on the Revolving Credit Facility. The Successor period includes net borrowings on the Revolving Credit Facility.
Our currently anticipated cash flow needs, both in the short-term and long-term, may include the following:
•normal recurring operating expenses;
•planned and discretionary capital expenditures; and
•repurchase, redemptions or repayments of debt and interest.
We may, from time to time, redeem, repurchase or otherwise acquire our outstanding Second Lien Notes through open market purchases, tender offers or pursuant to the terms of such securities.
We currently expect to fund theseour cash flow needs with cash generated by our operations, cash on hand, proceeds from sales of assets or borrowings under our Revolving Credit Facility. Subject to market conditions and other factors, we may also issue equity or long-term debt securities to fund theseour cash flow needs and for other purposes.
Capital Expenditures
Capital expenditures totaled $22.9$117.1 million, $10.3 million and $25.1$102.9 million during the period from February 6 through March 31,September 30, 2021, the period from January 1 through February 5, 2021 and threenine months ended March 31,September 30, 2020, respectively.
Capital expenditures during the period from February 6 through March 31,September 30, 2021 consisted of the following:
•$9.542.2 million for sustaining capital;
•$12.956.2 million in major projects, including subsea and other related projects;
•$0.21.7 million for capitalized interest; and
•$0.317.0 million for rebillable capital and contract modifications.
Capital expenditures during the period from January 1 through February 5, 2021 consisted of the following:
•$1.5 million for sustaining capital;
•$2.1 million in major projects, including subsea and other related projects; and
•$6.7 million for rebillable capital and contract modifications.
Including the effects of the recent Merger, ourOur total capital expenditure estimate for the period from February 6 through December 31, 2021 is expected to range between $180$165 million and $200$185 million, of which approximately $100$80 million to $110$90 million is currently anticipated to be spent for sustaining capital, and approximately $20$25 million is anticipated to be rebillable to our customers.
From time to time we consider possible projects that would require expenditures that are not included in our capital budget, and such unbudgeted expenditures could be significant. In addition, while liquidity and preservation of capital remains our top priority, we will continue to evaluate acquisitions of drilling units from time to time.
Share Capital
As of March 31,September 30, 2021, Noble had approximately 43.560.2 million shares outstanding as compared to approximately 251.1 million Legacy Noble ordinary shares outstanding and trading at December 31, 2020.
At Legacy Noble’s 2020 Annual General Meeting, Legacy Noble’s shareholders authorized its Board of Directors to increase share capital through the issuance of up to approximately 8.7 million ordinary shares (at then current nominal value of $0.01 per share). Other than shares issued to Legacy Noble’s directors under the Noble Corporation 2017 Director Omnibus Plan, the authority was not used to allot shares during the year ended December 31, 2020 and expired on the Effective Date.
In accordance with the Plan, all agreements, instruments and other documents evidencing, relating to or otherwise connected with any of Legacy Noble’s equity interests outstanding prior to the Effective Date, including all equity-based awards, were cancelled and all such equity interests have no further force or effect after the Effective Date. Pursuant to the Plan, the holders of Legacy Noble’s ordinary shares, par value $0.01 per share, outstanding prior to the Effective Date received their pro rata share of the Tranche 3 Warrants to acquire Ordinary Shares. Pursuant to the Memorandum of Association of Noble Corporation, the share capital of Noble is $6,000 divided into 500,000,000 ordinary shares of a par value of $0.00001 each and 100,000,000 shares of a par value of $0.00001, each of such class or classes having the rights as the Board may determine from time to time.
Legacy Noble hasand Noble have not paid dividends since the third quarter of 2016. With respect to Legacy Noble, the declaration and payment of dividends required the authorization of the Board of Directors of Legacy Noble, provided that such dividends on issued share capital may be paid only out of Legacy Noble’s “distributable reserves” on its statutory balance sheet in accordance with UK law. Therefore, Legacy Noble was not permitted to pay dividends out of share capital, which includes share premium. The payment of future dividends will depend on our results of operations, financial condition, cash requirements, future business prospects, contractual and indenture restrictions and other factors deemed relevant by our current Board of Directors; however, at this time, we do not expect to pay any dividends in the foreseeable future.Directors.
Guarantees of Registered Securities
Finco has issued the following registered securities: the Second Lien Notes due 2028. The Second Lien Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured second-priority basis, by the direct and indirect subsidiaries of Finco that are Credit Parties under the Revolving Credit Facility (the “Guarantors”). The guarantees are unconditional, irrevocable, joint and several senior obligations of each Guarantor and rank equally in right of payment with all future senior indebtedness of such Guarantor and effectively senior to all of such Guarantor’s unsecured senior indebtedness.
The Second Lien Notes and such guarantees are secured by second priority liens on the collateral securing the obligations under the Revolving Credit Facility, including, among other things, (i) a pledge of the equity interests in Finco, (ii) pledges of the equity interests in the Guarantors and (iii) a lien on substantially all of the assets of Finco and the Guarantors (including the equity interests in substantially all of the other direct subsidiaries of Finco and the Guarantors), in each case, subject to certain exceptions and limitations (collectively, the “Collateral”). The Collateral also includes mortgages on certain rigs owned by the Company as of the Effective Date. Neither Pacific Drilling nor any of its subsidiaries is a subsidiary guarantor of the Revolving Credit Facility or the Second Lien Notes. The Collateral does not include any assets of, or equity interests in, Pacific Drilling or any of its subsidiaries.
Second Lien Note Guarantees
The guarantees by the Guarantors are unconditional, irrevocable, joint and several senior obligations of each Guarantor and rank equally in right of payment with all future senior indebtedness of such Guarantor and effectively senior to all of such Guarantor’s unsecured senior indebtedness. The guarantees rank senior in right of payment to any existing and future subordinated obligations of such Guarantor and are effectively junior to any obligations of such Guarantor that are secured by senior liens on the Collateral or secured by assets which do not constitute Collateral. Under the indenture governing the Second Lien Notes, a Guarantor may be released and relieved of its obligations under its guarantee under certain circumstances, including: (1) upon Finco’s exercise of legal defeasance in accordance with the relevant provisions of the indenture governing the Second Lien Notes, (2) in the event of any sale or other disposition of all of the capital stock of any Guarantor in compliance with the provisions of the indenture governing the Second Lien Notes, (3) upon the dissolution or liquidation of a Guarantor, (3) with the requisite consent of the noteholders, (4) if such Guarantor is properly designated as an unrestricted subsidiary in accordance with the indenture governing the Second Lien Notes, (5) upon the release or discharge of the Guarantor’s obligations under its guarantee or (6) with respect to certain future immaterial guarantors, upon a written notice from Finco to the trustee for the Second Lien Notes.
Finco is a holding company with no significant operations or material assets other than the direct and indirect equity interests it holds in the Guarantors and other non-guarantor subsidiaries. Finco conducts its operations primarily through its subsidiaries. As a result, its ability to pay principal and interest on the Second Lien Notes is dependent on the cash flow generated by its subsidiaries and their ability to make such cash available to Finco by dividend or otherwise. The Guarantors’ earnings will depend on their financial and operating performance, which will be affected by general economic, industry, financial, competitive, operating, legislative, regulatory and other factors beyond Finco’s control. Any payments of dividends, distributions, loans or advances to Finco by the Guarantors could also be subject to restrictions on dividends under applicable local law in the jurisdictions in which the Guarantors operate. In the event that Finco does not receive distributions from the Guarantors, or to the extent that the earnings from, or other available assets of, the Guarantors are insufficient, Finco may be unable to make payments on the Second Lien Notes.
Pledged Securities of Affiliates
Pursuant to the terms of the Second Lien Notes collateral documents, the collateral agent under the indenture governing the Second Lien Notes may pursue remedies, or pursue foreclosure proceedings on the Collateral (including the equity of the Guarantors and other direct subsidiaries of Finco and the Guarantors), following an event of default under the indenture governing the Second Lien Notes. The collateral agent’s ability to exercise such remedies is limited by the intercreditor agreement for so long as any priority lien debt is outstanding.
The pledged equity of the Guarantors constitutes substantially all of the securities of our affiliates which have been pledged to secure the obligations under the Second Lien Notes. The value of the pledged equity is subject to fluctuations based on factors that include, among other things, general economic conditions and the ability to realize on the collateral as part of a going concern and in an orderly fashion to available and willing buyers and not under distressed circumstances. There is no trading market for the pledged equity interests.
Under the terms of the documents governing the Second Lien Notes (the “Notes“Second Lien Notes Documents”), Finco and the Guarantors will be entitled to the release of the Collateral from the liens securing the Second Lien Notes under one or more circumstances, including (1) to the extent required by or pursuant to the terms of the Second Lien Notes Documents; (2) to the extent that proceeds continue to constitute Collateral, in the event that Collateral is sold, transferred, disbursed or otherwise disposed of to third parties; or (3) as otherwise provided in the Second Lien Notes Documents, including the release of the priority lien on such Collateral. Upon the release of any subsidiary from its guarantee, if any, in accordance with the terms of the indenture governing the Second Lien Notes, the lien on any pledged equity interests issued by such Guarantor and on any assets of such Guarantor will automatically terminate.
Guarantor Summarized Financial Information
The summarized financial information below reflect the combined accounts of the Guarantors and the non-consolidated accounts of Finco (collectively, the “Obligors”), for the dates and periods indicated. The financial information is presented on a combined basis and intercompany balances and transactions between entities in the Obligor group have been eliminated.
Summarized Balance Sheet Information:
| | | | | | | | | | | | | | |
| Successor | | | Predecessor |
| March 31, 2021 | | | December 31, 2020 |
Current assets | $ | 254,142 | | | | $ | 461,587 | |
Amounts due from non-guarantor subsidiaries, current | 5,316,574 | | | | 5,552,158 | |
Noncurrent assets | 1,279,943 | | | | 3,590,865 | |
Amounts due from non-guarantor subsidiaries, noncurrent | 1,051,849 | | | | 1,045,237 | |
Current liabilities | 152,536 | | | | 159,601 | |
Amounts due from non-guarantor subsidiaries, current | 4,954,038 | | | | 5,532,634 | |
Noncurrent liabilities | 456,054 | | | | 120,033 | |
Amounts due from non-guarantor subsidiaries, noncurrent | 164,860 | | | | 480,460 | |
Summarized Balance Sheet Information:
| | | | | | | | | | | | | | |
| Successor | | | Predecessor |
| September 30, 2021 | | | December 31, 2020 |
Current assets | $ | 237,305 | | | | $ | 461,587 | |
Amounts due from non-guarantor subsidiaries, current | 5,419,725 | | | | 5,552,158 | |
Noncurrent assets | 1,275,657 | | | | 3,590,865 | |
Amounts due from non-guarantor subsidiaries, noncurrent | 1,070,031 | | | | 1,045,237 | |
Current liabilities | 164,910 | | | | 159,601 | |
Amounts due from non-guarantor subsidiaries, current | 4,996,139 | | | | 5,532,634 | |
Noncurrent liabilities | 449,442 | | | | 120,033 | |
Amounts due from non-guarantor subsidiaries, noncurrent | 132,787 | | | | 480,460 | |
Summarized Statement of Operations Information:
| | | | | Successor (1) | | | Predecessor (2) |
| | | | Obligors | | | Obligors |
| | | | | | | | | | | | | | | | | | | | | | Period From | | | Period From | | | |
| | Successor (1) | | | Predecessor | | | February 6, 2021 | | | January 1, 2021 | | | Year |
| | Obligors | | | Obligors | | | through | | | through | | | Ended |
| | Period From February 6, 2021 through March 31, 2021 | | | Period From January 1, 2021 through February 5, 2021 | | Three Months Ended March 31, 2020 | | | September 30, 2021 | | | February 5, 2021 | | | December 31, 2020 |
Operating revenues | Operating revenues | | $ | 83,948 | | | | $ | 70,584 | | | $ | 258,944 | | Operating revenues | | $ | 447,010 | | | | $ | 70,584 | | | | $ | 895,295 | |
Operating costs and expenses | Operating costs and expenses | | 87,662 | | | | 63,255 | | | 863,051 | | Operating costs and expenses | | 447,867 | | | | 63,255 | | | | 4,320,475 | |
Loss from continuing operations before income taxes | | (14,691) | | | | (2,303,528) | | | (620,531) | | |
Net loss | | (16,326) | | | | (2,318,932) | | | (623,952) | | |
Income (loss) from continuing operations before income taxes | | Income (loss) from continuing operations before income taxes | | (31,801) | | | | (2,303,528) | | | | (3,414,898) | |
Net income (loss) | | Net income (loss) | | (44,378) | | | | (2,318,932) | | | | (3,468,407) | |
(1)Includes operating revenue of $2.1$31.6 million, operating costs and expenses of $(2.8)$7.4 million and other expense of $4.3$11.3 million attributable to transactions with non-guarantor subsidiaries for the period from February 6, 2021 through March 31, 2021; September 30, 2021.
(2)Includes operating revenue of $3.8 million, operating costs and expenses of $(1.1)$1.1 million and other expense of $(1.2) million attributable to transactions with non-guarantor subsidiaries for the period from January 1, 2021 through February 5, 2021;2021. Includes operating revenue of $26.0$88.2 million, operating costs and expenses of $6.5$23.7 million and other expense of $12.9$3.3 million attributable to transactions with non-guarantor subsidiaries for three monthsthe year ended MarchDecember 31, 2020.
Environmental Matters
We are subject to numerous international, federal, state and local laws and regulations relating to the protection of the environment and of human health and safety. For a discussion of the most significant of these laws and regulations, see Part I, Item 1. “Business—Governmental Regulations and Environmental Matters” in our Annual Report on Form 10-K for the year ended December 31, 2020.
Continuing political and social attention to the issue of global climate change has resulted in a broad range of proposed or promulgated laws focusing on greenhouse gas reduction. These proposed or promulgated laws apply or could apply in countries where we have interests or may have interests in the future. Laws in this field continue to evolve, and while it is not possible to accurately estimate either a timetable for implementation or our future compliance costs relating to implementation, such laws, if enacted, could have a material impact on our results of operations and financial condition. For a discussion of climate change, see Part I, Item 1. “Business—Governmental Regulations and Environmental Matters—Climate Change” in our Annual Report on Form 10-K for the year ended December 31, 2020.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements as that term is defined in Item 303(a)(4)(ii) of Regulation S-K.
New Accounting Pronouncements
See Part I, Item 1, Financial Statements, “Note 4—5— Accounting Pronouncements,” to the condensed consolidated financial statements for a description of the recent accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There has been no significant change in our exposure to market risk when compared to those disclosed in “PartPart II, - Item 7A. Quantitative“Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2020.
Item 4. Controls and Procedures
Robert W. Eifler, President and Chief Executive Officer (Principal Executive Officer) of Noble, and Richard B. Barker, Senior Vice President and Chief Financial Officer (Principal Financial Officer) of Noble, have evaluated the disclosure controls and procedures of Noble as of the end of the period covered by this report. On the basis of this evaluation, Mr. Eifler and Mr. Barker have concluded that Noble’s disclosure controls and procedures were effective as of March 31,September 30, 2021. Noble’s disclosure controls and procedures are designed to ensure that information required to be disclosed by Noble in the reports that it files with or submits to the SEC are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.
Robert W. Eifler, President and Chief Executive Officer (Principal Executive Officer) of Finco, and Richard B. Barker, Director, Senior Vice President and Chief Financial Officer (Principal Financial Officer) of Finco, have evaluated the disclosure controls and procedures of Finco as of the end of the period covered by this report. On the basis of this evaluation, Mr. Eifler and Mr. Barker have concluded that Finco’s disclosure controls and procedures were effective as of March 31,September 30, 2021. Finco’s disclosure controls and procedures are designed to ensure that information required to be disclosed by Finco in the reports that it files with or submits to the SEC are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.
Management is in the process of evaluating and integrating the internal controls of the acquired Pacific Drilling business into the existing operations. There were no changes in Noble’s internal control over financial reporting that occurred during the quarter ended March 31,September 30, 2021 that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting of Noble.
Management is in the process of evaluating and integrating the internal controls of the acquired Pacific Drilling business into the existing operations. There were no changes in Finco’s internal control over financial reporting that occurred during the quarter ended March 31,September 30, 2021 that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting of Finco.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information regarding legal proceedings is presented in “Note 14—15— Commitments and Contingencies,” to our condensed consolidated financial statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q and is incorporated herein by reference.
Item 1A. Risk Factors
There are numerous factors that affect our business and results of operations, many of which are beyond our control. In addition to the risk factors set forth below and the other information presented in this Quarterly Report, you should carefully read and consider “Item 1A. Risk Factors” in Part I and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II of our Annual Report on Form 10-K for the year ended December 31, 2020, which contains descriptions of significant risks that might cause our actual results of operations in future periods to differ materially from those currently anticipated or expected.
Risks Related to Our Business and Operations
We may experience risks associated with future mergers, acquisitions or dispositions of businesses or assets or other strategic transactions.
As part of our business strategy, we may pursue mergers, acquisitions or dispositions of businesses or assets or other strategic transactions that we believe will enable us to strengthen or broaden our business. We may be unable to implement this element of our strategy if we cannot identify suitable companies, businesses or assets, reach agreement on potential strategic transactions on acceptable terms, manage the impacts of such transactions on our business or for other reasons. Moreover, mergers, acquisitions, dispositions and other strategic transactions involve various risks, including, among other things, (i) difficulties relating to integrating or disposing of a business and unanticipated changes in customer and other third-party relationships subsequent thereto, (ii) diversion of management’s attention from day-to-day operations, (iii) failure to realize the anticipated benefits of such transactions, such as cost savings and revenue enhancements, (iv) potentially substantial transaction costs associated with such transactions and (v) potential impairment resulting from the overpayment for an acquisition.
Future mergers or acquisitions may require us to obtain additional equity or debt financing, which may not be available on attractive terms. Moreover, to the extent a transaction financed by non-equity consideration results in goodwill, it will reduce our tangible net worth, which might have an adverse effect on credit availability.
Future sales or the availability for sale of substantial amounts of the Ordinary Shares, or the perception that these sales may occur, could, if the Ordinary Shares are listed on a national securities exchange, adversely affect the trading price of the Ordinary Shares and could impair our ability to raise capital through future sales of equity securities.
Pursuant to the Memorandum of Association of Noble Corporation, the share capital of Noble is $6,000 divided into 500,000,000 ordinary shares of a par value of $0.00001 each and 100,000,000 shares of a par value of $0.00001, each of such class or classes having the rights as our Board of Directors may determine from time to time. On April 12,November 3, 2021, there were 43,536,63660,172,178 Ordinary Shares outstanding and 6,463,182 Penny Warrants (as defined herein) issued and outstanding. In addition, as of April 12,November 3, 2021, 8,332,9108,311,090 Tranche 1 Warrants, 8,332,9108,319,514 Tranche 2 Warrants and 2,777,6982,777,562 Tranche 3 Warrants (each as defined herein) arewere outstanding and exercisable. On April 15, 2021, we issued approximately 16.6 million Ordinary Shares to the equity holders of Pacific Drilling in connection with the closing of the Merger. We also have 7,716,049 Ordinary Shares authorized and initially reserved for issuance pursuant to equity awards under the Noble Corporation 2021 Long-Term Incentive Plan.
A large percentage of the Ordinary Shares (or warrants exercisable for Ordinary Shares) are held by a relatively small number of investors. We entered into (i) the Equity Registration Rights Agreement (as defined herein) with certain parties who received Ordinary Shares under the Plan associated with our Chapter 11 reorganization and (ii) the Merger Registration Rights Agreement (as defined herein)a registration rights agreement with the holders identified therein in connection with the closing of the Pacific Drilling Merger, RRA Holders (as defined herein), in each case pursuant to which we have agreed to file a registration statement with the SEC to facilitate potential future sales of such Ordinary Shares by them. We intend to apply for a listing of the Ordinary Shares on a national securities exchange. However, we can provide no assurance when we will apply for listing of the Ordinary Shares, whether the Ordinary Shares will be approved for listing, whether an active trading market will develop for the Ordinary Shares or as to the liquidity of such trading market for the Ordinary Shares. If the Ordinary Shares are listed on a national securities exchange, salesSales of a substantial number of the Ordinary Shares in the public markets, exercise of a substantial number of warrants or even the perception that these sales or exercises might occur (such as upon the filing of the aforementioned registration statements), could impair our ability to raise capital for our operations through a future sale of, or pay for acquisitions using, our equity securities.
We may issue Ordinary Shares or other securities from time to time as consideration for future acquisitions and investments. If any such acquisition or investment is significant, the number of Ordinary Shares, or the number or aggregate principal amount, as the case may be, of other securities that we may issue may in turn be substantial. We may also grant registration rights covering those Ordinary Shares or other securities in connection with any such acquisitions and investments.
If the Ordinary Shares are listed on a national securities exchange, we
We cannot predict the effect that future sales of Ordinary Shares will have on the price at which the Ordinary Shares trades or the size of future issuances of Ordinary Shares or the effect, if any, that future issuances will have on the market price of the Ordinary Shares. Sales of substantial amounts of the Ordinary Shares, or the perception that such sales could occur, may if the Ordinary Shares are listed on a national securities exchange, adversely affect the trading price of the Ordinary Shares.
The warrants we issued pursuant to the Plan are exercisable for New Shares, and the exercise of such equity instruments would have a dilutive effect to shareholders of the Company.
The Tranche 1 Warrants are exercisable for one Ordinary Share per warrant at an exercise price of $19.27 per warrant, the Tranche 2 Warrants are exercisable for one Ordinary Share per warrant at an exercise price of $23.13 per warrant and the Tranche 3 Warrants are exercisable for one Ordinary Share per warrant at an exercise price of $124.40 per warrant (in each case as may be adjusted from time to time pursuant to the applicable warrant agreement). The Tranche 1 Warrants and the Tranche 2 Warrants are exercisable until 5:00 p.m., Eastern time, on February 4, 2028 and the Tranche 3 Warrants are exercisable until 5:00 p.m., Eastern time, on February 4, 2026. The Tranche 1 Warrants and the Tranche 2 Warrants have Black-Scholes protections, including in the event of a Fundamental Transaction (as defined in the applicable warrant agreement). The Tranche 1 Warrants and the Tranche 2 Warrants also provide that while the Mandatory Exercise Condition (as defined in the applicable warrant agreement) set forth in the applicable warrant agreement has occurred and is continuing, Noble or the holders of Tranche 1 Warrants or Tranche 2 Warrants representing at least 20% of such tranche (the “Required Mandatory Exercise Warrantholders”) have the right and option (but not the obligation) to cause all or a portion of the warrants to be exercised on a cashless basis. In the case of Noble, under the Mandatory Exercise Condition, all of the Tranche 1 Warrants or the Tranche 2 Warrants (as applicable) would be exercised. In the case of the electing Required Mandatory Exercise Warrantholders, under the Mandatory Exercise Condition, all of their respective Tranche 1 Warrants or Tranche 2 Warrants (as applicable) would be exercised. Mandatory exercises entitle the holder of each warrant subject thereto to (i) the number of Ordinary Shares issuable upon exercise of such warrant on a cashless basis and (ii) an amount payable in cash, Ordinary Shares or a combination thereof (in Noble’s sole discretion) equal to the Black-Scholes Value (as defined in the applicable warrant agreement) with respect to the number of Ordinary Shares withheld upon exercise of such warrant on a cashless basis. As of November 3, 2021, the Mandatory Exercise Condition set forth in the warrant agreement for the Tranche 1 Warrant had occurred. The exercise of these warrants into Ordinary Shares would have a dilutive effect to the holdings of our existing shareholders.
The potential for US Gulf of Mexico hurricane related windstorm damage or liabilities could result in uninsured losses, impacts to customer contracts and may cause us to alter our operating procedures during hurricane season, which could adversely affect our business.
Certain areas of the world such as the US Gulf of Mexico experience hurricanes and other extreme weather conditions on a relatively frequent basis. Some of our drilling rigs in the US Gulf of Mexico are located in areas that could cause them to be susceptible to damage and/or total loss by these storms. Damage caused by high winds, turbulent seas and other severe weather conditions could result in rig loss or damage (some of which may be uninsured), termination of drilling contracts for lost or severely damaged rigs or curtailment of operations on damaged drilling rigs with reduced or suspended dayrates for significant periods of time until the damage can be repaired, which could adversely affect our business. Moreover, our operating procedures may be altered during hurricane season in preparation for such severe weather conditions.
Our drilling operations in the US Gulf of Mexico have been impacted by hurricanes. On August 29, 2021, the Noble Globetrotter II encountered severe weather conditions related to Hurricane Ida in the US Gulf of Mexico. In preparation for the hurricane, the rig successfully secured the well and detached from the blowout preventer without incident. However, during transit, the lower marine riser package, which is a series of controls that sits above the blowout preventer, and a small number of riser joints separated from the rig. We are in the process of completing a full assessment of the rig’s condition. Although we have insurance coverage for property damage with a $10.0 million deductible, our insurance policies may not adequately cover our losses, which could adversely affect our business. Additionally, we have given force majeure notice to the customer of the Noble Globetrotter II in accordance with the governing drilling services contract, although there can be no assurance the customer will agree with our position.
Inflation may adversely affect our operating results.
Inflationary factors such as increases in the labor costs, material costs and overhead costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and general and administrative expenses as a percentage of total revenue, if our dayrates do not increase with these increased costs.
Risks Related to the Pacific Drilling Merger
The integration of Pacific Drilling into the combined company may not be as successful as anticipated, and the combined company may not achieve the intended benefits or do so within the intended timeframe.
The Pacific Drilling Merger involves numerous operational, strategic, financial, accounting, legal, tax and other risks, including potential liabilities associated with the acquired business. Difficulties in integrating Pacific Drilling into the combined company may result in the combined company performing differently than expected, in operational challenges or in the delay or failure to realize anticipated expense-related efficiencies, and could have an adverse effect on the financial condition, results of operations or cash flows of Noble. Potential difficulties that may be encountered in the integration process include, among other factors:
• the inability to successfully integrate the businesses of Pacific Drilling into the combined company, operationally and culturally, in a manner that permits Noble to achieve the full revenue and cost savings anticipated from the Pacific Drilling Merger;
• complexities associated with managing a larger, more complex, integrated business;
• not realizing anticipated synergies;
• the inability to retain key employees and otherwise integrate personnel from the two companies and the loss of key employees;
• potential unknown liabilities and unforeseen expenses associated with the Pacific Drilling Merger;
• difficulty or inability to comply with the covenants of the debt of the combined company;
• integrating relationships with customers, vendors and business partners;
• performance shortfalls, including operating, safety, or environmental performance at one or both of the companies as a result of the diversion of management’s attention caused by completing the Pacific Drilling Merger and integrating Pacific Drilling’s operations into the combined company; and
• the disruption of, or the loss of momentum in, each company’s ongoing business or inconsistencies in standards, controls, procedures and policies.
Additionally, the success of the Pacific Drilling Merger will depend, in part, on the combined company’s ability to realize the anticipated benefits and cost savings from combining Noble’s and Pacific Drilling’s businesses. The anticipated benefits and cost savings of the Pacific Drilling Merger may not be realized fully or at all, may take longer to realize than expected or could have other adverse effects that Noble does not currently foresee. Some of the assumptions that Noble has made, such as the achievement of certain synergies, may not be realized.
As noted above, certain shareholders own a substantial percentage of the Ordinary Shares. Certain of such shareholders may also have received additional Ordinary Shares in the Pacific Drilling Merger. As a result, the risks relating to concentrated ownership of the Ordinary Shares, described above in, “—Risks Related to Our Business and Operations—Future sales or the availability for sale of substantial amounts of the Ordinary Shares, or the perception that these sales may occur, could if the Ordinary Shares are listed on a national securities exchange, adversely affect the trading price of the Ordinary Shares and could impair our ability to raise capital through future sales of equity securities,” would be increased.
Risks Related to the Second Lien Notes
Noble conducts substantially all of its business through Finco and its subsidiaries, and the indenture governing the Second Lien Notes contains operating and financial restrictions that may restrict Finco’s business and financing activities.
On the Effective Date, and pursuant to the terms of the Plan, Finco issued an aggregate principal amount of $216$216.0 million of Second Lien Notes. The Second Lien Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured second-priority basis, by the direct and indirect subsidiaries of Finco that are Credit Parties under the Revolving Credit Facility. The Second Lien Notes and such guarantees are secured by senior priority liens on the assets subject to liens securing the Revolving Credit Facility, including the equity interests in Finco and each guarantor of the Second Lien Notes, all of the rigs owned by the Company as of the Effective Date or acquired thereafter, certain assets related thereto, and substantially all other assets of Finco and such guarantors, in each case, subject to certain exceptions and limitations. Neither Pacific Drilling nor any of its subsidiaries is a subsidiary guarantor of the Revolving Credit Facility or the Second Lien Notes, and none of their assets secure the Revolving Credit Facility or the Second Lien Notes. Finco is entitled to pay interest on the Second Lien Notes in the form of PIK Notes at its option in lieu of paying cash interest. As a result, we cannot assure you that Finco will make cash interest payments on the Second Lien Notes. The payment of interest through PIK Notes will increase the amount of Finco’s indebtedness and increase the risks associated with its level of indebtedness.
Noble conducts substantially all of its business through Finco and its subsidiaries. The primary restrictive covenants contained in the indenture under which the Second Lien Notes were issued limit Finco’s ability and the ability of certain of its subsidiaries to pay dividends or make other distributions or repurchase or redeem its capital stock and certain indebtedness, create liens securing certain indebtedness, incur certain indebtedness, consolidate, merge or transfer all or substantially all of its properties and assets, enter into transactions with affiliates and dispose of assets and use proceeds from the dispositions of assets.
Finco’s ability to comply with the covenants and restrictions contained in the indenture governing the Second Lien Notes may be affected by events beyond its control. If market or other economic conditions deteriorate, Finco’s ability to comply with these covenants and restrictions may be impaired. A failure to comply with the covenants, ratios or tests in the indenture governing the Second Lien Notes, if not cured or waived, could have a material adverse effect on Finco’s and our business, financial condition and results of operations. Finco’s existing and future indebtedness may have cross-default and cross-acceleration provisions. Upon the triggering of any such provision, the relevant creditor may:
• not be required to lend any additional amounts to Finco;
• elect to declare all borrowings outstanding due to them, together with accrued and unpaid interest and fees, to be due and payable (and, with respect to Finco’s secured indebtedness, foreclose on the collateral securing such indebtedness);
• elect to require that all obligations accrue interest at the default rate provided therein, if such rate has not already been imposed;
• have the ability to require Finco to apply all of its available cash to repay such borrowings; and/or
• prevent Finco from making debt service payments under its other agreements, any of which could result in an event of default under the Second Lien Notes.
If any of Finco’s existing indebtedness were to be accelerated, there can be no assurance that it would have, or be able to obtain, sufficient funds to repay such indebtedness in full. Even if new financing were available, it may be on terms that are less attractive to Finco than the Revolving Credit Facility or the Second Lien Notes or it may not be on terms that are acceptable to Finco.
Item 6. Exhibits
The following exhibits are filed as part of this Quarterly Report on Form 10-Q.
Index to Exhibits
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Exhibit Number | | Exhibit |
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2.1 | | |
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2.2 | | |
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2.3 | | |
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2.4 | | |
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2.5† | | |
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2.6† | | |
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2.7† | | |
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3.1 | | |
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3.2 | | |
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3.3 | | |
| | |
4.1 | | |
| | |
10.1 | | Settlement Agreement, dated as of February 3, 2021, by and among Michael A. Cawley, Julie H. Edwards, Gordon T. Hall, Jon A. Marshall, James A. MacLennan, Mary P. Ricciardello, Julie J. Robertson, and David Williams, Noble Corporation plc and the Paragon Litigation Trust (filed as Exhibit 10.1 to Legacy Noble’s Current Report on Form 8-K filed on February 5, 2021 and incorporated herein by reference). |
| | |
10.2† | | Senior Secured Revolving Credit Agreement, dated as of February 5, 2021, by and among Noble Finance Company and Noble International Finance Company, as borrowers, the lenders and issuing banks party thereto from time to time, and JPMorgan Chase Bank, N.A., as administrative agent, collateral agent and security trustee (filed as Exhibit 10.1 to Noble’s Current Report on Form 8-K filed on February 8, 2021 and incorporated herein by reference). |
| | |
10.3 | | |
| | |
| | | | | | | | |
Exhibit Number | | Exhibit |
| | |
10.4 | | |
| | |
10.5 | | |
| | |
10.6 | | |
| | |
10.7 | | |
| | |
10.8 | | |
| | |
10.9* | | |
| | |
10.10* | | |
| | |
10.11* | | |
| | |
10.12* | | |
| | |
10.13* | | |
| | |
10.14 | | |
| | |
10.15* | | |
| | |
10.16* | | |
| | |
10.17* | | |
| | |
| | | | | | | | |
Exhibit Number | | Exhibit |
| | |
10.18* | | |
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10.19* | | |
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10.20* | | |
| | |
10.21* | | |
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10.22*10.1* | | |
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10.23 | | |
| | |
10.24 | | |
| | |
22.1 | | |
| | |
31.1 | | |
| | |
31.2 | | |
| | | | | | | | |
Exhibit Number | | Exhibit |
| | |
| | |
31.3 | | |
| | |
31.4 | | |
| | |
32.1+ | | |
| | |
32.2+ | | |
| | |
32.3+ | | |
| | |
32.4+ | | |
| | |
101.INS | | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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| | | | | | | | |
Exhibit Number | | Exhibit |
| | |
101.SCH | | Inline XBRL Taxonomy Extension Schema Document. |
| | |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| | |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document. |
| | |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
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104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* Management contract or compensatory plan or arrangement.
† Certain portions of the exhibit have been omitted. The Company agrees to furnish a supplemental copy with any omitted information to the SEC upon request.
+ Furnished in accordance with Item 601(b)(32)(ii) of Regulation S-K.
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.
Noble Corporation, a Cayman Islands company
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/s/ Richard B. Barker | | May 7,November 5, 2021 |
Richard B. Barker Senior Vice President and Chief Financial Officer (Principal Financial Officer) | | Date |
| | |
/s/ Laura D. Campbell | | May 7,November 5, 2021 |
Laura D. Campbell Vice President, Chief Accounting Officer and Controller (Principal Accounting Officer) | | Date |
Noble Finance Company, a Cayman Islands company
| | | | | | | | |
/s/ Richard B. Barker | | May 7,November 5, 2021 |
Richard B. Barker Director, Senior Vice President and Chief Financial Officer (Principal Financial Officer) | | Date |
| | |
/s/ Laura D. Campbell | | May 7,November 5, 2021 |
Laura D. Campbell Vice President and Controller (Principal Accounting Officer) | | Date |