NE - Earnings call transcript Q2 2022

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Ian Macpherson

Good morning, everyone. Welcome to Noble Corporation’s Second Quarter 2022 Earnings Conference Call. We appreciate your continued interest in the company.

You can find a copy of our earnings report issued yesterday evening, along with the supporting statements and schedules in our website at noblecorp.com.

Joining me today are Robert Eifler, President and Chief Executive Officer and Richard Barker, our Senior Vice President and CFO. call Joey Denton, Operations. Kawaja, the and President, on and Contracts; Vice joining are Vice Blake Marketing Also President of

today’s begin Q&A. will call, remarks, For by followed with prepared we

may During of materially of the statements. to expectations various actual and in respect previous related our from statements certain risks and associated with could not Many uncertainties for results our the to are and are SEC. combination, Noble release more today. management are read forward-looking to non-GAAP and risks that cause with we business facts. filings not previously should filings information to this we differ to forward-looking assumptions therefore matters any to subject companies course our Also SEC disclosure press does business historical and statements carefully make these future call, and uncertainties financial yesterday factors and our the regarding impact note including based including with the regarding risks our are certain our ongoing uncertainties. Drilling. Investors and and and Such current Please statements obligation combination could announced including our assume on update call refer in that other Maersk our results referencing statements, in with such forward-looking these measures business issued

Robert that, earnings measures, issued I’d disclosure With the these associated supplemental the including most with our can You and our over required to turn filed to the yesterday GAAP report for an CEO, call directly the find Eifler. reconciliation like in and SEC. comparable measure

Robert Eifler

welcome Ian to Noble. and you, Thank

recession on Richard review Welcome everyone operations market have the for business over Noble’s the to very off the our offshore on before turning with you our us quarter. commentary an drilling environment some for lens global macro to rigs. and to I better context, in but will headlines, with concerns global appears We in results on our point view market to start well nature This our follow The glad the year highlights Starting of and as of also call the interest I’ll activity, with to positive. with us. call today. improving and joining tender frequency financial quite are offshore has global been have frequented rates customer than conversations as inflation industry through XXXX. far

sub needs projects over more were reliable developments and world the breakeven on represent sources gas at nearly than some price energy and And of below from and year majority have Next Data is better sanctioning up dollars X next from of to oil perhaps gas visibility and XX% those per $XX there. be The Rystad and of to the a compellingly, energy sustainable, indicate we this directed affordable be globe. and the year. barrel. of most offshore. over XX% continuing barrel years, economic, trillion improvement shaping to an will secure per oil $XX the occur oil of offshore which project

sight as some XXXX, space, free will detail and all let our on Over calls, offshore cost second rates. continue drilling day the Noble the as see the to would market, management step give Noble’s stated market where improvement global last progress in is the current But benefited we moment. year. and materially across to That floater improvement ultra-deepwater all first results that up XXXX reset higher our increasingly the two to into with we’ve business tight improved a as utilization, look half from we we segments. Richard evident financial quarterly improving of comment in utilization above contracts the quarter cash and the by important drillship results across meaningfully me through in state contracting past our saw is high team. results our This more day In quarter-over-quarter reclass on with flow further X of demand XX%. increased in activity solid a improve meaningful the marketed in work years second quarter rates, material recovery Revenue, ships, XXXX ships with approximately signifying region. well that spectral committed X for of and West Africa, EBITDA

now years quarter, rates for Contract of and rig rates in work options of leading-edge South day. mostly with Brazil announced range there was of the activity discoveries $XXX,XXX Further X.X continue. Here significant ExxonMobil and to UDW previously over demand approximately Gulf also region in our the the the announced years. by dominated in the we follow-on comprised extension were and quarter per produce with U.S. Mexico, America the contracted extensions growth in X during continues in region the coming south, expect during the year

fleet will the I future completed drilling with Kozack on XX-year the CNOOC about of Faye approximates a to $XXX,XXX $XXX,XXX which contract maintenance, and routine Noble the with includes Noble now clean Mexico after undergoing is Mexico, its of and pressure for the awarded contract X-well services basis. day QX and specifically Globetrotter Gulf, rate Noble mobilize Also the Shell contracts rig Petronas. in was a in a LLOG per day, which at managed by the Gulf more in per Speaking

local South, demand. is prolific position. developing and fields role and the in to Basin to market Moving holds our exploring will support the proud critical unmatched and leading play for operational Noble world’s invest continue is these capabilities in energy Guyana-Suriname the growing our communities and to meeting our potential

combination the two Corp’s Regina contracting the and second in address Across Drilling. and APA the and garnered Gerry de to Allen in much – concerns of planned worked UK second Souza fleet first Noble market the North for Trinidad with the of Surname six Tobago. Atlantic, Maersk its Noble throughout for the exercise our the Noble the competition authorities quarter of in Noble team regional included the second exercise Sea the regarding activity our as options quarter, option the Our attention of

of expect to Drilling sale and agreement for concerns on final is we’ve addressing decision their competition results. Noble’s we to CMA’s the after X an We some ruling October. their this our provides adequacy And As entered share the agreement The of fleet Shelf further will Richard month. the Sea transaction sell and financial North an divestments’ early overview final proposed master conditioned transaction in million. $XXX on look the thoughts to on forward previously into jack-ups I announced, closing

Richard Barker

$XXX all. and versus outlook then today, quarter Contract for brief second services drilling remainder for of our results discuss of second good remarks million the of revenue Thank morning I first the the provide some million and quarter our XXXX. you, In my Robert the plan quarter $XXX highlights year. for totaled to

the of of the quarter’s in of for client $X This the million and flow the second X EBITDA $XX the second days the operating $XX de revenue cash was $X.XX commencement of $XX for million. increases positively operating adjusted This rigs million Gerry in day EBITDA the was impacted a Adjusted rate previous per million for Noble investments. of under $XX Allen in share. an XX% million full in second was was approximately quarter margin Noble expenditures quarter to Guyana, operations quarter, for quarter for which million translates reimbursable totaled Souza, diluted or includes the Capital quarter. positive by the Free to March in Regina X compared the Net the quarter impact the CEA. income full a $XX quarter. quarter Guyana

million $XX Our just balance total over extremely of million. strong, sheet with remains over $XXX debt and net liquidity of

the We two billion. does Middle X.X-year in our backlog jack-up East, divestment continue rigs. include to the was sale potential the does adjust of post backlog. not end see June And our and as contracts in increases XX, at stood which not signed revenue it $X.X quarter This of the for

for time. today in our more long backlog double backlog discussions us had have combination a and is ongoing Our The than year. confidence the customer of stood and give end visibility we at almost profile this financial backlog our last of where

was The second significant we an in a results. our inflection financial as for company, step up important quarter the realize

to of step-ups. into expect As we further move we year, the the second half see

the of start is a anticipate work jack-ups, work mobilizing CEA to the quarter Sam the as before the Noble as well that Noble Hartley quarter in work, increase to The X Mexico CNOOC. in new the a as to full is September of rate will to a Globetrotter as that returning offset Houston the the third expected fourth an the and X pickup contract Noble well returning be from the to Kozack. contribution in third rate. this full jack-ups quarter Colbert The We for benefit quarter benefit with X Faye undergoing CEA quarter partially from expected by rate is on to the maintenance I Noble this highest

Turning outlook that maintaining now the to not rigs divestment of It previously to for guidance our full XXXX, into Maersk we know the more year disclosed our take guidance. account important is our does transaction are broadly.

the our by half year XXXX, guidance, QX. we the EBITDA rate QX implied to $XXX over be second average in with million adjusted full can As of quarter per expect of exit above

impacted We challenges. and inflationary continue by pressures be chain to supply

from financial the for expectation changed year. has not of last pressures these Our impact

sheet will the of in the business the of half Maersk in in believe that level cash and is flow forward simple of year support will cash of diversified be need our And to our classes. compelling for well-positioned hand about chip spend range attractive a terms, improving while unique asset back the expect continue the on compared today’s more rig the able to XXXX. generate specifics transaction. market, after outlook blue We look and levels being this remarks. Noble second encouraged profile financial qualities remain the prepared second Expected to company meaningful to half be my customers different realize and We to financial this of concludes without the by also we sharing growth closing the after real-scale to premium company In of extremely increase combination. That total conservative as call flow I average expenses to capital. and high now the closing single-digit the to to Robert. earnings the balance regions, from We combination across and markets will

Robert Eifler

to continue be with in leader to Drilling the we these create Noble priorities. drilling execute truly central transformational a for and The on Maersk will to XXXX Richard. as dynamic market. new priorities Thanks, offshore is strategic our year combination a

before to X. milestones anticipated remaining the two is have transaction, We which closing be October

Firstly, awaiting UK from mentioned CMA, hopeful receive previously, which the as in weeks. for the clearance we to final coming are we I are

look for lead of sustainability, to working potential tender was the sheet transaction offshore mid-September. safety and When already to flow dedication chain. past year, have performance $XXX Since will at the balance that committed the the the The and operational market November customers is return On companies about point leading the capability and to through our value run safely industry synergies combined Drilling people tomorrow Danish the the driven then, excitement for was scale will million have as to on individually Noble offshore of Maersk transaction allow with both outlook have remains is and we the utilization, organization overwhelmingly The which industry today and company two critical combined excited shareholders. and transaction the near priority which highly any cash least entire very to with and excellent a best-in-class like Secondly, belief future. combined last a organization stronger thank the need my strong at merits the generate to the best platform capital and to Noble assets, the rationale. And innovation recent officially of Noble for in and I everyday. their technology the us and offshore customer of operating than and we I’d culture in offer, launch complete component our conservative will stated strong to and to performance, announced in I further. met free outlook even the grown transaction, company onshore stronger the in satisfaction. deliver close and to to by of had a a the forward

Ian Macpherson

now the Angela, we are call questions to Thank ready and for open answers. you, Robert.

Operator

take our ahead. will with Fredrik from Securities. Clarkson We Please now Instructions] Stene first go [Operator question

Fredrik Stene

financial with. strong of Hey, a guys I and I quarter. questions, congratulations very a have but on will performance myself limit to this bunch begin

we the fee into half So I expect etcetera year should that will here, of saying here. a expected a I And am help bit on rates second you wanted are lot the to there. sure more that the performance step-ups some touch going the other

are every before to I March those. then correctly, with and rate and doing you If start September you negotiated lag have beforehand. remember let’s whatever start So, you this you this see

to Exxon happen to I into addition new am rate you negotiate with be in in sure meeting a going will So getting year. to next September, also what’s

wondering we on fleet to I could see on we are Mexico So the was March of when see your give expect are agreeing you color Gulf if of kind the U.S. September this part what in of whatever going next year for any given what you that re-pricing in to now?

Robert Eifler

thanks. Yes, Right.

and market timeframe of course the already just rate to set. clear, be is year. rate through won’t set come, year. It’s come September rate March of the we will April into in was a the point kind effect then come kicks – this set includes until will set So next year, the that will rate X that the discount, that rate that That this at later what of in that in be

haven’t started. called what’s conversations conversation. quarter those a That’s fourth So,

account the quarter. market off of that available the all data And conversation will take fourth that kicks so, when in into

Fredrik Stene

seems given are it should rates we like expect step way market presume up the I another Robert, Okay. than going. the

nice of example, other also have the rigs new and Lafosse later as up for de such contracts rest the some Souza, part a on in firm Stanley year, off points, the the their in the you you but here, this have Gerry rolling November. fleet of Following now few data

bring wondering, work? in X example, as to on are I addition happening can any the for new those comment in back assets now contracts, you if at opportunity if Brazil, stack also, work you So to was looking you are are And you for given to well seeing that? for what’s them looking

Robert Eifler

Blake, you want to?

Blake Denton

Yes, sure.

is Fredrik. question, Blake So the thanks here. for This

ships. the you opportunities we with their we others. the on conversations well the when legacy So are both in the current say at Drilling look front space, those different and mentioned the particularly by there having of as operators is encouraged Pacific lay of you drillships some wide would I are as nature that

closely. would got visibility for with question like I mean, a respect programs there Obviously, we So we your good have Brazil quite the country we history feel Petrobras, have ongoing watching on have both second after with Petrobras. I say to we specifically that. been in and

an the I interesting dynamics are us. now that opportunity for it’s think such

reactivated So in dynamics And we that’s to the forward participating in bode look here does are opportunity tender it due weeks. the Yes, for a couple there. an rigs. of

Robert Eifler

Yes.

of some I – tender, will everyone because those to quickly add It’s will is So, public That’s justify could be that. nature about looking the that’s how I it’s think on it’s interesting, opportunities. visibility just to – term that think get the reactivations. – market pretty I longer term the going at

about which justify we the reactivation, quite And could going has changed be a see to a to so am we approach that our said but for would I repeat, manner have I disciplined are come nothing times we conservative. part, opportunity few would through. any will which reiterate happy what in

Fredrik Stene

That’s will very color, from you that’s I much. helpful me – now. Thank Thanks. so guys. for it

Robert Eifler

Thanks.

Operator

Thank you.

Your of question from with Greg BTIG. next Please comes go line Lewis ahead. the

Greg Lewis

by say, any am I my just we to morning, question the the per for of we when is se. taking Mexico drillship of we clearly whole Blake, of specifically guess just rates guess think or everybody. across about let’s is strong, – globally, Thank Africa is market, market I there I comment my look rigs look pickup not we in picking good up. and Gulf pockets and at first Hey, what you for questions. a But a Robert go as the tightness. the West as fleet, you maybe strength or and Maersk it looking as on and even in

now around I two up, utilization? of guess tight i.e., more air going is starting about As whether should about don’t between a think of of terms does next thinking should in that. more whitespace of to thinking Asia, over that’s mentioned it in know. the does think doesn’t, obviously that there differ assume XX thinking pocket few XX-day kind about a I a of you continuation is, enough about be that of or rigs be quarters, location And it are contracts bull Gulf i.e., to One does, matter region, questions we maybe market parts where market is I be we we in the maybe rolling we rig Mexico? hey, in I by off but in it

Robert Eifler

Yes.

feel I think free in. like I’d someone to jump say

short XXX% don’t I think utilization I market. is to the back answer we think are

One so value we that in I proud of very, does a see think opportunities, we little short-term it of CEA Mexico our but higher visibility. and think have the I are reasons are that remains U.S. because number the the much that Guyana, nature. of there of Regionally, very that in region Gulf so matter bit,

is whitespace there So there.

I think those just to that the longer be Africa opportunities. And there. nature by I in more makes sense term just operations the of differences West tend think

them they of So they in longer are general. fewer are and

said Brazil. they when think rigs be are some switching think I speaking, have same customers. I But whitespace generally do can for

a significantly if in it’s note I’d you to ago, whitespace. you than point we count able better are where days, year So, for Greg, some were if you recall, but XXX% mobilization very get also a contribution customers. on switching are the to can we not highest on utilization

weighted towards are in market, protection we little conversations whitespace. in coming into cost still are back They recovery much the the more where today play. think revenue they are are than very I bit mobilization a probably

Blake Denton

whitespace it a wasn’t was only contract talking about forecast with add our coverage gaps, things. thus more And to trying couple of would far. just Yes. forecast I I

I mentioned hot the tightening continued Robert coverage. space, think have see a for to when mobilization UDW a we preference we in see market rigs. customer

are outlook So and certainly look on after of forward marketing Maersk. to the fleet with the the close high-quality encouraged again, today assets some we really for our transaction

Greg Lewis

any that maybe of $XXX couple more. just But anything have I guess of there a more money – One is in sale or in deposits then are buyer is is, could that North $XXX And or a required? am question the I absolutely. pending in rigs, sold I a the event And Yes, agreement. agreement could in there Sea that does lot the guess up around believe change event cash? the that wondering that with things. a is, the X come cash and I obviously, of seller roofs have asset still is the event to see cash for of – million been the any not financing the I is a there firm is what million realize counterparty any we unable the

Robert Eifler

Yes.

So, standard financing kind by there It’s of There rule out industry by that XX% the is of is available UK. law, a deposit. deposit. seller and no is

does forward. could going that So, the affect continuing to competition there any want link competition authority not see

Greg Lewis

Great. Okay.

Okay. Thank you Hey everybody. for the time.

Robert Eifler

Thanks. Thanks Greg.

Operator

you. Thank

next Evercore. Your Samantha with ahead. go from question Hoh comes Please

Samantha Hoh

you clean unusual Faye on a congrats scenario maybe it guys, available? I wanted was really wanted that white one a Was guys really well for question, a Greg’s if XXX space seems rate the had little bit opportunistic just maybe to quarter. more dig great that. very where just Kozack, could a back in wondering of just I about one they a contract. you that that talk Hey, certain to

Blake Denton

question. Samantha, is for thanks the Sure. Blake. Yes. This

Mexico available the contract the to It’s great the the – Gulf demands the just and it’s of a the particular think working we of nature in LLOG. capabilities rig the forward at with I rigs the look time. of this against program of

and some with for relationship long-standing to work have do time. with some a have we been We trying them them

versus So, rigs just specs of exciting rate opportunity. the the I an But rig alignment is again, of available. if it’s the depiction required think the a

Samantha Hoh

ultra basins? I progressing? geographic how next maybe deepwater we side. then in see leading up are them talk West on that you But realized kind Africa sort pushing the to Okay. is geographically? day rate do going broadly, are of can edge be of more the the to the rates about of where trending Is terms this the other or And how you catching U.S. year, sometime the guys

Robert Eifler

Yes. regions I see expected beginning to one of and up And less were this for the a the [indiscernible], with other we year at discount term. the we said of think was catching year, U.S. thing

inflicted through I that I this a probably I be Brazil and proven the through these some what out But slight is a think will think think premium America I year. think think Don’t great is year, there when for this into do term in in where West normalized have term. there we the discount couple tenders But still in rates that a market has between come yet. as everybody. for of also have progressed still have There U.S. South Mexico. think Africa weeks, remember, a and for – somewhat is of visibility, we that Gulf I

Blake Denton

Yes. further in that fixtures, I mean any in Robert it show see they as catching and mentioned Africa, are I both there, Samantha. we up. Brazil, to don’t have add West the will anything will

Samantha Hoh

of rig you could seeing Okay. costs? are course that quickly guys us of And reactivation like, And just reactivated? how what get again, in remind you terms

Blake Denton

Sure.

So, anyone else. we have reminder the two for as a

the pandemic the generation really under Of the got U.S. Pacific. a Meltem more just the that’s overall. Meltem actually those, seventh and that have the rig We is capable rig before That’s Scirocco. the mobilized,

a work. could a a performing longer it million So, at million year, but the which that’s cost, associated with let’s come we shipyard an little and creep say would includes price that’s kind year. year around than a that you work, a one think It labor would bit almost And the $XX the about all certainly right if to And point, it’s $XXX first call out. of all-in this expenses tag.

Samantha Hoh

Okay. Great. Thanks so much, guys. Congrats again.

Blake Denton

Thanks.

Operator

you. Thank

of line Pickering David Smith Your from next comes the with question Energy.

is open. line Your

David Smith

taking the my you for Good questions. solid you. Congratulations Thank on quarter and thank Hey. morning.

Robert Eifler

David. you, Thank

David Smith

in demand ships if of shrinking. is growing, any customer terms? are stretching nervous to So, to of Are getting drill interest they seeing color out? more in forward what secure conversations terms compared rent you procurement are the curious year ago, just manager. give maybe visibility lead any Border availability, be you could you I forward bigger contract I times, a am if on maybe would premium I CNB in availability longer were us seeing picture

Blake Denton

Sure.

So, time we contract term track it’s ticked up. ticked lead ticked it’s up U.S. has in as Gulf Mexico. actually well, of And the up,

behavior is because changing. So, longer there There – is persisting still yes, is to hesitation still necessary. I a contract think than

think still to So, is to behavior basis. try short-term more I contract on the a

don’t a year attention to a more nervous in So, out yet we are to look what are to But do are from a place I customers think description. we with think people a are transition continue I pay lot your things starting where whole to now. where like truly

David Smith

are And terms any that. you in instances to customers have approach they a seeing that a that their market negotiations tender follow-on in Appreciate in tender. question, don’t, But direct where competitive more process? inviting of change for in to recognizing pursuing the versus some countries,

Blake Denton

availability today. that. negotiations the same course, But kind from cases that degree less necessarily the Gulf of to I they followed We other are other of most markets. in want, that Mexico. an in want in and there of have direct customers U.S. the do increase in rigs same cannot seen is that restricted has the markets say And in

to similar through the to I seen the where selecting of control two maybe winning to like process, seven, where tender also way over is trend rigs are numbers a fewer something this of customers four are instead a some think people which that, achieving of have level that. we of So, go five

David Smith

and this moving color. probably that historically, the I improving see in comments that the noting terms mobilization conditions background. more you when just cost could with are one day on Appreciate recovery, up, on contract If and sneak touched Great. we rates

Just color bonus some is provisions? other curious time can around especially give around non-productive you allowance TNCs and if opportunities, cancellation us any

Robert Eifler

the provisions. we improvement seen there good It’s contractual a have point in and

market allocation well. to risk Ts are and we we the in the it improve revenue, the of the the as up, But So, for as improves protection downturn suffered Cs able tightens fought those the and work. hard and as

David Smith

so you Thank much. Great.

Robert Eifler

Thank you.

Operator

further There back Macpherson, call turn questions time. Ian you. are I to no at the Mr. will this

Ian Macpherson

And on thank again interest you participation our continued today for you, look with you your to for in Noble. call Thank speaking your Angela. everyone forward soon. We and

Operator

conference. concludes This today’s

disconnect. now may You

Noble (NE) 9 Aug 222022 Q2 Earnings call transcript