Texas-headquartered offshore drilling contractor Noble Corporation is feeling buoyant over the future opportunities for its rig fleet, especially the floater segment, as the U.S.-based player anticipates a further rise in day rates and the number of long-term deals. This will enable the drilling giant to bolster its fleet utilization level. With new multimillion-dollar assignments in the bag, the firm’s total backlog currently stands at $4.4 billion.
Noble Voyager drillship; Source: Noble Corporation
The current upcycle has enabled all players in the offshore drilling arena to boost their fleet utilization and day rates, thanks to a rise in rig demand, as hammered home by Noble’s peers, Transocean and Valaris,which also increased their contract backlogs in the first quarter of 2024 to$8.9 billion and $4 billion, respectively.
Following the disclosure of its 4Q 2023 earnings, Noble secured a new batch of contracts and extensions for its rig fleet with a total contract value of approximately $215 million, including mobilization payments. As a result, the U.S. drilling heavyweight’s backlog totals $4.4 billion as of May 6, 2024.
The firm’sNoble Venturerseventh-generation Samsung 96K drillshipwas awarded a three-well contract for an estimated 150 days with Trident Energy in Equatorial Guinea, which is expected to begin in June 2024. In addition, the rig was hired for two wells, plus options, by Rhino Resources in Namibia at a day rate of $410,000, excluding additional fees for MPD services, mobilization, and demobilization fees.
These new contracts are slated to follow in direct continuation of the rig’s current assignment with Tullow which is anticipated to end early due, in part, to drilling efficiency outperformance. The 2014-built Noble Venturer drillship can operate in water depths of 12,000 ft and its maximum drilling depth is 40,000 ft. This rig can accommodate 230 people.
The Noble Viking drillship won a deal for three wells plus one well option with Prime Energy in the Philippines at a day rate of $499,000, excluding additional fees for MPD services, mobilization, and demobilization fees. The 2013-builtNoble Vikingdrillship can accommodate 230 people. With a maximum drilling depth of 40,000 ft, the rig can work in water depths of 12,000 ft.
TheNoble Voyagerdrillship got a hold of a one-well option exercised by Petronas in Suriname for a minimum term of 60 days at a daily rate of $470,000. The 2015-built Noble VoyagerSamsung 96K drillship can accommodate 230 people. This rig can operate in water depths of up to 12,000 ft and its maximum drilling depth is 40,000 ft.
The Noble Innovatorjack-up rig recently landed a one-well extension with BP in the UK at a day rate of $145,000. However, two well-based options remain under the contract, thus, this drilling assignment may be prolonged further. The2003-builtNoble Innovatorjack-up rig is of Gusto MSC CJ 70 – 150 MC design. Constructed at Hyundai Heavy Industries Ulsan in Korea, the rig can accommodate 120 people.
Robert W. Eifler, President and Chief Executive Officer (CEO) of Noble Corporation, commented: “Our first quarter results reflect continued strong operational performance in a rising market, resulting in a 32% improvement in adjusted EBITDA compared to a year ago.
“Following the short-term slow down in deepwater contracting activity during late 2023, first quarter contracting momentum for 7G rigs has been back on trend for this up-cycle, with a significant pipeline of contracts due to come to market this year for 2025 and 2026 project commencements.”
How did Noble fare in 1Q 2024?
The Texas-based company’scontract drilling services revenuefor thefirst quarter of 2024totaled $612 million compared to $609 million in the fourth quarter of 2023 and $575 million in 1Q 2023, with the sequential and annual increase driven by higher fleet utilization.
While the firm’smarketed fleet utilizationwas 72% in 1Q 2024, compared to 68% in the previous quarter thecontract drilling services costsfor the first quarter of 2024 were $390 million, up from $374 million in the fourth quarter of 2023, with elevated contract preparation and mobilization expenses preceding several pending contract commencements.
Noble’snet income decreased to $95 million in the first quarter of 2024, down from $150 million in the fourth quarter of 2023 and $108 million in 1Q 2023 while adjusted EBITDA decreased to $183 million in the first quarter of 2024, down from $201 million in the fourth quarter of 2023 and up from $138 million in 1Q 2023.
The offshore drilling player’snet cashprovided by operating activities in the first quarter of 2024 was $129 million, capital expenditures were $167 million, and free cash flow (non-GAAP) was a loss of $38 million. The rig owner’sbalance sheetas of March31, 2024, reflected a total debt principal value of $600 million and cash (and cash equivalents) of $212 million.
The offshore drilling giant’smarketed fleet of sixteen floaterswas 76% contracted through the first quarter, compared with 75% in the prior quarter. The company underlines that industry utilization has stabilized over the past year, with contracted utilization of the marketed fleet of ultra-deepwater floaters in the mid-90% range.
Furthermore, the day rates for tier-1 drillships are approaching or eclipsing $500,000 per day, with discounts applicable for longer-term duration fixtures and lower specification sixth-generation floaters. Within the latter category, the firm’s twoGlobetrotterdrillships and theNoble Developercontinue to have a limited backlog, thus, they are being actively marketed for 2024 and 2025 opportunities.
Theutilization of Noble’s thirteen marketed jack-upsrose to 67% in the first quarter, up from 61% utilization during the prior quarter. While the international jack-up market is digesting a release of several rigs from the Middle East, the U.S. player is adamant that this dynamic has not impacted the North Sea and Norway markets where its jack-up fleet is primarily concentrated.
The rig owner explains that the harsh environment jack-up day rates are in the mid $200,000s per day in Norway and $130,000 to $150,000 per day in the other North Sea countries.
Noble reaffirms previous expectations for 2024
The Texas-headquartered giant has confirmed a guidance range for total revenue of $2.55 to $2.7 billion, adjusted EBITDA in the range of $925 million to $1.03 billion, and capital additions – net of reimbursements – between $400 to $440 million for the full year 2024.
Commenting on this outlook, Eifler pointed out: “Offshore drilling fundamentals, especially for high-spec floaters, remain supportive of a continuing multi-year uptrend in both dayrates and average term duration, while near-term white space for lower-spec units persists as a 2024 headwind.
“Our outlook for an earnings and cash flow inflection in the second half of this year is well supported by several meaningful contract startups that are on schedule to commence over the next several months. As Noble progresses into this next stage of earnings growth, we will remain committed to returning the significant majority of free cash flow to shareholders via dividends and share repurchases.”
While finding more work for its rig fleet, the offshore drilling giant is stepping up its decarbonization game by slashing the carbon footprint of its drilling operations with many different tools, including the fleetwide rollout of adigital emission-monitoring solutionthat has been fitted on 29 rigs.
