Noble in talks to buy Shell’s interest in Bully joint ventures

Offshore drilling contractor Noble Corporation is in discussions with Shell to receive payout of the Noble Bully II contract and to acquire Shell’s interest in the Bully joint ventures.

Noble said in its quarterly report on Wednesday it had been in discussions with Shell with respect to the ten-year drilling contract, which runs through April 2022, that Shell has with the Bully II joint venture. The Noble Bully II drillship is part of the Bully joint-venture where Shell and Noble each hold a 50% interest.

Noble said that the discussions were at an advanced stage and contemplate that Shell would buy out the remaining term of the drilling contract with the joint venture and that Noble would acquire Shell’s interests in the Bully II and the Bully I joint ventures.

Following completion of the transaction, which the company believes is likely, Noble would be free to market the Noble Bully II worldwide.

In connection with the transaction, Noble would receive a lump sum amount for its fifty percent share of the buyout of the Noble Bully II contract. The drilling contract buyout would approximate the margin afforded under the contract, and the lump sum payment would be net of a nominal amount to be paid for the two joint venture interests, with working capital and other customary adjustments for transactions of this nature.

“We expect to receive the payout in the fourth quarter of 2019. Noble recognized the impairment on the Noble Bully II in the third quarter as a result of the advanced stages of the discussions,” Noble said.

More red ink for Noble

Also on Wednesday, Noble reported a net loss attributable to the company for the third quarter of 2019 of $445 million on total revenues of $276 million.

In the same period of 2018, Noble reported a $81.59 million net loss on total revenues of $279.4 million.

According to the company, the results reflect the impact of a non-cash charge totaling $596 million ($331 million net of noncontrolling interests) relating to the impairment of the drillship Noble Bully II. Excluding the non-cash charge, the company would have reported a net loss attributable of $114 million.

Julie J. Robertson, Chairman, President and Chief Executive Officer of Noble Corporation, stated, “Activity in the offshore drilling market remains encouraging although we experienced the temporary impact of numerous mobilizations across the fleet. These included two drillships and a jack-up, while a third drillship was completing preparations for a transfer that is now in progress.

“These actions were largely responsible for a decline in third quarter of total fleet operating days and revenues when compared to the previous quarter. Two of the drillships, the Noble Sam Croft and the Noble Globetrotter II, have already commenced operations in their new regions, while the jack-up Noble Houston Colbert and the drillship Noble Don Taylor are expected to recommence operations by early and mid-November, respectively.”

Contract drilling services revenues for the third quarter totaled $259 million compared to $275 million in the second quarter. The six percent decline was due, in part, to lower revenues in the company’s floating rig fleet, which reflected the absence of revenues received during the second quarter for the utilization of a managed pressure drilling (MPD) system on the Noble Globetrotter II.

In addition, total fleet operating days declined in both the floating and jack-up fleets, reflecting temporary out-of-service periods on the drillship Noble Don Taylor and the jack-ups Noble Houston Colbert and Noble Scott Marks. The lower fleet operating days resulted in a decline in third quarter utilization to 76 percent compared to 82 percent in the second quarter.

Contract drilling service costs in the third quarter totaled $176 million compared to $169 million in the second quarter. The four percent rise in costs was associated with the Noble Don Taylor and the Noble Houston Colbert as both units prepared for their next drilling assignments.

Also, higher costs were experienced on the jack-up Noble Joe Knight as the rig approached commencement of its initial contract offshore Saudi Arabia. These items were partially offset by a reduction in operations support costs.

Utilization down 

Utilization in the third quarter of the company’s 12 floating rigs was 63 percent compared to 67 percent in the second quarter. Excluding three cold-stacked units, active utilization of the floating rig fleet was 83 percent in the third quarter compared to 89 percent in the second quarter.

The decline in utilization was due primarily to fewer operating days on the drillship Noble Don Taylor, which spent the quarter preparing for its relocation to Guyana where the rig is expected to start a one-year contract by mid-November. Floating fleet revenues declined nine percent in the third quarter when compared to the second quarter. In addition to the out-of-service days on the Noble Don Taylor, the decline was also attributable to lower revenues from the Noble Globetrotter II following the completion of a drilling program during the second quarter in which the rig utilized the company’s MPD system.

Utilization in the third quarter of the company’s 13-rig jack-up fleet was 89 percent compared to 98 percent in the second quarter and reflected a six percent decline in operating days.

The decline was due principally to relocation of the Noble Houston Colbert to the UK North Sea following the completion of a drilling program offshore Qatar, and to a regulatory inspection of the Noble Scott Marks. These out- of-service events were partially offset by a full quarter of operations on the Noble Johnny Whitstine. The Noble Houston Colbert is expected to start an estimated 150-day contract in the UK North Sea by early November 2019. The Noble Scott Marks completed its regulatory program and restarted operations in late September offshore Saudi Arabia.

At September 30, 2019, the company’s revenue backlog totaled approximately $2 billion, of which an estimated $303 million is related to the contract with the Bully II joint venture for the Noble Bully II.

Robertson noted, “As we observe increased project sanctioning across our industry, I believe Noble’s active fleet has superb positioning as we enter 2020. In addition, the company’s liquidity position remains solid as we move into an improving operating market.”

Offshore Energy Today Staff

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