Offshore drilling scene ‘very promising’ for Noble, as it works on bringing to life ‘leading’ market player

Offshore drilling contractor Noble Corporation has reaped the benefits of its combination with Maersk Drilling, as shown within its results for the fourth quarter and full-year 2022. With the integration of Maersk Drilling well underway, Noble has already realised over $50 million of synergies.

With the global energy crisis in full swing, the oil and gas players have recorded all-time high profits during 2022, thanks to higher energy prices and measures to strengthen energy security. As a result, the offshore drilling market sped up its emergence from the slowdown imposed by the COVID-19 pandemic.

As countries and companies opted to pursue new hydrocarbon resources, the demand for rigs increased, pushing day rates up, which is hammered home by the 4Q and full-year 2022 results announced by Noble’s rivals – Valaris and Transocean – confirming that the new contracts came with higher day rates.

While Transocean’s total fleet average revenue efficiency was 98 per cent in 4Q 2022 and 96.4 per cent for the full-year 2022, Valaris delivered revenue efficiency of 98 per cent in the fourth quarter of 2022 and 97 per cent for the full-year 2022.

Within its results for the fourth quarter and full-year 2022 released on Monday, 27 February 2023, Noble explained that its contract drilling services revenue for the fourth quarter of 2022 totalled $586 million, compared to $289 million in the third quarter of 2022 and $192 million in 4Q 2021. This increase is primarily attributable to the business combination with Maersk Drilling.

The offshore drilling giant’s marketed fleet utilisation was 88 per cent in the three months that ended on 31 December 2022, compared to 89 per cent in the previous quarter. The company explained that the contract drilling services costs for the fourth quarter were $366 million, up from $186 million in the third quarter of 2022.

Noble’s adjusted EBITDA for the three months that ended on 31 December 2022 was $157 million compared to $97 million in the third quarter of 2022 and $12 million in the fourth quarter of 2021. On the other hand, the firm’s capital expenditures totalled $77 million in the fourth quarter and $194 million for the full-year ending on 31 December 2022. 

The drilling contractor’s net cash provided by operating activities for the fourth quarter was $171 million and free cash flow was $106 million. As the business combination with Maersk Drilling closed on 3 October 2022, the results for the fourth quarter reflect the combined company for 90 out of 92 days of the period.

Robert W. Eifler, President and Chief Executive Officer of Noble Corporation, remarked: “Since the closing of the merger, our team has come together impressively. As a newly combined company, we generated strong free cash flow, implemented a return of capital programme, and are well on track to achieving our synergy target of $125 million, with $50 million realised as of the end of 2022.

“I would like to thank all of our employees for their tremendous effort and commitment throughout the critical first few months of our integration. I’d also like to thank our customers for their continued trust and support as we pursue our quest of creating the leading offshore drilling company.”

Noble’s balance sheet at the end of the fourth quarter of 2022 reflected total debt of $673 million and cash – and cash equivalents – of $476 million. Subsequent to the end of the fourth quarter, the company elected to pay off the $150 million Danish Ship Finance term loan with excess cash on the balance sheet.

During 4Q 2022, the firm executed $86 million of share repurchases, including the compulsory purchase of legacy Maersk Drilling shareholders in November and open market share repurchases conducted during December pursuant to Noble’s previously announced share repurchase programme, with additional share repurchases in January totalling $10 million. Noble’s backlog on 31 December 2022 stood at $3.9 billion.

Noble revealed that its marketed fleet of sixteen floaters was 91 per cent contracted through the fourth quarter of 2022, compared with 96 per cent utilisation on nine floaters in the prior quarter. This sequential change reflects the addition of seven UDW rigs added from the legacy Maersk Drilling fleet.

The company’s Tier 1 drillships remain at or above 95 per cent marketed utilisation, with day rate fixtures steadily increasing, presently in the low to mid $400,000s per day range. Since the prior fleet status report in early November 2022, Noble has secured 24 months of additional backlog across four sixth-generation and seventh-generation drillships at an average day rate above $420,000.

Noble’s sixteen marketed UDW rigs are currently 75 per cent contracted throughout 2023 with visibility toward securing additional utilisation for a portion of the remaining availability for this year, although some contract gaps and SPS time will remain uncontracted.

In addition, the Noble Globetrotter I drillship remains off contract since October 2022, pending permit approvals in Mexico. Due to permitting delays, the drillship was supposed to start its previously disclosed contract with Petronas in Mexico in late January 2023, but the start date has been bumped to March 2023. 

Additionally, the rig was awarded a new contract with Shell for 70 days of plug and abandonment work in the U.S. Gulf of Mexico at a day rate of $375,000, which is expected to begin in July 2023.

The 2011-built Noble Globetrotter I drillship is of Globetrotter Class design. It was constructed at STX Shipbuilding & Huisman and can accommodate 180 people. The rig’s maximum drilling depth is 40,000 ft and can operate in water depths of up to 10,000 ft.

The average day rate across Noble’s $2.7 billion floater backlog is approximately $400,000, and with over half of its 2024 floater days uncommitted, the company says that “an upward trajectory for repricing the fleet is visible based on current market dynamics.”

Furthermore, Noble underlined that the utilisation of thirteen marketed jack-ups was 85 per cent in the fourth quarter of 2022, compared with 82 per cent utilisation on eight marketed jack-ups during the third quarter of 2022. The sequential change in fleet composition reflects the addition of ten jack-ups from the legacy Maersk Drilling fleet and the sale of five legacy Noble jack-ups to a subsidiary of Shelf Drilling, as part of the business combination with Maersk Drilling.

During 4Q 2022, the Noble Innovator jack-up was awarded a one-year contract with BP in the UK North Sea at $135,000 per day, with a one-year option at a higher day rate. As previously reported, the Noble Regina Allen jack-up rig is currently off-contract due to mechanical issues. This rig is expected to be unavailable for a substantial portion of 2023, as leg and jacking system repairs are made.

The 2013-built Noble Regina Allen jack-up rig is of Friede & Goldman JU3000N design. It was constructed at Jurong Shipyard and can accommodate 150 people. With a drilling depth capability of 35,000 feet, this rig is capable of operating in water depths of up to 400 ft.

Currently, nine of Noble’s thirteen jack-ups are contracted, and 55 per cent of total available jack-up days across the firm’s fleet are contracted throughout 2023. The company’s $1 billion jack-up backlog is heavily weighted to the Noble Integrator and Noble Invincible rigs’ commitments under the Aker BP alliance.

While jack-up demand in Norway remains subdued in 2023, Noble claims that it continues to see improving demand indicators in Norway and globally for its jack-up fleet moving forward. The company anticipates a limited contribution from jack-ups to its total EBITDA in 2023.

Meanwhile, Noble disclosed a guidance range for the full-year 2023 with a total revenue of $2.35 to $2.55 billion, adjusted EBITDA in the range of $725 to $825 million and capital expenditures – net of reimbursable capex – between $325 and $365 million.

“We continue to see a very promising fundamental setup for the offshore drilling business, governed by increasingly tight industry utilisation, robust customer economics and demand growth visibility and, not least, rational capital allocation in our industry. As the market improves, we remain focused on execution across all facets of our business, and are committed to returning capital to shareholders,” underscored Eifler.