Recent global rig deals push Noble’s backlog to $5 billion as market tightens with higher day rates in the wind

Offshore drilling contractor Noble Corporation has secured a new batch of contracts and extensions for floaters and jack-ups in Brazil, Mauritania, Suriname, Malaysia, Australia, Norway, and the UK. This includes a deal for a warm stacked rig in the UK. With solid operational and financial performance tucked under its belt during the second quarter of 2023, the rig owner feels encouraged by the rise in rig demand on the global scene, thus, it is anticipating a further boost in fleet utilisation and day rates in the future.   

Ever since things went sideways for the offshore drilling market in 2014 due to the downturn in the oil and gas industry, the market was trying to recover, but it was not until 2022 that it truly started to pick up speed, bringing to life an upcycle, which rig owners expect to be a multi-year one. As operators are hiring rigs well ahead of their drilling campaigns and handing out long-term contracts, rig demand is skyrocketing, causing constraints in supply, while day rates keep their upward momentum in this tightening market landscape.

While the harsh environment semi-submersible market is believed to be sold out and drillships are certainly sought after worldwide, the jack-up segment is reaching very high levels in Asia, especially the Middle East. It is expected that ultra-deepwater rigs may reach rates of $500,000 per day or even higher before the end of 2023. Wood Mackenzie’s projections indicate that the Golden Triangle, comprising Latin America, North America, and Africa, and parts of the Mediterranean will account for 75 per cent of global floating rig demand through 2027.

The improvements in offshore drilling market fundamentals are visible in the rig owners’ results for the second quarter of 2023. One of Noble’s peers, Transocean, got its hands on a drillship deal along with new semi-submersible work during 2Q 2023 while Valaris filled its bag of contracts with not only a drillship and semi-sub assignment but also with jack-up jobs. In line with this, Noble also revealed new deals for both floaters and jack-ups in its rig fleet.

Thanks to the new deals totalling $0.8 billion, obtained over the past three months, Noble’s total backlog grew 9 per cent to $5 billion. In May the firm’s backlog was $4.6 billion. With the sequential increase driven by improving average day rates, the company’s contract drilling services revenue for 2Q 2023 totalled $606 million, compared to $575 million in the first quarter of 2023 and $262 million in 2Q 2022. The offshore drilling giant’s marketed fleet utilisation was 76 per cent in the three months ended on 30 June 2023, compared to 80 per cent in the previous quarter.

The company’s contract drilling services costs for the second quarter were $363 million, flat versus the first quarter. The firm’s adjusted EBITDA for 2Q 2023 increased to $188 million from $138 million in the first quarter of 2023 and $84 million in 2Q 2022. The rig owner’s net cash provided by operating activities for 2Q 2023 was $211 million, capital expenditures were $107 million, and the resulting free cash flow (non-GAAP) was $104 million.

Noble’s balance sheet as of 30 June 2023 reflected a total debt principal value of $600 million and cash – and cash equivalents – of $225 million. Subsequent to the end of the second quarter, the offshore driller announced the initiation of a planned quarterly interim dividend programme, beginning with a $0.30 per share dividend to be paid on 14 September 2023 to shareholders of record at the close of business on 17 August 2023.

Robert W. Eifler, President and Chief Executive Officer of Noble Corporation plc, remarked: “Our second quarter results reflected solid operational and financial performance. Our recent initiation of a quarterly dividend starting at $0.30 per share, combined with $60 million of share repurchases in the second quarter, highlights our industry-leading platform for cash flow generation and our commitment to returning capital to shareholders.

“We are realising the combined benefits of the business combination with Maersk Drilling with our enhanced capabilities, we believe, allowing us to better serve our customers. Continuing improvement in the UDW market has driven our backlog to $5 billion, with several recent floater awards including Noble Faye Kozack‘s 2.5-year contract in Brazil, and we are increasingly encouraged by the expanding geographic breadth of UDW demand worldwide.“

Furthermore, Noble’s marketed fleet of sixteen floaters was 90 per cent contracted through 2Q 2023, compared with 91 per cent in the prior quarter. The company claims that all sixteen floaters continue to be contracted with “strong visibility” for future follow-on opportunities, while utilisation remains tempered slightly by gaps between contracts and planned SPS-related downtime. According to the firm, leading-edge day rates for working tier 1 drillships are in the mid to high-$400,000s while sixth-generation floaters also continue to command a normal price discount to tier 1 drillships consistent with technical capability differentials.

Five rigs in Noble’s floater fleet secured new deals with a total contract value of approximately $750 million (including mobilisation payments) in 2Q 2023. The rig owner’s Noble Faye Kozack drillship was awarded a 2.5-year contract with Petrobras, which is expected to start in 1Q 2024. This deal, which is valued at approximately $500 million including mobilisation and additional services, will enable the rig to perform drilling operations at the BM-S-11 and Tupi fields offshore Brazil.

Currently, the rig is working for LLOG in the U.S. Gulf of Mexico. The contract is scheduled to end in October 2023. The 2013-built Noble Faye Kozak drillship was constructed at Samsung Heavy Industries and comes with a Samsung 96K design. This drillship can operate in water depths of up to 12,000 ft. The rig’s maximum drilling depth is 40,000 ft. It can accommodate 200 people.

The drilling giant also got a one-well contract for the Noble Voyager drillship with Shell for an exploration well in Mauritania at an undisclosed value. This contract with an estimated duration of 60 days follows in direct continuation of the current deal with Shell in Colombia and is expected to keep the rig busy through year-end 2023. The 2015-built Noble Voyager drillship can accommodate 230 people and has the same design and maximum drilling depth as the Noble Faye Kozack drillship.

In addition, Shell exercised three-well options – with one well being novated to PTTEP – for the Noble Viking drillship offshore Malaysia, with a total contract value of approximately $49 million and an estimated total duration of 111 days. The first of these three option wells is scheduled to commence in December following the rig’s SPS, and the rig’s firm backlog is now extended into 2Q 2025. The 2013-built Noble Viking has the same characteristics as the Noble Voyager drillship.

Moreover, the firm’s Noble Discoverer semi-submersible rig was chosen for a one-well contract with Petronas, which is anticipated to begin in August 2023, with an estimated duration of 90 days. The firm contract value is approximately $43 million, including additional services provided, mobilisation and demobilisation fees. The deal entails the drilling of an exploration well in Block 52 offshore Suriname.

The Noble Discoverer rig is currently operating for CGX Resources and Frontera Energy offshore Guyana, where a new oil discovery was recently confirmed. Following the contract with Petronas, the rig is scheduled to begin a contract offshore Colombia with Ecopetrol. The rig will drill the Orca North-1 exploration well offshore Colombia and the contract is expected to start between November 2023 and January 2024, with an estimated duration of 72 days.

The 2009-built Noble Discoverer is a DSS-21 column-stabilised dynamically positioned, sixth-generation semi-submersible drilling rig, capable of operating in water depths of up to 10,000 ft. The rig’s maximum drilling depth is 40,000 ft. It can accommodate 180 people.

Additionally, the Noble Deliverer semi-submersible rig received a nine-month extension from Inpex for drilling services at the Ichthys field in the Browse Basin offshore Western Australia. This extension is expected to continue from July 2024 to April 2025 at a day rate of $451,500. Following the completion of its contract with Inpex, the rig is planned to undergo a special periodic survey (SPS).

Blake Denton, SVP of Marketing & Contracts, stated: “We are delighted to confirm the Noble Deliverer will support Inpex offshore Western Australia. Following our recent merger, we remain focused on delivering safe and efficient operations, thereby supporting value generation for the Western Australia community.”

The 2008-built Noble Deliverer rig is of DSS21-DPS2 design. It was constructed by Keppel FELS in Singapore and can accommodate 180 people. It has the same maximum drilling and water depth capacity as the Noble Discoverer rig.

Based on Noble’s records, the utilisation of its thirteen marketed jack-ups was 59 per cent in 2Q 2023, compared with 67 per cent utilisation during the first quarter, with sequential downticks in utilisation experienced by the Noble Tom Prosser, Noble Innovator, and Noble Interceptor rigs.

While the rig owner underscores that the commercial activity for the jack-up fleet was subdued in the first half of 2023, it also notes that this has recently begun to pick up. The firm anticipates that its jack-up fleet utilisation will begin improving based on existing and potential contracts.

The offshore drilling player’s Noble Integrator rig scored a one-well contract with Harbour Energy on the Norwegian Continental Shelf (NCS), with an estimated duration of 35 days. This rig also secured more work with Aker BP, after the Norwegian player entered into drilling and wells alliance agreements in January 2023 with Noble, Odfjell Drilling and Halliburton to carry out drilling activities on the NCS.

The 2014-built Noble Integrator is a Gusto MSC CJ70 X150 MD jack-up rig, which was constructed at Keppel FELS shipyard in Singapore. It can accommodate 150 people. Capable of working in a water depth of 492 ft, the rig’s maximum drilling depth is 40,000 ft.

The rig owner’s warm-stacked Noble Intrepid rig secured a ten-month contract with Harbour Energy for the provision of accommodation services at the Judy field in the UK sector of the North Sea, with a contract value of $28.5 million. The contract contains options to add up to five months of accommodation and well intervention services. The 2014-built Noble Intrepid rig has the same specs as the Noble Integrator rig.

On the other hand, the Noble Tom Prosser rig started its long-term programme in Malaysia in July. The rig recently obtained contracts with two undisclosed customers for a combined term of 650 days to drill a total of 14 wells offshore Sarawak, Malaysia, in support of a rig-sharing agreement between the two companies.

The first of these contracts was expected to begin early in the third quarter of this year. The second one is slated to start in March 2024. The contracts come with options to extend the work scope involved. The 2014-built Noble Tom Prosser jack-up rig is of Friede & Goldman JU3000N design. It was constructed at Jurong Shipyard and can accommodate 150 people. With a maximum drilling depth of 35,000 ft, this rig is capable of operating in water depths of 400 ft.

The rig owner believes that the Noble Regina Allen rig is “well positioned” to resume operations by mid-2024 upon completion of repairs. As previously disclosed, the rig is undergoing repairs for its damaged leg and jacking system. The 2013-built Noble Regina Allen jack-up rig, which is of Friede & Goldman JU3000N design, was constructed at Jurong Shipyard. This rig can accommodate 150 people and work in water depths of up to 400 ft.

“Based on these dynamics and additional contract prospects over the near term, a steady recovery in jack-up revenue and EBITDA contribution is expected to unfold over the coming quarters, with a more assertive recovery still predicated on demand dynamics in Norway and then the North Sea from late 2024 onward,” outlined Noble.

Noble has decided to keep its previous guidance for total revenue in the range of $2.35 to $2.55 billion, adjusted EBITDA of $725 to $825 million, and capital expenditures (net of reimbursable capex) between $325 and $365 million for the full year 2023.

Commenting on this’s outlook, Eifler elaborated: “Offshore fundamentals remain exceptionally strong, supporting a steady upward progression in contract status across our fleet. We expect UDW market tightness to persist and drive further upward pressure on day rates going forward.

“With adjusted EBITDA and free cash flow expected to increase in the second half of the year versus the first half, we remain focused on maximising shareholder value through best-in-class execution and returning the significant majority of free cash flow to shareholders.”

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