Noble Corp. swings to loss as revenues tumble

Offshore driller Noble Corporation fell to a loss for the second quarter of the year dragged down by a significant reduction in revenues caused by a decline in fleet operating days and slashed dayrates in floating rig fleet. 

The driller reported a net loss attributable to the company for the second quarter 2017 of $93 million on revenues of $278 million.

The results include net charges of approximately $16 million, relating to the emergence from bankruptcy of Paragon Offshore, with approximately $1 million of such amount being accounted for as part of discontinued operations. Excluding the impact of the remaining amount, approximately $14 million, the net loss attributable to Noble Corporation from continuing operations for the period would have been $79 million.

For the second quarter of 2016, the company reported net income of $323 million on revenues of $895 million.

Second quarter 2016 results included net favorable items totaling $322 million, resulting primarily from a contract cancellation agreement involving two of the company’s drillships. Excluding these items, the driller’s profit would have been $1 million on revenues of $502 million.

Noble’s contract drilling services revenues for the second quarter of 2017 totaled $272 million compared to $355 million in the preceding quarter of the year, and compared to $876.7 million in the prior-year second quarter.

A decline in fleet operating days and downward dayrate adjustments, primarily in the company’s floating rig fleet, were largely responsible for the reduction in revenues. Also, revenues in the second quarter were reduced by $6 million due to the write-off of a derivative instrument relating to contingent payments associated with the contract cancellation settlement reached in May 2016 with Freeport-McMoRan. The opportunity to collect these contingent payments expired on June 30, 2017.

The decline in operating days reduced fleet utilization to 65 percent in the second quarter compared to 69 percent in the preceding quarter of the year, while unfavorable dayrate adjustments reduced average daily revenues to $164,500 from $202,700 over the same period of comparison.

Contract drilling services costs for the second quarter totaled $162 million, inclusive of the $14 million charge relating to Paragon Offshore.

Capital expenditures for the second quarter of 2017 were $30 million. Given the pace of capital expenditures through June 30, 2017, the company has lowered its expected total capital expenditures for the year to $105 million, down from a previous estimate of $115 million.

At the end of the quarter, the company reported total liquidity of $3 billion, comprised of cash and equivalents of $603 million, up from $520 million at March 31, 2017, and a revolving credit facility with total capacity of $2.445 billion. The credit facility, which matures in January of 2020, remains undrawn.

Decline in drillship fleet use

Utilization of the company’s floating rig fleet, comprised of eight drillships and six semi-submersibles, was 37 percent in the second quarter of 2017 compared to 46 percent in the preceding quarter. The decline in utilization was due to fewer operating days in the drillship fleet. Average utilization for drillships dropped to 52% in the second quarter of this year from 86% in the prior-year quarter.

The company’s jack-up fleet, comprised of 14 units, recorded utilization of 93 percent in the second quarter of 2017, unchanged from the preceding quarter of the year and increased from the prior-year quarter and utilization of 83%.

At present, 13 of the company’s 14 jack-ups are contracted, including seven units with contracts extending into late-2018 and beyond.

At the end of the quarter, the company’s contract backlog totaled $3.2 billion with an estimated $1.9 billion derived from the floating rig fleet and $1.3 billion from the jack-up rig fleet.

‘Emerging offshore opportunities’

In closing, David W. Williams, Chairman, President and Chief Executive Officer of Noble Corporation, focused on signs of industry improvement: “Despite the recent crude oil price volatility, our customers continue to evaluate offshore rig needs covering the remainder of 2017 and 2018. The number of jack-up rigs under contract has risen steadily since the fourth quarter of 2016, while several contract awards in recent weeks provide evidence of intermediate-term support for the industry’s floating rig capacity.

“Some of the recent floating contract awards and others still pending are addressing new, emerging offshore opportunities, such as the Black Sea, Guyana, Suriname, Mexico and Egypt, driven in many cases by the confirmation of excellent hydrocarbon potential. We still expect a meaningful decline in the industry’s total supply of jack-up and floating rigs given the age, condition and state of preservation of much of the global fleet. While our industry requires more time to recover, we continue to show steady progress.”