Noble Corporation plc — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Financial statements are unaudited. Noble is an offshore drilling contractor; at quarter-end its 32-rig fleet comprised 19 floaters and 13 jackups. The September 2022 Maersk Drilling combination means comparisons with 2022 are not fully like-for-like.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $697.5m | $305.9m | $1,946.0m | $791.3m |
| Operating income | $200.8m | $51.6m | $417.0m | $64.5m |
| Operating margin | 28.8% | 16.9% | 21.4% | 8.2% |
| Net income | $158.3m | $33.6m | $332.2m | $34.0m |
| Diluted EPS | $1.09 | $0.41 | $2.29 | $0.42 |
| Operating cash flow | — | — | $286.8m | $109.8m |
| Capital expenditures | — | — | $259.4m | $116.9m |
- Revenue and operating trends: Q3 contract drilling revenue rose 132% year over year. Floater revenue grew to $549.1m, aided by acquired rigs and higher dayrates; jackup revenue reached $121.9m, with acquired rigs partly offset by divestitures and fewer operating days. Q3 average dayrates were $403,813 for floaters and $140,775 for jackups. Total utilization was 72%, versus 80% a year earlier.
- Costs and earnings: Q3 operating expenses rose 95%, slower than revenue growth. The company cited acquired fleet costs, higher crew, repair, maintenance and materials costs, and inflation. Merger and integration costs were $13.0m for the quarter and $47.0m for the nine months. Nine-month results also include a $5.0m bargain-purchase gain and a $26.4m net loss on debt extinguishment.
- Cash, liquidity and debt: Cash and cash equivalents were $244.8m at September 30; restricted cash was an additional $4.8m. Working capital was $515.6m. Long-term debt was $585.8m, consisting of the 8.0% senior notes due 2030; there were no revolver borrowings and $5.4m of revolver letters of credit. The $550m revolving facility matures in 2028. Management said available sources are expected to cover cash needs over the next 12 months.
- Cash deployment: Nine-month financing cash outflow was $254.8m, including debt repayments and extinguishment costs, $80.0m of share repurchases and $42.4m of dividends. Cash and restricted cash declined by $236.1m over the period.
Material changes and outlook
- Revenue growth reflects both the Maersk Drilling fleet acquired in October 2022 and improved floater dayrates; therefore, the reported year-over-year increase does not represent purely organic growth. Nine-month floater average dayrates increased to $366,560 from $256,398, while jackup dayrates were $121,913 versus $119,449.
- Backlog at September 30 was approximately $4.7bn, including 59% of available days committed for the remainder of 2023. ExxonMobil and Aker BP represented approximately 46.3% and 16.3% of backlog, respectively. Backlog may change and is not a guarantee of realized revenue.
- Management described offshore demand as improving, particularly for ultra-deepwater floaters, while noting subdued activity in parts of the North Sea jackup market. It expects inflationary pressures and supply-chain disruptions to persist.
- 2023 capital expenditures, net of client reimbursables, were estimated at $325m–$365m, including approximately $210m–$230m for sustaining capital. No full-year revenue or earnings guidance was provided in the supplied filing text.
- The board approved a subsequent quarterly dividend of $0.40 per share, payable December 14, 2023; the prior quarterly dividend was $0.30 per share.
Risks, contingencies and unusual items
- Tax matters: Outstanding tax audit claims totaled approximately $327.8m across several jurisdictions; Noble disputes them and stated it believes their resolution will not materially adversely affect its financial statements. Reserves for uncertain tax positions were $192.2m. These estimates and outcomes remain subject to change.
- Litigation and operations: Personal-injury claims relating to Hurricane Ida are in discovery; the company cannot predict the outcome, and its estimated loss could change materially. It recorded $22.1m of net Hurricane Ida costs for the nine months.
- Subsequent rig damage: On October 20, 2023, the Noble Resilient was significantly damaged when a floating production vessel allided with it while it was stationary in Denmark. Investigation and damage assessment were underway; Noble expected coverage by the liable party or insurance, subject to policy terms. Repairs could affect availability for work before its scheduled Petrogas contract, though Noble did not then expect that contract’s timing to be affected.
- Other factors: Risks include offshore drilling cyclicality and dayrates, contract changes or termination, operating downtime and repair costs, customer concentration, inflation and supply constraints, tax disputes, and debt covenant compliance. The company reported effective disclosure controls as of September 30, 2023.
Investor verification priorities
- Assess how much of revenue and earnings growth is attributable to the acquired fleet, higher dayrates, and non-cash contract amortization, versus underlying utilization and operating performance.
- Track backlog conversion, contract awards and dayrate resets, particularly given ExxonMobil and Aker BP’s combined share of backlog and the fleet’s committed-day profile.
- Monitor cash generation against capital spending, shareholder returns, and the 8.0% debt cost; confirm continued compliance with revolver covenants and availability conditions.
- Follow the $327.8m tax audit claims, uncertain-tax-position reserves, and timing or financial impact of the Noble Resilient repairs and related insurance recovery.
- Verify the 2023 capital spending outlook and the sustainability of the increased dividend against operating cash flow and distributable reserves.