Noble Corporation plc — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Noble is an offshore contract driller with 32 rigs: 19 floaters and 13 jackups. Comparisons with 2022 are affected by the October 2022 Maersk Drilling acquisition, which added 18 rigs.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $638.5 million | $275.2 million | $1,248.6 million | $485.4 million |
| Operating income | $109.1 million | $47.6 million | $216.2 million | $13.0 million |
| Net income | $65.8 million | $37.1 million | $173.9 million | $0.4 million |
| Diluted EPS | $0.45 | $0.45 | $1.19 | $0.00 |
| Operating margin | 17.1% | 17.3% | 17.3% | 2.7% |
Cash flow and liquidity: Six-month operating cash flow was $148.1 million, compared with $36.3 million in 2022. Investing cash outflow was $169.5 million, primarily reflecting capital spending; financing cash outflow was $202.3 million. Cash and cash equivalents were $255.4 million at June 30, down from $476.2 million at year-end 2022. Working capital was $418.5 million. The company reported $550 million of revolving credit commitments, with no borrowings and $19.1 million of letters of credit outstanding. Management expects available funding sources to be sufficient for the next 12 months.
Debt: Long-term debt was $585.4 million at June 30, with no current maturities; the balance sheet showed $585.4 million total debt. In April, Noble issued $600 million of 8.0% notes due 2030 and used proceeds mainly to repay the DNB facility and redeem second-lien notes. The refinancing produced a $26.4 million debt-extinguishment loss in Q2. The new revolving facility matures in 2028.
Changes and operating trends
- Q2 revenue increased 132% year over year, primarily from the acquired Maersk fleet and higher floater dayrates. Six-month revenue increased 157%.
- Q2 average dayrates were $363,167 for floaters, up from $266,887, and $128,885 for jackups, up from $120,824. Total fleet utilization was 70%, versus 76% a year earlier; six-month utilization was 72% in both periods.
- Operating costs, depreciation, general and administrative expenses, and merger/integration costs increased, in part reflecting the larger post-merger fleet. Q2 merger and integration costs were $22.5 million; six-month costs were $34.1 million.
- Q2 included $15.9 million of net Hurricane Ida costs. Six-month costs were $19.5 million.
- Cash declined during the first half amid capital expenditures, debt repayments, and $70 million of share repurchases. The company repurchased 1.8 million shares during the six months.
Outlook, risks, and unusual items
- Management described offshore demand and dayrates as improving, especially for ultra-deepwater floaters, while noting regional variation, subdued North Sea activity, and potential newbuild rig supply. Inflation and supply-chain pressures are expected to persist and may raise costs.
- Backlog at June 30 was approximately $5.03 billion, including about 64% of available days committed for the remainder of 2023. ExxonMobil and Aker BP accounted for approximately 46.2% and 15.9% of backlog, respectively. Backlog is not a guarantee of realized revenue and can change with downtime, dayrate adjustments, contract changes, or termination rights.
- 2023 capital expenditures, net of client reimbursables, were estimated at $325–$365 million, including $210–$230 million for sustaining capital. Additional repair costs for the Noble Regina Allen may arise; an insurance claim was in process.
- Q2 tax results included discrete deferred-tax benefits, including $50.7 million from valuation-allowance releases and a $6.8 million Ghana tax-position release. These were offset by tax expenses and recurring accruals; the six-month income-tax benefit was $16.5 million. The company had $196.9 million of reserves for uncertain tax positions.
- Tax authorities had outstanding audit claims of approximately $587.6 million across several jurisdictions. Noble said it intends to contest them and currently does not expect resolution to materially adversely affect its financial statements. Hurricane Ida personal-injury litigation remains in discovery; outcomes are uncertain.
- After quarter-end, the board declared a $0.30-per-share dividend, payable September 14, 2023, and stated an intention to pay quarterly dividends subject to board approval and other factors. A July warrant exercise notice was expected to result in approximately 4.1 million new shares.
Key investor checks
- Separate growth from the Maersk acquisition from organic changes in utilization, dayrates, and operating costs.
- Track whether the $5.03 billion backlog converts to revenue and assess customer concentration and contract dayrate-reset provisions.
- Monitor cash generation against planned capital spending, shareholder returns, and the 8.0% notes’ interest burden.
- Review the status and potential financial effects of tax audits, uncertain tax positions, and Hurricane Ida claims.
- Assess whether market recovery, inflation, supply-chain constraints, and planned rig repairs change management’s outlook or capital needs.