Noble Corporation plc — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Noble is an offshore drilling contractor operating one reportable segment. At quarter-end, its fleet comprised 32 rigs: 19 floaters and 13 jackups. The September/October 2022 Maersk Drilling combination materially expanded the fleet, so Q1 2023 results are not directly comparable with the pre-acquisition Q1 2022 period.
Financial performance
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $610.1 million | $210.2 million |
| Operating income (loss) | $107.1 million | $(34.6) million |
| Net income (loss) | $108.1 million | $(36.7) million |
| Diluted earnings (loss) per share | $0.74 | $(0.54) |
| Operating cash flow | $(63.1) million | $(51.8) million |
| Capital expenditures (cash-flow statement) | $62.7 million | $47.0 million |
- Operating margin was approximately 17.6% in Q1 2023, versus an operating loss in the prior-year quarter. Revenue increased 190%; operating income improved by $141.7 million.
- Higher revenue reflected the acquired Maersk rigs, higher floater dayrates and more operating days. The acquisition also increased drilling costs, depreciation, general and administrative expense, and interest expense. Merger and integration costs were $11.6 million, compared with $9.5 million.
- Average utilization rose to 74% from 68%; average dayrate increased to $238,130 from $177,458. Floater dayrates rose to $331,705 from $213,194, while jackup dayrates fell to $97,940 from $119,606.
- Q1 net income included a $15.8 million income tax benefit, including a $50.1 million deferred tax benefit from valuation-allowance releases in Guyana and Switzerland, partly offset by tax expenses. The benefit is a notable factor in reported earnings.
Financial position, liquidity and debt
- At March 31, 2023, cash and cash equivalents were $186.2 million; working capital was $409.2 million. Total current assets were $872.2 million and current liabilities $463.0 million.
- Total debt was $520.7 million: $173.7 million of 11% senior secured notes and $347.0 million under the New DNB Credit Facility. No loans were drawn on the existing revolving facility; $21.1 million of letters of credit were outstanding. Noble repaid the remaining DSF facility balance in February using cash.
- Operating cash flow was negative despite net income, principally reflecting a $166.4 million net working-capital outflow. Management said working capital expansion was expected to largely reverse in Q2.
- On April 18, 2023, after quarter-end, Noble issued $600 million of 8.000% senior notes due 2030. Proceeds were primarily used to repay approximately $347.5 million under the New DNB facility, redeem approximately $173.7 million of second-lien notes, and pay related costs. The revolving facility was amended and restated with $550 million of commitments.
Outlook, backlog and risks
- Management expects 2023 capital expenditures, net of client reimbursements, of $325–$365 million, including approximately $210–$230 million for sustaining capital. The filing notes possible additional repair spending for the Noble Regina Allen, with an insurance claim in progress.
- Contract drilling backlog was approximately $3.7 billion at March 31, including 58% of available days committed for the remainder of 2023. ExxonMobil and Aker BP represented approximately 39.5% and 22.0% of backlog, respectively. Backlog may not convert to revenue as scheduled and is exposed to downtime, dayrate adjustments, customer termination rights and other contract factors.
- Management described offshore demand as improving, particularly for ultra-deepwater floaters and jackups, but noted regional variation, subdued North Sea activity, persistent inflation and supply-chain disruption, and the possibility that stranded newbuild rigs return to the market. The industry remains cyclical and sensitive to energy prices, customer investment, regulation and energy-transition policies.
- Tax authorities have outstanding audit claims totaling approximately $641.1 million across several jurisdictions; Noble disputes the claims and said it believes their ultimate resolution will not materially adversely affect its financial statements. Reserves for uncertain tax positions were $188.6 million.
- Other contingencies include Hurricane Ida personal-injury litigation, for which the company cannot predict the outcome; insurance is subject to a $5.0 million deductible and timing differences may arise. Noble also had $21.1 million of facility letters of credit and $117.2 million of additional letters of credit and surety bonds.
Key facts for investors to verify
- How much of the earnings improvement reflects the larger post-Maersk fleet and non-cash contract fair-value amortization, versus sustainable utilization and dayrate gains.
- Whether Q1 working-capital cash outflows reverse as management expects, and whether operating cash flow covers the stated capital-expenditure program and other cash needs.
- The full post-April refinancing impact, including fees, ongoing interest expense, repayment terms, covenants and available liquidity under the amended $550 million revolver.
- Backlog conversion, customer concentration, the outlook for floater and jackup dayrates, and potential effects of downtime, inflation and supply-chain constraints.
- Developments in the disputed tax assessments and Hurricane Ida litigation, including potential changes to reserves, insurance recoveries or cash exposure.