Noble Corporation (NYSE:NE) predicts that additional capital expenditures necessary to comply with new regulations for drilling in the Gulf of Mexico should not exceed $10 million per rig. In the company’s second quarter 10-Q report filed with the SEC Monday, management indicates that the exact amount required for rig retrofits cannot be precisely determined pending the release of final regulations. The amount required for each rig is expected to vary based on its age. It is also possible that Noble may incur similar costs for certain rigs that are presently located outside the Gulf of Mexico.
Earlier this month, we wrote about new requirements under consideration in Congress that could create competitive advantages for offshore contract drillers with relatively modern fleets. In particular, minimum standards for blowout preventers could require redesigns for rigs that lack sufficient space for the larger units. We noted that Noble CEO David Williams informed analysts that the cost for upgrading the company’s fleet could be easily managed.
Noble predicts that 2010 capital expenditures will be approximately $1.2 billion excluding additional capital expenditures related to the Frontier acquisition which was completed in late July. Within the context of the company’s regular capital expenditure program, the cost of retrofitting rigs currently deployed in the Gulf of Mexico should have only a minor overall impact.
More complete coverage of Noble’s Q2 results was provided in an article on July 20 written at the time of the company’s initial press release on Q2 results. We initially profiled Noble in early June as part of a series of articles examining potential opportunities in the oil and gas industry created by market reaction to the Deepwater Horizon disaster.
Disclosure: The author of this article owns shares of Noble Corporation.