Two update items. On July 10, Noble Corp. (NYSE:NE) released its monthly fleet update. Somewhat disappointingly, only one idle rig, a West Africa Jackup named Noble Percy Johns, was placed under contract and only until mid-September 2014. On July 11, NE announced the spin-off of Paragon Offshore (PGN). Shareholders will receive one share of PGN, in a tax-free spin-off, for every three shares of NE they hold. The record date for the transaction is July 23.
NE's fleet status report was not unexpected. However, it would have been a nice surprise to see any combination of a nice number of idle rigs placed or near-term expiring rigs with new contracts. The PGN news was anticipated, though the timing and share ratio were not previously finalized.
Last month, I argued that NE and the other underwater drillers would benefit from geo-political shifts that would expand demand as drillers began to view traditional sources such as the Middle East and Russia as less reliable in the wake of recent events. As my projection was over a six-to-twelve month time horizon, it was too much to ask that customer behavior change in less than a month. However, the long-term thesis is still valid. With respect to PGN, only the timing and share ratio is news; nothing substantive has changed. Therefore, my long-term opinion that NE and the sector is a buy is unchanged.
Disclosure: The author is long NE. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.