Noble Corp. is a top-tier offshore drilling company based in London, with a large rig fleet operating around the world.
Noble Corp. decided to spin off a large part of its fleet under a new company called Paragon Offshore Plc., with a distribution date of August 1, 2014.
Shareholders of Noble Corp. will receive one share of Paragon for three shares of Noble.
Noble Corp. (NYSE:NE) is a top-tier offshore drilling company. Founded 93 years ago, the company provides offshore oil contract drilling services and has expanded worldwide. Noble Corp. is based in London, UK, and has 6,000 full-time employees.
Noble Corp. has a total fleet of 77 offshore drilling units, such as 14 semi-submersibles, 14 drill-ships, and 49 jack-ups, including 2 ultra-deep-water drill-ships and 4 high-specification jack-up drilling rigs under construction.
The company recently announced a $1.185 billion private placement of senior notes in connection with its future spin-off called Paragon Offshore Plc. (NYSE:PGN), and yesterday, the company announced that Paragon Offshore Plc. has been approved, with a distribution date of August 1, 2014.
From the Notice of 2014 annual general meeting of shareholders, held on June 10, 2014 (page 56.)
Description of the Separation
The drilling units that would be owned and operated by Paragon Offshore comprise five drillships, three semisubmersibles, 34 jackups and one FPSO. Paragon Offshore would also be responsible for the Hibernia platform operations. The assets that would be owned by Paragon Offshore as a result of the separation would constitute less than 22% of the total assets of the Company as reflected on the consolidated balance sheet of the Company as of December 31, 2013.
Complete fleet analysis and status as of July 10, 2014. (Including Paragon Offshore Plc., approved on July 15.)
Data are from the Noble Corp. website, and can be accessed directly by clicking the rig class desired below:
1 - Class: Drill-ships
|1||Noble Bob Douglas||2013||10/40||02/2017||639||GOM|
|2||Noble Bully I||2011||8.2/40||03/2017||496||GOM|
|3||Noble Bully II||2001||8.25/40|
|5||Noble Don Taylor||2013||10/40||02/2019||497||GOM|
|7||Noble Globetrotter I||2011||10/40||07/2022||451||GOM|
|8||Noble Globetrotter II||2013||10/40||09/2023||461||West Africa|
|9||Noble Leo Segerius||X||1981/2002/2011||5.6/25||02/2017||300||Brazil/Argentina|
|12||Noble Roger Eason||X||1977/2005/2013||7.2/25.754||08/2017||347||Brazil/Argentina|
|13||Noble Sam Croft||2014||10/40|
In transit 08/14
|14||Noble Tom Madden||2014||10/40||02/2018||632||New Build|
2 - Class: Semi-submersibles
|1||Noble Amos Runner||1982/1999||8/32.5||11/2015||453||GOM|
|2||Noble Clyde Boudreaux||1987/2007||10/35|
|3||Noble Dany Adkins||1989/1999/2009||8/32.5||08/2014||498||GOM|
|4||Noble Dave Beard||1986/2008||10/35||02/2016||220||Brazil/Argentina|
|6||Noble Homer Ferrington||1985/2004||7.2/25||Shipyard||-||X|
|7||Noble Jim Day||1989/1999/2010||12/37||01/2016||543||GOM|
|8||Noble Jim Thompson||1984/1999||6/30||12/14||376||X|
|9||Noble Lorris Bouzigard||X||1975/2003||4/25||Shipyard||-||GOM|
|10||Noble Max Smith||1980/1999||7/25||08/2014||417||Brazil/Argentina|
|11||Noble Paul Romano||1981/1998||6/25||12/2014||420||Mediterranean|
|12||Noble Paul Wolff||1989/1999/2006||9.2/30||Available||-||X|
|13||Noble Therald Martin||X||1977/2004||4/25||10/2015||270||Brazil/Argentina|
|14||Noble Ton Van Langeveld||X||1979/2000||1.5/25||06/2015||278||North Sea|
3 - Class: Jack-ups.
|1||Dhabi II||X||1982/2006||120/20||07/2015||89||Arabian Gulf|
|2||Noble Al White||X||1982/2005||360/25||12/2015||176||North Sea|
|3||Noble Alan Hay||1980/2005||300/25||12/2015||97||Arabian Gulf|
|4||Noble Bill Jennings||X||1975/1997||350/25||01/2015||112||Mexico|
|5||Noble Byron Welliver||X||1982||256/30||01/2015||180||Arabian Gulf|
|6||Noble Carl Norberg||X||1976/2003||250/25||08/2014||68||India|
|7||Noble Charles Copeland||1979/2001||280/20||09/2015||95||Arabian Gulf|
|8||Noble Charlie Yester||X||1980||300/20||Shipyard||-||X|
|9||Noble Chuck Syring||X||1976/1996||250/20||Shipyard||-||X|
|11||Noble David Tinsley||1981/2004/2010||300/25|
|12||Noble Dick Favor||X||1982/2004||150/20||11/2015||95||Arabian Gulf|
|13||Noble Don Walker||X||1982/1992||150/20||Shipyard||-||X|
|14||Noble Earl Fredrickson||X||1979/1999||250/20||09/2014||85||Mexico|
|15||Noble Ed Holt||X||1981/2003||300/20||02/2015||55||India|
|16||Noble Ed Noble||X||1984/2003||250/20|
|17||Noble Eddie Paul||X||1976/1995||350/25||03/2016||112||Mexico|
|18||Noble Gene House||1981/1998||300/25||11/2015||81||Arabian Gulf|
|19||Noble Gene Rosser||X||1977/1996||300/25||Available||-||X|
|20||Noble Gearge McLeod||X||1981/1995||300/30||04/2015||120||Asian Pacific|
|21||Noble George Sauvageau||X||1981||213/35||06/2015||168||North Sea|
|22||Noble Gris Androes||X||1982/2004||300/20||Shipyard||-||X|
|23||Noble Hans Deul||2009||400/30|
|24||Noble Harvey Duhaney||X||1976/2001||300/20||03/2016||111||Arabian Gulf|
|25||Noble Houston Colbert||2014||400/35|
|26||Noble Jimmy Puckett||X||1982/2002||300/20||12/2014||197||Arabian Gulf|
|27||Noble Joe Beall||1981/2004||300/25||11/2015||81||Arabian Gulf|
|28||Noble John Sandifer||X||1975/1993||300/25||03/2016||101||Mexico|
|29||Noble Johnnie Hoffman||X||1976/1993||300/25||04/2014||101||Mexico|
|30||Noble Julie Robertson||X||1981/2001||290/20||04/2016||154||North Sea|
|31||Noble Kenneth Delaney||X||1983/1998||300/25||Shipyard||-||X|
|32||Noble Leonard Jones||X||1972/1998||350/25||04/2015||112||Mexico|
|33||Noble Lloyd Noble||X||1983/1990||250/20||12/2014||136||West Africa|
|34||Noble Lynda Bossler||X||1982||205/25||03/2015||162||North Sea|
|35||Noble Mick O'Brien||2013||400/35||09/2014||197||Arabian Gulf|
|36||Noble Percy Johns||X||1981/1995||300/25||09/2014||125||West Africa/Congo|
|37||Noble Piet Van Ede||X||1982||250/1.968||01/2015||168||North Sea|
|38||Noble Regina Allen||2013||400/35||06/2015||231||North Sea|
|39||Noble Roger Lewis||2007||400/30||03/2017||257||Arabian Gulf|
|40||Noble Ronald Hoope||X||1982||205/25||01/2015||168||North Sea|
|41||Noble Roy Butler||X||1982/1998||300/25||11/2014||82||Mexico|
|42||Noble Roy Rhodes||X||1979/2009||328/30||01/2017||135||Arabian Gulf|
|43||Noble Sam Hartley||2014||400/35|
|44||Noble Sam Noble||X||1982||300/25||10/2014||90||Mexico|
|45||Noble Sam Turner||2014||400/35|
|46||Noble Scott Marks||2009||400/30|
|47||Noble Tom Jobe||X||1982||250/25||05/2015||85||Mexico|
|48||Noble Tom Prosser||2014||400/35|
|49||Noble Tommy Craighead||X||1982/2003||300/25|
|1||Hibernia Platform||X||Labor contract|
Fleet repartition after the Paragon offshore spin-off
|Paragon Offshore Plc||5||3||34||2||2|
|*Fleet age average||2001/2011||2002/2004||1995/2009.4||-||-|
* Using the most recent date.
Noble Corp. will be a leaner company after Paragon Offshore Plc. (PGN) is officially separated on August 1, 2014. Noble Corp. will own 35 rig units and Paragon Offshore Plc will own the remaining 42 active rig units (plus one labor contract and another cold-stacked rig).
From a long shareholder's perspective, setting aside the more challenging part of its rig fleet and spinning off Paragon Offshore is a skilled and strategic move on Noble's part. Most of the older rigs in the drill-ship class and semi-submersible class, along with a significant number of the jack-up rig units will be gone from the Noble's rig fleet, leaving the company with a state-of-the-art fleet with a particularly much smaller jack-up fleet, including new-built units.
This transformation by elimination is a clear advantage in this actual challenging market environment, which is still experiencing rig oversupply and a broad day-rate bifurcation between older and new rig generations in general.
Noble chairman and CEO, David Williams said:
Noble will exit this process with a top tier fleet, a substantial contract backlog and a sharp focus on the high-specification drilling market, elements that when joined with our exceptional crews position Noble as a leader in the business for many years to come. At the same time, Paragon is positioned to excel in the standard specification drilling sector, with well-maintained and efficient rigs, highly-competent crews, a strong customer base and a talented management team.
Based on the ratio indicated by the company, which is 3:1, the stock price of both companies will adjust adequately when the two companies trade effectively.
Noble shareholders will receive one ordinary share of Paragon for every three ordinary shares of Noble held at 5:00 p.m., New York City time, on the record date of the distribution, July 23, 2014.
Following the distribution of the Paragon ordinary shares, Paragon will be a separate, publicly traded company, and Noble will not retain any ownership interest in Paragon. Paragon has applied to list its ordinary shares on the New York Stock Exchange (NYSE) under the symbol "PGN."
PGN when-issued is trading now at $12.50 before August.
Seadrill Ltd. (NYSE:SDRL) has done this process successfully before, with the creation of Seadrill Partners LLC (NYSE:SDLP) and North Atlantic Drilling Ltd. (NYSE:NADL), which are still subsidiaries of SDRL. Transocean Ltd. (NYSE:RIG) is choosing this path as well, and will create its own entity called Caledonia Offshore Drilling in the second half of 2014.
A complete and exhaustive recent study of these two companies can be found here.
When we look at the financial effect(s) of such spin-offs, we are noticing that they often add value to the long shareholder's portfolio. This YTD chart comparing SDRL and NADL supports that idea. SDRL owns over 70% of NADL.
SDRL data by YCharts
As I mentioned earlier, shareholders will get one share of PGN for every three shares of NE, which is a fair deal considering that Paragon Offshore represents less than 22% of the total assets indicated on Noble Corp.'s balance sheet.
I am bullish on the offshore drilling sector in general, and I believe both NE and PGN will perform well in 2015 and 2016. Already, we can see signs of day-rate improvement that will translate to better revenue down the road.
I am rating Noble Corp. as a BUY. I am rating PGN as a HOLD, at the moment.
Here is the YTD chart for NE:
NE data by YCharts
Disclosure: The author is long RIG, SDRL. 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.