Noble Corp.: Complete Fleet Analysis After Paragon Offshore Spin-Off And Commentary

Jul.16.14 | About: Noble Corporation (NE)

Summary

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.

(Picture from Noble website)

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. (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

# Name

Paragon Offshore

Spin-off

X

Year

Built/Upgraded

Specification

K feet

Contract

End

Current

Day rate

K$

Location
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

07/2015

04/2022

541

484

Brazil/Argentina
4 Noble Discoverer 1976/2009 0.1/20

En route

12/16

-

368

Arctic
5 Noble Don Taylor 2013 10/40 02/2019 497 GOM
6 Noble Duchess X 1975 0.1/25 05/2015 151 India
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
10 Noble Muravlenko X 1982/1997 4.9/20 Cold-stacked - X
11 Noble Phoenix X 1979/2009 5/20 05/2015 290 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

08/17

-

632

New Build
14 Noble Tom Madden 2014 10/40 02/2018 632 New Build
Click to enlarge

2 - Class: Semi-submersibles

# Name

Paragon Offshore

Spin-off

X

Year

Built/upgraded

Specification

K feet

Contract

End

Current

Day rate

$ k

Location
1 Noble Amos Runner 1982/1999 8/32.5 11/2015 453 GOM
2 Noble Clyde Boudreaux 1987/2007 10/35

04/2015

09/2015

417

515

Australia
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
5 Noble Driller 1976/2007 5/25 09/2014 415 GOM
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
Click to enlarge

3 - Class: Jack-ups.

# Name

Paragon Offshore

Spin-off

X

Year

Built/upgraded

Specification

Feet/K feet

Contract

End

Current

Day rate

Location
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
10 Noble CJ-70 2016 492/32

3Q/2016

3Q/2020

Transit

447

New build
11 Noble David Tinsley 1981/2004/2010 300/25

Inspection 09/2014

12/2015

-

97

Arabian Gulf
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

Shipyard 08/2014

03/2016

-

141

West Africa
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

08/2014

08/2016

242

235

North Sea
24 Noble Harvey Duhaney X 1976/2001 300/20 03/2016 111 Arabian Gulf
25 Noble Houston Colbert 2014 400/35

02/2015

02/2016

250

280

Brazil/Argentina
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

Available

4Q 2014

- New Build
44 Noble Sam Noble X 1982 300/25 10/2014 90 Mexico
45 Noble Sam Turner 2014 400/35

In transit

07/2016

-

215

North Sea
46 Noble Scott Marks 2009 400/30

07/2014

07/2017

237

257

Arabian Gulf
47 Noble Tom Jobe X 1982 250/25 05/2015 85 Mexico
48 Noble Tom Prosser 2014 400/35

1Q2015 Transit

3Q2016

-

203

Australia
49 Noble Tommy Craighead X 1982/2003 300/25

10/2014

01/2015

03/2015

145

172

165

West Africa
1 Hibernia Platform X Labor contract
2 Noble Seillean X Cold-stacked X
Click to enlarge

Fleet repartition after the Paragon offshore spin-off

Drill-ships Semi-submersibles Jack-ups Others Cold-stacked
Paragon Offshore Plc 5 3 34 2 2
Noble Corp. 9 11 15 0 0
*Fleet age average 2001/2011 2002/2004 1995/2009.4 - -
Click to enlarge

* Using the most recent date.

Commentary

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 Chart

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 Chart

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.