Update: Noble Corp.'s Fleet Report: Long-Term Strength, Weakness In The Short-Term

Aug.15.14 | About: Noble Corporation (NE)

Summary

NE's first post-Paragon Fleet Report reflected a much stronger contracting profile.

Fleet Report was in-line, but lack of progress on short-term contracting continues to concern.

Continue to be long-term bullish on NE.

On Thursday, Nobel Corp (NYSE:NE) released the Company's August Fleet Status Report. This is NE's first report since the Paragon Offshore (PGN) transaction. Compared to the last report, NE's situation looks much more positive as many of the idle or soon-to-be-off-contract rigs were moved to PGN. On a pro forma basis, the report was largely static. A bit of positive news was the Argentina Jackup, Noble Houston Colbert, a rig acquired this year, which added an eleven month extension to its maiden contract at a slightly higher day rate ($280K vs. $250K in the original contract). The Noble Bully, a drillship in the Gulf of Mexico added three-one year options (unpriced). The percentage of the in-service fleet with contracts beyond June 2015 was a strong 72% (by comparison, Seadrill (NYSE:SDRL) and Transocean (NYSE:RIG) had 82% and 52% of their respective fleets contracted past June 2015). However, the majority, five of six (83%), of these rigs will be non-revenue generating by the end of this year; three will be out-of-service by the end of the third quarter.

The results, from a contracted perspective, were a slight improvement over those profiled in my recent article, "Seadrill: Best Prospects Among The Drillers And A 'Buy'" and in-line with expectations. Though expected, from a medium-term perspective it is comforting to see a relatively high percentage of the fleet under contract. However, I was hoping to see more contracting activity with respect to the soon-to-be-out-of-contract rigs.

Though not as strongly positioned as my sector favorite, SDRL, I continue to be bullish on NE and view the Company as a long-term "Buy". Please note that my time horizon is medium-to-long term, and I acknowledge there may be short-term volatility, especially after Q4 results are released if out-of-service rigs have not been placed under contract (at respectable rates).

This article reflects the author's opinions and is not meant to be the basis of an investors' buy or sell decisions. All investors should conduct their own due diligence and make investment decisions solely on their research.

Disclosure: The author is long SDRL, 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.