Noble Corp. To Cut Approximately 110 Jobs After The End Of The Danny Adkins Contract Next Month

| About: Noble Corporation (NE)

Summary

Noble announced that it will cut between 100-120 jobs when the Danny Adkins ends its contract next month. Layoffs for the Noble Jim Day will start next week.

Noble's five semi-submersibles that are actually working predominantly in the Gulf of Mexico, will roll off contract at the end of 3Q'16 with little hope for a contract.

NE is struggling in this crashing oil environment. However, the company has a strong backlog and is more likely to weather this terrible bear cycle. I recommend a prudent accumulation.

Source: Drillship Noble Danny Adkins

Noble Corporation PLC. (NYSE:NE)

This article is an update of my preceding article published on January 16, 2016 about the January FSR.

Excerpt of the Semi-submersibles segment that presents a serious contracting situation in 2016. Basically, Noble five semi-submersibles that are actually working predominantly in the Gulf of Mexico will roll off contract at the end of 3Q'16.

Yesterday, according to upstreamonline, we learned that Noble was expecting to cut between 100 and 120 jobs -- Entire Noble Danny Adkins crew -- when the semi-submersible will roll off contract next month.

Class: Semi-Submersibles

# Name

Year

Built/upgraded

Spec.

K feet

Contract

End

Current

Day rate

$ k

Location
1 Noble Amos Runner 1982/1999 8/32.5 1/16 undisclosed

[LLOG]

US GOM

2 Noble Danny Adkins

1989

1999/2009

8/32.5

mid 2/16

206

[Talos]

US GOM

3 Noble Dave Beard 1986/2008 10/35 late 4/16 235

[Petrobas]

Brazil

15% bonus eligible

4 Noble Jim Day

1989/

1999/2010

12/37 Ready Stacked

US GOM

5 Noble Paul Romano 1981/1998 6/25

mid 9/16

302

[Hess]

USGOM

Click to enlarge

It is not really a surprise unfortunately, and I have commented on this issue in my preceding article. However, it is important to notice that the company is already preparing laying off the rig Danny Adkins' crew, which means the rig will be probably cold stacked for the remaining of 2016 at the least.

This news follows the layoffs of approximately 120-130 offshore workers of the semi-submersible Noble Jim Day starting effectively on January 26, 2016. According to rigzone, on November 30, 2015:

Noble Drilling will lay off 120 to 130 offshore workers as the company stacks its Noble Jim Day (UDW semisub) rig.

In a letter to the Texas Workforce Commission, Noble said that all affected employees work on the Noble Jim Day, a rig located in international waters in the Gulf of Mexico that reports directly to Noble's offices in Sugar Land, Texas. The company is still finalizing its plans, according to the letter.

"Noble continues to actively market the rig, but has taken this prudent step to manage a gap in contract coverage," John Breed, director, investor relations and corporate communication, Noble Drilling, said in an email to Rigzone.

The layoffs will occur over a period of 14 days and will begin Jan. 26, 2016.

- See more at: www.rigzone.com/news/oil_gas/a/141859/No...

Noble Drilling will lay off 120 to 130 offshore workers as the company stacks its Noble Jim Day (UDW semisub) rig.

In a letter to the Texas Workforce Commission, Noble said that all affected employees work on the Noble Jim Day, a rig located in international waters in the Gulf of Mexico that reports directly to Noble's offices in Sugar Land, Texas. The company is still finalizing its plans, according to the letter.

"Noble continues to actively market the rig, but has taken this prudent step to manage a gap in contract coverage," John Breed, director, investor relations and corporate communication, Noble Drilling, said in an email to Rigzone.

The layoffs will occur over a period of 14 days and will begin Jan. 26, 2016.

Furthermore, The Noble Amos Runner which is still drilling, as I am writing and according to Rigzone, will roll off contract before the end of this month. I expect another wave of layoffs after the rig will be cold stacked, as well.

On a final note, the Noble Dave Beard which is working for Petrobras (NYSE:PBR) in Brazil will end its contract in April 2016, with virtually no chance to get an extension after being linked to the Petrobras scandal according to offshore engineer on November 5, 2015.

Noble Corp. also said the company was notified by Petrobras that the Brazilian giant is currently challenging assessments by Brazilian tax authorities of withholding taxes associated with the provision of drilling rigs for its operations in Brazil during 2008 and 2009.

"Petrobras has also notified us that if Petrobras must ultimately pay such withholding taxes, it will seek reimbursement from us for the portion allocable to our drilling rigs. The amount of withholding tax that Petrobras indicates may be allocable to Noble drilling rigs is R$79 million (approximately US$19 million). We believe that our contract with Petrobras requires Petrobras to indemnify us for these withholding taxes. We will, if necessary, vigorously defend our rights," Noble Corp. said.

Conclusion:

Noble Corp. semi-submersibles segment is the weakest link for the company. Most of the semi-submersibles will be cold stacked and they will be facing an uncertain future.

Oil price is of a paramount importance and will force the company to eventually retire and scrap the oldest semi-submersibles that will present virtually no chance to secure a contract before 2018.

NE is struggling in this crashing oil environment. I commented recently about the 2016 outlook, and it is important to read this article in connection.

However, the company has a strong backlog of approximately $7.5 billion, and is more likely to weather this terrible bear cycle. As we can see here, the semi-submersible segment is negligible.

I recommend a prudent accumulation.

Disclosure: I am/we are long NE.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.