Noble Corp.: October Fleet Status And Backlog Analysis

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About: Noble Corporation plc (NE)
by: Fun Trading
Summary

Noble Corp. released its October Fleet Status on October 12, 2018.

Noble announced two gigs for two idle drillships and acquired a new jack-up which comes with a three-year contract in the Middle East.

While the market is proclaiming that an offshore drilling recovery is in sight, I am still not convinced at all and this new fleet status is another proof that we cannot turn optimistic yet.

Image result for Noble Don Taylor

Courtesy: Noble Corp. Drillship Don Taylor.

Business Thesis

Noble Corporation (NE) has been performing very well in this challenging environment. The company is showing a firm contract backlog estimated at ~$2.45 billion as of October 11, 2018, and the stock price managed an impressive rebound since early this year, buoyed by a bullish oil price environment.

While the market is proclaiming that an offshore drilling recovery is in-sight, I am still not convinced at all, and this new fleet status is another proof that we cannot turn optimistic yet.

We are still waiting for tangible signs of a full recovery, especially in the floaters' segment - Full recovery with long-term contracts at decent daily rates. While activity increased in the Jack-ups segment, the floaters' segment, on the other side, is still inert.

The fact is that the primary key component for a real turnaround lies in the floaters' recovery, and unfortunately, we are far from experiencing a sufficient level of activity that could convince me to be overly optimistic.

The main reason is that the Jack-ups segment has a limited financial impact on the backlog due to short-term contracts and meager day rates. The only way to counter the concerning backlog erosion that the offshore drilling sector has experienced since early 2015 lies in high-ticket long-term contracts which are mostly provided by the floaters' segment.

Earlier this year, I said that we were entering the first stage of a long-trend reversal, and accumulating NE on any severe price correction may present an excellent opportunity. I still believe that this statement is true, but I am more cautious with NE now trading well above $6.50, while we are still waiting for a full recovery.

Chart NE data by YCharts

Complete Fleet Analysis And Fleet Status As Of October 12, 2018

1. Class: Drillships

# Name

Spec.

K'

Contract

End

Current

Day rate

K$

Location

(0-rate)

1

Noble Bob Douglas

2013

10/40

4/21

Undisclosed ($220k/d?)

[Exxon Mobil (XOM)]

Guyana

2

Noble Bully II

2011

8.25/40

Commitment split 50/50 - Joint Venture between Shell (NYSE: RDS.A) (NYSE: RDS.B) and Noble Corp.

12/18 - 4/22

230 + (floor)

[Shell]

Malaysia

3

Noble Don Taylor

2013

10/40

Late 2/19

Early 11/18-Mid 1/19

(Within the idle period)

420

420 + Not disclosed

[Shell]

US GoM

15% bonus eligible

[Talos]

US GoM

4

Noble Globetrotter I

2011

10/40

Mid 7/22

275+ (floor)

[Shell]

Egypt

15% bonus eligible

5

Noble Globetrotter II

2013

10/40

Late 12/18

Late 12/2018 - Early 9/2023

Early 11/18 to Early 1/19 (within the idle period)

185

275+

275+ N/A

[Shell]

Bulgaria

[Total]

Bulgaria

6

Noble Tom Madden

2014

10/40

Mid 10/18

Mid 10/18 - Mid 12/18

Contract preparation and mobilization

Not disclosed

[Esso]

Guyana

2. Class: Semi-Submersibles

# Name

Spec.

K feet

Contract

End

Current

Day rate

$ k

Location
1

Noble Clyde Boudreaux

1987/2007

10k'

Mid 3/19

Not disclosed

[PTTEP]

Myanmar

3. Class: Jack-Ups

# Name

Spec.

Feet/K feet

Contract

End

Current

Day rate

Location
1

Noble Lloyd Noble

2Q'2016

492/32

Late 11/20

451 (including mobilization revenue)

[Equinor]

UKNS

2-year priced option

2

Noble Gene House

1981/1998

300/25

Mid 11/18

65

[Saudi Aramco]

Saudi Arabia

3

Noble Hans Deul

2009

400/30

Mid 12/18 (Exercised 65-day priced option)

Not disclosed

[Spirit Energy]

UK

North Sea

2 x 100 days options

4

Noble Joe Beall

1981/2004

300/25

Mid 11/18

65

[Aramco]

Arabian Gulf

(50d) 2Q or 3Q'18

5

Noble Roger Lewis

2007

400/30

Early 3/22

159

[Aramco]

Arabian Gulf

1Q'18 (15d)

6

Noble Sam Hartley

2014

400/35

Mid 10/18

Mid 10/18 - Mid 7/19

Contract preparation

Not disclosed

[Total (NYSE: TOT)]

UK

7

Noble Sam Turner

2014

400/35

Early 3/20

Not disclosed

[Total]

Denmark

8

Noble Scott Marks

2009

400/30

Early 7/22

159

[Aramco]

Arabian Gulf

9

Noble Regina Allen

2013

300/25

Mid-12/19

Mid 1/20 - mid 5/20

94

Not disclosed

[Exxon Mobil]

[Encana]

Canada

10

Noble Tom Prosser

2014

Jack-up 400 IC

Mid 12/18

Not disclosed

[ConocoPhillips (NYSE: COP)]

Timor-Leste

11

Noble Houston Colbert

2014

Jack-up 400/35

Early 2/19

5/19 - 11/19

Not disclosed

Not disclosed

[Dolphin]

[N/D]

Qatar

UK

12

Noble Mick O'Brien

2013

Jack-up 400 IC

Late 6/19

Not disclosed

[Qatar Gas]

Qatar

13

Noble Sam Hartley

Jack-up

Early 10/18 - Early 7/19

Not disclosed

[Total]

UK

14

Noble Johnny Whistine

Jack-up

CJ46

Shipyard

1Q'2019 to 1Q'2022

Singapore

Not Disclosed

[Not disclosed]

Middle East

4 - Rigs available, ready-stacked or cold-stacked, idle.

# Rig name/shipyard date Type Year built Status Location
1 Noble Jim Day(1/16) SemiSub 1989/1999/2010 Cold-stacked GoM
2 Noble Dany Adkins (3/16) SemiSub 1989/1999/2009 Cold-stacked GoM
3 Noble Paul Romano (5/18) SemiSub 1981/1998 Warm-Stacked GoM
4 Noble Sam Croft (5/16) Drillship 2014 Cold-stacked GoM
5 Noble Bully I (3/17)

Drillship

Commitment split 50/50 - Joint Venture between Shell and Noble Corp.

2011 Cold-stacked Curaçao

5 - Rigs retired

# Rig name/shipyard date Type Year built Status
1 Noble Amos Runner (2/16)

Semisub

1982/1999 Retired
2 Noble Dave Beard (4/16)

Semisub

1986/2008 Retired
3

Noble Alan Hay

(01/2018)

Jack-up 300/25

1980/2005 Retired
4

David Tinsley

Jack-up 300/IC

1984/2004/2010 Retired

Noble Fleet Snapshot

Noble Corp. Total Drill-ships Semi-subs Jack-ups
Active rigs 21 6 1 14
Idle or stacked 5 2 3 0
Retired 4 0 2 2
Total 30 8 6 16

Backlog Detail With Charts

Noble's contract backlog totaled approximately ~$2.5 billion October 12, 2018.


I estimated about ~$260 million in firm backlog remaining in 2018.

Note: This is an estimate only. The company is not providing the day rate of a few contracts, and the deal with Shell can vary notably on the plus side because I used only the floor day rate in my calculation. In some cases, NE can receive a 15% bonus (Thus, use these numbers with caution).

Changes noticed in FSR for October 2018

1 - The 2013-built drillship Noble Don Taylor has been awarded a contract by Talos (NYSE:TALO) in the U.S. Gulf of Mexico. The gig begins in early November 2018 and ends in mid-January 2019.

The daily rate has not been disclosed but Noble indicated that the rig will collect a day rate over the defined contract period in addition to the idle day rate of $420K/d in accordance with Shell’s decision from September to idle the rig for the remainder of its contract, or 183 days ending February 25, 2019.

2 - The 2013-built drillship Noble Globetrotter II has been awarded a contract with Total offshore Bulgaria. The contract starts in early November 2018 and ends in early January 2019 with an undisclosed day rate.

Noble Globetrotter II has worked previously for Total in Bulgaria as the drillship also drilled in the Black Sea with the same operator late last year. The drillship will receive a day rate over the defined contract period in addition to the $185K/d idle rate to be paid by Shell paid through December 2018.

3 - On September 25, 2018, Noble announced that it acquired a newbuild jack-up, to be named the Noble Johnny Whitstine. The company indicated that it paid $33.75 million of the $93.75 million purchase price in cash, with the remainder of the purchase price, or $60 million seller-financed at 4.25%. Noble entered into a new drilling contract in the Middle East region with a three-year primary term, plus a one-year option, with an expected start in early 2019. The company also noted that:

Noble also has an option for the purchase of a second newbuild CJ46 jack-up from PaxOcean... In connection with the purchase, Noble entered into a new drilling contract in the Middle East region with a three-year primary term, plus a one-year option, with an expected start in early 2019.

Conclusion

These two new gigs are not very impressive. Noble has probably negotiated these two contracts at a very low daily rate because the two drillships are also getting the idle daily rate from Shell. My quick estimate is that Noble negotiated a day rate below $130k/d and the total additional backlog for the two contracts should be no more than $20 million.

However, the new acquisition of the Jack-up Noble Johnny Whitstine is a definite good news because the company secured a high-quality jack-up with a long-term contract associated. Furthermore, the company has an option to acquire another similar new-built jack-up, while searching for a long-term contract.

Technical analysis (short term)

NE is forming an ascending wedge pattern (also called rising wedge) with strong resistance at $7.10 (I recommend selling at least 25% of your position) and line support at $6.20 (I recommend buying cautiously at this level if the resistance holds sufficiently). The rising wedge pattern is considered a bearish pattern which means we should expect a decisive breakout on the negative side triggered possibly by a correction in oil prices.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

Additional disclosure: I day trade and trade NE occasionally but do not have a position at the moment.