Noble Recent Fleet Status Report Is Not Inspiring
Summary
- Noble's contract backlog totaled an estimated ~$2.4 billion on February 7, 2019.
- No new contracts this time, and the Jack-up Noble Gene House was retired in December 2018.
- It is imperative to trade a large part of your NE position to be able to survive this volatile environment.
Image: Drillship Noble Tom Madden. Source: MarineTraffic.
Business Thesis
Noble Corp. (NYSE:NE) is a puzzling offshore drilling company. The reason is apparent because it was perhaps the most likely to be acquired, and while others like Transocean (RIG) and Ensco (ESV) have since engaged in such transactions multiple times, oddly, Noble has not been able to make the move that I was expecting about a year ago.
Last year, I predicted wrongly that Diamond Offshore (DO) and Noble could be a good match and by merging into one new entity, they could create a stronger company.
I was wrong, and nothing happened. The idea is becoming even more improbable now after the oil prices significantly began to weaken in October 2018, and never regained the level of strength that could allow sufficient confidence in the future.
It signaled the start of a new period for Noble, who will have to fight alone those harsh headwinds, which have slowed down and almost ended the company's effort to financial recovery.
The fact is that the Oil services is a cyclical industry which is highly dependent on oil and gas prices. NE is highly correlated to oil prices. Hence, it is imperative to trade a large part of your position to be able to survive this volatile environment which is here to stay and may get even worse in 2019.
Noble Corp. is showing a firm contract backlog that I have estimated at ~$2.3-$2.4 billion as of February 7, 2019.
Complete Fleet status and fleet analysis as of February 7, 2019.
1. Class: Drillships
| # | Name | Spec. K' | Contract End | Current Day rate K$ | Location (0-rate) |
| 1 | Noble Bob Douglas 2013 | 10/40 | 4/21 | Not disclosed ($220k/d?) | [Exxon Mobil (XOM)] Guyana |
| 2 | Noble Bully II 2011 | 8.25/40 Commitment split 50/50 - Joint Venture between Shell (RDS.A) (RDS.B) and Noble Corp. | 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 | Early 9/2023 Early 11/18 to Early 1/19 (within the idle period) | 275+ 275+ N/A | [Shell] Bulgaria [Total] Bulgaria |
| 6 | Noble Tom Madden 2014 | 10/40 | Mid 2/20 | Not disclosed | [Esso] Guyana 3x1 well option |
| 7 | Noble Sam Croft 2014 | 10/40 | Mid-March 2019 - Mid-May 2019 Mid 2019 (1 well firm) | Not disclosed Not disclosed | [WT&I] US GoM [Not disclosed] |
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 Hans Deul 2009 | 400/30 | Late 7/19 | Not disclosed | [Spirit Energy] UK North Sea 2 x 1 well options |
| 3 | Noble Joe Beall 1981/2004 | 300/25 | Late 4/19 | 65 | [Aramco] Arabian Gulf |
| 4 | Noble Roger Lewis 2007 | 400/30 | Early 3/22 | 159 | [Aramco] Saudi Arabia |
| 5 | Noble Sam Hartley 2014 | 400/35 | Mid 7/19 | Not disclosed | [Total (TOT)] UK |
| 6 | Noble Sam Turner 2014 | 400/35 | Early 3/20 | Not disclosed | [Total] Denmark |
| 7 | Noble Scott Marks 2009 | 400/30 | Early 7/22 | 159 | [Aramco] Arabian Gulf |
| 8 | Noble Regina Allen 2013 | 300/25 | Mid-12/19 Mid 1/20 - mid 5/20 | 94 Not disclosed | [Exxon Mobil] [Encana] Canada |
| 9 | Noble Tom Prosser 2014 | Jack-up 400 IC | 3or4/19 3or4/19-10/19 11/19-12/19 1/20-4/20 | Warm Stacked Not disclosed Not disclosed Not disclosed | [Santos/CarbonNet/Esso] 2x1 well options 6x1 well options Australia |
| 10 | Noble Houston Colbert 2014 | Jack-up 400/35 | Early 2/19 - Late 5/19 8/19 - 2/20 | Not disclosed Not disclosed | [Dolphin] [N/D] Qatar UK |
| 11 | Noble Mick O'Brien 2013 | Jack-up 400 IC | Late 8/19 | Not disclosed | [Qatar Gas] Qatar |
| 12 | Noble Sam Hartley | Jack-up | Mid 7/19 | Not disclosed | [Total] UK |
| 13 | 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 | SemiSub | 1981/1998 | Available | GoM |
| 4 | Noble Bully I (3/17) | Drillship Commitment split 50/50 - Joint Venture between Shell and Noble Corp. | 2011 | Cold-stacked | Curaçao |
Noble Fleet Snapshot
| Noble Corp. | Total | Drill-ships | Semi-subs | Jack-ups |
| Active rigs | 21 | 7 | 1 | 13 |
| Idle or stacked | 5 | 1 | 3 | 0 |
| Total | 25 | 8 | 4 | 13 |
Backlog Details And Charts
Noble's contract backlog totaled approximately ~$2.36 billion on February 7, 2019.
Below is the backlog breakdown per year.
Below is the breakdown per segment.
I estimated about ~$913 million in firm backlog remaining in 2019.
Note: It is an estimate only. The company is not providing the day rate of a large number of 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).
Fleet Status Report As Of February 7, 2019:
Sadly, no new contracts this month.
The Drillship Sam Croft, the Jack-ups Noble Houston Colbert, and Noble Johnny Whistine had a slight change in schedule.
The Jack-up Noble Gene House has been retired in December 2018.
Conclusion And Technical Analysis
One of the most pressing issues that Noble Corp. is facing now is its sizeable long-term debt and capital lease obligation of $3.9 billion. This massive debt load became a problem when revenues started to go down resulting in notable shrinking of EBITDA.
A vital ratio is a Net debt to EBITDA ("TTM"), which is about 13x. It indicates that the company will be able to pay off its debt in about 13 years, which is notoriously insufficient.
The net debt as of September 30, 2018, is $3.57 billion and it is possible that the net debt increased to $3.65 billion on December 31, 2018, after looking at the decrease rate in total cash in the chart below:
It is an important hurdle that the company must solve urgently.
The solution is to generate more revenues to free enough cash to reduce the debt to an acceptable level. The market believed last year that the nascent recovery experience during 2018 was going to be enough to provide the cash necessary and was quite bullish on the stock.
However, oil prices faltered at the beginning of October 2018 and the rosy outlook that analysts were expecting, quickly vanished. The new February fleet status report is not encouraging because it is not offering the EBITDA necessary to sooth the debt problem and the recovery expected has stalled.
It is why Evercore ISI is now cutting its price target from $8 to $7 on NE and indicates that the fleet status means an 8% cut to his 2019 EBITDA estimate and a 2% trim to 2020.
Technical Analysis (Short Term)
NE has formed strong line resistance at $3.40 (I recommend selling about 25%-30% at this level unless oil prices trend strongly up, which is not very likely).
It is difficult to deduct a plausible TA pattern right now, but my interpretation is that NE is probably trading in a falling channel pattern with line support in blue and line resistance starting in November 2018 to February 2019 which is parallel to the line support.
Descending channels are short-term bearish which means that the next move will be the re-test of the $2.50 bottom (double bottom, at which point I recommend cautiously buying depending on the oil prices).
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This article was written by
I am a former test & measurement doctor engineer (geodetic metrology). I was interested in quantum metrology for a while.
I live mostly in Sweden with my loving wife.
I have also managed an old and broad private family Portfolio successfully -- now officially retired but still active -- and trade personally a medium-size portfolio for over 40 years.
“Logic will get you from A to B. Imagination will take you everywhere.” Einstein.
Note: I am not a financial advisor. All articles are my honest opinion. It is your responsibility to conduct your own due diligence before investing or trading.
Analyst’s 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.
I am only day trading or trading short term the stock now.
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Comments (168)
I am mostly in real estate with LOTS of equity and a retirement account that would make your eyes POP along with a 34 year pension and many great dividend champions. My oil holding is a mere 22% of my apple. I live in my truck so I have no bills to speak of. I am just having a blast here watching the petro-dollar fail. Best time I have had since 2008. IMHO
The contract is with Aramco. NE is managing really well. It is stupid to short NE.
Do you still own NE?Best regards,
-Noble Hans JU in the North Sea will remain under contract until mid-July of this year with extended well options available.
-Noble Tom Madden and Bob Douglas are reaping the benefits of drilling in Guyana with the possibility of extension contracts for both of them.My point is despite the low day-rates NE has done an equal if not, a better job than its competitors in maintaining high utilization rates and taking advantage of contracts that come their way. Another thing I should note is management has recently stated "We fully recognize the large amount of debt as others in the sector also hold. The strategy is to position the company to grow in a balance sheet enhancing way." It is not fair to just pick on Noble as Fun Trading has done when ESV, RDC, RIG, and DO all also hold sizeable amounts of debt.I am not in any way a believer we see NE at its 2013 highs anytime soon but I am a strong believer in a touchback to the $6-$7 range in the coming months. For now, I am long the whole offshore sector and truly believe we have all set our eyes on exceptionally enticing prices. Take advantage, accumulate what you can, and wait for the ride up;)
However, we are in 2019 and it is more apparent that any potential recovery will take place in late 2020 or later. Read the cc from DO.
Thus, NE is entering a difficult period with new lows and new lower highs in my opinion. The question is not how high it will go but how cheap it will get before a rebound can be seen ahead?
Look at the TA pattern and you will see that NE may eventually test $2 (just a fact not a desire in any form). When NE will be cheap enough and recovery will be more evident, then your words will come true hopefully.
Trade NE with this thinking in mind.Best regards,
Thank you,Yes, however, it is still a good deal, and I hope they can repeat that with the other one. Not many options for the company at the moment.Best regards,
The EBITDA level has greatly degraded and I wonder if there are a minimum ratio based on that in the covenants? Best regards,
NE has 2 moored Semis. 1 working & 1 warm stacked...
The other 2 are DP (dynamic positioned with thrusters)
Wonder if there is the space to retrofit mooring spreads to those 2 relatively modern deepwater Semis? If market dynamics and hypothetically awarded contract economics were to justify doing so? If Marc Edwards is correct maybe NE will be able to get 2 of their 4 semis working on good contracts? And possibly they could do something with the 2 cold stacked DP Semis? Anybody know if retrofit mooring spreads are feasible to do on these 2 if good contracts appear in the Market?
2 with thrusters & DP3, no mooring spread mentioned.
I believe that is the status of those 4 Semis according to Noble Corporation. Can anyone accurately confirm any different?
Maybe too much...
Best regards,
