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Noble Corp.: Paragon Litigation Bites With A $100-Million Charge

Aug. 06, 2019 6:43 AM ETNoble Corporation Plc (NE)87 Comments
Vladimir Zernov profile picture
Vladimir Zernov


  • Noble Corp. reports Q2 2019 results.
  • Operating cash flow gets back into the positive territory.
  • Noble Corp. records a $100-million charge relating to the ongoing Paragon litigation.

Noble Corp. (NYSE:NE) has recently reported its Q2 2019 results. This earnings season has been very challenging for drillers, and Noble Corp.’s report was also not without problems.

The company reported revenues of $293 million and a loss of $152 million or $0.61 per share. The biggest driver for this loss was a $100 million charge for the ongoing Paragon litigation which was included in the G&A expense on the balance sheet. As a quick reminder, Paragon was a spin-off from Noble which was conducted at an unfortunate time of the oil price crash and quickly went bankrupt. My non-lawyer opinion is that Paragon had little if any chance to survive due to the oil price crash and the major downside in the offshore drilling market but at that time no one knew what was coming.

However, a general financial overview of the problem is not the same as a real-life court battle, and apparently Paragon litigation trust lawyers have something up their sleeves so that Noble Corp. has to record a charge. During the earnings call, Noble Corp. stated: “[…] we have consistently maintained that we would be willing to settle before going to trial if that could be accomplished on reasonable terms”. In my view, a $100-million hit in the current situation is not good news at all. While the charge has been recorded, the case has not been settled yet, so uncertainty over this matter remains and will have some negative impact on the stock. Now, back to the financial statements.

The company’s cash position continued to deteriorate, dropping from $187 million in Q1 2019 to $154 million in Q2 2019. However, operating cash flow has turned positive after slipping into the negative zone in the first quarter. Noble Corp. stated that it expected that 2019 would be the low point of EBITDA generation. The

This article was written by

Vladimir Zernov profile picture
I'm a trader who trades both short-term and long-term. I started my career as a day-trader for a trading firm, but then turned to longer time frames and went on my own to manage my portfolio. I use technical analysis as well as fundamental analysis in my research.

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.

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