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Noble Corp. Has Already Engaged With Restructuring Advisors And Will Likely File For Bankruptcy In The Next Few Months

May 08, 2020 2:23 PM ETNoble Corporation Plc (NE)59 Comments
Vladimir Zernov profile picture
Vladimir Zernov


  • Noble Corp. provides its first-quarter report and reveals that it has already hired restructuring advisors.
  • The cash flow situation in the first quarter was better than I expected but this won't help as the second-quarter performance was hit by negative contract developments.
  • Noble Corp. will need fresh capital injection so common equity has no chances to get any recovery.

Noble Corp. (NYSE:NE) has just released its first-quarter results and it's high time to look at the company's financials in the midst of the coronavirus pandemic.

Noble Corp. reported revenues of $281 million and net loss of $1.06 billion or $4.25 per share. The net loss was driven by the impairment of semi-subs Noble Danny Adkins and Noble Jim Day as well as drillships Noble Bully I and Noble Bully II. These rigs are cold stacked and do not have any chances to return to work.

In my previous article on the company, I stated that Noble Corp. was quickly running out of liquidity and would soon hit the liquidity covenant on the credit facility. As it turned out, I overestimated the cash burn at Noble Corp. but this does not change the big picture.

Noble Corp. finished the first quarter with $176 million of cash on the balance sheet, $261 million of short-term debt and $3.69 billion of long-term debt. Following the recent repayment of seller loans on jack-ups Noble Joe Knight and Noble Johnny Whitstine, the company had $297 million available under the credit facility.

Noble Corp. commented: "While we are in compliance with all covenants today, the negative impact on our financial condition of the oversupply of oil, and the substantial decline in demand for oil as a result of COVID-19 and related mitigation steps, raises significant uncertainty as to whether we can remain in compliance throughout 2020".

In the first quarter, Noble Corp. had negative operating cash flow of just $1 million but the cash flow situation is set to worsen as the company's contracts got hit by the collapse of oil prices (I wrote about the recent fleet status report here). In addition to the previously announced bad news, Noble Corp. stated that the jack-up rig Noble

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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.

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Comments (59)

WhyNotBuy profile picture
Filthy rich again. Yawn. But we did win the game boys if you followed me into the abyss of geopolitics and out of the box thinking with my BLUDOX1 algorithms. Carry on brothers and always remember to have good manners and life insurance too. Live long and prosper. IMHO
WhyNotBuy profile picture
Learn to play chess boys and not a short game of checkers. This will serve you well. IMHO
WhyNotBuy profile picture
NE slacker Barry Smith the lackadaisical one that got shares for free is a insider seller. Too funny this NE team. Comical really. Accumulate RIG boys. IMHO
08 Jun. 2020
Barry is not a strategic thinker - which is why he fits in so well with the rest of NE management team. The last good guy was Bernie Wolford, when he left the blood was cut off to the brain.
WhyNotBuy profile picture
3 TRILLION of heroin money injected into the markets are just beginning to wake up the dead addict. The S$P is heading for 4000. IMHO
PapaWhisky profile picture

"accumulate $spy, boys"
WhyNotBuy profile picture
Looks like DO is done boys. I thought this was BDs and Alecs and Vlads favorite name based on balance sheet. What happened??? IMHO
Loophole69 profile picture
Is IMHO your signature? You use it at the end of every comment. But shouldn't it be WNB?
WhyNotBuy profile picture
Nice volume boys. Accumulate RIG. DO has bitten the dust. The black swan pandemic has taken it's toll but the S&P moves almost back to record highs. I love this game give a dime take a dime even is even paper money is worthless no matter. IMHO

Still phishing for buyers???
the former CEO David Williams who seemed to be there almost on an indefinite basis, insisted on debt and more debt, he had ample opportunity to raise equity funding, and address the debt issue. But he never did. He adopted the American approach of having sky high debt on an indefinite basis, putting off the evil hour, delaying the inevitable. Well now chickens have come home to roost. They destroyed what was once a great business because of their refusal to address the right hand side of the balance sheet.
Bulldog67 profile picture
A sad ending to what was once an excellent company.

This is a great example of what happens when any company in a capital intensive, cyclical industry substantially expands, and finances that expansion with 100% debt. Always done in the boom times W/O any concern as to what might happen on a “Rainy Day”!
Henrik Alex profile picture
Their playbook didn't differ much from peers though.
PapaWhisky profile picture

The other side of that coin is the surge in revenue, profit and dividends that debt fueled capex brought us.

And also brought us the incredible advancements in rig technology. Allowed us to conquer the ultradeep offshore and the presalt.

Brought us 10 million BOPD in DW production ... and only money stands in the way of doubling or tripling that.

And with misty eyes I point out it probably brought Papa and Bulldog together.

The bottom line is that bottle of Lagavulin I picked up in Islay in '99: I can drink it. Or I can have it. I cannae do both.
Bulldog67 profile picture

“With misty eyes, eh?” I am touched, and you know the feeling is mutual! :-)

You raise some excellent points. And to be totally honest, as a NE shareholder at the time, I did not complain about seeing more modern rigs come out of the shipyard and immediately go to work at $500 - 600K day rates! I too enjoyed the NE dividends! So candidly, I was as guilty as NE’s management team. Hindsight is always 20/20, and just shows that every management team should not forget about too much debt - especially in a cyclical industry!
Another company that eliminated their dividend goes under. Anytime a company eliminates their dividend there is a 50% chance this will happen
Whonoz profile picture
Look at the stock performance before they started paying dividends.
In chapter 11 everybody loses besides executives... who will continue staying at the helm after the company remerges from bankruptcy. This is Corporate America.

CHK. The company says it does not expect to be in compliance with financial covenants beginning in Q4. Chesapeake says it will prepay $25M in incentive compensation to 21 executives to ensure they are motivated, even as the company reportedly is preparing to file for bankruptcy protection.
So what happens if demand for crude oil magically comes back to pre-COVID levels in the next 3-6 months? Do drillers like NE, VAL and DO still face restructuring, or can they just pick up where they left off? Did the dip somehow break their back permanently, that they have to restructure even if demand is back?
Bulldog67 profile picture
Higher oil prices in the next 6 months is not going to improve the supply/demand situation for drilling rigs. Thus NE, VAL, PACD, SDRL, & SDLP will all be joining DO by declaring BK.
You seem to be simply predicting that it wont improve their situation. I was rather looking for some wisdom on WHY higher oil demand in 3-6 will still not help OSD companies.
Bulldog67 profile picture
A higher oil price in and of itself does not add one dollar of additional revenue for Transocean. Higher oil prices may psychologically help the stock, but it will not help the company’s revenues.

Only when more rigs are hired, and when day rates rise, will RIG benefit. Higher oil prices will not help increase revenues in the next 6 months due to the oversupply of floating rigs. In fact, any RIG investor needs to factor in day rates renegotiated to lower levels, as well as some rigs placed on standby at substantially reduced day rates.
how will this affect NBLX (Noble Midstream)?
Bulldog67 profile picture
No effect at all. They are the MLP associated with NBL (Noble Energy, not Noble Corp.).
NE bonds trading at 2% of par.

What a beat-down.
Loophole69 profile picture
I favor bankruptcies but do not favor running a business into the ground, wiping out common and bond holders, retaining past executive members and back to business as usual. There ought to be some sort of way that if the debt gets discharged so do those who were in control.
Henrik Alex profile picture
Noble management has already been reshuffled in recent quarters.
Not enough. Deepsix Barry, Julie, Therald, and anyone else that has been in management for more than 2 years.
Some events are beyond management control, such as the price of oil which is affecting all OSD. By your logic all OSD management should be sent packing because they didn't plan for these ultra low prices 5 years ago. How could they have planned for any different outcome given the current circumstances?
Golden Sage profile picture
Henrik Alex profile picture
@Golden Sage

Don't get it. You will be wiped out. Even unsecured noteholders will likely be wiped out. This is a firm zero.
Whonoz profile picture
@Golden Sage

I thought you had moved on. Glad to see your still following. Are you really going to ride the ship down? If I could sell my shares now, the amount I would get makes it almost pointless.
WhyNotBuy profile picture
@Golden Sage

You are already wiped out as is almost everyone. This black swan is no ones fault but it is a OSD planet killer. Only RIG will survive without a restructure. Without the black swan, these names would have survived. The NE investor relations gentlemen Jeff Chastain does not even 'exist' anymore. Not sure if he was laid off of ?? IMHO
Aventador profile picture
Count me in as shocked :-)) __(sarcasm)

Imagine the $$ that could have been saved..made by just putting 2+2 together a long time ago and not interjecting nonsense. I still scratch my head how some minds can math out the OSD were a good investment.
I applaud you for battling the oil bulls all these years.
what is your viewpoint on borr? have u looked at it? it seems they might get through this downturn. if they do they will be the winners post this crisis.
Henrik Alex profile picture
Borr won't get through this downturn either. They need to raise additional capital and restructure their debt.
So will the stockholders get wiped out??
Bulldog67 profile picture
You might read up on bankruptcy law! YES!!!!
Does anyone know why most NE bonds are near zero? I mean nobody doubts shareholders will be completely wiped out, but bondholders too?

Is the market predicting liquidation instead of chapter 11?
Henrik Alex profile picture

1) Credit facility is structurally senior
2) 2026 notes are structurally senior
3) Material amount of exit financing will be required
This is very helpful @Henrik Alex thanks. It also explains the relatively better priced 2026 notes.

Can you see many scenarios where junior bondholders will get close to nothing (less than 1 cent on the dollar)?
Henrik Alex profile picture
Yes, that's the most likely scenario. They will likely file for bankruptcy with almost $850 million drawn under their credit facility and $750 million in guaranteed 2026 notes outstanding. Add the ongoing Paragon Offshore lawsuit and the need for exit financing of at least $500 million and you might understand why the notes are trading close to zero already.
so sad, I have followed this co off and on since 1997, the primary reason this mess has happened is because the previous board refused to address the debt issue when they had the chance. They insisted on carrying billions in debt indefinitely. Its a shame because operationally Noble is a highly professional and competent set of people, undone by boardroom stupidity.
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