Noble Q3 2023 Earnings Call Transcript

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Provided by Quartr
November 1, 2023

There are 11 speakers on the call.

Operator

You for standing by. My name is Bailey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Noble Corporation Q3 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

Please limit your question to one initial and one follow-up question. Followed by the number 1 on your telephone keypad. And I would now like to turn the call over to Ian MacPherson, Vice President of Investor Relations.

Speaker 1

Thank you, operator, and welcome everyone to Noble Corporation's Q3 2023 earnings conference call. You can find a copy of our earnings report along with the This conference call will be accompanied by a slide presentation that you can also find located at the Investor Relations section of our website. Today's call will feature prepared remarks from our President and CEO, Robert Heifler as well as our CFO, Richard Barker. Also joining on the call are Blake Denton, Senior Vice President of Marketing and Contracts and Joe Ekawaja, Senior Vice President of Operations. During the course of this call, we may make certain forward looking statements regarding various matters related to our business and companies that are not historical facts.

Speaker 1

Such statements are based upon current expectations and assumptions of management and are therefore subject to certain risks and uncertainties. Many factors could cause actual results to differ materially from these forward looking statements and Noble does not assume any obligation to update these statements. Also note, we are referencing non GAAP financial measures on the call today. You can find the required supplemental disclosure for these measures, including the most directly comparable GAAP measure and an associated reconciliation in our earnings report issued yesterday and filed with the SEC. With that, I'll turn the call over to Robert Eisler, President and CEO of Noble.

Speaker 2

Good morning. Welcome, everyone, and thank you for joining us on the call today. I'll begin with some opening remarks on our quarterly results and then provide some comments on the market outlook and commercial activity Before turning the call over to Richard to cover the financials. Following Richard's financial overview, I'll wrap up with some additional highlights on First, we've reported a solid 3rd quarter with total revenue of $679,000,000 and adjusted EBITDA of $283,000,000 On these metrics, this was our strongest quarter since the Noble Marist Drilling Combination closed a year ago. And these results reflect an exceptional collective effort by our employees around the world who have leaned into this merger and executed simultaneously on both the integration and the day to day business.

Speaker 2

So well done and thank you all. Next, we're pleased to announce an increase of our quarterly dividend to $0.40 per share this quarter, which represents a 33% increase and demonstrates our continued commitment to maximizing value for shareholders via return of capital. Following the dividend initiation last quarter, We have signed additional contracts to bring our 2024 scheduled backlog to $1,800,000,000 currently with near term visibility to additional bookings that could increase 2024 backlog to over $2,000,000,000 So, we have taken the decision to make this upward revision just 1 quarter after the While you should not expect us to continue to adjust the dividend each quarter, we will remain focused on maximizing free cash flow generation And as previously stated, returning the significant majority of free cash via dividends and buybacks. Turning now to the market outlook. Offshore drilling fundamentals remain robust with the marketed utilization rate for ultra deepwater rigs in the 90s percent and leading edge dayrates for working high spec drillships in the mid to high $400,000 Leading edge fixtures for harsh jackups outside of Norway Have been in the $130,000 to $150,000 per day range.

Speaker 2

During the 3rd quarter, The drillship Noble Valiant was awarded a 6 month contract with LLOG in the U. S. Gulf of Mexico at a day rate of $470,000 excluding potential additional revenue for MPD Services. This program is scheduled to commence in early January and direct continuation of the Valeant's current contract. Also in the Gulf of Mexico, both of the globetrotter drillships have recently We've been awarded additional contract scopes from Shell that are expected to keep both of these units working into March of next year at extension rates just below $400,000 per day.

Speaker 2

On the jackup side, we're looking forward to the redeployment of the Noble Regina Allen With a three well program for Total Energies in Argentina that's scheduled to commence in mid-twenty 24 at a day rate of $150,000 The Phoenix field provides a significant source of domestic natural gas for Argentina And this program aligns very well with the JU-three thousand rig's technical capabilities and well established operational track record in this unique harsh environment location. So we're very excited to be participating in the revival of Argentina's offshore upstream activity with the Regina Allen next year, which will mark Noble's 3rd drilling campaign in the country with the JU3000 jackup. In the North Sea, the Noble Resilient has been awarded a 120 day contract with Petrobras at $133,000 per day that's scheduled to commence next summer. Of note, the resilience sustained damages while in port 2 weeks ago When a floating production vessel experienced a mooring failure and alighted with our rig, which was stationary in position near Keysight. There were no reported injuries, an investigation and damage assessment is underway, and we expect damages to be covered by the liable party or our own insurance, subject to applicable terms and limits.

Speaker 2

The timeline for required repairs Could impact the extent of the resilience availability for additional work before the petrogas contract next summer. However, We do not expect the timing of the petrogas contract to be impacted. Moving on, also in the North Sea, The jackup Noble Reacher has been extended by 15 months with TotalEnergies via exercise of priced options, Extending the rig to mid-twenty 25 with 1 year of priced options remaining. These are legacy priced options, So the day rates for the Reacher will remain materially below the more recent leading edge fixtures. These recent jackup contract awards have Significantly firmed up 2024 visibility for our non Norway fleet, which has been a positive development.

Speaker 2

Within Norway, the timing of demand recovery continues to be hard to predict. At this point, we remain generally cautious on the outlook for this market through 2024. Thus our idle CJ-seventy jackup Noble Interceptor is still confronted with a limited opportunity set. You can find a summarized schedule of our backlog on Page 5 of today's earnings slide presentation. As shown, Our backlog stands at $4,700,000,000 currently, down slightly from $5,000,000,000 as of last quarter.

Speaker 2

However, Excluding our long term commitments from ExxonMobil in Guyana and Aker BP in Norway, our backlog was essentially flat quarter over quarter. Accordingly, we're much more focused on the quality of backlog additions rather than the absolute dollar total as we progress through time, And we remain overall quite constructive on the re contracting opportunities confronting our available rigs. 2 of the defining features of our floater backlog are that it is both more in step with current market pricing than most of our competitors and also more exposed to near term rollovers than average. Putting numbers to it, our average day rate in floater backlog is $408,000 And 62% of 2024 available days across our marketed floater fleet are currently exposed to market repricing. Approximately 1 third of this 2024 repricing exposure relates to the CEA rigs in Guyana And 2 thirds relates to uncontracted rig days across the balance of the UDW fleet.

Speaker 2

We think this is clearly an advantageous exposure to hold And it also provides a measure of flexibility in how we approach shorter and longer term contract opportunities as they arise. There is a partially offsetting negative effect from the utilization inefficiency that results from the churn of shorter term contracts. Within this context, as previously discussed, we continue to see more white space impacting our 6th generation floaters over the near to medium term, specifically the 2 Globetrotters and the developer and discoverer. That said, we still see a good pipeline of follow on opportunities next year And we do hope to announce some additional fixtures here in the Q4, which would resolve some of the near term rollovers in our fleet. So stay tuned.

Speaker 2

Overall, the supply demand situation and outlook for both deepwater and harsh jackups remains very similar to what we described last quarter. The contracted UDW rig count has hovered in the low 90s since early this year, with utilization of the marketed fleet of 99 rigs Stable in the low 90s percent. During the Q3, 22 rig years of UDW floater contracts were awarded King Edge fixtures have priced in the mid to high 400,000 per day for working Tier 1 rigs, a step lower in the low 400,000 for contracts Awarded to rigs that are being reactivated and mid-three hundred thousand to mid-four hundred thousand for 6th generation rigs. Although contracting activity and utilization rates have remained firm throughout this year, we recognize There has been some concern in the market recently over the lack of apparent demand growth over the past few quarters as indicated by the contracted UDW rig count. We see nothing to indicate any type of underlying problem with demand growth, although it has been slightly slower to materialize in the short term.

Speaker 2

Over the past few years, we've seen a similar pattern of seasonality in which volume of total UDW contracts in a given year Has been slightly weighted towards the first half of the year and this appears to be playing out similarly this year. Additionally, 8 of the 14 long term contracts that have already been awarded this year have gone to non active rigs that are being reactivated at discounted pricing. We had originally anticipated some of these programs to go to working rigs, which combined with normal blips here and there with certain programs flipping to the right, Has resulted in a slightly more moderate slope of appreciation in the UDW market in 2023 compared to 2022. So we're approaching the $500,000 day rate threshold a bit more slowly than we had previously expected. But if you scratch a little deeper, What you find is that the UDW market is still in fact tightening due to the steady absorption of the sideline capacity.

Speaker 2

Looking ahead throughout 2024, we continue to expect a double digit increase in UDW rig demand globally, driven primarily by incremental requirements throughout the Americas and West Africa. Brazil continues to be a major fulcrum of demand growth And despite customary delays with their award process, Petrobras' total floater fleet is poised to expand from 24 contracted rigs currently to approximately 30 rigs over the next year based on recent and pending awards. Additionally, major projects in Namibia and Suriname are poised Drive incremental rig requirements and established UDW basins such as Angola and Nigeria continue to trend higher. The methodical absorption of sideline capacity has had a bifurcating effect on day rates over the short term. However, We believe the structural trend with day rates will continue to correlate positively with demand growth over time, which in fact is one of the key reasons why we are beginning to See the emergence of more long term tenders in the market as the inventory of sideline capacity continues to dwindle And the economics for new reconstruction are at such a dramatically higher plane, as we discussed in detail during last quarter's call.

Speaker 2

And just to reiterate that point, we believe that the economic threshold to support new drillship construction would be something along the lines of a 10 year contract At or above $650,000 per day with a 3 to 4 year delivery time preceding contract commencement. Given these fairly straightforward supply and demand parameters and with mounting evidence that our customers are reengaging in their long life Offshore resource portfolios in a more deliberate way than we've seen in over a decade. We believe the outlook for our business is very encouraging. Now let me turn the call over to Richard to discuss the financials.

Speaker 3

Thank you, Robert, and good morning or good afternoon all. In my remarks today, I will briefly review the highlights of our Q3 results as well as our outlook for the remainder of the year. Contract Drilling Services revenue for the Q3 totaled $671,000,000 up from $606,000,000 in the 2nd quarter. Adjusted EBITDA was $283,000,000 in Q3, up from $188,000,000 in Q2. Diluted earnings per share was $1.09 and adjusted diluted EPS was $0.87 Cash flow from operations was $139,000,000 capital expenditures were $99,000,000 and free cash flow was 40,000,000 As anticipated, revenue and adjusted EBITDA improved from 2nd quarter levels with higher day rates being the primary driver.

Speaker 3

Our 16 marketed floaters were 92% utilized in the 3rd quarter, up from 90% in the 2nd quarter, With average day rates increasing to 404,000 per day in Q3, up from 363,000 per day in Q2. Our 13 marketed jackups were 61% utilized with an average day rate of 141,000 in the 3rd quarter compared to 59 percent and $129,000 per day in the 2nd quarter. As summarized on Page 5 of the earnings presentation slides, Our total backlog as of October 31 stands at $4,700,000,000 versus $5,000,000,000 as of July 31. It's important to recognize that our unique long term commitments with ExxonMobil in Guyana and with Aker BP in Norway Have an outsized impact on our total backlog profile. As such, the sequential decrease in backlog this quarter It's really attributable to the 6 rigs operating under the ExxonMobil CVA and the ACSA BP programs, which did not take on additional backlog bookings over the past Current backlog includes approximately $1,800,000,000 that is scheduled for revenue conversion in 2024.

Speaker 3

It is important to note that our backlog excludes reimbursable revenue as well as revenue from ancillary services. Last month, we celebrated the 1 year anniversary of our business combination with Maersk Drilling and integration activities continue to progress extremely well. Our synergy realization is ahead of plan. Within 1 year of closing, we have realized run rate synergies of approximately 100,000,000 which represents 80% of the $125,000,000 target. This is well ahead of what we communicated upon the transaction announcement And is a testament to how the 2 legacy companies have come together to create value for both our shareholders and customers.

Speaker 3

Referring to Page 9 of the earnings slides, we are adjusting our full year 2023 guidance for revenue adjusted EBITDA. For total revenue, we now expect a range of $2,500,000,000 to $2,600,000,000 versus the prior range of $2,350,000,000 to 2,550,000,000 And for adjusted EBITDA, our expected range is $775,000,000 to $825,000,000 which is the top half of the prior range And about a 3% increase at the midpoint. These improvements in guidance ranges are driven by our strong results year to date With revenue also benefiting from higher than expected reimbursable revenue. Full year guidance for capital expenditures remains unchanged at a range between $325,000,000 $365,000,000 excluding customer reimbursable CapEx. To reference reimbursable CapEx has totaled $13,000,000 through the 1st 9 months.

Speaker 3

Notwithstanding the enhanced full year expectation The upwardly revised range still implies a sequentially lower Q4 compared to the Q3. This is consistent with our prior directional view and primarily reflects greater anticipated downtime for various rigs in the Q4. The primary drivers include the Noble Fei Kozak, which has recently finished a contract in the Gulf of Mexico and is preparing for its next contract in Brazil That is expected to start in March. The Noble Developer, which finished its work scope in Brazil in late September and the Noble Voyager, which is about to finish It's current work scope in Mauritania. Looking beyond 2023 at a high level, we continue to expect a nice step up in adjusted EBITDA and free cash flow In 2024 versus 2023 and also envision a higher weighting of 2024 EBITDA in the second half of next year compared to the first half.

Speaker 3

As previously discussed, 2024 will be the peak year of 10 year SPS's major projects across athletes. And as such, we continue to expect a moderate increase in CapEx next year compared to this year. Additionally, we continue to see persisting inflationary trends across Sure. They're very consistent with the type of industry upcycle that we're currently experiencing. Therefore, we do expect Something in the range of mid single digit type percentage inflation rates on average from 2023 into 2024 across our full cost structure.

Speaker 3

Finally, I would like to provide a comment on cash flow. As our past few quarters have shown, the quarterly variability of working capital And create some short term swings in free cash flow. During the Q3, we generated $40,000,000 of free cash flow despite Over a $100,000,000 build in working capital. While some of this is a function of a growing top line, we do expect the portion of this build to reverse in Q4. As Robert stated, we remain committed to returning the significant majority of free cash flow to shareholders over time by share repurchases and dividends.

Speaker 3

We continue to believe that maintaining a conservative through cycle balance sheet in support of a high free cash flow payout It's the appropriate capital allocation formula for our business, and therefore, you can expect Noble to abide by this framework going forward. That concludes my remarks. And now I'd like to pass the call back to Robert for closing comments.

Speaker 2

Thanks, Richard. Before we move to Q and A, I'd like to close here with a couple of important highlights. First, an exciting new technology that we're developing And second, a few reflections on the 1 year anniversary of our merger. On the technology side, I'm very excited to highlight Horizon 56, a software platform that we've developed to promote the digitalization of well planning and execution. The benefits of digitalizing work Streams in closing the gap between our customers' well programs and our drilling crews are far reaching, impacting safety, Drilling speed, management of change, elevation of lessons learned and overall risk management.

Speaker 2

We believe the digitalization enhancements provided by Horizon 56 can ultimately drive drilling efficiency gains, which obviously translates into very significant value uplift for customers, including but not limited to well cost and emission factors. Overall, we feel fortunate to have this very talented Horizon 56 team at Noble, a group that came to us by way of the Maersk Drilling Combination as one of the many outstanding aspects of Maersk's Human Capital and Technology Suite. We talk frequently about the new industry landscape In which we aspire to be, as we say, 1st choice offshore. That ambition can only be realized with 2 major prerequisites, Which are inexorably linked: a, scale and b, a culture of tireless innovation and service posture, both of which we have very purposefully promoted as part of the industrial logic behind our strategic actions of the past few years. Accordingly, we remain keen to invest in and focus on areas like Horizon 56, where Noble can drive incremental value for our customers.

Speaker 2

Finally, a brief reflection on the state of the company as we approach 2024. Noble recently celebrated the 1 year 3 of our business combination with Maersk Drilling and we could not have asked for a better integration effort than we've seen so far. Within the 1st 6 months of close, we achieved operational stability and a true culture of 1 Noble that proved critical to our 1st year success, all while exceeding synergy targets and consistently executing for our customers. Year to date, our operational uptime of 97% has been outstanding, especially for year 1 of an integration of this scale. And ultimately, I believe the company's 3rd quarter results are a very clear demonstration of the power of this combination.

Speaker 2

So I would just like to conclude here with a special offering of gratitude and congratulations to our fantastic employees around the world For your tremendous efforts and for the great results that you're producing on behalf of Noble. We're off to a great start together and the best is yet to come. With that, we'll pause here and open up the call for Q and A.

Operator

And your first question comes from the line of Eddie Kim with Barclays.

Speaker 4

Hi, good morning. My first question is just on what feels like a Pause in contracting activity over the past 2 to 3 months, at least compared to what we were seeing through kind of July or August this year. Just in terms of the number of contracts and multi year durations we were seeing, should we view this as really more of a temporary pause? It seems like based on your prepared remarks, it feels like we should. And when do you expect we'll see multi year contract announcements start to pick up again?

Speaker 4

Yes.

Speaker 2

Thanks, Eddie. Yes. So it is very much a temporary phenomenon. If you look back through time At just contract awards per quarter, this is not unusual at all. I think it's gained it's had a lot of Understandably, but they ebb and flow.

Speaker 2

And as we mentioned in the remarks, the second half of the year, sometimes Traditionally, I guess, is a little lower volume than the first half of the year. And I think that's related just to normal budget cycles for our customers. You're going to see the working rig count increase next year. And we believe that you're going to see duration increase as well to your question. I think One of the potential drivers for this current pause is that certain operators, not all, but certain of the operators, Some of whom are some of the bigger players have been regrouping and connecting some of their programs together so that rather than going out To tender for 1 or 2 wells, which has been the norm for the last couple of years, they're pooling those together and Probably going out to tender for some longer duration type contracts.

Speaker 2

So, no hard evidence to that yet. That's our belief and I think that's what You're going to see as we move into 2024.

Speaker 4

Okay. Got it. Great to hear. And thanks for that color. Just my follow-up is on the comments around cost inflation next year.

Speaker 4

I believe you said we should expect Kind of a mid to high single digit level

Speaker 3

of cost inflation. Could you just expand upon that

Speaker 4

a little bit more? In what areas do you expect cost inflation to be highest next year? Is it labor, spare parts and equipment, The cost of SPSs, just any additional color here would be great.

Speaker 5

Sure, Eddie. Yes, we said mid single digit type Inflation next year is our expectation as we sit here today. And obviously, that's an average, right? And so As you know, some elements of the cost structure are going to be higher than others. I would say on the labor side, Gulf of Mexico, obviously, we're seeing So it's very, very regional dependent as well.

Speaker 5

It's hard to give maybe more specificity than that, but I

Speaker 2

think on average, I would think about it

Speaker 3

as a kind of mid single digit type level next year. Okay, understood. Thank you very much for the comments. I'll turn it back.

Speaker 2

Thanks, Eddie.

Operator

Your next question comes from the line of Kurt Hallead from Benchmark. Your line is open.

Speaker 6

Hey, good morning everybody.

Speaker 7

Good

Speaker 6

morning. I appreciate the color. So there Yes. In the context of the progression on headline day rate and The fact that we haven't quite yet reached the $500,000 per day mark, I think I want to get your perspective, right? How important is day rate versus total contract value, right?

Speaker 6

Because at the end of the day, the day rate is making up It's no longer 100% of the contract value because there's a lot of upfront costs that are being paid, some mode fees and so on and so forth, right? So, it seems like investors are just so intently focused on the headline day rate that they're missing the bigger picture that The total cash value of these contracts are going up. So I just want to get your perspective on that and see is it really It was important to you guys about the day rate or is it more important for you to maximize the cash value of the contract?

Speaker 2

It's a good question and you're spot on that There seems to have been an almost myopic focus on the 500 number here recently. And understandably, it's a visible threshold. We're headed there. We've said that before. Timing is maybe a little bit behind.

Speaker 2

But to your point, There's a couple of other things that go on. 1, between contract Contribution and efficiency does matter. Some mobilizations, etcetera, matter. I would say we're probably somewhere mid cycle ish on that component. So you're We're seeing obviously MOBs and DMOBs, we're a ways away from kind of full revenue type MOBs in DMOBs at this And that's a point that we reached last cycle as you'll remember.

Speaker 2

But also just within Contract drilling margins, there is a variation between contracts, regions, types of rigs, etcetera. And so we're very much focused on maximizing our margins and our cash flow. And I think we've got some places where we're very proud To have what we think is a good combination right now and is one of the things that's driving our cash flow right now.

Speaker 6

Okay. Appreciate that color. Now you guys referenced the prospect of seeing increased duration and Obviously, one of your competitors yesterday indicated that they've been seeing the same dynamic. So maybe give us some perspective on as you look out in potential contract awards that We'll come forth in 2024. What sort of duration are we talking about and relative to what we've So far like, are we seeing now a greater propensity of 3 to 5 year term or are we seeing a greater propensity of 2 year terms?

Speaker 2

It's the latter, but I think what you're going to see that if I recall, if I'm citing this Correctly, if you exclude the Petrobras contracts, the average contracted UDW term is like 11 or 12 months right now. And so we would anticipate that that statistic would go up fairly dramatically next year, Because we think, as I mentioned, that there are a few companies that are moving away from 1 and 2 well contracts and into 1 to 3 year contracts, which kind of covers your 2 year example.

Speaker 6

Okay, great. So is the just an extension of that question, right? So we're seeing all kinds of information that's suggesting that demand For 7 gen ultra deepwater drill ships are going to exceed supply in 2024 and 2025 In prior cycle periods that's tended to cause some angst among the oil companies about, hey, am I going to get what I need when I need it? And therefore, I need to basically reach further into the future and book it for a longer period of time. Based on your commentary, there's some movement toward that, but it doesn't seem like it's to the Same extent.

Speaker 6

So why are oil companies not willing to maybe book 3 years versus 2 years, let's just say. Just again, I know it's a theoretical question, but I just want to get a sense from you guys on what kind of pushback or What kind of color you're getting in your conversations with the oil companies?

Speaker 2

Sure. Yes. I mean, my view is that the market is Pretty well balanced right now and that it will continue to be pretty well balanced going forward. We've had 8 or 10 rig reactivations announced this year. So that's new good new supply coming into the market.

Speaker 2

And there's a few small handful left, including our Meltem that we anticipate would come into the market just broadly across the industry continue to come into the market through 2024 and 2025. Oil companies have and I mentioned this kind of briefly, but they have been selectively pushing some of the programs to the right. And I think some of that is in a couple of instances, it's I think been to avoid Headline rate perhaps. And but I think more broadly, it's trying to pull together programs as I mentioned earlier to get some term to tender for some term. I think it's part of what's creating this air pocket, takes a little longer to pull together multiple wells than just I don't know whether I'm not calling for the last upcycle level of urgency in the near term.

Speaker 2

I see this As a relatively balanced market with upward movement on day rates as we move through next year and into 2025.

Speaker 6

That's great, Robert. Thanks. Appreciate that.

Operator

And your next question comes from Gregory Lewis with BTIG. Your line is open.

Speaker 7

Hey, thanks and good morning everybody and thanks for taking my questions.

Speaker 2

Good morning, Greg.

Speaker 7

Hey, Robert. I realize the ink is not even drying and a lot still has to happen before Chevron can buy Hess, but just given Hess' position in Guyana with Exxon, Do you have any kind of broad thoughts on what that does? Or does that change anything or accelerate anything? Just kind of As you think about that changing of a partner, I'm kind of curious if you have any thoughts around that.

Speaker 2

Sure. I mean, I think all of the most interesting answers are obviously have to come from Chevron and Hess. But from our view, We feel we had an excellent relationship with Hess. We have regular contact there. And so we hope that that translates over and would hope to continue that.

Speaker 2

Looking a little bit outside of that, We of course talk a lot about Guyana. It's very important to us. And we've put a whole lot of focus on that operation. And I think the results very much speak for themselves. There's data that demonstrates our efficiency there And we think we've got some really, really great performance from the rigs down there.

Speaker 2

So hopefully, The Chevron is the new owner of that. We'll see our performance and that's a customer that we haven't done as much work for. So I see it as a potential opportunity, someone who will get a firsthand look into what we're doing.

Speaker 7

Okay. Okay, great. And then congratulations on getting that bolt on work on the Globetrotter rigs. It was a good update to see. But as kind of we look out in 2024 and really all signs point A definite pickup in acceleration, but maybe some of the work that's kind of being out there doesn't start up until mid-twenty 24.

Speaker 7

Any kind of rough way to think about or maybe handicap as we see some rigs roll off contract Over the next 1, 2 quarters, any kind of rough way to think about idle time in between contracts? I'm kind of curious if you have any thoughts around

Speaker 8

that. Yes. Thanks, Greg. It's Blake. So maybe the best So it would be to walk through a couple of the rollovers.

Speaker 8

And so if I start with the floaters and you look at the rigs that have options, the stainless floss Here in the Gulf of Mexico working for Murphy, we feel good about the prospect of continuing to serve their drilling needs. So not expecting an interruption in service there. Jerry D'Souza is a similar story there for Total Energies in Nigeria. Don't want to opine on what their decision will be around that But the election is this quarter. We know they have work there and we believe we're performing well for them.

Speaker 8

So we like our we like the prospect there as well. So then when you look out toward the Voyager and the Valiant, pleased to announce the contract we got with LLOG on the Voyager that will start round about The turn of the year. And then there's options on the back end of that, that if exercised, would take it through the end of the year. So feeling pretty good about the Voyager Sorry, feeling pretty good about the value yet. The Voyager is available for 2024.

Speaker 8

It's wrapping up program right now mobilizing back to the Americas. And I guess we would expect with the ongoing dialogue Some work that would pick up in the Q1 of next year. The other thing to think about when we're looking at that rig class is there's roughly 30% of the forecasted The UDW demand next year, that still remains to be contracted. So there's some awards we think, as Robert Outlaid in his prepared remarks some awards we expect in the Q4 that will provide some more visibility. Super helpful.

Speaker 8

Thanks. Yes. The only last point I would say and it's right again on the back of Robert's prepared comments. On the Globetrotters and the D rigs,

Operator

Your next question comes from David Smith with Pickering Energy Partners. David, your line is open. And our final question comes from Paley Bilbao with Clarkson Securities. Your line is open. And for our audience, please standby.

Operator

Our speakers are dialing back in. Thank you so much.

Speaker 6

Hello.

Operator

Yes, thank you. And your next question comes from Pele Bilbo with Clarkson Securities. Your line is open.

Speaker 9

Hi, guys. Thank you for taking my question here and congratulations on a stellar quarter. I guess most of my questions have been answered already. So I'm left with the final one on my list here. And I appreciate that you did touch upon this during the prepared remarks as well.

Speaker 9

But my question relates To the North Sea market and particularly harsh environment jackup fleet. I guess we touch upon this topic every single time we have this call, but it would be really great if Give some more color on what opportunities you see going forward for the region, at least on our part where we're sitting here in Norway. We see some signs with emphasis on some Increasing activity in 2024 and some more in 2025, but any additional color on your end would be really great.

Speaker 8

Yes, thanks for the question. I guess, I'll jump right on the back of your last statement and that we do see some Signs of increased activity, increased dialogue, I think most of those for Norway are more 2025 related than 2024. We do believe the next demand goes to us. The CJ-70s are the most well suited to compete in the competition zone there in Norway. There's also the potential upside of incremental production that could come from infill drilling if there was any sort of gas Shortage, whether that's a regional event or a global event.

Speaker 8

So there's a little bit of upside. I don't think there's firm demand yet To declare 2025 is going to explode there in Norway from a demand perspective, But the dialogue is encouraging. In the non Norway space, a little bit more positive in terms of the nature of the conversations with our having customers that we're having with our customers there. And of course, we've got the Intrepid that will be locked up all of next year. So the capacity is really limited for is really limited for 2024 to the interceptor now.

Speaker 8

And we like the capability of the rig if that demand comes to pass or if unexpected demand It comes to the market.

Speaker 10

Yes, great. I think that basically answers my questions here. Thank you guys

Speaker 9

for taking the call and have a great

Speaker 3

day. Thank you.

Operator

Your next question comes from David Smith with Pickering Energy Partners. Your line is open.

Speaker 10

Hey, thanks, Doug. Can you hear me okay?

Speaker 2

Yes, we can hear you. Sorry, there was some technical issues there.

Speaker 10

Good deal. Kudos on the quarter and especially the dividend increase. That's just great leadership on the shareholder return front. I did want to revisit your comments about the sidelined Ultra Deepwater capacity, you referenced a number of rigs added over the past year, whether reactivations or previously stranded new builds. And we've seen they can make very solid returns with term duration at rates below leading edge.

Speaker 10

But I wanted to ask your thoughts about the remaining sidelined capacity. Maybe how many high spec drillships you think might still be You brought out rates in the below 400s.

Speaker 2

Yes, I mean, I think, look, there's a small handful. It's 4% to 6% that kind of range. From there, you start to have, I think some concessions on marketability and you start To get into, it's all fighting scale here, but you start to get, in our opinion, a little bit closer to 6th generation territory, Where the rigs might be missing one of the critical components defining a 7th generation in certain instances, of course, We don't really know, not many of them or most of them are not our rigs, but could perhaps have some higher reactivation costs from their stacking status etcetera.

Speaker 10

We were coming up with 5 rigs. So really happy to hear your answer. Just a little bit of a housekeeping question. I think you're still managing the former Lloyd Noble. And just wanted to ask if so, maybe how much that contributed to Q3 cost and Really, how much longer do you expect Noble to manage that rig?

Speaker 4

Yes, Dave.

Speaker 5

So I think that was part of the beat from a top line perspective in Q3. So we are continuing to manage the CJ70 in North Sea. I think our expectation is that, that will continue through kind of mid part of this quarter. But you're right as well. If you strip that out, I think from a cost perspective, I think it was a very nice beat in Q3.

Speaker 5

And I also think As you look at the operational performance in Q3 and the uptime, I think that was obviously a big component of the beat as well.

Speaker 10

Good deal. I appreciate that. If I can get greedy and sneak one more in, I recognize your SMEs aren't harsh environment, but they're certainly Very high spec. I wanted to ask if there's any reason they wouldn't be competitive for some of the regions we've seen. The regions, I mean, it's pulled to right outside of the North Specifically Namibia.

Speaker 2

Yes. Look, those are some of the most capable semis in the world. As you said, they're not Harsh environment, so they're not going to go to the extreme cold weather environments. But in regions where they can Where semi is preferred generally, they compete very well. They can get I guess I would offer they are generally because they're moored and DP, they can Or compete a little bit less favorably in the deeper water you get, because upwards in 10,000 foot kind of range, You start to have some weight limitations that are Specific to semisubmersibles and less so to drill ships.

Speaker 2

So look, like we've said before, those rigs when they're operating in Their specific niches are going to compete very much on a 7th generation level. And when up against an alternative in a drillship or for whatever other reason they may have Some concession on their operation, they're going to compete more like a 6th generation rate.

Speaker 10

Perfect. Thank you so much.

Speaker 2

Thank you.

Operator

And there are no further questions at this time. Ian Macpherson, I will turn the call back over to you for closing remarks.

Speaker 1

Thank you, everyone, for sticking with us through the technical difficulty there, and thanks For dialing in today. We look forward to speaking with you again next quarter. Have a great day.

Operator

And this concludes today's conference. You may now disconnect.

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Earnings Conference Call
Noble Q3 2023
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