Noble Corp plc Q3 FY2024 earnings call

• Acquisition of Diamond Offshore closed on September 4, combining two companies with deepwater capabilities, adding $2 billion to backlog, and early integration wins with synergies on track to meet targets.
• Capital return program: $360 million of share repurchases completed under a $400 million authorization, Board approved second $400 million authorization, quarterly dividend maintained at $0.50 per share. Over $800 million in combined dividends and buybacks since Q4 2022.
• Financial highlights: Q3 adjusted EBITDA $291M, up from $271M in Q2; free cash flow $165M. Diamond acquisition enhanced free cash flow profile.
• Commercial and operational: Awarded 4.8 rig years of backlog from ExxonMobil in Guyana, booked 130 days for Ocean Endeavor in UK North Sea, BlackRhino awarded 6-month contract in Gulf of Mexico, Faye Kozack set pre-salt drilling record in Brazil, Discoverer drilled first well for Petrobras in Colombia, Ocean GreatWhite extended contract in UK, BlackLion and Deliverer moved to higher day rates.
• Market outlook: Global energy demand increasing, deepwater rig contracting uptick in Q3 (26 ultra deepwater rig years contracted, 20% increase over Q2), 56% of total marketed fleet committed for 2025, 59% of floaters and >75% of tier-1 drillships committed for 2025.

In the third quarter, contract drilling services revenue totaled $764 million, up from $661 million in the second quarter. Adjusted EBITDA was $291 million in Q3, compared to $271 million in Q2. Free cash flow for the quarter was $165 million. These results included approximately four weeks of contribution from the Diamond acquisition in September. The total backlog as of November 5th stood at $6.2 billion, with $500 million scheduled for revenue conversion in the final eight weeks of 2024 and $2.6 billion for 2025.

• Fourth quarter 2024 guidance: Total revenue $850M-$890M (includes ~$30M-$35M reimbursable revenue), adjusted EBITDA $275M-$305M, net capital additions $105M-$135M. Reduction in Q4 revenue and adjusted EBITDA due to shipyard projects and program finish-ups.
• Full-year 2024 adjusted EBITDA midpoint aligns with Q4 guidance midpoint. 2025 free cash flow expected to step up with reduced CapEx.

• White space in the first-half of 2025 due to customer capital discipline, delayed FPSOs, and potential for utilization headwinds.
• Potential stacking of rigs if demand doesn't materialize as expected, with considerations of cost minimization across a sliding scale of stack definitions.

Q: Eddie Kim asked about the outlook for the first-half of 2025, white-space concerns, and confidence in rig demand rebounding in 2026.

A: Robert Eifler stated there's white space in the first-half of 2025 due to customer capital discipline and delayed projects, but there are forward indicators like open tenders and FIDs suggesting work is coming, with hope for improvement in late-2025 and 2026.

Q: Kurt Hallead inquired about the magnitude of EBITDA inflection in the back half of 2025 and capital allocation with more debt post-acquisition.

A: Richard Barker said Q3 adjusted EBITDA would have been ~$350M if Diamond was included for the full quarter, with a flat first-half of 2025 and significant upside potential later; Robert Eifler noted they're waiting on tender outcomes before providing more guidance on 2025 and plan to continue dividends and share repurchases with excess free cash flow.

Q: Greg Lewis asked about the jack-up fleet and stacking costs.

A: Robert Eifler explained a sliding scale of stack costs, with full working OpEx down to ~$40,000-$50,000 per day for preservation-type stacks.

Q: Fredrik Stene asked about market opportunities by geography and segment rankings.

A: Robert Eifler said opportunities are global with more in the Golden Triangle, Suriname, West Africa, etc.; there's more market concern on jack-ups recently but jack-up numbers have held up well, while floaters show upside potential.

Q: David Smith inquired about the Developer rig's outlook and operating costs, and Globetrotter rigs.

A: Robert Eifler said operating costs for the Developer rig are in the ~$100,000 per day range; there are active conversations for both Globetrotter rigs, with higher focus in the U.S. Gulf, and they'll take appropriate action if market shifts to one rig.