Noble Corporation

Ladies and gentlemen, thank you for standing by and welcome to the Noble Corporation PLC third quarter 2020 results conference call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to turn the call over to Craig Mearhead, VP of Investor Relations and Treasurer. Please go ahead.

Thank you and welcome everyone to Noble Corporation's third quarter 2020 earnings conference call. We appreciate your continued interest in the company. You can find a copy of Noble's earnings report issued yesterday evening along with the supporting statements and schedules on our website at noblecorp.com. Joining today are Robert Eifler, President and Chief Executive Officer, and Richard Barker, Senior Vice President and Chief Financial Officer. For today's call, we will not be hosting a question and answer session at the end of the prepared remarks. Before I turn the call over to Robert, I'd like to remind everyone that we may make statements about our Chapter 11 filing, restructuring activities or plans, operations, opportunities, plans, operational or financial performance, the drilling business or other matters that are not historical facts and are forward-looking statements that are subject to certain risks and uncertainties. Our filings with the U.S. Securities and Exchange Commission, which are posted on our website, discuss the risks and uncertainties in our business and industry and the various factors that could keep outcomes of any forward-looking statement from being realized, including resolution of our Chapter 11 cases, our ability to consummate or restructuring as contemplated, the impact of the COVID-19 pandemic on Millville's operations, the price of oil and gas, customer demand, operational, and other risks. Our actual results could 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 in our call today. You will find the required supplemental disclosures for these measures, including the most directly comparable GAAP measures and an associated reconciliation on our website. And with that, I'll now turn the call over to Robert Eifler, President and Chief Executive Officer of Noble.

Thanks, Craig. Following our July 31st filing for protection under Chapter 11 of the U.S. Bankruptcy Code, we've made steady progress towards finalizing our process in emergence. As a reminder, we filed with a prearranged agreement with our largest creditors for a comprehensive restructuring that would convert all of our outstanding bond debt to equity, provide for $200 million of new capital from our existing bondholders, and provide a new $675 million credit facility from our existing bank group. In addition to the great progress with our creditors, we've cleared a critical element of uncertainty by reaching a settlement with the Paragon Litigation Trust. While the timing of several regulatory approvals remains unknown and outside of our control and could be affected by COVID shutdowns in certain jurisdictions, we maintain our target of emerging prior to year end or soon thereafter. Our decision to pursue a comprehensive restructuring was reached after a thorough review of several potential alternatives. We believe that this path will best position Noble to navigate what remains a very challenging environment and we are grateful for the broad support we have received from our creditors, customers, vendors and employees. Due to the ongoing court process and related activities, we will not be holding a question and answer session on today's call. Richard will give some more details on our restructuring in a moment, but first I would like to give an operational update. Our industry continues to endure one of the most difficult environments we have seen in decades. Timing of any industry recovery remains entirely uncertain. Our crews and operations support teams still face significant quarantine and travel restrictions that have become an unfortunate part of our business in the time of COVID-19. Despite the challenges, the Noble team continues to deliver safe and efficient operations to our customers around the world. We have increased our backlog from $1.4 billion at the end of the second quarter to almost $1.7 billion at the end of the third quarter. Having achieved those commitments from our customers during such uncertain times is a testament to the hard work of our crews and shore-based personnel who have maintained focus under challenging conditions. Since the end of the second quarter, we have been awarded seven years of additional work with ExxonMobil and Guyana. Six months of this work is on the Noble Sam Croft, which is expected to commence in the first quarter of 2021. Six and a half years of this work has been awarded to the Noble Tom Madden. This would extend the Tom Madden's contract into 2030. However, the terms of our Commercial Enabling Agreement, or CEA, allow Exxon to shift this backlog to other rigs at their option. So, we may see this contract term spread over multiple rigs under the CEA. The multi-year commitment allows us to further realize economies of scale and supports additional investment by Noble in our operations, including further developing our local Guyanese workforce. We are extremely pleased to extend our relationship with ExxonMobil and their partners, Offshore Guyana, and continue our participation in one of the world's premier offshore exploration and development opportunities. In the U.S. Gulf of Mexico, drill ship demand has remained relatively flat for the majority of 2020, with 15 drill ships contracted at the end of Q3. Two of those are our Globetrotter 1 and Globetrotter 2, which remain under contract with Shell into 2022 and 2023, respectively. The Noble Clyde Boudreau is currently warm stacked in Malaysia. We are bidding into numerous opportunities and are hopeful we will be able to get back on day rate in the first half of 2021. On the jackup side, we are very proud of the previously announced contract with Equinor, which will take the Noble Lloyd Noble to Norway in 2021. The Lloyd Noble is one of the most technologically advanced jackup rigs in the world and has been performing very well for Equinor on the Mariner platform. There will be some shipyard time to bring the rig into compliance with current Norway regulations and to add contract specific equipment at the request of our customer. We expect a net project cost of $35 to $45 million before contract commencement in mid-2021. Norway is a natural market for rigs of the CJ-70 design like the Lloyd Noble, and we expect we will have good opportunities for future work in the country. The North Sea has been a challenging market this year. Of 38 high spec jackups in the region, there are currently 18 under contract, excluding the Lloyd Noble, Two of our four other jackups in the region are uncontracted and bidding on jobs. There are a number of programs with start dates in 2021, including several P&A opportunities, and while the market remains extremely competitive, we believe our fleet measures up well against the other available rigs and hope to have some additional contracting news to you soon. We continue to have four rigs on contract with Saudi Aramco, Although the Noble Scott Marks is on standby at zero day rate until May 2021, and the Noble Roger Lewis has just been put on a similar suspension framework, which allows a Ramco to put the rig on standby for up to 12 months at zero rate. We expect the standby period to begin in late November. Elsewhere for our jackups, we have been awarded a contract extension on the Noble Mick O'Brien, which will keep it in Qatar with its current customer into August 2021. The Noble Regina Allen has commenced its contract with BHP in Trinidad and Tobago, and in Australia, the Noble Tom Prosser is currently warm-stacked but chasing several opportunities for work starting in 2021. Overall, the drilling market continues to suffer from oversupply. At the end of Q3, worldwide floater demand stood at 99 rigs versus a total supply, including rigs and shipyards, of 249 units for a total utilization of 40%. This is not sustainable. Of the uncontracted floaters, there are 48 cold stack rigs, which will require significant additional investment in order to bring them back to the market. On the jack-up side, the numbers are different, but the story is the same. Even cold stack rigs require daily cost to maintain, and with the widely held expectations of a delayed recovery, it is becoming harder for the industry to justify even modest costs on cold stack rigs. The market outlook and company's financial positions no longer support the cost of maintaining currently uncompetitive rigs for option value. Year to date, in 2020, 37 rigs have been retired from service, which already exceeds the full year 2019 attrition. We expect further retirements as drilling contractors continue to update their expectations of future cash flows based on market conditions. Restructuring activities at a number of drilling contractors may facilitate further attrition. At Noble, we have taken a hard look at our fleet as well, hence our recent announcement to dispose of our five cold stack rigs. These rig retirements further high grade our already high spec fleet and bolster our efforts towards cost efficiency. I'll now turn the call over to Richard to give an update on our financial results and more details on our restructuring process.