Noble Corporation

Thank you for standing by and welcome to the Noble Corporation second quarter 2021 results conference call. At this time all participants are in a listen only mode. After the speaker's presentation there will be a question and answer session. To ask a question during the session you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance please press star 0. I would now like to hand the conference over to your speaker today, Craig Muirhead. Thank you. Please go ahead, sir.

Thank you, Rebecca. And welcome, everyone, to Noble Corporation's second quarter 2021 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 me today are Robert Eifler, President and Chief Executive Officer, and Richard Barker, Senior Vice President and Chief Financial Officer. Also joining are Blake Denton, Vice President, Marketing and Contracts, and Joey Kawaja, Vice President of Operations. For today's call, we will begin with prepared remarks, followed by a question and answer session. 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. 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. Please refer to our SEC filings for more information regarding our forward-looking statements, including the risks and uncertainties that could impact our future results. Also note, we are referencing non-GAAP financial measures in the call today. You will find the required supplemental disclosure for these measures, including the most directly comparable GAAP measure and an associated reconciliation on our website. And with that, I will now turn the call over to Robert Eifler, President and Chief Executive Officer of Noble.

Thank you, Craig, and welcome to everyone joining us on the call today. I'm proud of the Noble team's performance in the second quarter and excited to walk you through the results we released yesterday. Noble continues to deliver value to our customers and investors, all while keeping our employees and business partners safe offshore. Last year, we had exceptional safety and operational performance. breaking a company record, and the second quarter of 2021 was even better. Thank you to all of our crews offshore and our people in our shore-based offices who have delivered such good performance in the face of the travel and logistical challenges brought about by COVID-19. We also executed on our strategic plans in the second quarter by acquiring Pacific Drilling, making substantial progress on the integration and contracting of the fleet, and relisting on the New York Stock Exchange. We'll speak more on our strategy later, but let me begin my prepared remarks today by addressing the floater and jack up markets. Ultra deep water market has improved dramatically during 2021 and our newly acquired Pacific rigs are allowing Nobles marketing team to again bid into that market following a period without any drill ship availability. As I mentioned last quarter, one of the key success factors for the acquisition was finding work for the new drill ships. Since we last spoke, Noble has secured three new contracts, which address that priority. This additional work adds approximately 180 operating days to the fleet prior to any exercise of options and has a cumulative total contract value of over $55 million, including associated mobilization fees and customer reimbursed rig upgrades. First two new contracts are for the Pacific Thompson and further build out its 2021 and 2022 drilling schedule. The rig's previously announced one-well campaign for Petronas in Mexico is expected to conclude in early fourth quarter of this year. Today, we're excited to share that the Comson is now contracted to return to U.S. waters for approximately 80 days of work with Murphy. Our second new contract award this quarter, which was announced in our June 22nd fleet status report, has the Comson remaining in the U.S. goal following Murphy to drill one well for Inven, who has three subsequent priced options for additional follow-on work. The other drill ship we have rolling off contract in 2021 is the Pacific Santa Ana. We still expect that rig to complete its current contract with Petronas in Mauritania in August, and I'm pleased to announce a new contract award with APA Corporation in Suriname. That contract is for one well plus two one well options and is estimated to commence in the first quarter next year. This award in surname is meaningful for the team here as it validates our thesis for the Pacific acquisition by deploying PAC-D's high-spec assets to further serve Noble's existing customer base. I'm encouraged by these new contracts, which show positive momentum in the ultra-deepwater market. I'll now walk through our key ultra-deepwater regions with some operational and market highlights. The U.S. Gulf of Mexico is quickly tightening, and both rates and utilization for ultra-deepwater rigs have moved sharply upward over the first half of 2021. Compared to the first quarter, the industry has seen a five-fold increase in contract fixtures in the region, with almost five rig years added in the second quarter. We are currently pursuing multiple contract opportunities in the U.S. Gulf for work starting in 2022 and beyond. The South America deep water region has seen several contract fixtures during the second quarter, and we continue to believe this region to have the highest growth potential in the near to medium term. In Brazil, the average 2021 fixture term stands at two years led by Petrobras demand. Historically floater day rates in Brazil lagged the rest of the world as local drilling contractors competed fiercely to keep their rigs utilized. However, with the local supply of drill ships now essentially fully booked, a favorable rate trend is evident in the more recent Petrobras tenders. Noble has a considerable history in Brazil, and we continue to look for the right opportunity to reenter the country. Further up the coast, we see activity and rates in Guyana and Suriname increasing into 2022 and remain committed to serving our customers and the local communities there. Early in the second quarter, the Noble Sam Croft began its contract in Guyana with ExxonMobil under our Commercial Enabling Agreement, or CEA, and Richard will provide a reminder on some of the mechanics of that agreement in a moment. This brings our fleet to four rigs working in Guyana, and the addition of the Santa Ana early next year will bring our fleet to five high-spec ultra-deepwater rigs in the region. The rig crews working in Guyana are delivering outstanding performance and I'm pleased that our customers continue to entrust us with some of their most important wells. West African deep water activity is beginning to rise as confidence in oil prices and global energy demand begin to normalize. Countries such as Nigeria and Ghana, which were deeply impacted by the loss of offshore drilling activity, are now seeking to improve their regulatory environment to incentivize operators to resume drilling plans. We're now seeing some of those previous projects getting sanctioned, and drill ship utilization in the area has increased from 56% in the first quarter to 73% in the second. Our conversations with customers indicate that there could be new long-term projects in Angola, Nigeria, and Ghana for 2022 starts, as well as some short-term high-spec floater work in Gabon. Looking at global supply for floaters, there have been 71 rigs retired since the beginning of 2018, including 15 retirements announced year-to-date. Excluding cold-stacked rigs and new builds, there are 141 floating rigs being marketed today, of which 104, or 74%, are committed to contracts. In addition, there are 17 Tier 1 drill ships that are either cold-stacked or stranded in new-build shipyards. Reactivation costs for cold-stacked rigs can vary widely depending on how long a rig has been stacked and what work is needed to bring it back into service, but can easily exceed $50 million for a stacked drill ship. bringing one of the stranded new-build ships into service is typically even more capital-intensive. The shipyard's pricing expectations are understandably higher than other options in the rig market, and new owners will then have costs associated with additional capital equipment, inventory build, and rig commissioning and mobilization. While we think market dynamics and capital constraints will limit the delivery of these rigs in the near term, We recognize the shipyards are exploring creative ways to offload those now long-held assets. We believe many of these cold-stacked and stranded assets will eventually enter the market, but expect these supply additions to be spread out over several years as the market recovery develops. Now turning to global floating rig demand, 2021 has been strong, especially for UDW. and we are seeing a trajectory towards further improvement in the UDW with 2022 demand possibly exceeding 2020 by over 25%. Even with recent volatility in oil prices, our customers recognize deepwater offshore oil and gas as an important part of a modern energy portfolio. Demand bottomed out in 2020, and contracting activity is now back to pre-COVID levels, with a total of 19 new contracts for UDW floaters signed in the second quarter. The U.S. Gulf of Mexico UDW market is nearing full capacity, and the pipeline of opportunities we see indicates the floater market is tightening globally. The rebalancing of supply and demand is now supporting sustainable rates with several recent fixtures in the mid-$200,000 per day range and some higher. Consistent with the early stages of past market recoveries, fixture durations are still primarily short, with most tenders being well-based and requesting options, But day rates are definitively increasing, rid by constraints on incremental supply posed by capital availability and cost. We expect day rates to continue to trend higher in every region and eventually contracting term to increase as well. Turning now to the jackup market. Activity levels across the North Sea jackup sector remain steady. A moderate number of new fixtures and requirements continue to reach the market with new work emerging for 2022. Today, two of our four jackups in the UK and Danish sectors are working with two rigs warm stacked. We are pursuing new work for our idle rigs. The competition is high for the few available 2021 opportunities, and we anticipate at least one of our rigs remaining idle through the end of the year. In Norway, the Nobel Lloyd Noble is currently in the shipyard preparing for its contract with Equinor, which is scheduled to commence in early September. The rig is one of the highest-spec jackups in the world and particularly well-suited for work in Norway. We're proud to have Equinor's trust as we enter that unique environment, and I'm confident the rig will remain well-utilized in that market for a long time. I'll now move to the Middle East. During the second quarter, Qatar Gas exercised a one-year option for the Nobel Mick O'Brien, which will keep the rig contracted into September 2022. More broadly across the Middle East, there was a respectable volume of contract awards during the quarter, most of which were won by incumbent rigs. We see demand gradually increasing into 2021, but do not expect much upward movement for rates in the near future. In Trinidad and Tobago, the noble Regina Allen is now expected to complete its work in mid-August. It is one of the more capable jackup rigs in the Americas and has follow-on opportunities in and around the region, which we anticipate could begin in the first half of 2022. The Noble Tom Prosser in Australia began its current contract with Santos in May. They will take it into early next year. The rig has performed very well, and we're happy to report today that it has been awarded an additional three firm wells by Santos with an estimated duration of 160 days. This new contract is subject to customers' final project sanctioning, and would begin in direct continuation to the current program. Speaking to the overall supply and demand balance for jackups, there have been 88 rigs retired since the beginning of 2018, including 22 retirements announced year-to-date. There are 402 jackups being marketed today, excluding stranded new builds and cold stack rigs, with 333, or 83%, contracted. Of the contracted jackups, 105 rigs are 25 years old or older. These rigs will eventually be replaced by newer rigs, but in the near term, some older units continue to find new work, and we currently see a stable market on the jackup side with rates and utilization roughly flat in the regions where we operate. So, in summary, we see positive market indicators for floaters and a stable outlook for jackups. I believe Noble is well placed with our top tier assets and exceptional people to thrive in today's offshore drilling market. While we are optimistic about market conditions, the whole Noble team remains laser focused on safety, operations, and customer satisfaction. And our strategy will not stray from maintaining cost discipline and making responsible investing decisions. This is key to our value proposition today. I'll now turn the call over to Richard to give an update on our financial results.