Noble Corporation

All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a Q&A session. If you would like to ask a question during this time, please press star followed by the number one on your telephone keypad. And if you would like to withdraw your question at any time, again, press star and then the number one on your telephone keypad. You're Ian McPherson, Vice President of Investor Relations. You may now take over your call.

Thank you, Devin, and welcome everyone to Noble Corporation's third quarter 2022 earnings conference call. We appreciate your continued interest in the company. You can find a copy of our 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 Q&A. 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 those 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. Also note that we are referencing non-GAAP financial measures in the call today. You can find the required supplemental disclosure for these measures, including the most directly comparable GAAP measure and associated reconciliation in our earnings report and filed with the SEC. With that, I'll now turn the call over to Robert Eifler, President and CEO of Noble.

Thank you, Ian. Good morning. Welcome, everyone, and thank you for joining us on the call today. I'd like to begin with some opening remarks about our recent milestones and objectives related to our business combination with Maersk Drilling and then provide some views on the market outlook and our global operations before turning the call over to Richard to review the financial results and outlook. First of all, Let me say how excited I am to finally be speaking today on behalf of our newly combined company and also remind the audience that next quarter's Q4 results will be our first quarter as a combined reporting entity. Like many of our senior leadership team, I've spent much of the past month since we closed the merger visiting with our teams and crews across the globe. And I have been incredibly galvanized by these interactions and by having an opportunity to observe firsthand the value and the power of our complementary cultures and capabilities. When we defined the strategic rationale for this combination, among the critical components was the importance of creating the necessary scale with which to forge deep customer relationships and a platform for leadership in innovation and sustainability. We view these factors as essential to maintaining first choice status amongst our Blue Chip customer base. These collaborative long-term commitments with some of the largest and most influential operators in our relevant markets, are foundational to our business, both in terms of the high-quality revenue backlog that they provide, as well as the opportunity to drive efficiency and improvement through the drilling and completions lifecycle with our customers. Integrating a combination of this size and complexity is a monumental undertaking, and we are well underway. As a reminder, we are targeting at least $125 million of annual cost synergies to be realized within two years. Meanwhile, the internal team at our newly formed offshore impact center is monitoring our integration efforts and filtering actions for our rig crews so that they can stay focused on our operations and safely removed from the noise of integration. Our entire company is laser focused on business continuity and ensuring seamless service delivery for our customers. We're very excited to announce today the authorization of a $400 million share repurchase program, which is a key first step of a capital allocation framework, which establishes our priorities for use of cash. Richard will give more detail on that in a moment. Providing a significant and sustainable capital return program has been a key rationale for the merger, and our financial profile is highly complementary with this rationale. We believe that our equity represents an excellent investment opportunity and therefore buying back shares represents an attractive return for our shareholders. As we assess the forward outlook for our business, of course extraordinary uncertainty and risks abound with respect to inflation, recession, interest rates, and geopolitical unrest. However, the macro backdrop for oil and gas remains comparatively more straightforward. Arresting runaway global inflation will be difficult, if not impossible, to achieve without significantly higher investment in upstream oil and gas, period. And even as our biggest IOC customers continue to solve for the right balance between their long-term energy transition objectives and responding to the current supply crunch, we remain confident that oil barrels with the lowest lifting cost and lowest carbon profile will be structurally advantaged over the long run. The strategic positioning of our new fleet toward the deep water and harsh environment shallow water markets is, in fact, a very purposeful reflection of that view, particularly with the Golden Triangle in Norway ranking very favorably in the global supply stack on both economic and CO2 metrics. Our customers' 2023 spending budgets are currently under development against the backdrop of a healthy, albeit still significantly backward-aided crude price strip. with Brent futures prices tapering from the mid-90s per barrel current spot price down to the mid-70s per barrel through 2024-25 timeframe, which is relevant to the planning cycle for offshore rig demand. Meanwhile, Brent prices have averaged close to $100 per barrel year to date. But even though the shape of the strip will likely serve to temper the rate of spending growth over the near term, it's also very important to keep in perspective that 80% of the offshore projects in the FIDQ have estimated break-even thresholds at or below $40 per barrel. Additionally, all of our internal and external commercial intelligence clearly indicates a higher level of deepwater rig demand next year relative to current levels, which are still recovering from a multi-year stretch of underinvestment. We remain confident that we are in the early stages of a multi-year upturn in offshore drilling. And with deepwater day rates already well into low to mid $400,000 per day, and with limited inventory of stacked rigs that can come back into the market, we believe the underlying fundamentals for our business are extremely promising. The supply-demand fundamentals for deepwater rigs are pretty straightforward. The current utilization rate on 100 or so marketed UDW rigs remains around 85%, where it has been for the past six to eight months. The fulcrum of pricing power, however, has been at the high end of the market, where mid-90s percent utilization of the 46 dual BOP drill ships has driven day rates into the low to mid $400,000 per day range. Our marketing intelligence indicates a likely demand increase for deepwater next year, which should exert further upward pressure on an already tight market. We had several new contract fixtures in the third quarter on the legacy Maersk drilling side of the fleet that I'd like to highlight. First, the drill ship Noble Viking received a contract extension from Shell in Malaysia for an additional eight wells at a day rate of $408,000 per day, including MPD services. That contract extension is expected to run from November 2023 to August 2024. As a reminder, This rig does have about five months of downtime scheduled ahead of this new program, which includes a special periodic survey. Next, the drill ship Noble Voyager had a six-month option taken up by Shell, with the base operating day rate increasing from $295,000 on the current contract up to $422,000 starting in April 2023 with a drilling program in Mexico. Among our deepwater semis, the Noble developer was awarded a one-well contract with Shell in Brazil at $411,000 per day, including mobilization, which commits that rig into the middle of next year. The drill ship Noble Jerry D'Souza has the next contract rollover in our deepwater fleet later this quarter, and we hope to communicate with you again soon with positive news regarding that rig's next engagement, which could commence in the first quarter of next year. Given the timing of contract roll-off for a couple of our deepwater semis, the Noble Discoverer and Noble Developer, we do expect gaps in between contracts for one or both of those rigs in 2023. Now on to the jack-up side of the business. The harsh and ultra-harsh environment markets where Noble's jack-up presence is now heavily focused are witnessing steady demand and utilization above 90%, with day rate traction remaining comparatively more moderate thus far. With European markets responding to rising energy supply challenges, license and permitting indicators for jack-up activity in the region are constructive. But we nonetheless continue to see the upturn for our jack-up business developing on a lag compared to the dynamics in the deepwater segment. With the combination of Noble and Maersk drilling, we are now the market leader in the CJ70 class of jack-ups, which are the top spec jack-ups in the world in the workhorse of the Norwegian continental shelf. As a reminder, Two of our five CJ70s, the Noble Invincible and the Noble Integrator, will soon commence under a renewed five-year frame agreement with OCRBP that extends through 2027. This framework encompasses up to a billion dollars of total potential work scope over the five-year period. There is some variability around the scheduling of this activity, and we have highlighted on our fleet status report the near-term windows in which the work scopes are not yet defined. We have shown these as option periods for OCRBP. Our current expectation is that we will partially but not entirely fill these windows in 2023. While the activity schedule for these rigs beyond 2023 remains extensive and should keep both of these rigs very well utilized over the next five years. And across our entire CJ70 fleet, we continue to expect a firmer NCS market to materialize by mid 2024. Outside of Norway, we are increasingly encouraged by strong activity levels in an improving pricing environment that's evident across the UK and other areas of the North Sea. Although several of the most recent contract fixtures and exercise options across our harsh environment jacket fleet have reflected legacy pricing with day rates below $100,000, We do have visibility into leading-edge fixtures improving to the $120,000 to $130,000 per day range for programs commencing in 2023. This improvement in the harsh environment segment is consistent with the direction of the broader offshore drilling market cycle, and we view this as a leading indicator of the later recovery that we see developing in the ultra-harsh segment as well. So the takeaway here is that we would earmark the mid-cycle earnings potential of our jack-up fleet is optional upside to what we expect to realize in 2023. That concludes my opening remarks, and now I'll pass it on to Richard to provide his commentary on the finance.