Noble Corporation

Good morning. My name is Brianna, and I will be the conference operator today. At this time, I would like to welcome everyone to Noble Corporation first quarter 2023 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would like to turn the conference over to Ian MacPherson, Vice President of Relations.

Thank you, Brianna, and welcome everyone to Noble Corporation's first quarter first quarter 2023 earnings conference call. You can find a copy of our earnings report along with the supporting statements and schedules on our website at noblecorp.com. 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 eifler as well as our cfo richard barker also joining on the call are blake denton senior vice president of marketing and contracts and joey kawaja 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 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 that 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 associated reconciliation in our earnings report issued yesterday 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'll begin with some opening remarks on recent progress with our operations and contract awards and then provide some broader market outlook commentary before turning the call over to Richard to review the financial results and outlook. After our prepared remarks, we'll be happy to take your questions, as always. Starting on page three of our earnings slides, 2023 is off to a great start as we continue to make steady headway with our business integration and continue to find exciting opportunities for re-contracting our fleet into an improving market. Q1 was our second full quarter as a combined company, and I would again like to take a moment to express my profound appreciation to all of our fantastic offshore crews and Global Shore Base team who have embraced this integration and placed Noble on such solid footing at the outset of the exciting future ahead of our industry today. Richard will speak more to the financials, but our first quarter adjusted EBITDA of $138 million was, in our view, a good start to the year and a building block for what we expect to be progressively improving earnings over the course of the year as the contracted status of our fleet improves and we continue to realize integration synergies. As an aside, we did encounter some additional slippage with the startup of the Globetrotter One's contract in Mexico due to the permitting delays that we described on last quarter's call. Fortunately, we have resolved that permit issue and the Globetrotter One's contract with Petronas is now expected to commence within the next one to two weeks. So, considering the subtraction of that contract's previously expected contribution during the month of March, which was not insignificant, We feel great about the results for the first quarter overall and would like to commend our offshore and onshore teams for the excellent operational performance. We're pleased to announce several new contract awards that are shown in our earnings press release and updated fleet status report. First, on the jack up side, the Noble Tom Prosser has been awarded new contracts from two operators in Malaysia for a combined estimated duration of 650 days starting in July. So the Prosser will be idle through most of the first half of this year, as we had previously indicated, but with full utilization, a modest day rate uplift, and a lower operating cost profile in Malaysia compared to its prior contract in Australia, this rig is now well-placed for an improved margin contribution over the next couple of years. Next, we've recently secured several new contracts and commitments across the floater fleet. First, the 6th Gen Semi-Submersible Noble Discoverer has received a contract with Ecopetrol in Columbia for one well priced at an undisclosed rate. Columbia is a reemerging exploration basin with several incremental drilling campaigns under evaluation in addition to this one. The Ecopetrol contract is expected to commence in Q4, and we are cautiously optimistic about filling more time on the Noble Discoverer between the conclusion of its current contract this month and the startup window for the Ecopetrol contract. Additionally, the Noble Valiant, which is currently finishing a program in Suriname, has been awarded a contract for one well in the Gulf of Mexico with an undisclosed customer at $450,000 per day and is expected to commence in Q4 2023. Prior to that well, the Valiant will mobilize back to the U.S. Gulf of Mexico to drill the Cosmos well that had previously been assigned to the Fay Kozak. And then, this newly awarded one-well contract will follow in direct continuation of the COSMOS contract, which creates a nice sequence for the Valiant into the fourth quarter. We have ample opportunities for the Valiant in 2024, both in the U.S. Gulf of Mexico and elsewhere, and would expect this rig to participate in the improving day rate environment as we contract its 2024 days. The rig swap on the COSMOS well was to accommodate some potential long-term work for the Fay COSAC starting in the fourth quarter, which we hope to finalize and announce soon. Last but not least, we're very happy to announce that ExxonMobil has committed an additional 6.3 years of backlog under the commercial enabling agreement in Guyana. This additional term will be distributed evenly across our four drill ships in Guyana, thus extending each of them from Q4 2025 into Q2 2027. The unique combination of long-term engagement and collaboration plus market pricing has proven to be an incredibly productive and mutually beneficial commercial model for the Guyana development, and we believe that this new additional backlog commitment speaks directly to the success of this model. We are pleased to have been entrusted with further work and honored to continue to play our small part in that world-class project. With these signings, our backlog as of May 1st has increased to $4.6 billion, up from $3.9 billion at the beginning of the year. In addition to these recent contracts and commitments, we're optimistic that we should have some additional UDW contracts finalizing over the coming weeks, which could further bolster our backlog and could also potentially resolve some of the near-term variability around white space that still appears on our fleet status sheet as of today. So we appreciate your patience as we work to get some more of these contracts over the finish line and look forward to updating you. So with that, I'd like to turn now to a broader market outlook. Last quarter, we provided a detailed geographic description of incremental UDW rig demand, concluding that an estimate of 10 to 15 incremental units in the near term on top of the low 90s contracted rig count that prevailed then as well as now. As we roll that outlook two months forward, nothing has fundamentally changed, and we remain highly optimistic that tightness will prevail going into 2024. Oil price volatility immediately ensued from the jolting news of bank failures in March and continues with recent news, but our customers' underlying economics remain robust, and we have observed no pause or change in customer sentiment or forward planning. Contracted utilization of the marketed UDW fleet has increased to 92 out of 99 rigs, or 93% effective utilization, up very slightly from last quarter. With this steadily creeping tightness in the existing marketed fleet, there is now, as expected, increasing bidding momentum behind the dozen or so sideline premium deepwater rigs that are either cold stacked or stranded in shipyards. As previously stated, we continue to expect a near-term dynamic in which some of this idle capacity is reactivated into the market at below average pricing, while the scarcity premium for hot rigs that have near-term availability will continue to push leading edge rates toward $500,000 per day. Demand growth for UDW units over the near term is primarily expected across South America and West Africa, with Petrobras representing the largest component demonstrated by outstanding tenders for eight floaters, including seven for Brazil and one outside Brazil, versus only two incumbent floating rigs coming off contract. We also expect an additional tender for one to two more units coming up. This indicates a need for six to eight additional rigs for Petrobras in the near to medium term. These tenders have recently been subject to customary delays, and wider delivery windows for some of these start dates extending into late 2024 are seen as an inducement to attract reactivations into the bidding, as can be observed in the most recent tender results. Turning back to the Noble fleet, as it stands today, we currently have approximately half of our marketed floater fleet exposed to contract rollovers over the next year. in addition to the four rigs operating under the CEA in Guyana, which reprice every six months. This affords us a great deal of attractive repricing leverage, with a partial offset being the short-term utilization inefficiencies that arise from a backlog structure that, for now, still holds a meaningful amount of short-term contracts. As previously stated, contract gaps and a relatively high number of 10-year SPSs are weighing on the utilization rates of our floater fleet over the near term, despite the exceptionally tight underlying supply demand. The periodic surveys for our floater fleet will peak in 2024 before normalizing significantly lower thereafter. This leaves backlog composition as the other area where we have an opportunity to pursue some utilization upside moving forward. A key question is whether customers are willing and motivated to start contracting on a longer-term basis. We see indications that some are. Up to this point, Apart from our unique arrangement in Guyana, Petrobras has been the main customer that has been taking a significant volume of multi-year floater contracts. If you look at the average duration of new floater contracts awarded, excluding Exconn, Guyana, and Petrobras Brazil, the average duration of all other floater contract awards a year to date has been 12 months, which is an increase of more than 50% compared to the average of under eight months per fixture during the comparable period a year ago. Term has already begun to expand and we would expect this trend to continue because contractors and operators are generally aligned around the motivations to reactivate the dozen or so high spec sideline rigs. And it simply won't be possible to satisfy implied demand of 10 to 15 additional deep water rigs without an acceleration of reactivations. And these reactivations require multi-year contract support. We are continuing to evaluate interesting opportunities to reactivate our cold stack seventh generation drill ship Meltem. with appropriate contract coverage and will maintain our previously outlined disciplined approach with this rig. As a reminder, we estimate the Meltem would require at least $100 million total capital in a year or longer to reactivate. Now on the jackups. Our outlook here is essentially the same as what we described last quarter. The Tom Prosser's new contracts for a combined 650 days are a welcome addition to our jackup backlog. Leading-edge jack-up day rates outside of Norway and the North Sea are now in the $125,000 to $150,000 range. And while we do have bidding activity underway that could provide additional for this year, these are generally more incremental in nature, and we continue to see improving demand possibilities for 2024 and beyond. This includes the ultra-harsh jack-ups Noble Interceptor and Noble Intrepid, which are continuing to muddle through very soft spot market conditions over the balance of this year. Additionally, the Regina-Allen is undergoing repairs to its leg and jacking system with marketability into jobs starting in early 2024. So no change to our prior view that jackups will contribute no more than about 10% of our total EBITDA this year, but there should be ample headroom for improvement beyond this year. As of today, excluding the Regina Ellen and the Warmstack Noble Highlander, the remaining 11 jackups are approximately 70% contracted over the balance of this year at an average day rate in the $120,000 range. So, when we frame the future revenue and EBITDA potential for our jackup fleet, it's from a fairly low baseline as of today, relative to forward indicators for day rates and utilization. Obviously, a recovery in Norway is an important driver for us, And the tightening harsh semi-market is a constructive leading indicator. In addition to the incremental Equinor jackup demand for 2024 work, which is important to restoring a more balanced supply demand situation for Norway jackups. For now, excuse me, for our non-Norway class jackups, there continue to be global opportunities for some of these rigs that may provide better near and long-term visibility than the UK and Southern North Sea. Since these are more geographically fungible than CJ70s, our strategy is to deploy these assets wherever is appropriate to capture the best returns. To summarize, we still have a somewhat bifurcated outlook for the deepwater and jackup fleets, but the recontracting trajectory for both remains very promising from where we stand currently. We've had a few nice contract wins recently for our deepwater fleet, and we're optimistic about signing up some additional high-quality backlog in the near term. With that, I'd like to pause now and turn the call over to Richard to go over the financials.