Noble Corporation

will be your conference operator today. At this time, I would like to welcome everyone to the Noble Corporation Q3 earnings 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. Please limit your question to one initial and one follow-up question. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star and one. And I would now like to turn the call over to Ian McPherson, Vice President of Investor Relations.

Thank you, Operator, and welcome everyone to Noble Corporation's third 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 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 an associated reconciliation in our earnings report issued yesterday and filed with the SEC. With that, I'll turn the call over to Robert Eifler.

President and CEO of Noble. Good morning. Welcome, everyone, and thank you for joining us on the call today. I'll begin with some opening remarks on our quarterly results and then provide some comments on the market outlook and commercial activity before turning the call over to Richard to cover the financials. Following Richard's financial overview, I'll wrap up with some additional highlights on technology innovation underway here at Noble and the strong progress we've made with our merger integration. And after that, we'll look forward to taking your questions. First, we've reported a solid third quarter with total revenue of $679 million and adjusted EBITDA of $283 million. On these metrics, this was our strongest quarter since the Noble Mares drilling combination closed a year ago. And these results reflect an exceptional collective effort by our employees around the world who have leaned into this merger and executed simultaneously on both the integration and the day-to-day business. So well done and thank you all. Next, we're pleased to announce an increase of our quarterly dividend to 40 cents per share this quarter, which represents a 33% increase and demonstrates our continued commitment to maximizing value for shareholders via return of capital. Following the dividend initiation last quarter, We have signed additional contracts to bring our 2024 scheduled backlog to $1.8 billion currently with near-term visibility to additional bookings that could increase 2024 backlog to over $2 billion. So, we have taken the decision to make this upward revision just one quarter after the dividend initiation. While you should not expect us to continue to adjust the dividend each quarter, we will remain focused on maximizing free cash flow generation and as previously stated returning the significant majority of free cash via dividends and buybacks turning now to the market outlook offshore drilling fundamentals remain robust with a marketed utilization rate for ultra deep water rigs in the 90s percent and leading edge day rates for working high spec drill ships in the mid to high four hundred thousand dollars leading edge fixtures for harsh jackups outside of norway have been in the $130,000 to $150,000 per day range. During the third quarter, the Drill Ship Noble Valiant was awarded a six-month contract with LLOG in the US Gulf of Mexico at a day rate of $470,000, excluding potential additional revenue for MPD services. This program is scheduled to commence in early January in direct continuation of the Valiant's current contract. Also in the Gulf of Mexico, Both of the Globetrotter drill ships have recently been awarded additional contract scopes from Shell that are expected to keep both of these units working into March of next year at extension rates just below $400,000 per day. On the jack-up side, we're looking forward to the redeployment of the Noble Regina Allen with a three-well program for Total Energies in Argentina that's scheduled to commence in mid-2024 at a day rate of $150,000, excluding mobilization. The Phoenix field provides a significant source of domestic natural gas for Argentina, and this program aligns very well with the JU3000 rig's technical capabilities and well-established operational track record in this unique harsh environment location. So, we're very excited to be participating in the revival of Argentina's offshore upstream activity with the Regina Allen next year, which will mark Noble's third drilling campaign in the country with the JU3000 jackup. In the North Sea, the Noble Resilient has been awarded a 120-day contract with Petrograss at $133,000 per day. It's scheduled to commence next summer. Of note, the Resilient sustained damages while in port two weeks ago when a floating production vessel experienced a mooring failure and alighted with our rig, which was stationary in position near Quayside. There were no reported injuries, an investigation and damage assessment is underway, and we expect damages to be covered by the liable party or our own insurance, subject to applicable terms and limits. The timeline for required repairs could impact the extent of the resilience availability for additional work before the petrogas contract next summer. However, we do not expect the timing of the petrogas contract to be impacted. Moving on, also in the North Sea, The Jackup Noble Reacher has been extended by 15 months with total energies via exercise of priced options, extending the rig to mid-2025 with one year of priced options remaining. These are legacy priced options, so the day rates for the Reacher will remain materially below the more recent leading edge fixtures. These recent Jackup contract awards have significantly firmed up 2024 visibility for our non-Norway fleet, which has been a positive development. Within Norway, the timing of demand recovery continues to be hard to predict. At this point, we remain generally cautious on the outlook for this market through 2024. Thus, our idle CJ70 jackup noble interceptor is still confronted with a limited opportunity set. You can find a summarized schedule of our backlog on page five of today's earnings slide presentation. As shown, our backlog stands at $4.7 billion currently, down slightly from $5 billion as of last quarter. However, excluding our long-term commitments from ExxonMobil in Guyana and Ocker BP in Norway, our backlog was essentially flat quarter over quarter. Accordingly, we're much more focused on the quality of backlog additions rather than the absolute dollar total as we progress through time, and we remain overall quite constructive on the re-contracting opportunities confronting our available rigs. Two of the defining features of our floater backlog are that it is both more in step with current market pricing than most of our competitors and also more exposed to near-term rollovers than average. Putting numbers to it, our average day rate in floater backlog is $408,000 and 62% of 2024 available days across our marketed floater fleet are currently exposed to market repricing. Approximately one-third of this 2024 repricing exposure relates to the CEA rigs in Guyana. And two-thirds relates to uncontracted rig days across the balance of the UDW fleet. We think this is clearly an advantageous exposure to hold in a strong and improving day rate environment. And it also provides a measure of flexibility in how we approach shorter and longer term contract opportunities as they arise. There is a partially offsetting negative effect from the utilization inefficiency that results from the turn of shorter term contracts. Within this context, as previously discussed, we continue to see more white space impacting our sixth generation floaters over the near to medium term, specifically the two Globetrotters and the Developer and Discoverer. That said, we still see a good pipeline of follow-on opportunities next year, and we do hope to announce some additional fixtures here in the fourth quarter which would resolve some of the near-term rollovers in our fleet, so stay tuned. Overall, the supply-demand situation and outlook for both deepwater and horse jackups remains very similar to what we described last quarter. The contracted UDW rig count has hovered in the low 90s since early this year, with utilization of the marketed fleet of 99 rigs stable in the low 90s percent.