Noble Corporation

the most directly comparable gap measure and associated reconciliation in our earnings report issued yesterday and filed with the SEC. Now, I'll turn the call over to Robert Eifler, President and CEO of Noble.

Welcome, everyone, and thank you for joining us on today's call. I'll begin with highlights of our second quarter results and recent contract awards, then provide some perspectives on the market before turning the call over to Richard to discuss the financials. Lastly, before we go to Q&A, I'll wrap up with a brief update on our pending acquisition of Diamond, which we are incredibly excited about. Starting with the Q2 results, we had a solid quarter with adjusted EBITDA of $271 million, up nearly 50% compared to $183 million in Q1, with a sequential improvement driven by several key contract startups. including the Noble Regina Allen commencing its contract in Argentina in early May, and the Noble Discoverer starting up in Columbia in mid-June. Subsequent to quarter end, the Noble Faye Kozak has commenced its contract in Brazil in mid-July. Each of these three rigs entailed significant contract preparation scopes, and I'd like to commend our projects teams on executing these crucial shipyard programs very well. In light of these de-risked contract startups, We are narrowing our EBITDA guidance for this year to a tighter range of $950 million to $1 billion. In June, our Board of Directors announced a 25% dividend increase to 50 cents per share for the third quarter of 2024. This next distribution in September will bring cumulative total capital return to shareholders since our Q4 2022 merger to $470 million, and also establishes Noble as the highest dividend payer across all U.S. listed oilfield services. And while this is a good start, we are confident that the free cash flow potential of our business in the years ahead looks demonstrably higher, and we will remain committed to returning essentially all of our free cash flow via dividends and share buybacks as this cash flow inflection develops. As reflected in our updated fleet status report, published last night adjacent to our earnings release, our total backlog stands at $4.2 billion, compared to $4.4 billion last quarter. I would remind you that since our backlog does have a high concentration to the long-term contracts in Guyana and Norway that do not replenish regularly, this tends to create some noise in our backlog trend lines. In the Gulf of Mexico, the Noble Stanley LaFosse was extended by Murphy for five additional wells spanning approximately one year, from February 2025 through February 2026, for a total contract value of $177 million. On the jack-up side, the Noble Resolve has picked up two additional contracts. First, a 45-day well with Central European Petroleum offshore Poland, followed by a 13-well P&A scope in Spain commencing in Q2 2025 with an estimated duration of about six months. Additionally, the Noble Resilient picked up a short-term intervention job with Harbor in the North Sea that has served as a helpful gap filler this summer between the RIG's other existing programs. And most recently, the Noble Innovator has been extended by BP in the UK North Sea from May through December 2025 via priced option at $155,000 per day. Collectively, these contract fixtures represent approximately $275 million in total contract value, including mobilization payments. Now I'd like to turn to a broader outlook with our semiannual review of current and expected deepwater activity levels across the key geographic segments. The contracted rig count of UDW floaters with 7,500 feet or greater water depth ratings currently stands at 105 rigs, up one from last quarter, and representing 94% utilization of the marketed fleet, excluding sideline capacity. This level has been fairly constant over the past year, as industry expectations for the next leg higher in activity have been constrained somewhat, both by tight rig capacity as well as by lengthening cycle times for certain long-term tenders to convert into contract awards. However, despite flatter activity recently, the forward indicators for further growth through the cycle remain firmly intact. This includes a strong pipeline of FIDs and extremely robust subsea orders, as well as customer tenders and direct dialogue regarding future drilling plans. The historically high level of open demand that we've cited over the past couple of quarters has recently increased further to over 110 rig years now. That's not surprising at all given the relatively low proportion of tenders that have converted to contract fixtures recently. We recognize that there's a growing amaze and curiosity about what's causing this slower pace of awards of late. And while there's not a single uniform answer, We believe that there are a few contributing factors at play with various parts of the customer base, including first, capital discipline and stakeholder alignment complexities that are causing contracts to take longer to execute, including partner approvals, permits, et cetera. Second, field development supply chain pinch points resulting from the sharp rise in global project backlogs over the past few years, and third, short-term after effects resulting from upstream consolidation transactions, which has definitely been a factor at play in the Gulf of Mexico recently. Although there is generally no indication or expectation of drilling programs being structurally deferred, the recent slower cadence of rigged contract awards does factor into the persisting utilization headwind confronting the sixth gen and lower end segment of the market, which appears likely to drag into 2025. more than we would have assumed earlier this year. Another way to frame this dynamic is to look at how industry backlog has progressed over the past few years. Whether measuring backlog by either contract length or in terms of absolute dollars, the industry UDW fleet witnessed a 40 to 50 percent backlog expansion between early 2022 and the first half of 2023. Since then, however, Total backlog for the industry deepwater fleet has been generally flat, and this looks likely to continue into 2025. While this slowdown has lasted longer than we had expected, all of the leading indicators for increased activity remain highly compelling. In taking all of this into consideration, we expect the next move higher in industry backlog is likely to come into view sometime next year. With that, let me now turn to the bottoms-up market outlook. The Golden Triangle of South America, Gulf of Mexico, and West Africa comprises over 75% of global UDW market, led foremost by Brazil, which has now increased to 34 rigs, up from 27 a year ago, with Petrobras comprising 30 of the 34 UDW rigs in Brazil. Elsewhere in South America, Guyana is at five rigs, Columbia at one, and Suriname is currently at zero. Looking out to 2026, this region appears capable of expanding from 40 rigs currently to up to 45, based on visible customer needs. Next, in the Gulf of Mexico, UDW demand currently stands at 24 and has been fairly stable in the 23 to 25 unit range over the past year. The U.S. Gulf of Mexico has actually been steady to up slightly since early 2023. while the Mexican side has fallen off from three to four rigs of normalized demand to just one unit currently. The inconsistency of activity in Mexico has been one of the contributing downside factors to the region's market balances recently. The U.S. Gulf, despite digesting a short-term impact from EMP consolidation, has been steady, as predicted, with current activity of 23 deepwater rigs. There remains a relatively thin spot market over the next few months for the five or so units with near-term availability. However, customer demand indicates that the combined U.S. and Mexican Gulf of Mexico should remain approximately flat compared to current levels. West Africa currently has 18 contracted UDW rigs, down slightly from 19 to 20 last year. Angola leads the region with seven rigs with other activity spread broadly across various other countries. Notably, Namibia is currently at a lull with just one active rig compared to three to four rigs last year. There is a clear line of sight to Namibia maturing into at least a three to five rig market structurally by 2026 as development plans get underway. Coupled with the likely commencement of gas development in Mozambique, the combined West and East Africa market could drive incremental UDW rig demand of five or more units by 2026. The Mediterranean and Black Sea region currently support eight units of demand, which we expect to be flat to down one unit over the next one to two years. The Far East market, including India and Australia, represents seven units of UDW demand currently, and Indonesia is expected to drive an incremental demand for a couple more rigs starting from late 2025 or 2026. And then finally, we expect the harsh environment markets of Norway, UK, and Canada to remain steady, plus or minus. Tying all of this together, the market does feel more flat, or up only slightly at least, through the first half of 2025. So we are maintaining a patient and disciplined approach in the meantime. We also continue to pursue intervention work with the Globetrotters which we are hopeful will begin to show some initial winds fairly soon, albeit with minimal contribution before late 2024 or early 2025. Against this demand backdrop, we expect day rates to remain in the high 400,000s to low 500,000s range for Tier 1 drill ships over the near term, excluding stacked rigs bidding into multi-year programs at customary discounts. and 6G rates will likely soften slightly until the slack comes out of the lower end of the market. However, assuming the next leg up in demand materializes as envisioned by 2026, a further increase in day rates is very probable. So with that, I'll pause here and pass it to Richard to cover the financial highlights.

Thank you, Robert, and good morning or good afternoon all. In my remarks today, I will briefly review the highlights of our second quarter and then touch on the outlook for the remainder of the year. Contract drilling services revenue for the second quarter totaled $661 million, up 8% from $612 million in the first quarter. Adjusted EBITDA was $271 million in Q2, up from $183 million in Q1. Our adjusted EBITDA margin on total revenue improved to 39% in Q2. Cash flow from operations was $107 million, capital expenditures were $133 million, and free cash flow was negative $26 million. The sequential improvement in the financial results was driven by stronger utilization across the fleet, including contract startups for the Noble Discoverer, Noble Resilient, and Noble Regina Allen. as well as the abatement of contract preparation and startup costs that burdened contract drilling expense more heavily in the first quarter. Our 16 marketed floaters were 78% utilized in Q2, up from 76% in the first quarter. And our 13 marketed jackups were utilized 77% in the second quarter, up from 67% in the first quarter. Average earned day rates in Q2 were $436,000 per day for floaters and $156,000 per day for jackups. As summarized on page 5 of the earnings presentation slides, our total backlog as of July 31 stands at $4.2 billion, which includes $1.2 billion that is scheduled for revenue conversion in the second half of this year and $1.7 billion that is scheduled for 2025. As a reminder, this backlog does not include reimbursable revenue or revenue from ancillary services. Referring to page 9 of the earnings slides, we were updating our full year 2024 guidance as follows. Firstly, total revenue increases and narrows to a range of $2.65 billion to $2.75 billion. A slight increase in the range is driven by higher reimbursable revenue and revenue from ancillary services. Secondly, adjusted EBITDA narrows to a range of between $950 million and $1 billion. The narrowing of the adjusted EBITDA range around our previous midpoints was driven by strong operational performance in Q2, offset by lingering white space in the second half for several floaters, as well as a couple of weeks of additional acceptance testing preceding the noble FACOSAC contract commencement in mid-July. Thirdly, we are maintaining our guidance range of $400 to $440 million for capital additions, excluding the billable CapEx. We expect available CapEx to be approximately $30 million in 2024, with $17 million spent in the first half of the year. Looking forward to the third quarter, EBITDA is currently tracking slightly lower versus Q2, with sequential revenue tailwinds from the Noble Faye Kozak and a few other rigs offset by greater anticipated white space on the Globetrotters and the Noble Voyager. I would like to now touch briefly on our free cash flow profiles. As we have previously stated, this year's free cash flow is expected to be heavily second-half weighted, driven by higher CapEx in the first half and the key contract startups previously mentioned. Q2 was additionally impacted by the working capital impact associated with the Noble Regina Allen incident in late 2022. Due to the timing of some expected insurance proceeds potentially pushing into 2025, full-year 2024 cash flow in the aggregate could be negatively impacted by around $50 million. With the Q2 cash flow deficit, we did draw down $35 million on the revolver in June. We expect this to be repaid in the near future. We believe that we have now reached an inflection in our free cash flow. We continue to expect full year free cash flow to be up very slightly year on year and exiting at a very healthy run rate in the second half. As we look towards 2025, we remain constructive on the market outlook. However, we do recognize that until we see a pickup in the pace of contract awards to where total floater rig demand increases more materially, we are likely to see lower utilization for our currently uncontracted 6G rigs well into 2025. As it relates to capital allocation, and as Robert has mentioned, with the material step-up in free cash flow expected in the second half of the year, We expect to get back into the market and start executing again on our share repurchase program as we look to return essentially all of our free cash flow to shareholders. With that, I'll turn the call back over to Robert.