Noble plc(NE) - 2024 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Presents Noble Corporation plc's unaudited condensed consolidated financial statements, reflecting the significant impact of the Diamond Offshore Drilling acquisition Condensed Consolidated Balance Sheets Total assets increased to $8.04 billion from $5.51 billion, and liabilities rose to $3.35 billion, reflecting the Diamond Offshore acquisition Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total current assets | $1,410,691 | $1,061,748 | | Property and equipment, net | $6,049,437 | $4,124,336 | | Total assets | $8,035,144 | $5,507,437 | | Total current liabilities | $900,465 | $641,680 | | Long-term debt | $1,981,237 | $586,203 | | Total liabilities | $3,350,195 | $1,586,197 | | Total shareholders' equity | $4,684,949 | $3,921,240 | Condensed Consolidated Statements of Operations Q3 2024 net income decreased to $61.2 million despite higher revenues, primarily due to increased operating and merger costs Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Operating revenues | $800,549 | $697,450 | $2,130,477 | $1,946,039 | | Operating income | $115,483 | $200,776 | $432,989 | $417,025 | | Net income | $61,216 | $158,323 | $351,705 | $332,202 | | Diluted EPS | $0.40 | $1.09 | $2.37 | $2.29 | Condensed Consolidated Statements of Cash Flows Net cash from operations significantly increased to $519.3 million, while investing activities used $813.8 million, and financing provided $331.9 million Cash Flow Summary for Nine Months Ended September 30 (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $519,261 | $286,848 | | Net cash used in investing activities | ($813,800) | ($268,131) | | Net cash provided by (used in) financing activities | $331,887 | ($254,847) | | Net increase (decrease) in cash | $37,348 | ($236,130) | Notes to Unaudited Condensed Consolidated Financial Statements Detailed notes cover the Diamond Offshore acquisition, debt structure including new senior notes, revenue recognition, and other significant financial disclosures - Noble completed its acquisition of Diamond Offshore Drilling on September 4, 2024, for a total consideration of $1.5 billion, consisting of $610.3 million in cash and $879.9 million in non-cash consideration (shares and RSUs)[16] - In August 2024, the company issued an additional $800.0 million of its 8.000% Senior Notes due 2030. It also assumed Diamond's $550.0 million 8.500% Senior Secured Second Lien Notes as part of the acquisition[39] - The company paid a quarterly dividend of $0.50 per share ($81.6 million total) on September 26, 2024, and repurchased 6.9 million of its Ordinary Shares during the third quarter[33][34] Contract Drilling Revenue by Rig Type (in thousands) | Rig Type | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Floaters | $605,327 | $549,130 | $1,617,538 | $1,519,346 | | Jackups | $158,216 | $121,874 | $419,140 | $333,128 | | Total | $763,543 | $671,004 | $2,036,678 | $1,852,474 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial results, positive market outlook, expanded fleet and $6.5 billion backlog post-Diamond acquisition, and sufficient liquidity Executive Overview & Market Outlook Post-acquisition, Noble operates 41 rigs (28 floaters, 13 jackups) with a favorable market outlook and a robust $6.5 billion contract backlog, with 70% of 2024 days committed - The company's contract drilling services backlog totaled approximately $6.5 billion as of September 30, 2024[85] Contract Backlog and Commitment as of Sep 30, 2024 | Metric | Total Backlog ($) | 2024 | 2025 | 2026 | 2027 | 2028 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Backlog | $6,489,302,000 | $830,855,000 | $2,569,849,000 | $1,673,285,000 | $1,012,013,000 | $403,300,000 | | % of Available Days Committed | | 70% | 49% | 28% | 19% | - | - Key customers contributing to the backlog include ExxonMobil (38.0%), Petrobras (13.5%), and BP (13.3%)[88] Results of Operations Q3 2024 revenues rose 15% YoY to $800.5 million, but operating income fell 42% due to a 434% surge in merger costs, while nine-month revenues grew 9% Q3 2024 vs Q3 2023 Operating Results (in thousands) | Metric | Q3 2024 | Q3 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Operating revenues | $800,549 | $697,450 | $103,099 | 15% | | Operating costs and expenses | $685,066 | $496,674 | $188,392 | 38% | | Operating income | $115,483 | $200,776 | ($85,293) | (42%) | - The increase in Q3 2024 floater revenue was mainly due to $84.0 million from the 10 floaters acquired in the Diamond Transaction and a $56.8 million increase from higher average dayrates[95] - Merger and integration costs surged to $69.2 million in Q3 2024 from $13.0 million in Q3 2023, with $63.1 million directly related to the Diamond Transaction[98] Liquidity and Capital Resources Liquidity is strong, supported by $519.3 million in operating cash flow, with major uses including the Diamond Transaction, capital expenditures, and significant shareholder returns - Net cash provided by operating activities for the nine months ended Sep 30, 2024, was $519.3 million, a significant increase from $286.8 million in the same period of 2023[116] - Capital additions for the first nine months of 2024 totaled $374.3 million. The full-year 2024 estimate is between $480 million and $510 million[117] - In the first nine months of 2024, the company returned significant capital to shareholders through $250.0 million in share repurchases and $198.2 million in dividend payments[116] - On October 22, 2024, the Board of Directors approved a new share repurchase program of up to $400 million[119] Item 3. Quantitative and Qualitative Disclosures about Market Risk No significant changes in market risk exposure have occurred since the disclosures in the 2023 Form 10-K - There has been no significant change in the company's exposure to market risk since the disclosures in the 2023 Form 10-K[124] Item 4. Controls and Procedures Disclosure controls and procedures were deemed ineffective due to an un-remediated material weakness in IT general controls related to program change management and user access - The Principal Executive Officer and Principal Financial Officer concluded that Noble's disclosure controls and procedures were not effective as of September 30, 2024[125] - A previously identified material weakness in IT general controls (program change management and user access) is still undergoing remediation and has not been fully resolved[125][126] - The material weakness did not result in a misstatement to the company's annual or interim consolidated financial statements[125] PART II OTHER INFORMATION Item 1. Legal Proceedings Legal proceedings include outstanding tax audit claims of $390.5 million and ongoing personal injury claims related to Hurricane Ida, both actively contested - Information regarding legal proceedings is incorporated by reference from Note 10 of the financial statements[130] - The company is contesting outstanding tax audit claims of approximately $390.5 million from various jurisdictions[62] - The company is defending against personal injury claims related to the Hurricane Ida incident in 2021 and has insurance for such claims with a $5.0 million deductible[64] Item 1A. Risk Factors No material changes to risk factors previously disclosed, with the Diamond Transaction completion rendering related risks irrelevant - There have been no material changes from the risk factors disclosed in the 2023 Form 10-K and Q2 2024 Form 10-Q[131] - The risk factor concerning the failure to complete the Diamond Transaction is no longer relevant following the closing of the acquisition[131] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q3 2024, the company issued 126,412 Ordinary Shares from warrant exercises and repurchased 6,938,128 Ordinary Shares for approximately $250 million - In Q3 2024, 126,412 Ordinary Shares were issued upon the exercise of Tranche 1 and Tranche 2 Warrants[132] Share Repurchases for Q3 2024 | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 1 - 31, 2024 | — | $ — | | August 1 - 31, 2024 | 1,166,493 | $ 37.90 | | September 1 - 30, 2024 | 5,771,635 | $ 35.63 | | Total | 6,938,128 | N/A | Item 5. Other Information No directors or executive officers adopted, terminated, or modified Rule 10b5-1 trading plans during Q3 2024 - No directors or executive officers adopted, terminated, or modified Rule 10b5-1 trading plans during the three months ended September 30, 2024[135] Item 6. Exhibits This section indexes all exhibits filed with the 10-Q, including the Diamond merger agreement, debt indentures, and officer certifications - The report includes an index of filed exhibits, such as the Diamond merger agreement, supplemental debt indentures, and officer certifications[138]