Noble plc(US:NE)2022-11-03 20:20PART I FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements for Noble Corporation plc and Noble Finance Company, along with detailed notes on accounting policies and significant events Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Noble Corporation plc and its subsidiary, Noble Finance Company (Finco), for the period ended September 30, 2022, including balance sheets, statements of operations, comprehensive income, cash flows, and equity, along with detailed notes Noble Corporation plc Financial Statements Noble Corporation plc reported total assets of $2.39 billion as of September 30, 2022, with a net income of $33.6 million for Q3 2022, driven by a 22% increase in operating revenues Noble Corporation plc - Condensed Consolidated Balance Sheet (In thousands) | | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total current assets | $754,626 | $455,646 | | Property and equipment, net | $1,221,690 | $1,478,700 | | Total assets | $2,385,509 | $2,073,442 | | Total current liabilities | $268,819 | $248,394 | | Long-term debt | $434,368 | $216,000 | | Total liabilities | $836,948 | $572,815 | | Total shareholders' equity | $1,548,561 | $1,500,627 | | Total liabilities and equity | $2,385,509 | $2,073,442 | Noble Corporation plc - Condensed Consolidated Statement of Operations (In thousands, except per share) | | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | | Contract drilling services revenue | $289,494 | $231,154 | $746,992 | | Total operating revenues | $305,872 | $250,371 | $791,255 | | Operating income (loss) | $51,561 | $(13,493) | $64,529 | | Net income (loss) | $33,585 | $(23,665) | $33,986 | | Diluted net income (loss) per share | $0.41 | $(0.36) | $0.42 | Noble Corporation plc - Condensed Consolidated Statement of Cash Flows (Nine Months Ended, In thousands) | | September 30, 2022 | Period Feb 6 - Sep 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $109,806 | $24,028 | | Net cash used in investing activities | $(93,479) | $(31,533) | | Net cash provided by financing activities | $214,030 | $13,147 | | Net increase in cash | $230,357 | $5,642 | Noble Finance Company (Finco) Financial Statements Noble Finance Company (Finco) reported total assets of $2.05 billion as of September 30, 2022, with a net income of $51.9 million for Q3 2022 on revenues of $305.9 million Noble Finance Company - Condensed Consolidated Balance Sheet (In thousands) | | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total assets | $2,052,526 | $2,063,459 | | Total liabilities | $825,276 | $568,041 | | Total shareholders' equity | $1,227,250 | $1,495,418 | Noble Finance Company - Condensed Consolidated Statement of Operations (In thousands) | | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | | Total operating revenues | $305,872 | $250,371 | $791,255 | | Operating income (loss) | $69,620 | $(3,810) | $109,143 | | Net income (loss) | $51,854 | $(13,980) | $78,813 | Notes to Combined Condensed Consolidated Financial Statements The notes detail significant corporate events and accounting treatments, including the company's emergence from Chapter 11 bankruptcy, the business combination with Maersk Drilling, and ongoing tax audit claims - The company emerged from Chapter 11 on February 5, 2021, applying fresh start accounting, making financial statements post-emergence not comparable to prior periods4449 - On September 30, 2022, Noble completed its merger with Maersk Drilling, with Noble Corporation plc becoming the ultimate parent company, accounted for as a business combination with Noble as the acquirer455258 - To gain regulatory approval for the Maersk merger, Noble agreed to sell five jackup rigs to Shelf Drilling for $375 million, with the transaction closing on October 5, 2022, and these rigs classified as held for sale as of September 30, 20226062131 - As of September 30, 2022, the company had $220.0 million of loans outstanding under its Revolving Credit Facility and $214.4 million principal amount of Second Lien Notes outstanding8090224 - Upon emergence from bankruptcy, the company recognized a $113.4 million intangible asset for favorable customer contracts, with a remaining balance of $25.3 million as of September 30, 2022105 - The company faces outstanding tax audit claims of approximately $613.3 million from various jurisdictions, which it is vigorously defending119 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, strategic direction, and market outlook, highlighting the positive impact of the Maersk Drilling business combination, the $3.9 billion pro-forma backlog, and liquidity position Executive Overview and Recent Events Noble is a leading offshore drilling contractor with a fleet of 32 rigs post-merger, having recently completed its business combination with Maersk Drilling and the sale of five jackup rigs to Shelf Drilling for $375 million - Completed the business combination with Maersk Drilling, making Noble a leading offshore driller with a fleet of 32 mobile offshore drilling units (19 floaters and 13 jackups)146149 - As part of the merger, Noble sold five jackup rigs (the "Remedy Rigs") to Shelf Drilling for $375 million in cash on October 5, 2022156 - The company's ordinary shares began trading on the NYSE under the symbol "NE" and on Nasdaq Copenhagen under the symbol "NOBLE"151 Market Outlook and Strategy The market outlook is improving due to reduced global rig supply and recovering demand, particularly for ultra-deepwater floaters and harsh environment jackups, despite challenges from inflation and the energy transition - The market is favorable due to reduced global rig supply, higher oil prices, and a focus on energy security, particularly benefiting the ultra-deepwater floater and harsh environment jackup markets163164 - Challenges include persistent inflationary pressures, supply chain disruptions, and the long-term energy transition as customers rebalance capital towards alternative energy165 - The company's strategy prioritizes safe and efficient operations, financial discipline, cash flow generation, and returning cash to shareholders, supported by a modern, high-specification fleet175177 Contract Drilling Services Backlog Noble's contract drilling backlog was approximately $2.2 billion as of September 30, 2022, increasing to $3.9 billion pro-forma post-merger, with floaters accounting for the majority and ExxonMobil representing 70.4% of the backlog - Contract drilling services backlog totaled approximately $2.2 billion as of September 30, 2022, and increased to $3.9 billion as of October 31, 2022, following the Maersk Drilling combination166 Contract Drilling Services Backlog by Rig Type (as of Sep 30, 2022, in thousands) | Rig Type | Total Backlog | 2022 (Remaining) | 2023 | 2024 | 2025 | 2026 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Floaters | $1,799,131 | $214,244 | $676,774 | $490,220 | $417,893 | $0 | | Jackups | $361,773 | $74,902 | $151,076 | $60,390 | $60,225 | $15,180 | | Total | $2,160,904 | $289,146 | $827,850 | $550,610 | $478,118 | $15,180 | - As of September 30, 2022, a single customer, ExxonMobil, represented approximately 70.4% of the total backlog174 Results of Operations For Q3 2022, Noble reported a net income of $33.6 million, a significant turnaround from a $23.7 million loss in Q3 2021, driven by higher floater dayrates and utilization, despite increased operating costs and merger expenses Key Financial Results (Three Months Ended Sep 30) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Operating Revenues | $305.9M | $250.4M | | Net Income (Loss) | $33.6M | $(23.7)M | | Diluted EPS | $0.41 | $(0.36) | Key Operating Metrics (Three Months Ended Sep 30) | Rig Type | Avg. Rig Utilization 2022 | Avg. Rig Utilization 2021 | Avg. Dayrate 2022 | Avg. Dayrate 2021 | | :--- | :--- | :--- | :--- | :--- | | Floaters | 78% | 73% | $285,362 | $214,304 | | Jackups | 82% | 75% | $118,209 | $87,972 | | Total | 80% | 74% | $212,958 | $150,287 | - Floater revenue increased in Q3 2022 due to a 5% rise in utilization and a 33% increase in average dayrates, driven by an overall upward industry trend and a new contract in Suriname184185 - Jackup revenue remained stable in Q3 2022 despite a smaller fleet (8 rigs vs. 12 in 2021) due to the sale of four rigs, with the remaining fleet seeing a 23% increase in average dayrate and a 32% increase in utilization186 - Merger and integration costs were $9.3 million in Q3 2022 related to the Maersk Drilling combination, compared to $5.0 million in Q3 2021 for the Pacific Drilling merger192 Liquidity and Capital Resources As of September 30, 2022, the company had $220.0 million outstanding on its Revolving Credit Facility and $214.4 million of Second Lien Notes, with plans to refinance Maersk Drilling's credit facilities with $500 million in new term loans - As of Sep 30, 2022, Noble had $220.0 million outstanding on its Revolving Credit Facility and $214.4 million of Second Lien Notes223224 - Noble has received preliminary commitments for $500 million in new term loans to refinance Maersk Drilling's existing credit facilities, with closing expected in Q4 2022227 - Capital expenditures totaled $116.9 million for the nine months ended Sep 30, 2022, and are estimated to be between $65 million and $85 million for Q4 2022235 - Net cash provided by operating activities was $109.8 million for the nine months ended September 30, 2022230 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company states that there has been no significant change in its exposure to market risk compared to the disclosures in its Annual Report on Form 10-K for the year ended December 31, 2021 - There has been no significant change in the company's exposure to market risk from what was disclosed in the 2021 Annual Report244 Item 4. Controls and Procedures Based on an evaluation as of September 30, 2022, the Principal Executive Officer and Principal Financial Officer of both Noble Corporation plc and Noble Finance Company concluded that their respective disclosure controls and procedures were effective - The Principal Executive Officer and Principal Financial Officer for both Noble Corporation plc and Noble Finance Company concluded that disclosure controls and procedures were effective as of September 30, 2022245246 PART II OTHER INFORMATION This section covers other information including legal proceedings, risk factors, unregistered sales of equity securities, and a list of exhibits Item 1. Legal Proceedings This section refers to Note 12 of the financial statements for information regarding legal proceedings, which details outstanding tax audit claims and personal injury claims related to Hurricane Ida - Information regarding legal proceedings is incorporated by reference from Note 12 of the condensed consolidated financial statements247 Item 1A. Risk Factors The company states that there have been no material changes to the risk factors previously disclosed in its 2021 Annual Report on Form 10-K and other recent filings, except for the closing of the Business Combination with Maersk Drilling - There have been no material changes to the company's risk factors since its 2021 Annual Report, other than those related to the now-closed Business Combination248 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the third quarter of 2022, Noble Cayman issued a total of 3,309,061 shares in connection with the exercise of various warrants, which were exempt from registration under the Securities Act - During Q3 2022, a total of 3,309,061 Noble Cayman Shares were issued upon the exercise of various warrants251 - These share issuances were made pursuant to exemptions from registration requirements under the Securities Act and the Bankruptcy Code249 Item 6. Exhibits This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including agreements related to the business combination, debt instruments, executive compensation plans, and required certifications - A comprehensive list of exhibits filed with the report is provided, including merger agreements, warrant agreements, credit facilities, and executive certifications250253255