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Noble plc(NE) - 2024 Q3 - Earnings Call Transcript
NENoble plc(NE)2024-11-06 16:05
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Financial Data and Key Metrics - Adjusted EBITDA for Q3 2024 was 291million,upfrom291 million, up from 271 million in Q2 2024 [12] - Free cash flow for Q3 2024 was 165million,includingapproximatelyfourweeksofcontributionfromtheDiamondacquisition[12]−ContractdrillingservicesrevenueforQ32024totaled165 million, including approximately four weeks of contribution from the Diamond acquisition [12] - Contract drilling services revenue for Q3 2024 totaled 764 million, up from 661millioninQ22024[26]−AdjustedEBITDAmarginforQ32024was36661 million in Q2 2024 [26] - Adjusted EBITDA margin for Q3 2024 was 36% [27] - Cash flow from operations was 284 million, and net capital expenditures were 119millioninQ32024[27]−TotalbacklogasofNovember5,2024,standsat119 million in Q3 2024 [27] - Total backlog as of November 5, 2024, stands at 6.2 billion, with 500millionscheduledforrevenueconversioninthefinaleightweeksof2024and500 million scheduled for revenue conversion in the final eight weeks of 2024 and 2.6 billion for 2025 [28] Business Line Data and Key Metrics - The company achieved 4.8 rig years of additional backlog for four drillships working with ExxonMobil in Guyana, extending visibility through August 2028 [13] - The Ocean Endeavor booked an additional 130 days for Shell in the UK North Sea, with options extending through July 2025 [13] - The BlackRhino was awarded a six-month contract in the Gulf of Mexico at a day rate slightly below 500,000,settocommenceinQ12025[13]−TheFayeKozacksetanewpre−saltdrillingrecordinBrazil,andtheDiscoverersuccessfullydrilleditsfirstwellforPetrobrasinColombia[14]−TheOceanGreatWhiteresumeditscontractwithBPintheUK,expectedtocontinuethroughApril2025[15]−TheBlackLionandDeliverermovedtohigherdayratecontractsinthemid−to−high500,000, set to commence in Q1 2025 [13] - The Faye Kozack set a new pre-salt drilling record in Brazil, and the Discoverer successfully drilled its first well for Petrobras in Colombia [14] - The Ocean GreatWhite resumed its contract with BP in the UK, expected to continue through April 2025 [15] - The BlackLion and Deliverer moved to higher day rate contracts in the mid-to-high 400,000 range during the quarter [15] Market Data and Key Metrics - Global demand for floaters remains high, with over 100 rig years of demand from tenders and pre-tenders [17] - 26 ultra-deepwater rig years were contracted in Q3 2024, a 20% increase over Q2 2024 [18] - 56% of the total marketed fleet is committed for 2025, with 59% of marketed floaters and 75% of tier-1 drillships contracted for 2025 [19] - Jack-up fleet utilization improved from 77% in Q2 to 83% in Q3 2024, with 11 of 13 rigs contracted at an average day rate of 145,000[23]CompanyStrategyandIndustryCompetition−TheacquisitionofDiamondOffshore,completedonSeptember4,2024,added145,000 [23] Company Strategy and Industry Competition - The acquisition of Diamond Offshore, completed on September 4, 2024, added 2 billion to backlog and created a fleet of 41 rigs, including the largest fleet of seventh-generation dual-BOP drillships [9] - The company is on track to achieve 100millioninsynergiesfromtheDiamondacquisition,with75100 million in synergies from the Diamond acquisition, with 75% expected to be captured within one year of closing [28] - The company is focused on maximizing capital returns to shareholders, with 800 million returned through dividends and buybacks since the Maersk Drilling combination in Q4 2022 [11] - The company expects a reduction in CapEx by 25%-30% in 2025, providing a free cash flow tailwind [33] Management Commentary on Operating Environment and Future Outlook - The company remains constructive on the multi-year fundamental outlook, with optimism for a demand uptick in late 2025 and early 2026 [18][36] - The company expects a flat EBITDA run rate in the first half of 2025, with a potential step-up in the second half of 2025 [31][36] - The company is actively negotiating contracts that could drive an inflection in backlog and EBITDA potential in the second half of 2025 [21][31] - The company is monitoring customer budget allocations for 2025, with early indications of higher offshore spending [36] Other Important Information - The company has elected not to stack any rigs at this time but may stack one or more sixth-generation units if demand does not materialize as expected [22] - The company is focused on maintaining a strong balance sheet and returning excess free cash flow to shareholders through dividends and share repurchases [33][48] Q&A Session Summary Question: Outlook for the first half of 2025 and potential rig stacking [38] - The company acknowledges white space in the first half of 2025 due to customer capital discipline and delayed FPSOs but remains optimistic about a rebound in rig demand by late 2025 and 2026 [39][40] - The company may stack sixth-generation rigs if demand does not materialize but does not anticipate dramatic measures for seventh-generation rigs [42] Question: Magnitude of EBITDA inflection in the second half of 2025 [45] - The company expects a significant inflection in EBITDA in the second half of 2025, with Q3 2024 combined EBITDA (including Diamond) at 350millionasareferencepoint[46]Question:Capitalallocationanddebtmanagement[48]−Thecompanyiscomfortablewithitscurrentcapitalstructureandplanstocontinuereturningcapitaltoshareholdersthroughdividendsandsharerepurchases[48]Question:Jack−upfleetstrategyandpotentialdivestitures[49]−Thecompanyhasnourgencytodivestnon−corejack−uprigsbutwillconsiderstrategicmovesiftheyalignwithshareholderinterests[50]Question:Costsavingsfromrigstacking[51]−Thecompanyoutlinedaslidingscaleofcostsavings,withoperatingcostspotentiallyreducedto350 million as a reference point [46] Question: Capital allocation and debt management [48] - The company is comfortable with its current capital structure and plans to continue returning capital to shareholders through dividends and share repurchases [48] Question: Jack-up fleet strategy and potential divestitures [49] - The company has no urgency to divest non-core jack-up rigs but will consider strategic moves if they align with shareholder interests [50] Question: Cost savings from rig stacking [51] - The company outlined a sliding scale of cost savings, with operating costs potentially reduced to 40,000-50,000perdaybeforecoldstacking[52]Question:Geographicopportunitiesandmarketoutlook[54]−Thecompanyseesopportunitiesglobally,withafocusontheGoldenTriangle(SouthAmerica,WestAfrica,andtheGulfofMexico)andexpectsgrowthinregionslikeSuriname,Namibia,andMozambique[55][56]Question:SynergiesfromtheDiamondacquisition[59]−Thecompanyseespotentialtoexceedthe50,000 per day before cold stacking [52] Question: Geographic opportunities and market outlook [54] - The company sees opportunities globally, with a focus on the Golden Triangle (South America, West Africa, and the Gulf of Mexico) and expects growth in regions like Suriname, Namibia, and Mozambique [55][56] Question: Synergies from the Diamond acquisition [59] - The company sees potential to exceed the 100 million synergy target from the Diamond acquisition, similar to the Maersk transaction [59] Question: Outlook for the Developer rig [63] - The Developer rig is currently idle, with operating costs around $100,000 per day, and the company is exploring opportunities for late 2025 and 2026 [64][65] Question: Demand for Globetrotter rigs [67] - The company is in active conversations for well intervention work for both Globetrotter rigs, primarily in the U.S. Gulf, but may adjust if demand shifts [68]