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Noble set to retire ‘old iron’ as market gets tougher

The Noble Bully I drillship
The Noble Bully I drillship

London listed, but still North American at its core, drilling contractor Noble Corporation is disposing of three of its older rigs . . . the semi-submersibles Noble Paul Wolff, Noble Driller and Noble Jim Thompson. What has not been stated is whether they will be scrapped.

In the case of the last named, the company will be substituting another semi-, the Noble Paul Romano to execute a previously announced contract covering four wells, or a primary term of up to one year in the US Gulf of Mexico.

The Paul Romano is in the Canary Islands and is expected to start operations on or around September 1.

The deteriorating drilling market is behind the decision with DavidWilliams, chairman, president and CEO of the company, reporting last month: “Rapidly declining crude oil prices during the fourth quarter further aggravated the offshore supply imbalance and contributed to an increasingly difficult environment for securing new contract commitments from our customers.

“Our decision to retire and recognise a non-cash charge with respect to three of our semi-submersibles in the quarter was based on revised assumptions on each rig’s future marketability in light of their age, technical features, and capital requirements in the context of the future supply of competitive rigs.

“These rig retirements will reduce the average age of a fleet whose concentration of premium assets is already among the industry’s highest. We will continue to evaluate the fleet in 2015 as we work to opportunistically position the company ahead of the next cyclical upturn.”

In other words, Williams appeared to signal the possibility of further rig disposals in a bid to better balance the fleet to meet anticipated market conditions.

However, while reporting a deterioration in Noble’s financial performance for Q4 last year, Williams also expressed optimism: “Despite the decline in market visibility and the difficulty in predicting client spending behaviour during a period of falling commodity prices, Noble remains well-positioned in 2015.

“We completed some timely transformative steps, including a well-contracted new-build programme that has driven a decided shift to a premium fleet mix.”

Since 2011, the company has added eight ultra-deepwater drillships and six high-specification jack-ups, with a final new-build jack-up addition expected in 2016.

Noble’s contract drilling services revenues for Q4 2014 declined 3% to $788million compared to $810million in Q3.

Fewer operating days were experienced on several rigs in the fleet as lower rig demand from customers persisted, resulting in a decline in average fleet utilisation in Q4 to 82% compared to 85% in Q3. Also, average daily revenues dropped to $330,700 from $346,700 as several rigs, particularly in the US Gulf of Mexico region, experienced lower contract day-rates.

However, Noble said the decline in contract drilling services revenues was partially offset in the quarter by improved activity in the company’s ultra-deepwater fleet, including the start of operations on the new-build drillship Noble Tom Madden, a full quarter of operations on the drillship Noble Sam Croft and improved operating performance on the semi-sub Noble Amos Runnerand and the drillship Noble Globetrotter I.

Looking to the future, Williams added: “We face this period of market uncertainty with 81% of our fleet operating days under contract in 2015 and a $10.1billion backlog that is expected to provide almost $3.0billion in gross revenues over the year.

“We possess a sound balance sheet and ample liquidity and we will continue to focus on capital discipline and preservation of liquidity through the cycle.

“Finally, an opportune and significant decline in capital expenditures compared to levels experienced over the past three years is expected to allow for positive free cash flow in 2015, providing the company attractive financial flexibility during a period of increased market uncertainty.”

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