Noble Corporation plc Reports Second Quarter 2020 Results
Noble Corporation plc (OTC-PINK: NEBLQ, the Company) today reported a net loss attributable to the Company for the three months ended June 30, 2020 (second quarter) of $42 million, or $0.17 per diluted share, on total revenues of $238 million.
Results for the second quarter included net after tax favorable items totaling $47 million, or $0.18 per diluted share. These items included a tax benefit totaling $112 million, or $0.44 per diluted share, related to a release of tax reserves upon the completion of certain tax audits, partially offset by an increase in legal contingencies of $54 million, or $0.22 per share, related to current litigation, and pre-petition charges of $11 million, or $0.04 per diluted share, primarily consisting of professional fees related to the Chapter 11 filing. Excluding the impact of the aforementioned items, Noble Corporation plc would have reported a net loss attributable to the Company for the three months ended June 30, 2020, of $89 million, or $0.35 per diluted share.
The adjusted results for the second quarter compared to a net loss attributable to the Company for the three months ended March 31, 2020 (first quarter) of $1.1 billion, or $4.25 per diluted share, on total revenues of $281 million. Results for the first quarter included net unfavorable items totaling $977 million, or $3.91 per diluted share. Excluding the $977 million of net unfavorable items, the adjusted net loss attributable to Noble Corporation plc for the first quarter of 2020 would have been $86 million, or $0.34 per diluted share.
A Non-GAAP supporting schedule is included with the statements and schedules attached to this press release and can also be found at www.noblecorp.com. It provides a reconciliation of revenues, net loss, income tax and diluted earnings per share for the second quarters of 2020 and 2019 and the first quarter of 2020.
Excluding pre-petition charges and the increase in legal contingencies, second quarter earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $58 million compared to $91 million in the first quarter, while contract drilling margin declined to 35 percent from 40 percent in the previous period.
Contract drilling services revenues for the second quarter totaled $220 million compared to $267 million in the first quarter of 2020. The decrease in revenues was due largely to a decline in total fleet operating days as a result of four rigs completing contracts in late first quarter or early second quarter and fewer available days in the second quarter due to the retirement of the Noble Joe Beall during the first quarter. This resulted in lower fleet utilization of 59% in the second quarter compared to 77% in the first quarter.
Contract drilling services costs for the second quarter were $144 million compared to $161 million in the first quarter of 2020. The 11% decline from first quarter costs was primarily driven by fewer operating days.
In early August, ExxonMobil awarded the drillship Noble Sam Croft a new 6-month contract to drill offshore Guyana, with operations commencing in the fourth quarter of 2020 after the rig finishes its current program offshore Suriname. This contract was awarded under the previously-announced Commercial Enabling Agreement (CEA) established with ExxonMobil for Guyana earlier this year. With this award, all four of Noble’s high-specification HHI drillships will now be contracted to ExxonMobil in Guyana, expanding our relationship with a valued client in one of the world’s most exciting deepwater basins and enhancing our footprint in this emerging region.
The Company’s 12 floating rigs achieved utilization of 53 percent in the second quarter compared to 58 percent in the first quarter. Excluding five cold stacked units, utilization in the second and first quarters was 92 percent and 100 percent, respectively. The eight percent decline in operating days in the second quarter versus the first quarter was due largely to reduced days for the semisubmersible Noble Clyde Boudreaux, which completed its contract early in the second quarter.
The Company’s 12 jackup rigs experienced fewer operating days when compared to the first quarter. A reduction in operating days on several rigs in the North Sea as well as reduced available days due to the retirement of the Noble Joe Beall were partially offset by increased operating days on the Noble Regina Allen. The Noble Tom Prosser was placed on a special standby rate in mid-April and returned to full dayrate in mid-July, and the Noble Scott Marks began a one-year contract suspension at zero dayrate in early May 2020. Additionally, the Company has agreed to an adjusted dayrate on the Noble Roger Lewis of $139,000 effective April 1, 2020 through December 31, 2021, after which the dayrate returns to the original rate of $159,000 for the remainder of the contract. Under the same agreement, the dayrates for the Noble Johnny Whitstine and Noble Joe Knight will not be adjusted. Utilization for the jackup fleet was 65 percent in the second quarter compared to 94 percent in the first quarter.
On July 31, 2020 the Company entered into a restructuring support agreement (the “RSA”) with two ad hoc groups of the largest holders of the Company’s outstanding bond debt which will be implemented through a voluntary chapter 11 process and is intended to significantly deleverage the Company’s balance sheet. Noble will continue to operate as usual during the bankruptcy and expects to pay employees and vendors in the normal course of business. The RSA, among other things, calls for all of the Company’s bond debt, which is currently over $3.4 billion, to be converted into equity of the reorganized company. In addition, the Company’s major bond holders have agreed to invest $200 million of new capital in the form of new second lien notes. At emergence, liquidity is expected to be further enhanced by a new $675 million secured revolving credit facility provided by the Company’s current syndicate of revolving credit facility lenders. The Company expects to emerge from chapter 11 before year end with a significantly improved balance sheet and liquidity position.
Robert W. Eifler, President and Chief Executive Officer of Noble Corporation plc, stated, “Last week we filed for Chapter 11 bankruptcy protection to help us facilitate a recapitalization of our balance sheet. I appreciate the support that we have been shown by our creditors, customers, and vendors as we work through this process. I am especially proud of the men and women at Noble who continue to deliver safe and reliable service to our customers without interruption. We will continue our day-to-day operations as usual as we manage through our restructuring, and Noble will emerge as a stronger company with a sustainable balance sheet to support our industry-leading operations.”
Commenting on the state of the offshore drilling industry, Mr. Eifler added, “Our industry is dealing with the most difficult environment we have endured in decades. After several years of low commodity prices that translated to severe reductions in overall rig demand and dayrates, the impact of the COVID-19 pandemic and the OPEC+ supply disruptions has led us to push out further our expectations for a meaningful recovery in demand. Despite the very challenging backdrop, Noble has continued to outperform the market in utilization. We are signing new contracts for our jackups in the North Sea and maintain very robust utilization for our floaters in the Gulf of Mexico and Guyana/Suriname basin. This is a reflection of the high quality of our rig crews and our high specification fleet. Looking forward, we will maintain our focus on efficiently managing our business and on strong operational execution. I am confident that the strength of our operations combined with a solid financial platform post emergence will position Noble to lead the industry as market conditions improve.”
Source: Noble Corporation plc