Noble Corporation plc 2026 Q3 Earnings Call

Please go ahead. Thank you, operator, and welcome everyone to Noble Corporation's third quarter 2026 earnings conference call.

You can find a copy of our earnings report, along with the supporting statements and schedules on our website at noblecorp.com. We will reference an earnings presentation as well that's posted on the investor relations page of our website. Today's call will feature prepared remarks from our President and CEO, Robert Eifler, as well as our CFO, Richard Barker. We also have with us Blake Denton, Senior Vice President of Marketing and Contracts, and Joey Kawaja, Senior Vice President of Operations. During this call, we may make certain forward-looking statements regarding various matters related to our business and companies that are not historical facts. Such statements are based upon current expectations and assumptions of management and are therefore subject to certain risks and uncertainties.

Several factors could cause actual results to differ materially from these forward-looking statements, including those described in our earnings release and in our most recent annual report and Form 10-K and quarterly reports on Form 10-Q filed with the SEC. Noble does not assume any obligation to update these statements. Also note we are referencing non-GAAP financial measures on the call today. You can find the required supplemental disclosure for these measures, including the most directly comparable GAAP measure and associated reconciliation in our earnings report issued yesterday, furnished to the SEC and posted to our website. Now, I'll turn the call over to Robert Eifler, President and CEO of Noble.

Thanks, Ian. Welcome, everyone, and thank you for joining us. I'll open today's call with a brief summary of our third quarter highlights and recent contract awards, followed by an update on the market. Richard will then cover the financials before I wrap up with closing remarks and move to Q&A. During the third quarter, we earned adjusted EBITDA of $201 million, with free cash flow of negative $48 million. We again distributed our $0.50 quarterly dividend, and yesterday our board declared a $0.50 per share dividend for the fourth quarter, maintaining our consistent return of capital program. The 5% sequential decrease in adjusted EBITDA resulted from a number of rigs transitioning between contracts, including the BlackRhino, Discoverer, Venturer, and Globetrotter I, each of which had fewer days on contract in Q3 compared to Q2.

These were partially offset by the resumed operation of our two rigs in Brazil in July, as well as the Gerry de Souza's contract start-up in August. Additionally, the Voyager commenced its four-year contract with Shell in the U.S. Gulf in late September. Final commissioning and weather delays resulted in a few weeks later start than planned for this contract. We are excited to now be underway with the Voyager. Next, in our major project startup queue, we are looking forward to the Valiant and Discoverer scheduled commencement right around the end of this year on their long-term development campaign for TotalEnergies in Suriname. Over the past three months, we have secured new contract awards totaling approximately $560 million. First, the Noble BlackRhino has been awarded a four-well contract with TotalEnergies in Nigeria, expected to commence within the next few weeks.

This program has an estimated duration of 150 days and includes options for up to six additional wells. Next, I am pleased to announce that the Noble Faye Kozack was awarded a five-well contract with Tullow in Ghana, scheduled to commence in mid-2027, with an estimated duration of approximately 250 days. Also, the sixth-generation drillship Noble Globetrotter I has been awarded a contract with TotalEnergies for light well intervention services under a three-year capacity reservation agreement with the first scope of work scheduled to commence in Angola in Q3 or Q4 next year. However, prior to this, the rig is scheduled for a recently awarded two-well exploration campaign with Occidental in Peru, commencing in Q2 2027, which leverages the Globetrotter's unique capability to transit through the Panama Canal in order to access this remote drilling location.

Continuing with frontier exploration in South America, the Noble BlackHawk has been awarded a one-well contract with Apache in Uruguay that is expected to commence in Q4 2027 with an estimated duration of 50 days and a contract value of approximately $25 million, plus additional fees for mobilization and demobilization. This contract value does not include MPD or any other additional services. As the BlackHawk is winding down its current work in the U.S. Gulf, we are continuing to pursue promising leads for additional work for the rig next year prior to the Uruguay move.

Switching over to Norway, the Noble Interceptor has been awarded a one-well contract with DNO that is expected to commence in mid-2027 with an estimated duration of 50-90 days. Upon completion of this campaign, the rig is scheduled to commence its P&A program with ConocoPhillips at the Ekofisk field in the third quarter of 2027 with an estimated duration of 670 days. Finally, the Noble Intrepid was awarded a one-well contract with ORLEN that is expected to commence in Q3 2027 with an estimated duration of 40-60 days. With these awards, our current backlog stands at $6.7 billion. Now, zooming out for a moment to the broader market, recent trends across both the deepwater and harsh environment sectors are continuing to gain nice momentum.

Deepwater contracting activity, which started out the year gangbusters, but then hit a quiet patch between May and July, has recently re-accelerated over the past few months with a spate of recent fixtures confirming day rate recovery for high-end drillships in the mid-$400s up to $500,000 per day as current utilization, but to a greater extent, anticipated 2027 utilization continues to firm up. Today, 109 out of 110 marketed UDW rigs are contracted currently or in the future, putting contracted utilization at 99%. This eclipses the 2024 high watermark of 105 contracted rigs. Meanwhile, current working utilization of 88 rigs is still 10 units shy of the 2024 peak. However, we've reached a point now where the number of pending contract startups for currently idle rigs modestly exceeds the number of contract rollovers over the next six months or so.

This creates a fulcrum for the active rig count to potentially expand over the next few quarters as additional contracts are executed. The deepwater market is firming up, consistent with what we've been anticipating for a while now. This is despite the fact that we really haven't seen any real demand response so far this year resulting from higher commodity prices. On the contrary, the U.S. Gulf, which has historically been one of the more demand elastic markets through commodity cycles, has been a noted soft spot amidst an otherwise robust global market throughout this year. Having now retreated from a low 20s rig count in recent years to a mid-teens market presently, we do expect to see some improvement in the Gulf next year based on current customer dialogue.

However, the departure of a few drillships to other regions could likely create upward day rate pressure in order to drive capacity back into the Gulf. Perhaps similar to recent dynamics in the harsh semi market, which in recent years has seen Norway rig count dip from the high teens down to the mid-teens and now back up to the high teens with strengthening Norway day rates accompanying the migration of capacity back into that region. Speaking of Norway, I would further add that the Norwegian jackup market is also developing into a bright spot for Noble. With our recent contract awards, we now have four of our five CJ70 jackups contracted in Norway for the first time, which is a very promising improvement with leading-edge day rates ranging between $230,000 to $300,000, depending on work mode and contract duration.

Currently, the Noble Innovator, the older unit among our five CJ70s, remains uncontracted, but we're optimistic about contracting that rig fairly soon in the southern North Sea, where day rates are structurally lower. Nonetheless, this gives us a clear shot at approaching effectively full utilization for our jackups in 2027. I'll pass the call over to Richard for the financial review.

Thank you, Robert, and good morning or good afternoon all. In my prepared remarks today, I will briefly review the highlights of our third quarter and then discuss the outlook for the fourth quarter of 2026. Starting with our quarterly results. Total revenue for the third quarter totaled $684 million. Adjusted EBITDA was $201 million, and adjusted EBITDA margin was 28%. Q3 cash flow from operations was $144 million, capital expenditures were $192 million, and free cash flow was negative $48 million. on October 9, the sale of the Noble Resolve was finalized, with the company receiving the remaining $45 million of proceeds. Further, the sale of the Noble Globetrotter II is expected to close in the fourth quarter of 2026 for a purchase price of $38 million. As summarized on page 5 of the earnings presentation slides, our total backlog as of October 26 stands at $6.7 billion.