July 27, 2016 - 5:00 PM EDT
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Noble Corporation plc Reports Second Quarter 2016 Results

Highlights of Report: - Fleet downtime of 2.9 percent - Liquidity position improves to $3.3 billion - Noble Lloyd Noble delivered from shipyard, completing current newbuild program - Full year capital expenditure estimate reduced to $675 million - Noble Mick O'Brien commences 400-day contract in Middle East - Noble Bob Douglas awarded contract offshore Suriname - Vigorous and successful cost management efforts continue

LONDON, July 27, 2016 /PRNewswire/ -- Noble Corporation plc (NYSE:NE) today reported second quarter 2016 net income attributable to Noble Corporation plc (the Company) of $323 million, or $1.28 per diluted share, on revenues of $895 million. The reported results include several net favorable after-tax items totaling $322 million, or $1.27 per diluted share. The favorable items include:

  • Net income of $336 million, or $1.33 per diluted share, related to the previously announced contract cancellation agreement with Freeport-McMoRan Inc. and its subsidiary, Freeport-McMoRan Oil & Gas ("Freeport") for the drillships Noble Sam Croft and Noble Tom Madden. The Company recognized $379 million as revenue in the quarter in connection with the cancellation agreement, partially offset by the accelerated recognition of deferred mobilization and other expenses of $11 million;
  • Net income of $13 million, or $0.05 per diluted share, resulting from the contract termination date valuation of a derivative instrument pertaining to future contingent payments from Freeport as part of the contract cancellation settlement; and
  • Net income of $10 million, or $0.04 per diluted share, resulting from the early retirement of debt in connection with the Company's tender offers on its Senior Notes due in 2020 and 2021.

The results mentioned above were also partially offset by the following items:

  • Net loss of $15 million, or $0.06 per diluted share, relating to the impairment of certain capital spares; and
  • Net loss of $22 million, or $0.09 per diluted share, resulting from an unfavorable discrete tax item.

Excluding all of these items, net income attributable to Noble Corporation plc was slightly greater than $1 million, or $0.01 per diluted share, on revenues of $502 million.

The second quarter results compare to net income attributable to Noble Corporation plc for the first quarter of 2016 of $105 million, or $0.42 per diluted share, on revenues of $612 million. Results in the first quarter of 2016 included a favorable discrete tax item of $27 million, or $0.11 per diluted share. Excluding the tax item, net income attributable to Noble Corporation plc in the first quarter was $78 million, or $0.31 per diluted share.

For the second quarter of 2015, net income attributable to Noble Corporation plc was $159 million, or $0.64 per diluted share, on revenues of $794 million.

David W. Williams, Chairman, President and Chief Executive Officer of Noble Corporation plc, said, "Industry conditions remain challenging, but our efforts to establish strong operational results and identify additional cost reduction measures have been highly successful. Total fleet downtime in the second quarter of 2.9 percent was well below guidance of 5.0 percent and the 3.8 percent we reported in the previous quarter. The result is impressive, given the increasingly complex designs of many well construction programs. Our vigorous cost management efforts continued in the quarter as we worked to align costs throughout our global operations with the decline in fleet operating days. These measures included close attention to the organization of our fleet during periods of rig inactivity. Our goal remains to keep our most advanced units ready to respond to changes in customer needs while reducing day-to-day costs as far as practicable.

"Utilization in our floating rig fleet declined steeply in the quarter, due in part to the contractual settlement with Freeport, which resulted in the preservation of considerable contract margin, but forced the unplanned idling of two drillships. However, our jackup rig fleet continues to operate at an impressive level, with utilization holding in the mid-80 percent range. Following the close of the second quarter, the Noble Mick O'Brien returned to work on a 400-day program in the Middle East. Also, we took delivery of the Noble Lloyd Noble, the world's largest, most capable jackup, which should begin its four-year primary term contract in the fourth quarter.  Finally, our ultra-deepwater drillship, the Noble Bob Douglas, was awarded a one-well program, plus options, for a drilling assignment offshore Suriname, commencing in direct continuation of the rig's current contract."

Contract drilling services revenues in the second quarter were $877 million, including $379 million related to the contract cancellation settlement with Freeport and $14 million pertaining to the contract termination date valuation of a derivative instrument relating to future contingent revenue payments from Freeport as part of the settlement. Excluding these amounts, contract drilling services revenues in the second quarter were $484 million, down from $591 million in the first quarter. The 18 percent decline in revenues was driven by a reduction in fleet operating days, with fleet utilization declining to 65 percent compared to 79 percent in the first quarter. Also, average daily revenues per rig fell slightly in the second quarter to $280,900, excluding the impact of the Freeport settlement, compared to $287,200 in the first quarter. The revenue decrease was partially offset by a reduction in fleet downtime and demobilization revenues relating to the jackup Noble Houston Colbert, which completed a drilling assignment offshore Argentina during the second quarter. Contract drilling services costs were $244 million in the second quarter, including $11 million of expenses associated with the accelerated recognition of deferred mobilization revenues in connection with the Freeport cancellation agreement. Excluding the accelerated expenses, contract drilling costs were $233 million, down $18 million, or 7 percent, compared to the first quarter. The lower costs were driven primarily by a reduction in labor costs, as crew counts were reduced on several rigs following the completion of contracts, and lower shore base and operations support costs. With the 18 percent decline in revenues in the second quarter, the Company's contract drilling services margin was 52 percent, excluding the impact of the Freeport settlement, compared to 58 percent in the first quarter.   

Net cash from operating activities was $862 million through June 30, 2016. Capital expenditures in the second quarter and through June 30, 2016 were $69 million and $121 million, respectively. The Company has lowered its full year 2016 estimate of total capital expenditures to $675 million from the previous estimate of $800 million. The $125 million reduction is attributable to lower revised expenditures across all spending categories.

At June 30, 2016, total debt was $4.1 billion, with a debt-to-total capitalization ratio of 34.6 percent. The Company's liquidity position, defined as cash, cash equivalents and availability under revolving credit facilities, was $3.3 billion, including a cash position of $823 million and the Company's revolving credit capacity of $2.445 billion, which remains undrawn. Following the conclusion of the second quarter, the Company took delivery of the high-specification jackup Noble Lloyd Noble, with a final payment of $409 million made on July 15, 2016. This delivery marks the end of Noble's current newbuild program under which the Company has taken delivery of 15 high-specification rigs since 2011.

Operating Highlights

Utilization of the Company's 16 floating rigs was 51 percent in the second quarter compared to 74 percent in the first quarter. The decline resulted from a 31 percent reduction in operating days following the conclusion of contracts on the semisubmersibles Noble Amos Runner, Noble Danny Adkins and Noble Dave Beard, with each rig having worked a significant portion of the first quarter. Also, following the contract cancellation agreement with Freeport, the Noble Sam Croft and Noble Tom Madden became idle effective May 10, with each of the rigs having been limited to 40 days of operations during the second quarter. Average daily revenues in the second quarter, excluding the impact of the Freeport settlement, were $472,600 compared to $425,900 in the first quarter. At the conclusion of the second quarter, five of the Company's semisubmersible rigs were cold stacked, or in the process of being cold stacked. These rigs were the Noble Homer Ferrington, Noble Amos Runner, Noble Max Smith, Noble Jim Day and Noble Dave Beard, which was relocated to Singapore following the rig's contract completion in April. The recently idled drillships the Noble Sam Croft and Noble Tom Madden, have been warm stacked in the U.S. Gulf of Mexico, along with the Noble Danny Adkins. The Company is currently evaluating contract opportunities for all three rigs.

Utilization of the Company's 14 jackup rigs was 83 percent in the second quarter, down slightly from 84 percent in the first quarter. This minor reduction was due primarily to the completion of a contract for the Noble Houston Colbert offshore Argentina, partially offset by a full quarter of operations on the Noble Sam Hartley working offshore Brunei. Average daily revenues increased in the second quarter to $136,000 compared to $134,900 in the first quarter due primarily to the demobilization revenues on the Noble Houston Colbert and a full quarter of operations on the Noble Sam Hartley. At the close of the second quarter, the Noble Regina Allen was warm stacked in the North Sea and the Noble Houston Colbert was available and is in the process of being relocated to the Middle East region. The remaining fleet is contracted through the balance of 2016 and well into 2017 or beyond, including the Noble Mick O'Brien, which commenced a 400-day program in the Middle East in early July 2016. Finally, following the delivery of the Noble Lloyd Noble, the rig remains on schedule to commence its four-year primary term contract in the North Sea during the early fourth quarter of 2016.

At June 30, 2016, Noble's total contract backlog stood at $5.1 billion.   An estimated 60 percent of available rig operating days for the remainder of 2016 are committed to contracts, including 40 percent of floating rig days and 85 percent of jackup rig days. In 2017, 46 percent of the available fleet operating days are committed to contracts, including 27 percent and 68 percent of floating and jackup rig days, respectively.

Outlook

In closing, Mr. Williams noted, "Reduced customer spending and the current fleet capacity imbalance weigh heavily on the near- to intermediate-term outlook for our industry. However, I remain encouraged by the long-term prospects for industry recovery. A number of our customers have commented on successful cost rationalization efforts that have resulted in baseline project economics that, in some cases, have been achieved at less than $50 per barrel. Also, although offshore exploration has been curtailed dramatically over the last two years, I am further encouraged by some recent operator interest offshore Guyana and Suriname, where a new, highly prospective hydrocarbon province is under evaluation, as well as the developing deepwater opportunity offshore Mexico. Opportunities such as these bode well for future offshore activity.

"Past actions taken by our Company to develop and enhance a strong competitive position support Noble's ability to address these and other offshore opportunities, expanding our global reach. These actions, together with our strong and consistent operations execution, the successful conclusion to our newbuild program, which will lead to dramatically lower capital expenditure requirements, and our steadfast commitment to financial discipline focused on the preservation of liquidity, will strengthen our ability to compete and pursue value-adding strategies for growth."

Non-GAAP Financial Measures

A description of all non-GAAP financial measures used in this press release and a reconciliation to the most comparative GAAP measure is set forth on the Company's website at www.noblecorp.com in the Investor Relations section.

About Noble Corporation plc

Noble is a leading offshore drilling contractor for the oil and gas industry. The Company owns and operates one of the most modern, versatile and technically advanced fleets in the offshore drilling industry. Noble performs, through its subsidiaries, contract drilling services with a fleet of 30 offshore drilling units, consisting of 16 semisubmersibles and drillships and 14 jackups, focused largely on ultra-deepwater and high-specification jackup drilling opportunities in both established and emerging regions worldwide. Noble is a public limited company registered in England and Wales with company number 08354954 and registered office at Devonshire House, 1 Mayfair Place, London, W1J 8AJ England. Additional information on Noble is available at www.noblecorp.com.         

Forward-looking Disclosure Statement

Statements regarding contract backlog, future earnings, costs, expense management, revenue, rig demand, fleet condition, operational or financial performance, shareholder value, contract commitments, dayrates, contract commencements, contract extensions, renewals or renegotiations, letters of intent or award, industry fundamentals, customer relationships and requirements, strategic initiatives, future performance, growth opportunities, market outlook, capital allocation strategies, liquidity, competitive position, capital expenditures, financial flexibility, debt levels, debt repayment, as well as any other statements that are not historical facts in this release, are forward-looking statements that involve certain risks, uncertainties and assumptions. These include but are not limited to operating hazards and delays, risks associated with operations outside of the U.S., actions by regulatory authorities, customers and other third parties, legislation and regulations affecting drilling operations, compliance with regulatory requirements, factors affecting the level of activity in the oil and gas industry, supply and demand of drilling rigs, factors affecting the duration of contracts, the actual amount of downtime, factors that reduce applicable dayrates, violations of anti-corruption laws, hurricanes and other weather conditions, market conditions, the future price of oil and gas and other factors detailed in the Company's most recent Form 10-K, Form 10-Q's and other filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated. 

Conference Call

Noble has scheduled a conference call and webcast related to its second quarter 2016 results on Thursday, July 28, 2016, at 8:00 a.m. U.S. Central Daylight Time. Interested parties are invited to listen to the call by dialing 1-866-393-4306, or internationally 1-734-385-2616, using access code: 43843071, or by asking for the Noble Corporation plc conference call. Interested parties may also listen over the Internet through a link posted in the Investor Relations section of the Company's Website. 

A replay of the conference call will be available on Thursday, July 28, 2016, beginning at 11:00 a.m. U.S. Central Daylight Time, through Friday, August 26, 2016, ending at 11:00 p.m. U.S. Central Daylight Time. The phone number for the conference call replay is 1-855-859-2056 or, for calls from outside of the U.S., 1-404-537-3406, using access code: 43843071.  The replay will also be available on the Company's Website following the end of the live call.

 

 NOBLE CORPORATION PLC AND SUBSIDIARIES 

 CONSOLIDATED STATEMENTS OF OPERATIONS 

 (In thousands, except per share amounts) 

 (Unaudited) 




Three Months Ended


Six Months Ended



June 30, 


June 30, 



2016


2015


2016


2015

 Operating revenues 









 Contract drilling services 

$  876,697


$  771,307


$  1,468,064


$  1,550,668


 Reimbursables 

17,933


22,248


38,539


47,229


 Other 

153


-


153


-



894,783


793,555


1,506,756


1,597,897

 Operating costs and expenses 









 Contract drilling services 

244,176


319,207


495,424


640,957


 Reimbursables 

14,298


17,652


30,304


37,809


 Depreciation and amortization 

150,946


159,123


300,665


313,261


 General and administrative 

19,033


22,424


38,573


46,362


 Loss on impairment 

16,616


-


16,616


-



445,069


518,406


881,582


1,038,389










 Operating income  

449,714


275,149


625,174


559,508










 Other income (expense) 









 Interest expense, net of amount capitalized 

(57,306)


(57,465)


(114,406)


(106,509)


 Gain on extinguishment of debt, net 

11,066


-


11,066


-


 Interest income and other, net 

(1,253)


(431)


(1,983)


6,151

 Income before income taxes 

402,221


217,253


519,851


459,150


 Income tax provision 

(56,822)


(39,405)


(50,319)


(82,852)

 Net income  

345,399


177,848


469,532


376,298


 Net income attributable to noncontrolling interests 

(22,533)


(18,817)


(41,181)


(38,864)

 Net income attributable to Noble Corporation plc 

$  322,866


$  159,031


$     428,351


$     337,434










 Per share data: 









 Basic 

$        1.28


$        0.64


$           1.70


$           1.36


 Diluted 

$        1.28


$        0.64


$           1.70


$           1.36

 

 NOBLE CORPORATION PLC AND SUBSIDIARIES 

 CONSOLIDATED BALANCE SHEETS 

 (In thousands) 

 (Unaudited) 




 June 30, 


 December 31, 



2016


2015

 ASSETS 




 Current assets 





 Cash and cash equivalents 

$      822,978


$             512,245


 Accounts receivable 

353,677


498,931


 Prepaid expenses and other current assets 

153,921


229,442

 Total current assets 

1,330,576


1,240,618






 Property and equipment, at cost 

14,135,376


14,056,323


 Accumulated depreciation 

(2,859,370)


(2,572,700)

 Property and equipment, net 

11,276,006


11,483,623






 Other assets 

132,862


141,404


 Total assets 

$ 12,739,444


$        12,865,645






 LIABILITIES AND  EQUITY 




 Current liabilities 





 Current maturities of long-term debt 

$      299,642


$             299,924


 Accounts payable 

138,659


223,221


 Accrued payroll and related costs 

50,460


81,464


 Other current liabilities 

306,799


258,975

 Total current liabilities 

795,560


863,584






 Long-term debt  

3,829,416


4,162,638

 Other liabilities 

294,687


417,193


 Total liabilities 

4,919,663


5,443,415






 Commitments and contingencies 









 Equity 





 Total shareholders' equity 

7,096,687


6,699,229


 Noncontrolling interests 

723,094


723,001


 Total equity 

7,819,781


7,422,230


 Total liabilities and equity 

$ 12,739,444


$        12,865,645

 

 NOBLE CORPORATION PLC AND SUBSIDIARIES 

 CONSOLIDATED STATEMENTS OF CASH FLOWS 

 (In thousands) 

 (Unaudited) 



Six Months Ended



June 30,



2016


2015

 Cash flows from operating activities 





 Net income 

$  469,532


$    376,298


 Adjustments to reconcile net income to net cash from operating activities: 





 Depreciation and amortization 

300,665


313,261


 Loss on impairment 

16,616


-


 Gain on extinguishment of debt, net 

(11,066)


-


 Other changes in operating activities 

85,810


78,319


 Net cash from operating activities 

861,557


767,878






 Cash flows from investing activities 





 New construction 

(20,059)


(23,360)


 Other capital expenditures 

(93,045)


(135,294)


 Capitalized interest 

(7,427)


(11,629)


 Other investing activities 

(17,188)


(38,408)


 Net cash from investing activities 

(137,719)


(208,691)






 Cash flows from financing activities 





 Net change in borrowings outstanding on bank credit facilities 

-


(1,123,495)


 Issuance of senior notes 

-


1,092,728


 Debt issuance costs on senior notes and credit facilities 

-


(16,070)


 Repayment of long-term debt 

(300,000)


-


 Early repayment of long-term debt 

(22,207)


-


 Premiums paid on early repayment of long-term debt 

(1,781)


-


 Dividend payments 

(42,542)


(185,669)


 Dividends paid to noncontrolling interests 

(41,088)


(44,484)


 Repurchases of shares 

-


(100,630)


 Other financing activities 

(5,487)


(2,394)


 Net cash from financing activities 

(413,105)


(380,014)


 Net change in cash and cash equivalents 

310,733


179,173

 Cash and cash equivalents, beginning of period 

512,245


68,510

 Cash and cash equivalents, end of period 

$  822,978


$    247,683

 

 NOBLE CORPORATION PLC AND SUBSIDIARIES 

 FINANCIAL AND OPERATIONAL INFORMATION BY SEGMENT 

 (In thousands, except operating statistics) 

 (Unaudited) 



Three Months Ended June 30,


Three Months Ended March 31,


2016


2015


2016


Contract






Contract






Contract






Drilling






Drilling






Drilling






Services


Other


Total


Services


Other


Total


Services


Other


Total

 Operating revenues 


















 Contract drilling services 

$    876,697


$          -


$ 876,697


$ 771,307


$          -


$ 771,307


$ 591,367


$          -


$ 591,367

 Reimbursables 

17,933


-


17,933


22,248


-


22,248


20,606


-


20,606

 Other 

153


-


153


-


-


-


-


-


-


$    894,783


$          -


$ 894,783


$ 793,555


$          -


$ 793,555


$ 611,973


$          -


$ 611,973



















 Operating costs and expenses 


















 Contract drilling services 

$    244,176


$          -


$ 244,176


$ 319,207


$          -


$ 319,207


$ 251,248


$          -


$ 251,248

 Reimbursables 

14,298


-


14,298


17,652


-


17,652


16,006


-


16,006

 Depreciation and amortization 

145,237


5,709


150,946


153,579


5,544


159,123


144,029


5,690


149,719

 General and administrative 

19,033


-


19,033


22,424


-


22,424


19,540


-


19,540

 Loss on impairment 

16,616


-


16,616


-


-


-


-


-


-


$    439,360


$  5,709


$ 445,069


$ 512,862


$  5,544


$ 518,406


$ 430,823


$  5,690


$ 436,513



















 Operating income (loss) 

$    455,423


$ (5,709)


$ 449,714


$ 280,693


$ (5,544)


$ 275,149


$ 181,150


$ (5,690)


$ 175,460



















 Operating statistics 


















 Jackups: 


















 Average Rig Utilization 

83%






84%






84%





 Operating Days 

981






993






981





 Average Dayrate 

$    136,041






$ 171,482






$ 134,868























 Semisubmersibles: 


















 Average Rig Utilization 

16%






63%






48%





 Operating Days 

115






455






350





Average Dayrate 

$    290,106






$ 403,319






$ 258,786























 Drillships: 


















 Average Rig Utilization 

86%






100%






100%





 Operating Days 

626






819






728





Average Dayrate (1)

$ 1,134,011






$ 509,783






$ 506,141























 Total: 


















 Average Rig Utilization 

65%






83%






79%





 Operating Days 

1,722






2,267






2,059





Average Dayrate (1) 

$    509,145






$ 340,217






$ 287,169









































(1) The second quarter of 2016 includes the contract cancellation and the termination date valuation of the contingent payments relating to the Noble Sam Croft and Noble Tom Madden contract settlement and termination with Freeport. Exclusive of these items, the average dayrate for the second quarter of 2016 would have been $506,146 and $280,884 for drillships and the total fleet, respectively. 

 

 NOBLE CORPORATION PLC AND SUBSIDIARIES 

 CALCULATION OF BASIC AND DILUTED NET INCOME PER SHARE 

 (In thousands, except per share amounts) 

 (Unaudited) 


 The following table sets forth the computation of basic and diluted net income per share: 

















 Three months ended 

 Six months ended 


 June 30, 


 June 30, 


2016


2015


2016


2015

 Numerator:  








 Basic 








 Net income attributable to Noble Corporation plc 

$  322,866


$  159,031


$  428,351


$  337,434

 Earnings allocated to unvested share-based payment awards 

(11,678)


(3,555)


(15,516)


(7,489)

 Net income to common shareholders - basic 

$  311,188


$  155,476


$  412,835


$  329,945

















 Diluted 








 Net income attributable to Noble Corporation plc 

$  322,866


$  159,031


$  428,351


$  337,434

 Earnings allocated to unvested share-based payment awards 

(11,678)


(3,555)


(15,516)


(7,489)

 Net income to common shareholders - diluted 

$  311,188


$  155,476


$  412,835


$  329,945









 Denominator: 








 Weighted average number of shares outstanding - basic 

243,217


241,966


243,021


242,324

 Incremental shares issuable from assumed exercise of stock options 

-


-


-


-

 Weighted average number of shares outstanding - diluted 

243,217


241,966


243,021


242,324









 Weighted average unvested share-based payment awards 

9,127


5,533


9,134


5,500









 Earnings per share  








 Basic 

$        1.28


$        0.64


$        1.70


$        1.36

 Diluted 

$        1.28


$        0.64


$        1.70


$        1.36

 

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/noble-corporation-plc-reports-second-quarter-2016-results-300305098.html

SOURCE Noble Corporation


Source: PR Newswire (July 27, 2016 - 5:00 PM EDT)

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