Noble 3Q Profit Drops 80% on Drilling Moratorium
Noble reported third quarter 2010 earnings of $86 million, or $0.34 per diluted share, versus $426 million, or $1.63 per diluted share, for the third quarter of last year. Results for the third quarter 2010 reflect $14 million, or $0.05 cents per share, in transaction costs associated with the acquisition of FDR Holdings Limited (Frontier) at the end of July 2010. Contract drilling services revenues for the third quarter of 2010 were $585 million versus $875 million in the third quarter of 2009. The Company generated $271 million in net cash provided by operating activities in the quarter.
"We are pleased to have closed the Frontier transaction during the quarter and commenced a new chapter in our relationship with Shell," said David W. Williams, Chairman, President and Chief Executive Officer. "However, the continuing and far-reaching effects of the ongoing operational disruption in the U.S. Gulf of Mexico negatively impacted Noble's third-quarter results. We recognize that the effects of U.S. policies related to offshore drilling will be felt into 2011 and beyond. Noble continues to make progress toward full compliance with the recently released regulatory changes, and we look forward to clearing the remainder of these hurdles and returning to work in the near term."
Noble invested $355 million in capital projects during the quarter and repurchased 4 million shares at an average cost per share of $32.67, bringing the total number of shares repurchased in 2010 to 6.1 million shares as of September 30, 2010. At the end of the third quarter 2010, the Company had approximately 6.8 million shares remaining on its existing repurchase authorization. Debt as a percentage of total capitalization increased to 27.4 percent at September 30, 2010 from approximately 9.4 percent at the end of the second quarter 2010 due to the issuance of $1.25 billion aggregate principal amount of senior unsecured notes in July 2010 to finance the purchase of Frontier and the assumption of approximately $690 million of fully consolidated Bully joint venture project financing debt.
At the end of the third quarter 2010, approximately 72 percent of the Company's available rig operating days were committed for the remainder of 2010 and approximately 49 percent were committed for 2011. The Company's total backlog at September 30, 2010 was approximately $14 billion.
In the U.S. Gulf of Mexico, the newbuild ultra-deepwater semisubmersible Noble Jim Day is currently undergoing final testing, customer acceptance and certification of the rig's blowout preventer (BOP) before commencing its contract with Marathon. The Noble Danny Adkins has received certification of its BOP and commenced operations during the quarter at full dayrate. Also, the Noble Amos Runner has received its BOP certification and the unit has recently been substituted for the Noble Lorris Bouzigard at that rig's same dayrate. The Noble Lorris Bouzigard has been stacked. The Company's remaining deepwater units in the Gulf are in the process of having their BOPs recertified.
In Mexico, the Noble Earl Frederickson received a contract extension through December 31, 2010 at a dayrate of $62,000 - $64,000 and the Noble Lewis Dugger received an extension of the current direct assignment which extends the contract to November 15, 2010 at a dayrate of $76,000 - $78,000.
In the North Sea, the Noble Julie Robertson received a contract extension through March 31, 2011 at $86,000 - $88,000 per day and a letter of intent for one year at $88,000 - $90,000 per day. The Noble Ronald Hoope contract has been extended until March 31, 2011 at the previously reported dayrate. The Noble George Sauvageau signed a one year contract with its current operator which will extend the rig through December 31, 2011.
In West Africa, the Noble Lloyd Noble received a letter of intent for one well that is expected to begin shortly. In the Middle East, the Noble Scott Marks and Noble Roger Lewis each received three year contracts in Saudi Arabia at dayrates of $236,000 - $238,000 and $131,000 - $133,000 respectively. These rates do not include lump sum payments for mobilization and capital upgrades.
Noble has initiated arbitration proceedings in connection with the Noble Homer Ferrington, currently located in the Mediterranean, with respect to an assignment of the drilling contract between operators. Payment of the dayrate is subject to the resolution of this dispute. The rig has been on standby since April 24, 2010 and continues to be on standby. Pending resolution of the dispute, the Company has not recorded any revenue related to the assignment.
"Looking ahead, while there is little doubt we will be forced to endure continued challenges in the U.S. Gulf as a result of regulatory uncertainty, we remain optimistic about the long-term strength of the Company and the industry," said Williams. "As clarity increases in the months ahead and we return to work, the Company's backlog and operating efficiency position us to resume our historical value creation and prepare us for further growth opportunities."
Manages 28 Offshore Rigs
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