Noble 1Q Profit Dives on Drilling Restrictions

Noble 1Q Profit Dives on Drilling Restrictions

Thursday, April 21, 2011
Noble Corp.

Noble reported first quarter 2011 earnings of $54 million, or $0.21 per diluted share, versus $99 million, or $0.39 per diluted share, for the fourth quarter of 2010. First quarter 2011 results include a one-time after-tax net gain of $0.06 per diluted share related to the previously announced substitution of the drillship Noble Phoenix for the drillship Noble Muravlenko in Brazil. Contract drilling services revenues for the first quarter of 2011 were $543 million versus $614 million for the fourth quarter of 2010. Contract drilling margin for the first quarter of 2011 was approximately 44 percent, versus 46 percent in the prior quarter. Noble invested $614 million in capital projects during the quarter.

"Noble's first quarter results reflect the continuing impact of drilling restrictions in the U.S. Gulf of Mexico," said David W. Williams, Chairman, President and Chief Executive Officer. "However, improving utilization in the rest of the world coupled with our extensive contract backlog afforded us the financial flexibility to expand and extend our newbuild program, adding both high-spec ultra-deepwater and jackup units to the fleet. With several new contracts commencing this quarter and the possibility of increased permitting in the U.S. Gulf of Mexico, we expect contract drilling revenues to improve across the balance of the year."

In February 2011, Noble issued $1.1 billion aggregate principal amount of senior notes in three separate tranches with a weighted average coupon of 4.71 percent. A portion of the proceeds was used to repay our half of the $693 million of joint venture debt associated with the Noble Bully I and Noble BullyII drillships. Our joint venture partner, Shell, contributed the remaining half to retire the full balance of the debt. Debt as a percentage of total capitalization was 29 percent at March 31, 2011.

Operations Highlights

At the end of the first quarter of 2011, approximately 64 percent of the Company's available rig operating days were committed for the remainder of 2011 and approximately 33 percent were committed for 2012. The Company's total backlog at March 31, 2011 was approximately $13.1 billion.

In the first quarter, Noble continued its strategy of upgrading its fleet by adding rigs with the latest technology and capabilities. Noble announced a total of five newbuilds, including three ultra-deepwater drillships and two heavy duty, harsh environment (HDHE) jackups which are in addition to the two HDHE jackups announced in December 2010. Deliveries are expected to commence in the fourth quarter of 2012 when the first jackup is scheduled to be completed. Additionally, the first of the three drillships has been awarded a Letter of Intent for five and a half years with an expected commencement date in the second half of 2013 at a dayrate of $410,000. The unit is eligible for up to a 15 percent performance bonus. In the past five months, Noble has committed more than $2.7 billion to its fleet upgrade strategy. The Company has one remaining drillship option that expires August 31, 2011 and two remaining jackup options that expire January 1, 2012.

In the U.S. Gulf of Mexico, the Noble Jim Thompson returned to earning its full dayrate of $359,000-$361,000 at the beginning of April after being on standby for approximately nine months. The unit resumed drilling operations for our customer Shell after they received approval for an exploration permit. Noble has three other rigs on standby with Shell in the Gulf, the Noble Danny Adkins and Noble Jim Day, both at dayrates of $155,000-$157,000, and the Noble Driller at a dayrate of $84,000-$86,000. As previously announced during the quarter, Noble secured a one-year commitment on the Noble Jim Day which includes a period of standby between mid-February and July 31, 2011 and an agreement that the rig will receive a dayrate of $484,000-$486,000 from August 1, 2011 through January 31, 2012 regardless of whether or not the unit is drilling. When operating, the unit will be eligible for a performance bonus of up to 15 percent of the dayrate.

In Mexico, Noble was awarded contracts on seven jackups at dayrates ranging from the mid-$50,000's to approximately $100,000 for durations between 139 days and 624 days. The Company also secured extensions on two units, the Noble Carl Norberg and Noble Roy Butler.

In January, Noble announced a substitution of the Noble Phoenix for the Noble Muravlenko to operate in Brazil. In conjunction with the rig swap, Noble canceled a planned reliability upgrade on the Noble Muravlenko. Also in Brazil, the Noble Clyde Boudreaux commenced a one-year contract at a dayrate of $289,000-$291,000 in early April. The rig is eligible for up to a 15 percent performance bonus.

The Noble Homer Ferrington commenced a farmout in mid-March earning a full dayrate of $504,000-$506,000 while operating in Morocco.

Finally, the Noble Roger Lewis commenced its three-year contract in Saudi Arabia in early March at a dayrate of $131,000-$133,000. The Noble Scott Marks, scheduled to begin a three-year contract in Saudi Arabia in July, arrived in the Middle East to begin necessary upgrades.

"A number of anticipated catalysts have come to fruition and created value for our shareholders during the quarter, including a return to work of rigs in the U.S. Gulf, in Mexico, the Middle East, and the Mediterranean," said Williams. "With what is now eleven newbuilds, we have committed to a significant fleet upgrade program and are beginning to evaluate our existing assets to determine their ultimate future within our fleet. In the meantime, we continue to believe that there is additional upside to the Noble story, including the delivery of three ultra-deepwater drillships during 2011 and a return to normal drilling activity in the U.S. Gulf."