Noble Corporation: Looking Past the DropNE) is down 25% in 2015 on the back of the drop in oil and gas prices as this has affected offshore drilling companies. The weakness in the oil market can be clearly seen on Noble’s performance as its revenue and earnings last quarter dropped year-over-year.
However, the oil and gas drilling company reported a small decline in both its top and bottom lines both on a sequential and a year-over-year basis, respectively, due to superior fleet performance and significant cost control efforts undertaken by the company during the quarter.
Positives to watch
Noble’s balance sheet and liquidity position are robust as its debt maturities will take place over the next few years and the debt to net capitalization ratio is well-managed under the target range of 35% to 40%. In addition, Noble is enhancing its liquidity position being hugely supported by its robust operations.
For instance, the company has successfully completed shipyard project on the Noble Paul Romano. Further, rigs have been extended in the yard and the company has developed an agreement with Hess in the Gulf of Mexico. Also, rigs gained improvements that include crew and helideck quarters leveraging resources from the lately left Noble Jim Thompson.
For the jackup rigs, Noble has entered new deal commitments including, an agreement for the Noble Sam Hartley, which is signed for a total of three years at a dayrate of nearly $111,000. The key deal leads to net backlog additions of about $121 million. Moreover, each of the six of Noble’s JU3000s has signed the basic deals.
The oil services provider is uniquely managing its cash position by significantly controlling the drilling activities over the years and estimates to initiate operations at 8 rigs in 2017 or later that include 3 rigs signed beyond 2020. At present, Noble is successfully managing 17 floating rigs and 15 jackup rigs with a prime focus on optimizing the drilling operations at the rigs, improving productions while controlling costs.
Going forward, Noble’s backlog provides excellent visibility for the company which estimates to gradually grow its forecasted annual contribution over the years. Among Noble’s key clients, Shell captures a majority 60.5% share of the entire backlog pie and it’s believed to notably contribute to Noble’s long-term growth.
The oil and gas drilling major is significantly focused on growing its drilling backlog in dollars while continuously lowering its year-over-year capital expenditures and in line with its continued commitment to deliver sustainable shareholder returns.
Moreover, analysts at Zacks Investment Research have provided a “Buy” rating on Noble Corporation primarily driven by the company’s solid backlog position of nearly $8.7 billion, which is believed to somewhat guard Noble against a huge setback that the industry has suffered over some time in the past and thus enjoys a competitive advantage against its peers.
Thus, Noble Corporation is making smart moves that will lead to a better performance when the oil market improves. This is why it will be smart to keep a close eye on the company’s performance going forward as it can make a recovery in the long run.
Published on Oct 8, 2015By Vinay Singh