Noble Corporation Reports Third Quarter 2010 Earnings of $0.34 per Diluted Share

Oct 20, 2010, 17:20 ET from Noble Corporation

ZUG, Switzerland, Oct. 20 /PRNewswire-FirstCall/ -- Noble Corporation (NYSE: NE) today 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.

Operations Highlights

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.”

About Noble

Noble is a leading offshore drilling contractor for the oil and gas industry. Noble performs, through its subsidiaries, contract drilling services with a fleet of 69 offshore drilling units (including five drilling rigs currently under construction) located worldwide, including in the Middle East, India, the U.S. Gulf of Mexico, Mexico, the Mediterranean, the North Sea, Brazil, West Africa and Asian Pacific. Noble also owns and operates a dynamically positioned floating production, storage, offloading vessel.  Noble’s shares are traded on the New York Stock Exchange under the symbol "NE". Additional information on Noble Corporation is available via the worldwide web at http://www.noblecorp.com.

Statements regarding contract backlog, earnings, costs, revenue, rig demand, fleet condition or performance, shareholder value, contract commitments, dayrates, contract commencements, contract extensions or renewals, letters of intent or award, industry fundamentals, customer relationships, future performance, growth opportunities, market outlook, 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, costs and difficulties relating to the integration of acquired businesses, 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, 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 third quarter 2010 results on Thursday, October 21, 2010, at 8:00 a.m. U.S. Central Daylight Time. Interested parties are invited to listen to the call by dialing from the U.S. 1-866-461-7129, or +1-706-679-3084 from outside the U.S., using access code: 38611734 or by asking for the Noble Corporation conference call. Interested parties may also listen over the Internet through a link posted in the Investor Relations section of the Company’s Web site.  

A replay of the conference call will be available on Thursday, October 21, 2010, beginning at 11:00 p.m. U.S. Central Daylight Time, through Wednesday, October 27, 2010, ending at 5:00 p.m. U.S. Central Daylight Time. The phone number for the conference call replay is 1-800-642-1687 from the U.S. or, for calls from outside of the U.S., +1-706-645-9291, using access code: 38611734.

The replay will also be available on the Company’s Web site following the end of the live call. The conference call may include non-GAAP financial measures. Noble will post a reconciliation of any such measures to the most directly comparable GAAP measures in the “Investor Relations” section of the Company’s Web site under the heading “Regulation G Reconciliations.”

NOBLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2010

2009

2010

2009

Operating revenues

Contract drilling services

$    584,919

$    874,969

$    2,081,075

$    2,615,571

Reimbursables

19,177

22,455

57,163

61,967

Labor contract drilling services

7,887

7,490

23,704

21,843

Other

635

721

1,449

1,277

612,618

905,635

2,163,391

2,700,658

Operating costs and expenses

Contract drilling services

315,844

250,842

845,870

742,752

Reimbursables

14,351

18,717

44,459

52,081

Labor contract drilling services

5,302

4,642

16,570

13,899

Depreciation and amortization

143,282

103,245

385,366

295,646

Selling, general and administrative

25,482

21,700

71,261

60,901

Loss on asset disposal/involuntary conversion, net

-

2,076

-

31,053

504,261

401,222

1,363,526

1,196,332

Operating income

108,357

504,413

799,865

1,504,326

Other income (expense)

Interest expense, net of amount capitalized

(4,144)

(379)

(5,119)

(1,261)

Interest income and other, net

2,561

2,605

7,193

4,995

Income before income taxes

106,774

506,639

801,939

1,508,060

Income tax provision

(20,287)

(80,556)

(126,801)

(275,833)

Net income

86,487

426,083

675,138

1,232,227

Net income attributable to noncontrolling interests

(467)

-

(467)

-

Net income attributable to Noble Corporation

$      86,020

$    426,083

$       674,671

$    1,232,227

Net income per share

Basic

$          0.34

$          1.63

$             2.63

$             4.72

Diluted

$          0.34

$          1.63

$             2.62

$             4.70

NOBLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

September 30,

December 31,

2010

2009

ASSETS

Current assets

Cash and cash equivalents

$             367,242

$           735,493

Accounts receivable

487,029

647,454

Prepaid expenses and other current assets

133,786

100,243

Total current assets

988,057

1,483,190

Property and equipment

Drilling equipment and facilities

11,981,111

8,666,750

Other

167,290

143,477

Total property and equipment

12,148,401

8,810,227

Accumulated depreciation

(2,468,867)

(2,175,775)

Net property and equipment

9,679,534

6,634,452

Other assets

338,833

279,254

Total assets

$        11,006,424

$        8,396,896

LIABILITIES AND  EQUITY

Current liabilities

Current maturities of long term debt

$               52,650

$                      -

Accounts payable

277,944

197,800

Accrued payroll and related costs

127,046

100,167

Taxes payable

35,751

68,760

Other current liabilities

96,051

67,220

Total current liabilities

589,442

433,947

Long-term debt

2,670,701

750,946

Deferred income taxes

270,645

300,231

Other liabilities

274,546

123,340

Total liabilities

3,805,334

1,608,464

Commitments and contingencies

Shareholders' equity

Shares

947,710

1,130,607

Additional paid-in capital

31,350

-

Retained earnings

6,531,742

5,855,737

Treasury shares

(373,813)

(143,031)

Accumulated other comprehensive loss

(60,994)

(54,881)

Total shareholders' equity

7,075,995

6,788,432

Noncontrolling interests

125,095

-

Total equity

7,201,090

6,788,432

Total liabilities and equity

$        11,006,424

$        8,396,896

NOBLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Nine Months Ended

September 30,

2010

2009

Cash flows from operating activities

Net income

$      675,138

$    1,232,227

Adjustments to reconcile net income to net cash from

operating activities:

Depreciation and amortization

385,366

295,646

Loss on asset disposal/involuntary conversion, net

-

31,053

Deferred income tax provision

(29,586)

29,916

Share-based compensation expense

26,906

28,543

Pension contributions

(8,249)

(13,022)

Net change in other assets and liabilities

236,122

(89,150)

Net cash from operating activities

1,285,697

1,515,213

Cash flows from investing activities

New construction

(381,928)

(457,233)

Other capital expenditures

(439,921)

(342,399)

Major maintenance expenditures

(64,244)

(93,112)

Accrued capital expenditures

4,213

(44,493)

Acquisition of FDR Holdings Limited, net of cash acquired

(1,629,644)

-

Net cash from investing activities

(2,511,524)

(937,237)

Cash flows from financing activities

Payments of long-term debt

-

(172,700)

Proceeds from issuance of joint venture partner notes

35,000

-

Proceeds from issuance of long-term debt, net

1,238,074

-

Proceeds from employee stock transactions

9,703

9,371

Settlements of interest rate swap agreements

(2,041)

-

Dividends/par value reduction payments

(193,869)

(35,093)

Repurchases of employee shares for taxes

(9,961)

(6,475)

Repurchases of shares

(219,330)

(130,297)

Net cash from financing activities

857,576

(335,194)

Net increase in cash and cash equivalents

(368,251)

242,782

Cash and cash equivalents, beginning of period

735,493

513,311

Cash and cash equivalents, end of period

$      367,242

$       756,093

NOBLE CORPORATION AND SUBSIDIARIES

FINANCIAL AND OPERATIONAL INFORMATION BY SEGMENT

(In thousands, except utilization amounts, operating days and average dayrates)

(Unaudited)

Three Months Ended September 30,

Three Months Ended June 30,

2010

2009

2010

Contract

Contract

Contract

Drilling

Drilling

Drilling

Services

Other

Total

Services

Other

Total

Services

Other

Total

Operating revenues

Contract drilling services

$    584,919

$            -

$    584,919

$    874,969

$         -

$    874,969

$    687,510

$            -

$    687,510

Reimbursables

18,488

689

19,177

21,511

944

22,455

12,989

764

13,753

Labor contract drilling services

-

7,887

7,887

-

7,490

7,490

-

8,056

8,056

Other

635

-

635

509

212

721

603

-

603

$    604,042

$    8,576

$    612,618

$    896,989

$  8,646

$    905,635

$    701,102

$    8,820

$    709,922

Operating costs and expenses

Contract drilling services

$    315,844

$            -

$    315,844

$    250,842

$         -

$    250,842

$    275,595

$            -

$    275,595

Reimbursables

13,696

655

14,351

17,811

906

18,717

9,626

739

10,365

Labor contract drilling services

-

5,302

5,302

-

4,642

4,642

-

5,380

5,380

Depreciation and amortization

140,199

3,083

143,282

100,669

2,576

103,245

123,379

2,848

126,227

Selling, general and administrative

25,220

262

25,482

21,629

71

21,700

23,561

247

23,808

Loss on asset disposal/involuntary conversion, net

-

-

-

2,076

-

2,076

-

-

-

$    494,959

$    9,302

$    504,261

$    393,027

$  8,195

$    401,222

$    432,161

$    9,214

$    441,375

Operating income

$    109,083

$     (726)

$    108,357

$    503,962

$    451

$    504,413

$    268,941

$     (394)

$    268,547

Operating statistics

Jackups:

Average Rig Utilization

77%

80%

81%

Operating Days

3,032

3,183

3,183

Average Dayrate

$      90,791

$    143,388

$      96,677

Semisubmersibles - (6,000 feet or greater):

Average Rig Utilization

89%

98%

92%

Operating Days

736

631

750

Average Dayrate

$    203,316

$    434,435

$    355,450

Semisubmersibles - (less than 6,000 feet):

Average Rig Utilization

94%

100%

100%

Operating Days

321

276

273

Average Dayrate

$    102,589

$    261,167

$    253,697

Drillships:

Average Rig Utilization

100%

100%

67%

Operating Days

468

276

182

Average Dayrate

$    229,963

$    243,186

$    242,045

Submersibles/others:

Average Rig Utilization

26%

42%

0%

Operating Days

64

78

-

Average Dayrate

$    304,000

$      65,944

$               -

Total:

Average Rig Utilization

79%

83%

80%

Operating Days

4,621

4,444

4,388

Average Dayrate

$    126,581

$    196,900

$    156,683

NOBLE CORPORATION AND SUBSIDIARIES

CALCULATION OF BASIC AND DILUTED NET INCOME

(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

Nine months ended

September 30,

September 30,

2010

2009

2010

2009

Allocation of net income

Basic

Net income

$    86,020

$    426,083

$    674,671

$    1,232,227

Earnings allocated to unvested share-based payment awards

(828)

(4,520)

(6,416)

(12,176)

Net income to common shareholders - basic

$    85,192

$    421,563

$    668,255

$    1,220,051

Diluted

Net income

$    86,020

$    426,083

$    674,671

$    1,232,227

Earnings allocated to unvested share-based payment awards

(825)

(4,505)

(6,394)

(12,141)

Net income to common shareholders - diluted

$    85,195

$    421,578

$    668,277

$    1,220,086

Weighted average number of  shares outstanding - basic

252,513

257,913

253,944

258,550

Incremental shares issuable from assumed exercise of stock options

672

925

855

778

Weighted average number of  shares outstanding - diluted

253,185

258,838

254,799

259,328

Weighted average unvested share-based payment awards

2,453

2,765

2,438

2,581

Earnings per share

Basic

$        0.34

$          1.63

$          2.63

$             4.72

Diluted

$        0.34

$          1.63

$          2.62

$             4.70

SOURCE Noble Corporation



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