Noble Q2 2025 Earnings Call Transcript

Key Takeaways

  • Positive Sentiment: In Q2, Noble delivered $282 million of adjusted EBITDA and $107 million of free cash flow, returned $80 million to shareholders, and declared a $0.50 per share dividend for Q3.
  • Positive Sentiment: Noble has achieved its $100 million synergy target from the Diamond acquisition ahead of schedule and is now focused on optimizing the combined operations.
  • Positive Sentiment: The company secured six new contracts this quarter—including extensions for the Noble Stanley LaFosse and awards for the Viking, Globetrotter I, Innovator, Intrepid, and Resilient—bringing YTD awards to $2.8 billion and backlog to $6.9 billion.
  • Neutral Sentiment: Noble expects a near-term flat deepwater market with day rates in the low-mid $400,000 range but sees a credible path back to around 105 contracted UDW rigs and stronger activity by late 2026/2027.
  • Positive Sentiment: To maximize cash flow, Noble is disposing of underperforming units—including the Globetrotter II, Highlander, and Reacher—and maintaining a high-spec fleet while managing idle costs.
AI Generated. May Contain Errors.
Earnings Conference Call
Noble Q2 2025
00:00 / 00:00

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Operator

Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the Noble Corporation Second Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

Thank you. I would now like to turn the call over to Ian MacPherson, Vice President of Investor Relations. Please go ahead.

Ian Macpherson
Ian Macpherson
VP - IR at Noble

Thank you, operator, and welcome everyone to Noble Corporation's second quarter twenty twenty five earnings conference call. You can find a copy of our earnings report along with the supporting statements and schedules on our website at noblecorp.com. We will reference an earnings presentation that's posted on our Investor Relations page of our website as well. Today's call will feature prepared remarks from our President and CEO, Robert Eiffler as well as our CFO, Richard Barker. We will also have with us Blake Denton, Senior Vice President of Marketing and Contracts and Joey Kouaja, Senior Vice President of Operations.

Ian Macpherson
Ian Macpherson
VP - IR at Noble

During the course of this call, we may make certain forward looking statements regarding various matters related to our business and companies that are not historical facts. Such statements are based upon current expectations and assumptions of management and are therefore subject to certain risks and uncertainties. Many factors could cause actual results to differ materially from these forward looking statements and Noble does not assume any obligation to update these statements. Also note, we are referencing non GAAP financial measures on the call today. You can find the required supplemental disclosure for these measures, including the most directly comparable GAAP measure and an associated reconciliation in our earnings report issued yesterday and filed with the SEC.

Ian Macpherson
Ian Macpherson
VP - IR at Noble

Now I'll turn the call over to Robert Eisler, President and CEO of Noble.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Thanks, Ian. Welcome, everyone, and thank you for joining us as we present our results for the second quarter. Today, I'll walk through our financial and operational highlights, recent commercial wins, our perspective on the market, including our semiannual outlook on regional deepwater demand and wrap up with our fleet strategy. Then I'll hand it over to Richard to cover the financials before I return with some closing remarks and open the line for Q and A. Starting with Q2, we delivered strong financial results with adjusted EBITDA of $282,000,000 and free cash flow of $107,000,000 Over the past two years, our capital return program has been a key element of our strategy.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

We affirmed that commitment this quarter, returning an additional $80,000,000 to shareholders through our $0.50 per share quarterly dividend. Yesterday, our Board declared a $0.50 per share dividend for the third quarter, now eclipsing $1,100,000,000 in capital returns since Q4 twenty twenty two through dividends and share repurchases. On the integration front, we're approaching the one year anniversary of the Diamond acquisition, and I'm pleased to report that we've achieved our $100,000,000 synergy target ahead of schedule. I want to thank the teams across organization who have made our integration efforts so successful. At this point, the heavy lifting is behind us, and our focus now is squarely on optimization.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

And I'm proud to say that we've already reached a point where we are truly better than the sum of our parts.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Turning to commercial activity. Our contracting momentum continued this quarter. Building on the transformative awards that we announced in April, we have subsequently secured six new contracts since the last earnings call as detailed in our fleet status report published yesterday. First, on the deepwater front, the Noble Stanley LaFos was extended by its current customer in The US Gulf for five additional wells, spanning approximately fourteen months and keeping the rig contracted through August 2027. There is an option for an additional five wells at mutually agreed rates.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Next, the Noble Viking received a one well contract with Total in Papua New Guinea scheduled to commence in Q4 in direct continuation of its Brunei campaign. This estimated forty seven day program is valued at $34,000,000 including mobilization, demobilization and MPD usage, but excluding a modest performance bonus. This will be the first drillship to operate in Papua New Guinea in over thirty years and the first ever ultra deepwater rig to do so. We're honored that Total has entrusted us with this high impact exploration well, which includes options for three additional wells in the region. And finally, on the deepwater side, the Noble Globetrotter I, having recently completed its campaign in The U.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

S. Gulf, secured a two well contract with OMV in the Black Sea. This contract is planned to begin in Q4 with estimated duration of approximately four months and a total contract value of approximately $82,000,000 including a day rate of $450,000 plus mobilization and demobilization fees. The rig's unique design provides a distinct advantage for transit into and out of the Black Sea. As a reminder, this Black Sea program is a specific niche market opportunity, but we have otherwise removed the Globetrotters from competitive bidding into drilling programs globally.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

In addition to these deepwater awards, we also secured several recent contracts in our jackup fleet that highlight the versatility of our harsh environment rigs and our ability to support both traditional and energy transition projects. First, the Noble Innovator was awarded a six well contract with BP for the Northern Endurance Partnership carbon capture and storage project in The U. K. North Sea. The program is expected to commence in Q3 twenty twenty six in direct continuation of our current contract with BP at a day rate of $150,000 with a minimum firm term of three eighty seven days plus two optional wells.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Subsequently, the Noble Intrepid was awarded a two well program with BP for additional Northern Endurance Partnership CCS wells, also at $150,000 per day. Intrepid's contract is scheduled to commence in April 2026 for an estimated duration of one hundred and sixty days plus options. We're very proud to support BP with this critical infrastructure project that underpins The UK's carbon storage ambitions. Lastly, the Noble Resilient secured a ninety two day accommodation services contract at the Inch Cape offshore wind farm in The UK North Sea. This contract is scheduled to commence within the next few weeks and is valued at approximately $6,500,000 for the firm ninety two day term with options to extend.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Year to date, we have now secured new contracts with total contract value of $2,800,000,000 and our total backlog as of August 5 stands at $6,900,000,000 As a reminder, our backlog position assumes 40% of available performance revenue realized on a combined basis under our recent long term contracts with Shell and Total. We continue to pursue a number of promising opportunities to build on this recent momentum and look forward to sharing further updates as they materialize. Before we move to the market outlook, I'd like to highlight two key contract start ups in Southeast Asia and The Americas that required significant planning and coordination to execute safely and on time. I wanna thank the teams involved for their hard work in bringing these projects online. First, in The Philippines, the Noble Viking commenced a critical three well program for prime energy in June to extend the life of a key gas field, an important part of the country's broader push for energy security and independence.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Following the recent award with Total, the Viking could remain active through most of the first quarter next year if options are exercised with a robust pipeline of future opportunities in the region thereafter. Next, in Suriname, the Noble developer recently kicked off an important three well development campaign for Petronovs in July, returning to a region with a growing pipeline of development activity for this class of rig. Now on to the market outlook, including our semi annual review of key deepwater geographic markets. Amidst significant macro uncertainty and upheaval this year between tariffs, Middle East conflict and Brent crude prices that have ranged between the low 60s and the low 80s per barrel, the demand characteristics for offshore drilling have stayed comparatively on trend. While we have seen intensifying pressure on twenty twenty five upstream CapEx resulting in incrementally more near term gaps for rigs, we've also seen a crystallization of firming conditions by H2 twenty twenty six and into 2027.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

On the UDW demand side, the global contracted rig count currently stands at 97 rigs, which is roughly flat compared to recent quarters, but down from the recent peak of 105 to 106 during 2023, 2024. We will still probably see a few more idle units over the next few quarters as scheduled rollovers are likely to outstrip visible contract starts and extensions. And this near term slack in the market continues to pressure day rates, which are now generally in the low to mid-400s per day for Tier one drillships. Geographically, the recent deepwater demand trend has been shaped by continuing strength in South America, contrasted with softness in West Africa. However, visibility for a potential rebound in West Africa is promising and hopefully drawing near.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Starting first in South America, where contracted UDW demand stands at 43 total units, including 35 rigs in Brazil, five in Guyana, two in Suriname and one in Colombia. This is a highly important region for Noble as we have two rigs working in Brazil and seven out of the eight rigs contracted across Guyana, Suriname and Colombia. Visibility throughout the region remains highly encouraging. Starting with Petrobras in Brazil, a strong outlook is supported by recent tenders covering existing development drilling throughout Buzios, Mero and Tupi, as well as potential for new frontier exploration activity in the recently licensed Folsom Amazonas Basin further to the north. These combined with Shell's recent FID at Gato De Mato, Equinor's recent drillship tender, very significant recent exploration success from BP announced just this week, plus miscellaneous demand from one or more smaller operators collectively all frame a very exciting outlook for Brazil for years ahead.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Elsewhere throughout South America, we are tracking potential floater programs throughout Suriname, Trinidad, Colombia, Uruguay, and The Falklands with varying probability and timing factors. So overall, the deepwater market in South America continues to show extraordinary depth and breadth of demand, which should keep the region in growth mode. U. S. Gulf has softened recently with 21 contracted UDW rigs today, down from 22 to 24 rigs last year.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Depending on how the spot market plays out, we may see activity drop slightly further in the back of this year. Although current indications from customers suggest that the rig count could normalize back toward around 20 UDW rigs next year. That said, demand on The U. S. Gulf tends to be a bit more dictated by spot market drivers and is sensitive in that regard to commodity prices as well.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Our primary marketing priority in The Gulf is the Noble Black Rhino, which will finish its current contract in the next month or so. We are constructive on the rig's long term outlook in 2026 based on direct conversations we are having with clients, but we would not be surprised to see the rig encounter some near term white space in the meantime. Next, on to West Africa, where current UDW demand is 12 rigs, similar to recent quarters but materially below the 17 to 20 range that prevailed throughout 2023 in the 2024. Angola remains steady at six rigs, while Namibia and Nigeria have declined to just one and zero rigs respectively, representing a combined decrease of six rigs compared to last year. The good news is that visibility for resumed growth in the region is increasingly tangible.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

While West Africa and Mozambique comprise only 12% of total deepwater rig count today, the region's corresponding share of open demand is two times that level at over 25%. Several prominent IOC tenders appear to be progressing towards contract awards with 26 and '27 start dates. These anticipated fixtures should be supportive of a UDW rig count back toward the mid to high teens or conceivably higher if and when Namibia eventually regains momentum. Namibia for now does not factor as prominently in the near term open demand picture as other areas like Nigeria, Ghana, Cote D'Ivoire and Mozambique, but it should ultimately progress back toward a more consistent multi rig basin in the fullness of time. Additionally, we are seeing potential incremental exploration activity in adjacent South African blocks, which could materialize as early as 2026.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

The Mediterranean and Black Sea have remained steady with eight to nine UDW rigs. However, the big positive surprise in this region recently has been Turkish Petroleum's acquisition of two more drillships from sideline capacity, which will increase their captive fleet from four to six drillships and add two more units of long term captive demand in the region. Open demand throughout the Med appears otherwise supportive of stable activity levels, excluding the oscillations in the Black Sea and the structurally upsized demand from Turkey. Asia Pacific plus India has remained muted and is now down to four UDW units compared to five earlier this year and seven to eight rigs last year. Despite the recent decline, open demand for multiple rigs across India, Southeast Asia and Australia suggests a modest upward bias in activity over the next one to two years, although some of the incremental rig needs are likely to be satisfied by lower spec equipment.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Lastly, the harsh environment North Sea and Norway market currently represents six units of UDW demand and 19 units of total floater demand including mid water, both of which are down by one rig compared to earlier this year. Two of our North Sea semis, the Great White and the Endeavor, have rolled off contract recently with no visible work opportunities for the balance of this year. Upstream customer consolidation policy and fiscal headwinds continue to suppress spending, and there has also been some incremental deferral of P and A and intervention programs since earlier this year. That said, most of the North Sea and Norway floater fleet is copiously contracted into 2027 and beyond. Moreover, there is potential for one harsh semi requirement in Canada, which is currently an inactive market.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

So tying all this together, although the next several quarters continue to be characterized by a variety of pluses and minuses on the demand side, which appear to shake out to a roughly flat market, we continue to believe that the bottoms up view supports promising upside by late twenty twenty six or 2027, including a very credible path back toward a contracted UDW rig count of around 105, assuming reasonably stable macro conditions. As we have seen over the past twelve to eighteen months, timing risk really continues to be the key wildcard as many FIDs and rig awards have been drifting to the right. Hence, our focus on judiciously managing our costs and active fleet posture based on current market realities. Now I'll comment briefly on our contract position and objectives. We've made very good headway toward contracting our 15 high end drillships.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

We are now principally focused on the Black Rhino, Viking and Jerry D'Souza as key remaining priorities, all three of which have very robust opportunities under discussion with customers for programs commencing in 2026. Moving down the fleet with the decision to dispose of the Globetrotter two, the Globetrotter one still remains in consideration for several multiyear well intervention scopes, which could potentially follow the rig's Black Sea drilling program. If none of these intervention opportunities comes to fruition, then we will likely move to dispose the Globetrotter one as well. Four of our eight semisubmersibles are well contracted next year, while the deliverer, Great White, Endeavor are currently idle and Apex rolling next month. We're pursuing active leads for all four of these units around the world with expected starts varying throughout 2026 and 2027, and each is subject to individual stacking plans over the interim term.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

We'll continue to carefully evaluate stacking costs vis a vis the opportunity set, especially with older rigs. Now on to jackups. In a harsh environment in Northern Europe market, current demand is 28 jackups. This demand level has fallen off by about three rigs compared to last year and forward visibility for 2026 continues to be clouded by fiscal and regulatory headwinds. We are happy with several of our recent contract wins, including additional CCS and wind farm construction support activity in The UK, in addition to expanding our customer book in Norway with the Intrepid's DNO contract.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Overall, however, we expect muted market conditions throughout the region to linger until policy driven impediments are removed, particularly in The UK. That said, our jackup earnings contribution is disproportionately weighted to our well contracted units, and we do not anticipate material earnings erosion from the overall jackup fleet segment compared to current levels. Wrapping up, on the supply side, we have recently closed the disposals of the cold stacked drillships Pacific Scirocco and Meltem, permanently removing those units from the drilling market. We are now moving forward with the disposal of the Noble Globetrotter II in addition to the jackup Noble Highlander for which we have entered into a definitive agreement to sell for $65,000,000 and the jackup Noble Reacher, which is also now held for sale. For additional context, the Reacher is the lowest capability jackup in our fleet, having worked exclusively in accommodation mode for the past few years, and the rig would require meaningful capital to be drilling ready again.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

These actions reflect our continued focus on maintaining a high spec competitive fleet and managing our costs and active capacity as judiciously as possible in order to maximize cash flow for our shareholders. To underscore this point, while we don't know with exact precision, our best estimate is that the current combined run rate costs for idlesacking time across the largest drilling contractors is likely approaching $800,000,000 to $1,000,000,000 on an annualized basis. By these estimates, idle costs for floaters alone represent a surcharge of around 30,000 to $35,000 per day on average across every one of the working floater rigs in the global fleet. With our focus on cash flow maximization and returning capital to shareholders, we are taking aggressive action to reduce Noble's exposure to this surplus cost burden. In other words, our recent and pending capacity rationalizations are instantly accretive as these units have not contributed positive economics in recent years.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

And as we look ahead to a near term flat market with promising upside optionality in the years ahead, we are optimally positioning the fleet for either a flat market or a growth market with effectively no relevant earnings attrition. With that, I'll pause here and turn it over to Richard now to discuss the financials.

Richard Barker
Richard Barker
EVP & CFO at Noble

Good morning or good afternoon all. In my prepared remarks today, I will review our second quarter results, provide a brief update on our integration progress and then discuss our outlook for the remainder of the year as well as some high level perspectives around 2020. Starting with our quarterly results. Contract Drilling Services revenue for the second quarter totaled €812,000,000 adjusted EBITDA was €282,000,000 and adjusted EBITDA margin was 33%. As expected, Q2 revenue and adjusted EBITDA was sequentially lower, primarily due to planned out of service time for the Noble Samcross SBS and rigs rolling off contract during the quarter into a softer spot market.

Richard Barker
Richard Barker
EVP & CFO at Noble

Q2 cash flow from operations was €216,000,000 net capital expenditures were €110,000,000 and free cash flow was €107,000,000 Included in the Q2 free cash flow is approximately €16,000,000 from the closing of this Virokka sale. The Meltem sale closed in early Q3 with a cash proceeds of approximately €25,000,000 As summarized on Page five of the earnings presentation slide, our total backlog as of August 5 stands at €6,900,000,000 which includes €1,100,000,000 that is scheduled for a revenue conversion for the remainder of the year, with €2,300,000,000 and €1,600,000,000 scheduled for conversion in 2026 and 2027, respectively. As a reminder, these figures exclude reimbursable revenue and revenue from ancillary services. We're very pleased with the progress of the Diamond integration and have now achieved our stated synergy cost target of 100,000,000 I'd like to echo Robert's earlier comments and thank our employees for their great work in achieving this milestone ahead of schedule. On fleet management, the moves outlined by Robert around the Globetrotter II, the Highlander and the Reacher highlights our commitment to managing the business to maximize cash flow.

Richard Barker
Richard Barker
EVP & CFO at Noble

While these decisions are not taken lightly, we can no longer justify keeping these rigs in our fleet when weighing the ongoing stacking costs and reactivation capital against the opportunity set. Referring to Page 10 of the earnings slide, we are updating our full year 2025 guidance as follows. First, total revenue is lowered to a range of $3,200,000,000 to $3,300,000,000 This update aligns with our commentary on the prior call around trending to the lower end of the initial range as we see white space persist in the second half of the year, specifically on rigs we previously thought would see option exercises that did not materialize. Second, the guidance range for adjusted EBITDA is narrowed to the upper end of the previous range, now standing at €1,075,000,000 to €1,150,000,000 This is driven by decent first half results and strong cost management across the business. The lower half of this revised range is effectively fully contracted based on year to date results and remaining 2025 backlog.

Richard Barker
Richard Barker
EVP & CFO at Noble

Third, we are increasing capital expenditures, excluding customer reimbursements to a range of 400,000,000 to €450,000,000 The increase reflects capital tied to the recent long term awards. Rebuildable CapEx for 2025 is expected to total approximately €25,000,000 with €10,000,000 incurred in the first half. Looking towards 2026, we currently would expect 2026 capital expenditures to be in the ballpark of around $450,000,000 which includes the capital acquired for the recent long term awards. As we look ahead, we anticipate adjusted EBITDA to decline sequentially in Q3, primarily due to contract rollovers and planned downtime for the Noble Venturer. These impacts will be partially offset by the Noble developer contract startup in Suriname and the Noble Samkov working following her Q2 SPF.

Richard Barker
Richard Barker
EVP & CFO at Noble

If we zoom out and bring 2026 into view, we remain constructive on the long term market despite white space that is expected to persist well into 2026. Given this, we expect quarterly EBITDA to trend lower over the next four quarters relative to the 2025, but expect a material rebound starting in the 2026 supported by the startup of new long term contracts in parallel with rising deepwater demand levels. In the meantime, we are taking a disciplined approach to managing our business that is calibrated to the realities of a nearer term flatter demand environment. With that, I'll hand it back to Robert for closing remarks.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Thank you, Richard. To reiterate, we're seeing signs that the deepwater market could firm up nicely by the 2026 or 2027. But in the meantime, we are managing the business from a cost and cash flow discipline perspective for the flatter market presently at hand. We remain committed to and confident in a stable dividend.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Thus, in Noble have the unique benefit of being paid to wait for the next leg up in the cycle. While late twenty twenty six is still a ways out and with perennial macro uncertainties and volatility continuing to shape upstream spending, our current backlog coupled with the active dialogue we're having with customers on a global basis gives us confidence in soon substantially derisking an annualized free cash flow run rate of 400,000,000 to $500,000,000 by the second half of next year, even in a scenario where current trough levels of demand linger past 2026. Today, we are keenly focused securing the very small handful of key remaining contracts that would be necessary to complete that picture while continuing to deliver the service integrity and value every single day that our customers expect and require from Noble. With that, operator, we're now ready to go to questions.

Operator

Your first question comes from the line of Arun Jayaram with JPMorgan. Your line is open.

Arun Jayaram
Research Analyst at JP Morgan Chase & Co

Yes, good morning gentlemen. I was wondering if we could unpack a little bit about around the guidance update. You're lowering your top line guidance by about 3%, but tweaking higher your EBITDA guide by about 1%. So maybe you could just help us unpack kind of the moving pieces there.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

So I think on the last conference call, I think we we softly guide it to the lower end of the revenue range. And, you know, I think, unfortunately, we've had a couple of options or specific options that should decide that it's happening through this year. It is only that talks why the the the top line is down. I think, also, an edit out perspective, I think, just strong customer management across the board. Think it is is something to so I think I think it's been that disconnect, if you will, which is why I it's always, you know, a little bit of the the midpoint of the the net it has now slightly.

Arun Jayaram
Research Analyst at JP Morgan Chase & Co

Got it. Got it. So cost management, the driver of that. Got it. Got it.

Arun Jayaram
Research Analyst at JP Morgan Chase & Co

Okay. Great. And then maybe for Robert, you highlighted the organization's focus from a marketing perspective on the Black Rhino, Viking and Jerry D'Souza. Obviously, the outlook, which is kind of consistent with your peers is for a broader set of opportunities kind of emerging later in 2026 and 2027. So talk to us about kind of your strategy around those three rigs because that can be a decent swing factor as we think about, you know, your earnings power next year.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Yeah. Sure. And and and that's why we're highly focused on those three. Mentioned at the end of my prepared remarks where we think we can get run rate and, you know, having probably two of those three contracted is a is a key part of that. What I would say is we have a very strong line of conversations behind all three of those rigs, And I think that that fits in.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

While we've had perhaps a slightly more muted tone on the outlook on the on the market outlook, we do see the big projects going through definitively, and we are extremely encouraged by the level of conversations we're having around bigger projects in in in search of the higher quality rigs. So I think what we've seen and it's in part of question, but I think what we've seen here, especially in the last three months, is a little bit of disappointing level of demand at the lower end spectrum of rigs globally, but with very little change on demand for the higher end rigs.

Arun Jayaram
Research Analyst at JP Morgan Chase & Co

Great. Thanks a lot, gentlemen.

Richard Barker
Richard Barker
EVP & CFO at Noble

Thanks, Arun.

Operator

Your next question comes from the line of Frederic Steen with Clarkson Securities. Your line is open.

Fredrik Stene
Head of Research at Clarksons Securities

Hey, Robert and team. Hope you are having a nice day so far. So I wanted to touch a bit first, a bit more specifically on Brazil. Clearly, you have, as you said in your prepared remarks, decent exposure to South America in general. But right now, are several tenders that are going on down in Brazil, Bucios, Merrell, 2P, etcetera.

Fredrik Stene
Head of Research at Clarksons Securities

The U. S. Have, I think, one rig rolling off in late twenty twenty six, one in early twenty twenty seven. How do you think about the recontracting opportunities for those units in particular? And are you planning to keeping them down in Brazil?

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Yeah. So I think we think about Brazil as, at worst flat and more likely, probably up, a rig or two on rig demand. Obviously, with 30 of the 35 rigs in country, Petrobras will be the the one who determines that. Then there I think, you know, the narrative from them is positive. You've got the video tender right now, and there are a lot of moving parts.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

They they they firmed up a handful of groups already, but the the way they kind of shape that tender and then move forward from there is very important, and it's just a little bit too early and things that have a a kind of a, I guess, a a factual opinion on on where they go. But we're we're planning for Petrobras to effectively be flat on recount through time and then with some some upside, as I mentioned, outside of Petrobras in Brazil. So we're pretty and then, obviously, if you're further north, there's an immense amount of activity at the core region for us. And so we think South America right now is is certainly a bright spot in the on the demand side.

Fredrik Stene
Head of Research at Clarksons Securities

Okay. That's very helpful. And then turning to supply. You have three rigs announced today that you're holding for sale, one being in the definitive agreement already. The two others, I maybe you said it in the prepared remarks, but are those targeted to be retired from the drilling fleet?

Fredrik Stene
Head of Research at Clarksons Securities

Or are you potentially selling to, call it, or niche markets where you don't have any presence? And as an add on to that, you also talked about rigs in your fleet now having, call it, individual stacking plants, etcetera, if there is prolonged downtime. But if you don't find opportunities for some of those rigs, can you identify potential further retirement candidates also beyond the Globe plus one, as you mentioned? Thanks.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Yeah. So the Highlander will go to a drilling project, and we we we don't have a conclusion on the reacher of the GT two, but we would not anticipate that those are sold for for drilling purposes. So we would not anticipate that the reacher or the Globetrotter that we would be competing against those later, but the Highlander will will go to drilling. I I would reiterate on on the second part of your question, what we've done already with the Meltem and the Scirocco, and then we we mentioned that with the Globetrotters, those are effectively competing for intervention work with the the sole exception of of one or two places in the world that really need the Globetrotter capabilities for drilling like the White Sea. And then and then I think being rational on jackup side as well.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

We're we're just big believers that the option value of hoping for a better a better market at present is more expensive than it has been in times past. And we've said for years that we're running this company to generate cash, and our fleet rationalization policy has been has been really in keeping with that. So what else could be out there? We mentioned the g c one, but I think from there, I think we've done what what we think we need to do. Obviously, we can be we'll continue to be rational, and we'll continue to look forward at what we see and offers specific opportunity set for a given rig and make decisions and continue to be rational as as we move forward.

Fredrik Stene
Head of Research at Clarksons Securities

Alright. Thank you so much. I will leave that up.

Noel Parks
MD - CleanTech and E&P at Tuohy Brothers Investment Research Inc

Thanks,

Fredrik Stene
Head of Research at Clarksons Securities

Frederic. Have good day.

Richard Barker
Richard Barker
EVP & CFO at Noble

You too.

Operator

Your next question comes from the line of Eddie Kim with Barclays.

Eddie Kim
Eddie Kim
VP - Equity Research at Barclays

So you provided a very constructive medium term outlook in your walk through the regions, but indicated some near term softness here. We've seen leading SG rates on recent multi year contracts in the low 400. Just curious on your expectation on where that pricing could go for upcoming contracts later this year. Do you think rates kind of hold firm here in the low 400s? Or could they even see a downtick lower just just given the the near term softness we're seeing right now? Just curious on your thoughts there.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Yeah. I mean, think thanks, Eddie. I think rates are low mid 4 hundreds, like we said. There there hasn't to my knowledge, there hasn't been a single example of a two b o p, you know, tier one rig below that range. You know, our outlook is that there should be some incremental rig rig demand by by late twenty six, hopefully.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

And, you know, I I can't imagine someone dropping rates with that outlook, but but who knows? I do think you have because of the you've got a little bit of a funny dynamic where there's a a number of big projects coming on in late twenty six and twenty seven with probably a drop in demand in the interim. So, you know, people like to talk about gas filler work, that kind of stuff. Knows? I think you could have some some lower rates, but I think I don't I don't think that's representative of of a broader market of you if you if you if you pull in late twenty six and twenty seven earnings potential.

Eddie Kim
Eddie Kim
VP - Equity Research at Barclays

Got it. That's very helpful color. Thank you. My follow-up is somewhat related. I think you said in prepared remarks that there's a very credible path back to UDW rig count back up to 105, think, towards the back half of next year, assuming stable macro conditions.

Eddie Kim
Eddie Kim
VP - Equity Research at Barclays

Fair to say that there is also a very credible path back to leading its dayrates sort of in that mid to high 400 level on contract announcements we might see in the back half of next year?

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

It's a great question. I wish I knew the answer. I think like, I the way I I think the way we view it is that we're we're in a little bit of a wall that's been created by a lot of macro noise right now. So if you wanna if you wanna I would make the claim that if we're we're now just just below a 100 working rates on the floater side from EDW side, and that perhaps would just take the Brent curve that perhaps comes in normalized demand level with current Brent curve, which should be 100 to a 105, that kind of range. And we've kind of counted up projects, and I think see a path to the higher end of that range.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

So, yes, I think that is at a minimum of stabilization, and and there is absolutely a path where rates kick back up from here. We're gonna have to wait and see what happens in the interim. You know, you can you can map out a relatively large slice of the demand for your big projects, but there is always just enough other out there that makes makes these things pretty pretty hard to predict. And and I kinda mentioned it earlier on around the lower spec the the demand requiring lower spec assets. But in in my opinion, it's the other that's created a softer market here recently than I think anyone was anticipating.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

So it's a it's a little early for these predictions, but we're certainly hopeful here that we get back to a much more normalized level by by the end of next year. And then I I guess I would add on the thought that we kinda made in prepared remarks, but we just feel very strongly that with our fleet, our current contract set, and then a pretty limited need for additional contracts that that in in that we can set ourselves up here for some pretty meaningful cash flow. We mentioned 400 to 500 in the prepared remarks with effectively a flat market from here. Even maybe, David, it's down a small tick. But but effectively, if if if what we see now is the new reality, we still think that we can generate meaningful cash flow for our for our investors.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

And we've given a lot of data out for cost or optimism that we would actually be above that.

Eddie Kim
Eddie Kim
VP - Equity Research at Barclays

It. Great. Thank you. I'll turn it back.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Your

Operator

next question comes from the line of Greg Lewis with BTIG. Your line is open.

Gregory Lewis
Managing Director at BTIG

Yes. Thank you, and thanks for taking my questions. I feel like I ask this, like, once a year. But could you kind of remind us the timing of the Exxon rig resets and maybe how we should be thinking about that? I believe it's in October.

Gregory Lewis
Managing Director at BTIG

How we should be thinking about that versus, say, where it was when it was reset, I guess, a few months ago.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Yes. It's it's March 1 and September 1 are the the the dates that the new rates go go into effect. And so those rates are, you know, respectively set three to five months prior to to when they go into effect. I would say in that that mechanism has worked extremely well, and it has tracked the market since since we we came up with the CEA. And and so we were talking about, you know, the September rate that will go into effect that was set two or three months ago.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

And so, you know, we don't we don't get the rates out, but, you know, I think there is honestly also ties, and and I think that that mechanism has really tracked the market very closely.

Gregory Lewis
Managing Director at BTIG

And then and and I felt like, Robert, you you mentioned kinda dual BOP, which is what those are. So that so is it safe to assume that excludes kind of the like a it definitely sounds like it excludes sixth gen rigs, but maybe even lower end seventh gen rigs?

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

That's correct. That's that two BOBs.

Gregory Lewis
Managing Director at BTIG

Okay. Great. Thank you for that. And then I did have a broader question. Obviously, was some big news yesterday with some consolidation in the jackup market.

Gregory Lewis
Managing Director at BTIG

Clearly, the acquirer has historically operated in the North Sea. Does this M and A is sometimes good for a sector, sometimes bad. Any kind of view on how this impacts the jackup market? And realizing you've been scaling down your jackup fleet over the last couple of years. But but any kind of view any kind of view how does this do anything to change how how you're thinking about jack that you your jackup fleet to post that m and a deal?

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

No. Not really, honestly. I mean, we have the three rigs outside of the North Sea that we're marketing aggressively. And then yeah. There there's obviously some some overlap with the North Sea in this m and a deal with but we're you know, it doesn't change our our demand.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Mean, I'm sorry. May not look better. And, honestly, no. It doesn't do a whole lot and to to change our views on anything. You know?

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

I said I'm happy for the companies, and I think it was probably a great deal and a win win. But it doesn't really I don't think it spurs action from our side necessarily.

Gregory Lewis
Managing Director at BTIG

Okay. Super helpful. Thank you very much.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Thank you.

Operator

Your next question comes from the line of Doug Becker with Capital One Security. Your line is open.

Douglas Becker
Equity Analyst at Capital One Securities, Inc

Thank you. Robert, you've laid out that Q1 drillships are still in the low 400 to mid 400 range. Have you seen any material changes to some of the other factors that can affect economics like mob or demob fees or capital reimbursements? Just trying to look a little deeper in terms of the economics in the current environment.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Yeah. I mean, look, contract terms are effectively correlated with day rates. However, I would say that if you're talking about wider spectrum of of potential day rates, so the awful years that had two handles on them all the way over to kind of some world with five handles where there is where there is a a true shortage of rigs, I don't think the change between high four hundreds and low four hundreds is particularly meaningful on on on the broader contract terms scale. So, yeah, there will be a bit of economic leakage probably today versus when we were knocking on the 500 door, but I I don't think that's a meaningful change so far.

Douglas Becker
Equity Analyst at Capital One Securities, Inc

Fair enough. And you touched on this a little bit, but just on some of the options that are that are outstanding, just any general commentary in terms of option exercises we think about those rigs going forward?

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Yeah. I think we made the assumption for two or three years that all options would be exercised. And I think today, we'll make the assumption that I'm just I have I have no idea. I'm just gonna throw out half to 75% are are exercised and hopefully towards the higher end of that. But maybe another way to put that is that there there's there's definitely gonna be if you look across the the full industry spectrum of options, there's gonna be, you know, a a a non negligible number that probably are not not exercised.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

We suffered from that a little bit on our 2025 numbers where mid to late last year, we were quite certain that a couple of them would be option would be exercised and ultimately for none.

Fredrik Stene
Head of Research at Clarksons Securities

Got it. Thank you.

Operator

Your next question comes from the line of David Smith with Pickering Energy Partners. Your line is open.

David Smith
Director at Pickering Energy Partners

Hey. Good morning, and thanks for taking my questions.

Richard Barker
Richard Barker
EVP & CFO at Noble

Hey.

David Smith
Director at Pickering Energy Partners

So a lot of mine had been answered. I'm gonna step back with just a little bigger picture question. In in past cycles, we typically saw floater contract lead times move in tandem with utilization and and backlog. In the past few months, we've seen operators locking in multiyear contracts with, you know, twelve to twenty four month lead times even as near term demand looks softer and the rig count trends lower. It's, you know, creating multi quarter gaps between, you know, contracts for for some rigs, a dynamic that seems fairly uncommon compared to prior cycles.

David Smith
Director at Pickering Energy Partners

I I was curious if this, you know, strikes you as unusual and and if you have any thoughts on what is driving that out your contracting behavior.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Yeah. That's a great observation, Dave, and and we agree with you. I mentioned earlier a little bit that it it is kind of a unique because we're asking about day rates, and it is a little bit of a unique situation where I think whether you're talking to a drilling contractor or a service company, everybody sees some demand on the horizon here in late twenty six and '27. You know, there's there's been a disconnect between some long lead providers and and the natural service providers for some time. And so it is creating kind of a a a different situation than we're accustomed to.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

You know, I I I think that part of this is look. Our understanding is that for these all the projects that are being sanctioned and moving forward, obviously, the math works here in the kind of sixties range for for Brent. So I think you're seeing that dynamic play out as major projects move forward. And I think you're seeing that on the back end of so much noise, macro noise, and and and also a a persisting commitment to distant to capital discipline for for our customers that that is creating this slightly different dynamic than what we're used to. And and the corollary you're right.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

The correlation on lead time is has has kind of fallen apart here. But we take all that as a good sign. We we went through the global view, and we're optimistic that we can get back to what I would call a more normal level for a more normal level of activity, you know, down a hundred hundred to a 105 working EDW rigs.

David Smith
Director at Pickering Energy Partners

Alright. Appreciate it. And a follow-up if I may. It's kind of relates to Eddie's question earlier. But for for the rigs that are facing multi quarter gaps between, you know, firm term contracts, do you see a risk that bidding strategies become more aggressive to to fill in those gaps?

David Smith
Director at Pickering Energy Partners

And and if so, do you think that, you know, more competitive pricing for short term and near term work might influence broader pricing expectations? Or, you know, do you think it's just gonna result in a a greater bifurcation for, you know, short term, near term versus longer term work?

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Yeah. I I mean, for sure, I think you're gonna see that sort of work where people aren't willing to to take almost any price or take a take a a a discount, maybe a better way to say it. But I don't I just don't think that affects the broader pricing strategies for companies. I don't think it will will will affect ours. And I think you back to this funny dynamic we have right now, everybody sees it, and we're one of the last to go on this earning season.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

And whether you're talking about billing contract or service company, everyone's talking about this same dynamic. And so I think that's really meaningful and important. And I think people are gonna price as as they see the market, and and people generally see a bit of an uptick here in in starting in late twenty six. So I I think of the gap filler stuff as more noise than I do of, you know, of of something that's gonna drive rates.

David Smith
Director at Pickering Energy Partners

Great. I really appreciate the color. Congrats on the quarter and the better cost outlook.

Eddie Kim
Eddie Kim
VP - Equity Research at Barclays

Thanks, Ned.

Operator

Your next question comes from the line of Noel Parks with Tony Brothers. Your line is open.

Noel Parks
MD - CleanTech and E&P at Tuohy Brothers Investment Research Inc

Hi, good morning. I was wondering, just given some of your comments about the marketplace so far. Do you see or have you considered any revisiting of the maintenance and upgrade schedule as you look at what's still some near term uncertainty about, you know, white space being taken up, balanced against you, as you pointed out, the pretty consistent industry optimism in '26 and '27?

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Yeah. I think what I would say is we we we talked earlier, of course, about rationalization of the fleet and our view on that in in in the carrying cost of some of this this quote option value. You're asking more specifically about the working rigs. And so I would I would say that we've we've, you know, we we had we we had we brought revenue down, EBITDA up, and so we've managed costs very closely. And, you know, we we we didn't in the previous call, we mentioned that we kinda take if you wanna divide things up between six month readiness and one year readiness, that kind of that kind of view.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

We've kind of taken a six month readiness on a couple of units, which we think is a good balance between present cost and and marketability. And we feel we feel we've been highly focused on on the engine cost and and, know, we're happy with the decisions we've made around the really on the more on the flow side on the on the couple of units that that we see work for, but maybe with a bit of a gap before that one starts.

Noel Parks
MD - CleanTech and E&P at Tuohy Brothers Investment Research Inc

Great. Thanks. And I'm just wondering if with BP's announcement of their big discovery at Boomerang Offshore Brazil, Do you have any sense of whether that might help sort of affirm or accelerate what we've seen as a little bit of a positive drift towards exploratory dollars in drilling in the industry?

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

Mhmm. Yeah. I mean, all discoveries are good for our business. And, you know, my my longer term view is very firm around the need for oil and gas produced from from offshore wells. There is a gap that we will eventually get to after the same of an oil demand, obviously. But if if history is any guide, I think, you know, I'm very confident that there's a gap between discovered barrels and needed barrels coming from offshore. And we thought that dynamic might start playing out this year.

Robert Eifler
Robert Eifler
President, CEO & Director at Noble

It's been pushed off to the right. There's a lot of macro noise, but I remain extremely confident that the need for our services to to increase offshore production is is imminent and and will come in the next few years. So you're starting to hear more about reserves, reserve life, reserve replacement from our customers. And I think, you know, BP is one of one of our biggest customers. And then highlighting that this is the best expiration year in ten years, I think, is is another data point that that there is a meaningful shift back offshore globally that's happening right now.

Operator

At this time, there are no further questions. I will now turn the call back over to Ian MacPherson for closing remarks.

Ian Macpherson
Ian Macpherson
VP - IR at Noble

Thank you, everyone, for joining us today. We appreciate your interest, and we'll look forward to speaking with you again next quarter. Have a good day.

Operator

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Executives
Analysts
    • Arun Jayaram
      Research Analyst at JP Morgan Chase & Co
    • Fredrik Stene
      Head of Research at Clarksons Securities
    • Noel Parks
      MD - CleanTech and E&P at Tuohy Brothers Investment Research Inc
    • Eddie Kim
      VP - Equity Research at Barclays
    • Gregory Lewis
      Managing Director at BTIG
    • Douglas Becker
      Equity Analyst at Capital One Securities, Inc
    • David Smith