Q2 2022 Noble Corp (Cayman Island) Earnings Call
Robert Eifler: Yeah. There is a deposit. It's kind of industry standard, 10% deposit. There is no seller financing available, and that is by law, by rule, out of the UK.
Robert Eifler: Yeah. There is a deposit. It's kind of industry standard, 10% deposit. There is no seller financing available, and that is by law, by rule, out of the UK.
Greg Lewis: Okay.
Greg Lewis: Okay.
Robert Eifler: The competition authority there does not wanna see any continuing link that could affect competition going forward.
Robert Eifler: The competition authority there does not wanna see any continuing link that could affect competition going forward.
Greg Lewis: Okay. Okay, great. Okay, hey, everybody. Thank you for the time.
Greg Lewis: Okay. Okay, great. Okay, hey, everybody. Thank you for the time.
Robert Eifler: Thanks. Thanks, Greg.
Robert Eifler: Thanks. Thanks, Greg.
Operator: Thank you. Your next question comes from Samantha Ho with Evercore. Please go ahead.
Operator: Thank you. Your next question comes from Samantha Ho with Evercore. Please go ahead.
Samantha Ho: Hey, guys. Congrats on a really great quarter. I wanted to maybe just dig back to one of Greg's question. The Faye Kozack that $400k day rate seems really unusual for a one-well contract. I was just wondering if maybe you could talk a little bit more about that. Was that just a very opportunistic scenario where, you know, they wanted it in a certain white space that you guys had available?
Samantha Hoh: Hey, guys. Congrats on a really great quarter. I wanted to maybe just dig back to one of Greg's question. The Faye Kozack that $400k day rate seems really unusual for a one-well contract. I was just wondering if maybe you could talk a little bit more about that. Was that just a very opportunistic scenario where, you know, they wanted it in a certain white space that you guys had available?
Blake Denton: Yeah, sure. Samantha, thanks for the question. This is Blake. I think it's just the nature of the capabilities of the rig and the demands of this particular program against the available rigs in the Gulf of Mexico at the time. It's a great contract. We look forward to working with LLOG. We have, you know, we have a long-standing relationship with them, and we've been trying to do some work for them for some time. It's an exciting opportunity. Again, I think the rate is just a depiction of the alignment of the rig specs required versus the rigs available.
Blake Denton: Yeah, sure. Samantha, thanks for the question. This is Blake. I think it's just the nature of the capabilities of the rig and the demands of this particular program against the available rigs in the Gulf of Mexico at the time. It's a great contract. We look forward to working with LLOG. We have, you know, we have a long-standing relationship with them, and we've been trying to do some work for them for some time. It's an exciting opportunity. Again, I think the rate is just a depiction of the alignment of the rig specs required versus the rigs available.
Samantha Ho: Okay. Maybe more broadly, can you talk about how day rates are trending geographically? You know, I realize that the US is sort of pushing the leading edge on the ultra-deepwater side. Where are we in terms of the other geographic basins? You know, is West Africa kinda going to be catching up to them sometime next year? Or how do you guys see the day rate progressing?
Samantha Hoh: Okay. Maybe more broadly, can you talk about how day rates are trending geographically? You know, I realize that the US is sort of pushing the leading edge on the ultra-deepwater side. Where are we in terms of the other geographic basins? You know, is West Africa kinda going to be catching up to them sometime next year? Or how do you guys see the day rate progressing?
Robert Eifler: Yes. Jump in, Blake, too. I think we said at the beginning of the year, one thing we expected to see this year were other regions catching up with the US, and less of a discount for term. I think that has proven out as we've progressed through this year. There is, I think, still. Remember, in a couple of weeks when these Brazil tenders come through, well, it'll be a great visibility, I think, for everybody. I think there is still probably some slight discount for term. Don't think we've inflected into a market where there's a premium for term yet.
Robert Eifler: Yes. Jump in, Blake, too. I think we said at the beginning of the year, one thing we expected to see this year were other regions catching up with the US, and less of a discount for term. I think that has proven out as we've progressed through this year. There is, I think, still. Remember, in a couple of weeks when these Brazil tenders come through, well, it'll be a great visibility, I think, for everybody. I think there is still probably some slight discount for term. Don't think we've inflected into a market where there's a premium for term yet.
Robert Eifler: I do think also that rates have normalized somewhat this year, between the South America and West Africa and the US Gulf of Mexico.
Robert Eifler: I do think also that rates have normalized somewhat this year, between the South America and West Africa and the US Gulf of Mexico.
<unk> as well as global tender activity, all point to an improving market for offshore rigs.
This year has been far better than our industry. In 2021 next year is shaping up to be better than this year and we have visibility to continuing improvement from there.
Blake Denton: Yeah. I don't have any.
Blake Denton: Yeah. I don't have any.
Samantha Ho: Okay.
Blake Denton: Anything further to add, Samantha. I mean, we'll see the fixtures both in Brazil, as Robert mentioned, in West Africa. I think will show they're catching up.
Samantha Hoh: Okay.
Blake Denton: Anything further to add, Samantha. I mean, we'll see the fixtures both in Brazil, as Robert mentioned, in West Africa. I think will show they're catching up.
Data from rise to add indicate nearly a trillion dollars of oil and gas project sanctioning to occur over the next five years.
Samantha Ho: Okay. Just remind us again, like, what are you guys seeing in terms of reactivation costs and, you know, how quickly you could get a cold stack rig reactivated?
Samantha Hoh: Okay. Just remind us again, like, what are you guys seeing in terms of reactivation costs and, you know, how quickly you could get a cold stack rig reactivated?
The majority of which will be directed offshore.
98% of those projects breakeven at an oil price below $60 per barrel and perhaps more compellingly over 80% work sub $40 per barrel.
Robert Eifler: Sure. We have the two. As a reminder for anyone else, we've got the Meltem and the Scirocco. Of those, the Meltem is really the more capable rig overall. That's a seventh-generation rig that had actually mobilized to the US just before the pandemic under Pacific. That's almost certainly the first one that would come out. If you think about an all-in cost, which includes labor and all the expenses associated with performing the shipyard work, that's kind of a $75 to 100 million price tag. At this point, let's call it a year's work. You know, it could creep a little bit longer than a year, but we would say right around a year.
Robert Eifler: Sure. We have the two. As a reminder for anyone else, we've got the Meltem and the Scirocco. Of those, the Meltem is really the more capable rig overall. That's a seventh-generation rig that had actually mobilized to the US just before the pandemic under Pacific. That's almost certainly the first one that would come out. If you think about an all-in cost, which includes labor and all the expenses associated with performing the shipyard work, that's kind of a $75 to 100 million price tag. At this point, let's call it a year's work. You know, it could creep a little bit longer than a year, but we would say right around a year.
The world needs affordable and reliable energy.
In offshore oil and gas developments represent some of the most economic sustainable and secure sources of energy on the globe.
Over the last two quarterly calls we have stated that noble's financial results would meaningfully improve as we progress through 2022, and our contracts reset to higher day rates.
That step up is evident in our second quarter results with further improvement insight through the second half of the year.
Revenue EBITDA and free cash flow all increased materially quarter over quarter as our business benefited from improving day rates improved utilization and solid cost management by the noble team.
Yes.
Richard will give some more detail on our results in a moment, but let me first comment on the current state of the offshore drilling market, where we continue to see improvement across all re class segments.
Samantha Ho: Okay, great. Thanks so much, guys, and congrats again.
Samantha Hoh: Okay, great. Thanks so much, guys, and congrats again.
In the floater space the global Ultra deepwater market is increasingly tight as we look into 2023 and 2024 with marketed utilization for high spec drillships well above 90%.
Robert Eifler: Thanks, Ann.
Robert Eifler: Thanks, Ann.
Operator: Thank you. Your next question comes from the line of David Smith with Pickering Energy. Your line is open.
Operator: Thank you. Your next question comes from the line of David Smith with Pickering Energy. Your line is open.
This past quarter saw meaningful drillship contracting activity in West Africa with approximately six years of work committed across six ships signifying a material demand recovery in that important region.
David Smith: Thank you. Hey, good morning. Congratulations on the solid quarter, and thank you for taking the question.
David Smith: Thank you. Hey, good morning. Congratulations on the solid quarter, and thank you for taking the question.
Robert Eifler: Thank you, David.
Robert Eifler: Thank you, David.
David Smith: Just bigger picture, seeing deepwater demand visibility growing, you know, forward availability of premium drillships is shrinking. I'd be getting more nervous if I were a rig procurement manager. I'm curious if you could give us any color on what you're seeing in customer conversations, to secure forward availability maybe compared to a year ago. You know, maybe in terms of lead times, are they stretching out? Are you seeing any interest in longer contract terms?
David Smith: Just bigger picture, seeing deepwater demand visibility growing, you know, forward availability of premium drillships is shrinking. I'd be getting more nervous if I were a rig procurement manager. I'm curious if you could give us any color on what you're seeing in customer conversations, to secure forward availability maybe compared to a year ago. You know, maybe in terms of lead times, are they stretching out? Are you seeing any interest in longer contract terms?
Here in the U S. Gulf of Mexico, There were approximately two rig years contracted during the quarter, mostly comprised of options and extensions for follow on work in the region continues to produce leading edge rates with UW rates now in the range of $400000 per day.
Contract activity in South America during the quarter was dominated by our previously announced seven four year extension with Exxonmobil.
And the announced discoveries in the region continue.
Further sale, we also expect significant demand growth in Brazil over the coming years.
Robert Eifler: Sure. Contract term has ticked up, and we track lead time as well. It's ticked up. It's actually ticked up in the US Gulf of Mexico. You know, yes, behavior is changing. There is still, I think, a persisting hesitation to contract longer than necessary. I think the behavior is still to try to contract on a more short-term basis. I don't think we're to a place yet where customers are truly nervous to continue with your description. I do think we're in a transition where people are starting to pay a whole lot more attention to what things look like a year out from now.
Robert Eifler: Sure. Contract term has ticked up, and we track lead time as well. It's ticked up. It's actually ticked up in the US Gulf of Mexico. You know, yes, behavior is changing. There is still, I think, a persisting hesitation to contract longer than necessary. I think the behavior is still to try to contract on a more short-term basis. I don't think we're to a place yet where customers are truly nervous to continue with your description. I do think we're in a transition where people are starting to pay a whole lot more attention to what things look like a year out from now.
Speaking more specifically about the noble fleet in the Gulf of Mexico, <unk> was awarded a one well contract by L loan at a rate of $420000 per day, which includes managed pressure drilling services, an approximate $400000 per day on a clean basis.
Also in the Gulf the noble Globetrotter, one completed its 10 year contract with shell in Q2 and is now undergoing routine maintenance after which the rig will mobilize to Mexico for future contracts with <unk> and Petronas.
Moving south the Guyana, Suriname basin holds unmatched potential and is critical for meeting the world's growing energy demand <unk>.
<unk> is proud to play a role in exploring and developing these prolific fields and we will continue to invest in our operational capabilities and the local communities to support our market leading position.
Our regional contracting activity in the second quarter included API Corp's exercise.
David Smith: Appreciate that. A follow-on to that question, recognizing that in some countries, you know, customers have to tender, but for instances where they don't, are you seeing any change in their approach to the market in terms of, you know, pursuing direct negotiations versus, you know, inviting a more competitive tender process?
David Smith: Appreciate that. A follow-on to that question, recognizing that in some countries, you know, customers have to tender, but for instances where they don't, are you seeing any change in their approach to the market in terms of, you know, pursuing direct negotiations versus, you know, inviting a more competitive tender process?
Second option for the noble jewelry to Susa in Suriname, and the exercise of the first two of six options for the noble Regina Allen and Trinidad and Tobago.
Across the Atlantic.
The noble the.
The North Sea fleet garnered much of our attention throughout the second quarter as the noble team work to address the UK competition and market authorities concerns regarding our planned combination with Maersk drilling.
Robert Eifler: We've seen an increase in direct negotiations in the US Gulf of Mexico. I cannot say necessarily that has followed in the same kind of to the same degree in other markets. Of course, other markets are restricted in most cases from that. But customers do want, you know, the rigs that they want, and there is less availability today. You know, we have also seen this trend where customers are selecting fewer people to go through a tender process, where maybe the numbers are two to four instead of, you know, five to seven, something like that, which I think is a similar way of achieving some level of control over the rigs that win that.
Robert Eifler: We've seen an increase in direct negotiations in the US Gulf of Mexico. I cannot say necessarily that has followed in the same kind of to the same degree in other markets. Of course, other markets are restricted in most cases from that. But customers do want, you know, the rigs that they want, and there is less availability today. You know, we have also seen this trend where customers are selecting fewer people to go through a tender process, where maybe the numbers are two to four instead of, you know, five to seven, something like that, which I think is a similar way of achieving some level of control over the rigs that win that.
As previously announced we've entered into an agreement to sell <unk> North Sea fleet of five jackups to shelf drilling were $375 million.
The sale agreement is conditioned on the <unk> final ruling on the proposed divestments adequacy in addressing their competition concerns and we expect their final decision this month.
We look forward to closing the transaction in early October and I'll share. Some further thoughts on the transaction. After Richard provides an overview of our financial results.
Thank you Robert and good morning, all and my remarks today I plan to provide some brief highlights of our second quarter results and then discuss our outlook for the remainder of the year.
Contract drilling services revenue for the second quarter totaled $262 million versus $195 million for the first quarter of 2022.
David Smith: Great. Appreciate that color. If I could sneak one more in. You touched on this with the comments on mobilization cost recovery. You know, just noting that historically, when we see dayrates moving up, you know, contract terms and conditions are probably improving in the background. Just curious if you can give us any color around some other T&Cs, especially around bonus opportunities, you know, non-productive time allowance, and cancellation provisions.
David Smith: Great. Appreciate that color. If I could sneak one more in. You touched on this with the comments on mobilization cost recovery. You know, just noting that historically, when we see dayrates moving up, you know, contract terms and conditions are probably improving in the background. Just curious if you can give us any color around some other T&Cs, especially around bonus opportunities, you know, non-productive time allowance, and cancellation provisions.
This quarter's revenue was positively impacted by a full quarter of operating days for the noble Jerry D'souza, the commencement of the noble Regina Allen operations in Guyana, and a full quarter impact of the March 1st day rate increases for the four weeks operating in Guyana under the CEO .
Adjusted EBITDA for the second quarter was $84 million compared to $27 million in the previous quarter. This translates to an adjusted EBITDA margin of approximately 30% for the second quarter.
Robert Eifler: It's a good point. We have seen the improvement in contractual provisions. I mean, the risk allocation, and the protection of the revenue, you know, those suffered in the downturn as we fought hard for work. As the market improves and it tightens, we're able to improve the T&Cs as well.
Robert Eifler: It's a good point. We have seen the improvement in contractual provisions. I mean, the risk allocation, and the protection of the revenue, you know, those suffered in the downturn as we fought hard for work. As the market improves and it tightens, we're able to improve the T&Cs as well.
Net income for the quarter was $37 million or <unk> 45 per diluted share.
Capital expenditures totaled $31 million in the quarter, which includes $4 million of client Reimbursable investments.
Free cash flow in the second quarter was positive $56 million.
David Smith: Great. Thank you so much.
David Smith: Great. Thank you so much.
Our balance sheet remains extremely strong with net debt of just over $50 million and total liquidity of over $800 million.
Robert Eifler: Thank you.
Robert Eifler: Thank you.
Operator: There are no further questions at this time. Mr. Ian Macpherson, I turn the call back to you.
Operator: There are no further questions at this time. Mr. Ian Macpherson, I turn the call back to you.
We continue to see increases in our revenue backlog and as of June 30, our backlog stood at $2 1 billion.
Ian Macpherson: Thank you, Angela, and thank you everyone for your participation on our call today and for your continued interest in Noble. We'll look forward to speaking with you again soon.
Ian MacPherson: Thank you, Angela, and thank you everyone for your participation on our call today and for your continued interest in Noble. We'll look forward to speaking with you again soon.
This does not include the two two and a half year jackup contracts in the Middle East, which was signed post quarter end and it does not adjust for the potential sale of the divestment risks.
Operator: This concludes today's conference. You may now disconnect.
Operator: This concludes today's conference. You may now disconnect.
Our backlog today is almost double where our backlog stood at the end of last year.
The combination of this backlog and ongoing customer discussions give us more visibility and confidence in our financial profile than we've had for a long time.
The second quarter was an important inflection for the company as we realized a significant step up in our financial results as.
As we move into the second half of the year, we expect to see further step ups.
The third quarter is expected to benefit from the two jackups the noble Houston Colbert and noble Sam Hartley returning to work a pickup in Cta rate on September 1st as well as an increase in the rate for the <unk>.
We anticipate that this will be partially offset by the noble globetrotter, one that is undergoing maintenance work before mobilizing to Mexico to start a new contract with <unk>.
The fourth quarter is expected to benefit from a full quarter contribution of the two jackups returning to work in the third quarter as well as a full quarter of the highest CEO .
Turning now to our full year outlook for 2022, we are maintaining our previously disclosed guidance.
It is important to note that our guidance does not take into account the divestment rigs or the maersk transaction more broadly.
As can be implied by our full year guidance, we expect to average over $100 million of adjusted EBITDA per quarter in the second half of 2022 with the Q4 exit rate above Q3.
We continue to be impacted by inflationary pressures and supply chain challenges.
Our expectation for the financial impact of these pressures has not changed from last quarter. We expect our total rig level expenses to increase on average in the high single digit range in the second half of this year as compared to the second half of 2021.
We remain encouraged by the outlook for our business and the extremely compelling financial profile of noble after closing the last combination.
In simple terms, we believe that the company is and will continue to be well positioned to generate attractive levels of cash flow in today's market, while also being able to realize cash flow and earnings growth from improving markets without the need to spend meaningful capital.
I expect it to support this unique combination will be a conservative balance sheet, and we'll scale diversified across different regions blue chip customers and premium asset classes.
We look forward to sharing more specifics about the financial qualities of the company after closing of the transaction.
That concludes my prepared remarks, and I'll now hand, the call back to Robert Thanks, Richard.
2022 will truly be a transformational year for noble as we continue to execute on our strategic priorities.
To create a new and dynamic leader in the offshore drilling market the.
The combination with Maersk drilling central to these priorities.
We have two remaining milestones before closing the transaction, which is anticipated to be October three.
Firstly as I mentioned previously we are waiting for final clearance from the U K CMA, which we are hopeful to receive in the coming weeks secondly.
Secondly, we need to complete the Danish tender offer which will officially launch tomorrow and run through mid September .
When the transaction was announced in November last year I was excited about the potential for the combined company and the overwhelmingly strong transaction rationale.
Since then the outlook is stronger and as we have mapped the capability of the combined company to lead the industry in operational performance technology innovation and sustainability my excitement and belief in the merits of the transaction have grown even further.
On close of the transaction noble will have scale and a platform to generate strong free cash flow.
Driven by excellent assets, the best people and our culture committed to best in class safety performance and customer satisfaction.
The two companies individually already had industry, leading utilization, which combined with at least $125 million of synergies and a highly conservative balance sheet will allow us to deliver on our stated priority to return capital to shareholders.
Now I'll look for the offshore market remained stronger today than at any point in the recent past.
<unk> is a critical component of that offshore value chain.
I'd like to thank the entire noble organization, both offshore and onshore for their dedication to our customers and to operating safely every day.
And I look forward to working with the Maersk drilling organization in the very near future.
Thank you Robert Angela we are ready now to open the call for questions and answers.
At this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad will pause for a moment to compile the question and answer roster.
We will now take our first question from project Kristina <unk> with Clarksons <unk> Securities. Please go ahead.
Hey, guys congratulations on a very.
Strong financial performance.
Quarter.
Yeah.
A bunch of questions, but I'll limit myself to.
To begin with so I wanted to touch on.
A bit more on the expected performance going into the second half of the area or you are saying.
You should expect some some other step ups here and I'm sure that.
The CEO pay rates et cetera will help unlock there so let's start with those.
If I remember correctly you are dealing with every March and September and then you have this luxury.
Like before you start to see whatever rate you negotiated beforehand.
In addition to getting a new rate in September I'm sure you'll also be meeting.
With Exxon to negotiate what's going to happen into next year. So I was wondering if you could give any color on kind of what to expect on that part of your fleet when we're going to see the year.
We.
Repricing in March next year from whatever you're agreeing this September .
Sure.
On the us Gulf of Mexico now.
Right yeah. Thanks so.
The rate that just to be clear the rate that kicks in September 1st of course is already set that rate was set in the kind of April time frame this year.
It's a market rate at that point.
And and then what will come through includes the discount.
We will set the rate that come with that will come into effect in March of next year.
We won't be set until later this year. So those conversations haven't started that's let's call it a fourth quarter conversation.
And so.
That will take into account all of the available market data when that conversation kicks off in the fourth quarter.
Okay phenomena, but it seems like we're should expect.
Step up than I presume.
Given the way the market rates are going.
Following up on the rest of the fleet here you had some nice new.
Data points, but you also have now.
The older rigs.
Rolling off their firm contracts.
Part of this year, such as the Gary the Souza.
For example.
As D&A levels in November so I was wondering are you.
Inhibition can working with new work for those.
Contract. If you can comment on that and also if you are looking given what's happening in Brazil. For example are you now seeing any opportunity for the.
The <unk> assets as well can bring them back to work.
Yeah sure. So thanks for the question <unk>. This is this is Blake here. So when you look at the Drillships you mentioned there is some white space, particularly on the legacy Pacific drilling ships I would say, we're encouraged by the nature of the conversations we're having and the different opportunities that lay in front of those both with there.
Their current operators as well as <unk>.
As others. So we feel like we've got good visibility for for ongoing programs.
After that I would say with respect to your second question on Petrobras I mean, we've been watching Brazil closely obviously, we have a quite a history there both in the country and specifically with Petrobras I think the dynamics are now such that it's an interesting opportunity for us. So we look forward to participating in the <unk>.
The tender here.
That's due in a couple of weeks and it does bode on opportunity for reactivated rigs.
The dynamics are there, yes, so I think that it's going to be I'll, just add onto that is that it's interesting because the public nature of that tender.
I think everyone will get visibility pretty quickly about how the market is looking at those longer term opportunities.
It's the the term could justify some reactivation.
And so we'll see what what come through.
I would reiterate for our part.
Nothing has changed about the disciplined manner in which we're going to approach any opportunity that could justify a reactivation, which I'm happy to repeat but we've said a few times.
Would be quite quite conservative.
That's very helpful. Cologuard. Thank you so much.
Thats It from me for now thanks.
Thanks.
Thank you. Your next question comes from the line of Greg Lewis with <unk>.
Please go ahead. Good morning, good morning, everybody and thank you for taking my questions.
Robert or Blake I guess I guess my first question.
Not looking for you to comment specifically on any of the Mers.
<unk> per se, but just as we look across the drillship fleet.
Let's just say.
And when we look at it as a whole or maybe we even go by market.
So as we think about.
Pockets of strength in the market and clearly the Gulf of Mexico strong West Africa is picking up.
Yes, I guess globally, there is a pick up in rates and tightness as we think about rigs.
Rolling off.
Sure.
Over the next few quarters.
I guess two questions around that one is.
Dislocation matter in terms of thinking about whether there's going to be I think you mentioned white space in between contracts starting up I E is it hey, we.
We should be thinking about a 30 to 60 day kind of air pocket or we know when a market that is tight enough, where we should be thinking more about that.
More of a bull market continuation of rig utilization.
And does that.
And does that differ by.
<unk>, obviously in the Gulf of Mexico, I assume 1000, but maybe.
And our play in parts of Asia, maybe it does I don't know.
Yes, I think I'd say something like feel free to jump in I think.
The short answer is I don't think we're back to a 100% utilization market.
One of the reasons that we.
See so much value in our subpart of the CEO and Guyana, because we have we have that visibility.
Regionally I think it does matter a little bit I think.
The U S Gulf of Mexico.
There are.
A higher number of our opportunities.
But that that region remains very very short term in nature. So.
There is white space there.
I think I think the difference is in West Africa, just by nature of the operation those tend to be longer term opportunities.
That just makes makes more sense there.
So there are fewer of them and they're longer in general.
Same can be said for Brazil.
I do think generally speaking.
Rigs have.
Some white space when they're when they're when they're switching customers. So it's significantly better than a year ago.
But we're not to a point where.
Yes.
Where you can count on 100% utilization if youre switching customers I'd also note in the very highest days if you recall Gregg.
We were able to get some contribution on mobilization for for for White space I think where we are today in the market.
Mobilization conversations are coming very much back into play.
They are probably still a little bit more weighted towards cost recovery than they are revenue protection in the white space.
Yes, I would only add a couple of things I wasn't trying to forecast with white space forecast gaps. It was more just talking about our contract coverage. Thus far in the <unk> space I mean, we see a tightening tightening market. We continued to see a customer preference for hot rigs Robert mentioned mobilization coverage. So.
Again, we're encouraged.
The outlook for our fleet today, and certainly look forward to marketing some really high quality assets. After the close of the transaction with <unk>.
Yes, absolutely and then just and then just more of a question around the pending asset sale of the five north Sea rigs, obviously, there's a there's a cash buyer and I believe that the agreement is a cash agreement.
I guess a couple of things one is are any or have there been or any deposits required and.
$375 million.
That.
It's still a lot of money I realize.
Maybe the rates kind of sold for more but in the event that.
I guess, what I'm wondering is could we see any seller financing in the event that there is not a.
Does that does that change anything in the event that the counterparties unable to come up with three.
$375 million and firm cash.
Yes. So there is there is a deposit kind of industry standard 10% deposit.
There is no seller financing available and that is by law by by rule out of the U K.
So the COO.
Competition authority, there does does not want to see any any continuing link.
That could affect competition going forward.
Okay, Okay, great. Okay, Hey, everybody. Thank you for the time.
Thanks, Thanks, guys great.
Thank you. Your next question comes from Samantha Hoh with Evercore.
Please go ahead.
Hey, guys congrats on a really great quarter.
I wanted to maybe just.
Dig back to one of my next question.
The se.
Uh huh.
That's 400 clean rate seems really unusual.
Well contract.
I was just wondering if maybe you could talk a little bit more about that was that just as very opportunistic scenario.
They wanted it.
Okay.
White space that you guys had available.
Yes sure Samantha Thanks for the question. This is Blake I think it's just the nature of the capabilities of the rig and the.
The demands of this particular program against the available rigs in the Gulf of Mexico at the time, it's a great contract, we look forward to to working with log.
We have we have.
A long standing relationship with them and we've been trying to do some work for them for some time. So it's an exciting opportunity, but again I think the rate is just a depiction of the alignment of the rig specs required versus the rigs available.
Okay, and then maybe more broadly can you talk about.
Day rates are trending geographically.
I realize that the U S is sort of pushing the leading edge on the ultra deepwater side.
Where are we in terms of the other geographic basins.
West Africa.
Going to be catching up to them sometime next year, how do you guys see the day rate progressing.
Yes.
Jumping back to I think.
We said at the beginning of the year one thing we expected to see this year was where other regions catching up with the U S.
And less of a discount for term.
I think that is is has proven out as we've as we've progressed through this year.
There is I think still and remember in a couple of weeks when these Brazil tenders come through what would be a great visibility I think for everybody.
But I think there is still probably some some slight discount for term don't think we've inflicted into a market where there's a premium for term.
Yet.
But I do think also that.
That rates have normalized somewhat this year between the South America, and West Africa, and the U S Gulf of Mexico.
Yeah, I don't have anything further to add Samantha I mean, we will see the fixtures that both in Brazil as Robert mentioned in West Africa, I think will show there they're catching up.
Okay, and just remind us again like what are you guys seeing in terms of reactivation costs.
Or how quickly you could get a cold stack rank reactivated.
We activated.
Sure. So we have the two as a reminder for anyone else.
Got the mountain and the <unk> of those the melt them is really the more capable rig overall, that's the seventh generation rig.
Debt.
I'd actually mobilized to the U S just before the pandemic.
Under Pacific. So that's that's almost certainly the first one that would come out.
And if.
If you think about an all in cost which includes labor.
Labor and all the expenses associated with the performing the shipyard.
Work, that's kind of a $75 million to $100 million price tag.
And.
At this point it's.
Let's call it a year's work.
No.
It could creep a little bit longer than a year, but but we would say right around here.
Yeah.
Okay, great. Thanks, so much guys and congrats again.
Thanks Sam.
Thank you. Your next question comes from the line of David Smith with Pickering Energy.
Your line is open.
Thank you Hey, good morning, congratulations on the solid quarter and thank you for taking my question.
Thank you Dave.
So.
Just bigger picture Youre seeing deepwater demand visibility growing.
Availability of premium Drillships is shrinking I'd.
I I'd be getting more nervous if I were a re procurement manager.
I'm curious if you could give us any color on what youre seeing in customer conversations.
To secure forward availability, maybe compared to a year ago, maybe in terms of lead times stretching.
Stretching out.
Are you seeing any interest in longer contract terms.
Sure. So the contract term has ticked up.
And we track lead time as well, it's ticked up it's actually ticked up in the U S Gulf of Mexico.
You know.
So yes behaviors is changing.
There is still because.
There is still I think a persisting.
<unk> to contract longer than necessary. So I think the behavior is still to try to contract on a more short term basis.
So I don't think I don't think we're to a place yet where customers.
Customers are truly nervous.
To continue with your description, but I do think we're in a transition where people are starting to pay a whole lot more attention.
What things look like look like a year out from now.
Okay appreciate that.
So on to that question recognizing that in some countries and your customers have to temper, but for instances, where they don't or are you seeing any change in their approach to the market in terms of pursuing direct negotiations versus providing a more competitive tender process.
So we've seen we've seen an increase in direct negotiations.
In the U S Gulf of Mexico.
I cannot say necessarily that that is has followed in the same.
Kind of to the same degree in other markets and of course other markets are are restricted.
In most cases.
From that.
But our customers do do want.
The rigs that they want and there is less availability today.
So we have also seen this trend.
<unk>.
Where customers are selecting fewer people to go through a tender process, where maybe the numbers are two to four instead of five to seven something like that which I think is.
A similar way of achieving.
Some some level of control over over.
Over the the rigs that win.
Okay.
Great I appreciate that color if I could sneak one more in you touched on this with the comments on mobilization cost recovery.
Just noting that historically when we see day rates moving up contract terms and conditions are probably improving in the background. Just curious if you can give us any color.
Around some other tncs, especially around bonus opportunities nonproductive time allowance cancellation provisions.
It's a good point.
There and we have seen the improvement in contractual provisions would be the the risk allocation.
And the the protection of the revenue those those suffered in the downturn as we as we fought hard for work, but as the market improves and it tightens, we're able to to improve the Ts and CS as well.
Great. Thank you so much.
Thank you.
There are no further questions at this time, Mr. Ann Mcpherson I turn the call back to you.
Thank you Angela and thank you everyone for your participation on our call today and for your continued interest in noble will look forward to speaking with you again soon.
This concludes today's conference you may now disconnect.
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Yeah.