Q1 2024 Noble Corp PLC Earnings Call

Operator: Ladies and gentlemen, good morning, and thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Noble Corporation first quarter 2024 earnings call.

Ladies and gentlemen, good morning, and thank you for standing by.

Abby: My name is Abby and I'll be your conference operator today.

Abby: At this time I would like to welcome everyone to the Noble Corporation first quarter 2024 earnings call.

Operator: All lines have been placed on mute to prevent any background noise, and after the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. Thank you, and I would now like to turn the conference over to Ian MacPherson, Vice President of Investor Relations. You may begin.

Abby: All lines have been placed on mute to prevent any background noise and after the Speakers' remarks, there will be a question and answer session.

Abby: If you would like to ask a question during that time simply press star followed by the number one on your telephone keypad.

Abby: If you would like to withdraw your question Press Star one a second time.

Abby: Thank you and I would now like to turn the conference over to Ian Macpherson, Vice President of Investor Relations you may begin.

Ian MacPherson: Thank you, Operator, and welcome, everyone, to Noble Corporation's first quarter 2024 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.

Ian MacPherson: Thank you operator, and welcome everyone to Noble Corporation's first quarter 2024 earnings conference call.

Ian MacPherson: Can find a copy of our earnings report along with the supporting statements and schedules on our website at Noble Corp Dot com.

Ian MacPherson: This conference call will be accompanied by a slide presentation that you can also find located at the Investor Relations section of our website.

Ian MacPherson: This conference call will be accompanied by a slide presentation that you can also find in the Investor Relations section of our website. Today's call will feature prepared remarks from our President and CEO, Robert Eifler, as well as our CFO, Richard Barker. Also joining us on the call are Blake Denton, Senior Vice President of Marketing and Contracts, and Joey Kawaja, Senior Vice President of Operations.

Speaker Change: Today's call will feature prepared remarks, Martin President and CEO, Robert Eifler as well as our CFO Richard Barker.

Speaker Change: Also joining on the call are Blake Denton senior Vice president of marketing and contracts and Joey Khawaja Senior Vice President of operations.

Speaker Change: 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 could differ materially from these forward looking statements.

Speaker Change: And noble does not assume any obligation to update these statements.

Speaker Change: Also note that we are referencing non-GAAP financial measures on the call today and you can find the required supplemental disclosure for these measures, including the most directly comparable GAAP measure and associated reconciliation in our earnings report issued yesterday and filed with the SEC.

Ian MacPherson: 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 that we are referencing non-GAAP financial measures on the call today, and you can find the required supplemental disclosure for these measures, including the most directly comparable GAAP measure and associated reconciliation, in our earnings report issued yesterday and filed with the SEC. Now, I'll turn the call over to Robert Eifler, President and CEO of Noble.

Speaker Change: Now I will turn the call over to Robert Eifler, President and CEO of noble.

Robert W. Eifler: Good morning. Welcome, everyone, and thank you for joining us on the call today. I'll begin with opening remarks on our first quarter results and recent commercial activity, a brief word on the market, and then hand it over to Richard to cover the financials. As usual, following our prepared remarks, we look forward to taking your questions. Our first quarter adjusted EBITDA of $183 million was up 32% year-on-year and reflected solid operational uptime during the quarter and a slight sequential increase in marketed utilization. While costs were up from last quarter, this was primarily timing-related and resulted in a modest sequential decrease in adjusted EBITDA.

Robert W. Eifler: Good morning, welcome everyone and thank you for joining us on the call today.

Robert W. Eifler: As we mentioned last quarter, we do expect quarter one to represent just a starting point for EBITDA this year, followed by progressive improvement throughout the year. Importantly, all of our major projects and contract preparation activities are progressing well on schedule with timing consistent with what we provided last quarter. Thus, we are excited to be commencing significant new contracts for several rigs over the next few months, including Discover, the Noble Faye Kozak, and the Noble Regina Allen, all of which will underpin this earnings ramp.

Robert W. Eifler: I'll begin with opening remarks on our first quarter results and recent commercial activity a brief word on the market and then hand, it over to Richard to cover the financials.

Richard B. Barker: As usual following our prepared remarks, we look forward to taking your questions.

Richard B. Barker: Our first quarter adjusted EBITDA of $183 million was up 32% year on year and reflected solid operational uptime during the quarter and a slight sequential increase in marketed utilization.

Richard B. Barker: While costs were up from last quarter. This was primarily timing related and resulted in a modest sequential decrease in EBITDA.

Richard B. Barker: As we mentioned last quarter, we do expect quarter one to represent just the starting point for EBITDA. This year, followed by progressive improvement throughout the year.

Richard B. Barker: Importantly, all of our major projects and contract preparation activities are progressing well with timing consistent with what we provided last quarter.

Richard B. Barker: We are excited to be commencing significant new contracts for several rigs over the next few months.

Richard B. Barker: Including the now will discover the novel <unk> and the noble Regina Allen all of which will underpin this earnings ramp.

Robert W. Eifler: The Discover has completed its SPS in contract prep and is undergoing acceptance testing for its Petrobras contract in Columbia. The Fay-Kozak has arrived in Brazil and has also commenced acceptance testing ahead of its two-and-a-half-year Petrobras contract.

Richard B. Barker: The discover has completed its Sps and contract prep and is undergoing acceptance testing towards Petrobras contract in Colombia.

Richard B. Barker: I think Jose has arrived in Brazil.

Richard B. Barker: And has also commenced acceptance testing ahead of its two and a half year Petrobras contract and lastly, the Regina Allen has also completed its shipyard stay.

Robert W. Eifler: And lastly, the Regina Allen has also completed its shipyard stay and has arrived in Argentina ready to commence its contract with Total in the next few weeks. While there's still work to be done, some of which is out of our control, we're tracking well against the completion timeline for those major projects, which are critical to our earnings ramp this year. The Board of Directors declared a $0.40 dividend for the second quarter of 2024, consistent with the previous quarter.

Richard B. Barker: Has arrived in Argentina ready to commence its contract with total in the next few weeks.

Richard B. Barker: While theres still work to be done some of which is out of our control.

Richard B. Barker: We're tracking well against the completion timeline for those major projects, which are critical to our earnings ramp this year.

Richard B. Barker: Non of directors declared a <unk> 40 dividend for the second quarter of 2024, consistent with last quarter.

Robert W. Eifler: This will bring cumulative total capital return to shareholders since our Q4 2022 merger to $400 million. As we outlined on last quarter's call, we expect full-year free cash flow to increase in 2024 versus 2023 and to be materially back half-weighted. With this progression, we plan to continue to deliver on returning the significant majority of free cash flow via dividends and buybacks as cash flow inflects to a higher plane later this year and especially into next year.

Richard B. Barker: This will bring cumulative total capital returned to shareholders since our Q4 2022 merger to $400 million.

Richard B. Barker: As we outlined on last quarters call, we expect full year free cash flow to increase in 2024 versus 2023 and to be materially back half weighted.

Richard B. Barker: With this progression we plan to continue to deliver on returning the significant majority of free cash flow via dividends and buybacks as cash flow and flex to a higher plane later this year and especially into next year.

Robert W. Eifler: The market outlook for offshore drilling remains encouraging, both from a top-down macro perspective as well as from the steady drumbeat of positive contract signings and indications of open demand from our customers, all of which point to enduring tightness and healthy commercial opportunities over the foreseeable horizon. Leading-edge drill ship day rates have approached and eclipsed $500,000 at the highest, and significant multi-year contract terms designed to hedge against these higher day rates have also arrived. We view both of these complementary developments as positive for the visibility of our business.

Richard B. Barker: The market outlook for offshore drilling remains encouraging.

Richard B. Barker: First from a top down macro perspective as.

Richard B. Barker: As well as from the steady drumbeat of positive contract signings and indications of open demand from our customers.

Richard B. Barker: All of which point to enduring tightness and healthy commercial opportunities over the foreseeable horizon.

Richard B. Barker: Leading edge drillship Dayrates have approached $500000 at the high end and.

Richard B. Barker: And significant multi year contract terms designed to hedge against these higher day rates have also arrived.

Richard B. Barker: We view both of these complementary developments as positive for the for the visibility of our business.

Robert W. Eifler: We've had several nice contract signings since our last report at the end of February. First, the Noble Viking was awarded a contract for three firm wells with Prime Energy in the Philippines at a daily rate of $499,000, excluding additional fees for MPD services, mobilization, and demobilization. This contract also features one additional option well at $549,000. They would keep the rig booked through most of 2025. Next, Petronas exercised an option for an additional 60-day well with the Noble Voyager in Suriname for $470,000 per day, which extends this campaign into mid-August and keeps the Voyager well-positioned for additional future opportunities in this exciting growth region where Noble has established a very strong presence.

Richard B. Barker: We've had several nice contract signings since our last report at the end of February 1st de Novo Viking was awarded a contract for three firm wells with Brion energy in the Philippines at a day rate of $499000.

Richard B. Barker: Excluding additional fees for MPD services mobilization and demobilization.

Richard B. Barker: This contract also features one additional option well at $549000.

Richard B. Barker: That would keep the rig but through most of 2025.

Richard B. Barker: Next Petra enough exercised an option for an additional 60 day well with de Novo Voyager in Suriname at $470000 per day, which extends this campaign into mid August and keeps the voyage, we're well positioned for additional future opportunities in this exciting growth region for noble has established a very strong presence.

Robert W. Eifler: And then finally, within the UDW fleet, we've been happy to announce a couple of new engagements recently for the Noble Venturer in West Africa, which have effectively eliminated the potential downside arising from TELO's early release of the rig, which, as a reminder, resulted in part from the rig's outstanding drilling efficiency. We now expect Tullow to finish with the rig in Ghana within the next several weeks, at which time we will mobilize for a three-well contract with Trident Energy in Equatorial Guinea for an estimated 150 days. And then next on to Namibia for a 2-well contract plus options with Rhino Research.

Richard B. Barker: And then finally within the <unk> fleet, we've been happy to announce a couple of new engagements recently for the noble venture in West Africa, which have effectively eliminated the potential downside arising from tell us early release of the rig which as a reminder resulted in part from the rigs outstanding drilling efficiency.

Richard B. Barker: We now expect to alluded to finish with the rig in Ghana within the next several weeks at which time, we will mobilize for a three well contract with <unk> energy in Equatorial Guinea.

Richard B. Barker: An estimated 150 days.

Richard B. Barker: And then next on Tinder, maybe for a two well contract plus options with Rhino resources.

Robert W. Eifler: The Trident contract is effectively a derivative of the Legacy Tullow contract that was signed several years ago in a very different market. And then, as some of you may recall from trade press coverage several months ago, the Rhino contract priced at $410,000 derives from an LOI that actually originated from the 6G Semi-Noble development. And then it became more efficient and attractive for both Noble and Rhino to assign this job to the Venturer after its availability status changed.

Richard B. Barker: The trading contract is effectively a derivative of the legacy Tullow contract that was signed several years ago in a very different market.

Richard B. Barker: And then as some of you may recall from trade press coverage several months ago.

Richard B. Barker: No contract priced at $410000 derived from an LOI that actually originated from the sixth <unk> semi novo developer and then it became more efficient and attractive for both <unk> and Rhino to assign this job to the venture after its availability status changed.

Robert W. Eifler: So that's a very relevant context behind these new fixtures looking somewhat lower than other leading edge day rates for 7G drill ships, which, as previously mentioned, are now in the high 400s to low 500s. On the jack-up side, the Noble Innovator had an additional option exercised by BP in the UK North Sea at $145,000 per day, extending from December 2024 into April 2025. Not yet reflected on our fleet status or in our backlog is an additional scope of work for the Jackup-Nobl resolve, which is pending contract execution within the next few days.

Richard B. Barker: So that's a very relevant context behind these new fixtures looking somewhat lower than other leading edge day rates for <unk> drillships.

Richard B. Barker: As previously mentioned are now in the high two hundreds to low five hundreds.

Richard B. Barker: On the Jackup side, the noble innovator had an additional option exercise by BP in the UK North Sea and $145000 per day, extending from December 2024 into April 2025.

Richard B. Barker: Not yet reflected on our fleet status or in our backlog is an additional scope of work for the Jackup noble resolve which is pending contract execution within the next few days, we will update the market with this news as soon as we get it over the finish line.

Robert W. Eifler: We will update the market with this news as soon as we get it over the finish line. Collectively, these recent fixtures, excluding the pending contract for the resolve, contribute an additional firm backlog value of approximately $210 million excluding mobilization, MPD revenue, and option period. With these bookings, in net of the shortened Tullow backlog for the Noble Venturer, our total backlog currently stands at $4.4 billion.

Richard B. Barker: Collectively these recent pictures, excluding the pending contract for the resolve contribute an additional firm backlog value of approximately $210 million, excluding mobilization MPD revenue and option periods.

Richard B. Barker: With these bookings and net of the shortened tullow backlog for the Novo <unk> insurer.

Richard B. Barker: Our total backlog currently stands at $4 4 billion.

Robert W. Eifler: From a higher level industry perspective, both contracting momentum and open demand remain constructive. UDW utilization remains around 95% on the marketed fleet. And after a short-term low in the fourth quarter last year, the first quarter of 2024 saw 26 rig years of UDW capacity contracted, which was back on par with the very healthy 2021 to 2023 trend line. We also continue to observe open demand for floaters exceeding 100 rig years in the pool of public tenders and pre-tenders, which represents a decade high and provides a strong basis of visibility for additional contracting strength in the months and years ahead.

Richard B. Barker: From a higher level industry perspective, both contracting momentum and open demand remain constructive.

Richard B. Barker: <unk> utilization remains around 95% on the marketed fleet.

Richard B. Barker: And after a short term at all in the fourth quarter last year. The first quarter of 2024 26 rig years of EDW capacity contracted.

Richard B. Barker: Back on par with a very healthy 2021% to 2023 trend line.

Richard B. Barker: We also continue to observe open demand for floaters exceeding 100 rig years in the pool of public tenders and pre tenders, which represents a decade high and provides a strong basis of visibility for additional contracting strength in the months and years ahead.

Robert W. Eifler: There's clearly an ongoing transition back toward longer-term planning and procurement strategies amongst some of the biggest IOC and NOC customers, as evidenced both by some of the long-term deals that have recently been signed as well as many others still in the commercial pipeline. The execution of these longer-term commitments represents a threshold backlog catalyst for our industry, as well as an opportunity for customers to lock in acceptable long-term rate pricing to de-risk their capital planning.

Richard B. Barker: There is clearly an ongoing transition back towards longer term planning and procurement strategy amongst some of the biggest IOC and NOC customers.

Richard B. Barker: As evidenced by some of the long term deals that have recently been signed as well as many others still in the commercial pipeline.

Richard B. Barker: The execution of these longer term commitments represents a threshold backlog catalysts for our industry as well as an opportunity for customers to lock in acceptable long term rig pricing to derisk their capital planning.

Robert W. Eifler: Over the near term, we still have some white space to fill on three of our six-gen rigs, both Globetrotter drillships and the semi-Nobl development. These three units remain a commercial priority and also account for most of the sensitivity range between the high and low ends of our EBITDA guidance for this year.

Richard B. Barker: Over the near term, we still have some white space to fill on three of our sixth Gen rigs first globetrotter drillships and semi noble developer. These.

Richard B. Barker: These three units remain a commercial priority and also account for most of the sensitivity range between the high and low ends of our EBITDA guidance for this year.

Robert W. Eifler: We're continuing to pursue work for these rigs, and we'll update their future status as it progresses. With the sixth-gen floaters comprising the lion's share of open capacity industry-wide over the near term, we expect the utilization and day rate bifurcation for these units to continue for some time. And just to zoom in a little bit on that dynamic.

Richard B. Barker: We're continuing to pursue work for these rigs and we will update their future status as it progresses.

Richard B. Barker: With the six Gen floaters, comprising the lion's share of open capacity industry wide over the near term.

Richard B. Barker: We expect the utilization and day rate bifurcation for these units to continue for some time.

Richard B. Barker: And just to zoom in a little bit on that dynamic.

Robert W. Eifler: If you look at total utilization of UDW floaters today with 7,500 feet or greater water depth ratings, there are currently 104 rigs with contracts and 7 marketable warm or hot rigs without contracts, all seven of which are six-gen units, including two of ours.

Richard B. Barker: You look at total utilization of EDW floaters today, with 7500 feet or greater water depth ratings.

Richard B. Barker: There are currently 104 rigs with contracts and seven marketable warm or hot rigs without contracts.

Richard B. Barker: All seven of which are <unk> units, including two of ours.

Robert W. Eifler: And then, looking at the UDW rigs that are scheduled to roll off contract over the balance of this year without follow-on contracts as of today, there are nine additional units, five of which are six. The steady rise in 7th gen day rates combined with this 6th gen utilization profile clearly underlines the swing supply nature of the lower tier asset, which is reflective of a firm in an orderly market rather than a scarcity situation. And there certainly is work coming for most of these lower tier rigs, but it's just more likely to be more patchwork than seamless, at least over the near term. That's the main point.

Richard B. Barker: And then looking at the EDW rigs that are scheduled to roll off contract over the balance of this year without follow on contracts as of today.

Richard B. Barker: There are nine additional units five of which for sixth Gen.

Richard B. Barker: The steady rise in seventh Gen day rates combined with this sixth Gen utilization profile.

Richard B. Barker: Clearly underlines the swing supply nature of the lower tier assets, which is a reflective of a firm an orderly market rather than a scarcity situation.

Richard B. Barker: And there certainly is worth coming for most of these lower tier rigs, but it's just more likely to be more patchwork been seamless at least over the near term.

Richard B. Barker: Main point.

Robert W. Eifler: The Jacob market, while also in the mid-90s percent in terms of marketed utilization, is obviously digesting the effects of the Saudi reset, which has impacted 22 rigs, or 5% of global demand. Despite some recent evidence of day-rate softness resulting from rigs leaving the kingdom for alternative work, we haven't seen, nor do we anticipate, any impact to market balances or day rates in the harsh and ultra-harsh segments where our jacked-up fleet is predominantly focused.

Richard B. Barker: The Jackup market, while also in the mid 90 percents in terms of marketed utilization is obviously digest testing the effects of the Saudi reset, which has impacted 22 rigs or 5% of global demand.

Richard B. Barker: Despite some recent evidence of day rate softness, resulting from rigs, leaving the kingdom for alternative more.

Richard B. Barker: We haven't seen nor do we anticipate any impact to market balances or day rates in the harsh and ultra harsh segments for our Jackup fleet is predominantly focused.

Robert W. Eifler: This is mostly a matter of Rigspect. Day rates in the non-Norway North Sea are still in the $130,000 to $150,000 range, or above this range for instances requiring more premium rig specifications, such as the CJ-7. In Norway, the most recently observed CJ-70 fixture was in the $240,000 to $250,000 range. For both of our jackups rolling off contracts later this year in the Southern North Sea, the Noble Resilient and the Noble Resolved, we are tracking opportunities for follow-on work, albeit potentially with some gaps between work in the second half of this year. So I'll pause here and pass the call to Richard to cover the finances.

Richard B. Barker: This is mostly a matter of rig specs dayrates in the non Norway North Sea are still in the 130 to $150000 range or above this range for instance is requiring more premium rig specs such as the CJ 70.

Richard B. Barker: In Norway.

Richard B. Barker: Most recently observed CJ 70 fixture was in the 240 to $250000 range.

Richard B. Barker: For both of our Jackups Rolling off contract later this year in the southern North Sea.

Richard B. Barker: <unk> resilient and the novel resolved, we're tracking opportunities for follow on work, albeit potentially with some gaps between work in the second half of this year.

Richard B. Barker: So I'll pause here and pass the call to Richard to cover the financials.

Richard B. Barker: Thank you, Robert, and good morning or good afternoon to all. In my remarks today, I will briefly review the highlights of our first quarter and then touch on the outlook for the remainder of the year. Contract building services revenue for the first quarter totaled $612 million, up slightly from $609 million in the fourth quarter. Adjusted EBITDA was $183 million in Q1, down from $201 million in Q4. Our adjusted EBITDA margin in Q1 was 29%. Cash flow from operations was $129 million, capital expenditures were $167 million, and free cash flow was negative $38 million.

Richard B. Barker: Thank you Robert and good morning, or good afternoon, all and my remarks today I will briefly review the highlights of our first quarter and then touch on the outlook for the remainder of the year.

Richard B. Barker: Contract drilling services revenue for the first quarter totaled 612 million up slightly from $609 million in the fourth quarter.

Richard B. Barker: Adjusted EBITDA was $183 million in Q1 down from $201 million in Q4, our adjusted EBITDA margin in Q1 with 29% cash.

Richard B. Barker: Cash flow from operations was $129 million capital expenditures were $167 million and free cash flow with negative 38 million.

Richard B. Barker: First quarter results were impacted across the Revenue, OPEX, and CATEX lines from several rigs that were idle and preparing for contract start-up. These contract start-ups for the Noble Discoverer, Noble Faye Kozak, and Noble Regina Allen are all expected to take place during the second quarter or early third quarter. Accordingly, the commencement of these rigs' next contracts is expected to drive improved revenue, ERIDAR, and cash flow over the remainder of the year.

Richard B. Barker: First quarter results were impacted cost of revenue Opex and Capex lines from several rigs that were idle and preparing to contracted audits.

Richard B. Barker: These contract startups for the noble discoverer kozak.

Richard B. Barker: Kodak and noble Regina Allen.

Richard B. Barker: All expected to take place during the second quarter.

Richard B. Barker: Third quarter.

Richard B. Barker: Accordingly, the commencement of these rigs next contracts is expected to drive improved revenue EBITDA and cash flow over the remainder of the year.

Richard B. Barker: Our 16 marketed floaters were 76% utilized in Q1, up from 75% in the fourth quarter, with 15 out of 16 rigs, or 95% of the marketed fleet, contracted for current and or future work. Our 13 marketed jackups will utilize 67% in the first quarter, up from 61% in the fourth quarter. Average earned day rates in Q1 were $434,000 per day for floaters and $144,000 per day for jack

Richard B. Barker: 16 marketed floaters with 76% utilized in Q1 up from 75% in the fourth quarter with.

Richard B. Barker: With 15 out of 16 weeks or 95% of the marketed fleet contracted for current and future work.

Richard B. Barker: 13, marketed jackups, where you'd like 67% in the first quarter up from 61% in the fourth quarter.

Richard B. Barker: Average day rates in Q1 were 434000 per day for floaters and 144000 per day Jackups.

Richard B. Barker: As summarized on page 5 of the earnings presentation slides, our total backlog as of May 6 stands at $4.4 billion. Additionally, we have $1.7 billion that is scheduled for revenue conversion in Q2-Q4 2024. As a reminder, this backlog does not include reimbursable revenue or revenue from ancillary services. Referring to page 9 of the earnings slide, we are maintaining full year 2024 guidance as follows. Total revenue within a range of $2.55 billion to $2.7 billion, which includes approximately $100 million in other revenues, such as reimbursables and contract intangibles amortization, adjusted EBITDA between $925 million and $1.025 billion, and capital additions, which excludes reimbursements, of between $400 and $440 million.

Richard B. Barker: As summarized on page five of the earnings presentation slides, our total backlog as of May six stands at $4 4 billion.

Richard B. Barker: We have one 7 billion that is scheduled for revenue conversion in Q2 through Q4 2024.

Richard B. Barker: As a reminder, this backlog does not include Reimbursable revenue.

Richard B. Barker: Revenue from ancillary services.

Richard B. Barker: Referring to page nine of the earnings slides, we are maintaining full year 2024 guidance as follows total revenue within the range of $2 55 billion to $2 7 billion, which includes approximately $100 million in other revenues, such as <unk> and contract intangibles amortization.

Richard B. Barker: Adjusted EBITDA between $925 million and $1 5 billion capital additions, which excludes reimbursements of between 400 and $440 million.

Richard B. Barker: We expect the key drivers for this year's earnings outcome to rest with the three sixth-gen floaters, Noble Globetrotters 1 and 2, and the Noble Developer, as well as successful contract startup for the three rigs previously mentioned. We believe that these major projects have progressed through solid execution, and we are optimistic about getting through acceptance testing in a timely manner. Assuming contract start-ups that are in line with our peak status report and recognizing that there are many other factors that could materially impact our financial performance, then we don't need much incremental work at all to be squarely in the lower half of our guidance.

Richard B. Barker: We expect the key drivers for this year earnings outcome rests with the three six Gen floaters noble Globetrotter as one and two and the notebook developer as well as successful contract startups for the three rigs previously mentioned.

Richard B. Barker: We believe that these major projects have progressed through solid execution, and we are optimistic about getting through acceptance testing in a timely manner.

Richard B. Barker: Assuming contract startups that are in line with our fleet status report.

Richard B. Barker: Recognizing that there are many other factors that could materially impact our financial performance and we don't need much incremental work at all to be squarely in the lower half of that guidance range.

Richard B. Barker: There are absolutely pathways to getting above the midpoint, but we would likely need a decent chunk of incremental work, probably on the 6G rigs, to reach the upper half of that 2024 EBITDA guidance frame. Lastly, on cash flow, Q1 was obviously a heavy quarter for CapEx, as well as being impacted by a working capital bill. A cash balance was also reduced by approximately $50 million related to taxes withheld or effectively a net share settlement on vesting equity awards related to a one-time Chapter 11 Emergence grant.

Richard B. Barker: There are absolutely pathways to getting above the midpoint, but we would likely need a decent chunk of incremental work probably on the 60 rigs to reach the upper half of our 2020 for EBITDA guidance range.

Richard B. Barker: Lastly on cash flow Q1 was obviously, a heavy quarter for capex as well as being impacted by working capital build.

Richard B. Barker: Our cash balance was also reduced by approximately $50 million related to taxes withheld or effectively a net share settlement on vesting equity awards related to one client chapter 11 emergence squads.

Richard B. Barker: With improved EBITDA and moderating CapEx over the balance of the year, we continue to expect our free cash flow for the year to be very much weighted to the second half. With that, I'll turn the call back over to Robert.

Richard B. Barker: With improved EBITDA and moderating capex over the balance of the year, we continue to expect that free cash flow for the year to be very much weighted to the second half.

Richard B. Barker: With that I'll turn the call back over to Robyn.

Robyn: Thanks, Richard before we turn the call over for Q&A.

Robert W. Eifler: Richard, before we turn the call over to Q&A, I'd like to take a quick moment to highlight our recently published sustainability report, which we put out last month and can be found on our website. Our team did a terrific job of delivering a framework, a vision, and a report that are ambitious yet grounded, and, in the end, worthy of our first choice offshore mantra.

Robyn: Like to take a quick moment to highlight our recently published sustainability report, which we put out last month and can be found on our website.

Robyn: Our team did a terrific job of delivering a framework a vision and a report that our ambitious yet grounded and then the and worthy of our first choice offshore mantra.

Robert W. Eifler: As part of defining our role in a sustainable energy future, we've taken a 360-degree approach to decarbonization that's focused on technology, operations, and collaboration opportunities with customers and partners. Reducing CO2 intensity requires us to invest in and optimize our assets and to partner with customers who share our attitude and commitment to environmental goals. The sustainable energy pillar of our framework encompasses the Digital Energy Efficiency Insights Monitoring System, which we have now rolled out across our entire fleet.

Robyn: As part of the funding our role in a sustainable energy future. We have taken a 360 degree approach to de Carbonization, that's focused on technology operations and collaboration opportunities with customers and partners.

Robyn: Reducing cotwo intensity requires us to invest and optimize our assets and to partner with customers, who share our attitude and commitment toward environmental goals.

Robyn: The sustainable energy pillar of our framework encompasses the digital energy efficiency insights monitoring system, which.

Robyn: Which we have now rolled out across our entire fleet.

Robert W. Eifler: We're also working on a suite of opportunities with alternative fuels and power sources, which, although not accessible on a fleet-wide basis, can still bring meaningful emissions benefits in specific applications. This includes renewable fuels, which can reduce CO2 emissions by up to 95% compared to regular diesel, as well as shore-based power for a jackup rig offshore Norway. And, of course, we've spoken before about our leadership position in offshore CCS. These are just a few of the highlights that fall under Sustainable Energy Management.

Robyn: We're also working on a suite of opportunities with alternative fuel and power sources, which although not accessible on a fleet wide basis can still bring meaningful emissions benefits and specific applications.

Robyn: This includes renewable fuels, which can reduce cotwo emissions by up to 95% compared to regular diesel.

Robyn: As well as shore based power for a jackup rig offshore Norway.

Robyn: And of course, we've spoken before about our leadership position in offshore Ccs.

Robyn: These are just a few of the highlights that fall under the sustainable energy mantle.

Robert W. Eifler: Equally important at Noble are the numerous areas in which we strive to provide the best possible workplace for our employees. This means a relentless focus on safety, as well as diversity and investment in the local communities where we work. We have concluded, for example, both our Drill Crew Development Program in Guyana, as well as a four-year Maritime Scholarship Program that we've been proud to sponsor for a number of Guyanese students. There's a tremendous amount of valuable information in this 64-page sustainability report, so please have a look.

Robyn: Equally important that novo are the numerous areas in which we strive to provide the best possible workplace for our employees.

Robyn: This means a relentless focus on safety as.

Robyn: As well as diversity and investment in the local communities, where we work.

Robyn: Including for example, both our drill crew development program in Guyana, as well as a four year Maritime scholarship program that we have been proud to sponsor for a number of <unk> students.

Robyn: Tremendous amount of valuable information in this 64 page sustainability report. So please have a look.

Robert W. Eifler: I think it's a very compelling representation of who we are and where we are, as well as where we're heading as a company. Wrapping up, for the near term, again, we remain excited about both the state of the business, as well as the execution status of our 2024 major projects, which should enable a progressive step up in earnings and cash flow over the balance of this year. With this ramp-up, especially in the second half of this year, we will look to expand our capital returns to shareholders. With that, Operator, we're ready now to open the call for questions.

Robyn: I think it's a very compelling representation of who we are and where we are as well as where we're heading as a company.

Robyn: Wrapping up over the near term again, we remain excited about both the state of the business as well as the execution status of our 2024 major projects, which should enable a progressive step up in earnings and cash flow over the balance of this year.

Robyn: With this ramp up especially in the second half of this year.

Robyn: We will look to expand our capital returns to shareholders.

Speaker Change: With that operator, we're ready now to open the call for questions.

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 a second time. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Speaker Change: Thank you.

Speaker Change: We will now begin the question and answer session.

Speaker Change: If you have dialed in and we would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.

Speaker Change: If you would like to withdraw your question simply press Star one a second time.

Speaker Change: You are called upon to ask your question and our listening BS speaker phone on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.

Speaker Change: We ask that you do please limit yourself to one question and one follow up.

Speaker Change: Press Star one if you would like to join the queue.

Operator: We ask that you please limit yourself to one question and one follow-up. Again, press star 1 if you would like to join the queue. And your first question comes from Kurt Hallead with Benchmark. Your line is open.

Speaker Change: And your first question comes from Kurt <unk> with benchmark. Your line is open.

Kurt Kevin Hallead: Hey, good morning, everybody. Morning, Kurt.

Kurt: Hey, good morning, everybody.

Kurt: Good morning, Kurt.

Kurt Kevin Hallead: I appreciate the updates. So, let me, I guess, let me start just with the guidance dynamics. And your commentary, very helpful commentary there, by the way, about, you know, what things, how things would need to shake out. But I'm assuming, or should we assume, is a better question, that given the range of EBITDA guidance, the fact that you affirm that EBITDA guidance, that there's, I don't know, a better than 50% probability that you're going to get work for those three EIDL 6

Kurt: I appreciate the updates so let me I guess, let me start just with the guidance dynamics.

Kurt: In your commentary.

Kurt: Helpful commentary, there by the way about what things, how things would need to shake out.

Kurt: But I'm, assuming or should we assume is a better question that given the range of EBITDA guidance. The fact that you affirmed that EBITDA guidance.

Kurt: There is.

Kurt: A better than 50% probability it youre going to get work for those three idle <unk> assets.

Robert W. Eifler: You know, I know, I'm not sure that's the right assumption. I mean, the I guess a way to put it is we're somewhere around 97% contracted fleet-wide this year and we, for where we need to be at the low end of the guidance, and so we feel extremely good about our currently contracted revenue at the low end of the guidance range, and then contribution from 6G's project execution very principally and then maintaining or I guess watching our costs, all contribute to paths upward from bottom half of guidance, so it's it still is pretty early and there are a number of different paths up to the top half of guidance, including 6G.

Speaker Change: Yeah, No no I am not sure Thats the right assumption.

Kurt: The.

Kurt Kevin Hallead: Okay, okay. I appreciate that.

Kurt: I guess a way to put it is.

Kurt: Sure.

Kurt: We're around 97% contracted fleet wide this year.

Kurt: And we.

Kurt: <unk> for where we need to be at the low end of the guidance.

Kurt: And so we feel extremely good about.

Kurt: About our currently contracted revenue at the low end of the guidance range.

Kurt: And then contribution from <unk>.

Kurt: <unk> project execution very principally.

Kurt: Then.

Kurt: Maintaining our or I guess.

Kurt: Watching our costs.

Kurt: All contribute to pass upward from bottom half of guidance.

Kurt: It still is pretty early and there are a number of different paths up to the top half of guidance.

Kurt: Including <unk> is one of them.

Kurt:

Robert W. Eifler: And so then in the context of the outlook for the 6G market, whether it's your rigs or the market in general, again, it didn't seem like there was a high degree of conviction, right, that there was enough demand to get those rigs and generate revenue for this year. But, you know, what kind of opportunities do you see? And, you know, what kind of market areas, and you don't have to get too specific if it's a very competitive situation, I understand that, but just give a broader idea in terms of regions and where these assets might have opportunities.

Speaker Change: Okay, Okay, I appreciate that and.

Speaker Change: So then in the context of the outlook for the <unk> market, whether it's your rigs or the market in general.

Speaker Change: Again, it didn't seem like there was a high degree of conviction right that there is enough demand.

Speaker Change: To get those rigs generating revenue for this year, but you know what.

Kurt: What kind of opportunities.

Kurt: You do you see.

Kurt: And what kind of market areas and you want to get too specific it is a very competitive situation I understand that but just give us broader idea in terms of regions, where these assets might have opportunities.

Robert W. Eifler: Sure. There are, I guess, seven rigs available now, as we said in the script, and another handful, five or six rigs, coming available this year in the 6G world. There are opportunities. We're chasing opportunities behind every single one of our 6Gs. We just announced a slide extension on one of them from Shell, which really is just the same contract taking a little longer to close out. We've had a couple that were very, very close but slipped away for various reasons, which is life in the contracting world.

Speaker Change: Sure Yes.

Speaker Change: There is there is I guess seven rigs available now as we said in the script in another handful five or six rigs coming available this year in the <unk> world.

Speaker Change: There are opportunities, we're chasing opportunities behind every single one of our <unk>.

Speaker Change: We just announced a slight extension on one of them from.

Speaker Change: From shell, which really is just.

Speaker Change: The same contract taking a little longer to close out.

Speaker Change: Uh huh.

Speaker Change: We've had a couple.

Speaker Change: We're very very close that slipped away for various reasons, which is his life in the contracting world.

Robert W. Eifler: We do think that this, the, the number of total six G open rig capacity does correct itself. I think we'll see some things that happen late this year, but I think a lot of it's going to take place next year as well on an industry-wide basis. And so, you know, we're just trying to do our best to see what's out there and where a good fit could be. Globally, we're bidding on rigs mostly in the Western Hemisphere, but we're open to working effectively anywhere that makes sense from a cash flow perspective.

Speaker Change: We do think that that this.

Speaker Change: The number of total 60 open rigs capacity does correct itself.

Speaker Change: And I think we'll see some some things that that happened in late this year, but I think a lot of it is going to take place next year as well on an industry wide basis.

Speaker Change: So we're just.

Speaker Change: Trying to do our best to see what's out there and we're a good fit could be.

Speaker Change: Globally.

Speaker Change: We're bidding the rigs mostly in the western hemisphere, but we're open to work effectively anywhere.

Speaker Change: That makes sense from a from a cash flow basis.

Kurt Kevin Hallead: Okay, I appreciate that color. Thank you.

Speaker Change: Okay I appreciate that color. Thank you.

Eddie Kim: And we will take our next question from Eddie Kim with Barclays. Your line is open.

Speaker Change: We will take our next question from Eddie Kim with Barclays. Your line is open.

Eddie Kim: Hi, good morning. Just sticking with the kind of 7G, 6G theme. Yeah, Rob, just wanted to get your thoughts on, you know, what in your mind is driving that difference between, you know, those asset classes? Is, you know, is the open capacity in the 6G market more a function of specific customers who normally take 6G rigs, you know, that those customers are delaying their programs? Or is it more a reflection of, you know, customers broadly, even those who used to take 6G rigs now looking to secure 6, 7G rigs instead? Just any thoughts around that would be great.

Eddie Kim: Yes, hi, good morning, just sticking with the kind of <unk> theme.

Eddie Kim: Rob just wanted to get your thoughts on what in your mind is driving that difference between those asset classes.

Eddie Kim: The open capacity in the <unk>, Mark and more a function of specific customers, who normally take 60 rigs.

Speaker Change: Those customers are delaying their programs or or is it more of a reflection of customers broadly even those who used to take 60 rigs now looking to secure 70 rigs instead, just just any thoughts around that would be great.

Robert W. Eifler: Sure, yeah, that's a great question. It's more the latter. The seventh-generation rigs, and particularly the rigs that have two BOPs, are just more efficient assets than the 6G rate, and I think through the downturn, we saw customers effectively get seventh-generation rigs for no premium compared to what else might be available. And obviously, the market's shifted from there. But the efficiency stands. For a short, let's call it a one well job, probably, the difference is less pronounced.

Speaker Change: Sure, Yes, it's a great question, it's more of the ladder.

Speaker Change: The seventh generation rigs and particularly the rigs that have to be op.

Speaker Change: Or just more efficient assets than the 60 rigs.

Speaker Change: And I think through.

Speaker Change: Through the downturn, we saw customers effectively get seventh generation rigs for for no premium compared to what else might be available.

Speaker Change: And obviously the markets shifted from there, but the efficiency stands.

Speaker Change: In.

Speaker Change: Sure, let's call it a one well job probably the difference is less pronounced.

Robert W. Eifler: However, when you're talking about longer-term work, either multiple wells, but even more so, a longer development project, the seventh-generation rigs really start to make a big difference in terms of efficiency. And so I think you're just seeing that dynamic play out. I think you've seen this play out over the last couple of years, and it's continuing today. So, you know, no surprise. But those are the best and most efficient assets. And that's where, you know, customers' preferences lie.

Speaker Change: However, when you were talking about longer term work, either multiple wells, but even more so a longer.

Speaker Change: Development project, the seventh generation rigs really start to make a big difference in terms of efficiency.

Speaker Change: So I think youre, just seeing that dynamic play I think you've seen it play out over the last couple of years.

Speaker Change: And it's continuing today.

Speaker Change: So no surprise, but those those are the best and most efficient assets.

Speaker Change: That's where.

Speaker Change: Where customers' preferences lie.

Eddie Kim: Got it. Got it. That makes sense.

Speaker Change: Got it got it that makes sense.

Speaker Change: Just my follow up is on.

Speaker Change: The bifurcation that you mentioned last quarter about the boat.

Eddie Kim: Just my follow-up question is on the bifurcation that you mentioned last quarter about the bifurcation between the kind of top-tier rigs that are working versus rigs that are being reactivated from the sidelines into multi-tier contracts. Roughly, how much of a discount would you expect for one of those sideline rigs versus a hot rig? One of your peers last week seemed to almost set the floor at around $450,000 a day, even for these sideline rigs. Would you be in agreement with that, or just your updated expectations there?

Speaker Change: Bifurcation between kind of top tier rigs that are working versus rigs that are being reactivated from the sidelines into multiyear contracts.

Speaker Change: Roughly how much of a discount would you expect for one of those sideline rigs versus the hot rig one of your peers last week seemed to almost set the floor at around 450000, a day even for these sideline rigs would you be in agreement with that.

Speaker Change: Your updated expectations there.

Robert W. Eifler: Sure. There are a variety of different owners of sideline rigs right now. We're one with the Meltem.

Speaker Change: Sure there's a variety of different owners of sideline rigs right now we're one with the meltdown.

Robert W. Eifler: You know, we've said that we're going to be fairly conservative in how we think about reactivating that rig, which, you know, translates into probably less of a discount to market, but we have always said that we think all of those rigs will come out at a discount to market. I think that's likely what would be required by a customer who's willing to contract one of those rigs. How much is it going to vary?

Speaker Change: We've said that.

Speaker Change: We're going to be fairly conservative and how and how we think about reactivating that rig.

Speaker Change: Which translates into probably less of a discount to market, but we have always said that we think all of those rigs will come out at a discount to market I think thats that's likely.

Speaker Change: What would be required.

Speaker Change: A customer who's willing to contract one of those rigs.

Robert W. Eifler: And I think there are, among the different owners out there, different economic incentives to drive the potential discount. Of course, I don't know how other people are thinking, but I do think that in certain instances, there's probably more motivation to go ahead and find a contract and get day rates started, even if it requires a slightly higher discount than perhaps we face in our own situation.

Speaker Change: How much is going to vary and I think there are.

Speaker Change: Among the different owners out there there are different economic incentives to drive the potential discount of course I don't know how other people are thinking.

Speaker Change: But I do think that in certain instances.

Speaker Change: The there's probably more motivation.

Speaker Change: Uh huh.

Speaker Change: Go ahead, and find a contract and get.

Speaker Change: Get day rates started even if it requires a slightly higher discount than perhaps we face in our own situation.

Eddie Kim: Got it. Got it. That makes sense. Thanks. That's very helpful. I'll turn it back.

Speaker Change: Got it got it that makes sense. Thanks, that's very helpful. I'll turn it back.

Speaker Change: Thanks, Andy.

Gregory Robert Lewis: And we will take our next question from Greg Lewis with BTIG. Your line is open.

Speaker Change: And we will take our next question is from Greg Lewis with <unk>. Your line is open.

Gregory Robert Lewis: Hey, thank you and good morning everybody and thanks for taking my questions. Hey Robert, I had a question about the contracts with Exxon and Guyana, realizing it's not until the price resets, not until September, but just had a couple questions around that, and one being... You know, it seems like, you know, and maybe it's always been through the cycles and it just was not as evident, you know, with extra equipment, but it seems like, you know, this cycle, you know, everyone's MPD and MPD is not included in the day rate, but it's an extra, you know, pick a number 30 to $40,000 on some of these term jobs.

Gregory Robert Lewis: Hey, Thank you and good morning, everybody and thanks for taking my questions.

Speaker Change: Morning.

Gregory Robert Lewis: And really, what I'm trying to understand in those negotiations is two things. One is, is it a headline day rate that, that, that, and I imagine Noble's fighting for more and Exxon's fighting for less. But as these other services, which I assume we're doing in Guyana as well, um, are, are, are part of the contract, but maybe not in the scope of the day rate. Is that, is that something that's in play? that they get as you negotiate the next rate.

Gregory Robert Lewis: Hey, Robert.

Gregory Robert Lewis: I had a question.

Gregory Robert Lewis: About.

Gregory Robert Lewis: The contracts.

Robert W. Eifler: With Exxon in Guyana.

Gregory Robert Lewis: Realizing it's not until the price resets not until September, but just had a couple of questions around that and one being.

Gregory Robert Lewis: It seems like.

Gregory Robert Lewis: And maybe it's always been through the cycles and it just was not as evident.

Gregory Robert Lewis: <unk>.

Gregory Robert Lewis: With extra equipment, but it seems like this cycle.

Gregory Robert Lewis: P day in MPD is not included in the day rate, but it's an extra.

Gregory Robert Lewis: Pick a number 30 to $40000 on some of these term jobs and really what I'm trying to understand is in those negotiations.

Gregory Robert Lewis: Two things one is is.

Gregory Robert Lewis: Is it a headline day rate that debt and I imagine <unk> fighting for more in exxon's fighting for less.

Gregory Robert Lewis: But as these other services, which I assume were doing in Guyana as well.

Gregory Robert Lewis: Our part of the contract, but maybe not in the scope of the day rate.

Gregory Robert Lewis: Is that is that something that's in play.

Gregory Robert Lewis: For noble.

Gregory Robert Lewis: As you as you renegotiate the next rate.

Robert W. Eifler: Yeah, so the rate isn't, it's always hard to decode, it's hard for us to decode just like it is for you guys when you get the total contract value, and there are a lot of different other services and rates right now, just as you said. We try to deconstruct rates and really understand the various components. Um, clearly, MOBE and DMOBE have to come out.

Speaker Change: Yeah. So.

Speaker Change: The the rate is.

Speaker Change: It's always hard to it's hard for us to decode just like it is for you guys on when you get total contract value and there's a lot of different other services in rates right now just as you said.

Gregory Robert Lewis: We we try to deconstruct rates and really understand the various components.

Gregory Robert Lewis:

Robert W. Eifler: And then the rest of the other services, you know; we always spend time trying to, to, understand what those might be in, in, some of the fixtures that are out there. The rate, you know, is supposed to be a market, a global market rate for a tier one, you know, a two BOP, all the bells and whistles rig for a six month job. And that filters out a variety of different rates out there.

Gregory Robert Lewis: Clearly mobe and Demoed have to come out.

Gregory Robert Lewis: And then the rest of the other services.

Gregory Robert Lewis: We always we spend time trying to.

Gregory Robert Lewis: To understand what those might be in some of the fixtures that are out there.

Gregory Robert Lewis: The rate is supposed to be.

Gregory Robert Lewis: Market global market right.

Gregory Robert Lewis: For a tier one <unk>, all the bells and whistles rig for.

Gregory Robert Lewis: For six month job.

Robert W. Eifler: And, you know, we spend time trying to understand and, and, and guess at what the fixtures actually represent. And so that, you know, it's work every six months. It always takes several meetings, and, as we've said before, often includes a third party to kind of offer a third opinion, but I think it's worked extremely well so far.

Gregory Robert Lewis: And that filters out.

Gregory Robert Lewis: A variety of different.

Gregory Robert Lewis: Rates out there and.

Gregory Robert Lewis: Yeah.

Gregory Robert Lewis: We spend time trying to.

Gregory Robert Lewis: Understand.

Gregory Robert Lewis: And guess.

Gregory Robert Lewis: What the fixtures actually represent and so that's.

Gregory Robert Lewis: It's work every six months.

Gregory Robert Lewis: I'll always take several meetings.

Gregory Robert Lewis: But.

Gregory Robert Lewis: And as we've said before often includes a third party to kind of offer.

Gregory Robert Lewis: <unk> opinion.

Gregory Robert Lewis: But I think has worked extremely well so far Oh, yes, no doubt.

Gregory Robert Lewis: Oh yeah, no doubt. And it's gotten up to a good rate, too. And I think you answered it in saying I wasn't sure about the duration. It sounds like anything over six months, so there was a one-year contract in the Gulf of Mexico for over $500,000. Not that we should expect the rate to go to $500,000, but a contract like that, even though it was an extension, would most likely be included in the updated price setting.

Gregory Robert Lewis: Outerwear, where a good rate yeah.

Gregory Robert Lewis: And then I think you answered it and saying it.

Gregory Robert Lewis: I wasn't sure about the duration it sounds like anything over six months so.

Gregory Robert Lewis: There was a there was a one year contract.

Gregory Robert Lewis: In the Gulf of Mexico over $500000 not that we should expect the rate to go to $500000, but a contract like that even though it was an extension would most likely be included in the <unk>.

Gregory Robert Lewis: The updated price setting.

Gregory Robert Lewis: Yeah, without getting into a very specific example like that, I would say that generally excluded are the longer contracts, two years and over. [inaudible] Also, included are globally the, you know, the rest of the contract. And, you know, for every leading edge U.S. Gulf of Mexico fixture, there's generally another fixture out there that's very relevant that's generally a little bit below the U.S. right now. And so the rate is a basket of all of the relevant fixtures globally and requires, you know, they all require some adjustments. It's not uncomplicated trying to put the basket together.

Gregory Robert Lewis: Yes.

Gregory Robert Lewis: Out getting into our space very specific example, like that I would say that generally excluded are the longer contracts two years and over.

Gregory Robert Lewis: Okay.

Gregory Robert Lewis: And.

Gregory Robert Lewis: Included are globally.

Gregory Robert Lewis: The rest of the contracts.

Gregory Robert Lewis: And.

Gregory Robert Lewis: Four.

Gregory Robert Lewis: Every leading edge U S Gulf of Mexico fixture there is generally another fixture out there that's very relevant.

Gregory Robert Lewis: That's that's generally a little bit below the U S. Right now and so the rate is a basket of all of the relevant fixtures globally.

Gregory Robert Lewis: And requires.

Gregory Robert Lewis: They all require some adjustments.

Gregory Robert Lewis: It's.

Gregory Robert Lewis: So not uncomplicated trying to trying to put the basket together as I mentioned.

Gregory Robert Lewis: Okay, great. Super helpful. Thank you for the thoughts.

Gregory Robert Lewis: Okay, great. It's super helpful. Thank you

Speaker Change: Great Super helpful. Thank you for that.

Gregory Robert Lewis: Thanks.

Speaker Change: Sure. Thank you.

David Christopher Smith: And we will take our next question from David Smith with Pickering Energy Partners. Your line is open.

Speaker Change: And we will take our next question from David Smith with Pickering Energy Partners. Your line is open.

David Christopher Smith: Hey, good morning. Thank you for taking my question. Hey, Dave.

David Christopher Smith: Hey, good morning, and thank you for taking my question.

David Christopher Smith: Hey, Dave.

David Christopher Smith: So I appreciate the commentary and the prepared remarks referencing the open demand for floaters from tenders and pre-tenders that say that it is a decade high. I wanted to ask about the demand that doesn't go through the tender process. If you can give us any color on the interest you're seeing from direct negotiations, if you're having more of those, or if really most new opportunities are going through the tender phase.

David Christopher Smith: So I appreciate the commentary in the prepared remarks, referencing the European demand for floaters from from vendors and great lenders.

David Christopher Smith: A decade high.

David Christopher Smith: Wanted to ask about the demand that doesn't go through the tender process.

Dave: You can give us any color on the interest you're seeing from a direct negotiation with your having more of those are really the most new opportunities there.

Speaker Change: That's understood.

Robert W. Eifler: No, I'd say that the direct negotiations, the level of direct negotiations, have increased relatively steadily through time. It's easier to quote open tenders. I think it's probably a slightly more objective measure.

David Christopher Smith: No.

David Christopher Smith: Say that that the direct negotiations the level of direct negotiations have increased.

David Christopher Smith: Relatively steadily through time.

David Christopher Smith: <unk>.

David Christopher Smith: Its easier to quote open tenders.

Speaker Change: I think it's probably a slightly more objective measure but for sure a lot of what's out there and a lot of what we're predicting will drive demand growth is actually direct negotiation. So if you remember last quarter, we thought we'd see about plus 10 rigs, perhaps a few more going through <unk>.

Robert W. Eifler: But for sure, a lot of what's out there and a lot of what we're predicting will drive demand growth is actually direct negotiation. So if you remember last quarter, we thought we'd see about plus 10 rigs, perhaps a few more going through next year on total floater demand. And while we see a tremendous number of open tenders, and I think that's a really positive story, the total demand growth is going to include some healthy direct negotiations as well, and sorry, go ahead Blake. Yeah, to provide a little bit just some numerics.

David Christopher Smith: Next year.

David Christopher Smith: Total floater demand.

David Christopher Smith: And while we see a tremendous number of open tenders and I think that's a really positive story.

David Christopher Smith: Total demand growth is going to include some some healthy direct negotiations as well.

Speaker Change: And sorry go ahead, yet to provide a little bit just some numerical context of that when you look at our fixtures over the course of 2023, 54% of those were direct negotiations and I know, it's a small number this year, we're at 75% to date year to date.

David Christopher Smith: Perfect; I appreciate that color. And if I could flip in a follow-up, just thinking about the little bit of U.S. Gulf Deepwater demand for well intervention and P&A, I know those contracts can come with very short lead times, and wanted to ask, in your experience, do forecasts for active hurricane seasons have any notable impact on operator interest in contracts for well intervention or P&A work in the, you know, July through November period?

Speaker Change: Perfect I appreciate that color and if I could ask slip in a follow up.

Speaker Change: Thinking about the little bit of U S Gulf deepwater demand for for well intervention and P&I.

Speaker Change: No those contracts can come with very short lead times.

Speaker Change: And wanted to ask.

Speaker Change: In your experience.

Speaker Change: <unk> forecast for active hurricane season.

Speaker Change: A notable impact on operator interest.

Speaker Change: Contract for well intervention or P&A work.

Speaker Change: July through November period.

Robert W. Eifler: It's a good question. I don't think I wouldn't say that there's seasonality in the shorter-term demand in the U.S. that we've noticed. The intervention market, which I think we've said, kind of hinted at before, is a, you know, there's some possible application of the Globetrotters to that market. It is a very short-term and a call-out market. It's a different market than drilling, and I don't, I don't, I would say I'm, I can't say I'm 100%.

Speaker Change: It's a good question.

Speaker Change: I don't think I don't I wouldn't say that there's seasonality.

Speaker Change: In the shorter term demand in the U S.

Speaker Change: That we've noticed.

Speaker Change: The intervention market, which I think we've said kind of hinted at before is theirs.

Speaker Change: So some some possible application of the globetrotters into that market.

Speaker Change: <unk>.

Speaker Change: It is a very short term and a call out market is it's a different market than than drilling.

Speaker Change: And I don't.

Speaker Change: I would say I can't say I'm, 100% and so a good question, Dave, but I don't I don't think Theres a lot of seasonality that really drives those dynamics.

Robert W. Eifler: It's a good question, Dave. But I don't think there's a lot of seasonality that really drives those dynamics. Look, in the U.S. Gulf, obviously hurricanes are very impactful, but... You get winter storms in the U.S. as well that can be pretty disruptive to actual rig operations, obviously less destructive, but anyway, I don't think there's a tremendous amount of seasonality.

Speaker Change: Look.

Speaker Change: In the U S. Gulf, obviously hurricanes are very impactful, but.

Speaker Change: You get winter storms in the U S as well that can be pretty disruptive.

Speaker Change: The actual rig operations, obviously less destructive but.

Speaker Change: Anyway, I don't I don't think there's a tremendous amount of seasonality.

David Christopher Smith: I do appreciate it. Thank you.

Speaker Change: I do appreciate it thank you.

Doug Becker: And we will take our next question from Doug Becker with Capital One. Your line is open.

Speaker Change: Okay.

Speaker Change: And we will take our next question from Doug Becker with capital One your line is open.

Speaker Change: Okay.

Doug Becker: Thank you. Robert, you mentioned that costs were up from last quarter because of contract preparation and mobilization, which makes a lot of sense given the contracts we have starting up over the next couple of quarters. Just any high-level comments on the trajectory for operating expense in CapEx over the coming quarters?

Doug Becker: Thank you Robert you mentioned that costs were up from last quarter because of contract prep mobilization, which makes a lot of sense given the contracts we have started up.

Doug Becker: Over the next couple of quarters.

Doug Becker: The high level comments on the trajectory for operating expense and capex over the coming quarters.

Robert W. Eifler: Sure, it's a very good question. Look, I think from an inflation perspective, we're obviously being impacted by that. I think it's obviously part of our guidance, if you will. So we're seeing inflationary pressure across our entire cost base, somewhere between, call it, 4% to 6%. But those numbers are absolutely part of our guidance, both on the OPEX side and on the CAPEX side as well. Obviously, CAPEX was higher in Q1, really due to these key contract startups. And we expect CAPEX, obviously, to moderate in the second half of the year.

Doug Becker: Sure.

Speaker Change: It's a very good question look I think from an inflation perspective, we would obviously.

Speaker Change: Being impacted by that I think I think it's obviously a part of our guidance. If you will so we're seeing inflationary pressure across our entire cost base.

Speaker Change: Somewhere between call it 4% to 6%.

Speaker Change: Those numbers are absolutely part of our guidance both on the Opex and on the Capex side as well.

Speaker Change: Obviously capex was higher in Q1.

Speaker Change: Down to these key contract startups.

Speaker Change: And we expect Capex, obviously, you said moderate in the second half of the year.

Speaker Change: Yeah.

Doug Becker: Should we expect it to be down in 2Q versus 1Q?

Speaker Change: Should we expect it down in <unk> versus <unk>.

Richard B. Barker: The CAPEX, I mean, it can be very lumpy, right? So from a CAPEX perspective, quarter to quarter, it can be very lumpy. You know, I think that obviously, we've maintained guidance for the full year from a CAPEX perspective. You know, so I think, obviously, Q1 was elevated. And so if you took the average of the remaining three quarters, obviously, that's down from where we were in Q1. So we're not going to provide specific guidance, if you will, for Q2, except for the fact that we've maintained full-year guidance on the CAPEX side.

Speaker Change: I think capex I mean, it can be very lumpy right. So from a capex perspective quarter to quarter. It can be very lumpy.

Speaker Change: I think that obviously, we've maintained guidance for the full year from a capex perspective.

Speaker Change: So I think.

Speaker Change: Obviously Q1 was elevated and so if you took the average of the remaining three quarters. Obviously, that's down from where we were in Q1. So we're not going to provide specific guidance. If you will for Q2, except for the fact that we've maintained full year guidance on the Capex side.

Speaker Change: Fair enough.

Doug Becker: Fair enough. And Richard, maybe speaking about the guidance, is it a fair way to characterize that the midpoint is still the most likely outcome? Or is it shading one way or the other? I understand there's a lot of different paths to get to the upper end or lower.

Speaker Change: And Richard maybe.

Richard B. Barker: Speaking about the guidance is that a fair way to characterize that the midpoint is still the most likely.

Richard B. Barker: Outcome or is it changing one way or the other I understand there's a lot of different paths to get to the upper end or lower end.

Richard B. Barker: Yeah, it's a very good and a very fair question, you know, obviously it's still early in the year, we feel very good about our range, there's various moving parts about that, so, you know, midpoint's a great number for sure, but there are various... Drivers that could impact guidance, both positive and on the other side of the equation as well. So we're obviously focused on trying to bring these three new contracts or startups online as soon as we can, and obviously, that will have a nice impact on the full year financial performance as well.

Richard B. Barker: Yes.

Speaker Change: Very good and a very fair question.

Speaker Change: Obviously, it's still early in the year, we feel very good about how range.

Doug Becker: understood. Thank you.

Speaker Change: There's various moving parts about that so.

Speaker Change: Mid points.

Speaker Change: Number for sure, but there's various drivers.

Speaker Change: Drivers that could impact guidance, both positive and on the other side of the equation as well. So we're obviously focused on trying to.

Speaker Change: Bringing these three class III new contracts.

Speaker Change: At ups online as soon as we can and obviously that will have a nice impact.

Speaker Change: On a full year financial performance as well.

Speaker Change: Understood. Thank you.

Speaker Change: Yeah.

Noel Augustus Parks: And as a reminder, press star 1 if you would like to ask a question. And we will take our next question from Noel Parks with the Tui Brothers. Your line is open.

Speaker Change: As a reminder, press star one if you would like to ask a question.

Speaker Change: And we will take our next question from Noel Parks with Tuohy Brothers. Your line is open.

Noel Augustus Parks: Hi, good morning. I just had a couple.

Noel Augustus Parks: Hi, Good morning, just had a couple.

Noel Augustus Parks: Just thinking about the negotiation process, I'm just wondering how you're seeing the tone of the negotiations at this point. In particular, I'm sort of wondering. Just in terms of contract terms, I guess just a basic question, when you're talking about multi-year terms, are these essentially all flat for the three years? Are there options for escalation throughout them? Is that something that customers are receptive to?

Noel Augustus Parks: Just thinking about the negotiation process I am just wondering how you're seeing the tenor of negotiations at this point in particular I'm sort of wondering.

Noel Augustus Parks:

Noel Augustus Parks: Just in terms of contract terms, but I guess just a basic question. When you are talking multiyear terms are these essentially all flat for the three years are there options for escalate.

Noel Augustus Parks: Escalation throughout them, that's something our customers are receptive to.

Robert W. Eifler: Yeah, I think I think it varies. We have, I think.

Speaker Change: Yes, I think I think it varies.

Speaker Change: We have.

Speaker Change: I think.

Robert W. Eifler: Some instances where locking in a low headline rate is a really important driver for certain customers, and we have others where locking in a very specific rig spec and letting the market dictate works as well. And so I think it varies. I think, you know, generally this, obviously, negotiations and contract terms kind of run in line with day rates. They're all very highly correlated.

Speaker Change: Some instances where.

Speaker Change: Locking in a low headline rate is a really important driver for certain customers.

Speaker Change: And we have others, where.

Speaker Change: Locking in a very specific rig spec and.

Speaker Change: In.

Speaker Change: Letting the market dictate.

Speaker Change: <unk> as well.

Speaker Change: And so I think it I think it varies.

Speaker Change: I think.

Speaker Change: Generally.

Speaker Change: This.

Speaker Change: Obviously negotiations and contract terms kind of run in line with day rates are all very highly correlated.

Robert W. Eifler: And I mentioned last quarter, and I guess I would repeat, that we see this as a balanced market going forward. It's not, really, a feeling of scarcity. I know some have called it that day is coming very soon.

Speaker Change: I mentioned last quarter, and I guess I would repeat that we see this as a as of a balanced market going forward.

Speaker Change: It's not.

Speaker Change: <unk>.

Speaker Change: Really a feel of scarcity.

Robert W. Eifler: Perhaps that's correct. We see it probably more as a balanced market through next year. It's one where when a customer needs a rig, generally, a customer can get a rig, but it's also one that's supportive of high utilization and gradually rising day rates for the contractors. You know, I think it's a very healthy market. And so if you extrapolate from that color into the nature of the negotiations, it's kind of in line. There are different push points in different negotiations.

Speaker Change: I know some have called that that day is coming very soon perhaps that's correct.

Speaker Change: See it probably more of a balanced market through next year.

Speaker Change: It's one where when a customer needs a rig generally a customer can get a rig.

Speaker Change: But it's also one that's supportive of high utilization.

Speaker Change: And gradually rising day rates for the contractors.

Speaker Change: It's a very healthy market.

Speaker Change: And so if you extrapolate from from that color into the nature of the negotiations it's kind of in line.

Speaker Change: Different different push points in different.

Speaker Change: Negotiations.

Noel Augustus Parks: Great. Thanks. And to the degree that, of course, everything is sort of in process, if you were going to point to one thing for whatever time frame, either before the end of next year or looking beyond that, is there any particular lever where you think you might have the best opportunity to pull it, whether it is the rate, the term, the equipment? So in other words, what could be the next piece of the puzzle that could, in theory, sort of drive things higher from here? Yeah, it's a good question.

Speaker Change: Great. Thanks, that's really helpful characterization and.

Speaker Change: To the degree that.

Speaker Change: Everything is sort of in process.

Speaker Change: We're going to point to one thing.

Speaker Change: Or whatever timeframe either before the end of next year, we're looking beyond that.

Speaker Change: Is there any particular lever where you think you might have the best opportunity to pull it where there is.

Speaker Change: The rate the term.

Speaker Change: The equipment.

Speaker Change: So in other words, what what what could be the next the next piece of the puzzle that could.

Speaker Change: In theory sort of drive things higher from here would you say.

Robert W. Eifler: Yeah, it's a good question. You know, we waited for a very long time for the $500,000 rate to be announced. And that's happened now. So that's a threshold. On average, I think the average rates are still below 500, but I think you'll, of course, continue to see rates in that range being announced. I think probably the faster moving dynamic over the next year to 18 months is going to be terms, where I think you're going to see average terms continue to increase, and I think that the average term of the open public tenders is representative of that.

Speaker Change: It's a good question.

Speaker Change: We waited for a very long time for a $500000 right to be announced.

Speaker Change: Sure.

Speaker Change: Happened now so thats.

Speaker Change: A threshold.

Speaker Change: On average I think the average rates are still below 500, but I think you will of course continue to see.

Speaker Change: Rates in that range being announced I think probably.

Speaker Change: The the.

Speaker Change: Perhaps faster moving dynamic over the next year to 18 months is going to be term.

Speaker Change: Where I think youre going to see average term continue to increase.

Speaker Change: And I think that the average term of the open public tenders is representative of that and of course, you've heard us and.

Robert W. Eifler: And of course, you've heard us and our competitors talk about all of the direct negotiations that are out there, and there's a number of those that carry significant terms as well. And so I think we will probably see improvement in both rate and term through this year and next year. Great. Thanks a lot.

Speaker Change: Our competitors talks about.

Speaker Change: All of the direct negotiations that are out there and theres a number of those that carry significant term as well.

Speaker Change: So I think.

Speaker Change: Probably we see improvement in both rate and term over the next.

Speaker Change: Over the next through this year and next year.

Speaker Change: Great. Thanks, a lot.

Speaker Change: Thanks.

Operator: And there are no further questions at this time, so I would now like to turn the conference back to Mr. Ian MacPherson for any additional or closing remarks. Thank you everyone for joining the call today. Have a great day and we'll look forward to speaking with you again next quarter. Goodbye. Ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.

Speaker Change: And there are no further questions at this time, so I would now like to turn the conference back to Mr. Ian Macpherson for any additional or closing remarks.

Ian MacPherson: Thanks, everyone for joining the call today have a great day, and we'll look forward to speaking with you again next quarter.

Ian MacPherson: Goodbye.

Speaker Change: Ladies and gentlemen, this concludes today's call and we thank you for your participation you may now disconnect.

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