Noble - Earnings Call - Q3 2025
October 28, 2025
Transcript
Operator (participant)
Thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Noble Corporation Third Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Ian Macpherson, Vice President, Investor Relations. Please go ahead.
Ian Macpherson (VP of Investor Relations)
Thank you, Operator, and welcome everyone to Noble Corporation's Third Quarter 2025 Earnings Conference Call. You can find a copy of our earnings report along with the supporting statements and schedules on our website at noblecorp.com. We will reference an earnings presentation that's posted on the Investor Relations page of our website. Today's call will feature prepared remarks from our President and CEO, Robert Eifler, as well as our CFO, Richard Barker. We also have with us Blake Denton, Senior Vice President of Marketing and Contracts, and Julie Kalaja, Senior Vice President of Operations. 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 therefore are subject to certain risks and uncertainties.
Many factors could cause actual results to differ materially from these forward-looking statements, and Noble does not assume any obligation to update these statements. Also, note we are referencing non-GAAP financial measures on the call today. You can find the required supplemental disclosure for these measures, including the most directly comparable GAAP measure and an associated reconciliation in our earnings report issued yesterday and filed with the SEC. Now, I'll turn the call over to Robert Eifler, President and CEO of Noble.
Robert Eifler (President and CEO)
Thanks, Ian. Welcome, everyone, and thank you for joining us on the call today. I'll open with a brief summary of our Q3 highlights and recent contract awards, then provide some perspective on the market outlook. Richard will provide more detail on the financials before I wrap up with closing remarks and move on to Q&A. During the third quarter, we earned adjusted EBITDA of $254 million, generated free cash flow of $139 million, and received an additional $87 million in net disposal proceeds. We again distributed $80 million to shareholders through our $0.50 quarterly dividend, and yesterday our board declared a $0.50 per share dividend for the fourth quarter, bringing total 2025 capital return to $340 million. The highly competitive cash yield on our stock continues to be a critical component of our story as we traverse this mid-cycle lull for our industry.
Before we discuss the market, I'd like to commend and thank our crews and operating teams for achieving excellent operational uptime and HSE performance. Aided by tools like our NORMS, Horizon56, and operations performance platforms, our teams have continued to push the envelope in technically challenging well construction and completion activities. In Guyana, our drillships continue to post record-setting results within the Wells Alliance. We have now constructed over 200 wells in the basin, delivering 60% of the most recent 25 wells in under 35 days. In the U.S. Gulf, the Noble Black Hornet set a new benchmark in deepwater drilling operations, earning high praise from the customer for outstanding execution of MPD influx management on a complex exploration well. Nearby, the Noble Black Lion recently performed the longest step-out yet for BP in the Gulf at over 12,500 feet, which was also delivered well ahead of AFE.
Results like these continue to be a defining success story for the deepwater industry and are leading the way in bringing deepwater sharply down the cost curve and thereby structurally increasing the size of the prize. We've also had another solid quarter on the commercial front, with backlog increasing to $7 billion currently on the back of several key contract awards. First, the Noble Black Lion and Noble Black Hornet have both been extended by an additional two years by BP in the U.S. Gulf, extending the rigs into September 2028 and February 2029, respectively. These extensions are valued at $310 million per rig, excluding MPD services, and both come with an additional one-year priced option.
These contract extensions further amplify the merits of the Diamond Offshore Drilling acquisition, which has materially overdelivered on our original accretion expectations, as the legacy Diamond Offshore Drilling rigs continue to perform and recontract at very high levels. We are thrilled to continue the Noble Black Lion and Noble Black Hornet's long-term assignments, which will now be approaching one decade in tenure. These long-duration engagements demonstrate the power of the deeply collaborative service posture that we've been working hard to cultivate over the past several years in order to drive value for our customers and earn their repeat work through dependable performance. Next, the jackup Noble Resolute has been awarded a one-year contract with ENI in the Dutch North Sea at a day rate of $125,000.
This contract is expected to commence later this quarter, and the Noble Interceptor has booked a five-month accommodation contract with Aker BP in Norway, which is scheduled to start next August. Lastly, the 6G semi, Noble Developer, has had an auction exercise by Petronas for an additional well early next year, and the drillship Noble Venturer was awarded a one-well contract from Omni in Ghana at a day rate of $450,000. This well is scheduled to follow in direct continuation of the ongoing Tullo work in Ghana, which is expected to resume in its second phase within the next several days before the rig mobilizes to the U.S. Gulf for long-term work commencing in late 2027. Beyond these specific contract awards, the broader contracting and utilization trends in deepwater are showing gradual signs of stabilization and improvement.
The committed UDW rig count of approximately 100 rigs and low 90% marketed utilization is, in fact, up slightly compared to recent quarters, despite some lingering near-term availability across several units with longer-dated contract starts. Additionally, deepwater contracting momentum is on an uptrend, with an average of 18 UDW rig years per quarter fixed in Q2 and Q3 this year, up 10% compared to the preceding two years. These are encouraging indicators, and there remains a significant number of additional fixtures anticipated over the next few months. Noble's backlog picture, as summarized on page five of the earnings presentation slides, shows 57% contract coverage across our entire fleet in 2026. When zooming in to our 15 high-spec drillships, we are now 70% booked for available days in 2026, excluding auctions.
However, we have active conversations behind all of our available rigs in 2026, including the Noble Viking and Noble Black Rhino. While we are also tracking the number of contract opportunities across the balance of the fleet, both jackups and floaters, securing additional work for these three drillships is a key priority, and our objective is to obtain 90 to 100% contract coverage across our 15 high-spec drillships by the second half of next year. On the jackup side, activity in the harsh environment Northern Europe market has been stable at 28 rigs and marketed utilization at 90%, flat with last quarter, with leading-edge day rates for drilling programs in the Southern North Sea holding flattish. Although the contracting environment has remained relatively subdued, we do have line of sight towards several opportunities that we hope to be able to book relatively soon.
With the Noble Interceptor's pending reactivation, we now have improving contract coverage for all five of our ultra-harsh CJ70 jackups as we progress through next year. While our six harsh rigs presently have limited contract coverage in 2026, we do expect this picture to improve based on several bidding opportunities currently in process. Overall, we are encouraged by the shape of things and the opportunity set at hand, which includes a broad range of UDW requirements throughout the Golden Triangle, Asia-Pacific, Mozambique, Mediterranean, and the harsh environment basins. The pipeline for early 2026 jobs is still significantly more limited compared to late 2026 and early 2027, but at this point, we are not seeing indications of additional project or procurement deferrals. Assuming reasonably stable oil prices, the path toward a methodically tightening floater market with deeper backlog appears to be on track.
Now, I'll pass it over to Richard to discuss the financials.
Richard Barker (CFO)
Good morning or good afternoon all. In my prepared remarks today, I will review our third quarter results and then discuss our outlook for the remainder of the year, as well as some additional high-level perspectives on 2026. Starting with our quarterly results, contract drilling services revenue for the third quarter totaled $798 million. Adjusted EBITDA was $254 million, and adjusted EBITDA margin was 32%. As expected, Q3 revenue and adjusted EBITDA were sequentially lower, primarily due to a number of rigs rolling off contract during the third quarter. Free cash flow of $139 million in Q3 excluded an additional $87 million in disposal proceeds, driven by the sale of the Pacific Meltem and Noble Highlander. Thus, we ended the quarter with a cash balance of $478 million, which is up $140 million compared to last quarter.
Subsequently, in October, we have completed the sale of the Noble Reacher for alternative use outside the drilling market for $27.5 million. As a reminder, the Reacher has not worked in drilling mode for several years, having recently completed a long-term and low-margin accommodation contract. The rig would have required a significant amount of capital to return to drilling mode again, and as such, the Reacher was an outlier within our fleet. As summarized on page five of the earnings presentation slides, our total backlog as of October 27 stands at $7 billion, which includes approximately half a billion dollars that is scheduled for revenue conversion for the remaining two plus months of this year, and $2.4 billion and $1.9 billion scheduled for conversion in 2026 and 2027, respectively. As a reminder, these figures exclude reimbursable revenue and revenue from ancillary services.
Referring to page 10 of the earnings slides, we are narrowing the range for our full-year 2025 guidance for adjusted EBITDA to $1.1 to $1.125 billion. The midpoint of this range implies Q4 adjusted EBITDA that is marginally lower versus Q3. I would point out that the exact start date of the Globe Quarter One contract in the Black Sea, which we currently estimate in mid-December, is a key sensitivity for Q4 revenue due to the relatively compressed duration of the full contract value, including mobilization. We have narrowed guidance for full-year 2025 CapEx net of customer reimbursables to a range of $425 to $450 million. Reimbursable CapEx is expected to be approximately $25 million this year, including approximately $20 million year to date through Q3. We plan to provide 2026 guidance on next quarter's earnings call.
In directional terms, I would say that the shape of our current fleet status report would indicate an EBITDA trough in the first half of 2026 that would be somewhat below second half 2025 levels, as well as lower results on a full-year basis for 2026 versus 2025. However, based on current and anticipated backlog, we are tracking toward a material inflection from late 2026 onward, which we will look to define more sharply next quarter as the next slug of foundational contracts are expected to come into backlog. We continue to anticipate approximately $450 million in CapEx net of customer reimbursables next year based on our current contract status. However, this estimate may be subject to increase to the extent that additional contract-supported opportunities arise with compelling accretion. The capital to reactivate the Noble Interceptor will be reimbursed through an upfront mobilization payment.
Additionally, we are likely to incur additional outlays totaling up to approximately $135 million associated with the termination of the BOP service and lease contracts on the legacy Diamond Offshore Drilling ships. During the third quarter, we delivered a termination for convenience notice for the service agreement, and we are currently in discussions around the lease agreement. We would expect an approximate $35 million of cash outlay during Q4 2025, which is expected to flow through OpEx and CapEx, and then the remainder during 2026. These amounts are not included in the aforementioned guidance ranges. However, as a reminder, this cash outlay would be offset by annual savings of approximately $45 million across OpEx and lease payments on the agreements on a combined basis. We are focused on building cash here in the last quarter of this year in anticipation of next year's capital requirements, including the potential BOP-related payments.
We are also committed to maintaining a robust return of capital program and a prudent balance sheet position. Based on existing backlog and current customer dialogue, we would expect a healthy EBITDA and cash flow inflection late next year. That concludes my remarks, and with that, I'll hand it back to Robert.
Robert Eifler (President and CEO)
Thanks, Richard. To wrap up, we're continuing to see a number of positive signs of increased deepwater activity after the anticipated trough over the next few quarters. This is essentially very similar to how we assessed the outlook last quarter, albeit with additional backlog in our books today to help lay the path toward that outcome, but also with a bit more slippage with certain program start dates, which continue to bifurcate the 2026 versus 2027 picture. We still have some work to do with securing a few more key contracts in order to support our expectation for a meaningful free cash flow inflection by late next year, but the opportunity set there is highly encouraging and progressing well.
We continue to watch our customers' budget announcements closely, which of course have in aggregate been less than inspiring at a headline level and which remain the ultimate growth governor for our business. At the same time, it has also been highly encouraging to see the relative resiliency of rig contracting activity this year in the face of elevated macroeconomic noise, sluggish oil prices, and upstream capital restraint. These divergent dynamics underscore the strategic long-term criticality of deepwater within the global upstream supply stack. We see this in the renewed emphasis and urgency surrounding upstream reserve replacement metrics. In that same vein, on the ground here in Houston, there's a palpable growing sense of the capital imperative toward deepwater exploration in a way that feels different from anything over the past decade.
I would encourage investors to pay close attention to this important litmus indicator in the months and quarters ahead. Meanwhile, as we wait for these anticipated demand tailwinds to materialize, we continue to manage our costs and marketed capacity to optimize cash flow, and we remain committed to paying a competitive dividend and maintaining a strong balance sheet through the cycle. With that, let me hand it back to you, Operator, to go to the Q&A section.
Operator (participant)
At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from Arun Jayaram from J.P. Morgan.
Arun Jayaram (Analyst)
Yeah, good morning, Robert. I wanted to maybe start with your thoughts on improving the utilization for your high-spec floater fleet. You mentioned that you're 70% booked for 2026 with a target of getting to 90 to 100% by the second half of 2026. Talk to us about the opportunity set to get there and kind of how long of a putt, using a golf analogy, would it take to get there?
Robert Eifler (President and CEO)
Yeah, morning. Thanks, Arun. It really revolves around the Noble Viking, the Jerry DeSouza, and the Black Rhino. Continuing with the golf analogy, I'd say it's really not a very long putt. While we didn't have any real new news for you this quarter versus last, we are advancing conversations around all three of those rigs. We hope to have some news for you here in the not too distant future. Those are all very technically capable rigs. We're bidding them in, they're in the discussions around a couple of different areas, but we do have line of sight towards the work that we're hopeful to win.
Arun Jayaram (Analyst)
Great. That's helpful. Maybe if you guys could just elaborate on the Diamond Offshore BOP leases. I believe those are agreements on eight of the rigs that you acquired. Can you just go through maybe the mechanics of that a little bit? It sounds like it's a pretty quick, in terms of a cash return payoff given the savings, but maybe you just go through the numbers a little bit just so we can tighten up our models.
Robert Eifler (President and CEO)
Sure, I agree. There are two components here. There's the service agreement and the lease agreement. We've now terminated the service agreement, and we'll have about a $35 million payment on that here in Q4. That's $35 million of cash out of the door here in the fourth quarter of this year. On the lease agreement, we're still working through that. There is a cap on that agreement of $85 million, and that would be payable next year. Obviously, there are a few remaining lease payments as well. If you sum that all up together, there's a maximum of $135 million of cash out of the door, and then the annual cash savings, if you will, to us is about $45 million for that. It's about three times an EBITDA on the multiple on that, if you will.
Arun Jayaram (Analyst)
Great. Thanks a lot for those details.
Operator (participant)
Your next question comes from Greg Lewis with BTIG.
Gregory Lewis (Analyst)
Hey, thank you. Good morning, everybody, and thanks for taking my question. Robert, I was hoping for a little more color, and I guess you kind of touched on it with some of the comments to Arun. As we think about the first half of 2026, the kind of the moderately bound versus what we are going to do in the second half of 2025, as we kind of look at those drillships, some of them all have idle time. In the second half of 2025, it looks like there's going to be some idle time in the first half of 2026. Is that largely what's driving that, or are there other costs? Is it maybe some idle time on the jackup fleet?
If you could help us maybe bridge why we're thinking it could be down, and what, I mean, I'm assuming that the answer to getting it higher would just be some spot work.
Robert Eifler (President and CEO)
Yeah, it really is largely driven by the floaters. Last quarter, we mentioned trying to get to a run rate of $400 to $500 million of cash flow here at the kind of back half of the year. Really, the driver there are those three rigs I mentioned earlier. I think what I also mentioned, we're aiming to get back to effectively market utilization, so low 90%, to hit those numbers. That translates to kind of two out of the three of those rigs working at any given time. Like I said, we have a line of sight on different jobs. We're not going to win everything that's out there, but we feel pretty confident that as we work through things, the goal of having two out of those three is very achievable and hopefully can outperform by finding work for all three of them.
The spot work, you asked about spot work. I think right now it's one of those times in the market. It's actually a more unique time, I think, than I've seen previously, where there is a fair amount of work on the horizon starting in 2026 and 2027, but there is a definitive gap in between where it's quieter than we've seen in multiple years. I'm probably missing some piece of history as I reflect on that, but I find it's almost singular in nature. I think the spot work, the gap filler work, so to speak, is going to be really separated from the rest of the work that's out there as it prices and as people think through it. I anticipate that to be a dynamic that plays out through 2026.
Gregory Lewis (Analyst)
Okay, great. Super helpful. The other question I had was around, you know, I know it's hard to look at snapshots in time, but just kind of trying to understand, you know, I think we all see the work out there, whether it's West Africa or parts of Asia. As we look at some of those term jobs that are out there, do we get a sense or are those dates kind of remaining firm, just given some of the macro out there? Or jobs that maybe three to six months ago we thought were going to be in the second half of 2026 still lining up to be in the second half? I'm trying to understand if there's been any drift or slippage in some of this work that, you know, me and you and a lot of people are waiting to kind of start early, yeah.
Robert Eifler (President and CEO)
Yeah, it's been a mixture. I think there's some that have held firm, and then there's some that have moved to the right. We really haven't seen anything being pulled back forward. That's certainly not the feeling we get right now. I can think of a handful of jobs that have been pushed by, say, six months, and I can think of a handful of jobs that are right on schedule, with our customers eager to start in the middle or the beginning of a start window. I think it's a mixture. Yeah.
Gregory Lewis (Analyst)
Okay, super helpful. Thank you very much.
Robert Eifler (President and CEO)
Thanks, Greg.
Operator (participant)
Your next question comes from Eddie Kim with Barclays.
Eddie Kim (Analyst)
Hey, good morning. I just wanted to touch on your expectations for the first half in next year. You mentioned you expect moderately lower earnings and cash flow compared to second half 2025 levels. Consensus currently has you guys at around $440 million in EBITDA, which represents about a 10% decline versus what your guidance implies for the second half of this year. I am just curious if you could speak to expectations for first half 2026 relative to where consensus is at now and what it would take, maybe in terms of some incremental contracting in the spot market from here to achieve that level of EBITDA or if that level might be a bit too optimistic at this point.
Robert Eifler (President and CEO)
Yeah, we haven't given out quarterly estimates. Let me think about how, you know, that is Eddie's true directionally that all that fits with kind of our narrative in the prepared remarks. I think I would focus also on the fact that there's not a whole lot of work that we see in the first half of 2026. There'll be a couple of announcements out there. There's some gap filler work that I mentioned earlier. I don't think there is a lot of room for upside improvement in the first half of the year. That does change pretty dramatically in the second half of the year. Of course, some of that's known and contracted and announced for both us and our competitors. There's other work out there as well that's being negotiated and hasn't been announced industry-wide. I think we're really focused on the timing of that.
We've set everything up, as we've mentioned, to hit this cash flow inflection. For us, the timing is a little less certain around that back half of the year, but we certainly see it coming.
Eddie Kim (Analyst)
Got it. Understood. My follow-up is just on your expectation for that, you know, you called it the deepwater utilization recovery by late 2026, early 2027. Could you just talk about your confidence level in this recovery? Is it based on the tenders that are out there currently or the tone of your conversations with customers, or contracts that you already have in hand? If you could just talk to your confidence level in that recovery.
Robert Eifler (President and CEO)
Sure. Yeah, I mean, it's a mixture of both. You know, starting with the contracts in the U.S. and in Suriname, I think we've kind of baked in somewhat of a floor for ourselves starting in the back half of next year, and we really see a tightening of the market out there. Some of that's announced and out there. Some of it is rumors that we understand some of our competitors have on some work, and some of it's stuff that we're working on ourselves. We're cautiously optimistic here that day rates have bottomed. Not to say that there won't be some lower day rates that get announced after I've made this statement, but we're cautiously optimistic that from here, the market is tightening to a point in late 2026 and 2027 that we've bottomed here. Stay tuned.
Eddie Kim (Analyst)
Great. Thanks, Rob. I'll turn it back.
Robert Eifler (President and CEO)
Thank you.
Operator (participant)
Your next question comes from Fredrik Stene with Clarkson Securities.
Fredrik Stene (Analyst)
Hey, Robert and team. Hope you are well, and thank you for taking our question. I think you've painted the, relatively, I guess, optimistic picture of demand from the second half of 2026 and beyond. You've mentioned a handful of rigs by name, more specifically the Viking, Jerry DeSouza, and the Black Rhino, which you seem to be relatively confident that you'll get some work on. I was wondering, there's the Globe Quarter One, and there's the Deliverer, for example. Do you have any additional color on how we should think about those rigs specifically going into next year? Maybe even more so on the Globe Quarter One, is that also going to be, at some point, a divestment candidate after this contract, or do you think it can get more work?
Robert Eifler (President and CEO)
Yeah, that's a good question. GT1, we continue to chase intervention work, as we've mentioned, and we continue to believe that is an interesting market for that asset. We also have said that it could be a divestment candidate. It's a little too early for us to give anything firm there, but I would say that both of those, frankly, are on the table. If we can't find work for the rig in the intervention market, then we'll make a decision there. On the Deliverer, I would maybe group all of the D rigs together as a bundle and say that we see more work today than we've seen at any point since at least the Noble side has owned those rigs for the last few years. Our outlook does not require all three of those rigs to be working.
I think finding work for all three would be lapping out for us, but we think we have a pretty good line of sight to at least two working, and again, probably more increase than we've had at any point.
Fredrik Stene (Analyst)
That's very, very helpful. Thank you. Just turning on the less spoken about assets also on the floater fleet, and maybe more on the harsh environment side. You have the Great White, the Apex, and the Endeavor that's currently idle. I guess there's a two-part question here. One, on the Great White, is originally a, you know, a UK type of rig, but have you thought anything more about potentially taking that rig into Norway, you know, getting a proper AOC, and I'm sure that will come with a major, you know, CapEx payment if you like to do something like that. On the Apex and the Endeavor, how do you think about the fleet size in general, or do you think that's maybe, you know, one too many rigs that are currently idle on the lower spec, harsh environment side? Thanks.
Robert Eifler (President and CEO)
Yeah. The Great White, we're marketing in a number of different regions around the world. You're right. It was not built to a Norwegian spec, so there would be a capital cost to take it into Norway if that were to become an option. I think we're just a little too early right now to give guidance on where that rig might end up. There will be some white space on it, and we're trying to find the best fit for it at any point in the future. There are several different jobs out there in different places around the world. The Apex and the Endeavor likewise have opportunities. You know, like with all of our older rigs, we'll continue to have a very sharp pencil and look at opportunities closely. For us, any opportunity needs to stand on its own for those rigs. That's pretty firm on our side.
Those are being marketed, and hopefully have some update on direction there, perhaps next quarter, we'll see.
Fredrik Stene (Analyst)
All right. This is very good. Thank you for all the details, and I'll hand it back. Have a good day.
Robert Eifler (President and CEO)
Thanks, Freddie.
Operator (participant)
Your next question comes from Douglas Lee Becker with Capital One.
Douglas Becker (Analyst)
Thank you. Robert, I was hoping you would expand on the prospects for the Black Rhino specifically. Is this likely to be well-to-well work in the U.S. Gulf, or is it more likely to be term work in the U.S. Gulf or some other region? I'll just, given that you've talked about line of sight to contracting that rig.
Robert Eifler (President and CEO)
That was the Rhino you asked about? Yeah, sorry.
Douglas Becker (Analyst)
Yes.
Robert Eifler (President and CEO)
Yeah. Look, I think we're talking to customers about both. We think we have opportunities both in the Gulf and outside the Gulf right now. I wish I had more direction than that. We have opportunities that fit in all three of those categories: short-term U.S., long-term U.S., and long-term non-U.S. We're going to have to just see what comes through for us here.
Douglas Becker (Analyst)
Fair enough. Maybe circling back to Norway, that was kind of encouraging to see the reactivation of the Noble Interceptor. Does this mean that there's a meaningful tightening in that market? Really kind of thinking about some of the CJ70s that are working outside Norway, the potential of moving back in, say, 2027 or so?
Robert Eifler (President and CEO)
Yeah, look, I would say I wish I could report that we saw a flood of work coming in Norway for the CJ70s. I can't claim that right now. We do have more opportunities today than we did six months ago or certainly a year or two ago, and that's driven us to look at reactivating the Interceptor there. I'd say that'll be probably the most marketable rig in the region that doesn't have a contract as it rolls out of that accommodation work. We like where it's positioned, and we're hopeful that perhaps rig demand ticks up by one, or if it's already ticked up by one, kind of maintains steady there. It is a little too early to tell. This contract I had stands on its own, and we're really happy to have it.
Douglas Becker (Analyst)
Got it. Thank you.
Operator (participant)
Your next question comes from Noel Augustus Parks with Tui Brothers.
Noel Parks (Analyst)
Hi, good morning. I just had a couple. Is it safe to say at this point that price sensitivity is not in the mix in a big way in customer decisions, either from sort of a formal perspective, which would, you know, maybe urge them to, you know, commit sooner rather than later, or from a bargain-hunting perspective? Is it just what they want to do, being conservative on their budget commitments the main driver that's at work these days?
Robert Eifler (President and CEO)
I wish I could say yes. I don't think so. No, I think our customers are as price-sensitive as ever. The macro outlook is obviously variable and uncertain. There's some downward oil price beliefs, and we'll learn more as 2026 budgets start to get announced or become more clear. We're, I would say, seeing the opposite. I'd say we're seeing extreme price sensitivity in our ongoing negotiations.
Noel Parks (Analyst)
Okay. Thanks. You did mention, in the wrap-up of the prepared remarks that in Houston, on the ground there, it feels different from how it has in terms of sentiment towards the deepwater at any time in the past decade. I wondered if we could talk a little bit more about, I don't know if there's a sense of there being like an inevitability that capital needs to head offshore relative to onshore opportunities, but just any color or feel you can give for what you're hearing?
Robert Eifler (President and CEO)
Sure. I think here it feels like it's well known that deepwater is going to be an important part of the supply mix going forward. That is obviously in the context of a slowing, plateauing Permian, which eventually someday has to decline. Deepwater is obviously long-cycle and requires forward thinking and investment, and those investments have to start at some point. To me, that's the most obvious connector between the malaise in the macro environment in a world where a lot of people are calling for perhaps lower oil prices in the near term, with the 2026 and 2027 opportunity set that we see. I think we see more activity than perhaps one would have predicted just given the macro uncertainty out there today. To me, one possible explanation is the understanding that deepwater is an important part of the energy mix going forward.
Noel Parks (Analyst)
Right. If I could just.
Robert Eifler (President and CEO)
I'll just add, you know, we mentioned exploration. I can't say today that we've seen any uptick in exploration wells. I have seen an analysis that shows that the entire explanation of the difference in rig count from last market cycle high in 2013-2014 to today is the difference between development work and exploration work. I think that's something we've watched very closely. I don't think it's right on the horizon as a driver for demand in our business, certainly not in 2026. I do think that's an important litmus test, which is why we mentioned that, because we're running at around 90% utilization today, on a pretty heavy development load or, put a different way, on a pretty low total exploration load. We watch that very closely, and we'll see what happens over the next couple of years here.
Noel Parks (Analyst)
Great. Thanks. I just wanted to ask one more, and that's about, I think last quarter you were observing that, in general, in West Africa, customers were a little slower to commit compared to South America. I just wondered if that's unchanged. You're talking about oil sentiment. It has been surprising to me that there seems to be just a lack of attention to sustained geopolitical premium in the oil strip these days, despite there being still quite a few hotspots out there to be sure. I just wondered if you saw the sort of concern about future oil prices or oversupply or whatever, if you saw it playing out more strongly in the thinking of customers in one region than another.
Robert Eifler (President and CEO)
Yeah, sure. First, just on West Africa, that's a long cycle region. It takes a lot of planning. I think last quarter we mentioned, but certainly in the past, we've mentioned that really the difference between where we at one point were hopeful the demand picture would be around this time, and reality here is explained by a lack of West Africa demand. We see that starting to play out in a number of countries in West Africa. We mentioned Mozambique too. We think that comes online in the next couple of years. As that corrects itself, I think that's a few units of demand that I think is going to really help in late 2026 and 2027, bring total utilization or, excuse me, total demand, back to where we were or where we're predicting it to be. On the oil piece, I think there's a lot of negative sentiment.
There's a lot of people hold a belief that it's likely to go down before it goes up. We struggle to predict, obviously. I will say, I guess, kind of repeat what I said around what we see on service demand, demand for our services, which is encouraging. I always point to kind of the middle part of the Brent curve, which has moved so much less than spot pricing and the very volatile sentiment. If you're a deepwater operator, you're obviously having to take 5 and 10-year views. It makes sense that, with that middle part moving less, we're seeing planning continue, perhaps beyond what the otherwise volatile macro would suggest.
Noel Parks (Analyst)
Terrific. Thanks a lot.
Operator (participant)
Again, if you would like to ask a question, press star one on your telephone keypad. Your next question comes from Josh Jamie, Daniel Energy Partners.
Josh Jayne (Analyst)
Thanks. Good morning. I just had one. I think it was at the end of the prepared remarks. You talked about the balance sheet and some cost rationalization. Maybe you could speak to the efforts you're taking on the cost side, and if you view those as sort of structural or if these are things that you're doing, assuming that we have a trough in the first half of next year before recovery. Maybe just go into more detail on the things that Noble's doing. Thanks.
Robert Eifler (President and CEO)
Sure. Yeah. Obviously, cost in the down markets are very important, and, you know, I think as you think about the Diamond Offshore Drilling transaction as an example, right? In that deal, we announced $100 million synergies. You know, we achieved that, I guess, in Q2 of this year, and it's like we're at an amount now, obviously, that's materially higher than that, but it's hard to bifurcate what is the synergy versus the other kind of cost work we're doing in the company. You know, we haven't put out a kind of an incremental cost savings target, but I think it's fair to say that we're realizing kind of incremental cost savings here just obviously as activity slows here in the first half of next year.
Josh Jayne (Analyst)
Okay. Thank you.
Operator (participant)
There are no further questions at this time. I will now turn the call back over to Ian Macpherson for closing remarks.
Ian Macpherson (VP of Investor Relations)
Thanks, everyone, for joining us today and for your interest in Noble. We'll look forward to speaking with you again next quarter. Have a great day.
Operator (participant)
Ladies and gentlemen, that concludes today's call. Thank you for joining. You may now disconnect.