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Noble Corp plc (NE)·Q4 2022 Earnings Summary

Executive Summary

  • Noble delivered a transformational Q4 2022, with total revenue of $623M, diluted EPS of $0.92, Adjusted EBITDA of $157M, free cash flow of $106M, and backlog at $3.9B; integration synergies realized reached $50M run-rate by year-end .
  • Guidance for 2023 was introduced: revenue $2.35–$2.55B, Adjusted EBITDA $725–$825M, and net capital expenditures $325–$365M; management expects ~65% of 2023 EBITDA in H2 due to dayrate momentum and operating days ramp .
  • Q4 results were impacted by jackup Regina Allen downtime and Globetrotter I permitting delays, reducing EBITDA by ~$15M vs expectations; despite this, Adjusted EBITDA landed above the January pre-announced range of $140–$150M at $157M (bold indicates surprise) .
  • Capital allocation remained a catalyst: $96M in repurchases to date including the Maersk squeeze-out and open-market buybacks (Q4), plus another $10M in January; subsequent repayment of a $150M loan underscores balance sheet conservatism .

What Went Well and What Went Wrong

  • What Went Well

    • Strong free cash flow ($106M) and CFO ($171M) in Q4; liquidity of ~$1.1B and net debt of ~$$197M post-merger support ongoing returns of capital .
    • Backlog rose to $3.9B with average floater backlog dayrate ~$400k; dayrate leadership evidenced by recent fixtures (e.g., Faye Kozack at $450k/day) and improved contracting terms (mobilization and termination protections) .
    • Integration synergies ahead of plan: $50M realized by Q4 exit and targeting $125M by Q4 2024; management confident in multi-year upcycle with Tier-1 drillships >95% utilization and leading-edge rates in low/mid-$400k/day (quote: “fundamental setup…best…in the past 20 years”) .

  • What Went Wrong

    • Jackup headwinds: North Sea softness and UK windfall tax pressured near-term utilization and margins; Regina Allen was off contract with extended repairs and no loss-of-hire insurance, limiting 2023 jackup EBITDA to ~10% of total .
    • Globetrotter I contract start delay from Mexico permitting reduced Q4 performance; floater whitespace and SPS downtime will constrain near-term operating days before backlog conversion accelerates in H2’23 .
    • Inflation persists in high single digits across OpEx/CapEx; SPS cycle (7 rigs in 2023) and potential reactivations create supply chain pinch points, cost inflation, and timing risk (management acknowledged SPS revenue loss at $400k+/day rates) .

Financial Results

MetricQ4 2021Q3 2022Q4 2022
Total Revenue ($USD Millions)$208 $306 $623
Diluted EPS ($USD)$1.70 $0.41 $0.92
Adjusted EBITDA ($USD Millions)$12 $97 $157
Adjusted Diluted EPS ($USD)($0.35) $0.50 $0.41
Adjusted EBITDA Margin (%)n/a32% 25%

Segment/Revenue Composition

MetricQ4 2021Q3 2022Q4 2022
Contract Drilling Services Revenue ($USD Millions)$192.5 $289.0 $585.8
Reimbursables and Other ($USD Millions)$15.7 n/a$36.7
Marketed Fleet Utilization (%)70% 80% 81%

Operational KPIs

KPIQ4 2021Q3 2022Q4 2022
Floaters Operating Days751 792 1,320
Jackups Operating Days622 606 1,201
Total Operating Days1,373 1,398 2,521
Average Dayrate – Floaters ($/day)$195,812 $285,362 $303,734
Average Dayrate – Jackups ($/day)$96,087 $118,209 $118,089
Average Dayrate – Total ($/day)$150,620 $212,958 $215,751

Cash Flow, Balance Sheet, Backlog

MetricQ4 2021Q3 2022Q4 2022
Cash Flow from Operations ($USD Millions)$27.6 $73.5 $171.2
Free Cash Flow ($USD Millions)($9.1) $43.8 $106.1
Cash Paid for Capex ($USD Millions)$36.7 $29.7 $65.1
Capital Expenditures (reported) ($USD Millions)n/a$41 $77
Total Debt ($USD Millions)n/an/a$673
Cash and Equivalents ($USD Millions)n/an/a$476
Net Debt ($USD Millions)n/a$12 $197
Liquidity ($USD Millions)n/a$1,077 $1,130
Backlog ($USD Billions)n/a$3.9 $3.9

Notes:

  • Reported capex ($77M) differs from “cash paid for capex” used in FCF reconciliation ($65M) due to cash timing; FCF was calculated as CFO $171.2M less cash capex $65.1M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA ($USD Millions)Q4 2022$155–$175 $140–$150 Lowered due to Regina Allen downtime; actual came in at $157 (> January range)
Revenue ($USD Billions)FY 2023n/a$2.35–$2.55 New
Adjusted EBITDA ($USD Millions)FY 2023n/a$725–$825 New
Capex, net ($USD Millions)FY 2023n/a$325–$365 New
Cash TaxesFY 2023n/aJust over 10% of Adjusted EBITDA New
Jackup EBITDA contributionFY 2023n/a~10% of total EBITDA guidance New
SPS Major Projects (rig count)FY 2023n/a7 rigs planned (30–60 days downtime typical) New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2022)Previous Mentions (Q3 2022)Current Period (Q4 2022)Trend
Deepwater dayrates/UDW utilizationUS GOM leading-edge ~$400k; tightening market, reactivation costs $75–$100M with ~1-year timeline Tier-1 drillships >95% utilization; low/mid-$400k/day; demand rising in 2023 “Best in 20 years” setup; path to potential $500k fixtures; average floater backlog ~$400k/day Up
Regional demand (Golden Triangle, Brazil, W. Africa)West Africa contracting surge; Brazil demand expected; Guyana/Suriname central Brazil renewals/extensions; W. Africa late mover now rising; GOM steady Brazil could add 5–7 floaters; W. Africa likely deficit by 2024; GOM flat-to-up 1–2 rigs Up
Jackups/North Sea dynamicsImproving pricing to $120–$130k in harsh environment; lagging recovery vs floaters Aker BP framework visibility through 2027; Norway recovery by mid-2024 UK windfall tax headwind; Norway demand improvement visible from mid-2024; jackups ~10% of 2023 EBITDA Mixed near term; improving later
Contract terms & mobilizationCustomers shifting to direct negotiations; fewer tender participants —Better mobilization cost recovery and termination protections Improving
Supply chain/inflationHigh single-digit rig-level inflation expected High single-digit inflation persistent into 2023 High single-digit inflation embedded in 2023 guide; SPS cycle pinch points Persistent
Reactivations (Meltem)Reactivation cost $75–$100M; 12 months —Need significant upfront (~half) and guaranteed returns; evaluating Golden Triangle opportunities Disciplined; selective
ESG/CCUS——Noble Resolve at Project Greensand (offshore carbon capture) Emerging

Management Commentary

  • “As a newly combined company, we generated strong free cash flow, implemented a return of capital program, and are well on track to achieving our synergy target of $125 million, with $50 million realized as of the end of 2022.” — Robert W. Eifler, CEO .
  • “The fundamental setup for our industry is arguably the best that it has looked in the past 20 years… day rates continue to rise in direct correlation with incremental demand growth.” — CEO .
  • “We expect to generate approximately 65% of our 2023 EBITDA in the second half of the year.” — CFO .
  • “Returning capital is central to our capital allocation strategy… we will look to return at least 50% of our free cash flow to shareholders.” — CFO .
  • “We would require a firm guaranteed contract with an attractive full payout plus return on capital in order to move forward [with Meltem reactivation].” — CEO .

Q&A Highlights

  • Rig reactivation (Meltem): Management seeks significant upfront (~half) and guaranteed returns; near-term opportunities centered in Golden Triangle; cautious timing to preserve FCF trajectory .
  • Jackup strategy/North Sea: Not relocating UK/Norway-class rigs; managing whitespace costs; expecting late-2024 Norway recovery; UK windfall tax was a major headwind .
  • Floater rates and contracting: Path to $500k/day fixtures exists; strategy balances rising rates with select long-term contracts; Guyana contracts provide valuable visibility .
  • SPS costs/downtime: Drillship 10-year SPS capital typically $20–$40M, rig-dependent; downtime (30–60 days) materially impacts revenue at current dayrates .
  • Backlog gap fill: Additional 2023 backlog expected primarily from floaters; DP+ moored semis targeting late-2023/early-2024 starts .
  • Inflation and pass-through: High single-digit cost inflation assumed through 2024; pricing resets expected to reflect increased costs; some contracts include cost recovery .

Estimates Context

  • We attempted to retrieve S&P Global consensus for Q4 2022 (EPS, revenue, EBITDA) but the service returned errors; consensus data was unavailable at time of analysis, so we cannot quantify beats/misses versus Street estimates [functions.GetEstimates errors].
  • Given 2023 guidance and management’s H2 weighting, we expect sell-side models (where available) to adjust for: higher H2 EBITDA contribution, SPS downtime timing, jackup under-earning in 2023, and floater repricing momentum .

Key Takeaways for Investors

  • Q4 delivered strong operational and financial performance with significant FCF and a $3.9B backlog; the integration is tracking ahead with $50M synergies realized (bold: resilient delivery despite operational headwinds) .
  • 2023 guide implies material H2 skew; dayrate momentum and operating days ramp should drive sequential EBITDA and FCF increases—position sizing should consider timing of SPS and whitespace .
  • Jackups remain a later-cycle upside call option; near-term EBITDA contribution ~10% and North Sea recovery visibility improves from mid-2024 (portfolio patience warranted) .
  • Floater cycle is tightening further; path to $500k/day fixtures and improved T&Cs supports margin expansion—exposure to Tier-1 drillships is the key lever (bold: dayrate upside narrative) .
  • Capital returns are a core pillar: ~$96M repurchased in Q4 plus $10M in January; conservative balance sheet maintained with subsequent $150M loan repayment—monitor future buyback cadence versus FCF .
  • Watch operational catalysts: Globetrotter I permitting progress, Meltem reactivation terms, semis DP+ moored awards, and SPS execution to minimize downtime slippage .
  • Estimate revisions (once available) should reflect guidance components (reimbursables and contract amortization ~+$200M revenue, cash taxes ~10% of Adj. EBITDA) and H2 weighting .