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Noble Corporation’s Backlog

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Backlog

A company’s backlog often indicates where future revenues of the company might be. It also indicates how much of the company’s fleet operates in the time charter market and how much in the spot market. Noble Corporation has a total backlog of $8,689 million compared to $9,425 million at the end of the previous quarter.

  • The backlog for the remaining half of the year stands at $1,479 million, which equals 95% of revenue recorded in first half of the year.
  • Similarly, the backlogs for 2016 and 2017 stand at $2,476 million and $1,524 million, respectively, comprising 78% and 48% of total 2014 revenue, respectively.
  • The backlogs for 2016 and 2017 are a result of 79% and 63% of available days committed, respectively.
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Comparing backlog with those of peers

  • Noble Corporation’s (NE) total revenue backlog was 276% of its 2014 revenue. This is currently one of the highest backlogs in the offshore (IYE) industry.
  • We have calculated the total backlog as a percentage of 2014 revenue. This figure for Diamond Offshore (DO) is 211%. Seadrill (SDRL), Pacific Drillers (PACD), Ensco (ESV), and Atwood Oceanics (ATW) came in at 151%, 174%, 162%, and 593%, respectively.

Are backlogs sustainable?

  • In the current industry scenario, customers negotiating or canceling contracts for their convenience has been very common. This poses a great threat not only to the existing backlog but also to the future revenues of the company.
  • Certain contracts of Noble Corporation (NE) give the customer the right to terminate a contract, which requires minimal or no notice or financial penalties. However, as of July 27, 2015, the company had not received any notification of contract cancellation.
  • The company’s management mentioned it is willing to lower the day rate for existing contracts in exchange for longer terms if such opportunity exists. This may decrease yearly backlogs and revenue, but the company would lock in stable cash flow for a longer period of time.
  • New long-term contracts seem to be rare in this industry downturn. Noble Corporation mentioned it was successful in securing some new short-term contracts, which it considers an accomplishment in this highly competitive environment.
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