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Noble’s 1Q16 Contract Drilling Revenue

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Apr. 29 2016, Published 12:27 p.m. ET

Revenue

Noble Corporation’s (NE) contract drilling revenue for 1Q16 was $591 million compared to 4Q15’s revenue of $837 million, or $693 million excluding the contract termination payment of approximately $145 million on the Noble Discover.

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What impacted revenue?

The 15% decline compared to 4Q15’s adjusted revenue was primarily driven by a decrease in operating days. Contract cancellation and subsequent retirement of Noble Discover and unfavorable day rate adjustments contributed to the decline in revenue. Fleet utilization dropped to 79% in 1Q16 as compared to 83% in the previous quarter. Also, the average daily revenue in 1Q16 was $287,200 as compared to $304,400 in the previous quarter.

Peers’ revenues

In the offshore drilling (IYE) sector, only Noble and Ensco have released their 1Q16 earnings so far. Wall Street analysts’ expectations for other drilling companies are as follows:

  • Transocean’s (RIG) revenue is expected to fall by 39% to $1,111 million in 1Q16 from the previous quarter’s revenue of $1,851.
  • Revenues for Diamond Offshore Drilling (DO) and Pacific Drilling (PACD) are expected to fall by 25% each.
  • Ocean Rig’s (ORIG) 1Q16 revenue estimate is $427 million, a 10% drop from $475 million in 4Q15.
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Industry outlook

In its 1Q16 conference call, Noble gave insight on its outlook for the offshore drilling (IYE) industry. The company noted that the 50% recovery in crude oil prices from the lows experienced in January is a positive sign, but this favorable move has yet to translate into a positive change in customer activity. Customers are maintaining a cautious approach with a focus on cost reduction. The company expects this mood to persist through 2016.

Noble believes if crude oil prices demonstrate some sustainability through the 2017 budget cycle, it will bode well with upstream spending.

Noble states that offshore activity levels for both the floating and jack-up rig segments remain low. According to Noble, floating rig demand in South America is expected to trend lower. The Middle East has a healthy level of jack-up rig demand, and in India, there is a possibility of incremental demand for floating and jack-up rigs. Activity in West Africa is expected to be flat to contractionary.

In the next part of this series, we’ll look at Noble’s costs.

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