F2Q10 Earnings Call

July 20, 2010  09:00 a.m. ET


Tom Michello - CFO

Roger Hunt – VP of Marketing Contracts




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Good morning. My name is Regina, and I will be the conference operator today. At this time, I would like to welcome everyone to the Noble Corporation Second Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers prepare remarks, there will be a question and answer period. If you would like to ask some question during that time, simply press * and the number 1 on your telephone keyboard. If anyone should need assistance at any time during this conference, press *, then 0, and an operator will assist you. As a reminder, ladies and gentlemen, this conference is being recorded today, Tuesday, July 20, 2010. Thank you. I would now like to introduce Mr. Lee Ahlstrom, Vice President of Investor Relations & Planning. Mr. Ahlstrom, you may begin your conference.

Lee Ahlstrom

Thank you, Regina, and welcome everyone to Noble Corporation’s Second Quarter 2010 Earnings Call. Before we begin, I would like to remind everyone that any statement we make today about our plan, expectations, and submit, predictions and expressions in the future, including those concerning financial performance, operating results, tax rates, spending guide, drilling business, the period of restricted drilling activity in the US, Gulf, and Mexico, and the effects of our confirmation of the previously announced Frontier transaction and Shell Agreements, our forward-looking statements are subject to risk, and I am certain these are falling with the US Securities and Exchange Commission, which are hosted on our website. Discuss the risks, and I am certain these are all business in the industry, and the various fact that they could keep outcomes of any forward-looking statements from being realized. Our actual results could differ materially from these forward-looking statements. We have included Summary Balance Sheets and incoming Cashworth Statements with our Earning mutually. Also, note that we may use Non-Gap financial measures in the call today.

If we do, you will find to require supplemental disclosure for these measures, including the most directly comparable Gap measure on our website, and an associated Reconciliation also on our website. Now, I return the call over to David Williams, Chairman, President, and Chief Executive Officer.

David Williams

Thanks, Lee. Good morning to everyone, and thanks for joining us today. It has certainly been an eventful time from the tragic events in the Gulf of Mexico, and the impact resulting in drilling limitations to our recently announced Agreement to our [ ] Frontier Drilling, and further, our step Agreement which shall provide unprecedented backlog, and some [ ]. To put it mildly, it has been a busy quarter. Joining today on call, are Tom Michello, CFO and our Senior VP of Marketing Contracts, Roger Hunt . Our prepared remarks will be relatively brief. In addition, because our new Frontier has not closed yet, we were not be able to provide you much more details within our call on June 28, 2010.

For those of you who might have missed the Frontier news, let me offer a very brief recap - Noble has agreed to acquire Frontier drilling and a cash transaction advice the enterprise at $2.16 billion. We will fund this with a combination of cash and debt, the DO and the net PSO, and six fully drilling units, including two high-spect dynametry position Ultra-deep water


-class drillships that are 50-50 by Joint Ventures between Shell and Frontier. Together, this part of the deal adds about 23 rigyears of work, and $3.2 billion to a close backlog. On top of this, our separate Agreements with Shell which provide term transaction of two new Ultra-deep water drillships, one of which is the

Noble Globetrotter

already on construction. And one is yet unnamed ship, plus a three-year extension on the

Noble Jim Thompson

. The ships are both at rates of $410,000 per day for the first five years, and go for an index in years 6 to 10+, at 15% upside in the form of bonus potential [ ] term.

Now, last important one agreement with Shell with protected backlog on the

Noble Danny Adkins


Noble Jim Thompson

, and

Frontier Driller

, while drillings operations in the Gulf was restricted by Government mandate - all without losing a day of backlog at their dayrates. Altogether, both of these commanded at more than $7 billion in growth contract backlog, and over 45 years of rigging work. These agreements collectively, will take our estimated gross backlog up to $40 million dollars, almost twice our current market Gap, and demonstrate the growth strategy that we have been sharing for you for sometime. We are very excited about this opportunity, and the further demonstrate Shells forllowed on [ ] this recent announcement - Shell has also committed to a two-year extension on the Noble Horse , at $175,000 per day for continuing operations in North Sea.

Our strategy of booking secured backlog we now see for super majors is alive and well, and we are delighted with the level of commitment competence for Shell and Stone, and Shell and Noble. We can really comment too much more, but we are honored to say we continue to expect transaction pull by nearer the month, obviously in deal with the size, we are going to have amplifications, both for expenses and capital expenditures, and although we are working to refine the impact of these transactions, we won't be able to provide some of the needed details which were aptly quoted. As a result, we won't be providing any updated gauge [ ] day on the Frontier side of the transaction. One thing I can show is that we will be working on plans to fully immerse the Frontier Cruise and Noble staking operational culture, something which I see, is central in integrating these operations into the fleet.

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