Noble Corporation (



Q4 2011 Earnings Call

January 26, 2012 09:00 am ET


Jeff Chastain - VP, IR

David Williams - Chairman, President and CEO

James MacLennan - SVP, CFO and Controller

Roger Hunt - SVP, Marketing and Contracts


Ian Macpherson - Simmons and Company

Kurt Hallead - RBC Capital Markets

Robin Shoemaker - Citigroup

Matt Conlan - Wells Fargo

Scott Gruber - Sanford Bernstein

Jim Crandell - Dahlman Rose

Todd Scholl - Clarkson Capital

Joe Hill - Tudor Pickering Holt

Dave Wilson - Howard Weil

James West - Barclays Capital

Robert Mackenzie - FBR Capital Markets

David Smith - Johnson Rice



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Good morning. My name is Regina and I will be your conference operator today. At this time I would like to welcome everyone to the Noble Corp fourth quarter yearend 2011 earnings call. (Operator Instructions.) As a reminder, ladies and gentlemen, this conference is being recorded today, Thursday, January 26


, 2012. Thank you.

I would now like to introduce Mr. Jeff Chastain, Vice President of Investor Relations. Mr. Chastain, you may begin your conference.

Jeff Chastain

Thank you, Regina, I would like to welcome everyone this morning to Noble Corporation’s fourth quarter 2011 earnings call. A copy of the company’s earnings report issued last evening along with the supporting statements and schedules can be found on the Noble website at

Also let me use this opportunity to notify you that members of the executive management of Noble will host an Analyst Day on Thursday, May the 24


. The event which will begin with a reception on the evening of May 23


will cover strategic, financial operations and marketing discussions and will include a tour of the company’s subsea control center in North Houston. Additional details will be sent out shortly and will also be available on the Noble website. We hope you can confirm your attendance.

Before I turn the call over to David, I’d like to remind everyone that any statements we make about our plans, expectations, estimates, predictions or similar expressions for the future, including those concerning the drilling business, the financial performance, operating results, tax rates, spending guidance, backlog, day rates, market outlook, contract commencements, tenders, extensions or announcements; rig demand, fleet condition or performance; industry fundamentals; new build delivery costs and dates, and plans and objectives of management for future operations are all forward-looking statements and are subject to risks and uncertainties.

Our filings with the US Securities and Exchange Commission which are posted on our website discuss the risks and uncertainties in our business and industry and the various factors that could keep outcomes of any forward-looking statements from being realized. Our actual results could differ materially from these forward-looking statements.

Also note that we may use non-GAAP financial measures in the call today. If we do you will find the required supplemental disclosure for these measures including the most directly comparable GAAP measure and an associated reconciliation on the website.

I’ll now turn the call over to David Williams, Chairman, President and Chief Executive of Noble.

David Williams

Thanks, Jeff. Good morning and thank you for joining us on the call today. With me and in Geneva in addition to

Jeff is James MacLennan, our new Senior Vice President and Chief Financial Officer who joined the company on January 9


. James comes to Noble with a prune track record as a versatile and experienced finance executive having serviced as Chief Financial Officer at several multinational companies.

You will have the opportunity to meet James in the company weeks as we conduct meetings with many of you. In addition to James today, Roger Hunt is here, our Senior Vice President of Marketing and Contracts and Dennis Lubojacky, Vice President and Controller.

I will begin today with some general comments on our 2011 accomplishments that we expect will create value in future quarters including progress made towards our fleet transformation. I will talk briefly on the fourth quarter results specifically as it pertains to downtime during the quarter and how we are addressing this issue.

I will then turn the call over James who will provide more detail comments on our quarterly performance and give you some guidance for 2012. After that Roger will follow with some color on the offshore market and some of the exciting developments that we are observing around the world. I will then make some final comments before we would take your questions.

We began 2011 with six rigs under construction consisting of the two Bully-class and the two globetrotter class drill ships along with two JU-3000N high specification jack-ups that we ordered right at the

very end of 2010. During

2011, we placed new orders for four more ultra-deepwater drill ships from Hyundai and four additional JU-3000N jack-ups from Jurong taking total project commitments at one point of the year to 14.

However, with the departure from the shipyard of the Noble Bully I in September and the Noble Bully II and Globetrotter I in December, we ended 2011 with 11 shipyard projects in progress and three rigs in various stages of acceptance testing, prior to actually commencing work later this quarter.

To update you, the Noble Bully I successfully deployed it’s BOP in the US Gulf of Mexico and is expected to begin its five-year contract within the next couple of weeks. The Noble Bully II is in transit to Brazil where we expect the rig to begin its 10-year contract in March and the Noble Globetrotter I has completed its required incline test and will conduct its sea trials and mobilize the US Gulf of Mexico, commencing its 10-year contract right about the very end of March.

The eight new rig orders placed last year were significant highlights in 2011 as they support our strategy to transform the Noble fleet into one of the most modern and versatile in the industry and we’re delighted with the pricing we’re able to negotiate on these units, especially when you consider the advanced technology that was built in all of the rigs.

We currently have three drillships and all six jack-ups uncontracted. These uncontracted units have, what we believed will be very attractive delivery points in late 2012, 2013 and 2014 and given our outlook, current assumptions regarding future offshore drilling activity and requirements by operators for this capability, we are confident we will secure contracts prior to delivery. We view this capacity as a huge positive

going forward.

Another highlight in 2011 was our success in penetrating some new offshore regions as we look to diversify our operations geographically. We opened an office in Anchorage, Alaska, to support our client Shell with their planned Arctic drilling program, which hopefully will commence in 2012. Noble personnel are expected to provide drilling support on the Shell-owned, [Culak] floating drilling unit and Shell awarded the Noble drillship Nobel Discoverer, a two-year contract in the fourth quarter of 2011 to provide additional drilling services.

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