NOBLE CORPORATION PLC The following discussion is intended to assist you in understanding our financial position atMarch 31, 2022 , and our results of operations for the three months endedMarch 31, 2022 , the period fromFebruary 6 through March 31, 2021 and the period fromJanuary 1 through February 5, 2021 . The following discussion should be read in conjunction with the condensed consolidated financial statements and related notes contained in this Quarterly Report on Form 10-Q, the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year endedDecember 31, 2021 filed by Noble Corporation, an exempted company incorporated in theCayman Islands with limited liability ("Noble" or "Successor"), andNoble Finance Company (formerly known as Noble Corporation), aCayman Islands company ("Finco"), and our other filings with theUS Securities and Exchange Commission ("SEC"). OnJuly 31, 2020 (the "Petition Date"), our former parent company, Noble Holding Corporation plc (formerly known as Noble Corporation plc), a public limited company incorporated under the laws ofEngland andWales ("Legacy Noble" or the "Predecessor"), and certain of its subsidiaries, including Finco, filed voluntary petitions in theUnited States Bankruptcy Court for the Southern District of Texas (the "Bankruptcy Court ") seeking relief under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code"). OnSeptember 4, 2020 , the Debtors (as defined herein) filed with theBankruptcy Court the Joint Plan of Reorganization of Noble Corporation plc and its Debtor Affiliates, which was subsequently amended onOctober 8, 2020 andOctober 13, 2020 and modified onNovember 18, 2020 (as amended, modified or supplemented, the "Plan"), and the related disclosure statement. OnSeptember 24, 2020 , six additional subsidiaries of Legacy Noble (together with Legacy Noble and its subsidiaries that filed on the Petition Date, as the context requires, the "Debtors") filed voluntary petitions in theBankruptcy Court . The chapter 11 proceedings were jointly administered under the caption Noble Corporation plc, et al. (Case No. 20-33826) (the "Chapter 11 Cases"). OnNovember 20, 2020 , theBankruptcy Court entered an order confirming the Plan. In connection with the Chapter 11 Cases and the Plan, on and prior to the Effective Date (as defined herein), Legacy Noble and certain of its subsidiaries effectuated certain restructuring transactions pursuant to which Legacy Noble formed Noble as an indirect wholly-owned subsidiary of Legacy Noble and transferred to Noble substantially all of the subsidiaries and other assets of Legacy Noble. OnFebruary 5, 2021 (the "Effective Date"), the Plan became effective in accordance with its terms, the Debtors emerged from the Chapter 11 Cases and Noble became the new parent company. In accordance with the Plan, Legacy Noble and its remaining subsidiary will in due course be wound down and dissolved in accordance with applicable law.The Bankruptcy Court closed the Chapter 11 Cases with respect to all Debtors other than Legacy Noble, pending its wind down. Noble is the successor issuer to Legacy Noble for purposes of and pursuant to Rule 15d-5 of the Exchange Act. References to the "Company," "we," "us" or "our" in this Quarterly Report are to Noble, together with its consolidated subsidiaries, when referring to periods following the Effective Date, and to Legacy Noble, together with its consolidated subsidiaries, when referring to periods prior to the Effective Date. Finco was an indirect, wholly-owned subsidiary of Legacy Noble prior to the Effective Date and has been a direct, wholly-owned subsidiary of Noble since the Effective Date. Noble's principal asset is all of the shares of Finco. Finco has no public equity outstanding. The condensed consolidated financial statements of Noble include the accounts of Finco, and Noble conducts substantially all of its business through Finco and its subsidiaries. As such, the terms "Predecessor" and "Successor" also refers to Finco, as the context requires. 29 --------------------------------------------------------------------------------
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes "forward-looking statements" within
the meaning of Section 27A of the US Securities Act of 1933, as amended, and
Section 21E of the US Securities Exchange Act of 1934, as amended. All
statements other than statements of historical facts included in this report or
in the documents incorporated by reference, including those regarding the impact
of our emergence from bankruptcy on our business and relationships, the global
novel strain of coronavirus ("COVID-19") pandemic and agreements regarding
production levels among members of the Organization of Petroleum Exporting
Countries ("OPEC") and other oil and gas producing nations (together with OPEC ,
"OPEC+"), and any expectations we may have with respect thereto, and those
regarding rig demand, peak oil, the offshore drilling market, oil prices,
contract backlog, fleet status, our future financial position, business
strategy, impairments, repayment of debt, credit ratings, liquidity, borrowings
under any credit facilities or other instruments, sources of funds, future
capital expenditures, contract commitments, dayrates, contract commencements,
extension or renewals, contract tenders, the outcome of any dispute, litigation,
audit or investigation, plans and objectives of management for future
operations, foreign currency requirements, results of joint ventures, indemnity
and other contract claims, reactivation, refurbishment, conversion and upgrade
of rigs, rig acquisitions and dispositions, industry conditions, access to
financing, impact of competition, governmental regulations and permitting,
availability of labor, worldwide economic conditions, taxes and tax rates,
indebtedness covenant compliance, dividends and distributable reserves, timing,
benefits or results of acquisitions or dispositions (including the Pacific
Drilling Merger and the Business Combination (each as defined herein) and our
plans, objectives, expectations and intentions related to the Pacific Drilling
Merger and the Business Combination), and timing for compliance with any new
regulations are forward-looking statements. When used in this report or in the
documents incorporated by reference, the words "anticipate," "believe,"
"continue," "could," "estimate," "expect," "intend," "may," "might," "plan,"
"possible," "potential," "predict," "project," "should," "would," "shall,"
"will" and similar expressions are intended to be among the statements that
identify forward-looking statements. Although we believe that the expectations
reflected in such forward-looking statements are reasonable, we cannot assure
you that such expectations will prove to be correct. These forward-looking
statements speak only as of the date of this Quarterly Report on Form 10-Q and
we undertake no obligation to revise or update any forward-looking statement for
any reason, except as required by law. We have identified factors, including but
not limited to risks and uncertainties relating to the Business Combination with
Maersk Drilling (as defined herein) (including the risk that the Business
Combination may not be completed in a timely manner or at all, the failure to
satisfy the conditions to the consummation of the Business Combination, the
occurrence of any event, change or other circumstance that could give rise to
the termination of the Business Combination Agreement (as defined herein), the
effect of the announcement or pendency of the Business Combination on Noble's or
Maersk Drilling's business relationships, performance and business generally,
the risk that the proposed Business Combination disrupts current plans of Noble
or Maersk Drilling and potential difficulties in Noble's or Maersk Drilling's
employee retention as a result of the proposed Business Combination, the outcome
of any legal proceedings that may be instituted against Noble or Maersk Drilling
related to the Business Combination Agreement or the proposed Business
Combination, requirements, conditions or costs that may be imposed on Noble or
Maersk Drilling in connection with obtaining regulatory approvals of the
Business Combination, the ability of Topco (as defined herein) to list the Topco
Shares (as defined herein) on the New York Stock Exchange or Nasdaq Copenhagen
A/S , volatility in the price of the securities of the combined companies (Noble
and Maersk Drilling) due to a variety of factors, including changes in the
competitive markets in which Topco plans to operate, variations in performance
across competitors, changes in laws and regulations affecting Topco's business
and changes in the combined capital structure, the ability to implement business
plans, forecasts, and other expectations (including with respect to synergies
and financial and operational metrics, such as EBITDA and free cash flow) after
the completion of the proposed Business Combination, and to identify and realize
additional opportunities, the failure to realize anticipated benefits of the
proposed Business Combination, the potential impact of announcement or
consummation of the proposed Business Combination on relationships with third
parties, and risks associated with assumptions that parties make in connection
with the parties' critical accounting estimates and other judgments), the
effects of public health threats, pandemics and epidemics, such as the ongoing
outbreak of COVID-19, and the adverse impact thereof on our business, financial
condition and results of operations (including but not limited to our growth,
operating costs, supply chain, availability of labor, logistical capabilities,
customer demand for our services and industry demand generally, our liquidity,
the price of our securities and trading markets with respect thereto, our
ability to access capital markets, and the global economy and financial markets
generally), the effects of actions by or disputes among OPEC+ members with
respect to production levels or other matters related to the price of oil,
market conditions, factors affecting the level of activity in the oil and gas
industry, the conflict in Ukraine , supply and demand of drilling rigs, factors
affecting the duration of contracts, the actual amount of downtime, factors that
reduce applicable dayrates, operating hazards and delays, risks associated with
operations outside the United States ("US"), actions by regulatory authorities,
credit rating agencies, customers, joint venture partners, contractors, lenders
and other third parties, legislation and regulations affecting drilling
operations, compliance with or changes in environmental, health, safety, tax and
other regulations or requirements or initiatives (including those addressing the
impact of global climate change or air emissions), violations of anti-corruption
laws, shipyard risk and timing, delays in mobilization of rigs, hurricanes and
other weather conditions, and the future price of oil and gas, that could cause
actual plans or results to differ materially from those included in any
forward-looking statements. Actual results could differ materially from those
expressed as a result of various factors. These factors include those referenced
or described in Part I, Item 1A. "Risk Factors" of our Annual Report on Form
10-K for the year ended December 31, 2021 , in Part II, Item 1A. "Risk Factors"
of this Quarterly Report on Form 10-Q and in our other filings with the SEC . We
cannot control such risk factors and other uncertainties, and in many cases, we
cannot predict the risks and uncertainties that could cause our actual results
to differ materially from those indicated by the forward-looking statements. You
should consider these risks and uncertainties when you are evaluating us.
30
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Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act are available free of charge at our
website. The SEC maintains an internet site that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the SEC at http://www.sec.gov.
Our website address is http://www.noblecorp.com. Investors should also note that
we announce material financial information in SEC filings, press releases and
public conference calls. Based on guidance from the SEC , we may use the investor
relations section of our website to communicate with our investors. It is
possible that the financial and other information (including fleet status
reports) posted there could be deemed to be material information. Except to the
extent explicitly stated herein, documents and information on our website are
not incorporated by reference herein.
31
--------------------------------------------------------------------------------Executive Overview
Noble is a leading offshore drilling contractor for the oil and gas industry. As of the filing date of this Quarterly Report on Form 10-Q, Noble performs, through its subsidiaries, contract drilling services with a fleet of 19 mobile offshore drilling units, consisting of 11 floaters and eight jackups focused largely on ultra-deepwater and high-specification jackup drilling opportunities in both established and emerging regions worldwide. We typically employ each drilling unit under an individual contract, and many contracts are awarded based upon a competitive bidding process. We report our contract drilling operations as a single reportable segment, Contract Drilling Services, which reflects how we manage our business. The mobile offshore drilling units comprising our offshore rig fleet operate in a global market for contract drilling services and are often redeployed to different regions due to changing demands of our customers, which consist primarily of large, integrated, independent and government-owned or controlled oil and gas companies throughout the world.
Recent Events
Business Combination with Maersk Drilling. The Business Combination Agreement has been unconditionally approved by the competition authorities inBrazil ,Norway , and theRepublic of Trinidad & Tobago . Accordingly, the only outstanding pre-closing merger control clearances are inAngola and theUK . We expect the competition authority inAngola to unconditionally approve the Business Combination duringMay 2022 . The merger control process for obtaining clearance in theUK remains ongoing following theUK Competition and Markets Authority's ("UK CMA") Phase 1 decision onApril 22, 2022 pursuant to which theUK CMA stated that the transaction gives rise to a realistic prospect of a substantial lessening of competition and that a remedy would be required to avoid a reference to a Phase 2 review. As a result, we and possibly Maersk Drilling plan to offer to divest certain jackup rigs currently located in theNorth Sea (the "Remedy Rigs") to seek to obtain conditional antitrust clearance from theUK CMA in Phase 1. The Remedy Rigs will comprise the Noble Hans Deul,Noble Sam Hartley ,Noble Sam Turner ,Noble Houston Colbert , and either the Maersk Innovator or the Noble Lloyd Noble, both of which are a CJ-70 design. We expect there to be clarity on which of the CJ-70 rigs will be included in the Remedy Rigs in the coming weeks. On this basis, we have started to examine different options to divest the Remedy Rigs. The duration and outcome of theUK CMA review process remains uncertain. If we are able to obtain a conditional Phase 1 antitrust clearance from theUK CMA, we expect closing of the Business Combination will occur in mid-2022.
Market Outlook
The global rig supply continues to come down from historic highs as Noble and other offshore drilling contractors retire less capable and idle assets. Concurrently, the incoming supply of newbuild offshore drilling rigs has diminished materially, with several newbuild rigs stranded in shipyards and generally requiring dayrates and contract terms in excess of what is currently available in the market. The recentRussia -Ukraine conflict and related sanctions have increased the volatility of global energy markets and oil prices reached a seven-year high in the first quarter of 2022. The combination of rising oil prices and a focus on energy security is favorable for the offshore oil and gas industry. However, the market outlook in our business varies by geographical region and water depth. We remain encouraged by the ongoing recovery in the ultra-deepwater floater market. Harsh environment jackup markets are showing stable opportunities and remain an important portion of our business. While we are cautiously optimistic about recent positive trends, our industry continues to face challenges and uncertainties and is unlikely to return to activity levels experienced in historical cycle peaks. Energy rebalancing trends have accelerated in recent years as evidenced by promulgated or proposed government policies and commitments by many of our customers to further invest in sustainable energy sources. Our industry could be further challenged as our customers rebalance their capital investments to include alternative energy sources and respond to the normal cycles that have historically existed in our industry. We expect inflationary pressures and supply chain disruptions to persist, which has led or may lead to increased costs of services. Nonetheless, the global energy demand is predicted to increase over the coming decades, and we expect that offshore oil and gas will continue to play an important and sustainable role in meeting this demand.
As of
32
--------------------------------------------------------------------------------Contract Drilling Services Backlog
We maintain a backlog of commitments for contract drilling services. Our contract drilling services backlog reflects estimated future revenues attributable to signed drilling contracts. While backlog did not include any letters of intent as ofMarch 31, 2022 , in the past we have included in backlog certain letters of intent that we expect to result in binding drilling contracts. We calculate backlog for any given unit and period by multiplying the full contractual operating dayrate for such unit by the number of days remaining in the period, and include certain assumptions based on the terms of certain contractual arrangements, discussed in the notes to the table below. The reported contract drilling services backlog does not include amounts representing revenues for mobilization, demobilization and contract preparation, which are not expected to be significant to our contract drilling services revenues, amounts constituting reimbursables from customers or amounts attributable to uncommitted option periods under drilling contracts or letters of intent. Backlog herein also has not been adjusted for the non-cash amortization related to favorable customer contract intangibles which were recognized on the Effective Date. The table below presents the amount of our contract drilling services backlog as ofMarch 31, 2022 , and the percent of available operating days committed for the periods indicated: Year Ending December 31, (2) Total 2022 (1) 2023 2024 (In thousands) Contract Drilling Services Backlog Floaters (3)(4)$ 965,873 $ 516,350 $ 448,226 $ 1,297 Jackups 197,270 175,464 21,806 - Total$ 1,163,143 $ 691,814 $ 470,032 $ 1,297 Percent of Available Days Committed (5) Floaters 66 % 43 % ** Jackups 72 % 6 % - % Total 68 % 27 % **
**Not a meaningful percentage.
(1)Represents a nine-month period beginning
(2)Some of our drilling contracts provide customers with certain early
termination rights and, in limited cases, those termination rights require
minimal or no notice and minimal financial penalties. Additionally, the table
includes backlog associated with the Remedy Rigs which we will or may be
required to divest in order to gain
(3)Two of our long-term drilling contracts withRoyal Dutch Shell plc ("Shell"), the Noble Globetrotter I and Noble Globetrotter II, contain a dayrate adjustment mechanism that utilizes an average of market rates that match a set of distinct technical attributes and is subject to a modest discount, beginning on the fifth-year anniversary of the contract and continuing every six months thereafter. Each of the contracts now has a contractual dayrate floor of$275,000 per day. Once the dayrate adjustment mechanism becomes effective and following any idle periods, the dayrate for these rigs will not be lower than the higher of (i) the contractual dayrate floor or (ii) the market rate as calculated under the adjustment mechanism. The impact to contract backlog from these amendments has been reflected in the table above and the backlog calculation assumes that, after any idle period at the contractual stacking rate, each rig will work at its respective dayrate floor for the remaining contract term. (4)Noble entered into a multi-year Commercial Enabling Agreement (the "CEA") with Exxon Mobil Corporation ("ExxonMobil") inFebruary 2020 . Under the CEA, dayrates earned by each rig will be updated at least twice per year to the projected market rate at the time the new rate goes into effect, subject to a scale-based discount and a performance bonus that appropriately aligns the interests of Noble and ExxonMobil. Under the CEA, the table above includes awarded and remaining term of one year and nine months related to each of the four following rigs: the Noble Tom Madden,Noble Bob Douglas ,Noble Don Taylor andNoble Sam Croft . Under the CEA, ExxonMobil may reassign terms among rigs. The aforementioned additional backlog included in the table above for periods where the rate is yet to be determined is estimated by using the most recently negotiated CEA rate. OnApril 1, 2022 , we signed an extension to the CEA which added an additional 7.4 years to the term, resulting in an increase of$702 million to our backlog, which is not reflected in the backlog above. 33 --------------------------------------------------------------------------------
(5)Percent of available days committed is calculated by dividing the total number of days our rigs are operating under contract for such period by the product of the number of our rigs and the number of calendar days in such period.
The amount of actual revenues earned and the actual periods during which revenues are earned may be materially different than the backlog amounts and backlog periods presented in the table above due to various factors, including, but not limited to, the impact of the COVID-19 pandemic, shipyard and maintenance projects, unplanned downtime, the operation of market benchmarks for dayrate resets, achievement of bonuses, weather conditions, reduced standby or mobilization rates and other factors that result in applicable dayrates lower than the full contractual operating dayrate. In addition, amounts included in the backlog may change because drilling contracts may be varied or modified by mutual consent or customers may exercise early termination rights contained in some of our drilling contracts or decline to enter into a drilling contract after executing a letter of intent. Backlog includes amounts representing revenues from the Remedy Rigs, which we may or will be required to divest to obtainUK CMA clearance due to uncertainty regarding the identity of the Remedy Rigs, timing of any divestiture, and other matters. See Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations-Executive Overview-Recent Events-Business Combination with Maersk Drilling." As a result, our backlog as of any particular date may not be indicative of our actual operating results for the periods for which the backlog is calculated. See Part I, Item 1A, "Risk Factors - Risks Related to Our Business and Operations - Our current backlog of contract drilling revenue may not be ultimately realized" in our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
As of
Strategy
Our business strategy focuses on a high-specification fleet of both floating and jackup rigs and the deployment of our drilling rigs in established and emerging offshore oil and gas basins around the world. We emphasize safe operations, environmental stewardship, and superior performance through a structured management system, the employment of qualified and well-trained crews and onshore support staff, the care of our surroundings and the neighboring communities where we operate, and other activities advancing our environmental sustainability, social responsibility, and good governance. We also manage rig operating costs through the implementation and continuous improvement of innovative systems and processes, which includes the use of data analytics and predictive maintenance technology. Our floating and jackup drilling fleet is among the most modern, versatile and technically advanced fleet in the industry, with the majority of our rigs having been delivered since 2011. Our fleet consists predominately of technologically advanced units, equipped with sophisticated systems and components prepared to execute our customers' increasingly complicated offshore drilling programs safely and with greater efficiency, contributing to an overall reduction of our carbon footprint. Our organization prioritizes financial discipline and cash flow generation and management will continue to evaluate our balance sheet, and focus on returning cash to shareholders, and improving our fleet of floating and jackup rigs, particularly focusing on higher specification rigs, to meet the demands of increasingly complex drilling programs required by our customers. Climate change is an environmental, social and economic challenge facing everyone today. We are committed to continuous improvement and a sustainable energy future, supported by our efforts to protect the environment throughout our operations and safely provide reliable and efficient services to allow access to resources essential for human and economic prosperity. Oversight of our sustainability is at the Board level, with theNominating, Governance and Sustainability Committee assisting in that oversight role with respect to the Corporation's sustainability policies and practices.
Results of Operations
Results for the three months endedMarch 31, 2022 compared to the period fromFebruary 6 through March 31, 2021 and the period fromJanuary 1 through February 5, 2021 Net loss for the three months endedMarch 31, 2022 was$36.7 million , or$0.54 per diluted share, on operating revenues of$210.2 million compared to a net loss for the period fromFebruary 6 through March 31, 2021 of$18.2 million , or$0.36 per diluted share, on operating revenues of$92.4 million and net loss for the period fromJanuary 1 through February 5, 2021 of$250.2 million , or$0.98 per diluted share, on operating revenues of$77.5 million . As a result of Noble conducting substantially all of its business through Finco and its subsidiaries, the financial position and results of operations for Finco, and the reasons for material changes in the amount of revenue and expense items for the three months endedMarch 31, 2022 , the period fromFebruary 6 through March 31, 2021 and the period fromJanuary 1 throughFebruary 5,2021 would be the same as the information presented below regarding Noble in all material respects, with the exception of operating income (loss) and the gain on bargain purchase. For the three months endedMarch 31, 2022 , the period fromFebruary 6 to March 31, 2021 and the period fromJanuary 1 to 34 --------------------------------------------------------------------------------February 5, 2021 , Finco's operating loss was$11.1 million lower, operating loss was$5.6 million lower and operating income was$0.3 million higher, respectively, than that of Noble. The operating loss difference is primarily a result of expenses related to corporate legal costs and administration charges attributable to Noble for operations support and stewardship-related services.
Key Operating Metrics
Operating results for our contract drilling services segment are dependent on three primary metrics: operating days, dayrates and operating costs. We also track rig utilization, which is a function of operating days and the number of rigs in our fleet. For more information on operating costs, see "-Contract Drilling Services" below.
The following table presents the average rig utilization, operating days and average dayrates for our rig fleet for the periods indicated:
Average Rig Utilization (1) Operating Days (2) Average Dayrates (2)
Successor Predecessor Successor Predecessor Successor Predecessor
Period From
Period From Period From Period From Three Months Period From January 1, 2021
Three Months February 6, 2021 Period From January February 6 , January 1, 2021 Ended February 6, 2021 through
Ended through March 1, 2021 through Three Months Ended 2021 through through February March 31 , through March 31 , February 5 ,March 31, 2022 31, 2021February 5, 2021 March 31, 2022 March 31, 2021 5, 2021 2022 2021 2021 Floaters 71 % 83 % 86 % 729 314 216 213,194$ 205,242 $ 231,745 Jackups 63 % 53 % 58 % 450 342 252 119,606 83,472 95,212 Total 68 % 64 % 68 % 1,179 656 468$ 177,458 $ 141,752 $ 158,228 (1)We define utilization for a specific period as the total number of days our rigs are operating under contract, divided by the product of the total number of our rigs, including cold stacked rigs, and the number of calendar days in such period. Information reflects our policy of reporting on the basis of the number of available rigs in our fleet, excluding newbuild rigs under construction. (2)An operating day is defined as a calendar day during which a rig operated under a drilling contract. We define average dayrates as revenue from contract drilling services earned per operating day. Average dayrates exclude the effect of non-cash amortization related to favorable customer contract intangibles. 35 --------------------------------------------------------------------------------
Contract Drilling Services
The following table presents the operating results for our contract drilling services segment for the periods indicated (dollars in thousands):
Successor Predecessor
Period from
January 1
Three Months Period from through
Ended March 31, February 6 through February 5,
2022 March 31, 2021 2021
Operating revenues:
Contract drilling services $ 195,035 $ 84,629 $ 74,051
Reimbursables and other (1) 15,195 7,804 3,430
210,230 92,433 77,481
Operating costs and expenses:
Contract drilling services 166,083 $ 79,589 46,965
Reimbursables (1) 13,478 7,044 2,737
Depreciation and amortization 25,605 14,244 20,622
General and administrative 17,524 7,927 5,727
Merger and integration costs 9,521 2,013 -
Gain on sale of operating assets, net (4,562) - -
Hurricane losses and (recoveries), net 17,212 - -
244,861 110,817 76,051
Operating income (loss) $ (34,631) $ (18,384) $ 1,430
(1)We record reimbursements from customers for out-of-pocket expenses as
operating revenues and the related direct costs as operating expenses. Changes
in the amount of these reimbursables generally do not have a material effect on
our financial position, results of operations or cash flows.
Contract Drilling Services Revenues.
Successor Predecessor
Three Months
Ended
Period from January 1, 2021 through
31, 2021 February 5, 2021
Floaters Jackups Floaters Jackups Floaters Jackups
Contract drilling services revenues $141.2 $53.8 $56.0 $28.6 $50.1 $24.0
Utilization 71 % 63 % 83 % 53 % 86 % 58 %
Operating Days 729 450 314 342 216 252
Average Dayrates $213,194 $119,606 $205,242 $83,472 $231,745 $95,212
Total rigs - Beginning 12 8 7 12 7 12
- Acquired 0 0 0 0 0 0
- Disposed 1 0 0 0 0 0
- Ending 11 8 7 12 7 12
Floaters. During the three months ended March 31, 2022 , floaters generated
revenue of $141.2 million with nine contracted rigs. Eight rigs were operational
for the full period and the ninth, the Noble Gerry de Souza, was in the shipyard
undergoing equipment upgrades for most of the period, followed by mobilization
and contract commencement on March 23, 2022 . The average floater utilization
decreased from the period ended March 31, 2021 , which was primarily driven by
the two floaters acquired through the Pacific Drilling Merger in April 2021
which remained cold stacked for the full quarter ended March 31, 2022 , and the
Noble Clyde Boudreaux, which was cold stacked prior to being sold in March 2022 .
During the three months ended March 31, 2022 , the average dayrates increased by
4% from the period ended March 31, 2021 . This was driven by increases in rates
for the floaters on the CEA with Exxon and the commencement of the Noble Gerry
de Souza contract,
36
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which includes reimbursement of equipment upgrades and mobilization costs to
Suriname. The higher rates have been partially offset by lower average rates on
the Noble Globetrotter I, Noble Globetrotter II and Noble Faye Kozak due to
higher downtime in the first quarter 2022, and the and Noble Stanley Lafosse ,
which had a lower contracted rate upon acquisition in April 2021 than the
average across the Noble fleet. Floater revenue was reduced by $14.1 million of
non-cash amortization related to customer contract intangibles, which were
recognized on the Effective Date.
During the period from February 6 through March 31, 2021 , floater contract
drilling services revenues totaled $56.0 million . Six of our seven floaters
operated the majority of the period. Floater revenue was reduced by (i) $8.5
million of non-cash amortization related to customer contract intangibles, which
were recognized on the Effective Date and (ii) the lower amortizations related
to deferred revenue that could not be recognized beyond the Effective Date.
Jackups. During the three months ended March 31, 2022 , jackups generated revenue
of $53.8 million with seven of our eight rigs contracted by the end of the
period. Five rigs were operational for the full quarter. The Noble Regina Allen
was preparing for operations in the second quarter 2022 and the Noble Sam
Hartley commenced preparations for operations in the third quarter 2022. The
average jackup utilization for the period ended March 31, 2022 increased from
the period ended March 31, 2021 as a result of five of our eight rigs being
operational for the full quarter, as compared to five of our then-twelve rigs
being operational for the full period ended March 31, 2021 . In the period ended
March 31, 2021 , several of our jackups did not operate the full period due to
suspensions and shipyard time. The total jackup fleet was reduced to eight after
the sale of four rigs in Saudi Arabia in the fourth quarter of 2021. During the
period ended March 31, 2022 , average dayrates increased by 43%. The increase was
primarily due to the Noble Lloyd Noble, which went back on contract and worked
the full period ended March 31, 2022 at a higher rate, and the sale of the rigs
in Saudi Arabia , which operated at rates lower than the fleet average.
During the period from February 6 through March 31, 2021 , jackup contract
drilling services revenues totaled $28.6 million . Eleven of our 12 jackups were
contracted of which five operated the entire period. One contracted rig, the
Noble Scott Marks, did not operate the entire period as a result of the work
suspension which began in May 2020 . The other contracted rigs not operating the
full period included the Noble Lloyd Noble, which completed its contract in late
February 2021 and subsequently moved to the shipyard to prepare for its upcoming
work in Norway , and the Noble Roger Lewis, which completed regulatory shipyard
maintenance during the period. This was offset by the Noble Sam Turner
commencing a new contract in early March 2021 .
January 1, 2021 to February 5, 2021 . During the period from January 1 through
February 5, 2021 , average dayrates for our floaters were benefited by a general
rise in dayrates in late 2020. Utilization for our floaters during this period
was benefited by the fact we had disposed of idled floaters in 2020 and had not
yet acquired certain uncontracted rigs in the Pacific Drilling Merger in April
2021 . Average dayrates and utilization for our jackup fleet during this period
were negatively affected by the lingering effects of the COVID-19 pandemic,
where five of the 12 jackups we began 2021 with were idled, as compared to one
of 13 rigs to begin the year 2020.
Operating Costs and Expenses
During the three months endedMarch 31, 2022 , contract drilling services costs, which includes our local administrative and operations support, totaled$166.1 million . During the three months endedMarch 31, 2022 , the total contract drilling services costs related to floaters was$103.8 million . During the period endedMarch 31, 2022 , costs substantially increased with 12 floaters in the fleet for a majority of the period as compared to seven in the period endedMarch 31, 2021 . The Pacific Drilling Merger inApril 2021 added five floater to the fleet, and the sale of the Noble Clyde Boudreaux had minimal effect on costs as it was cold stacked and sold in lateMarch 2022 . The Noble Gerry de Souza was in the shipyard undergoing equipment upgrades for most of the period, prior to mobilizing to Suriname for contract commencement in lateMarch 2022 . Two floaters acquired through the Pacific Drilling Merger remained cold stacked for the full quarter. During the three months endedMarch 31, 2022 , the total contract drilling services cost related to jackups was$62.3 million . Higher costs were incurred on the Noble Lloyd Noble related to increased labor costs for operations inNorway , integrated services, precontract and mobilization amortization. Two stacked rigs, the Noble Sam Hartley andNoble Regina Allen , had relatively high costs as they were in various stages of preparation for contracts commencing in the second and third quarter 2022. The higher costs were partially offset by the reduction of rigs when four jackups were sold inSaudi Arabia in the fourth quarter of 2021. During the period fromFebruary 6 through March 31, 2021 , contract drilling services costs totaled$79.6 million . There was a downward effect on operating costs in the period as a result of rigs stacked during the entire period, including the Noble Clyde Boudreaux,Noble Houston Colbert ,Noble Hans Deul andNoble Tom Prosser . The period also included lower amortizations for mobilization and pre-contract costs and lower insurance costs due to emergence from Chapter 11. During the period fromJanuary 1 through February 5, 2021 , contract drilling services costs totaled$47.0 million , and there was also a downward effect on operating costs in this period due to the stacking of the previously mentioned rigs for the entire period. 37 -------------------------------------------------------------------------------- Depreciation and Amortization. Depreciation and amortization totaled$25.6 million ,$14.2 million , and$20.6 million during the three months endedMarch 31, 2022 , the period fromFebruary 6 through March 31, 2021 , and the period fromJanuary 1 through February 5, 2021 respectively. Depreciation during the Successor period was impacted by the fair value remeasurement of our rigs as a result of the implementation of fresh start accounting on the Effective Date and has increased due to the rigs acquired from the Pacific Drilling Merger and offset by the recent sale of four jackups in the fourth quarter of 2021.
General and Administrative Expenses. General and administrative expenses totaled
Merger and Integration Costs. Noble incurred$9.5 million of merger and integration costs primarily as a result of the Business Combination Agreement with Maersk Drilling during the three months endedMarch 31, 2022 . Finco incurred$0.4 million of merger and integration costs in connection with the Pacific Drilling Merger during the three months endedMarch 31, 2022 . For additional information, see "Note 2- Acquisitions and Divestitures" to our condensed consolidated financial statements. Gain on Sale of Operating Assets. During the three months endedMarch 31, 2022 , Noble recognized a gain of$6.8 million in connection with the sale of the Noble Clyde Boudreaux, which was offset by additional costs recognized of$2.2 million related to the sale of rigs inSaudi Arabia in 2021. For additional information, see "Note 5- Property and Equipment" to our condensed consolidated financial statements. Hurricane losses and (recoveries), net. Noble incurred$17.2 million of costs during the three months endedMarch 31, 2022 , which primarily related to additional costs as a result of the incident. For additional information about the incident, see "Note 5- Property and Equipment" to our condensed consolidated financial statements. Other Income and Expenses Interest Expense. Interest expense totaled$7.7 million ,$6.9 million , and$0.2 million during the three months endedMarch 31, 2022 , the period fromFebruary 6 through March 31, 2021 , and the period fromJanuary 1 through February 5, 2021 respectively. The three months endedMarch 31, 2022 and the Successor period of 2021 included interest expense on our senior secured second lien notes (the "Second Lien Notes") and the successor period of 2021 had interest expense from borrowings under our Revolving Credit Facility. The Predecessor period of 2021 included reduced expenses due to theBankruptcy Court order of a stay on all interest expense during the pendency of the Chapter 11 Cases. For additional information, see "Note 6- Debt" to our condensed consolidated financial statements. Income Tax Provision (Benefit). We recorded an income tax benefit of$5.2 million and$7.0 million , during the three months endedMarch 31, 2022 and the period fromFebruary 6 through March 31, 2021 , respectively and we recorded an income tax expense of$3.4 million during the period fromJanuary 1 through February 5, 2021 . During the three months endedMarch 31, 2022 , our tax provision included net tax benefits of$3.8 million related to a release of valuation allowance forGuyana deferred tax benefits,$0.9 million related to an adjustment to Swiss deferred tax benefits, and$1.3 million related primarily to deferred tax adjustments. Such tax benefits were partially offset by tax expenses of$0.8 million related to various recurring items. During the period fromFebruary 6 to March 31, 2021 , our tax provision included tax benefits of$10.1 million related to US and non-US reserve releases. Such tax benefits were partially offset by tax expenses of$3.1 million related to various recurring items.
During the period from
Liquidity and Capital Resources
Senior Secured Revolving Credit Facility
As ofMarch 31, 2022 , we had no loans outstanding and$13.5 million of letters of credit issued under the senior secured revolving credit agreement ("Revolving Credit Facility") and an additional$6.3 million in letters of credit and surety bonds issued under bilateral arrangements. For additional information about our Revolving Credit Facility, see "Note 6- Debt" to our condensed consolidated financial statements.
Second Lien Notes Indenture
During the three months endedMarch 31, 2022 , there were no changes in the outstanding principal amount under the Second Lien Notes. Interest on the Second Lien Notes accrues, at Finco's option, at a rate of: (i) 11% per annum, payable in cash; (ii) 13% per annum, with 38 -------------------------------------------------------------------------------- 50% of such interest to be payable in cash and 50% of such interest to be payable by issuing additional Second Lien Notes ("PIK Notes"); or (iii) 15% per annum, with the entirety of such interest to be payable by issuing PIK Notes. Finco shall pay interest semi-annually in arrears onFebruary 15 andAugust 15 of each year, commencingAugust 15, 2021 . For accrual purposes, we have assumed we will make the next interest payment in cash and have accrued at a rate of 11%; however, the actual interest election will be made no later than the record date for such interest payment. For additional information about our Second Lien Notes, see "Note 6- Debt" to our condensed consolidated financial statements.
Sources and Uses of Cash
Our principal sources of capital in the current period were cash generated from operating activities and funding from our Revolving Credit Facility and Second Lien Notes. Cash on hand during the current period was primarily used for the following:
•normal recurring operating expenses; •fees and expenses related to merger & integration costs; and •capital expenditures.
Our currently anticipated cash flow needs, both in the short-term and long-term, may include the following:
•normal recurring operating expenses; •planned and discretionary capital expenditures; •repurchase, redemptions or repayments of debt and interest; •fees and expenses related to merger & integration costs; and •certain contractual cash obligations and commitments.
We may, from time to time, redeem, repurchase or otherwise acquire our outstanding Second Lien Notes through open market purchases, tender offers or pursuant to the terms of such securities.
We currently expect to fund our cash flow needs with cash generated by our operations, cash on hand, proceeds from sales of assets, or borrowings under our Revolving Credit Facility and we believe this will provide us with sufficient ability to fund our cash flow needs over the next 12 months. Subject to market conditions and other factors, we may also issue equity or long-term debt securities to fund our cash flow needs and for other purposes. Net cash used by operating activities was$51.8 million for the three months endedMarch 31, 2022 , net cash provided by operating activities was$18.2 million during the period fromFebruary 6 through March 31, 2021 , and net cash used in operating activities was$45.4 million for the period fromJanuary 1 through February 5, 2021 . The three months endedMarch 31, 2022 and the Predecessor had a cash outflow from operating assets and liabilities, while the period fromFebruary 6 through March 31, 2021 benefited from a cash inflow from operating assets and liabilities. We had working capital of$183.9 million atMarch 31, 2022 and$207.3 million atDecember 31, 2021 . Net cash used in investing activities was$32.8 million ,$15.1 million and$14.4 million for the three months endedMarch 31, 2022 , the period fromFebruary 6 through March 31, 2021 and the period fromJanuary 1 through February 5, 2021 , respectively. The three months endedMarch 31, 2022 includes the managed pressure drilling upgrade on the Noble Gerry de Souza offset against proceeds from the sale of the Noble Clyde Boudreaux. The Predecessor and Successor periods of 2021 include shipyard work on the Noble Lloyd Noble and the managed pressure drilling upgrade on the Noble Don Taylor andNoble Tom Madden . Net cash used in financing activities was$4.8 million , zero and$191.2 million for the three months endedMarch 31, 2022 , the period fromFebruary 6 through March 31, 2022 and the period fromJanuary 1 through February 5, 2021 , respectively. The Predecessor period included the repayment of Legacy Noble's 2017 Credit Facility, issuances of the Second Lien Notes and borrowings on the Revolving Credit Facility.
At
Capital Expenditures
Capital expenditures totaled
•$18.1 million for sustaining capital; •$14.1 million in major projects, including subsea and other related projects; and •$12.6 million for rebillable capital and contract modifications. Our total capital expenditure estimate for the year endingDecember 31, 2022 is expected to range between$170 million and$185 million , of which approximately$100 million to$115 million is currently anticipated to be spent for sustaining capital, and approximately$25 39 --------------------------------------------------------------------------------
million is anticipated to be reimbursed by our customers. Our current capital expenditure estimates are not inclusive of any potential merger capital outlay.
From time to time we consider possible projects that would require expenditures that are not included in our capital budget, and such unbudgeted expenditures could be significant. In addition, while liquidity and preservation of capital remains our top priority, we will continue to evaluate acquisitions of drilling units from time to time.
Guarantees of
Finco has issued the Second Lien Notes due 2028. The Second Lien Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured second-priority basis, by the direct and indirect subsidiaries of Finco that are Credit Parties under the Revolving Credit Facility (the "Guarantors"). The guarantees are unconditional, irrevocable, joint and several senior obligations of each Guarantor and rank equally in right of payment with all future senior indebtedness of such Guarantor and effectively senior to all of such Guarantor's unsecured senior indebtedness. For a discussion of the Second Lien Notes guarantees, see Part II, Item 7, "Guarantees ofRegistered Securities " in our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
Guarantor Summarized Financial Information
The summarized financial information below reflects the combined accounts of the Guarantors and the non-consolidated accounts of Finco (collectively, the "Obligors"), for the dates and periods indicated. The financial information is presented on a combined basis and intercompany balances and transactions between entities in the Obligor group have been eliminated.
Summarized Balance Sheet Information:
Successor
December 31,
March 31, 2022 2021
Current assets $ 304,351 $ 333,127
Amounts due from non-guarantor subsidiaries, current 5,218,166 5,150,694
Noncurrent assets 1,223,887 1,214,111
Amounts due from non-guarantor subsidiaries, noncurrent 646,778 646,778
Current liabilities 187,811 189,177
Amounts due from non-guarantor subsidiaries, current 5,895,323 5,254,540
Noncurrent liabilities 293,752 281,218
Amounts due from non-guarantor subsidiaries, noncurrent 407,111 168,873
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