Noble (NE) Q1 2026 earnings call transcript

Thank you, operator, and welcome everyone to Noble Corporation's first quarter 2026 earnings call. You can find a copy of earnings report, along with the supporting statements and schedules on our website at noblecorp. com. We will reference an earnings presentation that's posted in the Investor Relations page of our website as well. Today's call will feature prepared remarks from our president and CEO, Robert Eiffler, as well as our CFO, Richard Barker.

We also have with us Blake Denton, Senior Vice President of Marketing and Contracts, and Joey Kewaja, Senior Vice President of Operations. During the course of this call, we may make certain forward-looking statements regarding various matters related to our business and companies that are not historical facts. Such statements are based upon current expectations and assumptions of management and are therefore subject to certain risks and uncertainties.

Many factors can cause actual results to differ materially from these forward-looking statements, and Noble does not assume any obligations to update these statements. Also note, we are referencing non-GAP financial measures on the call today. You can find the required supplemental disclosure for these measures, including the most directly comparable GAP measure and an associated reconciliation and earnings report as you yesterday involved with the SEC.

Now, I'll turn the call over to Robert Eiffler, President and CEO of Noble.

Thanks, Ian. Welcome, everyone, and thank you for joining us. I'll open today's call with a brief summary of our Q1 highlights and recent contract awards, followed by an update on the market. Richard will then cover the financials before I wrap up with closing remarks and move to Q&A. During the first quarter, we earned adjusted EBITDA of $277 million and generated pre-cash flow of $169 million.

We again distributed our 50-cent quarterly dividend, and yesterday our board declared a 50-cent per share dividend for the second quarter, maintaining our consistent and highly differentiated return of cash strategy. Overall, there was a solid start to the year, and I'd like to thank our outstanding men and women of Noble around the world for your fantastic teamwork and helping us to realize our first choice offshore performance standards. While it's an understatement to say that energy markets have seen extreme volatility over the past couple of months since the outset of their end conflict, we are fortunate to have experienced limited operational disruption, confined to just one jacked up in the Middle East, the Makeoverion, which we sold in January, but have continued to operate under a bareboat agreement.

All of our crew and related personnel were safely evacuated from the rig during the early days of the conflict, and Richard will expand on the rig's current status. Outside of the war impacted region in the Middle East, commercial momentum throughout the offshore drilling market remains brisk, irrespective in many ways of the recent oil price surge. However, the recent reawakening of energy security concerns around the world, and the corresponding move higher in the oil future strip, are clearly supportive of the already steadily improving demand trends evident in the deep water and harsh environment offshore markets where we operate. Over the past three months, we secured new contract awards totaling approximately $565 million dollars.

First, the novel courage received an extension with petrographs of slightly more than three years, which will keep that rig committed in Brazil through the end of 2030. This extension represents net incremental backlog of $339 million, with the current day rate reduced from $290,000 to $280,000 from April 1, 2026 through late 2027, followed by the extension of slightly over three years, at just over $309,000 per day.

Next, I'm pleased to announce that the novel deliverer has been awarded a five-well contract from Woodside in Australia, which will support that rig's reactivation. This contract is valued at $121 million dollars based on an estimated 300 days of firm scope, excluding options, and also does not include revenue for additional services or potential rig upgrades. In Guyana, the novel developer has been awarded a one-well contract with ExxonMobil at $375,000 per day, which is scheduled to slot in after the rig's current program right around year-end.

Next, the novel black rhino has recently commenced an exercised option well for beacon in the U. S. Gulf, with an estimated duration of 100 days. In Guyana, the novel venture has been awarded a one-well contract with Planet One in Guyana at a day rate of $430,000, expected to commence late this year with estimated duration of approximately 45 days, with two unpriced options. And finally, in Southeast Asia, the novel Viking has received an additional one-well contract in Malaysia, which is expected to extend the rig through October this year.

With these awards, our current backlog stands at $7.5 billion dollars. Now, I'll share a few observations on recent developments in the market. In short, all measurable and anecdotal indicators of deepwater rig demand are flashing green. And I would submit that this is not a reflection of $100 oil, because most of what we're seeing in the market today has been in motion for months or longer. But of course, recent events absolutely have elevated energy security priorities around the world. And improved upstream cash flows will only serve to enhance an already strong and expanding demand picture and deepwater exploration thesis. In parallel, the volume of deepwater contract fixtures has spiked in the early part of this year.

Partially but not entirely due to the execution of Petrobras' wide-reaching contract extensions. The first quarter saw 32 rig years of UDW fixtures, which was roughly double the average quarterly run rate of last year. And with conclusion of Petrobras' extensions in April, this month alone has already had more than 40 additional UDW rig years fixed, bringing year-to-date backlog additions significantly above the entirety of last year's contracting volumes for the full year. Petrobras has comprised over half of 2026 year-to-date deepwater rig years fixed. And non-Petrobras' contracting activity has also continued at a healthy level. And notably, despite this recent surge in contract fixtures, the pipeline of open demand in the form of tenders and pretenders has actually continued to expand rather than deplete.

Last quarter we observed slightly over 100 rig years of open-flotor demand, which was a 33% year-on-year increase. This figure has now eclipsed 110 rig years. All this tendering activity is developing alongside an increasingly tightening supply-demand balance. Total UDW contracted utilization is currently 105 rigs, or 95% of marketed supply. This is approaching recent peak contracted demand levels of two years ago.

Albeit with markedly different directional momentum, especially considering the renewed links of backlog across the South America region, trucks deposed against open demand throughout the rest of the world that's now more than 55% higher compared to the previous high-water mark two years ago. The contracted UDW count of 105 includes 14 rigs with future contracts that aren't yet working today, six of which happen to be novel rigs. We have been anticipating the convergence of future contracted utilization in present utilization and a critical factor that could substantially eliminate industry-wide space and result in a comprehensively tight market. This convergence becomes increasingly tangible as these 14 future contracted assets ramp up over the next six to 12 months with average contractorations of two years per rig.

Taken together, all these market dynamics are resulting in upper day rate pressure. Therefore, we believe it is likely that we will begin to see floater rates move higher as we move through the rest of this year. So overall, with the continuing positive development of our backlog, as well as the state of the drilling market more broadly, we're even more optimistic about the years ahead than we were last quarter.

Now, I'll pass the call over to Richard for the financial review.

Thank you, Robert, and good morning of good afternoon. In my prepared remarks today, I will briefly review the highlights of our first quarter and then discuss the outlook for the remainder of 2026. Starting with our quarterly results, contract drilling services revenue for the first quarter totaled 742 million, adjusted EBITDA was 277 million and adjusted EBITDA margin for 35%. Q1 cash flow from operations was 273 million, capital expenditures were 104 million, and pre-cash flow was 169 million. I'd like to touch on a few discrete cash flow related items during the first quarter. Firstly, we received 210 million in cash proceeds from the Jakob sale to board drilling, in addition to the 150 million seller's note, which is recorded in other assets on the balance sheet.

Secondly, we completed the lease buyout on the first two of the four black ships, BOP systems, the 36.5 million. The buyout of the remaining two BOP systems is expected to occur during Q2 and Q4 this year for approximately 18 million each. In total, the lease buyout for all four systems is expected to cost 73 million. The cash outflow for these payments is not part of capital expenditures, but instead is part of financing activities on a cash flow statement.

Lastly, during the first quarter, we were doing 55 million principal amount of the 8.5% senior secured notes at 103 as an opportunistic and efficient use of capital.

At some rise on page five of the earnings presentation slide, a total backlog at the April 26th stands at 7.5 billion. As a reminder, a backlog excludes reimbursable revenue as well as revenue from ancillary services. Our current backlog includes approximately 1.8 billion, that is scheduled for revenue conversion during the remainder of 2026 and 2.4 billion scheduled for 2027. Referring to page nine of the earnings presentation, we are maintaining full year 2026 items for total revenue between 2.8 and 3 billion, which includes approximately 150 million in reimbursable and other revenue and adjusted EBITDA between 940 million to 1.02 billion. Capital expenditures guidance for this year is increased by 25 million, and this is due to the contract award supporting the reactivation of the noble deliverer.

The lower side of our adjusted EBITDA range is fully contracted by current backlog. Although we have banked to somewhat stronger than expected first quarter in terms of adjusted EBITDA, this is offset by a few discrete items. Including the recent Notice of Early Contract Termination on the Mycobrion, the lower near term day rate revision resulting from the coverage's blended extent, and slightly later estimated contract commencement dates for the Jerry DeSouza and Endeavour, driven by customer schedules.

Regarding the Mycobrion, recall that we close the sale to board drilling in January and have continued to manage the rig through the completion of its current contracting guitar with a corresponding bareboat that we paid to bore into early December 2026. On April 12, we received notice of early release from the customer, Huey LNG, and we are now in the process of winding down operations.

The contract termination is effective after 30 days, and this will result in an estimated negative impact of approximately 15 million due to our remaining bareboat obligations through early December, as well as stacking costs for the rig. To sum up, we have had a very solid start to 2026 with financial short point of view. With continued contract wins in the court and solid project execution, we continue to solidify the expected path to a healthy inflection of both EBITDA and pre-cash flows starting in 2027, as we outlined in detail on our cool last quarter.

With that, I'll now pass it back to Robert for concluding remarks.

Thank you, Richard. Starting in the summer with the Voyager, Jerry DeSouza, and interceptor startups, followed by the Valiant and Endeavor later this year, and then the Great White deliver adventurer throughout next year, we have a sharp organizational focus on project execution. This is a large slate of projects to deliver in a quote, normal time, and these are, of course, hardly normal times, given the various dislocations resulting from the Strait of Hormones so far, and we're incredibly excited to be preparing for commencement on these important drilling campaigns for our customers. These programs span virtually all of the major non-OPEC offshore basins around the world, which are increasingly critical to current and future energy supply.

To wrap up, as outlook for our business continues to improve, noble is very well positioned to grow into the next leg of the offshore drilling cycle with a strong balance sheet, $7.5 billion of backlog, and re-pricing opportunities across some of the most capable drill ships and jackups in the world. If anything, we feel better about 2027 today versus last quarter, given the deliverer contract, as well as the improving market dynamics confronting our open drill ship capacity. Meanwhile, we will continue to drive shareholder value through our robust return of capital program.

With that, I'll turn it back to the operator for questions. Answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. Again, that star followed by one on your telephone keypad. Kindly limit your question to one question and one follow-up.

Yeah, thanks, Arun. It's a good question. I think it's the topic on everyone's mind right now, including Arun. So I'd say a couple things. First of all, I'd reiterate that I think all of the positive indicators that we mentioned in our prepared remarks and that we're focused on right now started before the conflict in Iran.

And so this growing narrative around deep water, I think, is very real. And I think what I would say is there are certain regions that respond more quickly to oil prices in the deep water than others. Traditionally, the U. S. Gulf of Mexico has been one of those.

We're hopeful that we see something that comes perhaps as an early indicator out of the U. S. I think it's less likely that at this point today, our customers have re-written their budgets, or may a huge five or ten year move. That also would be a question for them. But I think from what we see in here, we don't have necessarily really tangible evidence today of positive changes that have hit us. But I think that we hear, obviously, positive narrative as you do, and we're pretty hopeful. And we don't really see any way that this doesn't turn out positively for our business on top of everything else that we've already seen. And these aren't necessarily the end-all be-all on indicators, but the numbers we used just a moment ago, I think are really striking when you think about the amount of deep water backlog that's been printed so far this year by noble and our competitors and compare that against the amount of outstanding activity that we've seen.

Obviously, our numbers were just open tenders, but they're direct negotiations and everything that comes along with our business behind all that as well. Got it, got it. And maybe just a housekeeping question, you guys are buying in your lease options on the BOPs, which you talked about in the prepared remarks. Can you maybe help us think about the impact on OPEX from buying in those BOPs? I'm thinking about maybe the impact in 26 and maybe as we think about 27 on a go-forward basis when you buy in all four of those leases. Sure. Yeah, so we're obviously buying in the leases during the course of this year and on an annualized basis, you want to have a benefit to end the time of about $25 million.

And so in 2026, probably half of that will be realized. Great. Thank you.

Thanks, Scott. I think that for sure, yes, there is an increase in narrative around and discussion around exploration work.

I don't know that, like I said before, I don't know that we can put our finger on a specific example that has a direct cause and effect related to a rant. But I think that generally we're seeing conversations, game momentum, and I think across the board, the realization that Deepwater is going to play a really important part in the supply stack, post everything that's happened here.

Our hope is that some of the demand that we've seen, whether it be from India or elsewhere, is more likely to solidify than before the Iran issue. But today, I'm not sure we'll wait. And then on the developer, you know, on that rig, you bumped a four-year cap expect $25 million for the reactivation cost. Is that the total cost of restart? Or is there some more spend required next year? And then does the incremental spend, including the upgrade investment that would add to the day rate? Or is that just your restart cost?

Yeah, the total that the $25 million is the total required for the Woodside contract. If there are any incremental rig upgrades in the capital, then any there would be incremental capital to that. But think about the $25 million is what's needed for the Woodside contract. It's gone. Okay, great. That's it for me. Appreciate it. I'll call it.

Yeah, I guess what I would say is we definitely see the market tightening. And that's because of that convergence I mentioned, but also because of this, a lot of the demand that we see behind even the 95%, the demand that's creating that 95% number. And obviously, what happens, but we're pretty optimistic about a really tight market. Got it. Great to hear.

I think it's in line with our expectations. We had always thought petro brush on total rig count would be flat, and they're going to end up dropping by a couple of rigs, at least in the near term. We're still hopeful that through time their number remains flat, and there's some possibility, I guess, that it could actually go up. But I think this is petro brush are very savvy.

And I think this is in line with their behavior through time. And they've secured their rig supply, and probably done it at a pretty good time. Sure did. Great. Thanks for that color up. I'll turn it back.

Sure. Yeah, I mean, here's what I would say. Well, I mentioned the US earlier, which I think is a region that sometimes responds quickly. So we don't have anything necessarily tangible to report there, but fingers crossed. But I think the real, probably the meat of your question would sit in two places. First would be Asia, where we think that we had growing demand even before the Iran conflict. And we think that that's very likely to solidify going forward because of the renewed security concerns, which is obviously a good outcome if that happens for the Viking and follow on work also in Australia. And then secondly, I would say that a lot of the growth that we've been forecasting has been from West Africa and higher oil prices just helps that region.

There's just no way that that hurts all of that. So I think if anything, if not incremental in West Africa, then projects on the table, we're hopeful that projects on the table are just even more likely to come through in time. Awesome. That's really helpful. And then my second question was just trying to get the outlook for a few rigs. So I think about kind of the Black Rhino, the Globetrotter 1 and Apex, there's some rigs that could still fill out some work, they roll off or early off contract. Maybe, do you think the Black Rhino could still potentially find work in the Gulf or do you think it may have to head elsewhere? And then just any potential works go through the Globetrotter 1 or Apex at this time?

So you could help me out on that. Thank you. Sure. Yeah. So Black Rhino could very easily stay in the U. S. That's most likely to be 27 work, but like I said, our fingers are crossed about potentially some 26 work popping up. It is bid outside of the region as well. So we'll, you know, just a little too soon to tell where that rig will end up. The GT1 is in the same place it's been where we're chasing primarily intervention work. We believe in that market, you know, in everything that's happened, it kind of makes us believe at least as much if not more in that market.

So we're hopeful to have some sort of news on that rig in, you know, I don't know, the next couple there's a couple of jobs out there like the one in the Black Sea that are really kind of worked very well for that rig. We're not bidding it into very many drilling programs, but there's a couple things out there that we're chasing right now. So we're hopeful to have something for that rig which would be like, you know, 27-starred. And then the Apex is an older unit and we're just evaluating options on that rig right now. There are some opportunities for the rig and we'll make a decision on what to do with that rig here over the next couple of quarters as well.

Awesome. That was really helpful. I will turn it back. Appreciate your time. Thanks.

The fake hose act is not a part of the blended extent that would have now been announced. We did have it very close on a different program. And so what I would say is there are opportunities in South America for the rig that we're chasing, but that we're also starting to bid that rig elsewhere. It's obviously not impossible for that rig to continue working for Petrovos. But it's not part of the current blended extent discussion. All right. Thank you. That's very clear.

Sure. Yeah. So there was a specific clause in the legacy diamond notes that allowed us to buy back 10% at 103. The bond was trading at 105, 106. So everything it was a very value, a pretty good fashion, if you will, to provide in that debt.

The legacy noble bonds are callable now. The legacy diamond bond is callable later this year. And at the right time, we'll definitely refinance the capital structure and clap step back. It all claps down into one silo. And through that process, we would expect to realize material cash interest savings on an annual basis. So obviously, both bonds are trading well in excess and par today, but we're going to find the right time to go for us. Right. Great. Appreciate all the answers and we should good day. That's all for me. Thank you.

That's a good question. I think we highlighted it last call, but as a reminder, we feel we've got one of the most competitive fleets on the globe right now. All of the rigs will have MPD here and not too distant future. And I think we have more of NOV's automation equipment installed on our rigs than the entire rest of the world combined. So we're really proud of where we sit on rig technology. We have upgraded or will upgrade a couple of the rigs for direct capacity, which is a pretty easy upgrade for a couple of our rig classes. I could see us doing something like that for certain programs. By and large, we're pretty happy with where everything sits right now, though.

And I guess at one caveat, we are constantly in communication with our customers around technology that they value. And of course, work with them as a normal course of business to find technology that works for our rigs. And there's always some discussion around who pays for that stuff. But I think right now, what we're seeing is a real push by customers to have the best technologies as a lot of things are really starting to prove their value, whether it's in the form of safety, perhaps red dead management or on efficiency, which would be more like MPD and automation and other things.

So we think that the trend will continue. Some of that is going to come from customer customer supply, CapEx, some of that is possible for months. But I think we're starting from a pretty high place right now as a company. I would agree.

Sure, Doug. Yeah, I think there's a few parts that you will to get to the high end. Obviously, in Q1, we had great uptime performance and fantastic cost control throughout the entire company. I think, obviously, opportunities, there's opportunities there, if you will, to drive cashflow that way. I think specific maybe to the black ride of opportunities, we're coming to the for that rig in the back half of the year, and then that would lead, I think, to us being towards the high end of the range. Thank you.

That's a good question. I wish I had a great story for you. I can't say, our customers continue to preach discipline and will continue to be disciplined. But I think I think the US is a place where some of the smaller independence can be a little bit more price sensitive in the near term, perhaps than some of the majors are. And I would say, but also kind of related to Richard's safe in just a moment ago. To the extent that something pops up for the black ride, I know that some upside in 2026 for us. And so we're hopeful that this environment eventually translates to a little bit of incremental work. Great. Thank you.

That's a good question. I think for the CJ 70s in 2027, we've got, I think we feel really good about having four of those rigs contracted and with multiple paths to having all five of those rigs contracted. And so we're happy with that. We're probably a little bit short of scarcity in that market on programs that genuinely require CJ 70s. But I think I would kind of broadly characterize our view as flat up for CJ 70s. And so we're in a little while since we would say that with that conviction. So cautiously optimistic there. Great. Thank you for taking my questions.

Thanks.

Josh, Josh, two seconds.

Let me interrupt you. You just you just came in. We didn't hear the first part of your question. Sorry, we may have done an issue on our end. That's okay.

Yes.

Yeah. Thanks. It's a good question. It's something we're extremely focused on here as we mentioned. So I would say logistics are strained.

And some of that started before we're in, but obviously fuel prices are way up now. And so that's adding a little bit of cost into the system. Right now I would say cost-wise, we're not seeing material effects as a directly correlated to the war.

Transportation costs up, yes. But I think everything else, all the stuff we're buying these projects has been built effectively. And so we feel reasonable, although there's probably, you know, there's risk there, obviously, given everything happening. We're really focused on timing right now. And that's where we're seeing a lot of pressure. And we're going multiple layers deep here to track the equipment we need and try to ensure that we get everything on time so that we're ready to go for our customers. So again, we're, I guess I'd say, we're optimistic in working hard to make sure that we stay on time here. There is a lot of pressure out there on the groups trying to pull everything together.

Understood. Thanks.

Yeah. That's going to continue. That's the path of everything. You know, we just, we don't, noble doesn't do anything specifically subsurface. We are focused on making sure that we have the most efficient rigs and then some of the logistics around that. But we work very closely with the other service companies and with our customers, of course. And I think one of the things that the mark is kind of where things are headed is that everyone is much more collaborative today so that I think maximum efficiency is achieved by service companies and operators really working together early, collaborating on shared technologies like what you just referenced in their number of examples like that out there. But that is the path of drilling today.

And I think, we've said before that we kind of wax poetic about the change from the concept of drilling yourselves out of a job and into the mindset of drilling yourselves into a job. We mentioned previously that we've seen that work directly in Guyana where they've had FID under set of circumstances that probably were not possible even three or four years ago given efficiency then. So we think that technology and automation is really an enabler for deep water work going forward and the further deep water comes down the cost curve, the more there is for the entire industry. So we're really optimistic about all of that. I understood. Thanks for taking my questions.

Thanks, Josh.

I'll give an answer like a blank, make sure I get it right. But I think Asia, for sure, we've seen a real change in the amount of demand and urgency there. And then I would say Caracomb where there's an enormous amount of work that obviously a lot of it we knew in Guyana, but then suddenly Venezuela seems more open and a number of other actually kind of shallower water trends that are creating a lot of demand through that region.

It's all pretty interesting.

Yeah, so just to clarify, the drill ships will have to be able to drill into high, it's a high percentage. And there are certain technologies out there that can be used outside of MPD. But the feeling for us has been that over the past really 10 years that MPD is kind of going the path of the top drive where it's almost ubiquitous. And so we're pretty happy with where we are on having the rigs outfitted. It's a $25 to $30 million expense depending on where your piping is and then that's before you get out of service time. So we're pretty happy to have all that pretty much paid for.

Got it. Thanks, Robert. Thanks.

Yeah, sorry. When you said term, do you mean like contractual terms or the length of the contract?

Yeah, yeah. So if you recall two or three years ago, the last time we kind of hit this inflection, I think average contract term was still less than a year. And so, you know, I think that's one important point we kind of made in the comments is, yeah, if you have, I don't think there's a ton of priced options out there. If someone has a priced option, I think they're pretty likely to take it right now. But across the board, I think we're seeing more and more big development projects that are driving this demand.

And like we mentioned earlier, I think the average contract term was at least two years on some of this recent contracting. That's a huge change compared to where we were before. So you think about hitting kind of similar utilization point as the last time day rate hit right at 500. There's a similar approaching, a similar utilization point, but with more term and a lot more open demand. So we're pretty optimistic.

Yeah, I mean, you know, our customers are very long term minded, obviously. And I think that they are, there has been this big movement towards exploration in the deep water, which to me is the most important test of the market that started before RAN, that hasn't slowed down. We hope that it is only solidified by what's happening right now. And so I guess one, another way to put it would be we certainly wouldn't expect our customers to waver from their commitment to discipline. And our optimism does not require them to abandon any discipline.

Yeah, Aaron. Yeah, so obviously it's an early termination for the rig. So the $15 million, if you think about that, it's about six months at the bareboat chart of plus stacking costs. So that's essentially the $15 million. So that's the extent early impact. We don't see any other impact to our financials. And obviously, once we get to early December, that rig will move over to Ball.

Thanks for joining us today, everyone. We appreciate your interest. And we'll look forward to speaking with you again next quarter. Have a great day.