Rates for offshore rigs improved and the amount of downtime fell between April and June, helping to buoy offshore drilling contractor Noble Corp. to higher-than-expected profits.
"A continuation of excellent business fundamentals produced a better than 5% improvement in average dayrates as a number of our rigs transitioned to new contracts and previously idle rigs returned to work," said CEO David Williams during a conference call on Thursday. "In addition, we experienced another quarter of declining unpaid operational downtime, contributing to lower-than-expected repair and maintenance expenses and increased bonus revenue in the quarter."
Noble is building some of the world's most expensive drillships to operate in some of the deepest areas offshore (see NGI, April 22). Eight rigs are operating in the Gulf of Mexico, including the Noble Bully drillship, which is working at 10,000-foot water depths and a drilling depth of 40,000 feet. The Noble Danny Adkins and the Noble Jim Day are working in 12,000 feet of water in drilling depths of 37,000 feet, while the Noble Amos Runner is in 8,000 feet of water at a drilling depth of 32,500 feet.
Contract drilling services revenue increased year/year to $975 million from $929 million. Contract drilling services costs totaled $492 million, versus $484 million in 1Q2013. The higher costs resulted from newbuild drillships that were offset by lower maintenance expenses. The contract drilling margin in the latest quarter climbed to 49.6%, up from the January-March period of 47.9%.
Marketing and contracts chief Roger Hunt said Noble now has "sold out of capacity in the offshore" through 2013, and 2014 already is looking strong. "The ultra deepwater sector remains strong, with a steady trends in place. All deepwater capacity, including most of the rigs that had started 15 years ago, are experiencing growth. And jack-up [sector] continues to surprise, with stable to higher dayrates in most regions."
At the end of June, about 78% of Noble's available rig operating days were committed for the remainder of 2013, including 82% of the floating rig days and 82% of the jackup days. For 2014, an estimated 60% of the available rig operating days already are committed, including 80% for floaters and 52% for jack-ups. More than a dozen new contracts are being fulfilled for ultra-deepwater rigs, predominantly tech-savvy newbuilds, at an average rate of $590,000/day, which "compares favorably to the last six months when it averaged $585,000," said Hunt.
"We remain confident that demand will be steady, preferably for rigs with the highest capacity." The confidence comes because of "strong crude prices, successful exploration results -- with 20 additional announced discoveries to date; last year there were 52 total. Also operators are expanding their reach as they explore frontier areas, which is leading to backlogs."
The 52 global ultra deepwater discoveries in 2012, in water 7,500 deep or more, were a record for the offshore, according to Noble. Its offshore contract backlog at the end of June totaled $16 billion, up $2 billion from the end of 1Q2013. Deepwater fleet utilization between April and June actually declined to 77% from 83% in 1Q2013, mostly because of a contract cancellation.
Quarterly profits jumped 11% year/year (y/y) to $177 million (69 cents/share), from $160 million (63 cents). Revenue rose 13% to $1.02 billion. Wall Street had pegged earnings on average to be 56 cents/share. Operating expenses increased y/y by 17%, while expenses associated with drilling services were 16% higher.
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