Leading contract drilling company,
) reported third quarter 2012 earnings of 45 cents per share,
failing to meet the Zacks Consensus Estimate of 50 cents.
Reported earnings also dropped 15.1% from the year-earlier profit
of 53 cents per share mainly due to extended downtime from rigs
in the Gulf of Mexico (GoM) and offshore Brazil.
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However, total revenue in the quarter jumped almost 20% to $884.0
million from $737.9 million in the comparable quarter last year,
but missed the Zacks Consensus Estimate of $898.0 million.
Contract Drilling Services contributed $833.2 million (up 18.2%
year over year) to the total revenue, mainly on the back of
improved rig utilization overall.
Total operating income in the quarter shot up 8.8% to $178.9
million from the year-ago level of $163.6 million. Operating
income from the Contract Drilling segment experienced an 8.6%
annualized growth and recorded $173.3 million in the quarter
versus $159.6 million in the year-earlier quarter.
Total rig utilization was 78% in the quarter compared with 76% a
year ago. Overall average dayrate was $168,608 versus $151,782 in
the year-ago quarter.
Average dayrate for semisubmersible rigs registered about 5.4%
year-over-year improvement to $331,900. Average capacity
utilization was 83% versus 84% in the year-ago period. Drillships
experienced an average dayrate of $267,166 versus $225,669 in the
year-ago quarter, while average capacity utilization was 73%
versus 60% in the comparable quarter of last year.
Average dayrate for the company's jackups was $97,857 compared
with $89,352 in the year-ago quarter. Average capacity
utilization increased to 83% from the year-ago level of 82%.
At the end of the third quarter, the company had a cash balance
of $218.5 million and long-term debt of $4.6 billion with
debt-to-capitalization ratio of 35.6% (versus 35.0% in the
preceding quarter). During the first nine-month period ending
September 30, 2012, Noble invested $1.2 billion in capital
projects. Over the year, Noble expects to spend $1.8 billion in
total, including approximately $580 million for newbuild
We reiterate our long-term Neutral recommendation on Noble
Corporation, a leading offshore drilling contractor and provider
of diversified services for the oil and gas industry.
Noble has failed to match our expectation mainly due to the
delays in the deployment of two new drillships, one offshore
Brazil and the other in the GoM.
Although the company's third quarter results were adversely
affected by a number of operational issues and delays in
returning rigs to work, the fundamentals remain strong and Noble
remains busy in securing contracts for both floating and jackup
rigs at significantly higher dayrates. The owner of the world's
third-largest offshore drilling fleet foresees continued
successes for its offshore drilling business.
We see long-term earnings and cash flow visibility in Noble's
impressive backlog position, which will be enhanced by the recent
agreement for newbuilds. The company's backlog, as of September
30, 2012, stood at $14.8 billion.
The company also remains committed to improving operational
performance in the final quarter of 2012 given that the
operational issues have now been resolved with the exception of a
Again, tough competition from its larger peers such as
Diamond Offshore Drilling Inc.
) is a concern.
Over the longer term, we expect the stock to perform in line with
the broader market. The company retains a Zacks #3 Rank, which is
equivalent to a short-term Hold rating.