Noble Corporation (NE)

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Noble Corp (NE)

Q3 2010 Earnings Call

October 21, 2010 9:00 am ET

Executives

Lee Ahlstrom – VP of IR and Planning

David Williams President and CEO

Tom Mitchell – CFO

Roger Hunt – SVP, Marketing and Contracts

Analysts

Collin Jerry – Raymond James

Ian McPherson – Simons & Co.

Robin Shoemaker – Citi

Scott Grouper – Sanford Bernstein

Matt Conklin – Wells Fargo Securities

Dan Boyd – Goldman Sachs

Roger Read - Natexis

Alan Law – BMO Capital Markets

Presentation

Operator

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 Drilling third quarter 2010 earnings call.

(Operator Instructions) All lines have been placed on mute to prevent any background noise. After the speakers prepared remarks, there will be a question & answer period. If you would like to ask a question during that time, simply press star and then the number 1 on your telephone key pad. If anyone should need assistance at any time during this conference press star, then zero and an operator will assist you.

As a reminder, Ladies and Gentlemen, this conference is being recorded today, Thursday, October 21, 2010.

Thank you, I would now like to introduce Mr. Lee Ahlstrom, Vice President of Investor Relations and Planning. Mr. Ahlstrom, you may begin your conference.

Lee Ahlstrom

Thank you Regina. And good morning and welcome to Noble Corp’s Third Quarter 2010 earnings call.

Before we begin, I’d like to remind everyone that any statements we make today about our plans, expectations, estimates, predictions or similar expressions for the future, including those concerning financial performance, operating results, tax rates, spending guidance, the drilling business, backlog, day rates, contract tenders, extensions or commencements, the period of restricted drilling activity in the U.S. Gulf of Mexico, and timing for compliance with new regulations, new bill delivery dates, plans and objectives of management for future operations, the outcome of any litigations, dispute, or investigation, and the effects of our confirmation of the previously announced Frontier transaction and Shell agreement, are forward-looking statements and are subject to risks and uncertainties.

Our filings with the U.S. 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.

We have included summary balance sheets and income and cash flow statements with our earnings news release. Also note that we may use non-GAAP financial measures in the call. If we do, you will find the required supplemental disclosure for these measures, including the most directly comparable GAAP measure on our website and an associated reconciliation, also on the website.

Now, I’ll turn the call over to David Williams, our Chairman, President, and Chief Executive Officer.

David Williams

Thanks, Lee. Good morning, everyone, and thanks for joining us on the call today. It’s been a challenging quarter to say the least, on a number of fronts, and I look forward to discussing our accomplishments and some of the issues that we have with you today.

Joining me on the call today are Tom Mitchell, our CFO, and our Senior Vice President of Contracts and Marketing, Roger Hunt, joining us from Geneva. Excuse me, I’m tongue-tied already.

Let me begin with some positive. On June 28, we announced that we had entered into a transaction to purchase privately held Frontier Drilling. And a cash transaction that valued that enterprise at $2.16 billion.

In addition, we entered into agreements with Shell for more than 23 rig years of work, including contracts on two drill ships. One of which the Noble Globetrotter was already at that time, under construction. Together, the shell of Frontier deals, at its seven drilling units in FPSO to the fleet, and doubled the backlog to about $14 billion.

During the third quarter, we successfully closed the transaction and have been working hard to integrate the assets and the folks into Noble.

We were also able to secure $1.25 billion financing for the debt portion of the Frontier transaction at a very attractive blended rate of about 4.9% and a combination of 5, 10, and 30 year notes.

Finally, we entered into a shipyard contract for the construction of the second Shell drill ship, the Noble Globetrotter 2, with all in price of $550 million. We are delighted to have concluded these transactions and believe the strategic relationship we’ve established with Shell will provide a foundation for additional growth, and benefit the company and our shareholders for many years to come.

Furthermore, our balance sheet remains strong and we continue to look at opportunities that could expand or high-grade the fleet.

Of course the big news in recent weeks is the lifting of the government imposed moratorium in the Gulf of Mexico. This is a step in the right direction, and we sincerely hope that the newly created BOEM can streamline the permitting process so that we actually see a step up of drilling activity, and avoid the de facto moratorium that’s plagued the shallow water Gulf fleet.

In the meantime, everyone at Noble is working very diligently to comply with the recently issued drilling rules that are essentially reflect the requirements of NTO fine, which was issued in May.

So far, we had the stacks of the Nobel Danny Adkins, and Noble Amos Runner certified by third parties and those units have returned to work. The Adkins for Shell and the Runner is a substitute for the Noble Bouzigard with a LLOG. We’ll be stacked to the Bouzigard for the time being.

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