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Noble Corporation (NE)
Q2 2011 Earnings Call
July 21, 2011, 9:00am ET
Jeff Chastain - VP, IR
David Williams - Chairman of the Board, President and CEO
Tom Mitchell - SVP and CFO
Roger Hunt - SVP, Marketing and Contracts
Arun Jayaram – Credit Suisse
Ian Macpherson - Simmons
Scott Gruber - Sanford Bernstein & Co
Brian Uhlmer - Global Hunter Securities
Robin Shoemaker - Citigroup Investment Research (US)
Judson Bailey - Jefferies and Company
Jeff Tillery - Tudor, Pickering, Holt
Mike Urban – Deutsche Bank
Roger Read - Morgan Keegan
Previous Statements by NE
» Noble Corp. CEO Discusses Q1 2011 - Earnings Call Transcript
» Noble Corporation CEO Discusses Q4 2010 Results - Earnings Call Transcript
» Noble Corp. CEO Discusses Q3 2010 Results - Earnings Call Transcript
» Noble Corp. Q2 2010 Earnings Call Transcript
As a reminder, ladies and gentlemen, this conference is being recorded today, Thursday, July 21st, 2011. Thank you. I would now like to introduce Mr. Jeff Chastain, Vice President of Investor Relations. Mr. Chastain, you may begin your conference.
Thank you, Regina. Good morning and welcome to Noble Corp’s second quarter 2011 conference call for earnings. A copy of the company’s earnings report issued last evening along with supporting statements and schedules can be found on the Noble website at www.noblecorp.com. Before we begin, this morning 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 the drilling business, financial performance, operating results, tax rates, spending guidance, backlog, dayrates, contract tenders, extensions or commencements, letters of intent, the outlook for the US Gulf of Mexico and other regions, new bill delivery costs and dates, plans and objectives of management for future operations, and the outcome of any litigation, dispute or investigation are all forward-looking statements and are subject to risks and uncertainties.
Our filings with the US 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 those forward-looking statements. Also please note that we may use non-GAAP financial measures in the call today. If we do, you will find the required supplemental disclosure for these measures, including the most directly comparable GAAP measure and an associated reconciliation on the Noble website.
With that, I’ll now turn the call over to David Williams, Chairman, President and Chief Executive of Noble.
Hi, thanks Jeff. Good morning and thanks for joining us today. With me in Geneva are Tom Mitchell, Senior Vice President and Chief Financial Officer and Roger Hunt, our Senior Vice President of Worldwide Contracts and Marketing. As you heard from the forward-looking statement, we are joined today by Jeff Chastain, our new Vice President of Investor Relations and we’re delighted to have a player of Jeff’s caliber and experience join the Noble team. He brings with him a wealth of experience and knowledge and we are certain that we all will benefit from his expertise. So Jeff, thanks for coming and welcome to the fight.
This was a frustrating quarter for us in terms of downtime. We experienced a good bit of downtime from premature failure of equipment related to subsea systems. I would like to touch on a couple of those more significant items right now. On the Noble Danny Adkins, we suffered an internal seal failure on depth compensated accumulator bottles on the BOP stack. This failure would precluded the dead man circuit from operating correctly and the bottle had to be replaced. Spare bottles also failed and the final repair involved engaging the manufacturer to provide a newly designed and more appropriate solution, installing the newly provided bottle and then demonstrating to BOEM that the repair was complete. The second event was a result of a quality assurance failure by the manufacturer of the lower flange of a newly fabricated slip joint for the Noble Clyde Boudreaux.
In this case, we had to oversee the re-manufacturer and installation of a new flange at an appropriate on-shore facility before the slip joint could be reconstructed and redeployed offshore. Downtime in the Noble Dave Beard was a result of two separate rise or leakage issues involving faulty coatings and worn out rig seals. Most of these failures were equipment related to manufacturing and we have had numerous discussions at all levels with the executives and staff of these organizations. Unfortunately even though these events significantly reduced our revenue, our recourse is very limited.
The good news is that these are separate, unrelated events that we have remedied and are not symptomatic of unknown or unsolvable issues. That said, giving the complexity of new kit and recognizing the inevitable change in a post-Macando world, I think it is likely the industry will begin to experience a decline in tolerance for even the most benign subsea issues, even on equipment that may have multiple layers of redundancy.
The result is likely to be more extra downtime in the future worldwide. In some cases the cost of that downtime may be borne by the operator and in some cases by the contractor. How we adjust to the new reality will be more clearly to find as the exact application of rules and expectations becomes clear in the months and years ahead. Greater complexity and lower tolerance for anomalies are part of our new reality and we must all be prepared to deal with it. Noble’s intention is to lead the way in this regard which is why we are investing so heavily in subsea spares, training personnel and systems.