On Sep 22, 2015, we issued an updated research report on Noble CorporationNE , which provides diversified services to the oil and gas industry.
Noble Corp. is a leading offshore drilling firm with a robust portfolio of assets. Though the industry has witnessed a setback over the past few months, the company is likely to be less affected by it than its peers. This is because Noble Corp. enjoys a strong backlog position ($8.7 billion).
As of Jun 30, 2015, 79% of the company's available rig operating days were committed for 2015, which included 78% of floating rig days and 80% of jackup rig days. For 2016, an estimated 63% of available rig operating days have been committed. This consists of 58% and 68% of floating and jackup rig days, respectively. These secured commitments act as a cushion for the company in the volatile pricing market.
Noble Corp. has made continuous endeavors to upgrade its fleet through acquisitions and newbuild projects. It continues to benefit from its robust position in the ultra-deepwater market.
The company completed the Paragon Offshore spin-off in Aug 2014, transferring 43 of its rigs into this new entity. The reduced asset base creates a more competitively placed company that should deliver better returns in the future.
However, the offshore drilling industry remains challenged with rig oversupply, which is a cause for concern for the likes of Noble Corp. If the situation persists, the company's contract flow and dayrates could be hampered substantially. In addition to this, major oil companies are lowering deep-water capital spending, which is making the situation even worse.
Moreover, Noble Corp. remains highly leveraged to the North Sea, where tax regime changes could have a significant impact on future demand. Also, the company is heavily reliant on select customers, which poses significant risk.
We also remain concerned about company-specific risks, which include new product growth challenges, potential backlog losses and high dependence on its top customers. Additionally, delays in deepwater infrastructure awards may also hinder the growth prospect of the company.
Zacks Rank and Other Picks from the Sector
Noble holds a Zacks Rank #2 (Buy). Other favorably ranked stocks from the same space are Alon USA Partners, LP ALDW , Braskem S.A. BAK and ReneSola Ltd SOL . All these stocks sport a Zacks Rank #1 (Strong Buy).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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