noble corporation plc (ne) ceo julie robertson on q2 2019 results - earnings call transcript

Noble Corporation (NYSE:NE)

ETCompany participant Jeffrey Chastain-2019 results earnings call at 9: 00 a. m. on August 2, 2019

Julie Robertson, vice president of investor relations

President, President and Chief Executive Officer Peakes am-

Robert eibler, senior vice president and chief financial officer-

Senior vice president of marketing and contracts Ian McPherson attends Conference Call

Simon Sean merkhamJ. P.

Taylor zucher

Tudor, Pickering, Holt harphead-

RBCMike Sabella-

Bank of America Evans-

Good morning.

My name is Natalie. I\'m your conference operator today.

At that time, you are welcome to attend the 2019 performance conference call of noble in the second quarter.

All lines are muted to prevent any background noise.

There will be a question after the speaker speaks --and-answer session. [

Operation instructions]. Thank you. Mr.

Sir, Jeff Chastan, vice president of investor relations at Noble, please proceed.

Jeffrey in Chase Tylenol (Compound Hydrobromide Dextromethorphan Oral Solution)

Thank you Natalie. Welcome to the 2019 earnings conference call of noble for the second quarter.

Thank you for your attention to the company.

If you miss it, we can find a copy of the revenue report that Noble posted last night and all supporting reports and schedules on noblecorp\'s website. com.

Before I transfer the call to Julie, I would like to remind you that we may make statements about our operations, opportunities, plans, operations or financial performance, matters of drilling business or other non-historical facts

Forward-looking statements affected by certain risks and uncertainties.

Our submission to the United StatesS.

The Securities and Exchange Commission, which is posted on our website, discusses the risks and uncertainties of our business and industry, as well as the various factors that may maintain the results of any progress

Look for statements from implementation.

These risks include oil and gas prices, customer needs, operations and other risks.

Our actual results may be very different from those.

Look statements and Noble are not obliged to update these statements.

Please also note that we have quoted

The financial indicators GAAP called this morning.

You will find additional disclosures required for these measures on our website, including the most directly comparable GAAP measures and related reconciliation.

Finally, based on our quarterly disclosure practice, once our call is over, we will post a summary of the financial guidance provided this morning on our website, which will cover the third quarter and the whole

Figures for 2019

With this in mind, I now transfer the call to Julie Robertson, chairman, president and CEO of Noble.

Julie Robertson thanks Jeff, Good morning ladies and gentlemen, welcome to our review of Noble\'s 2019 performance for the second quarter.

Thank you for attending today\'s conference call and for your continued attention to Noble.

In addition to Jeff, we are with me today with our senior vice president and chief financial officer, Adam Vance;

Robert eibler, our senior vice president of marketing and contracts.

Barry Smith, who also attended today\'s conference call, joined Noble two months ago as senior vice president of operations.

Barry has proven to be a very effective and valuable member of the management team and we are delighted that he is with us.

In yesterday\'s earnings report, we reported that EBITDA was $92 million in the second quarter and contract drilling revenue was $0. 275 billion.

Our business performance this quarter has been outstanding, and we have achieved these solid results.

As the recovery in the offshore market becomes increasingly evident, we are encouraged by many of the signs in our business.

Due to the increase in our asset class activities, the total fleet operating days increased by 13% from the first quarter to the second quarter, as we continue to benefit from the excellent layout of the global rig fleet, as well as the award and extension of contracts.

Utilization of the Jackup fleet rose from 98% in the first quarter to 93% in the second quarter, excluding utilization of nine active floating rigs in three cold regions

Stacking units increased to 89% from 80% in the previous quarter.

In the first half of this year, the total number of fleet operations increased by 32% over the same period in 2018.

We received more than $0. 3 billion in contract awards in six months.

We have a $2 bonus backlog.

1 billion as of June 30, the total amount of contract awards for the first six months of 2018 was more than double.

With regard to HSE, we have completed solid performance for another quarter in all areas, and thank the staff for their continued attention and commitment to our projects and initiatives, as well as our customers.

For the first time in this quarter, we deployed our new Noble\'s own managed pressure drilling system because Noble globetroter II carried out the drilling program in the Black Sea.

We are encouraged that the use of MPD technology is growing, and in the near future, opportunities for further deployment may increase.

I would like to provide some perspective on the Paragon lawsuit and our allegations for the quarter.

Noble completed the divestiture of a standard duty fleet and created Paragon at sea for almost five years.

Since the establishment of the noble litigation trust for the plaintiff in May 2017, we have received many questions about the status of the matter.

We understand the importance of keeping you as informed as possible about the situation and know that you can respect the sensitivity of the proceedings.

First, our views on the case have not changed.

Having said that, I would also like to remind you that we have always insisted that we are willing to settle before trial if it can be done on reasonable terms.

There are many important reasons why we consider reasonable solutions.

These include complex factual issues, uncertainties and risks associated with such litigation, time commitments and distractions of our organization, the potential impact of ongoing litigation, and uncertainty about our business, and the substantial costs incurred by bringing a lawsuit against a claim through trial.

We constantly assess potential outcomes, including the possibility of resolving issues before trial.

We also keep in touch with the litigation trust.

Judging by all major accounting standards and the requirements of these standards, we recorded the $100 million fee for this quarter as G & A fee.

We will continue to assess the matter as things develop.

Also, acknowledging that the charges in our financial statements do not mean

Trial resolution is imminent and does not indicate that Noble has reduced our view of our ability to present a convincing defense of the claims made by Paragon litigation trust, and we will vigorously defend ourselves.

As we have pointed out from the outset, we believe that Paragon Offshore at the time of the spin-off in August 2014 received the appropriate funds and solvents and had the appropriate liquidity, but the claim brought to us by the lawsuit is worthless.

Like many industry participants, Paragon was unexpectedly hit by a downturn that seriously affected the industry as a whole and insisted on staying.

As this is still a matter of litigation, our ability to comment further is limited.

We thank you in advance for your understanding of the limitations of our ability to comment.

Finally, as we disclosed earlier this week, we ended another step in supporting our long-term cooperation

Implement the long-term financial strategy after the company\'s 2017 Credit line amendment.

This amendment, which is strongly supported, provides the bank with a noble increase in the flexibility of the fiscal January 2023 through the maturity of this mechanism.

With more details on the revised facility, as well as an update to a more in-depth review and guidance on our financial performance for the second quarter, I am now transferring the call to Adam.

Thank you, Julie.

Good Morning, everyone. Welcome.

As disclosed last night, Noble reported a net loss of $0. 152 billion, or $0, in 2019.

Total revenue was $0. 293 billion, $61 per diluted share.

The results of the report included a total net income of $34 million or $0.

13 Diluted shares per share in connection with the release of previously retained tax positions after the company\'s US settlementS.

Tax returns as of December 31, 2010 and 2011.

In addition, as Julie discussed earlier, the results of the report included confirmation of a total cost of $100 million or $0.

Diluted shares per share in connection with Paragon Offshore litigation are £ 40.

Excluding the two projects, the company will report a net loss of $86 million or $0 attributable to Noble in the second quarter.

34 per share after dilution.

We included a non.

GAAP supports our press releases and schedules and can also be found on noblecorp\'s noble website. com.

I would now like to provide more insight into the performance of the second quarter and highlight some projects that are beyond the scope of the guidance we provided during our early call.

Contract drilling service revenues totaled $0. 275 billion in the second quarter, slightly higher than $0. 271 billion in the previous quarter.

This improvement is in part due to the daily revenue increase of the drilling vessel Noble Globetrotter II, which used the MPD system owned by Noble when implementing the oil well construction plan in the Black Sea.

In the second quarter, the effective daily rate of the rig (including revenue related to the MPD deployment) was approximately $398,000.

In addition, revenue for the quarter was positively affected by a 13% increase in total fleet operating days, which increased fleet overall utilization from 82% in the first quarter to 76%.

Added working days recorded by Sam Croft and jack-up drilling ship Noble Tom Prosser, Noble Johnny Whitstine, after the client asked to upgrade and transfer the rig to the Middle East, the company began operations at the end of April.

These events were partially offset by the decline in average daily income, mainly due to the completion of the legacy contract of the noble Don Taylor in February.

Revenue for the second quarter was 6% higher than our guidance range of $0. 255 billion to $0. 265 billion, this is mainly due to the delay on the completion of Jack Noble Scott Mark and Noble Roger Lewis now in the third quarter.

In addition, the contractual extensions of noble Don Taylor, Noble Sam Croft and Noble Clyde Boudreaux also had a positive impact on income.

In the second quarter, the contracted drilling service cost totaled $0. 169 billion, 2% lower than the cost of $0. 172 billion in the first quarter, 6% higher than the midpoint of our guidance range ($0. 175 billion to $0. 185 billion.

The lower maintenance and maintenance costs are in part due to the delay in the regulatory inspection of Scott Mark and Roger Lewis, as well as the reduction in the cost of other rigs, resulting in better results.

The average daily revenue increase for Noble globetroter II, coupled with reduced contract drilling service costs, resulted in a profit margin of 39% for contracted drilling services in the second quarter, up from 37% in the previous quarter, adjusted EBITDA for the second quarter totaled $92 million, up from $86 million in the previous quarter.

Interest spending in the second quarter totaled $69 million, compared to $70 million in the first quarter.

This total is below our expected range of $71 million to $75 million, mainly due to assumptions about the timing and final demand for the use of our credit facility during the quarter.

Total capital expenditure for the second quarter was $64 million, including $27 million in continuing capital;

$35 million related to major projects, including the re-commissioning of rigs and the purchase of Submarine Capital spare parts;

And capitalized interest of $2 million;

Compared with the capital expenditure of $83 million in the first quarter and the expected expenditure level of $90 million in the second quarter, the results in the second quarter.

Refer to our guidance for the quarter, the lowerthan-

The expected results are primarily determined by spending time related to Jack Noble Joe Knight and noble Johnny whittin.

I would like to comment on the recent revisions to our credit facility and provide additional color.

In summarizing the revised loan, the most important change was the elimination of 55% of the debt --to-

Total capital component and replaced by the Convention limiting the amount of senior secured debt --to-EBITDA.

The new ratio is currently set at the highest level of 4 times and remains unchanged throughout the year

2020 tails, down to 3.

5 times in 2021, 3 times from 2022 to January 2023 when the facilities are mature.

In addition, the total borrowing limit for the loan does not exceed 15% of the combined tangible net assets, less other secured debt.

The total commitment under the amended financing mechanism for 2017 was reduced to $1.

3 billion, compared to $1.

Before 5 billion.

However, as we model the business for the next few years, we expect 2019 to be the low point of the annual EBITDA generation.

Therefore, we are very pleased with the improvement of the facilities in the future.

Under the revised arrangement, the total projected current funds as at June 30, 2019 amounted to $1.

4 billion, including $0. 154 billion in cash and cash equivalents, and available funds under the revised $2017 credit mechanism. 25 billion.

I will now provide the latest financial guidance covering third quarter of 2019 and the rest of the year.

On 2019, our fleet was operating at 96%.

As of June 30, 2019, our fleet had a total uptime of 97% and was still ahead of our guidance.

However, with the increase in activities and the corresponding increase in fleet operating days, coupled with the structure and complexity of our fleet, a reasonable allowance is reasonable.

Once again, we have raised the guidance on contract drilling service revenue in 2019 to $1.

Between $7 billion and $1.

9 billion, compared to our previous $1 range.

Between $4 billion and $1. 07 billion.

The main reason for the increase was several contract extensions, resulting in an increase in the number of days of service.

Compared to our previous range of $45 million to $55 million, customer solvency revenue was revised to $35 million to $45 million in 2019.

The adjustment is driven by the customer\'s request for certain rig modifications.

In the third quarter of 2019, contracted drilling service revenues are expected to range from $0. 245 billion to $0. 255 billion, compared to $0. 275 billion in 2019.

Our guidance reflects that in the absence of a premium daily rate using the MPD capability, the average daily income of the noble globe Traveler II is lower.

The guide also reflects a reduction in global traveler II\'s revenue over an estimated 75-day period of 80% of the daily salary equivalent to its minimum daily salary of $275,000, which is being shipped to the United States. S.

Gulf of Mexico and shipyards received upgrades requested by customers.

Our guidance also reflects the expected downtime of noble Don Taylor and noble Sam Croft as both rigs are ready to move to Guyana and Suriname, respectively.

Finally, we expect the total service time of noble Scott Mark to be 30 days, and the service time of Noble Roger Lewis to be 10 days, because both departments are done from the second Noble Houston Colbert will not have any operating days this quarter, because it will move to the North Sea and shipyard to work before the drilling project starts later this year.

It is expected that the customer\'s reimbursed income will be between $8 million and $12 million in the third quarter.

The contract drilling service cost guidelines for 2019 have been slightly reduced from our previous updates, ranging from $0. 71 billion to $0. 725 billion.

2019 of customer repayments are now expected to range from $35 million to $45 million, compared to our previous $25 million to $35 million.

In view of the adjustment of the deductible income mentioned earlier, the profit margin of our activity remains unchanged.

In the third quarter of 2019, the cost of contracted drilling services was expected to be between $0. 185 billion and $0. 193 billion, compared with the actual result of $0. 169 billion in 2019.

The higher cost is due to the increase in maintenance and maintenance costs associated with Noble Globetrotter II following the relocation of the rig to the United StatesS. Gulf of Mexico.

In addition, we expect to experience costs associated with the pre-operation of noble Joe Knight, repairs and maintenance costs in Colbert, Houston, although the fixed costs of the shipyard are related to the relocation of noble Don Taylor and noble Sam Croft to Guyana and Suriname, respectively.

The cost associated with customer repayment is expected to range from $5 million to $10 million in the third quarter.

DD & A\'s guidance for 2019 has not changed in the range of $0. 445 billion to $0. 46 billion.

Compared with the actual expenditure of $0. 11 billion in the second quarter, we will also maintain the range of $0. 115 billion to $0. 111 billion in the third quarter.

SG & A\'s 2019 fee, excluding the $100 million fee associated with the Paragon litigation, is still between $65 million and $75 million, and the guidance range for the third quarter is consistent with the guidance level for the second quarter, between $16 million and $20 million.

In contrast, the adjustment cost for the second quarter was $16 million.

Compared to our previous range of $2019 to $0. 275 billion, 0. 28 billion of interest spending has been reduced to $0. 29 billion to $0. 296 billion.

Our revised net range is estimated at $8 million and capitalized interest related to the project of the noble Johnny whittin and the noble Joe Knight.

Interest expenditure for the third quarter decreased to $65 million to $70 million, with an estimated capitalization of $2 million in interest.

In contrast, the revised range was $71 million to $75 million, and the actual cost for the second quarter was $69 million. Non-

Controlling stake in P & L representing bully I and Noble Bully II 50-

The 50 joint ventures with Shell now expect the cost in 2019 to range from $13 million to $15 million, compared to the previous guidance range of $8 million to $12 million.

The increase in the profitability of the joint venture is due to the reduction in estimated operating costs, especially on Bully II.

We expect

Controls in the third quarter were $3 million to $4 million, while actual spending in the second quarter was $3 million.

With regard to capital expenditures, our guidance for 2019 remains $0. 25 billion.

The main components of capital expenditure include $90 million in maintenance capital and $0. 122 billion in major projects, including reboots and submarine spare parts, and $30 million in connection with the purchase of noble Joe Knight, $8 million related to capitalized interest.

Total capital expenditure is expected to reach US $67 million in the third quarter, compared with US $64 million in the second quarter, in part because, as the start time of the contract approaches, as well as higher customer requirements to modify the rig, the expenditure of noble Joe Knight is accelerating.

The third quarter included maintenance capital expenditure of $28 million, major project expenditure of $37 million and capital interest expenditure of $2 million.

Finally, our effective tax incentives for the whole year of 2019 are expected to be stable in the medium and long-termdigits.

The final result is highly influenced by the geographic combination of income.

The cash tax paid in 2019 is estimated at $20 million, which is entirely related to our international operations.

At the end of this morning, I am still encouraged by the steady progress our company has made in the first six months of 2019.

EBITDA was running more than we expected in early 2019 and is now reaching or exceeding $0. 3 billion this year, following our latest guidance advice.

As we transition several rigs to new contracts compared to the second quarter, the number of operating days in the third quarter is expected to drop by about 8%.

As you will see from our updated 2019 full year guide, we are confident that the fourth quarter will show an increase in activity and a good improvement in finance --over-

The rigs returned to work after relocation.

This temporary disruption and a steady trend to increase fleet utilization support our strategic initiatives to align our quality fleet with key areas that deliver exceptional long-term service

Semester opportunities.

I will now transfer the call to Robert to discuss the offshore drilling environment.

Thank you, Adam.

Good morning. Welcome.

Since we called May last time, the offshore industry has continued to show signs of a recovery in travel.

There are no better signs of improvement than the rigs back to work, and since the beginning of the second quarter, the number of working rigs in the floating sector has increased by 9% and the cumulative sector has increased by 6%.

The utilization of Jackup and the floating fleet has reached their highest level in four years, and customer inquiries indicate that this level has further increased by 2020.

In the jackup sector, with the full recovery of Southeast Asia, Australia and Mexico joining the early mobile North Sea and the Middle East, more and more regional activities have been significantly strengthened.

Rate improvements are no longer isolated from selected regions, but take a place globally for quality and high-spec units.

The floating plate is also recovering.

While the speed of improvement is different from that of the jack-up section, we recognize the number of supportive developments, the most important of which is the speed improvement of most modern drilling ships.

Customers are increasingly interested in gaining ownership of emerging dramas such as Guyana and Suriname, and we expect an improvement in the global offshore consumption yearover-

The year ahead is generally on the rise.

Mexico and Brazil offshore, operating through the recently acquired highly anticipated area position, are beginning to complete preliminary assessments, identifying the prospect of priority drilling, obtaining government approval and issuing an early rate hike.

Finally, the number of deep-water exploration wells drilled in 2019 is expected to increase by 25% over last year.

The importance of this renewed focus on deep water exploration cannot be underestimated, and as of the first half of 2019, 10 announced findings have been made.

Each of these developments is a powerful indicator of the continued transition of customer interests to the offshore sector, which we believe will ultimately lead to additional rig needs.

Adjusting the status of the aristocratic fleet, I am particularly encouraged by our contract coverage in 2019, and more importantly, the coverage rate is getting higher and higher in the next 12 months.

Of the remaining available days in 2019, as of June 30, our 80% floating fleet and 86% self-propelled fleet are under contract, excluding cold-stacked rigs.

When we look forward to the 12 months ended June 30, 2020, 74% of the available days are contracted, including 76% of the floating days and 73% of the accumulated days, also excluding cold daysstacked rigs.

Our excellent contractual coverage reflects our efforts to optimize the regional layout of the fleet, prioritize the geological opportunity area and match our professional capabilities to the technical requirements of our customers.

As Adam pointed out earlier, as we continue our efforts to improve rig installation, several rigs were transferred to new areas in the third quarter.

Including the noble Don Taylor and the noble Sam Croft, with further knowledge of the impressive resource potential, they moved to Guyana and Suriname, respectively, execute drilling projects where two customer interests continue to grow.

Travel to the United States with the rigS.

The Gulf of Mexico, the noble universal Voyager I and the noble universal Voyager II will complete the mobilization to enter the area and have or are about to begin drilling operations.

In the Eastern Hemisphere, Jack Noble Houston Colbert is currently moving to the North Sea and plans to start the contract later this year after the maintenance plan is completed.

Also on August, the new jack-up Noble Jim day will start crossing the Middle East and start a three-year drilling mission, which we expect to start at the end of the third quarter.

When we consider the contract opportunity for the floating jack-up rig listed in the medium term

2020, we remain confident that our history of alternative quality capabilities and proven performance has allowed us to compete well for new jobs.

The norble Sam Croft drilling ship is expected to complete its first well off the coast of sullinan by November 2019.

There are three other drilling projects.

Well selection, which may extend the rig to the first half of 2020.

Opportunities in the Western Hemisphere continue to increase in areas such as Guyana and the sullinan basin;

Brazil and the Gulf of Mexico are expected to bring good prospects for the rig.

In Southeast Asia, the current contract with Clyde isubmersible boubouboudreaux is expected to keep the rig active by the end of April ---

April of 2020

We are evaluating many customer needs in Southeast Asia and Australia for the more than half of the ball traditionally, and think the rig is good for replacing several of these projects.

We want our customers to commit to building platforms for these projects in the second half of this year.

Paul Romano, a semi-mysterious Noble, is still a noble piled up in the United States. S. Gulf of Mexico.

For certain items that require traditional mooring, the rig continues to be considered.

At the moment, however, we do not expect the rig to resume work by 2020.

In our jackup fleet, our 7 premium rigs are expected to complete the contract in the medium term2020.

On October, Noble Mick O\'Brien will finish his work outside Qatar.

Open demand in the Middle East, including Qatar, continues to emerge and we are evaluating these opportunities, as well as those in other regions, as we want to match the advanced capabilities of the rig with the needs of our customers.

In the North Sea, the Noble Hans doer, the noble Sam Turner, noble Sam Hartley and Noble Houston Colbert are expected to be the other three platforms in Deul from December to 2019 and March to April 2020.

The Noble Hans Deul contract includes a pricing option that will be retained until 2020 if exercised.

In addition to some seasonal downturns in the winter season, we believe that there are still a lot of opportunities in the North Sea, especially for high-end rigs, and are increasingly convinced that each drill will receive additional work many days ahead of the current price.

In Australia, the noble Tom Prosser, who is currently planning to complete a series of contracts by April 2020, is the most advanced jackup in the region\'s rapidly expanding demand.

Finally, the noble Regina Allen is expected to complete the P & A work off the coast of eastern Canada by May 2020.

We are promoting this high-end product in many regions around the world.

I would now like to review regional market developments and opportunities starting in the Western Hemisphere. In the U. S.

The Gulf of Mexico, using the industry\'s floating fleet, does not include cold-

As of the second quarter, the stacking unit was 89% units, compared with 80% units in the first quarter.

This improvement reflects a significant increase in exploration and assessment activities, especially among independents, and the return of the noble Global Traveler I, who will conduct a long-term assessment

Semester plan for the area.

Since the end of the second quarter, with the industrial utilization rate of the floating fleet rising to more than 90%, the number of contracted rigs in the region has increased further.

The ability to charter rigs improves business conditions.

The spot market daily rate recently awarded by the contract was more than 40% higher than at the end of 2018.

We believe that most rig demand has been assured for the remainder of 2019

Customer demand is expected to begin in 2020.

Mexico\'s medium-term outlook is improving and some international operators are finalizing plans to explore the recently acquired deepwater area.

Although these plans set the project start dates for 2020 and 2021, some limited deep water drilling is expected to begin by the end of 2019.

As concluded in the second quarter, only two floating rigs are active in Mexican waters, and we expect that number to rise to 6 or more in 2020.

With respect to Pemex, our focus on the existing shallow water sector has led to several tenders for the provision of self-raised Wells.

So far, local service providers have won most of the awards, but due to a shortage in Mexico,

Part of the capacity may come from areas outside Mexico that have rigs.

If all 15 awards are implemented, the cumulative number of contracts may reach 38 by the end of this year, up from 20 at the end of the second quarter.

In South America, the number of rigs offshore Brazil will increase for the first time in a few years, and tenders from Petrobras and international oil companies are pending.

Including the recent contract award, Petrobras expects to increase the number of rigs to 20 by the end of 2019, while additional rig demand may increase to 2020 or more.

As exploration and evaluation activities begin, IOCs can absorb two to five increments of floats in the medium termSalt price wheel.

Another three rounds are scheduled for the second half of 2019, which is expected to increase the interest of the IOC.

In addition, the Guyana, sulinan basin continues to drive customer interest with its impressive resource potential, as evidenced by the recent sulinan transaction.

A total of five drilling platforms, including three Noble ultra-deep water drilling vessels, are expected to be offshore in Guyana by the end of 2019, compared with only three at the beginning of this year.

Over time, additional drilling needs off the coast of Guyana are becoming more and more likely to emerge, and in addition, under the leadership of Noble Sam Croft, further exploration will begin in the third quarter.

With regard to the Eastern Hemisphere, the North Sea self-raised well demand remained stable in the second quarter, which may remain stable, as some rigs benefited from the additional days specified in the contract after the option well was implemented.

This increased time allows several work units to remain active during the seasonal [period]law].

In the Middle East, more than 24 years of rigs were granted cumulative rigs in the second quarter, and it is currently estimated that there are still 24 years under evaluation.

The impressive number of regional activities was following the award of 43 rig years of work to self-propelled Wells in 2019.

Does not include cold active fleet utilization

The stacking unit increased by 85% and supported the ever-improving daily rate throughout the year.

The incremental demand for rig demand at the end of 2019 and beyond continues to emerge in the region.

As we assess the opportunity at 2020, activity in Africa and Eastern Mediterranean remains sluggish, demand for self-propelled drilling platforms in West Africa is expected to improve slightly.

In places such as Angola and Senegal, as well as floating rigs with limited rig requirements on the east side of the offshore mainland of Mozambique and Kenya.

The mobile sector continues to be hampered by a large number of spare capacity areas.

In the eastern Mediterranean Sea of the Black Sea, with sufficient rig capacity to meet any incremental demand, incremental drilling projects are expected to be restricted in the near future.

Finally, in the Far East and Oceania, the expansion of the industry recovery is evident, where 24 contract awards were awarded in the second quarter, covering the needs of the jack-up rig and the floating rig

Demand for self-propelled drilling platforms in Southeast Asia is expected to improve for the rest of 2019, and international German contractors should benefit as the fleet owned by local service providers is now fully operational.

This important regional development is expected to support higher daily rates.

In addition, the Open demand for work projects outside Australia remains visible, and many of these development opportunities define contractual terms that extend to 2021.

Our high spec jackup Noble Tom Prosser is currently working on the mid market

The 2014 is well placed in the region with a premium equipment configuration and an exceptional performance history.

Finally, industry indicators continue to show a gradual recovery.

Adjusted to exclude self-lift and floating fleet utilization in cold

Stacking capacity, for the first time since June 9, exceeds 80% in 2015.

Significantly different from the industrial recovery in individual regions earlier this year, what we are seeing now is an expanded event, as most of the regions mentioned this morning are experiencing basic supply and demand improvements.

At the same time as the industry recovers, our sound marketing strategy is achieving the desired results, as evidenced by our excellent contract cover, engagement with key areas of strength and a strong customer base. Thank you.

I look forward to providing an update on further progress in October.

I\'m transferring the phone to Julie now.

Thank you, gentlemen, Julie Robertson.

During this year\'s work, I continue to be satisfied with the competitive position of Noble, including our fleet allocation, technical leadership and financial flexibility, all of this is the core practice of building our strength throughout the cycle.

Our advanced self-lift and floating rigs are located in a promising area with both mature resource potential and emerging resource potential to drive strong customer demand.

These areas, including the North Sea, the Middle East and Australia, are areas where we currently or will certainly live more than 90% people.

As Robert has previously pointed out, nearly 80% of our active floating drilling platforms will soon be in the Western Hemisphere Region, which offers extraordinary growth prospects, including the Gulf of Mexico, Guyana and Suriname.

With the development of new technologies and the development of good operational practices, we will continue to implement new technologies.

These advances have proven to create efficiency in automating the human-machine interface of machine control, production and machinery and standardized processes, providing our operations team with continuous technical capabilities and a safer environment

While we have just begun to see the benefits of this young technology, we expect to gain an advantage in offshore drilling design and development to ensure that we continue to meet and expand our customers\' drilling plans.

Our core focus is on financial discipline, which is critical to the longevity of cyclical businesses. A steady de-

Our main financial objective remains to take advantage of the balance sheet and ensure a solid liquidity track.

I would also like to note that, starting with the fleet status report scheduled for September 9, we will continue to provide daily rates to increase transparency, unless subject to customer restrictions, and provide insight into our business progress.

Finally, we continue to perform well on everything we control.

As always, I would like to thank all the staff of noble for their continued support and commitment to our company.

While we feel that we have a new bottom, we are clearly entering a period of recovery that has proven to be important.

It was a long and challenging downturn, the Noble Team members have been focused on doing the right thing, and I am very grateful for their loyalty and dedication.

I will transfer the phone to Jeff now.

Julie, Jeffrey Chastan. Okay. Thank you.

Natalie, we\'re ready to start this. and-

The response part of the call.

So if you are going to line up, we will take our first question and ask all the people in line to limit one of their own and please follow up.

Natalie, go ahead. Question-and-

Be sure to answer the session. [

Operation instructions].

Our first question came from Ian McPherson of Simmons.

Your line is now open.

Thank you, Ian McPherson. Good morning.

Very good quarter and I\'m glad to hear that dayrates transparency is back again.

We agree that this will help us and will also help you commercially.

So, I look forward to it.

I would like to ask a question about Guyana, Suriname, Julie or Robert just to ask

The annual visibility there and growing evidence that interest rates are rising during the day, and whether the dialogue there is starting to move towards more long-standing views acceptable to both sides

Contract term?

Or do you think this will continue to evolve step by step with your major customers and other customers who may add rigs to the area in the next five years?

Zinc Citrate Tablets Ian Julie Robertson

First of all, thank you for your participation this morning.

Obviously, we are having a conversation with key customers in the region.

We do believe that China-US relations are developing in a more mutually beneficial direction.

We are definitely working with them right now and we think we will release something soon.

But we didn\'t have much more to add until then.

I will ask Robert to comment, but the area will definitely become more solid and we are very excited about the future there.

The only comment by Robert eilermy is that the drilling plans there change regularly, and the known resources continue to change as the discovery grows.

So it\'s a dynamic environment, but it\'s very positive for the industry, especially for customers involved in the region.

Ian McPherson is fine.

We will continue to pay attention.

I would also like to ask about Tom Prosser as in China you seem to particularly like that platform in the prepared comments.

I kind of infer that maybe it\'s a rig that has the ability to set a new higher profit on the market for pricing when the opportunity comes.

But you do have some selection wells that look likely to take a big part next year.

So, when are you thinking about when the rig can be re-priced and hopefully set up a higher daily rate level for the high end of the region?

Julie Robertson, I will tell you that the rig has an incredible reputation in that market.

We hear feedback every day.

But I will ask. -

I asked Robert to answer your question.

But it all went well in Australia.

Robert.

So, as Julie mentioned, the performance below is good.

We are not ready to talk about the re-pricing there.

We are certainly having some conversations.

As you know, the area is somewhat isolated and supplies are limited, and it is difficult to increase supply rapidly due to security conditions and regulations in the country.

So we are discussing extended working procedures with many different customers that run all the way to 2022.

None of this is final, but there is a lot of visibility over the next period of time.

As we mentioned, the region may also support another rise at some point.

I hope we can provide you with more colors and it\'s just a bit early in some of the conversations we have there.

Our next question is Sean from J. P. Morgan.

Your line is open.

Sean merkham, so I want to focus on assessing the size of the Western Hemisphere.

You mentioned that Noble is building many different markets.

Obviously, you did a very good job in Guyana, sulinan basin.

I think you estimate the Mexican side that the Gulf of Mexico could be the four incremental rigs in Brazil in 2020 to see more rigs between Petrobras and the international oil company.

Can you estimate it for us? -

On the float side, if we put all of this together, what would the 20 + 19 years of age in the Western Hemisphere actually look like?

What is the annual incremental opportunity? over-year in 20?

Robert eilersure, so I mentioned in the transcript of the four drill machines in Mexico that I think the number of incremental rigs gave me--

Based on what we are seeing today, I think this is a fairly safe number.

There was a deadline for drilling there, and we heard a lot of positive progress on the existing schedule there.

This number may be a little higher, depending on the time and on a lot of exploration work.

So very short-term in nature.

So if some exploration work is scaled down together, then we think that number is the Delta four that we mentioned.

If some of these eventually overlap due to individual customer preferences, for whatever reason, this number may be higher in the country for a period of time.

In Brazil, as we mentioned, Petrobras will run up to 20 rigs this year.

We think their fleet will definitely be bigger than that.

We think we saw some of them in 2020, 5 to 10 incremental units.

At this point, it is hard to say that if supply is announced today, reaching £ 20 will take a little longer than anyone expected.

Therefore, it is difficult to predict the time from there to increase further.

But what we see is an extra slope.

It may include the Seventh Generation, which is only for Petrobras.

On the IOC side, we mentioned two or five rigs, which we believe will be heavily invested in the seventh generation.

Between Mexico and Brazil, it is even more difficult for us to say that we have commented earlier on Guyana, Suriname, but some exploration wells are planned later this year and early next year.

So I think next.

It could be 2021 events since then, but I also think that between now and 2020, some additional exploration work is likely to become visible, in that Caribbean region, either on the floating End or on the jack-up end.

I appreciate all the details. I think U. S.

There are obvious emissions in the Gulf of Mexico.

How does this factor come about?

We saw a ramp-

It\'s been quite a while now.

These professional drilling teams are basically in place, but the exploration has been a good success recently.

I think we were encouraged by the talk we heard on the street about planning to use a relatively high level among independent voters in 2020.

So, as you know, their plans tend to be smoother than some professional ones, but, we certainly hear some encouraging news about extending the current contract, and it is possible to add one or two drill machines.

Thank you, Sean merkham.

Then only 2020 of the utilization rate on your floats is close to 80%.

So, how do you reactivate the potential in the cold

The units piled up in the work plan support this effort at least in terms of consideration and next year\'s capital deployment?

Julie Robertson Sean, as we have always been, we will continue to show great discipline in reactivating.

Obviously, if something is there, we continue to believe there will be, which will enable us to reactivate any of our cold --stacked units.

We are in a hurry to do so, but we will not do so until the contract will reward our investment in the unit and get a good return for the stakeholders.

So, we are eager to reach this point, but we have not yet reached this point, and we will certainly be very cautious about how to deal with this.

The next question comes from Tudor, Pickering, and Taylor zücher at Holt.

Your line is now open.

Taylor zücher, I want to follow up on a previous issue.

Robert, I think you\'re talking about the IOCs in Brazil, and you can see the demand for two to five rigs for all the seventh gens in Mexico.

When we see the same places that require these rigs, many of them are already in long-term contract.

So I\'m curious about the incremental activity you see. -

Do you see further activity, is it a real increment, or do you think there is part of the rig that is currently used for a long time

Regular contracts between markets?

This is a question of fairness.

One of the most difficult conditions in our industry is

It is well known that the term nature of all ultra-deep water works.

The terms are increasing and I think we have seen the average monthly rewards and a slight increase in the quarteron-

It\'s been a while now.

But the conditions are still very short compared to the normal cycle of the ultra-deep water contract.

For the rest of the year, they are a large number of rolling enthusiasts and enter 2020.

So when I think-

What I\'m talking about is the upcoming new project, you know, it\'s hard to predict exactly who will expand and who won\'t scale because of all the scrolling.

But as I mentioned earlier, we got good feedback from many different customers about their intention to expand on the rig now.

I think that many of these conversations are not only with us, but also with our competitors to a large extent, and are now continuing direct negotiations.

When you hear a lot of discussions about direct negotiations, I think a lot of them have to do with capacity ---

The ability to continue in these rolls.

Okay, thank you.

Next, you talk about the full recovery in Southeast Asia and Mexico in the script.

Your fleet today is basically in the Middle East and the North Sea.

So, just curious if you can compare and contrast, or give us some color on cash margins in Mexico and southeast Asia relative to the two markets you are mainly in today?

Then Mexico. -

I tend to think that Pemex is a bit more onerous than T and C.

So, just curious if this is the type of work you are interested in bidding forward?

Robert eileryes, so I think the profit margin in Southeast Asia is roughly the same as in the Middle East, or maybe a slight drop.

Mexico, is a more difficult story in terms of profit, as Pemex has many different ways of contracting there, such as the fleet that provides the rig.

We do not yet have detailed information on these 15 tenders, which have been issued in the region.

So, when we were in Mexico before, we had a big profit in that country, and we were the biggest drilling contractor there.

The Ts and Cs you\'re talking about are true.

They have some constitutional rights there, and some find that I think it represents some risk in the past, and we are satisfied with that. I don\'t --

I did not mention Mexico earlier because it is an area that we are very likely to enter, but I do think it is an important part of the balance of supply and demand in the future.

The next question comes from a column of Kurt Hallead with RBC.

Your line is open.

Kurt Halard Julie, back to analyst day at the end of June, you provided a small sensitivity table on the daily rates required for the cumulative and floating, these are all what you need to get positive cash flow dynamics.

I would like to know if you can tell us some of the discussions on how to proceed in the market.

When you enter the second half of 20 years and 300,000 years, how much confidence do you have in the cutting edge rig to reach more than 2021 floating rate?

Is there any insight into this?

Julie Robertson we \'ve been saying that we\'re going to look into the second half of 2020 because some people think it might happen earlier than that.

But we have been continuing our ideas and hopefully it will start to pick up at the end of 2020 or the second half of 2020.

All the numbers that Robert read in his speech this morning certainly show how tight the market is getting, so that clearly leads to this.

But we feel good.

I mean the numbers that we put forward on the chart, you mean that we think we are within the scope of reason and grasp, and certainly within our time frame.

So we still feel very positive.

I know the mood of some of our peers may have declined, but we still feel ---

But we have never been as optimistic as we are now, and we still feel very, very positive.

Kurt HalleadOkay. Great.

I appreciate it.

Maybe in this context, when you think about the generation of future cash flow, when you exit 2020, do you expect or expect that you may get a positive level of free cash flow?

Is this a viable dynamic?

That\'s our goal, of course.

I think it will be a real extension.

But it certainly-

On our radar, it is obviously the most important thing to go back to the positive side of free cash flow, and we are trying to do that.

But I think it will be a bit of a push, but we are working on it.

Our next question is Mike Sabella from Bank of America.

Your line is now open.

Mike saberley, I hope you can--

Adam goes back to the discussion about the deed, so considering that the revolver is the case in most of today\'s availability or EBITDA.

Does this mean that the next step here may return to the priority of key markets?

If so, can we have a detailed look at the time or scale of the market, current dynamics? Yes, Adam.

Look, I mean, our financing plan is not to continue to survive with a revolver.

So I think we are lucky that we bought a bigger revolver for our size company and I think we are very comfortable on the $1 price.

3 billion in the revised facilities.

We have a lot of room there to comfort people with the mobility of the future.

Having said that, we will definitely look for the opportunity to withdraw from the draw of the revolver, giving priority to ensuring that the market may be the one we use.

I mean, we have several different options and different levels of financing, and I think we will keep a close eye on the market and find out the most attractive alternatives.

However, if the market is there in the second half of this year as our industry conditions improve, we will definitely be opportunistic.

Mike SabellaGreat. Thanks.

Then, if we can talk about the cost guidelines, it looks like 4Q is still expected to be a little higher than half the time.

Should we consider 4Q as a good run rate of 2020 or some more

Is there time for that number?

Adam PeakesWell, I don\'t think we want to be in a position yet where we provide more than expected guidance in the early stages of the fourth quarter 2020 budget process.

However, what I\'m saying is that the fourth quarter will be a--

All our rigs are active.

Therefore, the cost structure consistent with the high utilization rate of our fleet is not a bad starting point.

Our next question is from Jon Evans at SG Capital.

Your line is open. Jon Evans Yes.

Your competitors talked yesterday about their deal with Saudi Arabia from the perspective of their joint venture, they launched the two drill machines they should have ordered, etc.

I just hope you can give us some update on the Middle East dynamics.

Are these pressures tightening the short-term market, or do you see any opportunity for interest rates to rise, or do you add more demand because of the pressure in new buildings?

Robert eilerno, frankly, I don\'t think there is much dynamic change.

I think the more important thing to think about now in the Middle East is that in 190 yards there, 50% are over 30 years old.

Not only do you see Aramco\'s largest consumer in the world, but several other major consumers in the region are also clearly leaning towards more modern products.

This is a new development.

As part of some of the old rigs, you \'ve seen this in Saudi Arabia, and with the roll-out of these old rigs, you \'ve heard rumors about it elsewhere in the Middle East, I think you will see replacing these devices with more modern rigs.

When you see a wide supply demand for jackup space, this will be a big driver of high-end and high-spec equipment utilization.

Okay, Jeffrey Chastan, Natalie, I think we\'re going to go ahead and end the call.

We thank you all for your participation this morning and Natalie for coordinating the call today.

Hello everyone.

This is the end of today\'s conference call.

You can disconnect now.

Have a good day.