Noble Corp. profits flat in fourth quarter

Offshore drilling contractor Noble Corporation reported flat profits for fourth quarter, as increased downtime for its deep-water rigs offset higher average daily rental rates for its rigs.

The Swiss-based company’s net income for the fourth quarter was $126.28 million, 50 cents per share,  compared to $125.78 million, also 50 cents per share, for the same time last year.

The company added three new ultradeep-water drillships to its fleet in 2012, and completed extensive maintenance on two other drillships, but problems with new subsea equipment kept the ships out of commission for a significant portion of the quarter. The company has estimated that these five rigs contributed to 33 percent of its downtime days in the fourth quarter.

Noble’s revenue grew 28 percent to $922 million for the fourth quarter, benefiting from increases in the daily rig rates.

Offshore rig day rates climbed as high as $600,000 along with demand for offshore drilling  around the world, especially in the Gulf of Mexico, where Noble has seven ultra-deep-water drillships and 12 jack-ups operating.

Earnings for the full year 2012 totaled $522 million,  $2.05 per diluted share, on revenue of $3.5 billion, up from $371 million, $1.46 per  share, on revenue of $2.7 billion in 2011.

Noble Corp. CEO David Williams said that the company is disappointed with its operating performance for the quarter, stating at the fourth quarter earnings conference call, “we intend to show improvement in 2013”.

Williams said that problems with new subsea equipment led to longer downtime than expected  for the new rigs.

“We are trying to have discussions with the manufacturers,” Williams said. “Unfortunately, they don’t have a lot of skin in the game. We continue to receive equipment that is not always ready to run.”

Noble has analyzed its operations, added engineers and is aggressively making changes to decrease downtime for 2013, Williams said.

“Our level of downtime on the new build rigs was not acceptable to me,” Williams said. “We have done a lot of things differently and we expect to learn more from what we have already learned from these rigs. I don’t think we ought to expect that level of downtime on every rig going forward.”

Even with these setbacks, Noble is continuing to expand offshore drilling capacity as demand grows, with plans to add three additional ultradeep-water drillships and three jack-ups in 2013. Contracts continue to pour in, with backlog at the end of 2012 at $14.3 billion, up from $13.7 billion at the end of 2011.

“I don’t see anything that gives me any inclination that we don’t have a good long run in front of us,” Williams said. “One of the things I am so pleased with is that we have some 10-year contracts, some five-year contracts, and three-year contracts – and they are staggered, so they are not all rolling in at the same time. With the rate of new discovery and the demand for hydrocarbons, I don’t see anything yet that tells me that there is any issue with the strength of the offshore market.”

Noble plans to expand to Southeast Asia and is continuing with an asset divestment process, to improve the quality of its fleet into a ‘premium asset base’, said Roger Hunt, Noble’s senior vice president of marketing and contracts.