Good morning. My name is Melissa and I will be your conference operator today. At this time, I would like to welcome everyone to the Noble Corp. Fourth Quarter 2014 Earnings Conference Call. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded today, Thursday, February 5, 2015. Thank you. I would now like to introduce Mr. Jeff Chastain, Vice President of Investor Relations. Mr. Chastain, you may begin your conference.

Okay. Thank you, Melissa. And welcome, everyone, to Noble Corporation's Fourth Quarter 2014 Earnings Call. We appreciate your interest in the company. A copy of Noble's earnings report issued last evening, along with the supporting statements and schedules, can be found on the Noble website and that's noblecorp.com. Before I turn the call over to David Williams, I'd like to remind everyone that we may make statements about our operations, opportunities, plans, operational or financial performance, the drilling business or other matters that are nonhistorical facts and are forward-looking statements that are subject to certain 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, including the price of oil and gas, customer demand, operational and other risks. Our actual results could differ materially from these forward-looking statements, and Noble does not assume any obligation to update these statements. Also note that we are using non-GAAP financial measures on the call today. You can find the required supplemental disclosure for these measures, including the most directly comparable GAAP measure and an associated reconsideration on the website. Finally, consistent with our quarterly disclosure practices, we will post to our website, following the conclusion of our call, a summary of the financial guidance covered on today's call, which will highlight first quarter and full year 2015 figures. With that, I will now turn the call over to David Williams, Chairman, President and Chief Executive of Noble.

All right. Thank you, Jeff. Good morning, and welcome to a new year. As we entered 2015, I'm pleased with Noble's strong position in the offshore drilling industry, having largely completed in 2014 a transformative and well-executed newbuild program, along with the divestiture of the majority of our standard capability rigs, our fleet is now dominated by modern and virtual assets with excellent contract coverage, as evidenced by the current backlog of $10.1 billion. With these transformative steps behind us, we can focus our organization on stellar execution and preparing Noble for an industry recovery. There is no question our industry faces challenges in 2015. But this is a resilient business in the best and the worst of cycles and I'm confident we'll witness a vastly improved outlook when we exit this period of weakness and Noble will emerge as a clear industry leader. Joining me today in London is James Maclennan, our Senior Vice President and CFO. Jeff is in Houston along with Simon Johnson, our Senior Vice President of Marketing and Contracts. I'd like to begin today with some brief comments on our results for the fourth quarter including some thoughts on the asset impairment charge and our decision to retire 3 semisubmersibles. James will follow with a deeper dive in the fourth quarter results and, more importantly, our initial guidance for 2015. Simon will follow James with some brief comments on the offshore market and the status of the Noble fleet. I'll return with some closing comments to address some areas of focus during the cyclical turbulence and a discussion on capital allocation strategy with updated thoughts on the MLP structure, share repurchases and the dividend before we take your questions. As you saw from the earnings report issued last evening the reports -- the reported results…

Thank you, David, and good morning, to everyone on the call. I'll begin this morning by providing some high-level observations on Noble's fourth quarter results. I plan to cover only those line items that fell outside of our previously guided range in order to allow more time for a review of 2015 financial guidance. I'm happy to address items not covered in my prepared comments during the Q&A session at the end of today's call. You'll recall that our spinoff of Paragon Offshore was completed on August 1, 2014, and the operational results of Paragon and incremental spinoff related costs for the periods covered in our prepared statements have been recast and captured net of tax in the line net income from discontinued operations in our profit and loss statement. The highlights of the fourth quarter are as follows: we reported a net loss from continuing operations of $595 million, or $2.38 per diluted share on total revenues of $805 million. As David noted, these results included an after-tax impairment charge of $713 million, or $2.86 per diluted share relating to 3 of our semisubmersible rigs: the Noble Paul Wolff, the Noble Driller, and the Noble Jim Thompson, as a result of our decision to discontinue marketing these units and taken in connection with our annual impairment analysis. An impairment of the total amount of our goodwill, being $60 million, which originated from the acquisition of Frontier Drilling in 2010, is included in the $713 million charge. Excluding the after-tax impairment charge, net income from continuing operations would have been $119 million or $0.47 per diluted share. The results compared to net income from continuing operations in the third quarter of $147 million, or $0.57 per diluted share on total revenues of $829 million. Contract drilling services revenues declined by…

Thank you, James, and good day to everyone. This morning I plan to make some comments regarding conditions in both the floating and jackup sectors in our business, and I'll then turn my attention to Noble's demonstrated achievements and inherent strength in the cyclical pullback, including some statistics on the backlog, our rig-specific exposure to this market and efforts to position the company for the next upturn. In that respect, many of my comments today will extend beyond those affecting Noble and address the larger marketplace. To be sure, this is a tough contracting environment, we are focused on building on our considerable backlog and harvesting our strong customer relationships and capturing the value inherent in the Noble fleet. That said, we continue to observe numerous signs of stress in the offshore industry during the fourth quarter, and our view is that this market dynamic is not expected to abate materially in the near-term. The offshore rig supply imbalance that became evident in late 2013, was further complicated by commodity price weakness during the second half of 2014, especially during the fourth quarter. The timing of the price weakness was critical as it occurred during our customer's 2015 capital budget cycle. As oil process continue to decline, customers readjusted planned spending activity downwards. The fallout from these events have been featured on mainstream media reports on a daily basis. The current climate clouds our ability to make a reasonable judgment of when the market might moderate and improve. Operators are taking a wait-and-see approach that could well extend into the middle of the year. A significant first step towards recovery would be stability in the price of crude oil and higher levels than those experienced today. From 2010 through mid-2014, the consistency in crude oil prices, not just the price…

All right, thank you, Simon. Whether industry prospects are encouraging or challenged execution and solid operating performance remains critical to success in our business. So we are very focused on execution and our success in 2015 will be in part contingent upon 3 primary elements intended to promote operating efficiencies and cost control while we limit margin erosion. These elements include continued improvements in rig uptime and, in particular, continuation of our subsea BOP reliability improvement efforts which have led to BOP-related downtime reductions in excess of 35% in 2014, relative to our 2013 results. Also, we subscribe to the philosophy that a safe operation is an efficient one, hence our commencement to continuous to improvement in this area, and as demonstrated through our continued performance relative to our peer group and IDC [ph] criteria. In 2014, Noble had a total recordable incident rate of just 0.39, evidence of our safety leadership in the offshore industry, and I commend our crews for this impressive performance results. Finally, we are highly focused on cost, which includes proactively stacking rigs with limited market opportunities. The retirement of the Noble Paul Wolff, the Noble Jim Thompson and the Noble Driller will remove $80 million from operating costs in 2015, contributing to a forecasted 7% decline in year-over-year contract drilling operating cost and supporting operating margins at or around 50%. Should we have a need to stack additional units, we plan to take proactive measures to cut cost in the short-term while protecting the assets for the long term. I mentioned in my opening comments that Noble is strongly positioned in the offshore industry, and the company is capable of successfully steering through a period of uncertainty during 2015. Several attributes lead us to this conclusion, including the premium nature of the fleet, with…

Okay, David, thank you. Melissa, we're ready to begin the question-and-answer segment on the call and I realized our comments ran long today. There was a lot of detail to cover, but I would still like to ask that everyone please follow the 1 question and 1 follow-up rule so that we can get to as many questions as possible. Melissa, go ahead with the first question.

Your first question comes from Dave Wilson with Howard Weil.

First one regarding the EVA semis [ph], can you relay your thoughts on these rigs longer term given that I think one still looks like it's available. You just retired 2. Do you think this rig class in some form survives this downturn, whether that be just a couple of them that are used for specific applications or for specific customers?

Dave, thank you for the question. We really look at the fleet and the rigs as they have come up for refurbishment, facelifts and upgrades as they've come over the last few years, as you know. We spent a good bit of cash, or a good bit of capital on the Max Smith before we -- after we took it out of Mexico and before we took it to Brazil. For the program we show a couple of years ago, we also spent a good bit of money on the Romano and the Runner to upgrade those rigs. We did steel work, we did BOP refurbishments and other things. It was -- we had talked about the Paul Wolff and what it was required for it. The Thompson, as it came up, we had a job for it, but if you look at the competitive landscape, and what was required to keep all of these rigs, to drill all these rigs in service, it was a lot of capital. And so as we look at the supply coming in and the useful life of these rigs and how much just cash it was going to take to keep them competitive, we decided the better part of valor was to let those rigs go by the wayside and do our part for the -- for supply and we made a hard call on those rigs. The other rigs that we've got are -- have already been through the upgrade process. For jobs, they've already executed, they're in good shape, they're in class, there's not a lot of capital required for them in the future. So we'll continue to take a look at them. But as we sit today, we're happy with the fleet we've got. The Max Smith, we wanted it to position in that part of the world. We think we have some opportunities for it. So we took a hard look at the whole fleet and these are the 3 that we felt like needed dealing with now.

Okay, great. Thanks for that. And then a follow-on, Simon, I guess this one is for you. Regarding Noble's good contract coverage and kind of the lack of demand here near term, where do you find your efforts? From a marketing perspective team-wide, are being focused, is it like you said in your -- some of your prepared comments? Is it on -- you're getting a lot of conversations with renegotiating contracts for extended-term lower rates? Or how do you feel that your focus is changed over the last 6 months?

Yes. Well, obviously, in the immediate term, our attention's focused on getting jobs for the 2 jackups, [indiscernible] and the Max Smith. We're chasing a number of prospects for each of those rigs. With respect to the renegotiation comment, yes, we are seeing a lot of customers request discounts at the moment. Sometimes operators have short memories, but otherwise look at things with the correct lens. Our customers are driven by the oil price and the gas price, and when utilization is high, the joint contractors don't seek to renegotiate our contracted day rates higher. We'd honor our obligations, and rather than seek to reprice that prevailing market rates when we can. So when operators are being [indiscernible] historically high and stable oil prices, we've embarked upon a massive rebuilding program and that has to be financed, and we continue to finance that on a going forward basis. So we've endured a financial meltdown, a drilling embargo due to Macondo and where you, like the others, have seen big supply chain cost growth. We've enjoyed some good returns, but we've largely reinvested the profits. And so I guess this is a long lead in, but what I'm trying to say is we're going to be defending our contracts that we have in hand, whilst we work with our customers where we can to identify cost savings for both parties, where trading rate per term [ph] or other items to which we attribute value. So we're looking to work with our customers, but there needs to be something in it for us as well as them in so far as renegotiations required.

Your next question comes from the line of Jeffrey Campbell with Tuohy Brothers Investment Research.

I'd like to go back to the scrapped rigs again, just real quick and ask the question another way. Aside from the avoided cost that you've already given a lot of detail on, does the scrapping of the Paul Wolff and the Driller say something about demand for midwater rigs generally, or perhaps that they cannot compete with higher spec rigs that are accepting lower day rates?

I think it says something about our long-term view of the market, given the quality of the high-end of the supply coming in. These rigs are going to have to compete forevermore. All of these rigs are 30 plus years old, they're going to have to compete forevermore with a higher technical capability rig. And the question is, I think I threw out a number of -- well in excess of $300 million. It could have been a lot higher and I'm not -- I don't want to get too succinct about what each rig required. But in the grand scheme of things, do you want to spend several hundreds of millions of dollars or many hundreds of millions of dollars on these rigs that are already 35 years old and have a limited life? And given the near-term prospects and the long-term supply, complexity and supply, we came to a conclusion that the answer to that question on these particular rigs was no.

Okay, that's fair. I'd like to ask one as a follow-up, the broader question, because I know that you guys keep an eye on these kind of days. Looking forward, how does the prospectivity of the offshore exploratory landscape look to you? For example, in the past up-cycle just ended, we had noteworthy exploratory failures offshore Greenland, New Zealand, Angola presalt [ph], and the Norwegian Arctic, as a few examples.

I think we remain committed for the long term prospects of the industry. In addition to those failures you mentioned, there's also been several notable discoveries in the Gulf of Mexico and in other basins around the world. So whilst there've been a couple of well-publicized dry holes here recently, I think the broader picture is that people are continuing to explore the frontiers. We're opening up new plays and new basins. And I think there's going to be winners and losers in that obviously. I think the good news is that certainly, as far as the deepwater is concerned, these are long development cycles that are required -- long investment cycles. And in terms of people looking at the short-term impact of the pullback in the commodity price, I think there's a better story about the health of the deepwater if for no other reason than the investment cycle stretches beyond short-term periods of weakness.

Your next question comes from the line of Klayton Kovac with Tudor, Pickering, Holt. Klayton Kovac - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: So my first question, in your prepared remarks, you sounded confident regarding the Danny Adkins finding additional work after finishing its contract in June. Could you elaborate a little bit on prospects for this rig? For instance, do you feel like it stays in the Gulf of Mexico, or do you think it likely moves elsewhere?

Yes. No, look, certainly -- no, the Danny Adkins is -- has got an excellent operational record. It's been drilling some technically challenging wells. The specification of the rig is in the top shelf of those available in the near-term market in the Gulf of Mexico. We are, like everyone, considering every opportunity for our rolling rigs outside of the markets that they're currently in. But at this stage, we are quietly confident that we'll get ongoing work for the Adkins. As I say, that's going to be driven by specification, its reputation. And at this stage, we're not concerned. Klayton Kovac - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Okay, thanks. And as a follow-up, so after stacking and subsequently retiring the Paul Wolff and Driller, you're now left with only 1 cold stacked floater, the Homer Ferrington. What made you decide not to retire this floater as well?

The upgrade on the Ferrington was done -- completed in about 2000. So it’s a little later vintage. The hull was -- previously had been a floating hull that was stripped to the bare deck and completely refurbished from the -- effectively from the keel up. So it's a little bit different mouse trap. Plus we had in advance of moving the rig in the Mediterranean and during the process of being there, done some other upgrades on the rig. So just the condition of the hull, the condition of the rig, the future marketability of it, it's got better variable load than some of the other rigs. So we didn't feel like it was a good candidate.

Your next question comes from the line of Gregory Lewis with Crédit Suisse. Gregory Lewis - Crédit Suisse AG, Research Division: Simon, in thinking about the jackup, the Sam Hartley and the other one, the Mick O'Brien that are currently looking for work. As we kind of look around, there are -- there is tendering activity that we're seeing in the jackup market. If you could just elaborate a little bit, for the Mick O'Brien in the Middle East, is that something customer-specific that is delaying it? Or any color you can provide around that rig and then also on the Hartley.

Yes. Certainly. The Mick O'Brien and Sam Hartley, in fact all of our JU3000s have very big drilling packages. They're able to drill very demanding wells. And we've been focused principally on finding work for them that matches that specification where we can deliver the most value to the customer and obtain the best pricing terms. Now unfortunately, as the oil prices retreated, those kind of projects are exactly the ones that have been the victims of operator capital budget pullback. So what that has meant is that now we've forced to sort of reconsider the sort of jobs that we compete for with those units, and that's -- what you're seeing is just a little bit of time required for us to readjust our thinking and complete in the mainstream of the marketplace with those units. Gregory Lewis - Crédit Suisse AG, Research Division: Okay, perfect. And then just, David, real quick, clearly the outlook is challenging for '15, '16 is looking equally challenging. As you think about positioning the company for the next up-cycle, how should -- how are you thinking about the length of the duration of the current down-cycle? Like when can we start to maybe see some green shoots in the offshore drilling sector?

That's a great question. I guess nobody really knows. We certainly have a view. So what I would say is that the velocity of this little market evolution that we've seen here has been certainly more -- quicker and more dramatic than anything I've seen in my 30 something years. And as Simon noted, when it hit, I mean it hit right in the middle of the budget cycle that our customers are going through. We had an industry, high-level industry analyst-type company come through and kind of give us their long-term view of the market. I think in November or December, and then they came back in January and said, "Everything we said 30 days ago is now wrong." And then gave us another view and they characterized 1 operator as on iteration 22 of their budget. So the fact that it's been such a high velocity of impact and then the timing of it has made it really hard to kind of get any clarity for where the market's going. And I think as Simon pointed out, what we need to see is some oil price stability before we see operators kind of calm down and settle into an environment that makes sense. I think most people think that the old price is not -- can't stay down very long. Very long is relative. In our business, we still have to deal with the supply question. And so exactly how long takes to manifest itself, we don't know. I mean, what I can tell you is that after looking around the landscape of other competitive drillers, I like where we sit. We've got -- the backlog this year covers about $3 billion. We've got good coverage into next year. The oil price will settle down. And we will see our operators get back into what's the new normal. And you will see this cycle roll out. And so, it's all about -- one of the key elements of being a successful drilling contractor is managing the cycles. And so as we approach the cycle, we got the things done structurally that we needed to do. We're well-contracted. We're well-positioned. We're running a very efficient company right now. We're making some hard decisions. But with what Bernie's got going operationally in our contract cover, if it takes 6 months, we're in great shape. It takes 18 months, we're in great shape. So we'll see how it goes. As the market -- as the year progresses, we'll see more clarity that's the short answer.

Your next question comes from the line of Ian Macpherson with Simmons. Ian Macpherson - Simmons & Company International, Research Division: It's impressive to see how much you can preserve the cash flow margins from OpEx and CapEx when you move assertively with these retirements and stackings. And you've got -- there've been some questions already about idle, higher capability rigs or jackups specifically. Can you sort of explain what the strategy is? How long you're going to wait on a rig before you cold stack it, if it is the Sam Hartley versus the Danny Adkins versus the Max Smith? As you go down the food chain, how long do you wait before you stack -- before we eventually start seeing new generation rigs getting stacked indefinitely?

Let me make a quick comment and then I'll see if Simon has something to add. But for me, what you look at is the number of prospects that you have for that rig and the likelihood of success on one of them. Then that's -- so each rig in each different area of the world is a little bit different. You look at the Homer Ferrington, it's in the Med, and it's in the Eastern Med. We're a long way from really anywhere. There's so much political instability in that part of the world. There are not a lot of opportunities that we could move the rig out. The rig is ready to go to work, we can move the rig out, but there are other rigs in other parts of the world that are also ready to go, that are better positioned geographically to be able to take that work. So there's an easy coeffect [ph] decision. But the other rigs that we've got, we've got good opportunities for, or we're going through an analysis now on what they're about. The 3 that we retired not only had limited opportunity work, but also needed a lot of capital put into them. And so, that's what made those decisions easier. And then I'll let Simon -- do you have anything to add from the market perspective, Simon?

No not really. Just -- all I would add is that the Danny Adkins is not in any danger of getting stacked. The Max Smith is facing a much more challenging outlook. And we're continuing to compete for that rig to obtain work for it. For the jackups, obviously, I think we've addressed your questions earlier Ian, but we believe that we're going to have work for those rigs as we indicated in the middle of the year. Ian Macpherson - Simmons & Company International, Research Division: Okay. And Simon, thanks. Quick follow-up, I know that there is a rationale for why you retain the 4 standard jackups that did not go to Paragon and that Aramco and other operators in the Middle East have wells in platforms that are well-suited for the capabilities and the footprints and the standard rigs. But that being said, is there any rationale that makes sense to you and/or the customers to just putting your available high-spec rigs in those contracts, so that you can accelerate the retirement of older rigs and your own fleet high-grading [ph], does that make sense or does it not?

Not for the rigs that you refer to. The customers have -- got all those rigs under contract. They like them very much, and they're amongst the highest performing in their respective fleets in the Middle East. So I don't think that the customer attributes great value to a substitution of that nature. We're happy to chase work in the open market for the high specification rigs. I'd rather be selling a Mercedes and Toyota in the current market environment. So no, we have no intention to look at doing those kind of swaps. And the kind of customers that the older rigs that you referred to have under contract, they're not terribly motivated to explore those kind of swaps.

Nothing against Toyotas, mind you.

Melissa, we're getting close to the top of the hour. Let's take a final question, please.

Your final question comes from the line of Jud Bailey with Wells Fargo Securities.

Question, there've been some public commentary on Saudi Aramco and PEMEX, looking to potentially exercise their cancellation clauses on their contracts, or at least they're asking for pretty big price concessions. I know you guys that don't have any exposure to PEMEX anymore, but I was wondering if you could comment any on what Saudi Aramco is indicating to contractors or just overall discussions towards surface providers at this point?

Yes, look, I don't think it's limited to Saudi Aramco. I think there's some -- although most of the press coverage is focused on PEMEX and Aramco. I mean there's a number of other people, [indiscernible], Petrobras, some of the independents are also waving the flag on this point as well. I mean, what I'd say is that everyone has contracts with termination risks in them. In the current market environment, it's obviously a time of vulnerability for contractors. What I would say is that most of the discussions are about renegotiations and et cetera, rather than actual outright termination threats, with the past exception of PEMEX, where they seem to be determined to put a whole bunch of rigs out of contract shortly. So I think most operators take more of a holistic and a longer view of contractor relationships. And termination, even if it's prescribed right in the contract, is recognized generally as a pretty blunt instrument and a short-sighted one, and it reduces that operator's contracts' attractiveness relative to the others in the market. So it has a bigger impact than the short-term advantage, has enduring implications for the reputation across the whole market through time. So all contractors, not just Noble, have very long memories. So I think that the operators have to be very careful how they make these kind of threats.

Okay, I appreciate the color there. And then my follow-up is on the operating costs. Even factoring in the cold stack -- I'm sorry, the retirement of the 3 deepwater rigs, your operating costs were probably a little bit below what we would've expected and you highlighted some things like lower mobilization that contribute to that. But could you maybe give a little more color? It looks like you could probably see some, mistake me if I'm wrong, some deflation, or reduction on a per rig level based on the level of guidance. Am I correct in thinking that? And could you maybe discuss a little bit kind of the cost initiatives that you put in place that could help get the number down to where you have guided for this year?

Yes, Jud, this is James. Many initiatives, I really can't get into them, we don't have time for that. Work [indiscernible] in places we went through the tail end of 2014 and into the budget cycle for 2015. You are correct that the there was a per rig reduction in cost when we were finished pulling our numbers together for 2015, and that was a fairly significant reduction. As I mentioned in the prepared section, we do see a close to 0 inflation in goods and materials, and lower increases in personnel costs than we've seen in the past, and that's just a function of the market as it currently stands.

There's clearly a lot of work going on in this front, Jud. I mean running our business efficiently is a key driver. And I agree with James, we really don't want to get into all of the things that we're doing, but we're pulling every lever we can to save costs. But we got to maintain efficiency as well and that's a key driver for us.

Melissa, we're going to go ahead and conclude the call. Again, I realize we provided a lot of detail this morning, and unfortunately, we left a few names in the queue, but I will be reaching out to each of you over the course of the day. Thank you for your participation on today's call and your interest in Noble. You might make a note that our first quarter 2015 results call will be scheduled for the 30th of April and the results to be reported the evening before the 29th. And we'll confirm those dates as we get closer. Melissa, thank you for coordinating the call and good day to everyone.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.