Good morning. My name is Natalie, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Noble Corporation’s Second Quarter 2019 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. Mr. Jeff Chastain, Noble Corporation Vice President of Investor Relations, please go ahead, sir.

Okay. Thank you, Natalie, and welcome everyone to Noble Corporation's second quarter 2019 earnings conference call. We appreciate your interest in the company. And in case you missed it, a copy of Noble's earnings report issued last evening along with all the supporting statements and schedules can be found on our website at noblecorp.com. Before I turn the call over to Julie, 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 not historical 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. And these would include 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, we are referencing non-GAAP financial measures on the call this morning. You will find the required supplemental disclosure for these measures, including the most directly comparable GAAP measure and an associated reconciliation on our website. And finally, consistent with our quarterly disclosures practices, once our call has concluded, we will post on our website a summary of the financial guidance provided this morning, which will cover third quarter and full-year 2019 figures. With that, I'll now turn the call over to Julie Robertson, Chairman, President and Chief Executive of Noble.

Thank you, Jeff, and good morning, ladies and gentlemen, and welcome to our review of Noble Corporation's second quarter 2019 results. I appreciate your participation in today call and your continued interest in Noble. Joining me today in addition to Jeff are Adam Peakes, our Senior Vice President and Chief Financial Officer; Robert Eifler, our Senior Vice President of Marketing and Contracts. Also here for the call today is Barry Smith, who joined Noble two months ago as Senior Vice President of Operations. Barry has already proven to be a very effective and valuable member of the management team and we are delighted to have him here with us. In yesterday’s earnings release we reported second quarter EBITDA of $92 million on contract drilling revenues of $275 million. Our operational performance for the quarter was outstanding leading to these solid results. We are encouraged by number of markers in the business as recovery in the offshore market becomes increasingly apparent. Total fleet operating days improved 13% from to first to second quarter due to higher activity across our asset classes, as we continue to benefit from the excellent placement of our global rig fleet, as well as the contract awards and extensions. Utilization of jackup fleet rose to 98% in the second quarter, up from 93% in the first quarter, while utilization of our nine active floating rigs excluding the three cold-stacked units grew to 89% up from 80% in the prior quarter. For the first half of this year, total fleet operating days was 32% better than the same period in 2018. And we secured a little over $300 million in contract awards over the six month period. The awards, which contributed to our backlog of $2.1 billion at June 30 were more than twice the total of contract…

Thank you, Julie. Good morning and welcome to everyone. As disclosed yesterday evening, Noble reported a net loss attributable to the company for the second quarter of 2019 of $152 million, or $0.61 per diluted share on total revenues of $293 million. The reported results included net gain totalling $34 million or $0.13 per diluted share, relating to the release of previously reserved tax positions, following the settlement of the company's U.S. tax returns for the years ended December 31, 2010, and 2011. Also, as Julie discussed earlier, reported results included the recognition of a charge totalling $100 million, or $0.40 per diluted share relating to the Paragon Offshore litigation. Excluding these two items, the company would have reported a second quarter net loss attributable to Noble of $86 million or $0.34 per diluted share. We've included a non-GAAP supporting schedule with our press release and the schedule can also be found on the Noble website at noblecorp.com. I’d now want to provide additional insights into second quarter performance and highlight some of the items that fell outside of the range of guidance we provided during our last conference call in early May. Contract drilling services revenues in the second quarter totalled $275 million and were slightly better than revenues in the previous quarter of $271 million. The improvement was due in part to higher daily revenues on the drillship, Noble Globetrotter II which utilized the Noble owned MPD system while executing a well construction program in the Black Sea. The rig’s effective dayrates inclusive of the revenue associated with the MPD deployment was approximately $398,000 in the second quarter. In addition, revenues in the quarter were favourably impacted by a 13% pickup in total fleet operating days, which drove total fleet utilization to 82% up from 76% in the…

Thank you, Adam. Good morning and welcome to everyone on the call. Since our last call in May, the offshore industry has continued to display evidence of a broadening industry recovery. There is no better indication of improvement than rigs returning to work and the working rig count has increased by 9% in the floating sector and 6% in the jackup sector since the start of the second quarter. Both jackup and floating fleet utilization measures are as high as we have seen in four years and customer inquiries hint at a further improved 2020. In the jackup sector, stronger activity is apparent in an expanding number of regions as Southeast Asia, Australia and Mexico join the early moving North Sea and Middle East in full scale recovery. Rate improvement is no longer isolated to select regions, but rather is taking hold globally for premium and high spec units. The floating sector is also recovering. While the pace of improvement is different than that of the jackup segment, we recognize the number of supportive developments, not the least of which is rate improvement for the most modern drillships. There is a growing interest among customers to gain ownership in new emerging plays such as those in Guyana and Suriname and we anticipate an improved global offshore spend year-over-year with an upward trend generally into the future. Offshore Mexico and Brazil operated through recently acquired highly prospective acreage positions are beginning to complete initial evaluation with priority drilling prospects identified, government approvals received and early rate increase issued. Finally, the number of deepwater exploration wells drilled in 2019 is on track for a 25% improvement over last year. The importance of this renewed focus on deepwater exploration can't be underestimated and has already produced 10 announced discoveries through the first half…

Thank you, gentlemen. As we work through the year, I continue to be pleased with Noble’s competitive position, including our fleet distribution, our technical leadership and our financial flexibility, all of which serve as a central practice for establishing our strength through the cycle. Our premium jackup and floating rigs are located in regions that hold exceptional promise, promising both proven and emerging resource potential to drive strong customer demand. These regions including the North Sea, Middle East and Australia, areas where more than 90% of our jackups currently or will certainly reside. Almost 80% of our active floating rigs will be soon be located in Western Hemisphere regions that, as Robert noted previously, offer exceptional growth prospects, including the Gulf of Mexico, Guyana and Suriname. We continue to implement new technologies as they evolve and develop into sound operating practices. These advances are proving to create efficiencies in areas around automated machine controls, production and human interfaces with machinery and standardized processes to provide consistently sustainable technical capabilities and an even safer environment for our operation teams. While we are just beginning to see the benefits of this young technology, it is anticipated that there will be advantages gained in terms of offshore well design and development ensuring that we continue to meet and expand our customers’ drilling program. We maintain our core focus on financial discipline which is essential for longevity in a cyclical business. A steady de-leveraging of the balance sheet and ensuring a solid liquidity runway remain our key financial objective. I'd also like to note that effective with the fleet status report scheduled for September 9, we will be providing dayrates on a go forward basis unless restricted by our customers in order to promote greater transparency and provide insight to our commercial progress. In closing, we continue to execute well on all of the things within our control. And as always, I want to thank all of the employees at Noble for their continued support and commitment to our company. While we feel that we’ve new top bottom and we’re clearly entering into what is proving to be an important recovery period. It has been a long and challenging downturn and the Noble team members have remained focused on always doing the right thing and I'm so grateful for their loyalty and dedication. I'll now turn the call back over to Jeff.

Okay, Julie. Thank you. Natalie, we are ready to ahead and begin the question-and-answer segment of the call. So if you will assemble the queue, we'll take our first question and ask all of those in the queue to limit themselves to one question and a follow up please. Natalie, go ahead.

Certainly. [Operator Instructions]. Our first question comes from the line of Ian Macpherson of Simmons. Your line is now open.

Thanks. Good morning. Great quarter and I’m very pleased to hear that dayrates transparency is coming back. We agree that will help us, that will help you commercially as well. So, I'm looking forward to that. I wanted to ask a question on Guyana, Suriname, Julie or Robert, just getting the multi-year visibility there and the increasing evidence that dayrates are moving higher, has the conversation there begun to evolve towards more of a mutually acceptable view on long-term contracting? Or do you think that this will continue to play out incrementally with your key customer and the other customers that maybe adding rigs in the region over the next five years?

Well, Ian. First of all, thank you for participating this morning. We are in dialogues obviously with our main customer in that region. And we do think that it is moving to a more mutually beneficial relationship. We're certainly working on that with them right now and we think we will have something to release fairly shortly. But until then we don't have a lot more to add. I’ll ask Robert to comment but that region is definitely firming up and we are very excited about the future there.

My only comment would be, the drilling plans there change regularly and the known resources also continue to change as they make more and more discovery. So, it’s a dynamic environment but all hugely positive for the industry, especially for the customers participating in that region.

Okay. Well, we'll stay tuned on that. I also want to ask about the Tom Prosser because you seem to China particular like on that rig in the prepared remarks. I sort of infer that maybe that is a rig that has the capability to set a new a new higher margin in the market for pricing when its opportunity comes. But you do have option wells that look like they could occupy a good bit of next year. So what are you contemplating with regard to when that rig could reprice beyond its options and establish hopefully a higher dayrate level for the top end in that region?

Ian, I will tell you that that rig has an incredible reputation in that market. And we're hearing feedback on that daily. But I'll certainly ask -- I'll let Robert respond to your question. But that’s going very well in Australia.

Yes. So, as Julie mentioned, the performance is good down there. We are not quite ready to talk about repricing there. We are certainly in a number of conversations. As you know that region is somewhat isolated and with limited supply, and it's hard to ramp up supply quickly there because of the safety case, regulations in the country. So we are talking to a number of different customers about extended programs for work that runs all the way out into 2022. None of that’s final, but there's a great deal of visibility for quite some time to come there. And as we mentioned as well likely that that region supports another jackup at some point as well. I wish we had more color for you, it’s just a little bit early in some of our conversations there.

And our next question comes from the line of Sean Meakim of J.P. Morgan. Your line is open.

So I wanted to kind of focus on sizing up the Western Hemisphere. You mentioned Noble is building a lot of the different markets. You’ve done very well in the Guyana, Suriname Basin obviously. I think you sized the Mexican side, Gulf of Mexico as maybe four incremental rigs in 2020, Brazil to see more rigs between Petrobras and the IOCs. Can you maybe just kind of help us size what -- on the floating side what actually can look like in '20 over '19 in the Western Hemisphere if we take all that together? What's the incremental opportunity year-over-year in 20?

Sure, so I mentioned in the transcript piece four rigs in Mexico, I think that number for incremental rigs gives me -- I think that's a fairly safe number based on what we see today. There are deadlines for drilling there, and we hear a lot of positivity moving forward on existing timelines there. That number could be a bit higher, it depends on timing and it depends on a lot of this exploration work. And so it's short-term in nature. So if some of that exploration work is shrunk together, then we see the number coming in kind of as the incremental four that we mentioned. If some of those end up overlapping, for whatever reason, due to individual customer preferences, that number could actually tick higher for a period of time in the country. Down in Brazil, Petrobras is going to run up to 20 rigs this year as we mentioned. We think that for sure their fleet will grow larger than that. And we think that we see some of that in 2020, five to 10 incremental units. It's really difficult to say, at this point, getting to 20 if were announced supply today took a bit longer than anyone was anticipating there. And so, ramping up further from there and timing is difficult to predict. But what we do see an additional ramp-up, including probably some seventh gen usage there and that's just for Petrobras. On the IOC side, we mentioned two to five rigs and we think that all of those will be running heavily towards seventh gen rigs. And in between Mexico and Brazil a little more difficult to say, we commented earlier already on Guyana, Suriname but there are a number of exploration wells planned for late this year and early next year. So, I think that follow-on from that is probably more of a 2021 event, but I also think there is the potential for some additional exploration work to become visible between now and 2020, both on the floating side and the jackup side in that Caribbean region.

I appreciate all the detail. I think U.S. Gulf of Mexico has a notable emission there. How does that factor in?

So, we've seen a ramp-up among independents for a quite some time now. The majors have essentially had their rig fleets in place but decent exploration success recently. And we're encouraged I think by the talk we hear on the street about relatively high usage among the independents planned for 2020. So, as you know, their plans tend to be a bit more fluid than some of the majors, but certainly we're hearing some encouraging news about extending current contracts and potentially bringing on an incremental rig or two.

Thank you for that. And then just 2020 utilization across your floaters getting close to 80%. So, how you are approaching the potential to reactivate and in the cold-stacked units to the work programs out there support that type of effort at least in terms of consideration and just viability of that sort of approach in terms of capital deployment next year?

Sean, as we always have, we are going to continue to show great deal of discipline around reactivations. Obviously, if there is something out there and we continue to believe that there will be, that will allow us to reactivate any of our cold-stacked units. We are anxious to do that, but we are not going to do it until the contract will reward us for the investment put into the unit and to get a good return for stakeholders. So, we're anxious to get to that point but we are not there yet and we will certainly be very prudent in how we approach that.

And out next question comes from Taylor Zurcher from Tudor, Pickering, Holt. Your line is now open.

I wanted to just follow up on one of the prior questions. Robert I think you said the IOCs in Brazil you see visible demand for two to five more rigs with all of seventh gens for Mexico. When we look at the same IOCs that are demanding those rigs and a lot of them already have seven gen rigs under long-term contract. So I'm curious for that incremental activity you see -- well further activity you see, is it truly incremental or do you think there's a piece of that that will come from just rigs that are currently on long-term contracts transitioning between the markets?

It’s a fair question. One of the most difficult conditions in our industry right now is the short-term nature of all of the ultra deepwater work as you all know. Terms are increasing and I think we've seen on average month awarded, a slight uptick quarter-on-quarter for a bit of time now. But still compared to the normal cycle of ultra deepwater contracting, terms remain short. And they’re a great deal of rollovers for the rest of this year and into 2020. So when I think -- I'm talking about new programs coming on, you know, it's difficult to predict exactly who's going to extend and who's not because of all the rollovers. But as I mentioned earlier, we are getting great feedback from a number of different customers about their intentions to extend on rigs right now. And I think a lot of those conversations, and not necessarily just with us, but also in large part with our competitors, are kept to direct negotiations right now. And when you hear a lot of talks about direct negotiations existing, I think a lot of that relates to capacity -- to continuing capacity on these rollovers.

Okay, thanks. And follow up on the jackup side, you talked in the script about Southeast Asia and Mexico now being in full recovery as well. You're fleet today is essentially all in the Middle East and the North Sea. And so just curious if you could kind of compare and contrast or give us some color on cash margin for Mexico and Southeast Asia shakeout relative to the two markets you’re primarily in today? And then for Mexico -- and I tend to think of some of the Pemex versus the T and C there being a bit more onerous. So just curious if that's the type of a work that that you'd be interested in bidding on moving forward?

Yes, so margins in Southeast Asia are roughly equivalent I think to the Middle East, or maybe a slight tick down. Mexico, a more difficult story on the margin side, because there are a number of different ways Pemex contracts down there in terms of the fleet that's provided with the rig. And we don't have a ton of detail yet on these 15 tenders that have come out in that region. So, when we were in Mexico before, we made great margins in that country, and we were the largest drilling contractor there. The Ts and Cs you mentioned are true. They have some constitutional rights there that some have found I guess to represent some risk in the past, we've been comfortable with it. I don't -- I did not mention Mexico earlier in the context of being a region that we are overly likely to bring a jackup into, but I do think it's an important component of the supply demand equation going forward.

Julie, back to your Analyst Day at the end of June you provided a little sensitivity table around the required dayrate for jackup and floaters needed to kind of get you to a cash flow positive dynamic. I was wondering if you could just give us an update on how some of the discussions are going maybe in the marketplace. How much conviction you guys have in the leading edge rigs kind of getting you to those 300,000 plus kind of rates for floaters as you get into the second half of '20 and into 2021? Any insights on that would be really helpful?

We’ve said along that we look into the latter part of 2020 and as some people were thinking it might happen earlier than that. But we're continuing on what we thought all along that towards the end of 2020 or the second half of 2020 hopefully it will start to pick up. All the numbers that Robert read through in his remarks this morning certainly shows how tight the market is becoming and so that's obviously going to lead to that. But we're feeling very good. I mean the numbers that we put up on the chart that you're referring to we thought we're very much within reason and within our grasp, certainly within our timeframe. So, we're still feeling positive. I know there’s been a little pullback perhaps in sentiment on the part of some of our peers, but we're still feeling -- but we have never been quite as bullish as we were and we're still feeling very, very positive.

Okay. Great. I appreciate that. And maybe just in the context then, as you think about the cash flow generation on a go forward basis, do you expect or anticipate that you could potentially get to a free cash flow positive level on as you exit 2020? Is that a feasible dynamic?

Of course that certainly is our objective. I think there is going to be a real stretch. But it certainly -- leading back to free cash flow positive is clearly first and foremost on our radar and we're pushing for that. But I think it’s going to be bit of a push but we are working on it.

And our next question comes from the line of Mike Sabella of Bank of America. Your line is now open.

I was hoping you could just -- Adam go back to the discussion on the covenant, so given the fact that the revolver kind of takes to at most of the availability or EBITDA is today. Does that mean next steps here are probably to go back to the priority here in key market? And if so, could we get some detail around just timing or size, current dynamics in that market?

Yes. Look, I mean, our financing plans are not to continue to live off the revolver. And so I think we're fortunate that we've got a larger revolver for a company of our size and I think we're very comfortable at a $1.3 billion in the amended facility. We have got lots of headroom there to give people comfort on the liquidity picture going forward. That being said, we're absolutely going to look for opportunities to term out in revolver draws and priority guaranteed market could be one that we use. I mean we have got several different options and different levels that we can finance at and I think we're going to monitor the markets closely and figure out what's the most attractive alternative. But if the markets are there in the second half of this year as conditions in our industry improve, we're absolutely going to be opportunistic.

Great. Thanks. And then if we could just talk about the cost guide, and it looks like 4Q still expect to be running a little higher than where it’s been in the half. Should we be thinking about 4Q as a good run rate heading into 2020 or there is still kind of some one-time things in there that are with that number?

Well, I don't think we want to be in a position yet where we're providing guidance beyond what's implied in our fourth quarter in the early stages of our budgeting process for 2020. However, I will say that fourth quarter will be the beginning of a -- most all of our rigs being active. And so, that cost structure consistent with the high utilization of our fleet is not a bad place to start.

And our next question comes from the line of Jon Evans of SG Capital. Your line is open.

Yes. Your competitor yesterday talked about their deal with Saudi from the standpoint of their joint venture that they pushed out two of the rigs that they were supposed to already have ordered, et cetera. And I was just hoping maybe you could give us any kind of update on the dynamic in the Middle East for jackups. Are those pushouts make the near term market tighter or do you see any opportunity for rates to move up or more incremental demand because of those pushouts in newbuilds?

No, I don't think that dynamic changes very much at all frankly. I think the more important dynamic to think about in the Middle East right now is the fact that of the 190 yard jackups there, 50% of them are over 30 years old. And you're seeing some of not only the largest consumer of jackups in the world with Aramco, but also several other major consumers in the region show a clear preference to more modern units. And that's a new development. As some of these older rigs role and you're already seeing this in Saudi, and you're hearing rumours about it elsewhere in the Middle East, as these older rigs roll, I think you'll see replacement of those with more modern rigs. And when you look at the broad supply demand on the jackup space, that's going to be a big driver towards the utilization on the premium and high spec units.

Okay, Natalie, I think we're going to go ahead and close the call. We appreciate everyone's participation this morning, and Natalie, your coordination of the call today. Good day, everyone.

This concludes today's conference call. You may now disconnect. Have a great day.