Ladies and gentlemen, thank you for standing by and welcome to the Noble Corporation's Third Quarter 2019 Results Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Jeff Chastain, Vice President of Investor Relations. Please go ahead.

Okay. Thank you, Kinsey, and welcome everyone to Noble Corporation's third quarter 2019 earnings 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 the supporting statements and schedules can be found on the Noble website and that's 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 our 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, discussed 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 this includes 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 will be referencing non-GAAP financial measures in the call today. You will find the required supplemental disclosure for these measures, including the most currently comparable GAAP measure and an associated reconciliation on our website. And finally, consistent with our quarterly disclosure practices once our call has concluded, we will post our - to our website a summary of the financial guidance covered on today's call and that will provide guidance on our fourth quarter and full year 2019. With that I will now turn the call over to Julie Robertson, Chairman, President and Chief Executive of Noble.

Thank you, Jeff. Good morning and welcome to review of Noble Corporation's third quarter 2019 results along with our updated view of the offshore drilling industry. We appreciate your participation in today's call and your continued interest in Noble. I'll begin with a few remarks relating to important achievements over the third quarter and an update on some recent developments. Then will review our third quarter financial performance and provide financial guidance for the fourth quarter and full year 2019. And finally, we'll provide a discussion on the global offshore industry and address opportunities for the Noble fleet, after which I'll provide some closing thoughts and then we will be happy to address your questions. Joining me on the call today as we cover these topics is Laura Campbell, our Vice President and Controller, who will provide the financial report. Also participating is Craig Muirhead, our Vice President and Treasurer and both will be available to respond to any questions you might have. Meanwhile, we are continuing our search for Chief Financial Officer and hope to complete that process in the near future. After Laura, Robert Eifler, our Senior Vice President, Commercial will cover the marketing discussion. While activity levels remain encouraging, the upward trajectory since early 2018 in several of our quarterly measures including fleet utilization, revenues and EBITDA slowed a bit in the third quarter as we managed a combination of rig mobilizations, shipyard and contract preparation projects and scheduled regulatory work. These events which involved three floating units and two jackups contributed to a 6% decline in third quarter fleet operating days and revenues. Laura will provide more detail in her financial discussion. More importantly, these rig mobilizations and projects have concluded or will conclude very shortly. The jackup Noble stock marks, which completed a scheduled regulatory…

Thank you, Julie, and good morning to everyone. I'm happy to provide a review of our third quarter financial performance. From an operating point of view, a favorable outcome for both revenues and operating costs led to better than expected third quarter EBITDA and loss per share. I'll offer some insight on revenues and costs and review our capital expenditures and liquidity before I provide our thoughts of full year and fourth quarter 2019 guidance. Following yesterday's close of financial markets, Noble reported a net loss attributable to the Company for the third quarter of 2019, a $445 million or $1.79 per diluted share. Included in the results was a non-cash gross charge totaling $596 million resulting from the impairment of the drillship Noble Bully II, which has been idle since April of 2017. As Julie mentioned the impairment decision resulted from discussions with our customer. Excluding the portion of the impairment charge attributable to our partner and captured in the noncontrolling interest line of our P&L, Noble recognized the net charge of $331 million or $1.33 per diluted share. When the charge is excluded from our reported results, Noble would have reported a third quarter net loss attributable to the Company of $114 million or $0.46 per diluted share. Contract drilling services revenues in the third quarter totaled $259 million compared to revenues of $275 million in the second quarter. The 6% decline is due to fewer fleet operating days in the third quarter with planned out of service periods on the Noble Don Taylor and the Noble Houston Colbert as both rigs prepared for the commencement of new contracts. Also the Noble Scott March fall fewer operating days due to the scheduled inspection. Finally, the Noble Globetrotter II experienced lower daily revenues in the quarter following the utilization…

Thank you, Laura. Good morning, and welcome to everyone on the call. It remains clear that offshore drilling metrics are trending favorably and continue to support the case for steady recovery in the offshore drilling industry. This has been the case throughout 2019 and forward indicators such as FIDs are positive. For example, when comparing the active contracted utilization at the end of September 2019, to the same measure at the close of 2018, the industry's jackup fleet stood at 85% compared to 79% last December, driven by a 10% increase in the contracted rig count. Among the industry's floating fleet, the measure was 80% in September, compared to 75% as the year began, with an 8% increase in the contracted rig count. In addition, contract durations are getting longer, according to IHS data, the average duration tendered for floating rigs has increased to nearly 11 months in September from just over 8 months in January of this year. The progress is more pronounced for the industry's premium rig fleet. The active contracted utilization of premium jackups, which represent 46 units with high specification features has remained 100% over the period. Premium benign floaters representing the 39 most sophisticated ultra-deepwater drillships, or the delivered 7th Generation fleet has improved to 87% compared to 83% at the end of last year. And this improvement has led to a noticeably better commercial environment. Given the clear preference among many customers, a fully committed supply of these high specification drillships is increasingly likely in 2020. Outside of the improvement in various measures of rig activity, we remain encouraged by the actions of a growing base of customers that clearly demonstrate the importance of high quality offshore basins as a meaningful source from which to build reserves and long-term production. A growing list of…

Thank you, Robert. As we approach the end of 2019, It is hard to dispute the fundamental progress achieved to date in offshore drilling industry. The utilization metrics presented by Robert and numerous other indicators in support of our customers growing offshore exploration and development priorities bode well for future activity. With 95% of the active fleet under contract, Noble fleet utilization has remained above industry-wide utilization measures. Strong operations execution and a commitment to outstanding safety performance across our fleet of largely premium designed rigs is a significant contributor to our success. Also, we have advantageously positioned our fleet in regions where we can readily match the technical sophistication of our fleet with our customers increasingly complicated well structure programs. At the same time, we remain focused on identifying regions with emerging customer interest and long-term visibility. On the latter point, there is currently no better example than the Guyana Suriname Basin where Noble has been providing drilling services early 2018 initially with the Noble Bob Douglas. With the recent relocation of the Noble Sam Croft and the Noble Don Taylor, we now have 4 ultra-deepwater drillships assigned to the region, which is arguably the most prolific offshore opportunity in our industry with prospects for multiple years of exploration and developmental activity. As a region's resource estimates increase following the confirmation of numerous successful exploration efforts, customer interest continues to build an incremental rig needs covering both shallow and ultra deepwater requirements are increasingly likely. We continue to evaluate ways in which Noble can grow its presence in this attractive offshore basin. From a financial standpoint, we have improved our position under our credit facility following a well-timed amendment and we continue to possess attractive flexibility as we evaluate alternative to further manage debt maturities. In regard to operations, we have maintained exceptional performance, our fleet uptime to September at just under 97% and we added 2 new jackups to the fleet each with multiyear contracts, putting us on track to grow fleet operating days for full year 2019 by 18% over the prior year. By taking the steps necessary to fortify our already strong global fleet position, we have improved our prospects for additional growth in the future. All of these financial and operational accomplishments leave Noble better positioned as we prepare for 2020. As we approach the end of 2019. I am proud of what we have achieved during the year and is always somewhat to recognize and thank the employees of Nobel to continue to provide superior service to our customers and unwavering dedication to our company. With that I will turn it over to Jeff.

Okay, thank you, Julie. Kinsey we're going to go ahead and begin the Q&A segment of the call. So if you please identify the initial person in the queue. Thank you.

Our first question comes from the line of Kurt Hallead with RBC. Your line is open.

Sorry bad sound. Battle a little bit of cold here. Thanks for that. Thanks for that update. Appreciate the color. So, Julie, I just want to get a, see if you guys get a general sense, had some recent discussions with some other companies have already reported that kind of peaked kind of future day rates or up to deepwater rigs somewhere in the vicinity of $170, 000 to $250,000 a day for contracts that we are starting in 2020. I just want to get your perspective around that range and see if there is potential for that to be at the upper end or so we're in the middle

We don't disagree with that at all. Kurt. We think that we think obviously day rates are moving up, two of us are now disclosing right. So we hope it's putting pressures on others to maintain discipline and we think the upper end of that is readily achievable in that time period.

Now when you going through the process here of the, the acquisition of the Bully joint venture. I was wondering if you can just give us some idea of when you think the Bully II might get back on day rate?

We don't have any estimate right now, but as Robert noted, we all know. I think in our script, so this does give us flexibility to market, the rig more widely, we think we definitely think that there are opportunities for the units. So Robert, his team are focused on actively marketing it as we speak and we'll see what comes up. But we don't have anything right now. But we are very hopeful.

Your next question comes from the line of Sean Meakim with JPMorgan. Your line is open.

Julie, really the transaction with Shell makes sense. And I think you take cash now and I suppose this gives you optionality on the Bully II so hard to see the downside to take any steps from your perspective, assuming you may hold in the contract as you laid out, can you talk about your confidence in getting work for the Bully II next year? And if you're unsuccessful could we maybe just talk about the impact to cash flow and as it relates to your desire to get to free cash flow neutrality by the end of 2020?

Sean, we just said the prospects we believe are getting a good job for the Bully II obviously increase because we're able to market it more broadly. We don't have anything yet, but we remain optimistic. So we're just now being able to market it more broadly. So give us a little time to see what's out there and see where the applicability for that unit will be, but it's a good unit with a lot of operating efficiency, capabilities and we think that has a lot of opportunity ahead for it. In regard to free cash flow positive by the year 2020, obviously with this being removed from EBITDA estimates, we don't know what will be replaced but that is going to be a lofty goal at this point, we think that will probably be pushed out. We, I think what we said, we would hopefully reach that point by the end of 2020 moving into 2021, going forward obviously it's still our goal that tightens but we remain in focusing on that as our goal going forward obviously as free cash flow positive. We agree the deal with Shell was a good deal. We were glad that we could reach a deal that was good for both sides and one that they're satisfied with that we're satisfied with because they are an important customer going forward and so we're anxious to get that completed and more details out about it.

And then the CapEx budget for next year of $150 million can you maybe walk through the big buckets inside that. And then just maybe the flex points depending on what the market gives you next year from an activity perspective?

The CapEx budget for next year is about $150 which would be about $120 for sustaining and $30 for projects.

Is there any possibility or how do you think the flex points around depending on what the market gives you next year? Are there levers that could drive that number up or down?

We don't see that going up, Sean, we feel very comfortable with that number right now. If anything, we think that's on the high end. So if that's what you're talking about in terms of flexibility that's what we're anticipating. As you know, the CapEx for this year was higher because of the projects we had built into that. The two [indiscernible] so we're getting back down to a much more normal running rate in 2020.

Your next question comes from the line of Taylor Zurcher with Tudor, Pickering, Holt. Your line is open.

I don't want to be a dead horse in the ground. But for the Bully II now that your marketing it to other operators besides Shell, obviously you don't have work forward today but could you maybe talk about what sort of rig programs or regions that rig might be ideally suited for. I know it's technically 6 trend type floater but the technical specifications on that are a little bit different than some of the other Tier 1 assets out there, so just curious what sort of work programs that rig might be ideally suited for moving forward?

Sure. Taylor. I'll take that one. We've said in the past the Bully II is not as you mentioned, not necessarily a Tier 1. It does not have 2 BOPs, but it has an excellent performance history and it's currently located in Southeast Asia where there is a bit of a tightness in the dynamically positioned market at present. So we have a few different options there. I think generally speaking, and we said we're marketing it worldwide. I think generally speaking will be focused on kind of moderate term projects, we probably will not chase well to well projects with that rig today. But as I mentioned in my script, there are a number of projects out there that would be suitable for the rig today and we're going to, we're going to see if we can't find anything, we see the market tightening significantly in the middle of next year. We see a very definite path to all of the Tier 1 rigs becoming fully utilized. And I think that puts rigs like the Bully II and other 6th generation rigs, very much in play towards the middle of next year.

For 2020, I know that rig has been warm stacked for quite a while now in the CapEx guidance. Is there anything embedded in there for the Bully II or I guess the real question is, is there any CapEx needed to bring that rig back to active status on a contract next year.

Is not anything in the CapEx budget for 2020 for the rig. And we're looking at looking at what it would take, but it's basically recertification issues that would be included in that primarily to BLP, so let's say around $30 million.

Your next question comes from the line of Greg Lewis with BTIG. Your line is open. Robert, just had a couple of fleet questions for you. I guess the first one is you mentioned potential opportunities in Australia, just looking at the Australian market. Do you see-- the potential demand is more of an incremental, rig demand into that region or is it more just kind of getting in there against maybe some of these existing contracts that are rolling off work?

I think that, it is more incrementally, there could be another jack-up and there could be a replacement opportunity on the floating side. Incremental floating demand is more of 2021 type event there.

And then just on the, on Guyana. I mean clearly you guys have done a great job, you have four rigs down there and just trying to understand a little bit more about that base and I guess if you throw in that other competitor rig that will have five rigs in that region. Robert just kind of curious, as you think about 2020 and will even think I guess maybe 2021 also. Any thoughts around, what that market could look like in terms of rig availability - of rig demand? And then just, I mean you're down there, but you do have some rigs rolling off maybe what that could mean around without getting specific on day rates maybe incremental percentage increases to rates in that base?

Sure. So there have been, I think 13 discoveries in the Stabroek Block two discoveries outside of that and there are multiple exploration wells being drilled, as we speak, as well as a few other on the program for 2020 there. So it is early days to determine, what development drilling might. What demand might be driven by development drilling? But with the number of discoveries, we do expect incremental rig demand. We'll have to wait and see what that looks like kind of going into next year, as oil companies evaluate their discoveries and start to start to shape up more firmly there additional exploration and development needs. On the rate side, I expect the rigs that have been used down there, largely seventh generation rigs and I expect the rates there to track with the seventh generation rigs elsewhere worldwide. The operating expense there is roughly similar to the U.S. Gulf of Mexico. Maybe just a tick higher, but I think they'll track very closely with the broader market of the Tier 1 rigs.

Your next question comes from the line of Ian MacPherson with Simmons. Your line is open.

I missed the - term duration on the new Regina Allen contracts. Sorry.

160 days.

Would you characterize that as incremental work or displacing a competitor in Trinidad?

I characterize that is incremental.

So I was just taken aback really over the course of this year. We had observed you've been fully utilizing your jackups. But the rest of the high-end market has been playing catch up and it seems like the entire high-spec jackup market, is definitively tight today and so given that backdrop, I wanted to ask about your appetite as you described various opportunities for contracting this year on the jackup's growing over some shorter duration and in some longer duration, does the recent sort of more comprehensive tightening make you a little more averse to contracting long term, at this point going into 2020 or do you think you still have to have a, an equal balance?

We've always strove for a balance. I think we've been somewhat averse to longer-term contracting now for almost 18 months. Today, we would be fine, I think taking a year contract and I think beyond that kind of term we - and a number of others are likely to look for some sort of day rate escalation of protection going out past that. There aren't a - there are some ton of projects that are well over a year, today although there are a few in the Middle East and a few others elsewhere. So we look for a balance and I think I think getting out past 2 years is where we start to think a little bit about how to structure that.

And then I just wanted to ask a follow-up on the Paul Romano that reactivation opportunities in and out and it sounds like it's back in play now. And I just wonder if the reactivation parameters for that rig have swelled at all or if you still think it, fairly quick and inexpensive to bring the Romano out and what type of contract structure would trigger that for you?

So nothing has changed on the reactivation there. I think we've guided to $8 to $10 million. If anything, it would be on the high end of that range. And just a few months of required reactivation time. That said, we're not marketing that rig into short-term opportunities. I think given its capabilities in age and the presence of a number of longer-term opportunities out there that right now, we're focused on opportunities that are more like a year and over. And as I just mentioned, there are several. In the moor market, as you probably know moor market is a bit tight and I mentioned it in my comments. So there isn't a lot of availability out there and so far, we're just, we're just trying to match it up with the right job.

Your next question comes from the line of Mike Savella with Bank of America. Your line is open.

I was hoping maybe we could talk a little bit about the outlook on the Lloyd Noble. Could you guys give us an update on what you're hearing from the customer on the options that are on that rig and talk about how we should be thinking about that rig as its approaches the end of the existing contract?

Yes. So I think we've mentioned earlier the option has expired on that rig and it's unfortunately, Mike, a little too early to speak definitively about the rig, we are in discussions with the customer. And as we've mentioned before that rig is the only jackup in the world that can get on the Mariner platform, we do believe that they have continuing work on the platform, but we don't have anything secured for the rig today. So like I mentioned, we're in discussions and we'll give you guys an update. And just as soon as there is something to talk about there

And then kind of with respect to the capital structure, can you just walk us through what the next steps are. You will see in terms of managing the balance sheet and maybe comment on kind of what you see as current market conditions for priority guarantees or what whatever comes next?

Sure, Mike. We basically think we have a very solid one way right now was 1.2 billion of liquidity at the end of this quarter, the third quarter and as you know we have minimal debt service due until 2023. Our CapEx requirements remain low. We have considerable exposure to increasing day rates. So we feel good about where we are on the business side of things, but as you know with the amendment to the revolver a few months ago, we have a great deal of flexibility in our current balance sheet and we're looking at a number of opportunities, but we don't really feel any urgency do anything right now. We will continue to evaluate everything that's available to us out there and due to the flexibility we have, we think there's a lot of opportunities, but we don't have really have anything to discuss definitively at this time.

Your next question comes from the line of JB Lowe with Citi. Your line is open.

Sorry, I'm sorry if I missed this before. I hopped on the call a little bit late, but the payment that you guys paid to Shell for their 50% interest in the Bully II, it being a nominal amount. I'm just wondering, given that it gives them the ability rigs and implied rig value that's pretty low. I'm just wondering what was the kind of the puts and takes around that transaction?

Well, I mean the puts and takes, that I mean we just basically reach a mutual agreement of the contract, what the contract term was, what the payout would be and the rig values were between us and the client and I'm not sure what [indiscernible], obviously we can't, we're not able yet. We haven't finalized the discussions, so therefore we're not able yet to provide a lot of additional information, other than what's in the press release and what was talked about earlier on the call.

So Shell has kind of - they've historically been a pretty big client of yours, there may be just a couple of rigs and imagine I already know the answer to this, but the 2 Globetrotter rigs, they are working, that are actually actively drilling, has there been any discussions around the longer term outlook for those rigs?

Yes, sure. So we're in constant discussion with Shell, it's a little too early to talk about extending those contracts today. We are out till 2022. We've just installed our Noble owned MPD system on one of the rigs, which is operating offshore for them right now and we've got a long list of wells to drill for them for both of those rigs. They're operating beautifully and very efficient rigs both of them. So in that conversation we will start at the appropriate time, that's realistically the year and a half, probably two years away before we get deep into that sort of discussion with them.

Your last question comes from the line of David Smith with Heikkinen Energy. Your line is open.

I just wanted to make sure I understood guidance correctly. The Q4 revenue guidance assumes no revenue from the Bully II?

Correct.

So is it fair to assume the contract buyout, then would kind of be for the period starting on October 1, 2019 lasting through April 2022?

That is correct.

Awesome. And did I hear correctly that guidance for the JV interest line in Q4 is an expense of $1 million to $3 million despite no revenue?

That is correct, because we will have some expenses that continue through that first month.

And if I could ask one quick follow-up. Thank you for sharing the rate for the Regina Allen contract off Trinidad. It seems like a strong rate. Could you say if that includes consideration to ask that mobilization costs?

It is not. That's a clean rate.

Okay. Kinsey, we're going to go ahead and close the call today. I'd like to thank everyone for your participation today and your continued interest in Noble. And Kinsey we appreciate your time in coordinating today's call. Good day, everyone,

This concludes today's conference call. Thank you for your participation. You may now disconnect.