Ladies and gentlemen, thank you for standing by. And welcome to Noble Corporation’s Fourth Quarter 2019 Earnings Review Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] Thank you. I would now like to hand the conference over to your speaker today, Jeff Chastain, VP of Investor Relations. Please go ahead.

Thank you, Melissa. And welcome, everyone, to Noble Corporation’s fourth quarter and full year 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 the statement -- supporting statements and schedules, can be found on the Noble website, and again, that’s noblecorp.com. Before I turn the call over to Julie Robertson, 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 that 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 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 in today’s call. 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 disclosure practices, once our call has concluded, we will post our -- on our website a summary of our financial guidance covering today’s discussion, which will result in numbers for first quarter and full year 2020. 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 a review of Noble Corporation’s fourth quarter and full year 2019 results. We appreciate your participation on today’s call and your continued interest in Noble and the offshore drilling industry. In addition to Jeff, I am joined this morning by Robert Eifler, our Senior Vice President of Commercial, and the latest member of our Noble management team, Stephen Butz. Stephen joined the company in December 2019 as Executive Vice President and Chief Financial Officer and brings a wealth of experience following similar assignments in offshore drilling industry over more than 15 years. Stephen’s demonstrated leadership and financial strategy and his broad knowledge of capital markets are important skills that will complement our management processes and we look forward to his valued contributions. I cannot patch it to person who better fits Noble’s legacy of values and principles and I am grateful to serve on this team with Stephen. I will begin this morning with some brief comments on our fourth quarter and full year 2019 operating results, as well as details on some impressive commercial developments. Stephen will follow with a more thorough explanation of fourth quarter financial performance, as well as our 2020 financial guidance. Robert will then provide commentary on the global offshore market. He will offer regional perspective and thoughts on opportunities for the Noble fleet, after which I will provide some closing thoughts and we will all address your questions. We closed another quarter with strong operational performance, extending our record for consistency that remains among the best in our industry. Active fleet utilization in the fourth quarter, excluding our three cold stacked units was 88%, including 93% in our jackup fleet and 80% across our active floaters. Fleet downtime in the quarter was minimal at 2.9% and…

Thank you, Julie. Good morning, everyone, and thank you for joining us. Many of you on today’s call know that I just recently joined the company, agreeing to serve as Chief Financial Officer. And I was pleased to join this management team and the company that I have long held in high regard. To those of you who know me from my previous service at two other offshore drillers, I look forward to reconnecting with each of you in the coming weeks. I accepted the financial leadership role at Noble with an understanding of the tough, though improving, environment that the industry is experiencing and the challenges we face as a result of our high financial leverage and declining liquidity. While this backdrop is tough, it is not one that is either unfamiliar to me or unique to Noble, rather it is in fact widespread across our industry. I arrived with a clear list of priorities and over these initial 50 days on the job, have worked closely with the rest of the management team to complement the work they have done to identify the best solutions to these challenges. I will have more to say on priorities in a moment. But, first, I would like to provide some observations on the company’s operating results by comparing the sequential quarters. Then I will walk you through our expectations for 2020 operating results and capital expenditures, before concluding with some perspectives on the company’s balance sheet and my priorities. As we announced yesterday, Noble concluded the fourth quarter 2019 with a net loss attributable to the company of $33 million or $0.13 per diluted share on total revenue of $454 million. The result included $167 million of contract drilling services revenue, resulting from the Noble Bully II contract buyout with Royal…

Thank you, Stephen. Good morning, and welcome to everyone on the call. Steady improvement in offshore industry fundamentals remained evident through 2019. The number of contracted jackups and floating rigs ended the year well ahead of levels at the conclusion of 2018, with meaningful dayrate appreciation resulting from the tighter rig capacity. Importantly, customers continued to signal a growing interest in offshore programs. The purchase of sizable offshore positions over the past three years in a number of emerging regions has led to the commencement of exploration campaigns and further appraisal drilling in several of these prospective areas. As exploration activities increased in deepwater basins, new discoveries were announced, including 20 deepwater discoveries in 2019, representing the second consecutive year of increase. Multiple successes were announced in Guyana, Trinidad and Tobago, the U.S. Gulf of Mexico and Ghana. The incremental rig needs emerging across the jackup and floating segments, our industry is poised for further improvements in both utilization and dayrates in 2020 and the Noble fleet is well-positioned to benefit from this improvement. We began 2020 with all 13 of our jackups in seven of our 12 floating units under contract. Also, across the 25 rig fleet, 52% of the available days in the year were committed to contracts, including 58% of the days associated with our jackup fleet and 45% related to the floating rigs. Excluding three cold stacked rigs, floating days contracted improves to 65%. Eight jackups and four active floating rigs were expected to complete their current contracts over the year and through the first two months of 2020, we have begun to increase the number of contracted days in both the jackup and floating fleets. I want to bring you up to date on our progress thus far in 2020 and provide some insight into…

Thank you, Robert. Before we close and begin addressing your questions, I want to expand on Robert’s thoughts with regards to the status of our industry. It has been a while since a discussion about the offshore drilling industry was not accompanied by a cautionary tone and although industry challenges over the past five years have been immense, encouraging signs of a steady pace of fundamental recovery are now evident. As we enter 2020, we are not blind to the early concerns for crude oil demand caused largely by the Coronavirus, which has led to a decline in oil prices. However, we currently have no reason to believe this price decline will alter the spending plans of our customers. Therefore, we remain encouraged by the prospects for further industry improvement. In the floating rig sector, evidence continues to mount in support of a heightened interest in oil and gas resources among the industry’s exploration and production companies, with an anticipated focus in regions such as Guyana, Suriname, Brazil and the Gulf of Mexico. These regions, as well as others in the Eastern Hemisphere, including West Africa, the Eastern Mediterranean and the Asia-Pacific region continue to demonstrate strong oil and gas resource potential, which we expect to result in incremental rig needs as exploration and development drilling campaigns commence. I believe the Noble fleet of premium floating and jackup rigs possess an optimal geographic alignment that improves our prospects for securing contract awards and extensions as demand for premium efficient rigs accelerates. Our industry leading presence in the Guyana Suriname Basin where four of our premium ultra-deepwater drillships operate represents a unique position in an area that could provide the Western Hemisphere most rewarding opportunities. Our jackup fleet located predominantly in the Middle East and the U.K. North Sea is well-positioned…

Okay. Thank you, Julie. Melissa, we are ready to begin the question-and-answer segment of the call, please.

Thank you. [Operator Instructions] Your first question comes from the line of Greg Lewis from BTIG. Your line is open.

Thank you and good morning. I guess, first, Julie, thanks for the help over the years. Robert congratulations and Stephen, welcome back. I guess, Stephen, first, just since you walked through it a little bit in your prepared remarks around the tangible asset value on the credit facility. As we think about that in 2020, I guess, I am kind of curious what would trigger a potential write-down in those assets and is that something that is annual or how can we think about that as we think about your access to that liquidity?

Sure. Yeah. We are always mindful of triggering events for impairments and that’s something we are required to do under the accounting rules when there is a triggering event to test an asset’s recoverability, the cash flows that it would generate over the life versus the book value of the rig. And in this environment with weaker oil prices, you would logically expect that we are doing that frequently and so that was of course part of our year end procedures as well. We did have the $17 million in impairment, as I mentioned. But there is no way to know what the future will hold because it depends on our assumptions as far as the earnings power of the rigs. It’s highly dependent on our forecast, our reactivation plans and it’s a fluid environment. So we are always monitoring those things and it’s hard to really...

It’s more triggered -- sure. But it’s more triggered by sort of rate expectations and with rates, I guess, on the slow move higher, that definitely would trump sort of asset transactions in the second-hand market, is that a fair way to think about it?

Yeah. That’s right. It’s driven by our expectation of future cash flows.

Okay. Perfect. And then, just one more from me on the marketing side, Robert, as we look at the Lloyd Noble and the FSR, you kind of highlighted that maybe that rig could end a couple of months early. Just kind of curious, how we should be thinking about that rig, I imagine discussions are ongoing, you probably can’t talk much about those. But as, I guess, as we think about it and you talked about potential downtime between contracts, is there -- is that one of the rigs that we should be thinking about potentially seeing some downtime before it resets to a new contract?

Yeah. Sure. So, you guessed it right in the beginning. We are in the middle of some sensitive discussions. So I am afraid I can’t say a whole lot. We have offered previously that that rig was built specifically for the Mariner platform and the amount of time that it spends on that platform is up to the customer and their partners and they are evaluating what that looks like right now. At present, we have disclosed a November estimated end. We have also mentioned, as you said, that the contract could end as early as September and we are discussing extensions on that. So, at this date, we wish we had some more information for you, but we don’t and we will, of course, update everyone as those discussions continue. I would say that rig when it was built to Norwegian standards. The Norwegian Continental Shelf is thriving right now and I would anticipate that all CJ70s will be operating in the Norwegian sector. So, at some point, this being, we believe, the most competitive all of all the CJ70s. I would anticipate that that rig does end up in the Norwegian sector at some point. There would be some gap in between to mobilize over there and I wish I had more guidance for you right now, but without a conclusion on what’s going to happen with the Mariner platform, we really can’t give accurate guidance on when that transition into Norway may happen.

Okay. Perfect, guys. Thank you, everybody, for the time.

Thank you, Greg.

Thanks.

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

Thank you. Good morning.

Good morning.

Good morning.

So, Robert, congrats on the promotion, Stephen, welcome. Good to speak with you again.

Thank you.

Thank you.

So, I thought we could start with the two of you, it would be great if we could just talk about how this revamped management team intends to put a stamp on the company over time in terms of capital allocation. So in other words, it would be great just to get a little bit of insight into the pitch that won over the Board in terms of bring you in -- bringing you both into these new seats.

Well, I will touch on it briefly and then hand it over to Robert. But, of course, as I mentioned, near-term, in terms of capital allocation, we are really focused on balance sheet repair. The whole industry has too much debt. Of course, we have our share and as we touched on, and so that’s really the priority as far as capital allocation. Now, that said, of course, we have customer specific requirements against contracts that are attractive. We want to continue to reposition the fleet in the right areas and with the right customers, and so that could be part of our -- certainly, part of our capital allocation strategy. But, certainly, again, a key part is trying to reduce those levels of indebtedness. Robert?

Yeah. I’d just add, I think, what’s gotten us here today has been our operational execution. We have had incredible results out of operations, our safety results have been great and we have had a very strong customer focus here that’s enabled a lot of what we have today. So, certainly, focus will continue there. Stephen mentioned the priority to address the balance sheet and improve our liabilities. That persists without question and we have announced some targeted growth opportunities last year. We will continue to look at what’s out there within constraints, and obviously, we have a great deal of constraints right now. So we are trying to be creative and be mindful to what could be out there to help move us forward.

And, Julie, could we get your thoughts on the same questions just in terms of -- as you are shifting towards the Executive Chairman role, just how you see those pieces fitting in from that slightly altered vantage point?

Sure, Sean. Thanks for your support as always. We are looking forward to this next chapter in Noble’s history. Having Stephen come on the team is a tremendous add to this company and I am very grateful for him being here. Robert -- our Board spends a lot of time on succession planning and they do a mindful and dutiful job of that and this was the -- we think this is the right time for this and Robert is certainly up to the challenge and ready to go. What a privilege it will be for him to have this opportunity that I have had for so long to be involved with this company. We have been working on a number of the things that the two of them just mentioned and talked about and we will continue moving that ahead. Noble has a long history in this business and we continue that we expect to have a continued long history and with these two at the top of the ticket, I can’t imagine two people more capable of taking us into the next century of our operation. So we are looking forward to the future, Sean. Thanks.

Thanks. I appreciate those comments. Just the other topic I’d like to touch on is just thinking about the addressable market, call it, in Guyana and Suriname over time. Could you maybe just talk about just at a high level given you have highlighted this big contract, this big agreement with Exxon. Just how you think about balancing securing volume versus price, given the uncertainty of what the dayrate environment could look like especially the further out we go? And as we think about the introduction of potentially some shallow water opportunities, just that addressable market over time, it would be great to hear more detail how you think about that?

Sure. So, first of all, we are extremely pleased to be there, as I mentioned in the prepared comments. I think the reserve estimate went from 6 billion to 8 billion here just a few weeks ago. There is 31 exploration wells approved right now. So we think that momentum will continue there and we are really pleased to be right at the center of all of that. The shallow water side, I would say, it’s probably more on the periphery and -- but we do see a few wells that are going to be drilled that would require some discoveries to better understand what the demand there might look like. On the rate, we spent a lot of time with our client negotiating this agreement and we are -- believe very firmly that this is a win-win for both sides. One of the things that was extremely important to us was that we do maintain some sort of exposure to changes in rates. Now, of course, we have the same exposure to downside, but right now we see an improving market and as we see what we have contracted right now, we are very pleased to have been able to reach an agreement that does provide some upside and is a win-win with the structure we have negotiated. So we are just extremely pleased and honored to have been given this opportunity by Exxon.

Got it. Great. Thank you very much.

Thank you, Sean.

Thanks, Sean.

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

Thanks. Good morning. I’d like to also echo the sentiments of congratulations and welcome back to Robert and Stephen. And staying on that ECA with Exxon, Robert, I know that that was probably an index structure that was -- not to put words in your mouth, but I am sure that that was a preference for the customer. And your deepwater business that’s so much over the past few years that there is really a handful of active bidders and pricers and you and your team have been among those who have been heavy lifting and bringing rates higher. Do you have more confidence in the pricing discipline of your peers, your more consolidated peer group today than you would have a year or two ago to put yourself -- to put this much of your fleet into a passive pricing mechanism?

Yeah. So I don’t -- I actually don’t believe discipline is going to pull us through it, I believe supply and demand is going to pull us through it and we see improving demand here. And I think that, right now, we have 20 legacy contracts from pre-2014 that will roll over the coming years, and some of those are with great rigs, some of those are with lesser quality rigs. So I think you will see high grading that will contribute to effective demand in the market. And I don’t think we have yet seen customers price in the efficiency that these top tier rigs provided. The way we look at the market, we kind of divide between Tier 1, Tier 3, Tier 3. If you look at how we define Tier 1, Tier 2, the pricing -- there is no difference in pricing today. So we believe the Tier 1 rigs, which are essentially the two BOP rigs, we will still have room to price away from Tier 2 and all of that’s just driven by efficiencies in the value that the customer sees in the rigs. That’s before you ever get to the discipline question, all of that. On discipline, I think, every driller on earth needs rates to improve and we all need the market to improve. So I don’t want to rely on discipline for this to get better and I don’t think we have to. But you do have the slightly added bonus that we are all positive on the future. So, we have worked hard to market at fair rates and keep the market moving forward and if -- as we see demand during 2020 and 2021 in the floating benign segment, we see room for improvement.

Got it. Thanks. I am sorry, I have been split between a couple of different calls and I didn’t get all of your remarks. I don’t know -- when you were talking about the near-term patchiness in the North Sea jackup market, do you expect rates to hold firm through this patchy period of utilization or do you see any risk to some softness in rates this year as well?

Okay. So, I think, rates are generally holding firm when rigs are at their highest and best use in the Central North Sea. You will see some softer dayrates potentially where we try and on short-term work where you are trying to bridge a gap and I also think -- I think there’s two remaining standard specification jackups in the Southern North Sea today. With some of the softness, you may see some of the more premium assets compete down into the Southern North Sea gas plays, gas prices are a little bit weak, and so those customers are pretty price sensitive right now. So, I think you could see some weak pricing there. But as it relates to the highest and best use, which is the majority of the work in the North Sea, I think, rates are pretty strong and have remained strong.

Understood. Thanks, Robert. I will pass it over.

Melissa, let’s take one more question, please.

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

Hey. Good morning. Thanks and let me echo the prior comments with respect to the management changes for you, Julie, Robert and Stephen. A couple of housekeeping ones for me, as it relates to the CEA, in the press release you put an illustrative $200,000 example. I am just curious if you could give us any more kind of detail on how that prevailing market rate is calculated, clearly, it’s a sort of leading edge spot rate. But is it an average of a handful of rates that are out there in the market or is it the sort of the highest, most leading edge rate that you see out there, any color there would be helpful.

Sure. So it’s an average of what we call and I just earlier mentioned tier one benign rigs. So, that’s essentially all the rigs out there with the super drill [ph] activity, et cetera. So it’s an average of that. It’s intended to represent spot dayrates at the time they are negotiated and it resets twice a year on a set date, March 1 and September 1 for all of the rigs. And keep in mind, the rigs are staggered as they roll into this pricing structure and we disclosed that in the original press release there. But once everything is operating under the agreement, everything will reset March 1 and September 1 each year.

Okay. Great. And then, as it relates to the sluggishness you called out in the North Sea potentially over the first half, you have four rigs rolling I think in the first half, relative to the full-year revenue guidance you gave today, what does that imply for the utilization for those rigs in the back half, should we assume -- or does it assume that all four of those rigs find work in 2020 or could potentially one or more of those rigs have to wait till 2021 to resume work following the current firm periods of their contracts?

Yeah. So it seems all four rigs are going to find work, and we -- as I mentioned, we have conversations on all four of the rigs. I think third quarter starts as an average would be -- on all four of them would be a fair thing to assume right now. There’s a couple of opportunities that start earlier than that, couple of opportunities that start kind of at the end of the third quarter, but on average we see some potential for white space till about the third quarter.

All right. Thanks.

Thanks, Taylor.

Okay. Melissa, with that, we are going to go ahead and close the call today. I want to thank everyone for their participation today and your continued interest in Noble. Melissa, we appreciate your time in coordinating today’s call. Good day, everyone.

Thank you, ladies and gentlemen. This concludes today’s conference call. Thank you for participating. You may now disconnect.