Thank you for standing by, and welcome to the Noble Corporation Second Quarter 2021 Results 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] I would now like to hand the conference over to your speaker today, Craig Muirhead. Thank you. Please go ahead, sir.

Thank you, Rebecca, and welcome everyone to Noble Corporation's second quarter 2021 earnings conference call. We appreciate your continued interest in the Company. You can find a copy of Noble's earnings report issued yesterday evening along with the supporting statements and schedules on our website at noblecorp.com. Joining me today are Robert Eifler, President and Chief Executive Officer; and Richard Barker, Senior Vice President and Chief Financial Officer. Also joining are Blake Denton, Vice President, Marketing and Contracts; and Joey Kawaja, Vice President of Operations. For today's call, we will begin with prepared remarks followed by a question-and-answer session. During the course of this call, we may make certain forward-looking statements regarding various matters related to our business and companies that are not historical facts. Such statements are based upon current expectations and assumptions of management and are therefore, subject to certain risks and uncertainties. Many factors could cause actual results to differ materially from these forward-looking statements and Noble does not assume any obligation to update these statements. Please refer to our SEC filings for more information regarding our forward-looking statements, including the risks and uncertainties that could impact our future results. Also note, we are referencing non-GAAP financial measures in the call today. 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 with that, I'll now turn the call over to Robert Eifler, President and Chief Executive Officer of Noble.

Thank you, Craig, and welcome to everyone joining us on the call today. I'm proud of the Noble team's performance in the second quarter and excited to walk you through the results we released yesterday. Noble continues to deliver value to our customers and investors and also, keeping our employees and business partners’ safe offshore. Last year, we had exceptional safety and operational performance breaking the company record, and the second quarter of 2021 was even better. Thank you to all of our crews offshore and our people in our shore-based offices who have delivered such good performance in the face of the travel and logistical challenges brought about by COVID-19. We have also executed on our strategic plans in the second quarter by acquiring Pacific Drilling, making substantial progress on the integration and contracting of the fleet and relisting on the New York Stock Exchange. We will speak more on our strategy later, but let me begin my prepared remarks today by addressing the floater in jackup markets. The ultra-deepwater market has improved dramatically during 2021 and our newly acquired Pacific rigs are allowing Noble's marketing team to again bid into that market, following a period without any drillship availability. As I mentioned last quarter, one of the key success factors for the acquisition was finding work for the new drillships. Since we last spoke, Noble has secured three new contracts which address that priority. This additional work adds approximately a 180 operating days to the fleet prior to any exercise of options and has a cumulative total contract value of over $55 million, including associated mobilization fees and customer reimbursed rig upgrades. First two new contracts are for the Pacific Khamsin and further build-out its 2021 and 2022 drilling schedule. The rigs previously announced one-well campaign for Petronas…

Thank you, Robert, and good morning all. In my remarks today, I plan to provide some brief highlights of our second quarter results, provide a progress update on the Pacific Drilling acquisition, discuss our current capital structure and round off with some comments around our outlook for the remainder of 2021. Turning to our quarterly results. Contract drilling services revenue for the second quarter totaled $200 million versus $159 million for the combined first quarter. As a reminder, the combined first quarter of 2021 combines the results of the predecessor period from January 1 to February 5 and the successor period from February 6 through quarter end and was a result of adopting fresh-start accounting during the quarter. More detail can be found in our Form 10-Q on May 7. The quarterly increase is related to the addition of the Pacific Drilling rigs to our fleets with the Pacific Santa Ana and the Pacific Sharav earning revenue during the quarter, as well as several Noble rigs that went back to work will have significantly more operating days in the second quarter, including the Noble Hans Deul, Noble Sam Turner, Noble Roger Lewis, Noble Scott Marks, and Noble Tom Prosser. Contract drilling services revenue for the second quarter also reflects a reduction of approximately $14 million compared to $8 million recorded in the combined first quarter as a result of non-cash amortization of contract intangible assets specific to the two Globetrotter rigs. For similar reasons, our contract drilling costs were higher in the second quarter as we prepared rigs to go to work and absorbed the cost of the newly acquired Pacific Drilling rigs. The Noble Lloyd Noble experienced an increase in operating expenses during the quarter, as we readied the rigs for entry into Norway and its upcoming contract with…

Thank you, Richard. We are excited about our future. Our industry does continue to face challenges and we'll see a lot of change over the next few years. However, oil and gas will remain a major component of the world's energy mix. And since our beginnings, a 100 years ago, Noble has been an important part of the energy value chain, providing access to resources, the power of the world. Noble supports a sustainable energy future through our operational efforts to protect the environment and to safely deliver reliable and efficient drilling services. Doing our part, we are pursuing a number of strategies to reduce our fuel consumption and emissions such as power plant optimization and installation of Selective Catalytic Reduction systems. We are also modifying the Noble Lloyd Noble to accept shore power as an alternative to running onboard engines. The acquisition of Pacific Drilling has proven a great deal for Noble and I'm pleased that we've delivered on the economic rationale by signing several new contracts on those rigs at improving dayrates while moving expeditiously on the integration, as Richard described. Additional consolidation is essential for our industry and will not only provide meaningful cost synergies to the participants, but also allow the best companies to offer a broader range of services and solutions to more customers. We have accomplished a lot in the past several months. Our balance sheet is strengthened. Our fleet is enhanced with new high-spec assets and our cost structure has improved. We accomplished all of this while maintaining our focus on delivering safe and efficient operations to our customers and while facing the substantial challenges posed by COVID. Importantly, we currently expect to generate meaningful cash during calendar year 2022, but we have more work to do. We will continue to push in each of these areas to improve on where we are today, and I am confident that our efforts will lead to many years of sustained success from Noble. Thank you for your participation in our call today, and I'll now turn it back to the operator for Q&A.

[Operator Instructions] And your first question comes from the line of Greg Lewis with BTIG.

Yes. Thank you, and good morning, everybody.

Good morning, Greg.

Hey, Robert. I was hoping you could talk a little bit about what's going on in the jackup market. It's interesting and maybe I'm dating myself. But it seems like historically the oil prices get going. The jackup market kind of leads the drilling recovery and then the floater market tends to follow. I mean, you've kind of mentioned some certain dynamics. But I guess what I would say is if traditionally the floater market at time that follows the jackup market by six to 12 months. Are we just looking at the reverse of that? Or really jackups are clearly important to you? So when do we think we can start to see maybe the jackups might catch up just given the fact that we're in this pretty attractive oil price environment?

Sure. Yes. It's a good question, Greg. And I agree with you. Typically, we'd expect to see an improvement in the jackups first. I think part of the answer lies in the amount of volatility the industry has seen over the past few years. And so we had this extended downturn, then we had the jackups recover first as anticipated. And then in late 2019 and early 2020, we saw the floaters following again as anticipated. But then with the COVID disruption, I think it's just certain things off a little bit from the norm. Some of what we're seeing just on the floater side is a pipeline of work that kind of built-up and was delayed from COVID, so all that's working through the system right now. I think there was probably a little bit less of that on the jackup side. So you're seeing it a bit topsy-turvy going through 2021. But to kind of the broader question about when for jackups. I think we've also reached a point through that – if you think back to 2015 and 2016 when downturn really started, we've seen a ton of attrition on the floater side and we've seen some attrition on the jackup side. And so our view is that you have a – you have so many different jackup operators and you have a very powerful largely NOC clients. It's a more difficult sector to rebalance and it's cheaper to keep a jackup for option value than it is a floater. And you have a lot more players and smaller players and very importantly, some very capable regional players that are competing in that sector. And I think that as we've moved through this downturn that – we've reached a point on the jackup side whether all that's kind of converging and we're seeing this somewhat flattish outlook. So we do see demand increasing gradually there. But I think the attrition story is a more difficult one on the jackup side than the floater side. What we would anticipate and that we're hoping for here perhaps in 2022 or late 2022, is that we start to see the harsh sector – the harsh jackup sector improved first. That’s what we have seen in the past. We can see some tightening in the North Sea perhaps, certainly, Norway is a unique market. But with the restricted supply there, things can move quickly. So for me at least I think in a – kind of an early sign there is when we see the kind of the most difficult jackup regions start to improve and then perhaps see rates follow elsewhere from there. But for us that's not a 20 – we just can't see that in 2021. And so we're calling really for things to be stable, but probably not big growth drivers even going through 2022 right now.

Okay. Great. And then just one more for me. Certainly, more of a technical drilling question around or not even around customer demand. Like, I mean, clearly, there's been some contracts that we've seen involved in Mexico with managed pressure drilling. I realized that the Santa Ana has dual gradient drilling. Is there any way to kind of split up the mix of type of drilling activity that's going on? And really, I guess my question is, is MPD really gaining momentum and is that becoming the standard or it’s kind of – hey, it's happening, but it's still kind of – it's a less than more in terms of what we're seeing for like future contracts across the Golden Triangle?

It's a good question. So MPD is gaining momentum and it's not standard kit at all. But in certain regions, it's something close to that depending on downhaul characteristics. It's a useful tool. It's not necessary or even helpful for every well out there. But there are a lot where it is helpful and it's a safe tool to have employed. So we'll have six units in our fleet, actually we're changing the Santa Ana over from dual gradient to a more traditional MPD setup. And the most of what we have – so I guess one came with Pacific purchase. We bought one several years ago, which is the one that will end up going on the Santa Ana. Everything else we have in the fleet actually was customer funded. And so I think that is important and it speaks to the value and certain application for customers, they're not going away and customers are willing to pay. There's a market rate for them on the dayrate side and there's also a willingness to fund the equipment themselves for certain applications. So it's important. I recognize it creates some noise in market rates and we see the same thing. But I think you'll continue to have a mix, some rigs with, some rigs without.

Okay. We’ll start to push [indiscernible]. Hey, thank you very much for the time.

Very good. Thanks, Greg.

Your next question comes from the line of Fredrik Stene with Clarksons Platou Sec.

Hey guys. Fredrik here, and nice to have you back in the roster on the opening up for Q&A. Really appreciate that. So I think you were thorough on your market view and on kind of your thoughts about the market, which is always helpful here. But I have two questions or maybe three extra questions for you. If you start with the M&A side, your name has come up with – in certain news articles around Seadrill, Diamond, et cetera. And then, of course, and I know you can't comment specifically on the kind of rumors, et cetera. But I was wondering if anything had changed in your take on this M&A role when it comes to what would fit into your own fleet, or are you still going to target high-spec floaters and jackups, if you would like to do more M&A or are you thinking kind of above and beyond that? For example, more narrowly exposure or anything you are able to say around that would be very helpful.

Sure. So I'll start by stating obvious that they're looking at a lot of different things and that will always be focused on what's in the best interest of our shareholders. We have said and we believe, we have extremely high quality fleet right now. Fleet quality matters for us. We like and think that we add a lot of value, particularly in the benign deepwater segment. But we also like our jackups and we think, particularly, our JU3000 class in the CJ70, that's heading to Norway, compete quite well in the marketplace and provide us some important scale. So I can't say that that we're ready to give anything a whole lot more definitive than that. We are very focused on synergies. And I think that when you look at how fragmented the whole industry is today, I think that will remain a meaningful component of any analysis for quite some time. But through synergies and the associated scale, we do think there are a number of different opportunities that will take different forms, but a number of different opportunities that can allow us to expand our service globally to more clients. And we're really pleased with the Pacific acquisition and in the way that's gone post. And I think that demonstrates some bias towards drillships there. But outside of that, I'm not sure there's a ton more color. I guess, I'll add Fredrik, Norway, we've been very open about saying that we'll have one rig going into Norway and I think that could be a platform for additional growth if the right opportunity comes up. But it's not something that we're focused and think that we have to grow.

Okay. And that's very helpful [indiscernible] into too much specific here. Just two other quick ones here, for two rigs being more specific rigs that’s a spec right now, are you building those into any tenders at this point? Or are they just specs?

That's a good question. They're just stacked right now. Well, first of all, so much has happened in the past couple of months not only with our story, but also more broadly in the industry and with rates moving so quickly, a ton of contract announcements out there. But we've already owned those rigs for a couple months now. So some of the longer term stuff out there, we couldn't have had bid those. But I will say, we definitely haven't seen anything that peaks our interest or would justify reactivation on those today. We've promised to be disciplined and so the base case for that means that we would make our money back and make a return on our money to get those back into the marketplace. And we haven't seen anything like that. So the really short answer is that, at present we're watching, but we don't anticipate that to be any sort of near-term announcement.

Okay, perfect. And just another quick one here before I jump off. For the Exxon rigs here and the dynamic there, the rate at which or the rate that they set at March and September, do you benchmark that towards a specific region such as the U.S. Gulf of Mexico, which geographically close? Or is it the more global approach?

Yes. So the way it's set up, it supposed to be a rate then the current rate that a rational drilling contractor such as ourselves or one of our competitors would bid for six months job in Guyana. So that's intended to take into account any particulars that may develop about Guyana specifically. But I think a good proxy for Guyana right now is the U.S. Gulf of Mexico. And I recognize that there's a bit of a spread between U.S. Gulf today and rest of the world. The actual rate is not targeted at U.S. Gulf of Mexico rates, specifically it's targeted to Tier 1 drillships. So [indiscernible] et cetera, like drillships. But it's technically set up to be where would we or one of our competitors bid that work for six months in Guyana at that moment.

Okay. That's very helpful. Thanks, guys. That's all for me at this time. Have a good day.

Very good. Thank you.

[Operator Instructions] And there are no further questions at this time. I would now like to turn the conference back over to Craig Muirhead for closing remarks.

Thank you, everyone for your participation on today's call and your continued interest in Noble. Rebecca, we appreciate your time coordinating today's call as well. Good day, everyone.

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