Thank you for standing by. My name is Bailey and I will be the conference operator today. At this time, I would like to welcome everyone to the Noble Corporation Q3 Earnings 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] I would now like to turn the call over to Ian Macpherson, Vice President of Investor Relations.

Thank you operator and welcome everyone to Noble Corporation's third quarter 2023 earnings conference call. You can find a copy of our earnings report along with the supporting statements and schedules on our website at noblecorp.com. This conference call will be accompanied by a slide presentation that you can also find located at the Investor Relations section of our website. Today's call will feature prepared remarks from our President and CEO, Robert Eifler as well as our CFO, Richard Barker. Also joining on the call are Blake Denton, Senior Vice President of Marketing and Contracts; and Joey Kawaja, Senior Vice President of Operations. 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. Also note, we are referencing non-GAAP financial measures on the call today. You can find the required supplemental disclosure for these measures including the most directly comparable GAAP measure and an associated reconciliation in our earnings report issued yesterday and filed with the SEC. With that, I'll turn the call over to Robert Eifler, President and CEO of Noble.

Good morning. Welcome everyone and thank you for joining us on the call today. I'll begin with some opening remarks on our quarterly results and then provide some comments on the market outlook and commercial activity before turning the call over to Richard to cover the financials. Following Richard's financial overview, I'll wrap-up with some additional highlights on technology innovation underway here at Noble and the strong progress we've made with our merger integration. And after that we'll look forward to taking your questions. First, we've reported a solid third quarter with total revenue of $679 million and adjusted EBITDA of $283 million. On these metrics, this was our strongest quarter since the Noble-Maersk Drilling combination closed a year ago. And these results reflect an exceptional collective effort by our employees around the world who have leaned into this merger and executed simultaneously on both the integration and the day-to-day business. So, well done and thank you all. Next, we're pleased to announce an increase of our quarterly dividend to $0.40 per share this quarter, which represents a 33% increase and demonstrates our continued commitment to maximizing value for shareholders via return of capital. Following the dividend initiation last quarter, we have signed additional contracts to bring our 2024 scheduled backlog to $1.8 billion currently with near-term visibility to additional bookings that could increase 2024 backlog to over $2 billion. So, we have taken the decision to make this upward revision just one quarter after the dividend initiation. While you should not expect us to continue to adjust the dividend each quarter, we will remain focused on maximizing free cash flow generation and as previously stated returning the significant majority of free cash via dividends and buybacks. Turning now to the market outlook. Offshore drilling fundamentals remain robust with the…

Thank you, Robert and good morning or good afternoon, all. In my remarks today I will briefly review the highlights of our third quarter results as well as our outlook for the remainder of the year. Contract Drilling Services revenue for the third quarter totaled $671 million up from $606 million in the second quarter. Adjusted EBITDA was $283 million in Q3 up from $188 million in Q2. Diluted earnings per share was $1.09 and adjusted diluted EPS was $0.87. Cash flow from operations was $139 million. Capital expenditures were $99 million and pre-cash flow was $40 million. As anticipated, revenue and adjusted EBITDA improved from second quarter levels with higher day rates being the primary driver. Our 16 marketed floaters were 92% utilized in the third quarter up from 90% in the second quarter with average day rates increasing to $404,000 per day in Q3 up from $363000 per day in Q2. Our 13 marketed jackups were 61% utilized with an average day rate of $141,000 in the third quarter compared to 59% and $129,000 per day in the second quarter. As summarized on page 5 of the earnings presentation slide, our total backlog as of October 31 stands at $4.7 billion versus $5 billion as of July 31. It's important to recognize that our unique long-term commitments with ExxonMobil in Guyana and with Aker BP in Norway have an outsized impact on our total backlog profile. As such, the sequential decrease in backlog this quarter is really attributable to the fixed rigs operating under the ExxonMobil CEA and the Aker BP programs which did not take on additional backlog bookings over the past three months. Current backlog includes approximately $1.8 billion that is scheduled for revenue conversion in 2024. It is important to note that, our backlog excludes…

Thanks, Richard. Before we move to Q&A, I'd like to close here with a couple important highlights. First, an exciting new technology that we're developing. And second, a few reflections on the one-year anniversary of our merger. On the technology side, I'm very excited to highlight Horizon56 a software platform that we've developed to promote the digitalization of well planning and execution. The benefits of digitalizing work streams and closing the gap between our customers' well programs and our drilling crews, are far-reaching impacting safety, drilling speed, management of change, elevation of lessons learned and overall risk management. We believe the digitalization enhancements provided by Horizon56 can ultimately drive drilling efficiency gains, which obviously translates into very significant value uplift for customers including, but not limited to well cost and emission factors. Overall, we feel fortunate to have this very talented Horizon56 team at Noble, a group that came to us by way of the Maersk Drilling combination as one of the many outstanding aspects of Maersk's human capital and technology suite. We talk frequently about the new industry landscape in which we aspire to be as we say first choice offshore. That ambition can only be realized with two major prerequisites, which are inexorably linked; A scale; and B, a culture of tireless innovation and service posture, both of which we have very purposefully promoted as part of the industrial logic behind our strategic actions of the past few years. Accordingly, we remain keen to invest in and focus on areas like Horizon56 where Noble can drive incremental value for our customers. Finally, a brief reflection on the state of the company as we approach 2024. Noble recently celebrated the one-year anniversary of our business combination with Maersk Drilling and we could not have asked for a better integration effort than we've seen so far. Within the first six months of close, we achieved operational stability and a true culture of One Noble that proved critical to our first-year success, all while exceeding synergy targets and consistently executing for our customers. Year-to-date our operational uptime of 97% has been outstanding especially, for year one of an integration of this scale. And ultimately, I believe the company's third quarter results are a very clear demonstration of the power of this combination. So, I would just like to conclude here, with a special offering of gratitude and congratulations to our fantastic employees around the world, for your tremendous efforts and for the great results that you're producing on behalf of Noble. We're off to a great start together and the best is yet to come. With that, we'll pause here and open up the call for Q&A.

[Operator Instructions] And your first question comes from the line of Eddie Kim with Barclays. Your line is open

Hi, good morning. My question -- my first question is just on what feels like a pause in contracting activity over the past two to three months, at least compared to what we were seeing through July or August this year just in terms of the number of contracts and multi-year durations we were seeing. Should we view this as really more of a temporary pause? It seems like based on your prepared remarks, it feels like we should. And when do you expect we'll see multi-year contract announcements start to pick up again?

Yeah. Thanks Eddie. So it is very much a temporary phenomenon. If you look back through time at just contract awards per quarter this is not unusual at all. I think, it's gained -- it's had a lot of attention understandably. But they ebb and flow. And as I mentioned in the remarks, the second half of the year sometimes traditionally I guess is a little lower volume than the first half of the year. And I think that's related just to normal budget cycles for our customers. You're going to see the working rig count increase next year. And we believe that you're going to see duration increase as well to your question. I think one of the potential drivers for this current pause is that certain operators, not all but certain of the operators some of whom are some of the bigger players have been regrouping and connecting some of their programs together. So that rather than going out to tender for one or two wells, which has been the norm for the last couple of years, they're pulling those together and probably going out to tender for some longer duration type contracts. So no hard evidence to that yet. That's our belief. And I think that's what you're going to see as we move into 2024.

Okay, got it. Great to hear. Thanks for that color. Just my follow-up is on the comments around cost inflation next year. I believe you said, we should expect a mid to high single-digit level of cost inflation. Could you just expand upon that a little bit more? In what areas, do you expect cost inflation to be highest next year? Is the labor, spare parts and equipment, the cost of SPSs? Just any additional color here would be great.

Sure Eddie. Yeah, we said mid single-digit type inflation next year is our expectation as we sit here today. And obviously that's an average. And so as you know some elements of the cost structure are going to be higher than others. I would say on the labor side, Gulf of Mexico obviously we're seeing [Technical Difficulty]. So it's very, very regional dependent as well. So it's hard to give maybe more specificity than that. But I think on average, I would think about it as a kind of mid single-digit type level next year.

Okay. Understood. Thank you very much for the comments. I’ll turn it back.

Thanks Eddie.

Your next question comes from the line of Kurt Hallead from Benchmark. Your line is open.

Hey, good morning everybody.

Good morning.

Okay. Appreciate the color. So there is in the context of the progression on headline day rate and the fact that we haven't quite yet reached the 500K per day mark. I think, I want to get your perspective, how important is day rate versus total contract value, right? Because at the end of the day, the day rate is making up is no longer 100% of the contract value because there's a lot of upfront costs that are being paid to MOB fees and so on and so forth, right? So it seems like investors are just so intently focused on the headline day rates, if they're missing the bigger picture that the total cash value of these contracts are going up. So I just want to get your perspective on that. And see is it really it's important to you guys about the day rate or is it more important for you to maximize the cash value of the contract?

Hey, it’s a good question. And you're spot on that there seems to have been an almost myopic focus on the 500 number here recently. And understandably, it's a visible threshold. We're headed there. We've said that before. Timing's maybe a little bit behind. But to your point, there's a couple of other things that go on. One, between contract, contribution and efficiency does matter. So mobilizations, et cetera matter. I would say we're probably somewhere mid-cycle-ish on that component. So you're seeing obviously, mobs and dmobs. We're a ways away from kind of full revenue type mobs and dmobs at this stage in the cycle. And that's a point that we reached last cycle as you'll remember. But also just within contract drilling margins, there is a variation between contracts regions types of rigs, et cetera. And so we're very much focused on maximizing our margins and our cash flow. And I think we've got some places where we're very proud to have what we think is a good combination right now and is one of the things that's driving our cash flow right now.

Okay. Now you guys referenced the prospect of seeing increased duration. And obviously, one of your competitors yesterday indicated that they've been seeing the same dynamic. So maybe give us some perspective on as you look out in potential contract awards that will come forth in 2024, what sort of duration are we talking about and relative to what we've seen so far? Like are we seeing now a greater propensity of three to five-year term? Or are we seeing a greater propensity of two-year terms?

It's the latter. But I think what you're going to see that, if I recall, if I'm citing this correctly, if you exclude the Petrobras contracts, the average contracted UDW term is like 11 or 12 months right now. And so we would anticipate that that statistic would go up fairly dramatically next year because we think as I mentioned that there are a few companies that are moving away from one and two-well contracts and into one to three-year contracts, which kind of covers your two-year example.

Okay. Right. So is the – just an extension of that question, right? So we're seeing all kinds of information that's suggesting that demand for seven-gen, ultra-deepwater drillships can exceed supply in 2024 and 2025 and prior cycle periods that tended to cause some angst among the oil companies about hey, am I going to get what I need when I need it? And therefore I need to basically reach further into the future and book it for a longer period of time. Based on your commentary, there's some movement toward that, but it doesn't seem like it's to the same extent. So, why are oil companies not willing to maybe book three years versus two years, let's just say? Just, again, I know it's a theoretical question, but I just want to get a sense from you guys on what kind of pushback or what kind of color you're getting in your conversations with the oil companies?

Sure, yes. I mean, my view is that the market is pretty well-balanced right now and that it will continue to be pretty well-balanced going forward. We've had eight or 10 rig reactivations announced this year, so that's good new supply coming into the market. And there's a few a small handful left, including our Meltem, that we anticipate would come into the market just broadly across the industry, continue to come into the market through 2024 and 2025. Oil companies have -- and I mentioned this kind of briefly, but they have been selectively pushing some of the programs to the right. And I think some of that is -- in a couple of instances, it's, I think, been to avoid headline rate, perhaps. And -- but I think more broadly, it's trying to pull together programs, as I mentioned earlier, to get some term, to tender for some term. I think it's part of what's creating this air pocket, takes a little longer to pull together multiple wells than just one or two wells and go to tender on all of it. I don't know whether -- I'm not calling for the last up-cycle level of urgency in the near term. I see this as a relatively balanced market with upward movement on day rates as we move through next year and into 2025.

That's great. Robert, thanks. Appreciate that.

And your next question comes from Gregory Lewis with BTIG. Your line is open.

Hey, thanks and good morning everybody and thanks for taking my questions.

Good morning, Greg.

Hey, Robert. I realize the ink's not even dry, and a lot still has to happen before, Chevron can buy Hess, but just given Hess' position in Guyana with Exxon, do you have any kind of broad thoughts on what that does, or does that change anything or accelerate anything? Just kind of as you think about that changing of a partner, I'm kind of curious if you have any thoughts around that.

Sure. I mean, I think all of the most interesting answers obviously have to come from Chevron and Hess. But from our view, we feel we had an excellent relationship with Hess. We have regular contact there, and so we hope that that translates over and would hope to continue that. Looking a little bit outside of that, we, of course, talk a lot about Guyana. It's very important to us, and we've put a whole lot of focus on that operation, and I think the results very much speak for themselves. There's data that demonstrates our efficiency there, and we think we've got some really, really great performance from the rigs down there. So, hopefully, Chevron, as the new owner of that, we'll see our performance. And that's a customer that we haven't done as much work for. So I see it as a potential opportunity, someone who will get a firsthand look into what we're doing.

Okay. Okay great. And then -- congratulations on getting that bolt-on work on the Globetrotter rigs. It was a good update to see. But as kind of we look out in 2024 and really all signs point to, a definite pickup in acceleration, but maybe some of the work that's kind of being out there doesn't start up until mid-2024. Any kind of rough way to think about or maybe handicap as we see some rigs roll off contract over the next one, two quarters? Any kind of rough way to think about idle time in between contracts, I'm kind of curious if you have any thoughts around that.

Yeah. Thanks, Greg. It's Blake. So maybe the best way would be to walk through a couple of the rollovers. And so if I start with the floaters and you look at the rigs that have options the Stanley Lafosse here in the Gulf of Mexico working for Murphy, we feel good about the prospect of continuing to serve their drilling needs, so not expecting an interruption in service there. Gerry De Souza is a similar story, there for TotalEnergies in -- at Nigeria. We don't want to opine on what their decision will be around that option, but the election is this quarter. We know they have work there. And we believe we're performing well for them. So we like the prospect there as well. So then when you look out toward the Voyager and the Valiant, pleased to announce, the contract we got with LLOG, on the Voyager that will start around about the turn of the year. And then there's options on the back-end of that that if exercised would take it through the end of the year, so feeling pretty good about the Voyager -- or sorry, feeling pretty good about the Valiant. The Voyager is available for 2024. It's wrapping up a program right now mobilizing back to the Americas. And I guess, we would expect with the ongoing dialogue some work that would pick up in the first quarter of next year. The other thing to think about when we're looking at that rig class is there's roughly 30% of the forecasted UDW demand next year that still remains to be contracted. So there's, some awards we think as Robert outlaid in his prepared remarks some awards we expect in the fourth quarter that will provide some more visibility. Yeah. The only last point I would say and it's again on the back of Robert's prepared comments on the Globetrotters and the de-rigs [Technical Difficulty]

Your next question comes from David Smith with Pickering Energy Partners. David, your line is open. And our final question comes from Pelle Bibow with Clarksons Securities. Your line is open. [Technical Difficulty]

And for our audience, please stand by. Our speakers are dialing back in. Thank you so much.

Hello?

Yes, thank you. And your next question comes from Pelle Bibow with Clarksons Securities. Your line is open.

Hey, guys. Thank you for taking my question here and congratulations on a stellar quarter. I guess most of my questions have been answered already. So I'm left with the final one on my list here. And I appreciate that you did touch upon this during the prepared remarks as well that my question relates to the North Sea market and particularly the harsh environment jackup fleet. I guess we touch upon this topic every single time we have these calls. But it would be really great if you could give some more color on what opportunities you see going forward for the region. At least on our part where we're sitting here in Norway, we see some signs with emphasis on some of increasing activity in 2024 and some more in 2025. But an additional color on your end would be really great.

Yes. Thanks for the question. I guess I'll jump right on the back of your last statement in that we do see some signs of increased activity increased dialogue. I think most of those for Norway are more 2025-related than 2024. We do believe the next demand goes to us. The CJ70s are the most well-suited to compete in the competition zone there in Norway. There's also the potential upside of incremental production that could come from infill drilling, if there was any sort of gas shortage, whether that's a regional event or a global event. So, there's a little bit of upside, I don't think there's firm demand yet to declare 2025. It's going to explode there in Norway from a demand perspective. But the dialogue is encouraging. In the non-Norway space, a little bit more positive in terms of the nature of the conversations that we're having with our customers there. And of course, we've got the Intrepid that will be locked up all of next year. So the capacity is really limited for 2024 to the Interceptor now. And we'd like the capability of the rig, if that demand comes to pass or if unexpected demand comes to the market.

Great. That’s really answers my questions here. Thank you guys for taking the call and have a great day.

Thank you.

Your next question comes from David Smith with Pickering Energy Partners. Your line is open.

Hey thanks. Can you hear me okay?

Yes we can hear you. Sorry. There were some technical issues there.

Good deal. Kudos on the quarter and especially the dividend increase. That's just great leadership on the shareholder return front. I did want to revisit your comments about the sidelined ultra-deep water capacity. You referenced the number of rigs added over the past year, whether reactivations or previously stranded new builds and we've seen they can make very solid returns with term duration at rates below leading edge. But I wanted to ask your thoughts about the remaining sidelined capacity, maybe how many high-spec drillships you think might still be brought out at rates in the low 400s?

Yes I mean, I think look, there's a small handful. It's four to six that kind of range. From there, you start to have I think some concessions on marketability and you start to get into it's all a fighting scale here, but you start to get in our opinion a little bit closer to 6th generation territory, where the rigs might be missing one of the critical components defining a 7th generation. In certain instances, of course, we don't really know. Not many of them or most of them are not our rigs, but could perhaps have some higher reactivation costs from their stacking status et cetera.

Great. We were coming up with five rigs so really happy to hear your answer. Just a little bit of a housekeeping question. I think you're still managing the former Lloyd Noble and just wanted to ask if so maybe how much that contributed to Q3 costs and really how much longer do you expect Noble to manage that rig?

Yes, Dave. I think that was part of the beat from a top-line perspective in Q3. We are continuing to manage the CJ70 in North Sea. I think our expectation is that that will continue through mid-part of this quarter. But you're right as well. If you strip that out I think from a cost perspective I think it was a very nice beat in Q3. I also think as you look at the operational performance in Q3 and the uptime I think that that was obviously a big, big component of the beat as well.

Good deal. I appreciate that. If I can get greedy and sneak one more in I recognize your semis aren't harsh environment but they're certainly very high-spec. I wanted to ask if there's any reason they wouldn't be competitive for some of the regions we've seen the Norwegian semis pulled to right outside of the North Sea specifically Namibia?

Yes, look those are some of the most capable semis in the world. As you said they're not harsh environments so they're not going to go to the extreme cold-weather environments. But in regions where they can -- where semis is preferred generally they compete very well. They can get -- I guess, I would offer they are generally because they're more to NDP they can compete down into relatively shallower waters. Many semis compete a little bit less favorably in the deeper water you get because upwards in 10,000-foot kind of range you start to have some weight limitations that are specific to semisubmersibles and less so to drillships. So look -- like we've said before those rigs when they're operating in their specific niches are going to compete very much on a 7th generation level. And when up against an alternative in a drillship or for whatever other reason they may have some concession on their operation. They're going to compete more like a 6th-generation rig.

Perfect. Thank you so much.

Thank you.

And there are no further questions at this time. Ian Macpherson, I will turn the call back over to you for closing remarks.

Thank you everyone for sticking with us through the technical difficulty there. And thanks for dialing in today. We look forward to speaking with you again next quarter. Have a great day.

And this concludes today's conference. You may now disconnect.