Noble Corporation plc (NE) Q4 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary presents strong financial performance with a 30% backlog growth and positive EBITDA, despite lower crude prices. The Q&A section shows management's optimism about strategic consolidation, market strength, and potential growth in various regions. While there are some uncertainties, management's cautious optimism and robust shareholder returns support a positive sentiment. The company maintains a strong capital return program and dividend, indicating financial health. Overall, the combination of strategic positioning and financial strength suggests a positive stock price movement in the short term.

Key Financial Performance

Adjusted EBITDA (Q4 2025) $232 million, with a year-over-year increase as the full-year adjusted EBITDA for 2025 slightly exceeded the $1.1 billion midpoint of the original guidance. This was driven by strong operational performance and backlog growth.

Free Cash Flow (Q4 2025) $35 million, contributing to a full-year free cash flow of $454 million. The year-over-year change was influenced by capital expenditures and strategic investments in fleet upgrades.

Backlog $7.5 billion, representing a 30% year-over-year growth. This growth was attributed to strong booking levels and strategic contract wins.

Contract Drilling Services Revenue (Q4 2025) $705 million, contributing to a full-year revenue of $3.3 billion. The year-over-year increase was supported by higher utilization and new contracts.

Capital Expenditures (Q4 2025) $152 million, with a full-year total of $497 million. This included investments in fleet upgrades and termination of a BOP service agreement, which increased Q4 CapEx by $18 million.

Dividend (Q4 2025) $0.50 per share, with $80 million returned to shareholders in Q4. This reflects the company's commitment to shareholder returns.

Brent Crude Price (2025) $68 per barrel, down 15% year-over-year. Despite this, Noble achieved significant backlog growth, showcasing resilience in a challenging market.

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Operating Highlights

Noble GreatWhite Contract: Awarded a 3-year contract with Aker BP in Norway valued at $473 million. This includes mobilization but excludes additional fees for integrated services and bonus potential. The rig's reactivation and certification will cost approximately $160 million, with an expected EBITDA potential of $240 million over the contract period.

Noble Gerry de Souza Contract: Secured a 2-year contract with Exxon in Nigeria valued at $292 million, starting mid-year 2026, with three 1-year options.

Noble Developer Contract: Received a 3-well contract with BP in Trinidad starting early 2027 at a day rate of $375,000 for 240 days, plus three optional wells.

Noble Endeavor Contract: Awarded an 11-well contract with an undisclosed operator in South America, starting late 2026, with an 18-month duration at $300,000 per day.

Deepwater Rig Demand: Global contracted UDW rig count increased to 105, nearing the 2024 high of 107. Utilization rate of marketed fleet is 95%, though only 82% of rigs are currently working.

Regional Market Trends: South America remains strong with 44 rigs, U.S. Gulf slightly decreased to 21 rigs, West Africa rebounded to 15 rigs, and Asia Pacific increased to 8 rigs. Mediterranean and Black Sea demand grew to 11 rigs.

Backlog Growth: Increased to $7.5 billion, with 90% of floaters contracted. Year 2 backlog exceeds current year backlog for the first time in years.

Fleet Strategy: Sold 5 jackups for $360 million and one more expected sale for $64 million. Investments in fleet upgrades, including the GreatWhite, to enhance capabilities and market positioning.

Capital Allocation: Maintained $0.50 per share quarterly dividend and returned $80 million to shareholders in Q4 2025. Strategic investments in fleet upgrades to support long-term growth.

Market Positioning: Focused on high-end deepwater and CJ70 jackup markets, with strategic entry into the Norwegian continental shelf.

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Risk or Challenges

Brent crude price decline: The average Brent crude price of $68 per barrel in 2025 was down by 15% compared to 2024, creating friction for significant expansion in drilling activity and day rates.

Idle rigs with future contracts: Six of the 14 rigs that are currently idle but have future contracts in hand are Noble rigs, indicating underutilization in the short term.

Petrobras budget pressure: Petrobras budget constraints have emerged as a near-term headwind, resulting in slower contract executions and ongoing blend and extend negotiations.

CapEx increase: Capital expenditures for 2026 are expected to be between $590 million and $640 million, amplified by upgrade projects, which could strain financial resources.

Soft day rates: Day rates for Tier 1 drillships have settled at around $400,000 per day, with lower-spec units capturing low to high $300,000 per day, reflecting a soft market.

U.S. Gulf demand softening: The U.S. Gulf has seen a slight pullback in demand, with the contracted UDW rig count below last year's average level.

Petrobras activity reduction: Petrobras is paring back activity by a few rigs over the short term, which could impact overall demand in South America.

Inflation impact: Inflation rates in the low single-digit area are expected to affect various cost components, potentially increasing operational expenses.

Contract churn: The industry is experiencing recontracting churn, with 25 UDW floaters having contracts expiring during the year, leading to potential idle gaps.

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Guidance & Outlook

Revenue Expectations: Noble Corporation expects total revenue for 2026 to be between $2.8 billion and $3 billion, including approximately $150 million in reimbursable and other revenue.

Adjusted EBITDA Projections: The company projects adjusted EBITDA for 2026 to range between $940 million and $1.02 billion, with a slightly higher weighting in the second half of the year.

Capital Expenditures: Total capital expenditures for 2026 are expected to be between $590 million and $640 million, including $160 million for the GreatWhite project, $25 million of customer reimbursable CapEx, and $50 million for additional project-related CapEx.

Free Cash Flow Projections: Noble anticipates a meaningful step-up in free cash flow in 2027, with a run rate of approximately $600 million in the second half of the year.

Market Trends and Utilization: The company expects a steadily improving activity level in the deepwater market through 2026 and into 2027, with utilization rates improving across the global fleet. Day rates for Tier 1 drillships are expected to have an upward bias from the current $400,000 per day.

Backlog and Contract Coverage: Noble's backlog stands at $7.5 billion, with over $2.3 billion scheduled for revenue conversion in 2026 and a slightly greater amount already booked for 2027. The company has greater year 2 backlog than current year backlog, providing visibility for future earnings.

Strategic Investments: The company is making significant investments in fleet upgrades, including the reactivation and upgrade of the Noble GreatWhite and enhancements to its drillship fleet, which are expected to support higher EBITDA and free cash flow potential.

Regional Market Outlook: Noble anticipates steady strength in South America, a slight decrease in the U.S. Gulf, and upticks in West Africa, the Mediterranean, Black Sea, and Asia Pacific regions. The harsh environment North Sea and Norway market is expected to tighten further.

Long-Term Financial Goals: The company aims to achieve an annualized run rate of approximately $1.3 billion in EBITDA by the second half of 2027, supported by its backlog and market conditions.

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Shareholder Return Plan

Quarterly Dividend: $0.50 per share dividend declared for the current quarter.

Total Dividend in Q4: $80 million returned to shareholders through $0.50 per share quarterly dividend.

Shareholder Capital Returns Program: Maintained robust shareholder capital returns program.

Capital Allocation: Proceeds from asset sales and strategic investments support shareholder returns.

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Key Q&A

Q:What are your thoughts on industry consolidation and its implications for Noble's strategy?

A:Consolidation has been the path for the industry post-COVID, and Noble has benefited from it. The CEO believes consolidation makes the industry better, more capable, and efficient.

Q:Do you feel you have sufficient scale now, and do you see opportunities to expand in the floater market?

A:The CEO believes Noble has sufficient scale and is a better company today. They will continue to evaluate opportunities but remain selective about the type and quality of assets.

Q:What is driving the recent strength in the sixth-generation market, and can you get good term on the Deliverer rig?

A:The strength is due to project-specific factors and the unique capabilities of D-class semis. It is not driven by value buying by customers. The CEO is optimistic about securing good terms for the Deliverer rig.

Q:What conditions could drive day rate improvement in the sixth and seventh-generation rig market?

A:Day rate improvement depends on a mix of factors, including crude prices and the realization of deepwater production needs. The CEO is optimistic about 2027 but cautious about 2026.

Q:Do you think day rate fixtures for Tier 1 drillships could reach mid-400s in 2027 or 2028?

A:The CEO sees a possibility but stops short of making it a base case. They are well-positioned for an inflection without day rate improvement.

Q:What is the status of negotiations with Petrobras, and how do you view their impact on the market?

A:Negotiations are ongoing, and Petrobras is managing multiple tenders and blend-and-extend contracts. The CEO is optimistic about Brazil's market remaining strong or improving slightly.

Q:What is your outlook for the Norwegian market, particularly for jackups?

A:The CEO is cautiously optimistic, noting steady utilization and multiple customers considering jobs in Norway. They believe the market is more likely to improve than worsen.

Q:What are your plans for the Globetrotter I and Ocean Apex rigs?

A:The Globetrotter I is being bid for intervention or niche drilling applications, while the Ocean Apex has fewer immediate opportunities.

Q:What is the potential for the BlackRhino rig in the U.S. Gulf market?

A:The CEO is hopeful for some spot work in 2026 and more exciting programs in 2027, both in the U.S. and globally.

Q:Are you concerned about projects shifting to the right, particularly in West Africa?

A:The CEO acknowledges the risk but is optimistic about 2027 due to announced backlogs and upstream CapEx trends.

Q:Can you provide details on the $50 million CapEx for the Endeavor and de Souza rigs?

A:The $50 million is split between the Endeavor and de Souza rigs.

Q:Would you consider selling the remaining jackups to become a pure-play floater fleet?

A:The CEO is committed to the CJ70s and the Stavanger operation, with no plans to sell the remaining jackups.

Q:Review of Unclear Management Responses

A:Management avoided giving a direct answer on the exact timing of day rate improvements for Tier 1 drillships, stating it is hard to predict and depends on multiple factors. They also provided limited details on the future of the Ocean Apex rig, indicating uncertainty about its prospects.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

NE Transcript

Noble Corporation plc (NE) Q4 2025 Earnings Call Transcript

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The earnings call summary reveals strong financial metrics and optimistic guidance, but the Q&A indicates some uncertainties, particularly regarding revenue guidance and recontracting opportunities. The slight reduction in top-line guidance and vague responses about Brazil's rig opportunities create mixed sentiment. The market strategy and shareholder return plan are positive, but concerns about day rates and demand for lower-end rigs temper enthusiasm. Overall, the sentiment is neutral, reflecting balanced positive and negative factors.

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The earnings call highlights strong financial performance, with a 30% increase in backlog and strategic acquisition synergies. Despite operational risks, the company has a solid capital return program and optimistic guidance. The Q&A reveals competitive wins and strategic contract structuring, which are positive indicators. The company’s guidance and strategic moves suggest a favorable market reaction, but some risks and uncertainties temper this outlook.

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