Noble Corporation (NE) reported first-quarter 2010 earnings of $1.43 per share, beating the Zacks Consensus Estimate of $1.32. However, the result was lower than the year-earlier earnings of $1.63, due primarily to a weak utilization and dayrate environment.
Operational Performance
Total revenue for the quarter was $840.8 million, down 6.2% year over year. Contract Drilling Services revenue was $808.6 million, down 7.3%. Total operating income for the quarter was $422.9 million, down nearly 18% from the year-earlier level. Operating income for the Contract Drilling segment was $424 million, down more than 17%.
Overall average rig utilization and dayrate for the quarter were 81% and $187,214, respectively, compared with 86% and $194,308 in the year-ago quarter.
Average dayrate for the semisubmersible rigs (6,000 feet or greater) were $484,510, compared with $369,988 in the year-earlier quarter. Average capacity utilization was 90% versus 100% in the year-ago period. Semisubmersible rigs, which are capable to work up to 6,000 feet, experienced an average dayrate of $250,254, versus $246,118 in the year-ago quarter, while average capacity utilization was the same for the comparable periods at 100%.
Average dayrate for the company’s jackups was $116,498, compared with $158,359 in the year-ago period. Average capacity utilization fell significantly to 81% from the year-ago level of 86%.
Balance Sheet
At the end of the quarter, the company had a cash balance of $847.7 million and long-term debt of $751 million, representing a debt-to-capitalization ratio of 9.6%. During the quarter, the company repurchased 2.1 million shares. At the end of first quarter, the company had approximately 10.8 million shares remaining on its existing repurchase authorization.
Noble’s total backlog as of March 31, 2010 was approximately $7.5 billion (down from $8.1 billion at the end of 2009). Its solid backlog position will provide the company with significant earnings and cash flow visibility in the coming years.
Outlook
We believe that Noble offers investors a quality, diversified play on the international offshore drilling markets, with exposure to both deepwater and shallow water. Importantly, Noble’s 10,000 feet newbuild Dave Beard recently commenced operations in Brazil for a five-year contract.
However, we are concerned about the continued weakness in the global jackup market with dayrates still drifting down. Consequently, we are unchanged in our Neutral recommendation.
Read the full analyst report on “NE”
Zacks Investment Research
