Noble's Q3 2025: Contradictions Emerge on 2026 Market Outlook, Deepwater Utilization, and High-Spec Floater Contract Coverage

Date of Call: October 28, 2025

Financials Results

• Revenue: $798 million in Q3, sequentially lower due to several rigs rolling off contract
• Operating Margin: Adjusted EBITDA $254 million and adjusted EBITDA margin 32% in Q3; Q3 results were sequentially lower vs Q2 due to rigs rolling off contract

Guidance:

• Full-year 2025 adjusted EBITDA narrowed to $1.10B–$1.125B; midpoint implies Q4 adj. EBITDA marginally lower vs Q3
• 2025 CapEx net of reimbursables narrowed to $425M–$450M; reimbursable CapEx ~ $25M for year
• Expect to provide formal 2026 guidance next quarter; directional CapEx net of reimbursables ~ $450M for 2026 (subject to change)
• Anticipate an EBITDA trough in H1 2026 below 2H25, with a material inflection late 2026 onward
• BOP termination/lease cash outlays up to ~$135M ( ~$35M in Q4 2025), not included in guidance; annual cash savings ~ $45M

Business Commentary:

* Earnings and Cash Flow: - Noble Corporation reported adjusted EBITDA of $254 million and generated free cash flow of $139 million in Q3 2025. - The company also received an additional $87 million in net disposal proceeds, contributing to a cash balance of $478 million. - The earnings were driven by strong operational performance and strategic divestments.

• Contract Awards and Backlog:
• Noble's backlog increased to $7 billion, supported by several key contract awards, including extensions for the Noble Black Lion and Noble Black Hornet.
• The company has achieved 70% contract coverage across its high-spec drillships for 2026, and aims for 90-100% coverage by the second half of 2026.

• The increased backlog is attributed to strategic commercial efforts and a stable contracting environment.

• Deepwater Market Tightening:

• The committed UDW rig count stands at approximately 100 rigs, with low 90% marketed utilization, indicating a slightly improved market compared to recent quarters.
• There is an increasing trend in deepwater contracting momentum, with an average of 18 UDW rig years fixed per quarter in Q2 and Q3, up 10% from the preceding two years.

• The tightening market is evident in Noble's contract awards and customer dialogues, supporting expectations of a methodical recovery by late 2026.

• Dividend and Shareholder Returns:

• Noble distributed $80 million to shareholders through its $0.50 quarterly dividend and announced a fourth-quarter dividend of the same amount.
• This brings total 2025 capital return to $340 million.
• The competitive cash yield on Noble's stock remains a critical component of its strategy amidst a mid-cycle lull in the industry.

Sentiment Analysis:

Overall Tone: Neutral

• Management highlighted $7B backlog, record operational execution and $254M adjusted EBITDA, but cautioned a near-term trough (H1 2026) and only a cautious, late‑2026 inflection. Comments combined optimism on improving deepwater contracting with caution on timing and customer budget sensitivity.

Q&A:

• Question from Arun Jayaram (J.P. Morgan): Thoughts on improving utilization for high‑spec floater fleet and how long to reach 90–100% coverage for 15 drillships?
  Response: Management: Line of sight on three key rigs (Noble Viking, Jerry DeSouza, Black Rhino); not a long 'putt' — advancing conversations and hopeful to book work in the near term to reach target coverage.

• Question from Arun Jayaram (J.P. Morgan): Can you explain the mechanics and cash impact of the Diamond Offshore BOP service and lease terminations?
  Response: Management: Terminated service agreement (∼$35M cash in Q4); lease agreement has an $85M cap payable next year; total max cash outlay ∼$135M, offset by ~ $45M annual OpEx/lease savings.

• Question from Greg Lewis (BTIG): Is the expected H1 2026 weakness driven by floater idle time vs jackups, and what bridges the gap to higher results?
  Response: Management: H1 weakness is largely floater-driven (idle time); restoring two of the three targeted floaters to work drives the desired cash flow run‑rate and is the primary bridge.

• Question from Eddie Kim (Barclays): How should we view consensus EBITDA for H1 2026 and what would be required to hit or exceed it?
  Response: Management: Limited upside in H1 absent incremental contracting; little work in H1 2026 so upside constrained — recovery expected to materialize in H2 2026 and later.

• Question from Eddie Kim (Barclays): How confident are you in a deepwater recovery by late 2026/early 2027 — based on tenders, customer tone, or contracted backlog?
  Response: Management: Cautiously optimistic — a mix of contracted backlog, active tenders and customer dialogue supports a tightening late 2026/2027 and suggests day rates may have bottomed.

• Question from Fredrik Stene (Clarkson Securities): Any color on Globe Quarter One (GT1) and Deliverer rigs — will GT1 be divestment candidate and can Deliverer/D rigs find work?
  Response: Management: GT1 remains marketed for intervention but could be a divestment candidate if no suitable work; D‑rigs (Deliverer group) see more opportunities than recently and management expects at least two to secure work.

• Question from Fredrik Stene (Clarkson Securities): Plans for Great White, Apex, Endeavor idle rigs and potential Norway positioning for Great White?
  Response: Management: Great White is being marketed globally; moving it to Norway would require material CapEx for certification; Apex and Endeavor are being evaluated on standalone economics with updates possible next quarter.

• Question from Douglas Lee Becker (Capital One): Prospects for Black Rhino — well‑to‑well in U.S. Gulf vs term work or non‑U.S. opportunities?
  Response: Management: Multiple opportunities exist — short‑term U.S., long‑term U.S., and long‑term non‑U.S.; discussions ongoing with customers in all categories.

• Question from Douglas Lee Becker (Capital One): Does Noble Interceptor reactivation signal meaningful tightening in the Norway CJ70 market?
  Response: Management: It indicates more opportunities than earlier and positions Interceptor well for Norway demand, but not yet a broad flood of work; contract stands on its own.

• Question from Noel Augustus Parks (Tui Brothers): Are customers broadly price‑sensitive or being conservative on budgets; any regional differences (West Africa vs South America)?
  Response: Management: Customers remain highly price‑sensitive and conservative; West Africa demand has been slower but shows signs of recovery and will help late‑2026/2027 dynamics.

• Question from Greg Lewis (BTIG): What cost actions are you taking and are savings structural or cyclical?
  Response: Management: Realized the $100M Diamond synergies and continued incremental cost reductions as activity slows; no new formal target but ongoing structural and cyclical cost discipline is being applied.

Contradiction Point 1

2026 Market Outlook and Contract Coverage

It involves differing expectations for the utilization and market recovery in 2026, which are crucial for planning and investor expectations.

What are the 2026 plans for improving high-spec floater fleet utilization? What are the details of Diamond Offshore’s BOP leases? - Arun Jayaram(J.P. Morgan)

2025Q3: The focus is on the Noble Viking, Noble Jerry DeSouza, and Noble Black Rhino, with a target of 90-100% contract coverage by the second half of 2026. - Robert Eifler(CEO)

How do you assess recontracting opportunities for rigs in Brazil given ongoing tenders and rigs rolling off contracts? - Fredrik Stene(Clarksons Platou Securities AS, Research Division)

2025Q2: We expect Brazil's rig demand to remain stable or increase slightly, especially outside Petrobras, with opportunities in development and exploration. - Robert W. Eifler(CEO)

Contradiction Point 2

Deepwater Utilization Recovery

It highlights differing expectations for deepwater utilization recovery, which impacts fleet planning and investor confidence.

What are your expectations for H1 2026 relative to consensus, and your confidence in deepwater utilization recovery by late 2026? - Eddie Kim(Barclays)

2025Q3: The market is expected to tighten from late 2026 onward, with some contracts already secured. - Robert Eifler(CEO)

Is there a credible path for leading-edge day rates to reach mid- to high-400s by mid-2024? - Eddie Kim(Barclays)

2025Q2: We expect rates to stabilize or increase by late '26, assuming stable macro conditions. - Robert W. Eifler(CEO)

Contradiction Point 3

Customer Price Sensitivity

It reflects differing perspectives on customer price sensitivity, which is crucial for understanding market dynamics and pricing strategies.

Is price sensitivity a key factor in customer decisions, and how does Houston's industry sentiment affect deepwater investment decisions? - Noel Augustus Parks(Tui Brothers)

2025Q3: Customers remain highly price-sensitive. - Robert Eifler(CEO)

How will performance bonuses be paid, and when can Noble collect them? - Scott Gruber(Citigroup)

2025Q1: There's certainly, in the overall market, there's a lot of focus on cost control. - Robert Eifler(CEO)

Contradiction Point 4

Utilization and Contract Coverage of High-Spec Floaters

It reflects differing expectations about the utilization and contract coverage of high-spec floaters, which are key assets for the company's revenue generation.

What are the plans to improve utilization of the high-spec floater fleet in 2026? - Arun Jayaram(J.P. Morgan)

2025Q3: The focus is on the Noble Viking, Noble Jerry DeSouza, and Noble Black Rhino, with a target of 90-100% contract coverage by the second half of 2026. - Robert Eifler(CEO)

What is the current utilization rate of your floater fleet, and how is it expected to trend in 2025? - Arun Jayaram(J.P. Morgan)

2024Q4: We have 6 floaters that are marketed for either long-term or term work. We have 2 that are currently under contract, and our goal is to increase our floaters' utilization by 25% during 2025. - Robert Eifler(CEO)