Noble Corporation's Q3 2025: Contradictions Emerge on Market Recovery, Utilization Targets, and Deepwater Recovery Timelines

Date of Call: October 28, 2025

Financials Results

• Revenue: $798M, sequentially lower vs prior quarter due to a number of rigs rolling off contract
• Operating Margin: Adjusted EBITDA margin 32%, sequentially lower vs prior quarter

Guidance:

• Narrowed full-year 2025 adjusted EBITDA guidance to $1.1B–$1.125B (Q4 implied marginally lower vs Q3)
• Full-year 2025 CapEx net of customer reimbursables narrowed to $425M–$450M; reimbursable CapEx ~ $25M YTD
• 2026 guidance will be provided next quarter; 2026 EBITDA expected lower on a full-year basis vs 2025 with a trough in H1 2026
• Tracking toward a material EBITDA/cash inflection late 2026 onward based on current and anticipated backlog
• Expect ~ $450M CapEx net in 2026; potential up to ~$135M BOP-related termination payments (approx $35M in Q4 2025) not included in guidance

Business Commentary:

• Financial Performance and Cash Flow:
• Noble Corporation reported adjusted EBITDA of $254 million and free cash flow of $139 million for Q3 2025.
• The company distributed $80 million to shareholders through a $0.50 quarterly dividend.

• The strong financial performance was driven by operational efficiency and strategic contract awards.

• Contract Awards and Market Activity:

• Noble secured several key contract awards, including extensions for the Noble Black Lion and Noble Black Hornet by BP, valued at $310 million each.
• The company's backlog increased to $7 billion, providing a future revenue stream.

• The contract awards reflect the strategic value of long-term assignments and the overperformance of acquired Diamond Offshore Drilling rigs.

• Deepwater Market Trends:

• Noble's high-spec drillships are 70% booked for 2026, with a target to reach 90-100% contract coverage by mid-2026.
• The deepwater utilization rate is at 90%, with committed UDW rigs at 100.

• Market tightening is anticipated for late 2026 and early 2027, supported by contract fixes and industry demand.

• Cost Management and Strategic Positioning:

• The company is focused on maintaining a strong balance sheet and cost management, particularly in anticipation of a trough in the first half of 2026.
• Noble is realizing incremental cost savings, including those from the Diamond Offshore Drilling acquisition synergy, despite not having set specific targets.
• The strategic management of costs ensures the company is positioned to capitalize on future growth opportunities.

Sentiment Analysis:

Overall Tone: Neutral

• Management highlighted solid Q3 operational and commercial results (adjusted EBITDA $254M; free cash flow $139M) and increased backlog to $7B, but repeatedly cautioned about a near-term trough in H1 2026 and customer price sensitivity—resulting in a cautiously optimistic but measured outlook.

Q&A:

• Question from Arun Jayaram (J.P. Morgan): Thoughts on improving utilization for your high-spec floater fleet—you’re 70% booked for 2026 with a target of 90–100% by 2H26; how long of a 'putt' to get there?
  Response: Primary focus is on three rigs (Noble Viking, Jerry DeSouza, Black Rhino); management says it’s a short 'putt' with active conversations and line of sight to work, hopeful to announce deals soon.

• Question from Arun Jayaram (J.P. Morgan): Can you elaborate on the Diamond Offshore BOP leases mechanics and cash payoff/savings?
  Response: Two parts: service agreement terminated—~$35M cash payment in Q4 2025; lease agreement cap up to $85M likely payable in 2026; total potential outlay up to ~$135M offset by ~ $45M annual OpEx/lease savings.

• Question from Greg Lewis (BTIG): Is the anticipated decline in 1H26 EBITDA largely driven by floater idle time or other costs (e.g., jackup idle time)?
  Response: Mostly floater-driven—idle time on several drillships is the primary reason; management targets having two of the three key rigs working to restore desired cash flow.

• Question from Greg Lewis (BTIG): Have scheduled start dates for term jobs remained firm or have you seen slippage versus prior expectations?
  Response: It’s mixed—some jobs have slipped by ~six months, others remain on schedule; no material pull-forwards observed.

• Question from Eddie Kim (Barclays): Relative to consensus for 1H26 EBITDA, how should we think about expectations and what incremental contracting would be needed to hit consensus?
  Response: Management declined to give quarterly specifics but reiterated limited work in 1H26 and limited upside in that period; meaningful improvement is expected only in back half of 2026 and into 2027 as contracts materialize.

• Question from Eddie Kim (Barclays): How confident are you in the deepwater recovery in late 2026–2027—based on tenders, tone, or contracted work?
  Response: Cautiously optimistic—confidence is driven by a mix of contracted work, visible tenders, and customer conversations; management believes day rates may have bottomed and market tightening is likely late 2026/2027.

• Question from Fredrik Stene (Clarkson Securities): Any color on Globe Quarter One and Deliverer going into next year; is GT1 a divestment candidate after the contract?
  Response: GT1 remains targeted at intervention work but could be a divestment candidate if suitable work isn’t found; D-class rigs show more opportunities than in recent years and management expects at least two of them to find work.

• Question from Fredrik Stene (Clarkson Securities): Plans for Great White, Apex, and Endeavor—could Great White be moved to Norway (AOC) and are there too many idle lower-spec harsh rigs?
  Response: Great White is being marketed globally but would require capital to meet Norwegian spec; Apex and Endeavor are being marketed and evaluated case-by-case—each opportunity must stand on its own; potential updates next quarter.

• Question from Douglas Lee Becker (Capital One): Prospects for Black Rhino—well-to-well in US Gulf, term in US Gulf, or term outside the Gulf?
  Response: Conversations cover all scenarios—short-term and long-term opportunities both in the U.S. Gulf and internationally; no firm decision yet.

• Question from Douglas Lee Becker (Capital One): Does the Noble Interceptor reactivation imply meaningful tightening in Norway and potential CJ70 returns?
  Response: There are more opportunities in Norway than six months ago; Interceptor’s reactivation is marketable and stands on its own, but broader tightening remains uncertain.

• Question from Noel Augustus Parks (Tui Brothers): Are customers less price-sensitive now or is budget conservatism the main driver of delayed commitments?
  Response: Customers remain highly price-sensitive; management sees 'extreme price sensitivity' in ongoing negotiations and conservative budget behavior.

• Question from Noel Augustus Parks (Tui Brothers): Color on Houston sentiment—do you see an inevitability of capital returning to deepwater vs onshore?
  Response: Management sees growing recognition that deepwater is a long-term critical part of supply, prompting planning despite near-term macro uncertainty; exploration has not yet meaningfully increased.

• Question from Noel Augustus Parks (Tui Brothers): Is West Africa still slower to commit versus South America and is that affecting near-term demand?
  Response: West Africa remains longer-cycle and slower to commit; some jobs have been delayed but regions like Mozambique and other West African projects are expected to add demand in late 2026/2027.

• Question from Greg Lewis (BTIG): What cost-reduction efforts are you taking and are they structural or temporary measures for the trough?
  Response: Post-Diamond integration synergies (~$100M announced) have been realized and additional cost savings are being captured; no new target given, but management expects incremental structural and activity-related savings as volumes slow.

Contradiction Point 1

Market Recovery and Utilization Targets

It involves differing expectations regarding the market recovery and utilization targets for the company's high-spec floater fleet, which impacts operational and financial planning.

How do you plan to improve utilization of your high-spec fleet and what are the opportunities to achieve this target? - Arun Jayaram (J.P. Morgan)

2025Q3: The focus is on the Noble Viking, Noble DeSouza, and Noble Black Rhino. There is clear line of sight to work for these rigs, with discussions underway and potential news in the near future. We are optimistic about securing contracts to reach the 90-100% utilization target by the second half of 2026. - Robert Eifler(CEO)

Can you explain the guidance update, specifically lowering top-line guidance by about 3% and increasing EBITDA guidance by about 1%? - Arun Jayaram (JPMorgan Chase & Co, Research Division)

2025Q2: We have a strong line of conversation behind all 3 of those rigs. The market outlook sees big projects going through definitively, and we're encouraged by the level of conversations we're having around bigger projects and high-quality rigs. - Robert W. Eifler(CEO)

Contradiction Point 2

Deepwater Utilization and Market Recovery

It involves differing perspectives on the expected recovery of deepwater utilization rates, which impacts forecasted financial performance and client expectations.

How confident are you in the expected deepwater utilization recovery by late 2026? - Eddie Kim (Barclays)

2025Q3: We're cautiously optimistic about the market tightening. Day rates are likely at the bottom, and the market should show recovery by late 2026 and 2027, driven by known contract commitments and conversations with customers. - Robert Eifler(CEO)

How should we think about utilization for 2023 and 2024? Is your guidance of 58% and 60% still accurate? - Greg Lewis (BTIG)

2025Q1: We expect the utilization of the ultra-deepwater floater segment to average 57% in 2023 and to increase to 60% in 2024, maintaining utilization in the 60% range over the long term. - Robert Eifler(CEO)

Contradiction Point 3

Customer Price Sensitivity and Budget Conservatism

It highlights differing assessments of customer behavior regarding pricing and budgeting, which affects revenue projections and negotiation strategies.

How does customer budget conservatism impact negotiations, and is price sensitivity a significant factor in customer decisions? - Noel Augustus Parks (Tui Brothers)

2025Q3: Customers remain extremely price-sensitive, with negotiations reflecting this. The macroeconomic outlook is volatile, and customer budget conservatism is a major factor influencing decisions. - Robert Eifler(CEO)

Can you explain the performance bonus size in the Shell and Total Energies contracts? How does your experience in Guyana affect this risk? - David Smith (Pickering Energy Partners)

2025Q1: We are optimistic that the first quarter of -- the year will be a good quarter. In fact, particularly, due to the fact that the contract with Shell for Suriname will begin this month. - Robert Eifler(CEO)

Contradiction Point 4

Deepwater Utilization Recovery Timeline

It directly impacts expectations regarding the recovery of deepwater utilization, which affects the company's financial outlook and investor expectations.

How confident are you in the deepwater utilization recovery by late 2026? - Eddie Kim (Barclays)

2025Q3: We're cautiously optimistic about the market tightening. Day rates are likely at the bottom, and the market should show recovery by late 2026 and 2027, driven by known contract commitments and conversations with customers. - Robert Eifler(CEO)

What specific strategies is the company implementing to drive growth in the next fiscal year? - Questioner's Name (Company Name)

2024Q4: Overall, we remain optimistic about deepwater activity due to positive macro indicators and dialogue with customers. However, we've seen a mid-cycle low since the second half of last year. Contracted deepwater demand has dipped to 100 rigs and 89% marketed utilization. We expect bottoming out this year and a recovery by late 2026 or early 2027. - Robert Eifler(CEO)