Executive Summary / Key Takeaways

• Strategic Consolidation and Fleet Optimization: Noble Corporation has strategically transformed its fleet through the Diamond Offshore (DO) acquisition, creating the industry's largest fleet of 7th-generation dual-BOP drillships. Coupled with aggressive fleet rationalization, this strategy focuses on high-spec, highly utilized assets to maximize cash flow.
• Robust Backlog and Performance-Driven Contracts: The company has secured significant long-term contracts, including nearly 14 rig years with Shell (SHEL) and TotalEnergies (TTE), adding $2.0 billion to $2.5 billion in revenue potential. These performance-based contracts, where Noble expects to capture approximately 40% of variable revenue, align incentives and derisk future earnings.
• Strong Financial Performance and Shareholder Returns: Despite near-term market softness, Noble delivered Q2 2025 operating revenues of $848.7 million and H1 2025 operating revenues of $1.72 billion. The company achieved its $100 million Diamond acquisition synergy target ahead of schedule and has returned over $1.1 billion to shareholders since Q4 2022, maintaining a $0.50 quarterly dividend.
• Medium-Term Market Rebound Expected: While a "mid-cycle lull" is anticipated to persist into early 2026, management projects a material rebound in deepwater demand by late 2026 or 2027, with a credible path to 105 contracted ultra-deepwater rigs. This outlook supports an annualized free cash flow run rate of $400 million to $500 million by H2 2026.
• Technological Edge and Competitive Positioning: Noble's investment in advanced technologies like Managed Pressure Drilling (MPD), increased hook load, and closed bus power systems enhances its competitive moat. These differentiators, combined with operational reliability, position Noble favorably against peers like Transocean, Valaris, and Seadrill in securing high-value, long-duration contracts.

Noble's Enduring Legacy and Strategic Evolution

Noble Corporation plc, with a heritage in contract drilling dating back to 1921, has consistently evolved to meet the dynamic demands of the global oil and gas industry. The company's journey from a foundational drilling contractor to a leading offshore powerhouse is marked by strategic foresight and aggressive fleet management. This long-standing presence has cultivated deep customer relationships and operational expertise, forming the bedrock of its "First Choice Offshore" strategy.

Recent years have seen Noble undergo a transformative period of strategic consolidation and fleet optimization. The business combination with Maersk Drilling in 2022 and, more significantly, the acquisition of Diamond Offshore Drilling in September 2024, have reshaped Noble's competitive landscape. These moves have created the industry's largest fleet of 7th-generation dual-BOP drillships, solidifying its focus on ultra-deepwater and high-specification jackup opportunities.

Noble operates a global fleet of 38 drilling rigs, comprising 25 floaters and 13 jackups, serving major integrated, independent, and government-owned oil and gas companies worldwide. This diversified fleet, coupled with a global operational footprint, allows Noble to adapt to changing regional demands. The company's strategic positioning is further enhanced by its commitment to technological leadership and operational excellence, which are critical differentiators in a competitive market.

Technological Edge and Operational Prowess

Noble's competitive advantage is significantly underpinned by its differentiated technology and continuous investment in fleet capabilities. A key technological differentiator is its extensive Managed Pressure Drilling (MPD) capabilities, with 15 rigs equipped with MPD following the Noble BlackRhino's upgrade. MPD systems offer enhanced well control, improved drilling efficiency, and the ability to operate in narrower pressure windows, translating to safer and more cost-effective operations for customers.

For its recently awarded long-term contracts with Shell, Noble is undertaking significant rig upgrades, including increasing direct hook load from 2.5 million to 2.8 million pounds, adding a controlled mud line system (an alternative approach to MPD), installing active heave compensated cranes, and implementing closed bus power system upgrades. These enhancements, requiring $60 million to $70 million in capital expenditure per rig spread across 2025-2027, are designed to make these units among the most high-spec drillships globally. The increased hook load enables deeper and more complex wells, while the closed bus power systems reduce the carbon footprint, aligning with evolving industry and regulatory demands. These upgrades not only secure long-term contracts but also enhance the versatility and marketability of these assets for a wide variety of future clients.

The company's operational prowess is evident in its ability to execute complex projects and achieve high performance metrics. The Noble Viking, for instance, commenced a critical 3-well program in the Philippines in June 2025, and the Noble Developer kicked off a 3-well development campaign in Suriname in July 2025. Furthermore, the Noble Faye Kozack set a new pre-salt drilling record on its first well for Petrobras (PBR) in Brazil, and the Noble Valiant earned the Deepwater Rig of the Year from TotalEnergies, underscoring Noble's commitment to safety and efficiency. These operational achievements directly contribute to the company's ability to secure and excel in performance-based contracts, where efficiency gains translate into significant economic upside for both Noble and its customers.

Competitive Landscape and Strategic Positioning

Noble operates in a highly competitive offshore drilling market, contending with major players such as Transocean Ltd. (RIG), Valaris Ltd. (VAL), and Seadrill Ltd. (SDRL). Noble's strategic acquisitions, particularly Diamond Offshore, have significantly bolstered its deepwater capabilities, creating a formidable fleet of high-specification rigs. This focus on premium assets, combined with a long history of operational reliability, provides Noble with a strong competitive moat.

Noble's TTM EBITDA margin of 44.26% highlights strong operational efficiency, a metric that compares favorably to the gross profit margins of some peers like Valaris (20%) and Seadrill (21%) in their latest annual reporting, though direct EBITDA comparisons require further context due to varying cost structures and reporting nuances. While Transocean boasts a large fleet and a strong reputation for complex projects, Noble's emphasis on high-spec 7th-generation drillships and advanced technologies like MPD provides a distinct advantage in securing long-duration, high-value contracts. Valaris, with its diversified fleet, and Seadrill, known for cost optimization, also compete intensely. However, Noble's strategic upgrades and focus on performance-based contracts differentiate its offerings, potentially leading to higher average dayrates and better capital efficiency.

The company's fleet rationalization strategy further sharpens its competitive edge. By permanently retiring cold-stacked and lower-capability rigs such as the Meltem, Scirocco, Noble Globetrotter II, Noble Reacher, and Noble Highlander, Noble is actively reducing its "surplus cost burden" from idle assets. This move is "instantly accretive" as these units have not contributed positive economics, allowing Noble to focus resources on its high-performing, high-spec fleet. This disciplined approach to capacity management contrasts with some competitors who may retain older, less efficient assets, potentially leading to higher stacking costs and lower overall fleet utilization.

Financial Performance and Shareholder Returns

Noble's financial performance in the first half of 2025 reflects the strategic impact of its recent acquisitions and disciplined cost management. For the second quarter of 2025, operating revenues from contract drilling services reached $812.1 million, contributing to a total operating revenue of $848.7 million. For the six months ended June 30, 2025, operating revenues were $1.72 billion, a significant increase from $1.33 billion in the same period of 2024. This growth was primarily driven by the additional floaters acquired through the Diamond Transaction, despite some offset from fewer operating days and a decrease in average dayrates for floaters (from $435,677 in Q2 2024 to $400,802 in Q2 2025).

Net income for Q2 2025 was $42.9 million, or $0.27 per diluted share, compared to $195.0 million, or $1.34 per diluted share, in Q2 2024. For the six months, net income was $151.2 million ($0.93 per diluted share) versus $290.5 million ($1.99 per diluted share) in the prior year. The decrease in net income was influenced by higher operating costs, including those related to the Diamond acquisition, mobilization expenses, and increased depreciation and amortization ($147.1 million in Q2 2025 vs. $90.8 million in Q2 2024). Interest expense also rose significantly to $40.0 million in Q2 2025, up from $12.0 million in Q2 2024, primarily due to the debt assumed and issued for the Diamond acquisition.

Despite these pressures, Noble demonstrated strong cash flow generation. Net cash provided by operating activities for the six months ended June 30, 2025, was $487.4 million, a substantial increase from $235.5 million in the prior year. This was driven by improved cash flows from operating assets and liabilities and the Diamond Transaction. The company's working capital improved to $573.1 million at June 30, 2025, from $448.5 million at December 31, 2024.

Noble remains steadfast in its commitment to shareholder returns. The company has surpassed $1.1 billion in combined dividends and share repurchases since Q4 2022. The Board declared a $0.50 per share quarterly dividend for Q3 2025, underscoring confidence in its cash flow generation. An additional $400 million share repurchase authorization was approved in October 2024, with $370 million remaining, signaling continued capital allocation flexibility.

Market Outlook and Strategic Vision

Noble's outlook for the offshore drilling market is characterized by a near-term "mid-cycle lull" but with a strong conviction in a medium-to-long-term rebound. Management anticipates that the global contracted ultra-deepwater (UDW) rig count, currently at 97 rigs (down from a peak of 105-106 in 2023-2024), will "sag a bit lower" through the remainder of 2025. This near-term softness is attributed to intensifying pressure on 2025 upstream capital expenditures and the "timing risk" of project delays.

However, a "material rebound starting in the second half of 2026" is projected, with a "very credible path back toward a contracted UDW rig count of around 105 by late 2026 or 2027," assuming stable macro conditions. This optimism is fueled by a robust pipeline of opportunities, particularly in South America, where 43 UDW units are contracted, and a promising rebound in West Africa, despite its current softness. Dayrates for Tier 1 drillships are currently in the low to mid $400s per day, but the anticipated demand uptick could support a return to mid-to-high $400s.

For the full year 2025, Noble updated its guidance, lowering total revenue to a range of $3.2 billion to $3.3 billion, reflecting unmaterialized option exercises and persistent white space. However, adjusted EBITDA guidance was narrowed to the upper end of the previous range, now $1.075 billion to $1.15 billion, driven by strong first-half results and aggressive cost management. Capital expenditures for 2025 are projected between $400 million and $450 million, increasing to approximately $450 million in 2026, to fund strategic rig upgrades for long-term contracts.

Management is focused on securing contracts for key rigs like the Noble BlackRhino, Noble Viking, and Noble Gerry de Souza for 2026 programs. The company expects to derisk an annualized free cash flow run rate of $400 million to $500 million by the second half of 2026, even if current trough demand levels persist. This "paid to wait" proposition for shareholders, supported by a stable dividend, underscores Noble's confidence in its long-term strategy and market position.

Risks and Investment Considerations

While Noble's investment thesis is compelling, investors must consider several pertinent risks. The offshore drilling market remains susceptible to significant macroeconomic uncertainties, including fluctuating Brent crude prices (ranging from low $60s to low $80s per barrel), geopolitical conflicts, and global trade policies, such as tariffs, which could impact costs and rig demand. The "timing risk" associated with project Final Investment Decisions (FIDs) and rig awards "drifting to the right" could prolong periods of market softness and impact utilization rates.

Noble's cost profile is sensitive to global labor market conditions, capital-intensive repair and maintenance, and evolving trade and sanctions regimes. The energy transition from hydrocarbons to renewables also poses a long-term challenge, potentially influencing capital flows and demand for offshore services. Furthermore, the company faces ongoing tax audit claims, totaling approximately $357.3 million, primarily in Brazil, which remain under objection. Management explicitly acknowledges the potential for lower utilization for its lower-specification drillships and semi-submersibles due to customer prioritization of the highest-spec assets.

Conclusion

Noble Corporation plc stands as a compelling investment in the offshore drilling sector, strategically positioned to capitalize on the anticipated long-term recovery of deepwater demand. Through a series of transformative acquisitions, aggressive fleet rationalization, and a steadfast commitment to technological differentiation, Noble has forged a high-spec, highly utilized fleet. The company's ability to secure significant, performance-based long-term contracts, even amidst a near-term market lull, underscores its operational excellence and strong customer relationships.

Despite the current "mid-cycle lull" and associated market uncertainties, Noble's robust backlog, disciplined cost management, and clear path to substantial free cash flow generation by late 2026 offer a unique "paid to wait" proposition for investors. The company's strategic focus on maximizing cash flow and consistently returning capital to shareholders, combined with its technological leadership in areas like MPD and advanced rig upgrades, solidifies its competitive standing. As global energy demand continues to evolve, Noble's strategic agility and operational prowess position it as a resilient and attractive player in the essential offshore energy landscape.