Executive Summary / Key Takeaways

• Strategic Consolidation and Fleet Optimization: Noble Corporation has strategically expanded its deepwater footprint through the Diamond Offshore acquisition, achieving $100 million in synergies ahead of schedule by Q2 2025, while aggressively rationalizing its fleet by retiring less competitive assets to maximize cash flow and maintain a high-spec, highly utilized fleet.
• Robust Backlog and Performance-Driven Contracts: The company has significantly bolstered its backlog to $7.0 billion as of October 27, 2025, driven by substantial long-term, performance-based contracts with major oil companies like Shell (SHEL) and TotalEnergies (TTE), signaling strong future revenue streams and alignment with customer efficiency goals.
• Technological Edge and Operational Excellence: Noble's ongoing rig upgrades and proven operational performance in challenging basins, such as Guyana and the U.S. Gulf, demonstrate a technological differentiator that enhances drilling efficiency, reduces costs for customers, and structurally increases the value proposition of deepwater projects.
• Anticipated Financial Inflection Amidst Near-Term Lull: Despite an expected EBITDA trough in the first half of 2026 and a "mid-cycle lull" in the near term, Noble forecasts a material EBITDA and free cash flow inflection from late 2026 onwards, supported by its growing backlog and a projected rebound in global deepwater demand.
• Commitment to Shareholder Returns: Noble maintains a strong commitment to its stable quarterly dividend and share repurchases, having returned over $1.1 billion in capital to shareholders since Q4 2022, offering a compelling cash yield during the industry's transitional phase.

A Legacy Forged in Deepwater: Noble's Strategic Evolution

Noble Corporation plc (NYSE:NE) stands as a preeminent offshore drilling contractor, with a rich history dating back to 1921. The company provides essential contract drilling services to the global oil and gas industry, operating a specialized fleet of mobile offshore drilling units, including both floaters and jackups. Noble's overarching "first choice offshore strategy" centers on maintaining a high-spec, highly utilized fleet to deliver superior value to its diverse customer base, which primarily comprises large, integrated, independent, and government-owned or controlled oil and gas companies worldwide.

The company's strategic trajectory has been significantly shaped by transformative acquisitions. Following the business combination with Maersk Drilling, Noble completed the pivotal acquisition of Diamond Offshore Drilling, Inc. on September 4, 2024, for a total consideration of $1.50 billion. This strategic consolidation was instrumental in bolstering Noble's deepwater capabilities and expanding its global footprint. By the second quarter of 2025, Noble had successfully integrated the legacy Diamond fleet into its ERP system and achieved its ambitious $100 million synergy target ahead of schedule, underscoring its operational efficiency and integration prowess.

Technological Edge and Operational Prowess

Noble's competitive advantage is deeply rooted in its technological differentiators and a relentless pursuit of operational excellence. The company's high-specification rigs are equipped with advanced systems that translate directly into tangible benefits for its customers and, by extension, for Noble's financial performance. For instance, in Guyana, Noble's drillships have consistently delivered record-setting results within the Wells Alliance, constructing over 200 wells in the basin, with 60% of the most recent 25 wells completed in under 35 days. This efficiency significantly reduces drilling time and costs for operators.

Further showcasing its technological leadership, the Noble BlackHornet in the U.S. Gulf set a new benchmark in deepwater drilling operations through its outstanding execution of Managed Pressure Drilling (MPD) influx management on a complex exploration well. Similarly, the Noble BlackLion performed BP (BP)'s longest step-out in the Gulf, exceeding 12,500 feet, delivered well ahead of the Authorized for Expenditure (AFE). These achievements highlight Noble's ability to handle technically challenging projects with superior efficiency, driving down the cost curve for deepwater operations and structurally increasing the attractiveness of offshore plays.

Strategic rig upgrades further solidify Noble's technological moat. As part of its long-term contracts with Shell, two 7G drillships, including the Noble Voyager, are undergoing enhancements. These upgrades include increasing the direct hook load from 2.5 million to 2.8 million pounds, adding a controlled mud line system (an alternative to manage pressure drilling), installing active heave compensated cranes, and implementing closed bus power system upgrades for a reduced carbon footprint. These improvements, costing an estimated $60 million to $70 million per rig spread across 2025-2027, are designed to position these units among the most high-spec drillships globally, enhancing their efficiency, safety, and environmental performance. This technological investment directly contributes to Noble's competitive advantage, enabling it to secure premium contracts and potentially higher dayrates, while offering customers enhanced operational capabilities and reduced project risks.

Competitive Landscape and Strategic Positioning

Noble operates in a highly competitive offshore drilling market, contending with prominent players such as Transocean Ltd. (RIG), Valaris Ltd. (VAL), and Seadrill Ltd. (SDRL). While these competitors also offer contract drilling services, Noble distinguishes itself through its "first choice offshore strategy" and a focused approach on high-specification assets. Noble's operational reliability and strong customer relationships, particularly in key deepwater basins, are significant competitive advantages.

Compared to Transocean, which often boasts a broader scale, Noble's focused strategy on high-spec units and operational efficiency allows it to compete effectively, particularly in complex projects where its technological capabilities shine. Noble's emphasis on long-term, collaborative relationships, as evidenced by its performance-based contracts, provides a unique value proposition that fosters stable revenue streams. While Valaris and Seadrill also possess modern fleets, Noble's consistent operational uptime and HSE performance, aided by tools like NORMS and Horizon56, position it favorably in securing repeat work and long-duration engagements.

The company's strategic fleet rationalization, including the permanent retirement of cold-stacked drillships like the Meltem and Scirocco, and the removal of the Noble Globetrotter I and II from general drilling bids, is a direct response to market oversupply. This proactive approach, which sheds approximately $20 million in annualized stacking costs, is designed to maintain a lean, high-quality fleet and avoid competing against its own less capable assets. This contrasts with some competitors who might retain idle capacity, potentially eroding market pricing. Noble's management explicitly states that the "option value of sideline capacity in this industry has eroded," reinforcing its disciplined approach.

Financial Performance and Liquidity

Noble's financial performance in recent periods reflects both the benefits of its strategic acquisitions and the challenges of a dynamic market. For the nine months ended September 30, 2025, total operating revenues from contract drilling services reached $2.52 billion, an 18.3% increase from $2.13 billion in the same period of 2024. Floater revenues were a significant driver, growing 24.1% to $2.01 billion, largely due to the additional floaters acquired in the Diamond Transaction. However, jackup revenues saw a 6.0% decline to $394.0 million over the same nine-month period.

In the third quarter of 2025, Noble reported a net loss of $21.10 million on operating revenues of $798 million, compared to a net income of $61.20 million on $800.50 million in operating revenues for Q3 2024. This shift was influenced by increased depreciation and amortization ($147.30 million in Q3 2025 vs. $109.90 million in Q3 2024) and interest expense, primarily due to the Diamond Transaction. The company also recognized a $60.70 million impairment loss in Q3 2025 related to the Noble Globetrotter II and Noble Reacher, reflecting its ongoing fleet rationalization efforts. Despite these factors, adjusted EBITDA for Q3 2025 stood at $254 million, with a margin of 32%.

Noble's liquidity remains robust, with cash and cash equivalents of $477.95 million as of September 30, 2025. Net cash provided by operating activities for the nine months ended September 30, 2025, was $764.55 million, a substantial increase from $519.26 million in the prior year, primarily driven by improved cash flows from operating assets and the Diamond Transaction. The company expects to fund its cash flow needs through operations, cash on hand, asset sales, or its $550 million revolving credit facility, which had no borrowings outstanding as of September 30, 2025.

Capital expenditures for the nine months ended September 30, 2025, totaled $367.78 million, with a full-year 2025 estimate ranging between $425 million and $450 million.

Outlook, Guidance, and Shareholder Returns

Noble's management acknowledges a "mid-cycle lull" in the offshore drilling market, characterized by upstream capital discipline and a "choppy spot market" through 2025 and into 2026. However, the company maintains a constructive long-term view, anticipating a "material inflection" in EBITDA and cash flow from late 2026 onwards. This outlook is underpinned by a growing backlog and a projected rebound in global deepwater demand, with expectations for the ultra-deepwater (UDW) contracted rig count to potentially reach 105 to 110 rigs or more by late 2026 or 2027, up from the current 100 rigs.

For the full year 2025, Noble has provided adjusted EBITDA guidance in the range of $1.1 billion to $1.125 billion. The company anticipates a quarterly EBITDA trough in the first half of 2026, which is expected to be somewhat below second-half 2025 levels, leading to lower full-year results for 2026 compared to 2025. However, a "healthy EBITDA and cash flow inflection" is expected late next year, supported by new long-term contracts and rising deepwater demand. Capital expenditures for 2026 are projected to be around $450 million, subject to increase with additional contract-supported opportunities.

Noble's backlog has seen significant growth, reaching $7.0 billion as of October 27, 2025. This includes approximately $0.5 billion scheduled for revenue conversion in the remainder of 2025, $2.4 billion in 2026, and $1.9 billion in 2027. Recent contract awards, such as the multi-year extensions for the Noble BlackLion and Noble BlackHornet with BP, valued at $310 million per rig, and the strategic contracts with Shell and TotalEnergies for multiple rigs, totaling nearly 14 rig years of additional backlog, solidify future revenue streams. These performance-based contracts, where Noble expects to capture approximately 40% of the combined variable revenue components, align incentives with customers and offer substantial economic upside through drilling efficiencies.

The company remains steadfast in its commitment to shareholder returns. Noble declared a quarterly cash dividend of $0.50 per share on October 27, 2025, bringing total 2025 capital return to $340 million. The company has surpassed $1.1 billion in total capital returned to shareholders since Q4 2022 through dividends and share repurchases. This robust return of capital program, coupled with a focus on building cash in late 2025, underscores Noble's prudent balance sheet management and commitment to providing a competitive cash yield to investors.

Risks and Challenges

Despite the optimistic long-term outlook, Noble faces several risks. Economic uncertainty, coupled with OPEC's stated intent to increase oil production, presents potential demand risks for offshore rigs in the near term. The company's cost profile is sensitive to global labor market conditions, capital-intensive repair and maintenance, global trade and sanctions regimes (including tariffs), and geopolitical crises. Management acknowledges that customers remain "as price sensitive as ever," and the timing risk of Final Investment Decisions (FIDs) and rig awards continues to be a "key wild card," with many projects "drifting to the right."

Noble is also exposed to tax-related contingencies, with approximately $356.40 million in audit claims, primarily in Brazil, remaining outstanding. While the company intends to vigorously defend its positions, the ultimate resolution of these claims could impact its financial statements. The payment of future dividends is subject to various factors, including financial condition, cash requirements, and distributable reserves, highlighting that shareholder returns are not guaranteed.

Conclusion

Noble Corporation plc is strategically positioned to capitalize on the long-term criticality of deepwater resources, leveraging its high-specification fleet, operational excellence, and a disciplined approach to capital allocation. The company's successful integration of Diamond Offshore, coupled with its proactive fleet rationalization and a growing backlog of performance-based contracts, underpins a compelling investment thesis. While the industry navigates a near-term "mid-cycle lull" and faces macroeconomic uncertainties, Noble's technological differentiators and commitment to efficiency are driving structural improvements in deepwater project economics.

The anticipated EBITDA and free cash flow inflection from late 2026 onwards, supported by a robust pipeline of opportunities and a projected rebound in deepwater demand, offers a clear path to enhanced shareholder value. Noble's consistent return of capital through dividends and share repurchases further strengthens its appeal, providing investors with a competitive yield as the company executes its strategy through the cycle. The focus on high-spec assets and operational outperformance positions Noble to emerge stronger from the current market dynamics, ready to meet the increasing global demand for reliable and affordable energy from offshore sources.