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Noble (NE) Rises 10% on Q4 Earnings Beat & Positive Outlook

Zacks Equity Research

Noble Corporation plc NE reported fourth-quarter 2019 loss of 33 cents per share, excluding one-time items, narrower than the Zacks Consensus Estimate of a loss of 50 cents. The quarterly loss was also narrower than the year-ago loss of 36 cents per share.   

Total revenues increased to $454 million from $310 million in the prior-year quarter. Quarterly revenues also beat the Zacks Consensus Estimate of $262 million.

The company’s better-than-expected results were supported by a year-over-year increase in total rig fleet utilization and average dayrate.

Importantly, the narrower-than-expected quarterly loss and positive outlook for offshore drilling business drove the stock more than 10%. The rally is likely to help the company return to compliance with the NYSE continued listing requirements.

Noble Corporation Price, Consensus and EPS Surprise

Noble Corporation Price, Consensus and EPS Surprise

Noble Corporation price-consensus-eps-surprise-chart | Noble Corporation Quote

Operating Highlights

Total average rig utilization increased to 77% from the year-ago level of 75%. Moreover, overall average dayrate increased to $250,760 from $176,443 in the year-ago quarter. Overall operating days increased to 1,760 from 1,655 in the year-ago period.

The average dayrate for the company's jackups was $129,898, up from $121,949 in the prior-year quarter. However, average capacity utilization dropped to 93% from the year-ago level of 94%.

The average dayrate for its floaters was $450,362 compared with $267,737 in the prior-year quarter. Moreover, average capacity utilization rose to 60% from the year-ago level of 56%.

Costs & Expenses

Total contract drilling service costs increased to $181.8 million in the quarter from $178.7 million in the year-ago period. General and administrative costs rose to $18.9 million from $14.7 million in fourth-quarter 2018.

Backlog

As of Dec 31, 2019, the offshore drilling contractor’s total revenue backlog was reported at roughly $1.5 billion.

Financials

Capital expenditure in the reported quarter totaled $48 million.

At the end of the fourth quarter, the company had cash balance of $104.6 million and long-term debt of $3,779.5 million, with a debt-to-capitalization ratio of 51.2%.

Outlook

Noble hasn’t noticed any changes in explorers’ spending patterns although the outbreak of coronavirus in China has dented global energy demand. With the contracted floating and jackup rig counts rising in 2019, the company is optimistic that the robust offshore drilling activities will continue in 2020. Notably, in the Middle East and Asia, the company expects opportunities for premium jackups to remain bright. Demand for floating rig fleet will also remain impressive since there has a rise in interest among the upstream energy players for prolific offshore resources in regions like Guyana, Suriname, Brazil and Mexico.

Zacks Rank & Stocks to Consider

Noble currently carries a Zacks Rank #3 (Hold). Meanwhile, a few better-ranked players in the energy sector are Denbury Resources Inc. DNR, Chevron Corporation CVX and Hess Corporation HES, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Denbury Resources’ earnings per share estimate of 30 cents for 2020 has been unchanged over the past seven days.

Chevron’s bottom line for 2020 is expected to rise 12.8% year over year.

Hess’ bottom line for 2020 is likely to grow 93.7% year over year.

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