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Noble Posts Adequate Quarterly Results

Noble reported solid third-quarter results. Total revenue increased slightly to $1.08 billion from $1.02 billion in the prior quarter, thanks mainly to the commencement of operations for two new ultra-deep-water rigs. The company also benefited from lower operational downtime, which fell to 4.6% from 5.2% in the prior quarter, essentially flat operating costs, and fewer shipyard days. Accordingly, Noble’s contract drilling margin improved to 53.1% from 49.6% in the second quarter.

Utilization and day rates also continued to improve as floater utilization moved upward to 79% from 77% in the prior quarter and day rates increased 6% sequentially to $369,100. Noble continues to see healthy demand for jackups and floaters in both standard and high-spec capacities, thanks to healthy oil prices, frontier exploration efforts, and a growth phase in deep-water development.

That said, we continue to remain concerned about a potential oversupply of deep-water rigs toward the end of 2014, given the large number of newbuild deliveries. Noble also noted that it expected to see an increase in rig mobilizations, lowering utilization levels, as rigs move to regions where the rig demand is greatest. At this time, we do not see any reason to change our fair value estimate or moat rating.

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