Noble Corp (Cayman Island)

NYSE:NE

Earnings Call Analysis

Noble Corporation Q3 Earnings Reflect Strength

Noble Corporation experienced its strongest quarter post the Noble-Maersk Drilling merger, showing robust finances with $679 million in revenue and $283 million in adjusted EBITDA. A substantial quarterly dividend increase to $0.40 indicates a focus on shareholder returns. With robust market fundamentals, ultra-deepwater rig utilization rates are above 90%, and day rates are reaching mid-to-high $400,000s. Although the backlog dipped slightly to $4.7 billion, quality over quantity is the strategy, with 62% of 2024 floater fleet days exposed to favorable market re-pricing. Near-term, the company's sixth generation floaters face potential gaps, but the overall landscape for re-contracting and day rates is positive.

Solid Performance and Dividend Increase

Noble Corporation commenced their earnings call with a spotlight on a robust third quarter, marking the strongest performance since the Noble-Maersk Drilling combination closed a year ago. Total revenue soared to $679 million with an adjusted EBITDA of $283 million, a testament to the workforce's dedication amidst the merger's integration. To shareholders' delight, the quarterly dividend surged by 33% to $0.40 per share, reflecting Noble's commitment to capital return. The scheduled backlog for 2024 robustly stands at $1.8 billion, with potential increments to over $2 billion, an encouraging sign for future stability.

Optimistic Market Outlook and Commercial Successes

The offshore drilling market exhibits vitality, where ultra-deepwater rigs boast a remarkable 90% marketed utilization rate and leading-edge day rates reaching mid- to high $400,000s. Noble secured several lucrative contracts, including a $470,000 per day drillship contract with LLOG in the Gulf of Mexico and harsh environment jackup fixtures ranging from $130,000 to $150,000 per day. In particular, the Noble Regina Allen is set for a $150,000 per day three-well program in Argentina, poised to kick off in mid-2024. These contracts not only enhance revenue but also deepen Noble's involvement in key geographical markets.

Current Challenges and Rig Damages

The earnings call briefly touched upon the Noble Resilient's incident in the North Sea, but reassured that the forthcoming Petrogas contract should remain unaffected. Although the rig sustained damages, Noble anticipates insurance coverage, mitigating financial implications. This incident does not seem to detour Noble from its positive trajectory; however, investors should monitor any potential delays or unforeseen costs.

Strong Backlog amid Market Cautiousness

Noble's backlog dipped modestly to $4.7 billion from $5 billion the previous quarter, yet the quality of the backlog—critical for future operations—remains intact. Specifically, the backlog is more aligned with current market pricing compared to competitors, and 62% of 2024's floater fleet is available for re-pricing, which could herald favorable rate renegotiations amidst a bolstering day rate environment. Still, investors should note the limited opportunity set in Norway, potentially impacting the utilization of the Noble Interceptor jackup.

Anticipated Demand Growth and Rig Market Seasonality

Noble referenced an observable seasonality in offshore drilling, with the beginning of the year often attracting more contracts. Despite a perceived stagnation in demand growth, Noble remains confident in the demand robustness, chalking up any short-term slow-down to typical market patterns. Nevertheless, investors should be cautious and watch for signs of true demand shifts as they contemplate the stock's long-term prospects.

Focus on Technology and Merger Progress

Technology innovation and the rapid advancement of the Noble-Maersk Drilling merger were highlighted as key progress areas. Noble emphasizes its readiness in technology deployment to bolster operational efficiency and safety. The company's strategic focus and agility in merger integration could be important levers for future growth, offering investors a glimpse into the potential for improved competitiveness and market adaptation.

Question & Answer Session Insights

The earnings call concluded with a Q&A session, which often provides additional detail and color on the management's perspective and operational nuances. Investors seeking deeper insights or clarifications on the call's discussions tend to gain valuable information from these exchanges.

Earnings Call Transcript 2023-Q3

[Operator]

Thank you for standing by. My name is Bailey, and I will be the conference operator today. At this time, I would like to welcome everyone to the Noble Corporation's Q3 earnings call. [Operator Instructions] I would now like to turn the call over to Ian MacPherson, Vice President of Investor Relations.

[Ian MacPherson, executive]

Thank you, operator, and welcome, everyone, to Noble Corporation's Third Quarter 2023 Earnings Conference Call. You can find a copy of our earnings report, along with the supporting statements and schedules on our website at noblecorp.com. This conference call will be accompanied by a slide presentation that you can also find located at the Investor Relations section of our website.Today's call will feature prepared remarks from our President and CEO, Robert Eifler, as well as our CFO, Richard Barker. Also joining on the call are Blake Denton, Senior Vice President of Marketing and Contracts; and Joey Kawaja, Senior Vice President of Operations.During the course of this call, we may make certain forward-looking statements regarding various matters related to our business and companies that are not historical facts. Such statements are based upon current expectations and assumptions of management, and are therefore subject to certain risks and uncertainties. Many factors could cause actual results to differ materially from these forward-looking statements, and Noble does not assume any obligation to update these statements.Also note, we are referencing non-GAAP financial measures on the call today. You can find the required supplemental disclosure for these measures, including the most directly comparable GAAP measure and an associated reconciliation in our earnings report issued yesterday and filed with the SEC.With that, I'll turn the call over to Robert Eifler, President and CEO of Noble.

[Robert Eifler, executive]

Good morning. Welcome, everyone, and thank you for joining us on the call today. I'll begin with some opening remarks on our quarterly results, and then provide some comments on the market outlook and commercial activity, before turning the call over to Richard to cover the financials. Following Richard's financial overview, I'll wrap-up with some additional highlights on technology innovation underway here at Noble, and the strong progress we've made with our merger integration. And after that, we'll look forward to taking your questions.First, we've reported a solid third quarter, with total revenue of $679 million and adjusted EBITDA of $283 million. On these metrics, this was our strongest quarter since the Noble Maersk Drilling combination closed a year ago. And these results reflect an exceptional collective effort by our employees around the world, who have leaned into this merger and executed simultaneously on both the integration and the day-to-day business. So well done, and thank you all.Next, we're pleased to announce an increase of our quarterly dividend to $0.40 per share this quarter, which represents a 33% increase and demonstrates our continued commitment to maximizing value for shareholders via return of capital. Following the dividend initiation last quarter, we have signed additional contracts to bring our 2024 scheduled backlog to $1.8 billion currently with near-term visibility to additional bookings that could increase 2024 backlog to over $2 billion.So we have taken the decision to make this upward revision just one quarter after the dividend initiation. While you should not expect us to continue to adjust the dividend each quarter, we will remain focused on maximizing free cash flow generation and as previously stated, returning the significant majority of free cash via dividends and buybacks.Turning now to the market outlook. Offshore drilling fundamentals remain robust, with the marketed utilization rate for ultra-deepwater rigs in the 90% and leading edge day rates for working high-spec drillships in the mid- to high $400,000. Leading-edge fixtures for harsh jack-ups outside of Norway have been in the $130,000 to $150,000 per day range.During the third quarter, the drillship Noble Valiant was awarded a 6-month contract with LLOG in the U.S. Gulf of Mexico at a day rate of $470,000, excluding potential additional revenue for MPD services. This program is scheduled to commence in early January and direct continuation of the Valiant's current contract.Also in the Gulf of Mexico, both of the Globetrotter drillships have recently been awarded additional contract scopes from Shell that are expected to keep both of these units working into March of next year at extension rates just below $400,000 per day.On the jackup side, looking forward to the redeployment of the Noble Regina Allen with a 3-well program for TotalEnergies in Argentina that's scheduled to commence in mid-2024 at a day rate of $150,000, excluding mobilization.The Phoenix field provides a significant source of domestic natural gas for Argentina, and this program aligns very well with the JU-3000 rigs' technical capabilities and well-established operational track record in this unique harsh environment location. So we're very excited to be participating in the revival of Argentina's offshore upstream activity with the Regina Allen next year, which will mark Noble's drilling campaign in the country with a JU-3000 jackups.In the North Sea, the Noble Resilient has been awarded a 120-day contract with Petrogas at $133,000 per day that's scheduled to commence next summer. Of note, the resilient sustained damages while import 2 weeks ago when a floating production vessel experienced a mooring failure and aligned with our rig, which was stationary in position near Keysight. There were no reported injuries and investigation and damage assessment is underway, and we expect damages to be covered by the liable party or our own insurance, subject to applicable terms and limits.The time line for required repairs could impact the extent of the resilience availability for additional work before the Petrogas contract next summer. However, we do not expect the timing of the Petrogas contract to be impacted.Moving on, also in the North Sea. The jackup Noble Reacher has been extended by 15 months with TotalEnergies via exercise of priced options, extending the rig to mid-2025 with 1-year of priced options remaining. These are legacy priced options, so the day rates for the reach will remain materially below the more recent leading-edge fixtures. These recent jackup contract awards have significantly firmed up 2024 visibility for our non-Norway fleet, which has been a positive development. Within Norway, the timing of demand recovery continues to be hard to predict. At this point, we remain generally cautious on the outlook for this market through 2024. Thus, our idle CJ70 jackup, Noble Interceptor is still confronted with a limited opportunity set.You can find a summarized schedule of our backlog on Page 5 of today's earnings slide presentation. As shown, our backlog stands at $4.7 billion currently, down slightly from $5 billion as of last quarter. However, excluding our long-term commitments from ExxonMobil and Guyana and Aker BP in Norway, our backlog was essentially flat quarter-over-quarter.Accordingly, we're much more focused on the quality of backlog additions rather than an absolute dollar total as we progress through time, and we remain overall quite constructive on the re-contracting opportunities confronting our available rigs. Two of the defining features of our floater backlog are that it is both more in step with current market pricing than most of our competitors and also more exposed to near-term rollovers than average.Putting numbers to it, our average day rate in floater backlog is $408,000 and 62% of 2024 available days across our marketed floater fleet are currently exposed to market re-pricing. Approximately 1/3 of this 2024 re-pricing exposure relates to the CEA rigs in Guyana and 2/3 relates to un-contracted rig days across the balance of the UDW fleet.We think this is clearly an advantageous exposure to hold in a strong and improving day rate environment. And it also provides a measure of flexibility in how we approach shorter and longer-term contract opportunities as they arise. There is a partially offsetting negative effect's from the utilization inefficiency that results from the churn of shorter-term contracts.Within this context, as previously discussed, we continue to see more white space impacting our sixth generation floaters over the near to medium term, specifically the 2 Globetrotters and the Developer and Discoverer. That said, we still see a good pipeline of follow-on opportunities next year, and we do hope to announce some additional fixtures here in the fourth quarter, which would resolve some of the near-term rollovers in our fleet. So stay tuned.Overall, the supply-demand situation and outlook for both deepwater and harsh jackups remains very similar to what we described last quarter. The contracted UDW rig count has hovered in the low 90s since early this year, with utilization of the marketed fleet of 99 rigs stable in the low 90%s.During the third quarter, 22 rig years of UDW floater contracts were awarded [Audio Gap] leading edge fixtures have priced in the mid- to high 400,000 per day for working Tier 1 rigs, a step lower in the low $400,000 for contracts awarded to rigs that are being reactivated and mid-300,000 to mid 400,000 for sixth generation rigs. Although, contracting activity and utilization rates have remained firm throughout this year, we recognize there has been some concern in the market recently over the lack of apparent demand growth over the past few quarters as indicated by the contracted UDW rig count.We see nothing to indicate any type of underlying problem with demand growth, although it has been slightly slower to materialize in the short term. Over the past few years, we've seen a similar pattern of seasonality in which volume of total UDW contracts in a given year has been slightly weighted towards the first half of the year, and this appears to be playing out similarly this year.Additionally, 8 of the 14 long-term contracts that have already been awarded this year have gone to non-active rigs that are being reactivated at discounted pricing. We had originally anticipated some of these programs to go to working rigs, which combined with normal blips here and there, with certain programs slipping to the right, has resulted in a slightly more moderate slope of appreciation in the UDW market in 2023, compared to 2022.So we're approaching the $500,000 day rate threshold a bit more slowly than we had previously expected. But if you scratch a little deeper, what you find is that the UDW market is still, in fact, tightening due to the steady absorption of the sideline capacity.Looking ahead throughout 2024, we continue to expect a double-digit increase in UDW rig demand globally, driven primarily by incremental requirements throughout the Americas and West Africa. Brazil continues to be a major fulcrum of demand growth. And despite customary delays with their award process, Petrobras' total floater fleet is poised to expand from 24 contracted rigs currently to approximately 30 rigs over the next year based on recent and pending awards.Additionally, major projects in Namibia and Suriname are poised to drive incremental rigs requirements and established UDW basins, such as Angola and Nigeria continued to trend higher. The methodical absorption of sideline capacity has had a bifurcating effect on day rates over the short-term. However, we believe the structural trend with day rates will continue to correlate positively with demand growth over time, which, in fact, is one of the key reasons why we are beginning to see the emergence of more long-term tenders in the market as the inventory of sideline capacity continues to dwindle and the economics for new rig construction are at such a dramatically higher plane, as we discussed in detail during last quarter's call.And just to reiterate that point, we believe that the economic threshold to support new drillship construction would be something along the lines of a 10-year contract at or above $650,000 per day with a 3 to 4-year delivery time preceding contract commencement.Given these fairly straightforward supply and demand parameters and with mounting evidence that our customers are reengaging in their long-life offshore resource portfolios in a more deliberate way than we've seen in over a decade, we believe the outlook for our business is very encouraging.Now let me turn the call over to Richard to discuss the financials.

[Richard Barker, executive]

Thank you, Robert, and good morning or good afternoon all. In my remarks today, I will briefly review the highlights of our third quarter results as well as our outlook for the remainder of the year.Contract Drilling Services revenue for the third quarter totaled $671 million, up from $606 million in the second quarter. Adjusted EBITDA was $283 million in Q3, up from $188 million in Q2. Diluted earnings per share was $1.09, and adjusted diluted EPS was $0.87. Cash flow from operations was $139 million. Capital expenditures were $99 million, and pre-cash flow was $40 million.As anticipated, revenue and adjusted EBITDA improved from second quarter levels with higher day rates being the primary driver. Our 16 marketed floaters were 92% utilized in the third quarter, up from 90% in the second quarter, with average day rates increasing to $404,000 per day in Q3, up from $363,000 per day in Q2.Our 13 marketed jackups were 61% utilized, with an average day rate of $141,000 in the third quarter, compared to 59% and $129,000 per day in the second quarter. As summarized on Page 5 of the earnings presentation slide, our total backlog as of October 31 stands at $4.7 billion versus $5 billion as of July 31. It's important to recognize that our unique long-term commitments with ExxonMobil in Guyana and with Aker BP in Norway have an outsized impact on our total backlog profile.As such, the sequential decrease in backlog this quarter is really attributable to the fixed rigs operating under the ExxonMobil CEA and the Aker BP programs, which did not take on additional backlog bookings over the past 3 months.Current backlog includes approximately $1.8 billion that is scheduled for revenue conversion in 2024. It is important to note that our backlog excludes reimbursable revenue, as well as revenue from ancillary services.Last month, we celebrated the 1-year anniversary of our business combination with Maersk Drilling, and integration activities continue to progress extremely well. Our synergy realization is ahead of plan. Within 1 year of closing, we have realized run rate synergies of approximately $100 million, which represents 80% of the $125 million target. This is well ahead of what we communicated upon the transaction announcement and is a testament to how the 2 legacy companies have come together to create value for both our shareholders and customers.Referring to Page 9 of the earnings slide, we are adjusting our full year 2023 guidance for revenue adjusted EBITDA. For total revenue, we now expect a range of $2.5 billion to $2.6 billion versus the prior range of $2.35 billion to $2.55 billion. And for adjusted EBITDA, our expected range is $775 million to $825 million, which is the top half of the prior range and about a 3% increase at the midpoint. These improvements in guidance ranges are driven by our strong results year-to-date, with revenue also benefiting from higher-than-expected reimbursable revenue.Full year guidance for capital expenditures remains unchanged at a range between $325 million and $365 million, excluding customer reimbursable CapEx. For reference, reimbursable CapEx has totaled $13 million through the first 9 months.Notwithstanding the enhanced full year expectation for adjusted EBITDA, the upwardly revised range still implies a sequentially lower fourth quarter compared to the third quarter. This is consistent with our prior directional view and primarily reflects greater anticipated downtime for various rigs in the fourth quarter. The primary drivers include the Noble Faye Kozack, which has recently finished a contract in the Gulf of Mexico and is preparing for its next contract in Brazil that is expected to start in March, the Noble Developer, which finished its work scope in Brazil in late September, and the Noble Voyager, which is about to finish its current work scope in Mauritania.Looking beyond 2023 at a high level, we continue to expect a nice step up in adjusted EBITDA and free cash flow in 2024 versus 2023, and also envision a higher weighting of 2024 EBITDA in the second half of next year compared to the first half.As previously discussed, 2024 will be the peak year of 10-year SPSs and major projects across our fleet. And as such, we continue to expect a moderate increase in CapEx next year compared to this year.Additionally, we continue to see persisting inflationary trends across our cost structure that are very consistent with the type of industry upcycle that we're currently experiencing. Therefore, we do expect something in the range of mid single-digit type percentage inflation rates on average from 2023 into 2024 across our full cost structure.Finally, I would like to provide a comment on cash flow. As our past few quarters have shown, the quarterly variability of working capital can create some short-term swings in free cash flow. During the third quarter, we generated $40 million of free cash flow despite over a $100 million build in working capital. While some of this is a function of a growing top line, we do expect a portion of this bill to reverse in Q4.As Robert stated, we remain committed to returning the significant majority of free cash flow to shareholders over time via share repurchases and dividends. We continue to believe that maintaining a conservative through-cycle balance sheet in support of a high free cash flow payout is the appropriate capital allocation formula for our business. And therefore, you can expect Noble to abide by this framework going forward.That concludes my remarks. And now I'd like to pass the call back to Robert for closing comments.

[Robert Eifler, executive]

Thanks, Richard. Before we move to Q&A, I'd like to close here with a couple important highlights. First, an exciting new technology that we're developing. And second, a few reflections on the 1-year anniversary of our merger.On the technology side, I'm very excited to highlight Horizon56, a software platform that we've developed to promote the digitalization of well planning and execution. The benefits of digitalizing work streams and closing the gap between our customers' well programs and our drilling crews are far-reaching, impacting safety, drilling speed, management of change, elevation of lessons learned, and overall risk management.We believe the digitalization enhancements provided by Horizon56 can ultimately drive drilling efficiency gains, which obviously translates into very significant value uplift for customers, including, but not limited to, well cost and emission factors.Overall, we feel fortunate to have this very talented Horizon56 team at Noble, a group that came to us by way of the Maersk Drilling combination as one of the many outstanding aspects of Maersk's human capital and technology suite.We talk frequently about the new industry landscape in which we aspire to be, as we say, first choice offshore. That ambition can only be realized with 2 major prerequisites, which are inexorably linked; A, scale; and B, a culture of tireless innovation and service posture, both of which we have very purposefully promoted as part of the industrial logic behind our strategic actions of the past few years.Accordingly, we remain keen to invest in and focus on areas like Horizon56, where Noble can drive incremental value for our customers.Finally, a brief reflection on the state of the company as we approach 2024. Noble recently celebrated the 1-year anniversary of our business combination with Maersk Drilling, and we could not have asked for a better integration effort than we've seen so far. Within the first 6 months of close, we achieved operational stability and a true culture of One Noble that proved critical to our first-year success, all while exceeding synergy targets and consistently executing for our customers. Year-to-date, our operational uptime of 97% has been outstanding, especially for year 1 of an integration of this scale. And ultimately, I believe the company's third quarter results are a very clear demonstration of the power of this combination.So I would just like to conclude here with a special offering of gratitude and congratulations to our fantastic employees around the world for your tremendous efforts and for the great results that you're producing on behalf of Noble. We're off to a great start together, and the best is yet to come.With that, we'll pause here and open up the call for Q&A.

[Operator]

[Operator Instructions] And your first question comes from the line of Eddie Kim with Barclays.

[Eddie Kim, analyst]

My question -- my first question is just on what feels like a pause in contracting activity over the past 2 to 3 months, at least compared to what we were seeing through kind of July or August this year, just in terms of the number of contracts and multi-year durations we were seeing. Should we view this as really more of a temporary pause? It seems like, based on your prepared remarks, it feels like we should. And when do you expect we'll see multi-year contract announcements start to pick up again?

[Robert Eifler, executive]

Yes. So it is very much a temporary phenomenon. If you look back through time at just contract awards per quarter, this is not unusual at all. I think it's gained -- it's had a lot of attention, understandably. But they ebb and flow. And as I mentioned in the remarks, the second half of the year, sometimes traditionally, I guess, is a little lower volume than the first half of the year. And I think that's related just to normal budget cycles for our customers.You're going to see the working rig count increase next year. And we believe that you're going to see duration increase as well, to your question. I think one of the potential drivers for this current pause is that certain operators, not all, but certain of the operators, some of whom are some of the bigger players have been regrouping and connecting some of their programs together. So that rather than going out to tender for 1 or 2 wells, which has been the norm for the last couple of years, they're pulling those together and probably going out to tender for some longer duration type contracts. So no hard evidence to that yet. That's our belief. And I think that's what you're going to see as we move into 2024.

[Eddie Kim, analyst]

Okay. Got it. Great to hear. Just my follow-up is on the comments around cost inflation next year. I believe you said we should expect kind of a mid to high single-digit level of cost inflation. Could you just expand upon that a little bit more? In what areas do you expect cost inflation to be highest next year? Is the labor, spare parts and equipment, the cost of SPSs? Just any additional color here would be great.

[Richard Barker, executive]

Yes. We said mid single-digit type inflation next year is our expectation as we sit here today. And obviously, that's an average, right? And so as you know, some elements of the cost structure are going to be higher than others.I would say on the labor side, Gulf of Mexico, obviously, we're seeing [Technical Difficulty]. So it's very, very regional dependent as well. So, it's hard to give maybe more specificity than that. But I think on average I would think about it as a kind of mid single-digit type level next year.

[Operator]

Your next question comes from the line of Kurt Hallead from Benchmark.

[Kurt Hallead, analyst]

So, there is in the context of the progression on headline day rate and the fact that we haven't quite yet reached the 500K per day mark, I think, I want to get your perspective, right, how important is day rate versus total contract value, right? Because at the end of the day, the day rate is making up is no longer 100% of the contract value because there's a lot of upfront costs that are being paid to MOB fees and so on and so forth, right?So, it seems like investors are just so intently focused on the headline day rates if they're missing the bigger picture that the total cash value of these contracts are going up. So, I just want to get your perspective on that. And see is it really it's important to you guys about the day rate or is it more important for you to maximize the cash value of the contract?

[Robert Eifler, executive]

It's a good question. And you're spot on that there seems to have been an almost myopic focus on the 500 number here recently. And understandably, it's a visible threshold.We're headed there. We've said that before. Timing's maybe a little bit behind. But to your point, there's a couple of other things that go on. One, between contract contribution and efficiency does matter. So, mobilizations, et cetera, matter. I would say, we're probably somewhere mid-cycle-ish on that component. So, you're seeing, obviously, mobs and dmobs. We're a ways away from kind of full revenue type mobs and dmobs at this stage in the cycle. And that's a point that we reached last cycle, as you'll remember. But also, just within contract drilling margins, there is a variation between contracts, regions, types of rigs, et cetera.And so, we're very much focused on maximizing our margins and our cash flow. And I think we've got some places where we're very proud to have what we think is a good combination right now and is one of the things that's driving our cash flow right now.

[Kurt Hallead, analyst]

Okay. Now, you guys referenced the prospect of seeing increased duration. And obviously, one of your competitors yesterday indicated that they've been seeing the same dynamic. So, maybe give us some perspective on, as you look out in potential contract awards that will come forth in 2024, what sort of duration are we talking about and relative to what we've seen so far? Like, are we seeing now a greater propensity of 3 to 5-year term? Or are we seeing a greater propensity of 2-year terms?

[Robert Eifler, executive]

It's the latter. But I think what you're going to see that, if I recall, if I'm citing this correctly, if you exclude the Petrobras contracts, the average contracted UDW term is like 11 or 12 months right now. And so, we would anticipate that that statistic would go up fairly dramatically next year, because we think, as I mentioned, that there are a few companies that are moving away from 1 and 2-well contracts and into 1 to 3-year contracts, which kind of covers your 2-year example.

[Kurt Hallead, analyst]

So, is the -- just an extension of that question, right? So, we're seeing all kinds of information that's suggesting that demand for seven-gen ultra-deepwater drillships can exceed supply in '24 and '25 and prior cycle periods that tended to cause some angst among the oil companies about, hey, am I going to get what I need when I need it? And therefore, I need to basically reach further into the future and book it for a longer period of time. Based on your commentary, there's some movement toward that, but it doesn't seem like it's to the same extent. So, why are oil companies not willing to maybe book 3 years versus 2 years, let's just say? Just, again, I know it's a theoretical question, but I just want to get a sense from you guys on what kind of pushback or what kind of color you're getting in your conversations with the oil companies?

[Robert Eifler, executive]

Sure, yes. I mean, my view is that the market is pretty well-balanced right now and that it will continue to be pretty well-balanced going forward. We've had 8 or 10 rig reactivations announced this year, so that's good new supply coming into the market. And there's a few a small handful left, including our Meltem, that we anticipate would come into the market just broadly across the industry, continue to come into the market through '24 and '25.All companies have -- and I mentioned this kind of briefly, but they have been selectively pushing some of the programs to the right. And I think some of that is -- in a couple of instances, it's, I think, been to avoid headline rate, perhaps. And -- but I think more broadly, it's trying to pull together programs, as I mentioned earlier, to get some term, to tender for some term.I think it's part of what's creating this air pocket, takes a little longer to pull together multiple wells than just 1 or 2 wells and go to tender on all of it. I don't know whether -- I'm not calling for the last up-cycle level of urgency in the near term. I see this as a relatively balanced market with upward movement on day rates as we move through next year and into 2025.

[Operator]

And your next question comes from Gregory Lewis with BTIG.

[Gregory Lewis, analyst]

I realize the ink's not even dry, and a lot still has to happen before, Chevron can buy Hess, but just given Hess' position in Guyana with Exxon, do you have any kind of broad thoughts on what that does, or does that change anything or accelerate anything? Just kind of as you think about that changing of a partner, I'm kind of curious if you have any thoughts around that.

[Robert Eifler, executive]

Sure. I mean, I think all of the most interesting answers obviously have to come from Chevron and Hess. But from our view, we feel we had an excellent relationship with Hess. We have regular contact there, and so we hope that that translates over and would hope to continue that.Looking a little bit outside of that, we, of course, talk a lot about Guyana. It's very important to us, and we've put a whole lot of focus on that operation, and I think the results very much speak for themselves. There's data that demonstrates our efficiency there, and we think we've got some really, really great performance from the rigs down there.So, hopefully, Chevron, as the new owner of that, we'll see our performance. And that's a customer that we haven't done as much work for. So I see it as a potential opportunity, someone who will get a firsthand look into what we're doing.

[Gregory Lewis, analyst]

And then -- congratulations on getting that bolt-on work on the Globetrotter rigs. It was a good update to see. But as kind of we look out in '24, and really all signs point to a definite pickup in acceleration, but maybe some of the work that's kind of being out there doesn't start up until mid '24. Any kind of rough way to think about, or maybe handicap, as we see some rigs roll off contract over the next 1, 2 quarters? Any kind of rough way to think about idle time in between contracts? I'm kind of curious if you have any thoughts around that.

[Blake Denton, executive]

Yes. It's Blake. So maybe the best way would be to walk through a couple of the rollovers. And so, if I start with the floaters, and you look at the rigs that have options, the Stanley LaFosse here in the Gulf of Mexico, working for Murphy, we feel good about the prospect of continuing to serve their drilling needs, so not expecting an interruption in service there.Gerry De Souza is a similar story there for TotalEnergies in -- at Nigeria. We don't want to opine on what their decision will be around that option, but the election is this quarter.We know they have work there, and we believe we're performing well for them, so we like the prospect there as well. So then when you look out toward the Voyager and the Valiant, pleased to announce the contract we got with LLOG on the Voyager that will start around about the turn of the year. And then there's options on the back end of that that, if exercised, would take it through the end of the year, so feeling pretty good about the Voyager -- or sorry, feeling pretty good about the Valiant.The Voyager is available for 2024. It's wrapping up a program right now, mobilizing back to the Americas. And I guess we would expect with the ongoing dialogue some work that would pick up in the first quarter of next year. The other thing to think about when we're looking at that rig class is there's roughly 30% of the forecasted UDW demand next year that still remains to be contracted. So there's some awards we think, as Robert outlaid in his prepared remarks, some awards we expect in the fourth quarter that will provide some more visibility. Yes. The only last point I would say, and it's again on the back of Robert's prepared comments, on the Globetrotters and the de-rigs [Technical Difficulty]

[Operator]

Your next question comes from David Smith with Pickering Energy Partners. David, your line is open. And our final question comes from [Pello Bilbao ] with Clarksons Security.[Technical Difficulty]

[Operator]

And for our audience, please stand by. Our speakers are dialing back in. Thank you so much. Yes, thank you. And your next question comes from [ Pelle Bilbao ] with Clarksons Security.

[Unknown Analyst]

Congratulations on a stellar quarter. I guess most of my questions have been answered already. So, I'm left with the final one on my list here. And I appreciate that you did touch upon this during the prepared remarks as well, that my question relates to the North Sea market and particularly the harsh environment jackup fleet. I guess, we touch upon this topic every single time we have these calls. But it would be really great if you could give some more color on what opportunities you see going forward for the region. At least on our part, where we're sitting here in Norway, we see some signs with emphasis on some of increasing activity in 2024 and some more in 2025. But an additional color on your end would be really great.

[Robert Eifler, executive]

I guess I'll jump right on the back of your last statement in that we do see some signs of increased activity, increased dialogue. I think most of those for Norway are more 2025-related than 2024. We do believe the next demand goes to us. The CJ70s are the most well-suited to compete in the competition zone there in Norway. There's also the potential upside of incremental production that could come from infill drilling, if there was any sort of gas shortage, whether that's a regional event or a global event. So, there's a little bit of upside, I don't think there's firm demand yet to declare 2025. It's going to explode there in Norway from a demand perspective. But the dialogue is encouraging.In the non-Norway space, a little bit more positive in terms of the nature of the conversations that we're having with our customers there. And, of course, we've got the Intrepid that will be locked up all of next year. The capacity is really limited for 2024 to the Interceptor now. And we'd like the capability of the rig if that demand comes to pass or if unexpected demand comes to the market.

[Operator]

Your next question comes from David Smith with Pickering Energy Partners.

[David Smith, analyst]

Can you hear me okay?

[Robert Eifler, executive]

Yes, we can hear you. Sorry. There were some technical issues there.

[David Smith, analyst]

Good deal. Kudos on the quarter, and especially the dividend increase. That's just great leadership on the shareholder return front. I did want to revisit your comments about the sidelined ultra-deep water capacity. You referenced the number of rigs added over the past year, whether reactivations or previously stranded new builds, and we've seen they can make very solid returns with term duration at rates below leading edge. But I wanted to ask your thoughts about the remaining sidelined capacity, maybe how many high-spec drillships you think might still be brought out at rates in the low 400s.

[Robert Eifler, executive]

Yes, I mean, I think, look, there's a small handful. It's 4 to 6, that kind of range. From there, you start to have, I think, some concessions on marketability, and you start to get into, it's all a fighting scale here, but you start to get, in our opinion, a little bit closer to 6th generation territory, where the rigs might be missing one of the critical components defining a 7th generation. In certain instances, of course, we don't really know. Not many of them, or most of them, are not our rigs, but could perhaps have some higher reactivation costs from their stacking status, et cetera.

[David Smith, analyst]

Great. We were coming up with 5 rigs, so really happy to hear your answer. Just a little bit of a housekeeping question. I think you're still managing the former Lloyd Noble, and just wanted to ask if so, maybe how much that contributed to Q3 costs, and really, how much longer do you expect Noble to manage that rig?

[Robert Eifler, executive]

Yes, Dave. I think that was part of the beat from a top-line perspective in Q3. We are continuing to manage the CJ70 in North Sea. I think our expectation is that that will continue through mid-part of this quarter. But you're right as well. If you strip that out, I think from a cost perspective, I think it was a very nice beat in Q3. I also think, as you look at the operational performance in Q3 and the uptime, I think that that was obviously a big, big component of the beat as well.

[David Smith, analyst]

Good deal. I appreciate that. If I can get greedy and sneak one more in, I recognize your semis aren't harsh environment, but they're certainly very high-spec. I wanted to ask if there's any reason they wouldn't be competitive for some of the regions, we've seen the Norwegian semis pulled to right outside of the North Sea, specifically Namibia.

[Robert Eifler, executive]

Yes, look, those are some of the most capable semis in the world. As you said, they're not harsh environments, so they're not going to go to the extreme cold-weather environments. But in regions where they can -- where semis is preferred, generally, they compete very well. They can get -- I guess, I would offer they are generally, because they're more to NDP, they can compete down into relatively shallower waters. Many semis compete a little bit less favorably in the deeper water you get, because upwards in 10,000-foot kind of range, you start to have some weight limitations that are specific to semisubmersibles and less so to drillships. So look -- like we've said before, those rigs, when they're operating in their specific niches, are going to compete very much on a 7th generation level. And when up against an alternative in a drillship or for whatever other reason, they may have some concession on their operation. They're going to compete more like a 6th-generation rig.

[Operator]

And there are no further questions at this time. Ian Macpherson, I will turn the call back over to you for closing remarks.

[Ian MacPherson, executive]

Thank you, everyone, for sticking with us through the technical difficulty there. And thanks for dialing in today. We look forward to speaking with you again next quarter. Have a great day.

[Operator]

And this concludes today's conference. You may now disconnect.