Noble Corp (Cayman Island)
NYSE:NE
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
28.84
51.06
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
Noble Corp (Cayman Island)
You don't have any saved screeners yet
Good morning. My name is Kim, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Noble Corporation Fourth Quarter 2017 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.
Thank you. Jeff Chastain, Noble Corporation's Vice President of Investor Relations. Please go ahead, sir.
Okay. Thank you, Kim, and welcome, everyone, to Noble Corporation's fourth quarter and full year 2017 earnings conference call. We appreciate your interest in the company. In case you missed it, a copy of Noble's earnings report issued last evening along with the supporting statements and schedules can be found on the Noble website and, again, that's noblecorp.com.
Before I turn the call over to Julie Robertson, I'd like to remind everyone that we may make statements about our operations, opportunities, plans, operational or financial performance, the drilling business, or other matters that are not historical facts and are forward-looking statements that are subject to certain risks and uncertainties.
Our filings with the U.S. Securities and Exchange Commission, which are posted on our website, discuss the risks and uncertainties in our business and industry and the various factors that could keep outcomes of any forward-looking statements from being realized, including the price of oil and gas, customer demand, operational and other risks. Our actual results could 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 in the call today. You will find the required supplemental disclosure for these measures, including the most directly comparable GAAP measure and an associated reconciliation, on our website. And, finally, consistent with our quarterly disclosure practices, once our call has concluded, we will post to our website a summary of the financial guidance covered on today's call. And this will include first quarter and full-year 2018 figures.
Now, with that, I'll turn the call over to Julie Robertson, Chairman, President and Chief Executive of Noble.
Thank you, Jeff, and good morning, everyone. It's a pleasure to review fourth quarter and full year 2017 results with you this morning. And I want to begin by welcoming you and thanking you for your interest in and support of Noble. I've been fortunate to meet many of you at one time or another during my years at Noble and I look forward to meeting many more of you in the weeks and months ahead.
Frank and open dialog with access to our leadership team remains an important value in our investor outreach. Before making my prepared comments, I want to introduce the members of the Noble management team participating on today's call. In addition to Jeff, I'm joined by Adam Peakes, our Senior Vice President and Chief Financial Officer; Robert Eifler, Vice President and General Manager of Marketing and Contracts; Bernie Wolford, Senior Vice President of Operations.
In keeping with our best past practice, after I provide some opening comments, Adam will cover the financial review, which includes our initial comments on 2018 guidance and Robert will follow with some color on the offshore market and an update on the Noble fleet. I will then close with some final thoughts that include 2018 priorities. The five of us will be available at the end to address your questions.
Despite a challenging industry backdrop, it's clear we did a number of things well in 2017. But before we get into that, I first want to express my appreciation and gratitude for the dedication and commitment shown by our rig crews and our global shore-based personnel for all they do.
From an operating perspective, in 2017, we established a record low for total fleet downtime at 3.2%. You'll recall that we began the year with a 4% expectation for fleet downtime and you would have to go back more than 20 years to a period before we began operating floating rate to find a better annual result. Also, we posted an outstanding safety performance for the year with a record low for Total Recordable Incident Rate, which was 32% better than the industry average reported by the International Association of Drilling Contractors.
Our 2017 contract drilling services cost, aligned with reduced industry activity, declining 27% compared to cost in 2016, while helping to maintain contract drilling services margins at an adjusted 46%. We also took steps to structurally address rig operating costs and efficiencies through the cycle. For example, a new partnership with GE Marine utilizes the data analytics system to enhance rig operational productivity. This Digital Rig solution will be fully functional in 2018 on four Noble rigs and our expectation is to reduce annual repair maintenance cost related to target rig equipment by 20%.
From a marketing perspective, we added approximately $855 million of backlog over 2017 in a highly competitive environment ending the year with a total contract backlog that was only modestly lower than the total at the end of 2016 for approximately $3 billion. We clearly benefited from our established presence in the important offshore regions, such as the Middle East, North Sea and the U.S. Gulf of Mexico. Our fleet continued to perform at an exemplary level in each of these regions and Robert will have more to say about this in a moment.
Finally, from a financial perspective, just before the close of 2017 and with strong support from our banking partners, we negotiated a new five-year unsecured revolving credit facility with a maturity in early 2023. This important transaction, together with a highly successful issue of senior guaranteed notes and a concurrent tender offering early 2018, create a significant new financial flexibility for Noble through 2023.
When each of the accomplishments I've noted this morning are taken into account, 2017 was actually a very successful year. Our operational, marketing, and financial achievements reinforced Noble's history of strong, efficient and safe operations as well as a sound financial strategy. Together, they serve to enhance our competitive position as we enter 2018.
With that, I'll turn the call over to Adam for a more detailed financial discussion.
Thank you, Julie, and good morning to all. I also want to express my congratulations and my appreciation to our global workforce for their excellent performance in 2017. I'll begin this morning by expanding on some of the important operational and financial points noted by Julie. We reported total fleet downtime for the year of 3.2% compared to 4.3% in 2016, representing the third consecutive year of improvement and the lowest annual downtime result in almost two decades.
Said another way, our revenue efficiency for 2017 was very strong at 98.6%. Also contract drilling services costs declined 27% from 2016 costs, as we remain vigilant in our efforts to align these costs with prevailing industry activity levels. It is also worth noting that capital expenditures of $111 million continued an annual decline following the timely conclusion of our newbuild projects, helping to secure another year of strong free cash flow generation of just under $240 million before principal debt repayments.
And, finally, we maintained a comfortable level of liquidity, closing the year at approximately $2.5 billion, including cash of over $660 million. With regard to our liquidity, in December 2017, we announced a new five-year $1.5 billion unsecured revolving credit facility. I'll cover this development in more detail in a moment.
In early 2018, we completed a $750 million senior guaranteed notes offering and a concurrent tender transaction. These important financial initiatives reinforce our strong liquidity position going forward by significantly reducing annual debt maturities over the next five years. I'll provide further details on all of these points in a moment after a review of the fourth quarter results we issued yesterday afternoon. I'll also offer you some color on the net favorable items in the quarter in addition to an explanation of certain line items on the P&L that fell outside of our previously issued guidance range.
And before turning the call over to Robert, I'll close with some initial thoughts on financial guidance for 2018. For the fourth quarter of 2017, Noble reported a net loss attributable to the company of $25 million or $0.10 per diluted share on revenues of $330 million. Including these results were net favorable items totaling $47 million or $0.19 per diluted share. These items consisted of the following: two payments totaling $38 million accounted for in contract drilling services revenues; one payment totaled $25 million and pertained to the recovery of certain cost increases covering 24 months of operation on the Noble Bully II.
Essentially higher contract drilling services costs were being reflected over the 24-month period with no revenue offset. Given the 50%/50% JV structure, the impact of the payment on Noble's results was $12 million or $0.05 per diluted share stated as an after-tax and net of noncontrolling Interests. The second payment represented a residual payment totaling $13 million or $9 million after taxes amounting to $0.04 per diluted share and resulting from the final settlement of a 2013 contract with a customer.
Also, we recognized a non-cash gain totaling $121 million or $0.49 per diluted share, driven largely by a recalculation of deferred taxes following changes to various parts of the U.S. federal income tax law, including the reduction of the corporate tax rate from 35% to 21%. This non-cash gain also included a discrete tax item resulting from additional steps taken in support of internal reorganization efforts.
Partially offsetting the payments to Noble and the non-cash gains was a non-cash pre-tax charge of $122 million or when stated on an after-tax basis $95 million or $0.39 per diluted share relating to the impairment of three rigs and certain capital spares. These rig impairments pertain to the semisubmersible Noble Amos Runner and jackups, Noble Alan Hay and Noble David Tinsley. Excluding these three items, Noble's adjusted net loss attributable to the company would have been $72 million or $0.29 per diluted share on revenues of $292 million.
For your convenience, a non-GAAP supporting schedule was included with our press release. It can also be found on the Noble website at noblecorp.com. The schedule provides a reconciliation of net income or loss attributable to Noble Corporation as well as income tax and diluted earnings per share for the fourth quarter of 2017 as compared to the fourth quarter of 2016. It also presents a full year comparison of 2017 to 2016.
Contract drilling services revenue in the fourth quarter were $321 million or $283 million, excluding the $38 million in payments from customers. This 9% improvement when compared to third quarter revenues of $260 million was attributable to the floating rig fleet with the drillships, Noble Globetrotter II and Noble Bob Douglas, experiencing an increase in operating days and average daily revenues. The improvement was partially offset by fewer operating days recording in the jackup fleet due largely to the completion of contracts on the Noble Mick O'Brien and Noble Houston Colbert.
Contract drilling services costs in the fourth quarter were $153 million compared to $165 billion in the third quarter. Recall third quarter cost included a charge of $14 million relating to damage to two rigs following Hurricane Harvey. Excluding this charge, third quarter contract drilling costs were $151 million. The modest cost increase in the quarter was due generally to higher activity in the floating fleet. Our success in managing costs together with excellent contract coverage contributed to a contract drilling margin in the fourth quarter of 52% or 46%, excluding the noted payments.
EBITDA in the fourth quarter was $150 million bringing the total for 2017 to $506 million. With regard to fourth quarter guidance, SG&A and noncontrolling interests were the only P&L statement line items that fell outside the guidance ranges we provided in November. SG&A expenses were $22 million compared to guidance of $15 million to $18 million and this increase was due primarily to higher professional fees.
The noncontrolling interest line, which totaled $12 million of income, exceeded guidance of $2 million of income due to the previously noted payments from Shell relating to the recovery of certain costs on the Noble Bully II. Our fourth quarter effective tax rate was favorably influenced by the recalculation of our deferred tax liabilities following the U.S. tax reform and consequent reduction in the corporate tax rate.
Excluding the $121 million in tax related benefits and the previously noted charges due to asset impairments and payments related to the Noble Bully II and the 2013 contract settlement, our effective tax benefit in the fourth quarter would have been 25%. I will have more to say on tax reform and its expected impact on our effective tax rate during my review of 2018 guidance.
Fourth quarter capital expenditures of $37 million exceeded our guidance of $27 million to $31 million due primarily to reactivation of the semisubmersible Noble Clyde Boudreaux in advance of an expected April 2018 contract commencement offshore Myanmar. Capital expenditures for the year totaled $111 million.
Before I begin a review of 2018 financial guidance, I want to comment on our liquidity and debt positions in light of the recently completed transactions that I noted earlier. With a December 2017 extension of our credit facility, Noble now has borrowing capacity totaling $1.5 billion into January 2023. In addition, we retained $300 million of borrowing capacity under our previous credit facility resulting in total revolver capacity of $1.8 billion into January of 2020. There are no outstanding draws on these facilities.
Total liquidity at December 31, 2017, was $2.5 billion, including a cash and cash equivalent balance of $663 million. We closed 2017 with total debt of $4 billion and that amount was virtually unchanged following the January 2018 issue of $750 million in senior guaranteed notes and the concurrent tender for $750 million of outstanding notes maturing between 2018 and 2024. These transactions enabled us to reduce our aggregate debt maturing through 2022 to approximately $391 million. This is almost a 60% reduction when compared to the $952 million outstanding before the transactions took place.
Earlier this week, we completed the additional step of redeeming the $61.9 million of 2019 notes that remained outstanding after completing the tender offer. I view these transactions as highly successful steps for Noble. The debt issuance and tender transaction in combination with the credit facility extension significantly improved our go-forward liquidity position and expanded our financial flexibility.
I'll now cover our guidance for the full year and first quarter of 2018 beginning with fleet downtime. We begin 2018 with a downtime expectation of only 4%. This outlook reflects the premium nature of our fleet as well as rig reactivations, including that of the Noble Clyde Boudreaux and other possibilities as market opportunities improve.
Contract drilling services costs in 2018 are expected to fall in a range of $625 million to $640 million. Contract drilling costs in 2017 were $612 million before the addition of $28 million in costs resulting from hurricane damage and the write-off of an uncollected receivable relating to a 2010 claim while working in Mexico. The modestly higher cost guidance for 2018 is due primarily to fleet mix, specifically a higher percentage of contribution coming from our floating fleet and to the commencement of operations on the Noble Clyde Boudreaux.
Client reimbursables for 2018 are expected to fall within a range of $16 million to $20 million resulting in total operating costs in 2018 between $641 million and $660 million. Contract drilling services costs in the first quarter are expected to range between $145 million and $152 million compared to $153 million of cost in the fourth quarter of 2017.
The number of operating days in the first quarter are expected to be at the lowest point for the year with four rigs, the jackup, Noble Houston Colbert, Noble Hans Deul and Noble Tom Prosser, and the semisubmersible, Noble Clyde Boudreaux, each missing all or a portion of the quarter while preparing to commence contracts beginning later in the first quarter or during the second quarter.
Costs associated with client reimbursables are expected to be in a range of $4 million to $5 million in the first quarter. DD&A expense in 2018 is expected to fall in a range from $520 million to $535 million compared to $548 million in 2017. The decline is due to asset impairments taken in 2017. DD&A in the first quarter is expected to range from $130 million to $135 million.
SG&A expense in 2018 is expected to fall between $73 million and $78 million compared to $72 million in 2017 with the difference primarily driven by higher professional fees and a payment related to the retirement of Mr. Williams, the company's previous Chief Executive Officer. First quarter SG&A expenses are expected to total approximately $20 million to $22 million.
Our full year guidance range for interest expense is between $300 million to $305 million with the range for the first quarter projected at $75 million to $77 million. This expectation includes the impact of our recent notes transaction and tender. Noncontrolling interests on our P&L representing the Bully I and Bully II 50%/50% joint ventures with Shell is expected to range from $6 million to $10 million of income to Noble in 2018, with the line item expected to reflect income to Noble of approximately $2 million for the first quarter.
Capital expenditure in 2018 are expected to total approximately $150 million, with approximately $85 million of the total devoted to sustaining capital requirements. This estimate compares to $111 million of capital expenditures in 2017. The increase is primarily driven by the reactivation of the Noble Clyde Boudreaux and spending around the purchase of a managed pressure drilling system.
With regard to the Clyde Boudreaux reactivation, we plan to spend an estimated $30 million to reactivate the rig. This number includes related crew costs, upgrades to the drilling control system and reactivation of the rigs dual activity capability. Approximately $10 million of this amount was spent in the fourth quarter of 2017 with a balance of $20 million being included in our 2018 capital expenditure outlook. An estimated $49 million of spending is expected for the first quarter.
Finally, I want to clarify the expected impact of tax reform on our taxes and effective tax rate in 2018. There are aspects of U.S. tax reform that are expected to result in increased limitations on certain deductions. These include limitations on interest expense deductibility and the elimination of the U.S. federal income tax carryback provisions for net operating losses generated after 2017. Implementation of these provisions in 2018 is expected to result in an effective tax rate of 4% to 6%. The post-reform environment is not expected to change our cash tax exposure, however, with any cash taxes paid limited to international operations.
In summary, our financial results in 2017 were clearly impacted by the reduced offshore activities seen industry-wide. However, we successfully managed numerous challenges and exited the year with obvious momentum. Superior operational performance, successful cost management efforts, and a strong contract backlog are clear attributes of Noble. These achievements, combined with our new credit facility and the refinancing of debt maturities, give us a firm base from which to perform as we begin 2018.
I'll now turn the call over to Robert for an overview of the offshore market and an update on the Noble fleet.
Thank you, Adam, and good morning to everyone. We completed another challenging year in 2017 with excellent contracting performance booking $855 million in new contracts, as Julie mentioned previously. The contracts we secured in the fourth quarter have provided a positive start to 2018. And although challenges will persist in our industry, we believe that a broader recovery will become increasingly evident during the year.
Today, I'll expand on our recent contract awards, address the outlook for those rigs in our fleet with current availability and offer a perspective on the offshore market with comments on regional activity. Our contracting successes in the fourth quarter of 2017 and into the early part of 2018 provided further diversification of our customer base and expanded our geographic footprint.
The awards included, in the Eastern Hemisphere, the high-specification jackup, Noble Tom Prosser, with a drilling assignment offshore East Timor with ConocoPhillips. The rig is expected to begin the estimated 200-day program early in the second quarter of 2018 and we'll position the rig well to compete for follow-on work in Australia and elsewhere in the region. This rig, along with other units in our JU-3000N class of jackups, has distinguished itself in the market through operating efficiency, solid uptime and safety performance.
In the North Sea, the jackup, Noble Hans Deul, which was named Shell's Rig of the Year on three occasions during its highly successful campaign on the technically challenging Shearwater platform, will begin a new contract with Spirit Energy, also in the North Sea. The contract is expected to commence in early April 2018 with an expected completion in October. The rig's strong operating history, HPHT experience and safety performance have generated notable demand among North Sea customers. And we remain confident about securing follow-on drilling assignments.
Also, as we confirmed in last week's fleet status update and as Adam noted in his comments, the Noble Clyde Boudreau is expected to commence operations offshore Myanmar in Southeast Asia in April 2018 with our customer, PTTEP. The primary term of the contract is a minimum of 200 days. But we currently expect the rig to be under contract through the remainder of 2018 and possibly beyond.
While we are not disclosing the dayrate for competitive reasons, the contract is cash flow positive and contributes toward the reactivation and upgrade costs. We anticipate demand to continue to emerge for drilling programs requiring conventionally moored semisubmersible units and believe that the Noble Clyde Boudreaux's dual-derrick 16-point mooring system, large deck area and modern drilling control system offer compelling value to the market.
In addition to these new contract awards, the jackups, Noble Houston Colbert and Noble Regina Allen, have recently commenced operations on previously announced programs. Following a brief idle period, the Houston Colbert commenced operations in early February 2018, offshore the state of Qatar. Noble has a strong legacy of successful operations in Qatar and this latest contract is expected to keep the rig employed into the first quarter of 2019.
In mid-December 2017, the Noble Regina Allen commenced an estimated two-year project offshore Nova Scotia and Eastern Canada with ExxonMobil. The rig completed a successful rig upgrade and started the project ahead of schedule and we are proud to be executing this important P&A program for Exxon.
Continuing in the Western Hemisphere, the drillship, Noble Bob Douglas, secured additional contract days in the Gulf of Mexico with a one well contract from ExxonMobil that concluded in November 2017. The rig is currently completing maintenance programs before an expected March 2018 departure for Guyana. We expect the rig to commence its three-year primary term on Phase 1 of ExxonMobil's Liza development in early April 2018.
And, finally, the semisubmersible, Noble Paul Romano, earned yet another extension from our client, Hess, which will keep the rig working in the U.S. Gulf of Mexico through the first quarter of 2018 and possibly longer. According to IHS, the rig is one of only three conventionally moored, semisubmersibles that have remained active in the U.S. Gulf through the prolonged downturn, which places the rig in a strong competitive position for a growing set of opportunities in and around the region.
As we continue to manage through this challenging phase of the business cycle, we maintain our positive tenet with regard to improving market fundamentals and growing prospects for the six- warm stacked rigs in our fleet. Our two warm stacked JU-3000N class jackups, the Noble Sam Hartley and the Noble Mick O'Brien, are strategically placed in Southeast Asia and the Middle East respectively.
As you will see in my later comments, we continue to see opportunities for these high specification jackups throughout the Eastern Hemisphere in the current year and beyond. Considering the excellent performance by both of these assets during the recent drilling assignments, we're confident that their reputations will enhance our ability to secure contracts on the rigs. Having performed efficiently and safely in harsh environments on HPHT programs and in numerous varied regions worldwide, the JU-3000N class rig has built an impressive resume since the first unit was delivered in 2013.
On the floating side, we continue to evaluate opportunities for the Noble Tom Madden and Noble Sam Croft and remain optimistic that at least one of the units will find work in 2018. Both of these high specification drillships have efficient operating systems, successful performance histories and minimal reactivation requirements, all of which our customers appreciate and in fact require in many cases.
Our marketing efforts are strengthened by the state-of-the-art training facilities in NobleAdvances Center. At this facility, we work with our customers to preplan operations, drill difficult well sections on simulator, practice emergency management with the client and enhance crew familiarization. We have received overwhelmingly positive feedback from customers who have taken advantage of the facility and are confident that it provides an advantage for both rig start-ups and transitions between clients.
The drillship, Noble Globetrotter II, which completed a drilling program offshore Bulgaria in January 2018 is currently warm stacked in the region and is well-positioned to compete for several known opportunities in the Black Sea. The rig continues to earn a dayrate of $185,000 per day while idle. Lastly, the drillship, Noble Bully II, is currently completing a maintenance program ahead of an expected return to work later this year with our joint venture partner, Shell.
Noble and Shell are currently in discussions that should lead to improved clarity on the rigs return to active status and we will provide an update once the process is complete. The rig will continue to receive a dayrate of no less than $200,000 per day up to its return to service. I now want to review regional markets and breakdown the opportunities for increased offshore activity. I'll start in the Western Hemisphere beginning with Brazil.
As we have highlighted before, regulatory developments in Brazil are allowing greater operational participation by international oil companies as evidenced by the high level of interest in the pre-salt leasing round held in October 2017 and the post-salt round in September. Noble has a long history in Brazil and we are hopeful to use our operating knowledge, local expertise and established infrastructure to return to the region.
Also, Guyana continues to attract attention due to its rapidly growing resource potential. ExxonMobil continues to have exploration success in the region with six substantial discoveries announced thus far. We expect additional development opportunities to emerge both with ExxonMobil and other operators and there is also continued interest in neighboring Suriname where additional exploration is planned for 2018.
Further north, market interest in Mexico continues to intensify following the country's second deepwater leasing round, 2.4, where 19 blocks were awarded. Strong operator interest in the round increasingly establishes the deepwater resource potential in Mexico as another significant global exploration play in the Western Hemisphere. The country's third shallow-water licensing round, known as 3.1 with 35 blocks up for bid is scheduled for late March 2018 and we expect substantial interest due to recent exploration successes.
In the U.S. Gulf of Mexico, we expect to see stability or possibly a modest increase in floater demand this year as certain operators carry out exploration and other development opportunities. The fourth quarter of 2017 resulted in an increase in fixtures compared to the previous two quarters. While most programs have been shorter in nature, we believe rig demand in the region could improve rapidly as an offshore recovery is established. The region boasts plentiful infrastructure, ample labor and accommodating business climate and an excellent resource base. And we're encouraged both by recently announced deepwater discoveries and by the exploration wells on the slate for 2018.
Moving to the Eastern Hemisphere, rig needs in the Asia-Pacific region improved during 2017 and we see additional potential in Australia and throughout Southeast Asia. Standard specification jackup rates will remain competitive but wells requiring HPHT experience and Australian safety case or robust leg strength will continue to provide niche opportunity.
As we have mentioned already, the outlook for moored semisubmersible units is positive. The Middle East remains resilient as demonstrated by the region's ability to maintain marketed utilization of 70% through all of 2017 despite an influx of rigs. Operators in the region are seeking long-term contract durations, which we believe indicates a growing belief that recovery is on the horizon. Demand in 2018 could increase by as many as 20 rigs, driven primarily by requirements in Saudi Arabia, the UAE, Iran and Qatar.
Finally, the North Sea jackup market experienced a flurry of activity in the fourth quarter with multiple new tenders for programs in 2018 and 2019. While the majority of the opportunities are shorter in duration, improvement in the region is likely. We are pleased to see the increase in operator interest generally but are especially encouraged that operators are seeking to secure jackup rigs for work starting more than a year out.
In closing, the outlook for offshore drilling is improving. Reserve replacement among oil companies has remained depressed and our recent industry report concluded that the discovered reserves in 2017 were the lowest since the 1940s. This is an unsustainable investment model for the long-term and it is our belief that operators will increasingly refocus attention on the substantial opportunities that can be found offshore.
Recent commentary from some of the largest operators supports this claim. If our customers are to grow production and then replace or expand their reserve bases, spending will inevitably return to the offshore sector and we believe this transition is poised to occur sooner rather than later.
That concludes my comments and I will now turn the call back over to Julie.
Thank you, Robert. I want to close my prepared comments this morning by highlighting our belief that there are now more visible and encouraging signs pointing to industry improvement than we have seen since 2014.
Crude prices, which remain volatile, have shown meaningful appreciation since 2017. This price improvement, together with the significant progress our customers have made in reducing offshore project costs, are in part responsible for a growing number of offshore opportunities as project planning intensifies and new programs commence. As Robert noted, we're witnessing an increase in jackup rig requirements in the North Sea, Middle East and Asia while in the floating rig fleet, growing opportunities are apparent in the Gulf of Mexico, South America, and Africa.
At the same time, we see access improving for promising offshore operating areas around the globe which represent longer-term opportunities. Although the market for offshore rigs remains highly competitive, we're confident that a demonstrated preference by customers for premium, high specification jackups and floating rigs with proven performance records and experienced and highly qualified crews will continue and lead to improving opportunities in 2018. These same operational qualities were key factors when in 2017 ExxonMobil selected our drillship, the Noble Bob Douglas, to provide drilling services on their Liza project offshore Guyana where we expect a successful start-up in April.
As you might expect, our priorities in 2018 start with remaining true to what we do best, continuation of strong operational execution. Improving rig operational efficiency will remain our focus as we further evaluate new processes and procedures. In addition, we will focus on penetrating some of the emerging regions I mentioned a moment ago where we see exceptional resource potential and high customer interest.
Finally, we will maintain our long-standing focus on strong financial discipline. In support of this priority, our new five-year credit facility and the reduction in debt maturities over the next five years have enhanced what was already a robust and comfortable liquidity position. A firm foundation for growth is in place at Noble supported by our demonstrated excellence in all phases of our business: operations, commercial and technical, safety, environmental, and financial. For all the reasons noted today, we believe Noble represents a compelling opportunity for increased shareholder value as the offshore industry approaches its next period of growth.
Thank you again for your participation this morning and your continued interest in Noble. I will now turn the call back over to Jeff.
Okay, Julie, thank you. Kim, let's go ahead and begin the Q&A segment of the call. So if you'll assemble the queue, we'll take the first question and we'll take questions up to the top of the hour.
Thank you. Your first question comes from the line of Sean Meakim with JPMorgan. Your line is open.
Thank you. Good morning.
Good morning, Sean.
So, I appreciate all the detail around the fleet. I guess we've been just trying to think about the Croft and the Madden and the opportunities that we have out there. Just could you give us a sense of the minimum tender duration that you'd be willing to bid for those two rigs specifically? And I guess I'm just curious if that changes if you're looking at tenders outside of the Gulf of Mexico.
Sure. Yeah. Sean, this is Robert. So, we kept those rigs warm stacked for a reason. We can get them back into the market quickly and for a lower cost than had we cold stacked them. So that reduces any sort of minimum term that we would consider. I would say that we probably look at follow-on opportunities as much as we look at initial term for those units.
As we mentioned in the script, we are hopeful about the future of that market going forward and there are a number of opportunities out there, mostly short-term today, but also with some longer-term opportunities emerging that we think would be good fits for the rigs. And to your second question, there's work both in the U.S. Gulf of Mexico, but also internationally and we're looking at all of it.
Okay, so pretty good flexibility for those, but then I guess if we contrast that with some of the cold stacked semis, like if you look at the Jim Day and the Danny Adkins, I guess, what's the framework that you think about reactivation and upgrades in order to put those rigs back to work?
So, those rigs have a future we believe. They have a rather unique drilling platform. They're extremely large and they can offer a few things to the market that's a bit different than some of the competition. We've looked at adding mooring systems to the rigs. And I think we've said before that we see certain regions that are a bit more semisubmersible-friendly as being some primary targets. So, we're continuing to evaluate opportunities. We have bid those rigs and we'll just have to wait to see what the future holds.
Hey, Sean. It's Adam. And I'd just add a few thoughts to the answer. I mean, it is clearly fair to say that the Day and Adkins are farther back in the queue. And as you think about requirements to bring those back out, any rig that's going to be forced to have a reactivation spend in the tens of millions of dollars, you start becoming a lot more focused on what that initial contract looks like and how you recapture that spend. As Robert mentioned, the fortunate thing about the Madden and Croft is we don't have much in the way of incremental start-up expense or capital that goes into those.
So those are a little bit unique animal. But even as we talk about the Boudreaux, there was some spend there to bring it out and we're very pleased with the contract and the work we have initially. But as much as anything, that's a statement on our belief and conviction that there's work thereafter. And so you think about the spectrum. I mean the Day and the Adkins, we absolutely believe there's work out there, but we're going to be even more disciplined just given the reactivation spend that would be required there.
Got it. Okay. Great. Thank you for that feedback.
Thank you. And your next question comes from the line of Haithum Nokta with Clarksons Platou. Your line is open.
Hi. Good morning.
Morning, Haithum.
I'll ask Sean's question on the drillships maybe kind of the opposite spectrum. You have the Croft and the Madden and you also have the Don Taylor coming available in about a year from now. Are you comfortable taking long-term contracts as well or kind of can you just shed a little bit of light of how you're thinking about securing longer-term backlog at this point as we're looking towards the recovery?
Haithum, I'll start and then turn it over to Robert. As you know, we've always seen our structure as a latter process. We try to have some things on long-term, some contract short-term, obviously, in order to take advantage of the uptick in the market. I think we see the Don Taylor the same way and you will see what comes available for it. We'll see what comes available for it. And so we'll look at opportunities in. But I mean we're open to both. Obviously, we do see the trend up in the market. So it's a – presents a different valuation for us, which is a nice thing to have. But we'll continue to manage our contracts as we have in the past and layer them in appropriately. Robert, do you want to add to that?
Yeah. I'd say I think we're probably – in terms of where we are on the cycle, I think, we're probably at a point on the jackups where we are managing the term a bit more than we are in drillships right now. So what Julie said is absolutely correct. We would take long-term contract on the floaters where one presents itself presently and, as I mentioned before too, evaluating some shorter-term opportunities as well.
Great. Thanks for that. And I guess curious on the cost guidance that you provided for the year. Does that contemplate reactivation of either of the Croft or the Madden or is that kind of with the jackups at full-ish operating cost and then the Clyde Boudreau working?
Haithum, it does include some days in the back half of the year from either the Madden or the Croft. So there is some built-in for one of those rigs working.
Okay. Great. Thank you. I'll turn it back.
Thank you. And your next question comes from the line of Gregory Lewis with Credit Suisse. Your line is open.
Yes. Thank you and good morning. And hey, Julie, congratulations and good luck.
Thank you, Gregory. I appreciate it.
I guess I have a big picture question. Over the last year, obviously there's been a lot going on in Noble. Noble's really hasn't come up much in terms of the M&A conversation that's been out in the marketplace. But I'm just kind of curious. As you think about the fleet, I mean, I don't think anyone argues the quality of the rigs whether they're jackups or floaters, but as we think about where Noble wants to be positioned as the cycle starts the turn, is the fleet of the appropriate size? Is there any area where maybe – do we need more jackups in the fleet? Do we need more floaters in the fleet? Just kind of curious how you think about Noble's fleet position in terms of size.
Okay. Thanks. I'll start and then ask others to add in their comments. We do think that our fleet is of a respectable size. We think it's of an appropriate size right now and certainly the quality to your point we agree with you on. As you know, we believe in a balanced fleet and always have in terms of jackups and floaters and we continue to see the market that way. So that will continue to be our focus going forward. In regard to your initial comment about M&A activity, we are certainly open to M&A. We believe M&A is good for this industry and necessary for this industry and we think that we'll see more of it going forward.
But, again, it would need to be in line with our strategy, which, of course, is in regard to quality assets and high spec assets. So, as long as something would be along those lines, in a balanced fleet, then we would certainly be very open to it. But we think right now that our fleet is of a size that we can work with and we wouldn't want to get a lot smaller than we are right now, but we feel comfortable at this time. And I'll ask Adam or Rob...
Yeah. This is Adam. I don't have a whole lot to add. I mean I think Julie hit the nail on the head in terms of our approach. The one other piece of context I might offer is it's probably fair to say for the last year or so we've been a little more inwardly focused just making sure that we had our shipping order and we were shipping away some of the priorities on the balance sheet. But, as Julie mentioned, we're big believers in the benefits of consolidation. We think it makes sense.
We would like to participate in that if it makes sense for us strategically. We're in the fortunate position of we don't feel like we have to do something to improve our fleet or reposition the company. So we're going to be quite picky in terms of what makes strategic sense and make sure it's not something that is asset dilutive to what we're trying to accomplish. So we've been less vocal about it. We certainly want to look and try and see if there are opportunities to create value at this point in the cycle but we're absolutely going to be disciplined.
Okay. Great. Thank you for that. And then just my other question just, clearly, when Rob went through his prepared remarks about opportunities in Brazil, opportunities in other parts of the Golden Triangle, maybe West Africa, I mean I guess as we look at the fleet today, Noble's not in either of those markets. It has been in the past but is not. Does that put the company at all at a disadvantage in trying to get those initial contracts that surface in those markets, just trying to understand that a little bit better?
Okay. We don't see that it puts us at a disadvantage. We still have good contacts in those regions. As you've noted, we've worked in there previously for long periods of time and we maintain contact and we're bidding actively into all the Golden Triangle related markets. I'll ask Robert if he has anything to add.
No. I think that's right. I think we're comfortable in each of those markets and we're bidding in each of them.
Okay. Thank you very much.
Thank you, Gregory.
Thank you. And your next question comes from the line of Ian Macpherson with Simmons. Your line is open.
Thanks. Good morning and I'd also like to say congratulations, Julie, on your appointment and...
Thank you, Ian.
Yes. So I guess my first question is, well, there is a lot of information out there right now and it's mostly better news that demand is clicking globally. But there is also headwinds in the form of shorter backlogs, backlog exploration for the industry and we don't see the dayrates as much as we used to. And I wonder if you could help eliminate where we are with leading-edge dayrates for floaters and jackups as a broad proposition and if we could talk about both of them separately. Have leading-edge rates bottomed definitively?
Do you think maybe for some classes like the sixth and seventh gen drillships which some of your competitors have been more cautious about, that they actually are going to have to go a little bit lower to clear the market before they begin to march up? And then similarly in prior cycles, jackups have tightened and inflected a little bit earlier than floaters. Does that playbook apply again in this cycle or jackups and floaters are more on the same synchronization? So I know that it's several parts, but I think the question is pretty clear, if anyone out there, Robert or Julie, would like to address that. Thanks.
I'll start and quickly turn it over to Robert. First of all, your comment about backlog, as we mentioned at the beginning of the call, we've pretty much started 2018 with where our backlog was at the end of 2016. So, while we're burning through some of it, we're also replacing it, which we're very pleased about. So, we think we're in a very comfortable shape in terms of backlog. In terms of dayrates and bottoming out, they continue to be at a point where Noble is releasing the dayrates, granted, but we don't see them going particularly any lower as of right now. We haven't seen that in the market on either jackups necessarily or floaters, but I will turn over to Robert who can add more color.
So, I think – let me answer your second question, Ian. So, I think jackups have bottomed and the floaters we're still kind of trying to see. If you look at the jackup market, when utilization started its uptick and there was a lot at the end of the tunnel, so to speak, I think, you did see kind of a flurry of a bit more aggressive activity by contractors trying to secure work to bridge over into a better time. I think that's possible in the drillship market as it becomes more evident. But I would note that pricing there has been fairly stable for quite some time now. And I anticipate, in general, to see discipline in pricing through the industry.
Okay. Good. Thank you, both, for that. And then as my follow-up, assuming that we are getting into the stages of a reactivation cycle already with the Clyde Boudreaux and hopefully with the Croft and the Madden later this year, can you talk about the crewing up process? Are there challenges there? Are you finding it at this point easier to re-crew rigs than you have in prior reactivation cycles and at what point do you expect that to become a bottleneck?
Ian, I'll turn this over to Bernie to answer. But obviously we've preserved as many of our crews as we can. We've done a very good job at that. As you follow this industry for a long time, you know what we do. We bump people back to lower level positions in order to keep them and keep as many experienced people as we have. Right now, we believe we can crew up a number of additional rigs with experienced people who we've maintained in the fleet. We obviously maintain very good relationships with those who have had to be let go from the company, was with stacked rigs, but we believe we're in a very good position. But I'll ask Bernie to add some color to that.
Yeah. Thanks, Ian. As we stand today, we've got the capacity to crew up four rigs with critical skill positions. We need to operate those rigs at a high performance level. Backing that up, we have the NobleAdvances Center as well and a crew familiarization program. So if we had to start-up as many as four rigs over the next 60 to 90 days, we would not struggle with that. Longer-term if the market continues to improve, clearly, we'll have to make some investments in training and some expenditures prior the contract start to bring crews on board and get them up to speed. But right now that's not a challenge at all.
Okay. That's helpful. Thanks. And if I read between the lines, it does sound like the Boudreaux is a more expensive reactivation than you would anticipate for Croft or Madden. Is that correct?
Absolutely.
That's correct.
For the Croft and Madden, we're looking in the $10 million to $20 million at the very tops, really towards the lower end of that range. And so the Clyde Boudreaux represents a higher cost. Also, we're upgrading several features on the Clyde Boudreaux, reactivating the dual activity capability and installing a new cyber drilling system. So, the cost on the Clyde Boudreaux actually reflects some upgrades as well.
Got it. Okay. Thank you.
Thank you, Ian.
Thank you. And your next question comes from the line of Kurt Hallead with RBC. Your line is open.
Hi. Good morning.
Morning, Kurt.
Hey. Julie, I want to echo congrats as well. Well earned, for sure.
Thank you very much.
You're welcome.
Thank you.
You're welcome. So, I just wanted to get a general sense. I want to make sure I heard something correctly on the call. I think there was some reference to some operators looking to book rigs now for projects that start in 2019. So, I just want to make sure, if I heard that correctly, number one, and secondly, if I did hear correctly, was that for the deepwater market or jackup market or both?
You did hear that correctly. And well, I'll have Robert rephrase what he said earlier and we'll add some more detail to that.
Sure. That specific comment was in reference to the jackup market in the North Sea. So, we've seen several tenders already out this year for work that starts in 2019.
Okay. Okay. Great. So, second follow-up. I think if we rewind the clock, which I think most of us really don't want to do because it was a pretty nasty market environment for offshore drilling, whether it's comments that came out of today's call or some of your peers' call over the last week or so, just seems to me that we're starting to get more tangible evidence of a bona fide turn for offshore rig demand. So, Julie, given your experience in this business, how would you characterize the turn and how do you kind of see it playing out over the next 12 to 18 months?
Kurt, we agree that we don't want to turn the clock back and relive what we've had the last few years. But we do feel we do see a lot of optimism in the market right now. This is not going to take off like a hockey stick by any means. We think it will be slow and steady. But starting toward the end of last year, we did start seeing a lot of signs of improvement, a lot of bid activity, some longer-term contracts in certain markets, different markets opening up. The big lease sale in the Gulf; there's going to be a first lease sale offshore Peru and Argentina later this year. Lots of markets opening up that haven't been active in the last few years.
We think Brazil will be getting back to where they'll be contracting more rigs. As was mentioned earlier, West Africa has some activity that we haven't seen in a while. So everything is looking up. Everything's looking very positive. We're feeling very good about this market. But, again, I think it's going to be a slow, steady incline into that, but we certainly see the incline and certainly are very enthused about what we see ahead of us. And I'll ask anybody here to add in?
The only thing I would add very briefly is that all the forward indicators are up. So project sanctionings are up. Tenders doubled 2017 over 2016. All of that's very encouraging.
Great. Excellent. That's all from me. Appreciate the color. Thank you.
Thank you, Kurt.
Thank you. And your final question comes from the line of Diane Molterbagen with Arctic (54:59). Your line is open. Ms. Diane (55:07), your line is open.
Let's go to the next question, please.
Thank you. Your next question comes from the line of Howard Goldberg with Janney. Your line is open.
In your press release, you talk about the Noble Globetrotter II, which appears to have earned both an active and an idle dayrate in the fourth quarter. I was hoping if you could say whether that continues into 2018 and what the amount of that double benefit, if you will, helped you buy in Q4?
Robert, do you want to...?
Sure. So, we do get paid a standby rate of $185,000 per day for the underlying contract with Shell. Anything that we contract during 2018, we keep. We have not released what we were paid during the fourth quarter, so I apologize there. But I will say that we're happy with the work we secured in a relatively unique market and we're continuing to bid that rig for 2018 work in the Black Sea market and looking outside of it as well.
Okay. And one last one if I could squeeze it in, if you could say what the exact amount of the backlog was at year-end? I appreciate it. Thank you.
The backlog at year-end was about $3 billion.
Thanks.
Thank you.
Thank you. And we do have one final question from Haithum Nokta with Clarksons Platou. Your line is open.
Hi. Thanks for taking my follow-up. I wanted to actually just ask about the GE Marine arrangement that you have. And, Julie, I think you mentioned at 20%, I think it was maintenance cost reduction, but can you just walk through a little bit of that and does that apply more to the floaters or the jackups or kind of anything around that as well, please?
I'll have Bernie respond to that. It is 20% but on specific equipment items, not across the board on the entire rig operating cost. But I'll have Bernie respond to that.
So, Haithum, thanks for the question. It applies to both drillships and jackups. So our pilot program will roll out on two drillships and two jackups. The first drillship is up and live and the remaining three assets will be up and live by the end of May. And we're concentrating initially on seven pieces of the most critical and most expensive equipment on the rig, things like thrusters, engines, straw works, mud pumps, pipe handling systems. And that 20% expected cost savings is as it relates to those particular pieces of equipment on the repair side. In addition to that, we hope to see the benefits on the reduced downtime side as well as we're able to predict failures before they actually happen and then schedule repairs of the critical path.
Appreciate that. And is there any way to kind of help us figure out how much maybe that could drive the total cost savings? If it's just 20% on those seven key items or is that just kind of contemplated to be the start and eventually rolled out to more components on the rigs?
It's definitely the latter. That's contemplated to be the start. That's kind of the low-hanging fruit and we will be rolling out to more and more assets, particularly control systems, where we can make quick and timely repairs of the critical path. With regard to giving a dollar indication, we've kind of chosen not to do that at the present time. I will let you know that the contracts are arranged in such a way that GE stands to get a bonus if we outperform our expectations and stands to be penalized if we underperform. So we're all very well aligned to squeeze the most cost out of this we can.
Cool. Thanks so much.
Thanks, Haithum.
Thanks, Haithum. And with that, we're going to conclude today's call. We do appreciate everyone's participation and your continued interest in Noble. Kim, we appreciate your time as well in coordinating the call today. Good day, everyone.
Thank you. Ladies and gentlemen, this concludes today's conference call. You may now disconnect.