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Morningstar | Another Quarter of Losses Brings Noble's Cash Problem Into Focus

No-moat Noble Corp. posted a net loss of $71 million ($0.29 per share), wrapping up a tenth consecutive quarter of operating losses. Quarterly revenue increased to $283 million, or 20% year over year, positively influenced by an increase in operating days and negatively impacted by a bottoming out in day rates that has persisted since third-quarter 2018.

Noble possesses a lean fleet of 25 drill ships, jackups, and floaters, only four of which are stacked without any contacts in the pipeline, thanks to a strong recovery in utilization since early 2018. Following the trend we have observed in other offshore drillers during the first quarter, increased demand led to a further buildup in contract backlog from new contracts and extensions. We maintain, however, that day rates have yet to reach their inflection point, and we expect a few additional years before revenue will show a positive trend in day rates. Noble in particular looks like it may have been bidding very low on day rates in order to secure higher rates of utilization.

Investors should remain cautious and be mindful of the liquidity issues facing the company. Noble burned through $137 million in cash during the first quarter (excluding a $50 million debt payment), a combination of negative net income, increasing capital expenditures, and working capital. Capital expenditures included a $30 million advance payment for its purchase of a new jackup rig out of shipyard that will cost $84 million altogether. This may have been a bargain purchase, but we’re hesitant to say this was a good use of cash given Noble’s very high debt load.