(Idea) Noble
By: Jon Costello
Noble Corporation (NE) is the second-largest public offshore drilling company after Transocean (RIG). Noble’s shares are cheap and offer multi-bagger upside amid a sustained recovery in the offshore drilling market. Its dividend is sustainable and offers an attractive feature for investors who want to be paid to wait during the offshore drilling recovery. Despite these attractive features, the shares offer less appreciation potential than their offshore peers due to Noble's relatively low operating and financial leverage.
Noble’s fleet consists of 14 seventh-generation drillships, three sixth-generation drillships, eight semisubmersibles, and 13 jackups, for a total fleet of 38 vessels. Two of the company’s floaters and two jackups are currently inactive.
Add Noble to the list of offshore drillers that went bust in the 2021-2022 period. The company entered bankruptcy on July 1, 2020, after the Covid downturn slowed offshore drilling activity and sparked a price war among offshore drillers.
Noble emerged from bankruptcy on February 4, 2021. Shortly thereafter, it acquired Pacific Drilling in 2021 and Maersk Drilling in 2022.
On September 4, 2024, Noble closed its acquisition of Diamond Offshore. Diamond's fleet was smaller than Noble’s and more heavily concentrated in seventh-generation floaters, which are among the highest-spec deepwater vessels.
Noble’s current fleet is well diversified by rig category, with vessels also diversified geographically throughout the world’s offshore oil-producing regions, as shown below.
Source: Noble Corporation February 2025 Investor Presentation.
What Sets Noble Apart
Noble is one of the few dividend payers in the offshore drilling space. Its peers lack the cash flow profile to realistically sustain a dividend. Some are too highly leveraged to pay a dividend. Borr Drilling (BORR) had paid a dividend but announced on Wednesday that its dividend would be eliminated to improve liquidity and capital allocation optionality vis-à-vis its large debt load.
Noble’s management stated on the company’s first-quarter earnings conference call that it intends to defend the company's $0.50 quarterly dividend, which yields an attractive 8.6% on Noble’s $23.30 stock price. That said, the company is not likely to cover its dividend from operating cash flow alone in 2025, even if it hits management’s annual EBITDA guidance for the year of approximately $1 billion.