Noble’s third-quarter revenue beats expectations, but profit falls short as new contracts fail to halt backlog decline

Why did profit fall short despite better-than-expected revenue?

Noble’s third-quarter revenue was 729 million dollars, 6% above JPMorgan’s estimate and 2% above market consensus; however, adjusted EBITDA was 201 million dollars, respectively 5% and 11% below the bank’s estimate and market consensus.
The shortfall came mainly from costs: contract drilling expenses were 469 million dollars, 15% above JPMorgan’s estimate and up 5% quarter on quarter. The EBITDA margin fell to 27.6%, 318 basis points below the bank’s estimate and 193 basis points lower quarter on quarter.
Two rigs in Brazil resumed operations during the quarter, but several rigs in the fleet were transitioning between contracts, weighing on performance. JPMorgan had already factored into its forecast both the previously disclosed Petrobras day-rate settlement taking effect from August and Noble Voyager’s delayed start until mid-September.
JPMorgan expects a slightly negative share-price reaction following the results and maintains its neutral rating.

The company narrowed its 2026 EBITDA guidance from 850 million–925 million dollars to 850 million–900 million dollars; it narrowed revenue guidance from 2.8 billion–2.9 billion dollars to 2.85 billion–2.9 billion dollars. JPMorgan considers the approximately 1.4% decline in the EBITDA guidance midpoint to be less than a major reset.
Based on year-to-date EBITDA of approximately 691 million dollars, the new guidance implies fourth-quarter EBITDA of 159 million–209 million dollars. The midpoint of 184 million dollars is above the median market forecast of 174 million dollars; JPMorgan’s forecast of 160 million dollars is near the lower end of the range.
Full-year capital expenditure guidance was raised from 615 million–665 million dollars to 680 million–705 million dollars, mainly because customer-reimbursed capital expenditure is expected to rise from 25 million dollars to 65 million dollars. Even excluding this effect, spending guidance rose slightly.
Third-quarter operating cash flow was 144 million dollars, capital expenditure was 192 million dollars, and free cash flow was negative 48 million dollars. That improved from negative 60 million dollars in the second quarter but was below JPMorgan’s forecast of negative 29 million dollars; net debt rose 8% quarter on quarter to 1.55 billion dollars.

Since the July fleet status report, Noble has added approximately 560 million dollars in contract value, but its backlog at the end of the third quarter still fell from 6.8 billion dollars in the second quarter to 6.7 billion dollars.
Recent orders added approximately 44 months of contract term for floating rigs and approximately 26 months for jack-up rigs. Third-quarter floating rig utilization rose to 63% from 59% in the second quarter, while jack-up utilization fell to 79% from 83%.
Management said contracted capacity in the second half of 2027 is approximately 20% higher than in the first half, and therefore expects utilization and cash flow to improve markedly beginning in the second half.

Noble BlackHawk will undertake a drilling contract in Uruguay for approximately 50 days in the fourth quarter of 2027. The contract is worth approximately 25 million dollars, excluding mobilization fees, equivalent to approximately 500 thousand dollars per day. JPMorgan believes the latest rates for high-specification drillships remain around this level.
However, BlackHawk’s existing contract ends in November 2026; without new work to fill the gap, it could be idle for as long as approximately 11 months before the Uruguay contract begins. Short-term exploration work in remote areas also typically carries a premium, so the bank does not regard this quote as a long-term contract rate.
For comparison, a Transocean contract lasting approximately 700 days works out to approximately 464 thousand dollars per day. JPMorgan believes this better reflects rates for multiyear work in the US Gulf of Mexico.