Tags: Noble | offshore | drilling | NE

Noble a Play on Oil Demand from Offshore Drilling Tech

By    |   Tuesday, 24 July 2012 05:23 PM

Noble (NE) is an oil play along the lines of a Schlumberger (SLB) or Halliburton (HAL), although more narrowly focused on offshore drilling. While it might seem common sense that oil demand over time will be higher, it’s less obvious how much oil will need to come from riskier offshore rigs, or if Noble is too far ahead of the curve in its investments in offshore drilling tech.

Noble is a Swiss offshore drilling contractor for the oil and gas industry. It performs contract drilling services with a fleet of 79 mobile offshore drilling units and one floating production storage and offloading unit. The fleet consists of 14 semisubmersibles, 14 drillships, 49 jackups and two submersibles. A fleet addition that includes 11 units is under construction.

As of Feb. 15, 2012, approximately 84 percent of Noble’s fleet was located outside the United States in the following areas: Mexico, Brazil, the North Sea, the Mediterranean, West Africa, the Middle East, India and the Asian Pacific.

“We have actively expanded our offshore drilling and deepwater capabilities in recent years through the construction and acquisition of rigs. As part of this technical and operational enhancement, we plan to continue pursuing opportunities to upgrade our fleet to achieve greater technological capability and increase our operational efficiencies,” Noble management said in a recent filing.

“Our business strategy also focuses on the active expansion of our worldwide deepwater capabilities through upgrades and modifications, acquisitions and divestitures of drilling units, as well as the deployment of our drilling assets in important oil and gas producing areas.”

Noble has a market cap of $9.06 billion in a sector, energy equipment and services, where the average company size is $6.18 billion. Its trailing 12-month P/E ratio is 16.85 and its five-year projected price-to-earnings-growth (PEG) ratio is 1.27, compared to 0.86 for the sector.

Its projected earnings per share growth for the coming year is 62.87 percent, compared to a sector average of 25.40 percent.

Back on track

Analysts are positive on NE, with buy or outperform calls from RBC Capital Markets, Standard & Poor’s Equity Research, Citigroup Investment Research, UBS, Deutsche Bank, Goldman Sachs, Raymond James and Friedman, Billings, Ramsey & Co.

“We believe that regulatory risk in the U.S. Gulf of Mexico is beginning to ease as the permit process begins to get back on track. We still consider NE a high-risk offshore drilling play, though, given an aggressive newbuild program, with nine of the 11 units not yet contracted (although largely jackups in the 2014-2015 timeframe),” S&P analysts wrote in late April.

“We think NE can use operating cash flows and incremental tapping of its debt facilities to finance its expansion efforts, but still view the regular dividend as secure.”

Noble next reports on Oct. 17.

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Tuesday, 24 July 2012 05:23 PM
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