Noble drill contracts shortened due to oil price, COVID-19 woes

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Noble Corporation says as a result of the oil price war and the global COVID-19 outbreak, its oil drilling contracts have been shortened, drill ships placed on standby and day rates slashed.

The US drilling corporation has updated its drill rig status and contract information as of April 9, 2020 as a result of the ongoing low oil price shock that threatens to cripple the industry and which is being made worse by the novel coronavirus (COVID-19) outbreak.

This move directly affects Noble Corporation’s operations in Guyana – the new emerging oil destination in South America – which currently has three Noble drill ships operating at the Stabroek Block for ExxonMobil.

In February, Noble Corporation and ExxonMobil executed a Commercial Enabling Agreement (CEA) for drilling services on the Guyana-Suriname Basin. Noble Corporation’s three drill ships currently in Guyana – the Noble Don Taylor, Noble Tom Madden and Noble Bob Douglas – were included in the CEA. It was also agreed that other drill rigs might be added to the agreement.

The Noble Tom Madden is reported to be on standby effective April 2, 2020 for a period of up to 90 days. Its day rate has reduced to 50 percent of operating day rate through the standby period, which shall not count against the contract term. The Noble Tom Madden is contracted to ExxonMobil until mid-December 2023, according to the report.

The Noble Don Taylor is listed as being on Transfer of one-year contract term from Noble Sam Croft, commencing Nov 2020 at a mutually agreed day rate. This contract comes to an end in November 2021. The Noble Sam Croft is currently in Suriname under contract with Apache.

The Noble Bob Douglas has received a six-month award under the CEA agreement, starting in late March 2021 and ending in late September 2021. It will be allowed a repricing of its day rate in November 2020, according to the Rig Status report.

Noble said that in addition, the company expects that the decline in oil prices resulting from the substantial increase in production by Saudi Arabia and the decrease in demand for crude oil resulting from the COVID-19 pandemic “will negatively impact the Company’s business and results of operations for its full year 2020.”

The company noted too that given the uncertainty surrounding the disruptions, it cannot yet predict with reasonable accuracy the magnitude or duration of the impact, or the magnitude or pace of any recovery.

“As a result, the Company is withdrawing its full year 2020 financial guidance that was provided on its February 20, 2020 conference call. Though the Company has not yet completed its review of results for the recently completed first quarter of 2020, it does not expect that its results of operations will differ materially from its previously announced financial guidance for the quarter,” the report said.

While the Noble Bob Douglas is engaged in development drilling for ExxonMobil and its joint venture partners HESS and CNOOC, its sister vessels Noble Tom Madden and Noble Don Taylor have been engaged in drilling exploration wells for the Stabroek Block co-venturers.

Noble Corporation joins a growing list of oil and gas related entities which have adjusted their workplans for 2020 due to the low oil prices and the COVID-19 pandemic, with a view to remaining financially viable.

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