Noble Corporation Plc

Jeffrey L. Chastain - VP, Investor Relations and Corporate Communications David W.

Williams - Chairman, President and CEO James A. Maclennan - SVP and CFO Simon W.

Johnson - SVP Marketing and Contracts

Edward Muztafago - Societe Generale Dave Wilson - Howard Weil Ian Macpherson - Simmons & Company International Greg Lewis - Credit Suisse Michael Urban - Deutsche Bank Matt Marietta - Stephens J.B. Lowe - Cowen and Company Harry Mateer - Barclays Capital Praveen Narra - Raymond James Jeffrey Campbell - Tuohy Brothers Investment Research

Thank you, Melissa, and welcome everyone to Noble Corporation's third quarter 2014 earnings call. We appreciate the interest in the Company.

A copy of Noble's earnings report issued last evening, along with the supporting statements and schedules, can be found on the Noble Web-site, and that's noblecorp.com. Before I turn the call over to David Williams, I'd like to remind everyone that we may make statements about our operations, opportunities, plans, operational or financial performance, and the drilling business or other matters that are not historical facts and are forward-looking statements that are subject to certain risks and uncertainties.

Our filings with the U.S. Securities and Exchange Commission, which are posted on our Web-site, discuss the risks and uncertainties in our business and industry, and the various factors that could keep outcomes of any forward-looking statements from being realized, including the price of oil and gas, customer demand, operational and other risks.

Our actual results could differ materially from these forward-looking statements and Noble does not assume any obligation to update these statements. Also, note that we may use non-GAAP financial measures in the call today.

If we do, you will find the required supplemental disclosure for these measures, including the most directly comparable GAAP measure and an associated reconciliation on our Web-site. And finally, consistent with our quarterly disclosure practices, we will post to our Web-site, following the conclusion of our call, a summary of the financial guidance covered on today's call which will highlight fourth quarter figures.

Okay, with the preliminary details covered, I'll now turn the call over to David Williams, Chairman, President and Chief Executive Officer of Noble.

Thanks, Jeff. Good morning everyone and welcome.

Joining me today in Houston in addition to Jeff is Simon Johnson, our Senior Vice President of Marketing and Contracts. James Maclennan, our Senior Vice President and CFO, is participating on the call from London today.

I'm sure you'd agree when I say a lot has transpired since our last call given the completion of our spinoff. We recently announced decisions that addressed our capital allocation strategy and of course further developments regarding the offshore drilling industry.

Between the three participants from Noble on today's call, we'll be covering a bit on each one of these topics. I'd like to begin today with some brief comments on our results for the third quarter.

I'll also update you on further progress with our newbuild program as we will soon be down to one final project in the construction backlog. I'll then turn the call over to James for a more complete discussion on the third quarter and some guidance on the final quarter of the year.

Simon will address the residual points on the offshore market and how those are positioned. And then I'll close with some final comments on the news we reported on Tuesday relating to the share repurchase authorization approved by our Board and plans to form an MLP structure.

Of course we also want to hear from you, so we'll close today by taking a few questions. The third quarter represents another solid result from Noble despite the challenges we faced to keep certain rigs active as they completed existing contracts.

Contract drilling revenues increased 4% compared to the second quarter due in part to the start of two new build rigs. I'll say more on this subject in just a moment.

Operating costs were also up 4% reflecting the operations of these two rigs but remained at the low end of our guidance range. Our operating margin in the quarter remained steady at a little over 52%.

Although downtime and idle days were higher than the previous quarter, the addition of two new assets helped to offset the impact. Cost management is always a focus at Noble and we can possibly impact our future financial performance by remaining vigilant about operating costs and employing further steps to mitigate margin erosion.

James will provide greater detail on the third quarter results in just a moment. I now want to update you on the status for our newbuild program.

As we wind down the four year effort, we are just finally proud of this program when you consider the timing of our new rig orders, our strong shipyard execution experience with each project, our success in securing excellent contract coverage, and the relative performance of the rest of the offshore industry. The third quarter provided further evidence of this success.

During the quarter, we started operations on the ultra-deepwater drillship Noble Sam Croft in the U.S. Gulf of Mexico and on the high-specification jackup Noble Sam Turner in the North Sea.

We also took delivery of the ultra-deepwater drillship Noble Tom Madden, the final project from Hyundai. The Tom Madden was delivered from the shipyard 32 days ahead of plan and commenced its transit to U.S.

Gulf of Mexico on August 29. The rig is now expected to commence a three-year contract in mid-December at a day rate of $632,000 per day, including mob revenues.

Tomorrow we expect to take delivery of the high-specification jackup, the Noble Sam Hartley, the final JU3000N jackup design under construction with Sembcorp Marine in Singapore. The Sam Hartley which is the only newbuild out of the 12 orders since 2010 that remains uncontracted, we remain in Singapore to receive additional enhancements to increase the rig's geographic reach and its opportunity set.

We continue to evaluate contract opportunities for the Hartley and believe the rig will secure an initial contract progress revised departure date estimated to be during the second quarter of 2015. During 2014, we delivered six newbuild rigs with each being on or ahead of schedule leaving one final newbuild as we move into 2015.

Our CJ-70 jackup Noble Lloyd Noble is scheduled for delivery during the first half of 2016 followed by a four year primary term in the North Sea at a day rate of $447,000 per day including mob revenues. Delivering a series of newbuild projects on time and on budget is made possible by choosing excellent shipyards with a history of success in putting skilled project managers in place.

As we close down our presence at HHI and with the completion of the JU3000N projects at Sembcorp Marine, I want to thank all those involved in these important efforts for a job well done. Each of you has played an important role in transformation of the Noble fleet.

Finally I want to make special mention of two of our rigs that are a product of exceptional shipyard execution and of Noble's operational capabilities. Recently the ultra-deepwater drillship Noble Bully II was awarded Rig of the Year honours by Shell, representing the customer's highest performing rig across their theaters of operation and based on the rig's excellent record for efficiency and operational safety.

One year ago, the Bully I received the same honor from Shell. Also, the crews of the ultra-deepwater drillship Noble Sam Croft participated in the setting of a world record while operating in the U.S.

Gulf of Mexico for Freeport-McMoRan. This ship and its crew landed a string of casing weighing more than 2.2 million pounds while constructing well in the customer's location in the U.S.

Gulf of Mexico. This is just one more indication of the increased difficulty of some well projects and the value of advanced rig technical specifications required to execute these complex well construction projects.

Congratulations to the crews of both rigs. I'll now turn the call over to James for further discussion on the third quarter.

Thank you, David, and good morning to everyone on the call. As David mentioned, Noble delivered strong financial results again in the third quarter, including the earnings and cash flow contributions from two new rigs.

As I've done in the past, I plan to cover in detail only those line items from the P&L that fell outside of the guided range offered on our last conference held in July. For additional color on the quarter or clarification on the items in the release, Jeff and his team will be available following the call.

Our spin-off of Paragon Offshore was successfully completed on August 1 and the operational results of Paragon and incremental spin-off related costs have been recast and captured net of tax in the line 'net income from discontinued operations' in the P&L. As a result, the financial statements now reflect Noble on a post spin-off basis.

Also as promised in our second quarter call, on August 29 we filed pro forma financial data for the six months ended June 30, 2014. These financial data are adjusted for the spin-off and should be helpful it modeling the Company going forward.

This information is also available on the Company's Web-site. For today, I'll provide the highlights of our third quarter financial performance and also cover guidance assumptions for the fourth quarter of 2014.

Net income from continuing operations totaled $147 million or $0.57 per diluted share on total revenues of $829 million. These results compare to net income from continuing operations in the second quarter of $140 million or $0.54 per diluted share on total revenues of $804 million.

Contract drilling services revenues increased by approximately $31 million or 4% from the second quarter to $810 million. The increase was primarily related to the third quarter commencement of operations of two newbuild, the drillship Noble Sam Croft and the jackup Noble Sam Turner.

These two combined added $50 million to revenues. In addition, the Noble Paul Romano which commenced its contract in early June experienced a full quarter of operations with a $27 million impact.

These revenue increases were partially offset by the Noble Paul Wolff and the Noble Max Smith which completed their contracts offshore Brazil in April and August respectively with a $31 million negative impact. You'll recall that the Company received an $18 million payment relating to our customer's decision to reduce the contract term on the Max Smith from three years to 18 months in accordance with the terms of the contract.

The payment was intended to offset expenses incurred by Noble resulting from the early contract conclusion. We also saw an increase in scheduled shipyard days on the Noble Amos Runner with a $19 million impact as we moved closer to completing the regulatory survey and maintenance program on that rig.

The Runner is expected to return to work in early November. Contract drilling services cost in the third quarter increased $15 million to $386 million, which compared to $371 million in the second quarter.

At $386 million in the quarter, this was right within the range we guided to. The increase quarter on quarter was mainly due to the current quarter operations from the new rig additions, the Sam Croft and Sam Turner.

DD&A and SG&A at $161 million and $25 million respectively were within the guided ranges provided to you in our second quarter call. Interest expense, net of amounts capitalized, increased a little more than $1 million to $38 million in the third quarter compared to guidance of $30 million to $35 million.

The higher than expected level was primarily due to borrowing for the milestone payment on the Noble Sam Croft which commenced operations earlier than expected. The noncontrolling interest line on our P&L, which represents the Bully I and Bully II 50-50 joint ventures with Shell, were $20 million in the third quarter compared to guidance of $16 million.

The increase compared to guidance was due to the continued strong operational performance of the two Bully rigs with third quarter unpaid downtime near zero for both rigs. Our effective tax rate for the third quarter was 19.5% compared to 17.4% in the second quarter and within the range of prior guidance of 18% to 20%.

The increased rate from the second quarter was driven mainly by the finalization of a change in UKs tax law which was discussed in our previous call. This change related to the disallowance of certain related party costs and was retroactive to April of 2014.

As the law was only finally enacted during July, the catch-up effect was booked in the third quarter. Capital expenditures in the third quarter totaled $516 million including capitalized interest, below our guidance of $600 million.

This brought our capital expenditures for 2014 to-date to approximately $1.6 billion. The components are as follows; $1.2 billion for newbuild rigs, $246 million for major projects and other, $109 million for sustaining capital, and $39 million in capitalized interest.

Taking a look at the balance sheet, total debt at September 30, 2014 was $4.74 billion, down $1.28 billion compared to June 30, 2014. The debt to total capitalization ratio was 37%, down from 39% at the end of the prior quarter.

Liquidity, measured as a sum of cash and cash equivalents and availability on revolving credit facilities, totaled approximately $2.0 billion at September 30. The decrease in total debt and the increase in liquidity from the prior quarter were driven primarily by the net proceeds of $1.7 billion received from Paragon Offshore in settlement of inter-company debt related to the spin-off.

As a final comment on the quarter, the Company repurchased a little over 2 million ordinary shares under an existing repurchase authorization at an average price per share of $26.22. Following the third quarter repurchase activity, approximately 4.8 million shares remain under the current authorization, which is separate from the proposed authorization to repurchase up to 15% of shares announced on Tuesday and which David will address in his closing remarks.

Switching on to guidance for the remainder of 2014 for certain profit and loss line items as well as capital expenditures, we continue to forecast operational downtime to average 6% for the fourth quarter due to the higher mix of premium rigs and newbuilds recently placed in service. Contract drilling services cost for the fourth quarter, we expect these costs to be in the range of $375 million to $390 million.

The guided range reflects the higher cost of newbuilds placed in service, offset by reduced cost on idle rigs, for example the Max Smith, and the cold stacking of the Homer Ferrington. Newbuilds' effective fourth quarter costs include full and partial quarter costs for the Sam Croft starting in mid third quarter, the Sam turner late in the third quarter, and the Tom Madden late in the fourth quarter.

DD&A for the fourth quarter is expected to be $160 million to $165 million, higher primarily due to the addition of the Tom Madden. SG&A is expected to total about $25 million in the fourth quarter.

Interest expense net of capitalized interest in the fourth quarter is expected to be $45 million to $50 million. The increase in net interest expense reflects the impact of the newbuild that will have been delivered in placement of service.

The noncontrolling interest line on our P&L, the Bully I and II joint ventures, is expected to range from $16 million to $20 million in the fourth quarter. This line item is wholly dependent on the performance of these two rigs, Bully I and Bully II, and they continue to experience lower than expected operational downtime.

Our effective tax rate for the year remains in the range of 18% to 20% including the impact of the recently enacted U.K. tax law change.

As you are aware, changes in the geographic mix of sources of revenue or levels of profitability and tax assessments or settlements, or movements in certain exchange rates, all can affect this line. Finally, we expect our capital expenditures for the fourth quarter to be about $400 million, including the final payment to the shipyard upon delivery of the jackup Sam Hartley.

Capital expenditures for 2014 in full are expected to total $2.0 billion. The breakdown by major spending category for the full year is expected to be as follows.

In our newbuild program, we expect to spend $1.4 billion. After 2014, the remaining CapEx needed to complete the final newbuild project, the Noble Lloyd Noble, which was previously referred to as the CJ-70, is approximately $525 million most of which is expected to be spent in 2016.

Major projects in 2014 are expected to total approximately $400 million. The amount includes newbuild, subsea and other capital spares of $200 million and several rig maintenance and regulatory inspection programs.

Sustaining capital expenditures are expected to total $160 million. And capitalized interest is expected to come out at $50 billion in 2014.

As to discontinued operations, we expect to incur certain spin-off related costs in the fourth quarter, primarily related to pension plan settlements. These are expected to total approximately $10 million.

That concludes my prepared comments. Simon Johnson will now comment on the market outlook.

Thank you, James, and good day to everyone. I'll begin this morning with a brief comment on the offshore market and some observations on recent contracting progress.

I'll also cover some points on Noble's backlog including recent awards that I'll be discussing with you for the first time today. Before I close, I'll review Noble's limited exposure to the current environment, with a focus on our floating rig exposure and our view on contract opportunities for these rigs, along with how we will manage through the challenging business environment that we believe will persist into 2016.

The 2014 offshore spending plans of our clients have been flat relative to the experience of recent years. The effect of this customer response is evident in offshore exploration activity with a number of offshore exploration wells spudded in the first half of the year, almost identical to the same period in 2013.

The impact of this plateau has been most pronounced in the deepwater segment which has suffered from overcapacity in 2014 as new supply entered the market unsupported by incremental demand. As we have seen, it only takes a contract signing or two in an oversupplied market to have a material impact on day rate expectations, both within and across different classes of rig.

During the third quarter we saw several awards in different regions of the world with significant but not surprising declines in day rates. The U.S.

Gulf of Mexico had several of the awards including contracts for ultra-deepwater semisubmersible Noble Danny Adkins and the conventionally more deepwater semisubmersible Noble Jim Thompson. I'll address the Noble Danny Adkins contract in more detail in a moment.

With additional uncontracted newbuilds adding to supply and existing units rolling off contacts in the near-term, it's easy to present a scenario where rates will continue to oscillate and trend lower across most floating rig categories. But new units have been absorbed, albeit slowly, and some market participants are making the tough decision to cold stack or retire older less capable units requiring material capital investment.

This is important and will help improve the supply balance going forward. Remember the industry began 2014 with expected deliveries on 13 uncontracted newbuild floaters.

As we move through the fourth quarter of 2014, three of these rigs remain uncontracted following fixed use for six units and delays with another four rigs which have pushed their expected deliveries into 2015. It appears the industry will begin 2015 with approximately 12 uncontracted newbuilds scheduled for delivery through that year with seven arriving in the final quarter.

All in all, it is a comparatively modest supply equation. After experiencing limited contracting activity through most of 2014, we have seen several rigs secure contracts in key regions for floating demand, such as Brazil where five rigs have recently been awarded multiyear contracts with more fixtures anticipated to follow in the near-term.

Other regions with intensive floating rig activity, such as the U.S. Gulf of Mexico and West Africa, could follow soon.

It is our belief that modern high specification units with near-term availability should secure units on a preferential basis with many of the less capable rigs experiencing reduced utilization or the possibility of cold stacking. I'm not suggesting 2015 will see a return to equilibrium in the floating rig sector and the industry will remain challenged and should the weaker crude oil price environment persist, we may face greater uncertainty regarding upstream spending levels beyond 2015.

We consider the long-term view of the oil price to be a critical barometer of upstream activity and the closely monitoring of recent weakness which has occurred most [indiscernible] in the midst of our customers' annual planning process. We look to identify areas of margin improvement and we're seeing progress in fixture activity and an uptick in cold stacking and retirements.

Both represent normal stages of evolution in our business that along with eventual upstream spending recovery and onset of meaningful demand catalysts such as Mexico and other emerging regions will lead us back to a more balanced rig market. If this rebalancing takes longer than expected, it could well see a sharp recovery which ultimately benefits few players.

I now want to turn the discussion to the Noble fleet backlog and some recent contracting success. As we closed the third quarter, the backlog stood at $10.6 billion, down from $11.1 billion at the end of the second quarter, but with a reduction in our daily burn rate to $5.5 million from $6.5 million in the second quarter.

Our floating rig represents $8.6 billion of that total backlog with the jackup fleet amounting to some $2 billion. Our daily burn rate also declined in the third quarter due to the addition of new contracts.

As previously announced, we signed a 200 day contract for the semisubmersible Noble Danny Adkins at [$317,000] (ph) a day along with a full well contract of 12 to 18 months duration for the semisubmersible Noble Jim Thompson at $300,000 a day. Also, we are reporting this morning new fixtures on the jackups Noble Joe Beall and Noble Gene House.

Both rigs which work in the Middle East region were awarded three year contract extensions at a day rate of $143,000 a day, up from the current day rate of $81,000 a day. The extensions will commence in November 2015 following the conclusion of contracts currently in place.

Please note that contracts for the Noble Joe Beall and Noble Gene House were excluded from the September backlog figure I mentioned earlier as they were secured in October, but they do represent an additional $313 million in future contract revenue. Following those contract awards, the percentage of available floater operating days committed in 2015 and 2016 increases to 69% and 48%, respectively.

For the jackup fleet, the figures are now 79% and 45% respectively, impressively high I'm sure you'll agree. I would like to remind everyone that the Company's committed time in 2015 across our entire floater segment is comparatively high at 69%, but I do want to cover some thoughts on the five rigs that presently lack contract cover in the next year.

These rigs are the semisubmersible Noble Homer Ferrington, Noble Paul Wolff, Noble Max Smith, Noble Paul Romano, and Noble Driller. In regards to the Homer Ferrington, the rig is now cold stacked offshore Malta and is not currently expected to be active in 2015.

Daily cash operating cost while stacked in this mode are expected to run between $10,000 and $12,000 per day. The Noble Paul Wolff and Noble Max Smith have just arrived to the Singapore following demobilization of both rigs from Brazil.

The Noble Paul Wolff will enter a shipyard to begin regulatory maintenance work which we do not expect to be completed until the second quarter of 2015, and whilst the unit is not without some prospects our expectation is the unit will remain inactive through 2015. The Noble Max Smith is available and is being considered for opportunities in the Eastern Hemisphere where its technical features and outstanding operational performance are well aligned with customer requirements.

The Noble Paul Romano is approaching the completion of its contract offshore Morocco and we are looking at opportunities in Europe, Africa, and further afield. Finally, the Noble Driller is expected to complete its current assignment in U.S.

Gulf of Mexico by mid-November. We expect to demobilize to a Gulf Coast shipyard for maintenance and repairs whilst we evaluate the outlook for the rig in the region.

Our current assumption is that it will be idle into the second half of 2015. The limited amount of time available in our jackup fleet during 2015 was largely found on two rigs, the Noble Mick O'Brien and Noble Regina Allen, 2013 additions to our active fleet.

We do expect to secure assignments with both rigs with some idle time possible between contracts. These are both very high specification units that offer greater efficiency and capability relative to competing newbuilds and existing supply.

In closing, 2015 will present a set of challenges similar to 2014 and our marketing operation strategy will remain constant. We believe top shelf rigs will generally experience better utilization than those with more modest features, but this assumption is sensitive to the country of operation, pricing and the quality of service that customers associate with your brand.

We will remain focused on asset utilization, especially as it pertains to our leading edge rigs. Using the recent contract awards for Noble Danny Adkins as an example, we secured an estimated 200 day assignment for the premium asset in the Hartford contest.

We believe customer demand for high capability units in the Gulf of Mexico when the rig rolls in mid-2015 could be higher than what we have seen recently. Aside from the Noble Danny Adkins, the next available asset that rolls off contract in our dynamically positioned fleet will be the Noble Jim Day in early 2016.

We will move to sizably lower costs on those rigs that experience idle periods, and where the near-term opportunity set is limited maintaining an effective cost management discipline is paramount. I'll now turn the call back to David.

Thank you, Simon. Clearly challenges remain in the industry as we prepare for 2015, but as Simon noted, premium assets hold an advantageous position in securing contracts as we receive greater clarity regarding the spending plans of our customers.

We continue to believe in the long-term fundamentals of the industry and believe what we have seen over the last half of 2014, and more specifically the last month, supports our belief even in the current market. However whether the industry is experiencing meaningfully higher activity as we close 2015 or the industry requires another 6 to 12 months to achieve balance in the offshore rig capacity, it does not detract from Noble's strong position and excellent competitive footing following the completion of our strategic transformation.

I believe we can now point to the following characteristics and accomplishments that differentiate Noble; our premium, younger and more versatile fleet; a significant asset divestiture effort that is now complete with the Paragon spin-off; and newbuild project program that is near completion; and excellent backlog or contract backlog totaling over $10.6 billion; limited exposure to the current market, especially among our newbuild assets new to our backlog; consistent operations performance and demonstrated success with cost management; strong balance sheet and liquidity; and positive free cash flow beginning in 2015. Our improved positioning in the offshore industry places us in a position to address the subject of capital allocation with greater clarity while considering enhanced options.

Our announcements earlier this week regarding our Board's approval to seek shareholder authorization of a larger share repurchase program and to develop an MLP are clear indications of our positive longer-term view of the offshore drilling business, especially for premium rigs, and how we intend to create shareholder value by having greater flexibility to address cash allocation options that are incremental to our dividend. As a review of the previous announcements, we will seek shareholder approval at a special shareholders meeting scheduled for December 22 to repurchase an aggregate of up to 37 million or approximately 15% of our outstanding shares.

The repurchase authorization is intended to be effective for 16 months which takes us up to our Annual General Meeting in 2016. Why this proposed action makes sense?

Because we believe in the long-term outlook for the offshore drilling and the improved competitive position that Noble now enjoys in our industry and we believe we have a unique opportunity to take advantage of low share valuations that present an opportunity to create shareholder value. The approval we seek is of meaningful size or about 15% of shares outstanding, can be executed over a defined period of approximately 16 months and is accretive to Noble's earnings in 2015 and beyond.

Also our decision to pursue the development of an MLP structure is attractive for the added capital allocation flexibility [it offers] (ph). We believe possessing this flexibility will further improve our competitive posture in the offshore industry and will allow us to act on other value enhancing strategies.

We have devoted a great deal of thought and analysis to the MLP structure and are able to pursue this opportunity now that we have addressed beyond some of the structural and transformative events undertaken at Noble. We are positioning noble to compete more effectively through the cycles of our business, possess greater flexibility to pursue value enhancing opportunities and remain an attractive investment option for our investors.

With that, I'll turn the call back over to Jeff and we can take some questions.

Thank you, David. Melissa, let's go ahead and assemble the queue for the question and answer segment of the call.

And since we'll only take questions up to the top of the hour, I'd like to remind everyone to please limit their questions to one and then a follow-up just as a rule. Melissa, go ahead and we'll take the first question.

I guess I wanted to maybe just focus on the potential MLP a little bit and maybe get your thoughts in terms of what the long-term building strategy would be for Noble there. I mean presumably as you drop in the assets that have clearly the largest cash flow components, you quickly get to a situation where the growth profile starts to temper and almost forces you guys to I guess add newbuilds to the fleet.

So can you sort of talk about what your thought process there is on that?

Sure. I think given our fleet profile and what we've done with the newbuild program, I think we have a number of assets that fit into that structure.

We've got rigs that range in contract from around three years to as much as what's remaining on 10 year contacts, and then we've also got a four-year contract that starts in 2016. So if you look at the way these things have been structured within the group and other MLPs in other areas, the way they are created and the way they are built upon, we think we have a good suite of assets, we think we've got good build opportunities and we think we've got good forward visibility.

How you feed it in the out years is something that this structure gives you the latitude to take advantage of, but we still we've got a long time before we run out of assets that put us in that box [indiscernible].

Okay. Yes, clearly I guess the concern is always about the growth trajectory for the MLP.

I guess as an unrelated follow-up, just wanted to go back to the Hartley, and I don't remember specifically but was your decision to do the additional upgrades on the Hartley driven by an inability to secure work for that rig or was it something that you realized prior to bringing it out, that the rig probably should have on it before you brought it to market?

This is something that as we deliver the early rigs in different markets, we learn more about the designs and this is an opportunity that we recognized some time ago, and with the contracting of all the other rigs we didn't have time to do it on the other rigs and on this rig we did. So it has nothing to do with the market condition, it has everything to do with being able to expand the geographic opportunities for the rig.

Okay, excellent. Thanks.

So to start off, I can appreciate the efforts going into transforming the Company over the past four years and the resulting frustration over having the share price seemingly be unresponsive to those efforts and it's clear that you guys haven't given up the fight yet to drive shareholder value with the recent announcements of the renewed share buyback and the MLP proposal, but really have a question on the latter, the MLP. It seems a little different for you guys versus some of your competitors that have already gone down that road.

I think one can argue that the MLP structure, I mean at least to me, it's done little for them in terms of creating shareholder value. I don't think we see it in their share performance.

So I was wondering why you think it will be different for Noble and actually help create shareholder value.

Just on your early commentary, it's a cyclical business and you always run the risk in this business of having cycles sneak up on you. This thing will roll out and we think we're very well-positioned for it when it does roll out.

The MLP for us I think as you – if you look at some of the other people that have undertaken this structure, I think as you correctly point out, I think they have different drivers. For us, it creates increased flexibility for us going forward.

We're at the end of the capital program, not in the beginning or in the middle, it's a different need of cash, a different opportunity set for us. So for us at this stage in the cycle, it is a cyclical business.

It will roll out and it's not a question of if but when and we think the MLP structure provides us an opportunity to accelerate some things and to provide additional flexibility for us going forward. So this is purely in our mind about how to create more value for our shareholders.

Okay, thanks for that. And then just kind of on the other one as far as the share buyback, and not trying to read too much between the lines on the new repurchase authorization, but convening a special meeting of shareholders seems to put some sense of urgency behind it rather than waiting for the regular shareholder meeting in the middle of next year.

But along those lines and given the average price where the recent purchases were made versus the current share price, can we assume the remaining authorization of 400 million shares will be utilized here in the near-term? I know you guys [indiscernible] on what you could say around, specifically around share repurchases but is my line of thinking along the right track here?

Yes, you said 400 million shares [indiscernible].

I'm sorry, 4 million shares.

Yes, 4 million shares, so it's 4.8 million left. We were active at a higher price than it is now.

The share repurchase authorization we are asking is over the 4.8 million, so I think it's reasonable to assume that all things being equal that we think it's good value. So I think that's a reasonable assumption.

Congratulations on the good quarter and the Saudi extensions. David, am I wrong in inferring that your capital strategy now is implicitly dialing up your comfort level for leverage?

Can you refresh us on what you're thinking there as you embark on this buyback and possibly the MLP in terms of what your comfort area is for the leverage?

I'll let James add too. I mean we've all – I think we've been pretty consistent, Ian, about what we've said.

We've always maintained a range that we're fairly comfortable with but always said that we would be willing to get outside that range if we saw an opportunity that we thought made sense for shareholders. I think clearly where our current, where we think the shares are now, is one of those opportunities.

So without getting too distinct, I think that I'll say that and ask James if he's got anything to add to that.

Don't really have anything to add to that. The leverage will move, Ian, in the same direction obviously as the debt-to-capital.

In other words, as debt-to-cap reduces, so will our leverage.

Okay. A follow-up, Simon, you mentioned it sounds like of your open floaters, the Max Smith is one that you're relatively more constructive on outlook-wise.

What types of opportunities are you seeing in that part of the world with regard to the types of customers and types of contract terms that are out for bid?

There's a number of opportunities in Southeast Asia. Some have been receiving a bit of publicity here in recent weeks.

So it's a new region for us as Noble. We've only been in the region for a relatively short period of time.

We've had some success contracting a rig into Australia, or two rigs as of today. So that's a market of interest obviously.

And there are other opportunities in Southeast Asia more generally. So I don't really want to talk too much about individual opportunities but it's a market where we see opportunities in the near term for that rig.

I just wanted to follow up. You mentioned that the Ferrington is cold stacked and that's costing about $10,000 to $12,000 a day to stack.

As we look at the other idle or potentially idle semis in the fleet, from the Smith to the Wolff to the Romano to the Driller, if we think about some of those rigs potentially not being able to get work, is that $10,000 to $12,000 a day assumption on stacking for all of those rigs, is that fair, or given maybe that the Paul Wolff is a DP rig, should we think about that costing a little bit more?

Look, every rig [indiscernible] on response. It's going to depend on where the rig is stacked, the location, it's going to depend on the individual characteristics of the rig.

I think that's a good proxy for a conventionally [indiscernible] floater. For the Noble Paul Wolff, that's a rig that's in the shipyard at the moment.

We don't know exactly what we're going to do with that rig once we've done the discrete [indiscernible] work that we've identified. So I can't speak to what our anticipated costs of stacking that unit would be today, but I think the figure for the Ferrington rigs across the other conventionally [indiscernible] units, in a general sense, yes.

Okay, great. And then just James, as I think about 2015 contract drilling expense going forward, beyond the addition of the full year on the Madden and the Croft and a couple of the jackups that are coming online, should we be thinking about that being sort of a flattish number or should we be kind of modeling a couple of percentage points higher related to just sort of general cost inflation?

Greg, as you know I think we're right in the middle of our budget process right now for 2015, but what we're seeing at this point is probably somewhere around the 2% mark for inflation.

I don't want to harp on the MLP too much, but you have been pretty consistent in saying you would take a hard look at it, and certainly you have, and maybe I'm just kind of reading it or was reading the [tea-leaves] (ph) wrong, but it seemed like something maybe you were maybe leaning against, and maybe you weren't, but just if you could kind of go through the thought process there, and you've talked about this a little bit, how much of that was success that you've seen or just the market reaction you've seen with some of the other MLPs that have been in the market, how much of it is just again some of the conclusion of the processes that you had ongoing, if you could just elaborate on that just a bit more?

I don't think – I hate that people think that we were negative. We weren't really negative, but we recognized the benefits of it all along.

We've been considering it for a long time, it's been in the space for a good while. As long as we were as deeply involved in the Paragon transaction and trying to structurally create two entities that we could create a spin-off entity, we couldn't physically, we couldn't undertake to create the MLP during that environment.

So I mean we were looking at it, we've done models on it, James has done a great deal of research and been involved with a number of different advisors and keeping us advised on what the benefits and what the challenges of it might be. We really weren't in a position to fully consider it with any clarity until the spin was over, or to be able to act on it until the spin was over.

We've been monitoring it, and of course the fact that a couple of others have done it and recently it was done successfully by another group in the peer group, it certainly gives us comfort, but we took the decision, we did the evaluation, we've done a lot of research and a lot of analysis on it, we came to the conclusion that it's a structure that we think works for us. We've had that debate internally for a good while.

It doesn't serve us to telegraph anything to the market that we can't actually act on. So we recognize the benefits and the challenges but we came to the conclusion we think it's a structure that if the market supports us when we're ready, then we think it provides a lot of value.

James, do you have anything to add to that?

No, not really, other than the fact that we have been saying for a while that we would wait and watch and learn through that period, which we did.

So just a lot of [indiscernible] up until now. And then an unrelated follow up, you guys have fairly limited exposure to the jackup market coming up here and you've generally expressed a reasonably positive outlook for that market.

Given the deterioration in the macro fundamentals, the commodity prices, I generally think of the shallow water market as being a little bit more commodity price sensitive and we are now getting into the teeth of the newbuild deliveries here over the next say 18 months or so, are you more concerned about the same or has your outlook changed for the jackup market over the next again 18 months to two years?

I think the story for the jackup sector is the same as for deepwater. I think there is potential for it to trend down.

I think you're quite correct in saying that its fortunes are more tied to the prevailing commodity price. However, I would point out that pullback on the old price has been out there for a matter of weeks now, it's not months.

So I don't think it has necessarily caused a major U-turn in the fundamentals in terms of capital investment strategy by the operators and so on going forward. So, we're going to sit back and watch how that develops.

I think we've spoken before about the impact on deteriorating environment on potential opportunities for distressed assets in some of those yards in the Far East. So that will be of interest to us and to other people as well.

So, yes, it's wait-and-see at this point in time.

Sorry if you've hit on this, I got disconnected at the start of Q&A, but having the cash profile you do puts you in a pretty nice position where the uses of cash can actually be pretty diverse. So as you walk through the prioritization process of whether it would be buybacks, acquisitions, dividend hikes or even more newbuilds further down the line obviously, what's kind of the rationale or how do you prioritize these options that you have in front of you and maybe help us understand the framework for that?

Clearly I think right now given the Board has just approved the authorization, we're expecting to ask our shareholders for approval. I would say the buyback program is probably our number one priority.

I mean we are a drilling contractor and we certainly have a strong view of the long-term fundamentals of this business. We think what we're going through now is a temporary condition and it's a cyclical business, and again it will roll out, and when it rolls out it will be just as surprising to everybody as this one was, and it will be probably more dramatic on the upside I expect.

So, we want to position the Company to create as much value on that swing as we can. We think the repurchase of shares is a good thing, is an excellent opportunity for us, so we expect to act on that.

I don't know that raising the dividend right now does much for us or does much for the stock. But as you correctly point out, there are a number of options through the years going forward or the months going forward, there are options and we hope we'll be nimble enough to be able to take advantage of those opportunities when they come up.

And the quick follow-up here is, as you talk about those opportunities in the longer-term, have you begun to have discussions with your customer base on what 2017 could look like and are there any indications that the customer base may be looking for additional newbuild assets as we talk about the longer-term horizon, call it 2017, 2016 and so on, or 2017, 2018 and so on?

Look, I don't think we have any active discussions with that kind of horizon today. I can tell you that we do have general conversations with our key customers about the outlook and the evolution of the market, but I think everyone's horizon these days is more focused on 2015, 2016 and beyond.

So I don't know if there's much more to add than that.

Congrats on the Saudi extensions. I just had a quick question for Simon.

I know you touched on this earlier. On the two rigs, the Adkins and the Jim Day that are rolling off in the Gulf in '15 and '16, can you just speak a little bit about what you see as the outlook for the Gulf in 2015 going forward?

I think you had mentioned a little bit about this but are those rigs that have the potential to stay in the region or do you think you'll have to eventually move those out of there?

At the moment we're very comfortable having them in the Gulf of Mexico. Historically that's been a very elastic market, it's been a very responsive one when the cycle turns, whichever way that might be.

At the moment we are starting to see, I think we've commented several times, a growing trickle of inquiries principally through the smaller independents. Overnight there's been some market chatter that BP may now be looking for a high specification modern rig for Mad Dog.

So that could be the beginning of renewed interest in the Gulf of Mexico going forward, and we anticipate seeing demand improvement in 2015. But what I would caution you is that at the moment it's a trickle not a flood, but it's heading the right direction, and both of those rigs we believe are well-positioned to respond to an uptick, with the Jim Day rolling in the middle of the year and as we said – sorry, the Danny Adkins rolling in the middle of the year and the Jim Day in early 2016.

So I think they are excellent rigs for operators drilling demanding wells in the heart of the Gulf of Mexico deepwater.

And my other question is just on the Max Smith and the Romano. I know it's two different markets but what do you think is a realistic estimate for how much those rigs actually work next year, I mean is there a potential for them to need to be down for a significant amount of time early next year before finding work?

Look, I think you are going to see some idle time between contracts. In the current environment, as ourselves and many people in our peer group have said, it's very difficult to give detailed guidance because all the opportunities that are out there are so competitive and we don't want to tilt our hand to the competition.

At this stage we haven't given up on either unit. We have a number of opportunities for both of the rigs that you talked about, albeit in separate geographies, and we are at this stage hopeful of contracting both of the rigs for most of the year.

Both rating agencies in the wake of the announcement earlier this week have put your ratings on a review for downgrade and they haven't yet articulated how far the ratings might fall. So if the share buyback is approved by shareholders, is your intention to accomplish that as well as the MLP in a way that's consistent with maintaining investment grade ratings?

Harry, the investment grade rating is important to us, we recognize the importance of it and the economic benefit of having it. We will engage in the share buyback program in a measured manner.

So how that rolls out exactly remains to be seen and it depends on other events, it also depends on how the market performs.

Okay, and so by measured manner should we take that to mean not necessarily funding all of it with debt off the back but you're going to use cash flow and other sources of cash to fund it as opposed to doing a levered buyback?

That would be a reasonable assumption, yes, and we have positive free cash flow starting next year as well.

We've seen the weakness in the floater market leading to day rates falling pretty quickly, but has there been any changes in the contract language terms outside of day rates at all, like operators getting more stringent on unpaid downtime or really any shifts in the contract language?

Yes. I think there has been.

Our commercial leverage varies as a function of the business cycle and at the moment utilization is our key concern. I think that's true for everyone across the industry.

[Indiscernible] contract terms is subject to more renegotiation and the outcome would generally be more favorable to the oil companies, and that's part of our rationale for being careful about committing long-term at current spot rates in higher cost markets such as Brazil or even in more rate elastic markets where rates can improve quickly in the right conditions such as the Gulf of Mexico. All that said, not every aspect of the contracting bargain is under attack.

Liabilities [indiscernible] and other key provisions can be company killers and we are candidly aware of that. So we have set core principles that we are not willing to compromise, and I think that's true for other members and market competitors.

Okay, perfect. And then an unrelated follow-up, and it still might be early but with E&Ps either in the process of or having completed their budgets, can you give us a sense for what you guys expect to see from this year-end tender season, and if you could, how that compares to years prior?

I mean our expectation was that it was generally going to be flat for 2015, comparable to 2014, possibly a modest uptick, maybe a modest downtick. At this stage we still haven't got a clear indication from our key clients exactly where that's going to go.

As I mentioned in the prepared comments, we are a little bit concerned that the oil price deteriorated through the operator budget planning cycle, but I think it won't really be until we see the tender activity that's generated upon the conclusion of the budget planning process, and that's probably going to be towards the end of this month and into next month. That will be when we see the first hard results of where the operator community is going with capital allocation.

Okay, perfect. Thanks and congrats on the extensions.

Melissa, let's take a final question please.

My first question is a quick one on the MLP. Was it being formed in part to fund the increased share buyback that you announced or is it primarily for advantageous future growth of the fleet?

It's really being set up because it will give us flexibility going forward, and obviously the dollars are fungible within the business, so if some of the dollars are used for share buybacks, that may be the case.

Okay. And my other question was, David said that heavy exploration in the past six years suggest the future activity will be weighted more towards delineation rather than exploration, and I was wondering do you see any significant bifurcation in future day rates between delineation versus exploration work?

Interesting question. No, I don't think so.

I think most of the rigs that have been added to the fleet in recent years are equally capable of exploration and appraisal drilling. Really the differential in rates that we see in the market is really more a function of the [term] (ph) [indiscernible] operator provides at a point in time rather than the type of work that we are performing.

I do think that as the deepwater completions become more challenging, as the types of reservoirs that we access become more demanding in terms of surface equipment requirements, that there might be a requirement for a new type of rig, and I think that BP and Anadarko's moving to 20,000 is an excellent example of that. I think some of those field developments might drive a requirement for new rigs that currently don't exist in the marketplace, and obviously those capital investments will require a different pricing equation given that they have to be built.

So generally speaking, I don't think there will be a departure other than to the extent it relates to new technology or leading edge requirements and the need for new rig construction to fill those needs.

Okay, thanks, that was helpful color.

Okay, Melissa, we're going to go ahead and close the call. For those of you left in the queue, John Breed and I will be contacting you over the course of the day to address your questions.

Thank you for your participation on the call today and your interest in Noble. And Melissa, thank you for coordinating the call.

Good day, everyone.