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Noble, Ensco profits fall Despite second quarter dip, contract drillers see improving market conditions in Gulf of Mexico, but North Sea remains drag on earnings Ray Tyson Petroleum News Houston Correspondent
International rig markets in the 2004 second quarter continued to improve along with the Gulf of Mexico, but the North Sea remained a drag on earnings for contract drillers Noble Corp. and Ensco International.
“While we are generally more encouraged about the improvement in several markets, it is still too early to conclude we have turned the corner in terms of a clear worldwide acceleration in activity,” James Day, Noble’s chief executive officer, told industry analysts in a July 20 conference call.
Noble’s profit in the 2004 second quarter, with the help of a stronger rig market in West Africa, increased 22 percent from the previous quarter to $34.4 million or 26 cents per share. But the company’s second-quarter net was down 21 percent from the $43.7 million versus the same period a year earlier.
Despite the decline in profit, operating revenues for the 2004 second quarter were $253-mil compared to $247.9 million for the same period last year.
“Worldwide activity over the last two quarters continued to improve, certainly not dramatically, but in a very measured fashion,” Day said. “I’m constantly amazed that people struggle in this market to achieve good returns.” Earnings up 5 cents per share Noble’s overall earnings were 5 cents per share higher in the 2004 second quarter versus the year-ago period. However, 2004 second-quarter profits in the North Sea alone were 3 cents per share lower than the previous quarter and 9 cents per share below a year earlier, Noble said.
Noble’s rig utilization in the North Sea decreased to 81 percent in the second quarter of 2004 from 95 percent in the second quarter of 2003, the company said, adding that the average day rate in the region decreased nearly $10,000 from $60,150 in the second quarter of 2003 to $50,247 in the recent quarter.
Market conditions in the Gulf of Mexico are improving but not by much, Day said, adding that “the only thing that looks somewhat promising is some of the deeper water projects that may be coming up.”
The average rig day rate on the company’s deepwater assets in the U.S. Gulf capable of drilling in 6,000 feet or greater decreased 30 percent to $96,727 in the second quarter of 2004 compared to the second quarter of 2003, while utilization increased to 99 percent from 71 percent.
He said rig day rates in some areas of the U.S. Gulf are currently averaging between $40,000 and $50,000 but that Noble “would like to see them” in the range of $70,000.
“We believe we’ll be able to march toward that range over the next 18 months, as activity in deeper water starts improving,” Day said.
However, overall rig bidding activity year-to-date in the U.S. Gulf is down compared to the same period last year but is up internationally, he said.
“In general, the Gulf of Mexico is improving but only slightly,” he said. “It’s really nothing in our opinion to get excited about. But hope springs eternal.” Rig acquisition program provides biggest lift While improving market conditions West Africa not doubt helped in the 2004 second quarter, it was Noble’s rig acquisition program that proved the biggest lift, adding 5 cents per share in net income during the quarter.
The company added two premium jack-ups to its fleet and plans to add a third in November. “These recent acquisitions will also be accretive to earnings in the second half of the year,” said Mark Jackson, Noble’s chief financial officer.
He noted that the company’s recent rig acquisitions were paid from cash flow. In addition, Noble generated enough cash during the first six months of this year to finance its capital projects and to repurchase 1.1 million shares of its stock without having to resort to credit. Ensco continues Gulf upgrade Meanwhile, Ensco International said that after having lagged other markets, the U.S. Gulf and the North Sea are now showing signs of improvement. “We continue our upgrade program in the Gulf of Mexico,” said Carl Thorne, the company’s chief executive officer.
Still, Ensco’s 2004 second-quarter net income of $17.5 million or 12 cents per share was down nearly 44 percent compared to the same period last year. Revenues were $181.4 million versus $194.3 million.
The company’s rig day rate for its operating jackup rig fleet was $51,200 for the second quarter of 2004 compared to $47,500 in the prior year quarter. But utilization of the company’s jackup fleet decreased to 83 percent in the most recent quarter from 88 percent in the second quarter of 2003.
“Consistent with our expectations, the demand for premium jackups is strengthening with activity in the second half of the year expected to be stronger than in the first half,” Thorne said, adding that activity currently remains strong in the Pacific Rim, Middle East and India.
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