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Good morning. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Noble Corporation Plc First Quarter 2019 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. [Operator Instructions] Thank you.
Mr. Jeff Chastain, Vice President Investor Relations. You may begin.
Thank you, Krista, and welcome everyone, to Noble Corporation's first quarter 2019 earnings conference call. Thank you for your interest in the Company. In case you missed it, a copy of Noble's earnings report issued last evening along with the supporting statements and schedules can be found on the Noble Corporation website, and that's noblecorp.com.
Julie Robertson, will begin the discussion this morning, but before I turn the call over to her, I'd like to remind everyone that we may make statements about our operations, opportunities, plans, operational or financial performance, 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 website, 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. And this would include 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, we are referencing non-GAAP financial measures in the call today. You will find the required supplemental disclosure for these measures, including the most directly comparable GAAP measure and an associated reconciliation on the website. And finally, as we have done for several quarters now, we will be post to our website a summary of our financial guidance covered on today’s call.
And with that, I'll now turn the call over to Julie Robertson, Chairman, President and Chief Executive of Noble.
Thank you, Jeff, and good morning, ladies and gentlemen. We appreciate you taking the time to join us today for our first quarter 2019 results and your continued interest in Noble. It has been a promising start to the year and we have a number of details and encouraging developments to review relating to Noble and the offshore drilling industry.
In addition to Jeff, joining me today are Adam Peakes, our Senior Vice President and Chief Financial Officer; and Robert Eifler, our Senior Vice President of Marketing and Contracts. Adam will lead you through a discussion of first quarter financial results and update financial guidance for the year, and Robert will provide a review of the Noble fleet and an assessment of global offshore regions and opportunities. I will then offer some closing comments before we begin taking your questions.
I'm encouraged by our strong start to 2019 and the growing evidence is steady fundamental improvement in the offshore drilling industry. With regard to the first quarter, I could speak to progress on several fronts. In February, we added a second newbuild jackup to the fleet with the purchase of the Noble Joe Knight.
The rig is currently completing client requested upgrades and commissioning and preparation for an expected third quarter commencement of a three-year contract offshore Saudi Arabia. The Joe Knight is a sister rig to the Noble Johnny Whitstine, which was purchase last September and convinced the three-year contract offshore Saudi Arabia in mid-April.
First quarter total fleet utilization improved to 76%. Although only modestly better than the previous quarter it is significantly improved from total fleet utilization of 47% in the first quarter last year. Utilization of our 13 rig jackup fleet of which 11 units were active in the first quarter remained at an industry leading 93% about flat with the previous quarter due to some out of service days and the Noble Tom Prosser while transitioning between contracts.
However, utilization was meaningfully improved from the 56% we reported this time last year. We also experienced further activity improvement among our 12 floating rigs. Utilization for this subset of the fleet reach 60% for the first time since mid-2016 and compared favorably to utilization in the fourth and first quarters of 2018 of 56% and 37% respectively.
Marketing utilization of our floating fleets, which excludes our three cold stacked units was 80% in the first quarter compared to 75% and 57% during the same period in 2018. From this measure, you can see the meaningful activity improvement achieved to-date.
A year-ago, we concluded the prospects for the industry improvement are increasingly supported by certain leading indicators of offshore activity. Therefore, we moved decisively to reactivate our warm stacked premium capacity in order to advantageously position for a pending recovery.
This well timed and cost effective reactivation program has paved the way to better fleet utilization and financial achievement. The combination of increased premium rate capacity located in or near regions with emerging customer demand has allowed us to achieve important commercial successes, while wealth is in – our fleet for future opportunities.
Five of our previously warm stacked rigs have been reactive over the last 16 months including four floating units and one jackup. The loss of the reactivation projects involving the drillship Noble Sam Croft was completed during the first quarter of 2019 when the rig commenced an initial program in the U.S. Gulf of Mexico to be followed later this year by contract commitment for work offshore Suriname.
All five of these reactivations are contracted and are currently executing our customers drilling programs. Equally important, these rigs and others in our fleet are beginning to assemble work programs, then in some cases extend well into 2020.
For example, after an initial contract award for the Noble Tom Madden covering two from plus three option wells offshore Guyana, this January the rig secured an additional one-year of work with our customer. That should keep it committed into mid 2020.
Also the semisubmersible Noble Clyde Boudreaux is now expected to work into the first half of 2020 following the March 2019 extension of the rigs work program officer Myanmar. In April, the contract and the Noble Sam Hartley was extended by nine months continuing to rigs work program into April 2020 in the UK sector of the North Sea.
With regard to other contracts achievements the Noble Don Taylor as disclosed in our April fleet status report or seeking contract extension for work in the U.S. Gulf followed by one-year on assignment offshore Guyana. The rig is now expected to be committed into the second half of 2020.
Once in Guyana, the Taylor will join the drillships and Noble Bob Douglas and Noble Tom Madden enhancing our role as a leader of contract drilling services and what continues to be one of the industry's most opportunity rich offshore basis.
As a final comment on our fleet, the drillship Noble Globetrotter II completed the installation of our managed pressure drilling system during the first quarter, further expanding the rigs capabilities and client appeal. The new system, which reflects the extensive involvement from Noble's subsea control engineering talent has a modular design and a smaller footprint than other MPD systems in use today and can easily be deployed for installation on other floating units in our fleet.
In April, the Globetrotter II convinced drilling program offshore Bulgaria in the Black Sea where the system is fully launched. With the added MPD capability, the work will receive an enhanced effective dayrate during the drilling program. As we closed the first quarter of 2019, 95% of our actively marketed fleet was contracted, including all 13 jackup and eight of nine market floating units.
Robert, will have more to say about emerging opportunities for our fleet in a moment. But first I want to turn the call over to Adam for review of first quarter financial performance.
Thank you, Julie. Good morning and welcome to everyone. First quarter 2019 results were highlighted by further improvements in total fleet operating days with utilization for the quarter reaching 76% compared to 47% in the same quarter of 2018. Also contracts only services revenues finished the quarter at the high end of our guided range while the company delivered another quarter of excellent operational performance as demonstrated by fleet uptime of 97.8%, which remain near record levels.
These outcomes supported the higher than guidance level of EBITDA in the first quarter. A greater importance and as Julie touched on, the combination of well timed rig reactivations and strong fleet positioning has played a significant role with regard to our commercial achievements through April and leave the company favorably positioned as we were reassessed the financial outlook for the remainder of 2019.
I will review our updated thoughts on financial guidance in a moment. First, I want to review some important aspects of our first quarter performance. For the first quarter, Noble reported a net loss attributable to the company of $71 million or $0.29 per diluted share.
As was noted in our earning report $4 million or $0.02 per diluted share was accounted for as discontinued operations resulting from the recognition of a reserve for a Mexico customs audit that extends back to our previous ownership of the standards specification assets that operated in that country.
The Company's net loss from continuing operations was $67 million or $0.27 per diluted share on total revenues of $283 million. The results included an after tax gain of $25 million or $0.10 per diluted share, resulting from the early extinguishment of debt following our March, 2019 cash tender offer. I'll provide some additional details on the tender offer in a moment.
Excluding the impact of the gain from the early debt extinguishment Noble would have reported a first quarter net loss from continuing operations attributable to the company of $92 million or $0.37 per diluted share. We have included a non-GAAP supporting schedule with our press release and that schedule can be found on the Noble website at noblecorp.com. That schedule provides reconciliations of non-GAAP numbers to net loss attributable to Noble Corporation, to income tax provision and to diluted earnings per share for the first quarter of 2019 and fourth and first quarters of 2018.
Contract drilling services revenues in the first quarter totaled $271 million compared to $292 million in the fourth quarter of 2018. The 7% decline was due in part to lower average daily revenues in the floating rig fleet. More specifically, revenues from the drillship Noble Don Taylor declined in the quarter following the completion in February of a multiyear contract signed prior to the industry downturn.
Also, the Noble Globetrotter II as I noted during our February call, was at a standby rate in the first quarter while completing the installation and testing of a new managed pressure drilling system. The rig returned to a full dayrate in early April following the commencement of our program in the Black Sea.
In addition, revenues in the first quarter were reduced by the fourth quarter 2018 retirement of the standard duty jackup, Noble Gene House as well as by fewer calendar days. These adverse factors were partially offset by operations on the drillship Noble Sam Croft and Noble Tom Madden and the jackups Noble Sam Hartley and Noble Tom Prosser.
Contract drilling services costs declined 4% in the first quarter to $172 million compared to $179 million in the fourth quarter of 2018. Costs in the quarter were 4% below fourth quarter 2018 due to the retirement of the Noble Gene House and other previously announced rig retirements.
Also, lower expenses for repair and maintenance, shore-based support costs and rig mobilization costs contributed to the decline. These favorable events were partially offset by an increase in floating rig activity. Our margin on contract drilling services in the first quarter was 37%, down from 39% in the fourth quarter reflecting the lower average daily revenues in the floating fleet.
EBITDA ended the first quarter at $86 million a better than guidance outcome due in part to favorable fleet uptime and contract drilling services costs ending the quarter at the low-end of our guided range. Before I address the first quarter capital expenditures and certain items on the balance sheet, I want to provide an explanation for interest expense and non-controlling interests to P&L line items that fell outside of our range of guidance provided in February.
Interest expense in the first quarter totaled $70 million below our expected range of $72 million to $74 million. The modestly favorable result was due primarily to higher capitalized interest relating to the upgrade and commissioning projects on the Noble Johnny Whitstine and Noble Joe Knight.
Concerning non-controlling interest, we recognized expenses of $4 million compared to a range of guidance of $1 million to $2 million of expense. The higher result which signifies increased aggregate profitability of the Noble Bully I and Noble Bully II joint ventures with Shell was due primarily to a reduced level of expenses relating to the Bully II, while the rig remains warm-stacked.
Capital expenditures for the first quarter totaled $83 million excluding $54 million in seller financing relating to the February, 2019 purchase of the newbuild jackup Noble Joe Knight. Our first quarter total capital spend was comprised of the following categories; $8 million in sustaining capital, $41 million relating to major projects, which included rig reactivations and the purchase of Subsea capital spares, $30 million for the upfront purchase price of the Noble Joe Knight, and $4 million of capitalized interests.
Capital expenditures in the first quarter were approximately 14% below guidance due largely to lower outlays for sustaining capital and major projects the latter due to the timing of expenditures for the Noble Joe Knight.
Finally, in March we completed cash tender offers for certain of our outstanding Senior Notes resulting in the purchase of $441 million aggregate principle amount of notes for $400 million plus accrued interest. We use cash on hand and the $300 million of available capacity on our 2015 credit facility to fund the tender.
This opportunistic transaction modestly reduced debt maturities through 2024, while also reducing annual interest expense by approximately $10 million. We closed the first quarter with cash and cash equivalents of $187 million and $350 million outstanding on our revolving credit facilities.
Next, I'll provide an updated financial guidance covering both the second quarter and the remainder of 2019. Although, our fleet uptime has remained at near record levels including 97.8% during the first quarter of 2019 we are maintaining and assume fleet uptime factor of 96% or 4% downtime before now.
New contract awards and extension security date are expected to result in a 16% increase in 2019 total fleet operating days compared to the same measure in 2018 driven in part by the floating fleet. We believe our fleet uptime guidance reflects a prudent expectation given a high level of sophistication and complexity found in our floating fleet.
We are raising guidance for a contract drilling services revenues in 2019. With a new range at $1.04 billion to $1.07 billion up from the previous range of $1 billion to $1.03 billion. The favorable revision is driven largely by an expected increase in days and our contract on the Noble Sam Croft and the Noble Joe Beall.
Revenues from client reimbursables or revised slightly higher to a range of $35 million to $45 million in 2019. In the second quarter of 2019 revenues are expected to range from $255 million to $265 million compared to $271 million in the first quarter of 2019.
The modest decline is due primarily to lower average daily revenues in the floating fleet led by the late February conclusion of a legacy contract on the Noble Don Taylor, which was partially offset by higher activity on the Noble Sam Croft, Noble Tom Prosser and Noble Johnny Whitstine, which commenced operations in the Middle East on April 19.
In addition, revenues for the Noble Globetrotter II are expected to increase in the quarter following the installation and utilization of its managed pressure drilling capabilities. Revenues from client reimbursables are expected to remain in a range of $7 million to $12 million in the second quarter.
Guidance for contract only services costs is modestly increased to arrange of $710 million to $730 million in 2019 compared to a previously stated range of $705 million to $725 million. The increase is driven by the continued growth and total fleet operating days, including increased contract coverage for the Noble Don Taylor and Noble Clyde Boudreaux and an approving outlook for the Noble Sam Croft following the rigs mobilization in June to South America were incremental prospects continue to emerge.
Client reimbursables for 2019 are expected to range from $25 million to $35 million. For the second quarter of 2019, contract drilling services costs are expected to range between $175 million and $185 million compared to actual results of $172 million in the first quarter of 2019. The increase is due largely to the commencement of operations on the Noble Johnny Whitstine. Costs associated with client reimbursables in the second quarter are expected to remain in the range of $5 million to $10 million.
DD&A guidance for 2019 is unchanged at a rate of $445 million to $460 million. Also, we do not anticipate the change in DD&A for the second quarter when compare to the previous quarter. A range of guidance remains $110 million to $115 million compared to actual expense in the first quarter of $110 million.
SG&A expense guidance for 2019 remains at $65 million to $75 million, while the second quarter range will remain at $16 million to $20 million. Actual expense in the first quarter was $16 million. Interest expense guidance for 2019 is lower to arrange of $290 million to $296 million compared to our previous range of $295 million to $300 million.
The decline is primarily driven by our March 2019 tender offer and as net of an estimated $9 million and capitalized interest relating to projects for the Noble Johnny Whitstine and the Noble Joe Knight. Interest expense for the second quarter is expected to total between $71 million and $75 million net of an expected $3 million in capitalized interest. Interest expense in the first quarter was $70 million.
Non-controlling interest on our P&L representing the Bully I and Bully II 50-50 joint ventures with Shell are now expected to range from $8 million to $12 million of expense in 2019 compared to a previous guided range of $5 million to $10 million. The increase which represents higher joint venture profitability is due to reduction and project operating costs, especially on the Bully II. We expect non-controlling interest of $2 million to $3 million of expense in the second quarter compared to actual expense of $4 million in the first quarter.
Capital expenditures for 2019 are unchanged from our previous guidance of $250 million. The major components of capital spend include $91 million for sustaining capital, a $120 million for major projects, including reactivations and Subsea spares, $30 million relating to the purchase of the Noble Joe Knight, and $9 million relating to capitalize interest.
Capital expenditures for the second quarter are expected to total $90 million, including sustaining capital of $33 million, major projects at $54 million, which includes projects associated with the Noble Johnny Whitstine and Noble Joe Knight and $3 million for capitalized interest.
Finally, we now expect our full-year 2019 effective tax benefit to be in the low single digits driven largely by the geographic mix of revenues. Estimated cash taxes to be paid in 2019 remained at $20 million and relate entirely to our international operations.
In summary, it should be clear for my comments this morning that industry recovery is underway and a Noble is capturing the benefits of an improving cycle. We continue to leverage our premium fleet and attractive regional exposure to secure further commercial, operational and financial successes.
Total fleet operating days, which are now conservatively expected to increase 16% this year, continue to expand as we witnessed a broadening industry recovery and we secure contracts and extensions across our floating and jackup fleets.
The growth in our days and our contract and an improving dayrate environment provide support to our revenue backlog, which closed the first quarter at $2.3 billion and are driving positive revisions to our expected 2019 revenues and EBITDA.
As Robert will confirm, the steady rise and contract opportunities is improving the prospects for our fleet and driving the potential for additional positive revisions to our 2019 outlook as the year progresses.
I'll now turn the call over to Robert for more commentary on the improving offshore drilling environment.
Thank you, Adam. Good morning and welcome to everyone on the call. Like Julie and Adam, I am also encouraged by the steady evidence of improvement in the market for offshore drilling services. Only a quarter ago, we sided concerned about delays and operator drilling plans following what proved to be a short lived decline in crude prices during late 2018.
That concern has largely been dismissed due to mounting evidence of an industry that continues as steady and broadening climb off a cyclical bottom and there is no better evidence of fundamental industry gain then rigs are turning to work. During the first quarter, the industry slowing rig fleet was awarded a total of 59 contracts including an impressive 45 awards in the month of February.
The inflection in customer awards drove utilization of the industry's marketed floaters at the end of the first quarter to 80% the highest measure reported since September, 2015. Also the same utilization measure was matched by the industry's Jacqueline Fleet, which closed the first quarter at 80% marketing utilization while a subset of the jackup fleet representing premium rig designs approach to a hundred percent marketing utilization over the initial four months of 2019 we have seen an estimated 44 rig years awarded to jackups with more contract awards imminent.
Before I closed my comments today, I'll provide some perspective on where floating and jackup demand is most apparent and more importantly where we could experience further contracting success as the year progresses. Some interesting trends are gaining strength early on in 2019 and these movements are expected to play a significant role in elevating rig activity over the near to intermediate term.
First, we have begun to experience a lengthening of contract duration for jackups with the measure over the first four months of 2019 improving to an average of just over 400 days compared to under 350 days during the last six months of 2018.
Recall that the industry is jackup or first to reach cyclical in late 2017 average contract links among the industry floating fleet has remained static for now when measured over the same period at approximately 220 to 240 days. However, 11 of the 59 floating rigs contract awards during the first quarter had a primary term of one year or longer, an additional six contracts of a year or longer were awarded in the month of April.
Also transactions among operators continue to transfer ownership of offshore production assets into portfolios of companies with a greater likelihood of drilling the prospects. We've already seen a number of examples in 2019 and regions such as the UK, North Sea and U.S. Gulf of Mexico.
Furthermore, access to promising offshore basins both mature in frontier is expanding its licensing rounds are offered by an increasing number of host countries, many of these regions including numerous countries in South America are attracting heightened interest from operators following an evaluation of resource potential.
Finally, many offshore programs are being extended its customers increasingly exercise option wells that are included in the commercial terms of the contract. The practice is adding divisible rig days under contract in tightening fleet capacity.
Referencing again data pertaining to the industry's floating fleet, and estimated 32 rigs or 25% of the average number of rigs under contract, saw their drilling programs scope expand through April following the decision by customers to exercise well options. In the Noble fleet through April, our customers exercise the options on four different rigs, including three floating units in one jackup and we expect the trend to continue.
On that note, I want to update you on the current status of the Noble floating and jackup fleets. Julie has already mentioned our strong commercial achievements over the first four months of the year, including contract awards covering one-year for both the ultra-deep-water drillship Noble Tom Madden and Noble Don Taylor. Both programs cover drilling services in the Guyana basin.
Also, we secured the addition of year of work for the semisubmersible Noble Clyde Boudreaux, offshore Myanmar following the exercise of option wells, and most recently, a nine month extension for the jackup Noble Sam Hartley in the UK, North Sea, and an eight month extension for the standard duty jackup Noble Joe Beall in the Middle East.
In our floating fleet, the ultra-deep-water drillship Noble Sam Croft and the semisubmersible Noble Paul Romano represent the only available capacity in 2019 among our nine marketed units.
Following the completion of its current drilling program in the U.S. Gulf of Mexico in May, the Noble Sam Croft will mobilize Suriname where the rig will drill one from well and possibly three more optional wells. In the event that all option wells are drilled, the rig would be available in early 2020 to address other customer needs in the Western Hemisphere.
The Noble Sam Croft has won four Gusto designed drillships in the Noble fleet. All four of these high specification units are currently under contract for the first time since mid-2016. Also, given its conventionally-moored capability, the Noble Paul Romano is under consideration for opportunities in both the Western and Eastern Hemispheres and we are increasingly optimistic that the rig will return to work in 2019.
Our three inactive floaters, the semisubmersibles Noble Jim Day and Noble Danny Adkins and the drillship Noble Bully I, remain cold stacked as we searched for work programs that will provide suitable returns on our reactivation cost. Similar to our floating rigs, open capacity in 2019 among our jackups is limited. Following the recent extensions for the Noble Sam Hartley and Noble Joe Beall, available days are restricted to the Noble Hans Deul in the UK, North Sea and the Noble Mick O'Brien in the Middle East.
Although, the Noble Hans Deul is expected to be available in July, two option wells remain as part of the program executed in early 2018, which if exercised could consume the remaining days in 2019. The Noble Mick O'Brien is expected to complete its current well assignment offshore Qatar in August.
We are evaluating additional customer needs in and outside of the region and remain confident that a premium rig such as the O'Brien should attract ample client interests given its technical sophistication in history of proven performance. Our jackup fleet remains largely consolidated in the UK, North Sea in Middle East regions where 11 of 13 units currently or will soon reside.
I now want to provide an update on regional market developments and opportunities beginning in the Western Hemisphere. In the U.S. Gulf of Mexico, the marketed supply floating rigs continued to decline through the first quarter of 2019 and is now down 50% over the last three years. The steady decline in supply coupled with a modest increase in customer demand has pushed marketed utilization in the region above 80%. Due to the tighter capacity, dayrates for premium floaters in the region are increasing.
The U.S. Gulf of Mexico continues to hold the priority status with a number of exploration and production companies due in part to ample deepwater infrastructure in a steady level of geologic success with 28 announced deepwater discoveries since 2015. The Noble Globetrotter I is in the process of relocating to the region following the completion of a drilling campaign in the Eastern Mediterranean.
A steady increase in jackup rig needs is expected in Mexico as the country looks to arrest steadily declining production, which fell to a 40-year low in January of 2019. Demand for as many as 15 jackups is expected over the next two years and P-MAX awarded three jackup contracts in the first quarter. We continue to expect floating rig needs in the region to increase in 2020 and beyond.
South America is home to an increasing number of attractive locations. In Brazil, recently these awards associated with the fourth and fifth Pre-Salt Bid Round indicate the country could absorb three to five floaters over the near to intermediate term. Three more lease rounds are scheduled for 2019 covering acreage and pre-salt, post-salt and in open acreage round.
These spending rounds are expected to drive additional interest from international exploration and production companies who collectively have under contract just to have a total of 16 floating rigs in Brazil. Following recent contract awards for three ultra deepwater floaters, Petrobras now has tenders outstanding for three shallow water semisubmersibles and two or more ultra deepwater floaters. We anticipate rig demand by both Petrobras and international operators to ramp up through 2020 and beyond.
Exploration offshore Guyana continues with exceptional results. Driving the likelihood for additional floating capacity as resource potential and development opportunities expand. 2019 we'll see at least five ultra deepwater drill ships operating offshore Guyana, three belonging to Noble.
Also exploration offshore Suriname is set to continue in mid-2019 with the Noble Sam Croft. Operators are also expressing interest offshore, Trinidad and Tobago, Colombia, Peru and Nicaragua. In the Eastern Hemisphere North Sea jackup demand remains robust with nine new contracts announced over the first quarter.
Dayrates for high specification jackups increased over the quarter and continue to raise as capacity for these units remains tight. Seven premium jackups in the region are expected to conclude contracts in 2019 and most are likely to be extended, including our Noble Hans Deul. Recently the lead time between tendering and contracts start has increased notably. And we believe that is a sign of operators growing cognizant of securing rigs in the tightening market.
In the Middle East jackup opportunities remain plentiful. Over the first quarter Saudi Arabia awarded 23 rig years of work including three years to the Noble Joe Knight. Despite these awards and additional 50 rig years of open demand remains under evaluation in Saudi Arabia, Qatar and Kuwait.
Marketed utilization of the jackup fleet has risen above 80% and see you high specification units are available. Creating an environment that is conducive for dayrate appreciation. West Africa on the Mediterranean regions continue to experience muted tendering activity, while rig availability in the regions remains high.
Although the capacity and balanced is expected to persist for another year, demand is expected to increase in 2020. Finally, opportunities remain encouraging in the Far East and Oceania. Jackup rig demand is trending higher in Malaysia and fleets owned by local drilling contractors are expected to reach full capacity during 2019, creating greater opportunity for international contractors.
Contractors Asians are expanding and dayrates have begun to appreciate. It's confirmed by recent contract awards in Malaysia and Vietnam. Offshore Australia an increase in development drilling programs aimed at improving natural gas production has resulted in several contract awards for both jackups and semisubmersibles in the region.
For example, the Noble Tom Prosser was awarded a series of contracts in late 2018 that should keep the rig employed into mid-2020 and is a strong candidate for additional customer needs in the region that could extend the rig into 2021. Floating rig needs in the region have improved in dayrates have shown progress as well. As I noted earlier, the Noble Clyde Boudreaux has added a year or its primary term and we already see several opportunities for follow on work in the region.
In closing, the early days of steady industry recovery are underway. More rigs are returning to work, leading to rising utilization among the industries marketed floating and jackup fleets and rig operating margins are once again improving his dayrates begin to appreciate.
Sustainability of the cycle seems more likely when we consider our customers noted improvements in offshore project economics, a growing list of projects to be sanctioned for development, a particularly encouraging increase in exploration activities worldwide and growing interest among our customers for greater access to promising offshore basins. I believe the Noble fleet is in an excellent position for this early stage of the cycle. With 21 of our 22 marketed rigs contracted, we are embedded in some of the industry's most active regions for floating and jackup rigs.
More importantly, many of these regions such as the Guyana and Suriname basins, the UK, North Sea, Middle East and Australia possess excellent long-term opportunity for our fleet as operator needs expand and exploration in field development. Thank you. And I look forward to addressing your questions.
I'll now turn the call back to Julie.
Thank you, Robert and Adam. Before we begin addressing your question, I want to offer some final thoughts. We have many reasons this morning for our positive tone. First, we note undeniable improvement and enthusiasm toward our industry.
After 48 months, a very challenging conditions we can refer to an industry that is now on a positive different trajectory. Affirming the fundamental indicators as noted by Robert, strongly suggest a broadening industry recovery as the year progresses and we enter 2020.
Our customers are increasingly turning to projects in their offshore portfolio as they evaluate economically attractive programs with a potential to significantly augment future production and reserves. Marketed utilization of the industries offshore fleet has begun to tighten, and as Robert noted, evidence continues to appear in support of further rig demand for both floating and jackup units.
Tightening of capacity is increasingly evident in the Noble fleet. Among our floating rigs, the Company has 57% of the days available over the next 12 months currently committed to contracts, up from at least 49% at the beginning of the year. At our jackup fleet 81% of the available days over the next 12 months are contracted compared to 75% as the year began. Further tightening is increasingly likely in both areas of the business.
As I said in my opening comments, I'm very encouraged by our achievements over the first four months of 2019. I believe Noble has established an enviable competitive position as prospects for a healthier industry cycle unfold. Another opportunistic rig purchase, a highly successful reactivate and position strategy, newest contract awards and extensions in key offshore basins along with a strong revenue backlog in value adding fleet enhancements, collectively fortify our industry position as recovery in offshore activity progresses and new opportunities emerged.
The regional positioning of our diversified fleet of jackup and floating rigs is exceptional and combining with our high standards was consistently safe and efficient operations, Noble has the attributes for long-term success.
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As always, I want to thank the Noble team around the globe, their continued dedication, commitment, and hard work which combine for superior operating performance for our customers. These men and women continue to exemplify the Noble culture, which sets us apart from our peers and I'm grateful for their unwavering loyalty and support.
I'll now turn the call back over to Jeff.
Okay, Julie. Thank you. Krista, we have a number of questions in the queue today, so let's go ahead and get started. If you begin the – assembling the queue, I’ll remind everyone to please limit their questioning to one and a follow-up, so that we can take as many questions to the top of the hour as possible. Krista, go ahead with the first question please.
Certainly. Our first question comes from the line of Kurt Hallead with RBC. Please go ahead. Your line is open.
Hey, good morning.
Good morning, Kurt.
It sounds like there's more positive momentum building, which is good to know after a number of challenging years. So in that context, you guys have, I believe four rigs that are currently idle, given the backdrop of improving demand dynamics, I was wondering you could give us some perspectives on how many of those four rigs do you think could potentially find some work before maybe the end of 2019? And if you're so willing to make an assessment as well as how many of those four rigs could find their way back into the market? And then as part of that process, what are the cost dynamics of potentially getting those rigs to get ready and get back to work?
Sure, Kurt. I’ll take that one. So the Paul Romano I think has a very good chance of getting back to work this year. We're evaluating a number of opportunities right now all over the globe. There are only a few more rigs available out there and we think that fits nicely into a couple of different opportunities.
On the cold-stacked rigs, I think it's a bit of a different story. As we've said before in order to reactivate those, we'd be looking for a significant recruitment of costs during the initial contract. And that hasn't changed at all. We are bidding certainly the day in the Adkins into a number of opportunities. We continue to believe those rigs have a few unique capabilities including their size, hook load, DP3 status and the fact that they're upgradable to add mooring and potentially some offline efficiency activities.
We believe those have a place in a couple of different regions around the world. We need the market to catch up and allow us to justify the reactivation costs. So we're not there yet. But we do think that those rigs have the potential to offer some efficiencies to some customers around the world.
I appreciate that. What the cost for bringing the Romano and getting that ready to work and what's the cost maybe getting one of those cold-stacked rigs back into working order?
Romano, we’ll say $3 million to $5 million and I think probably at the lower end of that range depending on where we take the rig. And then the cold-stacked rigs, we've said previously is $50 million to $100 million and that depends largely on the customer requirements and again where we would put them to work.
And Kurt, this is Adam. I guess I'd just add to it. Our CapEx guidance assumes the Romano’s, is back working. So that's already embedded into the CapEx that we've put forward as our 2019 guidance. It does not have anything as it relates to the day in the Atkins. I think from Robert's comments, I think sitting here in the room we think it's highly unlikely that that's a 2019 event for the day in the Atkins.
I appreciate that color. Maybe one additional follow-up, just in the context of as the market's improving and as you're most likely going to have a number of opportunities, bring at least one of those cold stacked rigs back to work over the next year and a half. What kind of contract duration would you be willing to entertain and what kind of cash margin would you require in order to get the return necessary to bring that back into service, so one of those rigs back into service?
Sure. So multivariable equation there, I think really, we just want significant payback of the reactivation costs during the term of the first contract. So margins aren't there today. We think that – we get to a place here sometime next year where that becomes a possibility and we're marketing the rigs as such. So I think mainly we're looking for a return on the investment and we want to see a significant portion of that during the term of the first contract.
Okay, great. Thanks. Appreciate all that color. Thank you.
Thanks, Kurt.
And your next question comes from the line as Sasha Sanwell with UBS Securities. Please go ahead. Your line is open.
Thank you and good morning. Yes, just wanted to start off kind of following up in your commentary on the industry of recovery. In the last year earnings call, you spoke about how Noble is looking at. I guess indexed and type mechanisms to kind of bridge the gap to a more resilient dayrate environment that we could have in 2020. And so kind of given the focus and discipline in near-term bidding strategies, could we get an update in your thinking there and maybe what you're seeing in the marketplace today?
Sure. I think one of the biggest changes in the last few months has been I think along the lines of price options that were a lot less willing to give out price options today and when a customer really needs some level, certainly we have been looking at indexing mechanisms to address options.
And I think that's an effective way to bridge the gap that we continue to think that this market is changing quickly and evolving, both on the jackup side and on the drillship side. And we continue to entertain measures that would allow us to bridge that gap and allow us to maintain what we think right now is a good exposure to a rising dayrate environment, so that that's top on our list right now.
Thank you. That's helpful. And maybe if we can get an update on your thinking on the floater market in Brazil and West Africa, and how that shaping up? So Robert, you highlighted the uptick in demand, right? And one of your peers referenced a potential doubling of the rig count in Brazil by 2022, right.
So Noble isn't present. I have a bestseller West Africa at this point, right? All the clearly you've operated there in the past. You've built a very strong presence, Guyana, Suriname, the cycle. But maybe how much of a strategic imperative is rebuilding a present in those two markets, especially as we think about the day in the Atkins.
Sasha, as Robert noted in his comments, we do expect a pretty – great deal of further tendering in Brazil towards the end of this year and certainly into 2020, not only with Petrobras obviously, but obviously IOC.
And we do think it's important. As you noticed, we had a strong presence in Brazil in the past as well as West Africa. And we certainly believe that the Brazil market is important for us to return to and we fully intend to work toward that.
We do think that's a good opportunity for some of the cold stacked rigs, which we've been asking about this morning. We do think it's important to get back into at least one or both of those markets. Robert, do you want to add anything?
No, I think in the very near-term West Africa is less likely for us to in Brazil just by because of where we're located today. But we're starting to see a few [indiscernible] opportunities there and that's really encouraging really from kind of a macro supply view so.
Thank you. I'll turn it over.
Thank you, Sasha.
And your next question comes from the line of Sean Meakim with J.P. Morgan. Please go ahead. Your line is open.
Thanks. Hey, good morning.
Good morning, Sean.
So maybe staying in that part of the world, could you maybe give us a sense of what you think is the capacity for no oil rigs he put to work over the long-term? And I guess part of what I'm trying to get at in the near-term is how much are you able to extract synergies, shore-based cost of absorption with the three rigs in Guyana and then the one in Suriname. And just thinking about how does that overlap with what shore-based fixed assets you have today in Brazil? Just try to think about how your footprint looks today and as the opportunity set evolves, your ability to drive value and margin through that footprint.
Well, Sean, as you may know we still actually have a yard facility in Brazil remaining from our former operation down there. So we are well positioned to be able to quickly put rigs back to work in that market. We know that market well. We've very comfortable working there and look for the opportunity.
So you're right. We already have some infrastructure set up there. In terms of the massive rigs, the three rigs that we have working in Guyana. You are all on, I mean, it's a great setup to have and great to be able to have three like real shifts in that same market.
So you can share spares et Cetera, and between the rigs with it's a wonderful setup for us and we're glad to be able to operate like that, obviously we have some one-off operations which are not ideal and not what we – not as old, but certainly Guyana as exactly very much what we want to see going forward. And the rig and shore-based actually, we'll obviously we'll be very close and can benefit from some of those things synergies. Bob, do you want add anything?
The only thing I'd add is that synergies cut both ways and we think that it's effective for our customer there too to be able to move bricks around and share technology and so we're really pleased to be that the current contractor of choice there and we see a great deal of work they're moving forward.
Okay. Thank you for that feedback. And maybe moving to the Eastern Hemisphere, could we maybe get a little more feedback on the market opportunity in Australia? We've talked to the past about, I think you guys have appetite at least you believe there's appetite for jackups in the region? What kind of assets would make sense there?
Is demand and the market conditions sufficient for a newbuild purchase in placement like you done in other markets? And also I just thought I'd like, so as an aside, maybe the appetite for more SMEs in that market was pretty good. And so how does that opportunity said look for the Boudreaux as a next stop?
We got to let Robert comment further, but we agreed that there's a lot of opportunity in the Australian market and it is a great market for more semis, without a doubt. And to your point about would we be interested in doing a newbuild purchase in that market? Sean, as you know, we're always looking for ways to grow our fleet and grow a company. And if that made economic sense for shareholders, we would certainly look has certainly concerned about it as an opportunity. Rob, you want to comment on?
I'd just say, there's limited supply in Australia, because of the safety case regime there. And I think on the jackup side it's been about a 1.5 rig market for quite some time and which is difficult because of the costs of getting in and out or are quite high. But we see that improving now with some of the gas projects that need to be delivered. Tom Prosser is going to move over to the East Coast of Australia.
And so we think there's room, we think it's built a great brand for the JU-3000 and we think there's potentially room for another JU-3000 in there. Certainly there's competition, but again, the spot somewhat limited. And then on the MOD rigs, five Boudreaux has worked there before. We've maintained the safety case there. So Australia is absolutely a target for us in the future.
Very good. Thank you for that feedback.
Thank you, Sean.
And your next question comes from the line of Ian Macpherson with Simmons. Please go ahead. Your line is open.
Good morning, everybody.
Good morning, Ian.
I wanted to first ask about the MPD contract enhancements for the Bulgaria well and you said that you'll get a dayrate uplift. I was wondering if you could describe that a little bit more in terms of the size or just a ballpark that and also how long that uplift goes for?
Ian, when we said effective dayrate increases because it's a lump sum amount that we received from Shell for the MPD system and installation on the rig. So it's just a lump sum. So that's what we referred to as the effective dayrate increase.
So for modeling purposes will we see that on a lumped basis or going forward for the term of the well?
Yes, it's based out over some incremental payments, it is only applicable to this specific well and then we just got – it's a not insubstantial payback on the cost of the system.
Okay. Picking up, Adam, I wanted to ask about the working capital movement, which has been a little bit volatile lately, the past few quarters and it moved against you in Q1. I just want to get your perspective on working capital movements for the balance of this year. If you could put some light on that please. Thanks.
Yes, it's a good – happy to – Ian, it's a good question. I think there was a little noise in first quarter that is shown in the numbers. I've seen a few people comment on it. I think the receivables balance; it's really a timing issue as much as anything else. And so I think it very much will normalize over the course of the year. In fact, in April alone, we've cleaned up some of that, so there've been some one-time issues that happened to – we close out the quarter where there were still some receivable balances pending, but nothing in terms of being worried about it. It's largely corrected itself in April and I think will be normalized going forward.
Normalized meaning essentially neutral would be the bogey for the full-year.
Yes, I think that's right. I mean, look we will certainly – as we turned to the upturn and start growing the business, you'll have the normal working capital that results from that. But I think as we look at 2019, I think it's basically flat.
Great. Thanks, Adam. I’ll pass it over.
Thanks, Ian.
And your next question comes from the line of Connor Lynagh with Morgan Stanley. Please go ahead. Your line is open.
Thanks. Good morning.
Good morning, Connor.
I was wondering if you guys could – you mentioned the Middle East as a strong market in light of the contracts that we just saw from Qatar. And I'm wondering if you could speak to what you see as opportunities for the Mick O'Brien, and just generally where you see rigs serving incremental demand in that market? I mean, are you going to have to pull from yards, are you going to have to pull from other regions? What sort of the knock on effect you see from strength in that market?
Yes. Sure, Connor. This is Robert. So I think it's widely publicized at this stage that we were not given the final award for the Qatar gas tender, so the Mick O'Brien will be searching for work elsewhere. We do have several opportunities that we've been tracking. And you can expect just in changing customers a small gap there, but we do anticipate picking up some work fairly quickly for that.
To the second part of your question, that was an exciting tender in large part because of the high specification on the rigs. We hear they may even need a few more rigs. And so, I think you probably going to have to move rigs in from outside the region to service any additional rings that they might award.
Got it. And beyond the gas work there, have you generally seen a shift in the preference for higher spec rigs in that market? Or is that unique to that contract opportunity?
Yes, I think that's been one of the major stories, if we don't say higher specification, I think we could at least say newer. There's been a shift into the more – into a preference for the more modern rigs by a number of the biggest jackup consumers there. And we think that's an important trend that's only going to gain momentum. The Middle East has 200 rigs right now. A number of them continued to be legacy assets and standard assets. And I think as that market shifts into the newer more efficient rigs that's going to be a meaningful shift in the demand equation on the jackup side.
Got it. Thanks. I’ll turn it back.
Thanks, Connor.
And your next question comes from the line of Jud Bailey with Wells Fargo. Please go ahead. Your line is open.
All right, thanks. Good morning.
Good morning, Jud.
Hey, most of my questions were answered. But I have kind of a big picture question. If I look at your fleet, it's not that dissimilar from some of your peers where you're starting to build nice backlog in the 2020 a lot of your better rigs now don't have availability until the middle of next year.
As that has happened, have you – is the customer tone starting to change at all? I mean, is there more of a sense of urgency that now some of the better rigs just simply aren't available this year and into early next year? I'd just be curious if the tone from the customer base is starting to change is as backlog begins to build here of just the last few months.
Jud, I'll let Robert, answer that. But yes, definitely customer sentiment is changing. We feel like we're incredibly well positioned with our contracts on our deepwater units where they are written out and when they're rolling off. So that we can help you take advantage of continuing to improve the market. But yes, it's definitely their story to be some tightening and not higher in deepwater market and operators are syncing that. I'll ask Robert to add anything you'd like.
No, I think that's it. I think the only other note I'd make is that, we think rates are off bottom now for the high end of the drillship segment. We spent a lot of effort reactivating the fleet and getting it positioned and we're very proud going into this kind of mid 2020 timeframe that you've quoted to have some availability and hopefully take advantage of the right movement that we've already seen.
Okay. Thanks for that. And then my follow-up would just be on the Croft. I know it's got some option wells that can take it into early next year, but where we do anticipate that rig ultimately, what do you think it stays in and kind of Central America or do you – how do you think about that rig and it's kind of next contracted to stay wells, are you looking at term opportunities? Just help us think about that rig and its next opportunity. Sure.
Sure. So, I think it stays in the Western Hemisphere, although that's not a guaranteed, but we're focusing most of our marketing efforts in the Western Hemisphere right now. I think when you look at kind of late 2019 and early 2020, there are a lot of shorter-term prospects out there and that's part of what we think is going to drive the utilization in the early part of 2020.
So we're more than happy to continue to take short-term jobs for that rig as we watched the market. We think longer-term opportunities will continue to develop and we'll evaluate those on a case by case basis, and measure that against the broader market throughout the Western Hemisphere and that includes what country we've made it into in, in certain economic factors that go along with that.
Certainly we'd be happy to have it in that – in the region where it'll end in Suriname but we think also there'll be a bunch of opportunities north and south of there.
Okay, great. Thanks. I'll turn it back.
Thanks. Krista, final question please. Certainly, our final question comes from the line of Taylor Zurcher with Tudor, Pickering & Holt. Please go ahead. Your line is open.
Hey, good morning and thanks for squeezing me in. One question on the Don Taylor, you've clearly developed a pretty close relationship with Exxon down to Guyana and so I'm curious if that contract was privately negotiated or competitively bid? And then secondarily, if you could help us think about the best way to think about the rate for that contract, either relative to its previous rate or are relative to the other two drillships you have currently working down in Guyana for Exxon.
Okay.
Yes. Sure. So that was a direct negotiation, you were saying direct negotiations, across the world. Right now, we've certainly seen an uptick that's been benefiting. I think our industry a across the board. On the rate, we're not disclosing the rate a couple points we – top bottom and it does involve two different rates and it goes higher during the second six months of that contract.
Okay. Fair enough. And maybe a follow-up there. Guyana is clearly going to be a healthy source of floating rig years for probably years to come and so I'm curious just from a marketing perspective two of the rigs, really all three of the rigs are contracted into mid 2020 or early 2021.
And so when you have a wealth of opportunities developing around the globe or from a marketing perspective, are you always -- are you already having to bid those rigs and into their next contracts or are those sort of a kind of wait and see approach as in year that the contract end date as it relates to finding the follow on work?
Well, I think it's a little too early right now really for 2020 work and certainly 2021 work. Obviously we're in close communication with the customer there, daily – mainly on an operational basis. You're right, there's tons of work there. And we're really focused on staying competitive in providing the service to the customer there. So that they'll want us back.
Great. Thanks.
Thanks Taylor.
Okay. With that we're going to close today's call and again, thank you for your participation and the Krista, we also thank you for coordinating the call today. Good day everyone.
And this concludes today's conference call. You may now disconnect.