Noble Corporation (NE) is improving the execution of its ambitious new rig construction program by decreasing drilling downtime, leading James West, Lead Oil Service and Drilling Analyst at Barclays Capital, to choose the name as its favorite in the offshore drilling group.
“They’ve had some operational hiccups recently, mostly driven by some new rig deliveries,” West said. “They saw the need to re-fleet early and they ordered new rigs. While they’ve had some downtime related to bringing these rigs into the fleet, we think that will start to dissipate and execution will improve. Earnings estimates are now much more achievable.”
West adds that Noble Corporation trades at a discount to peers and expects upside for the company’s stock. He likes the name despite his expectations of a plateauing of day rates for the industry in the $600,000 to $650,000 range.
“As a result some of the missteps in recent quarters the valuation has come down, and it’s trading at a discount to the group. We think as they improve and they can execute going forward, that discount should shrink considerably and there may be some upward momentum to earnings estimates at that point,” West said.
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