Tickers in this Article: NE, DO, RIG, PBR
Noble Corp (NYSE:NE) struggled with several issues in the second quarter of 2011, but the company remains optimistic on the recovery in the offshore rig market in both the deepwater and offshore segments.

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Second Quarter of 2011
Noble Corp earned $54 million or 21 cents per diluted share in the second quarter of 2011. The results included a gain of 4 cents per diluted share from a tax matter that the company settled during the quarter. Noble Corp missed estimates on earnings and revenues due to extended downtime on five of its rigs during the quarter. The stock initially traded down after the earnings release but ended the day up slightly.

Utilization
Noble Corp reported average fleet utilization of 70% in the second quarter of 2011, up from 61% in the first quarter. This utilization rate varied by type of rig, with the company's semi-submersible fleet at 85% utilization, while jack up rigs were reported at a 71% utilization rate. Drillship utilization came in the lowest at 58% for the quarter.

Bullish on Offshore Markets
Noble Corp gave an optimistic outlook on the deepwater and jack up markets during the company's earnings conference call. The company said that it was encouraged by the permitting activity in the Gulf of Mexico and expected operators to get more involved here as the review process is better understood. Noble Corp also said that recent contracts announced for deepwater rigs indicate a firming of day rates in the mid to upper $400,000 range. The company expects that the unused deepwater rig capacity plus any new builds coming to market will be absorbed by early 2012.

In the jack up market, Noble Corp is optimistic on continued demand for rigs from Pemex, the Mexican national oil company. The company received contract extensions on some rigs here in July and now has all 12 rigs in Mexico under contracts. Noble Corp was also optimistic on trends in other world markets, including the North Sea, Brazil and Saudi Arabia.

Newbuild Program
Noble Corp has an aggressive program of constructing new offshore rigs and last week reported a small delay on the delivery of two of these new rigs. The company put the blame on manufacturing issues in the shipyard and delay in transportation due to weather issues.

Other Players
Other offshore rig operators have also announced recent contract signings. Diamond Offshore Drilling (NYSE:DO) signed 10 rig agreements in the 45 days prior to its second quarter of 2011 earnings release.

Petrobras (NYSE:PBR) had two rigs under three year contracts with Diamond Offshore Drilling and agreed to extend the term to five years in return for a slight reduction in day rates. The company also signed an agreement with Pemex for three rigs.

Transocean (NYSE:RIG), the world's largest offshore driller is set to release earnings on August 3, 2011 after the market closes, with a conference call the following morning. The company's market commentary will be closely watched due to its prominent position in many regions of the world.

The Bottom Line
Although the optimism of Noble Corp is encouraging, it's still hard to get excited about the company and other offshore drillers given the low utilization, inconsistent demand and large amounts of new capacity under construction and set to hit the market over the next few years. (For additional reading, check out Peak Oil: Problems And Possibilities.)

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