Press Release

DBRS Confirms Noble Corp. and Noble Drilling Corp. at A (low)

Energy
May 15, 2008

DBRS has today confirmed the A (low) ratings for the Senior Notes of Noble Corporation (Noble or the Company) and for the Senior Notes of Noble’s subsidiary, Noble Drilling Corporation (Noble Drilling) at A (low), both with Stable trends. The ratings reflect Noble and Noble Drilling guaranteeing each others’ debt, Noble’s strong position in the offshore contract drilling industry, and its conservative and flexible financial profile.

In 2007, Noble delivered two of the seven rigs under its new-build program, initiated in 2005 to construct and deliver three new jack-ups and four ultra-deepwater semi-submersibles (semis). These projects are all supported by long-term commitments (four with Shell Oil Company), with one jack-up and one semi remaining for delivery in 2008, and one jack-up and two semis in 2009. With $1.45 billion of planned capital expenditures in 2008 (a 12% increase over $1.29 billion in 2007), the new-build program somewhat limits investment flexibility, though DBRS currently expects the investments to be covered from internal cash flow based on the Company’s existing contracts and strong market conditions. Furthermore, with the high demand for shipyard resources and labor constraints, the projects present a significant level of project completion risk.

However, associated follow-on contracts and the large backlog of contracted revenue should assure strong cash flow and liquidity over the medium term, which significantly mitigates the investment risk. In recent months, Noble has also announced the addition of almost $5 billion in backlog revenue, increasing the total backlog to approximately $11.4 billion. The total includes approximately $4 billion from five deepwater rigs currently operating offshore Brazil (representing more than 29 rig years commencing in 2009/2010). Noble had been considering other options for its drillships in Brazil due to the significant upgrades required (estimated at $175 million each). Under the new contracts, Noble will also be paid for 150 days for each rig at $90,000 per day while the upgrades are being completed.
With approximately 56% of 2007 revenues and 70% of backlog revenue from regions outside of North America and Europe, Noble is exposed to a high degree of political and legal risks. In 2007, Noble initiated an internal investigation of its Nigerian operations under the U.S. Foreign Corrupt Practices Act (FCPA) as well as local laws regarding its affiliate’s reimbursement of expenses in connection with obtaining and renewing permits for the temporary importation of drilling units and related equipment, with the understanding that this could lead to civil and criminal sanctions including monetary penalties and required changes to business practices and compliance programs. During the first quarter of 2008, civil unrest in Nigeria led to choppy near-term demand, which may lead to minimal stacking of some of Noble’s rigs. However, international diversity has contributed to more stable cash flow and improved day rates for Noble as it has moved all of its jack-up rigs out of the U.S. Gulf of Mexico (GOM), primarily to Mexico, as the oversupplied GOM experienced weaker day rates.

Noble continues to benefit from strong industry conditions and is well positioned to maintain its strong credit profile into the future. Credit metrics have improved over the past five years including debt-to-capital (13.6% as of Q1 2008) and debt-to-cash flow (0.4x for the 12 months ending March 31, 2008). In the absence of sufficient attractive investment opportunities, in April 2008, Noble announced that it will distribute excess cash flows with a special cash dividend of $0.75 per ordinary share (estimated total of $202 million to be paid in mid-May 2008 based on shares outstanding). DBRS expects that Noble will continue to distribute excess cash flow to shareholders through share repurchases and dividends, and that it will also be in a good position to increase its rig fleet through acquisitions as it has done in the past.

Please refer to the DBRS website at www.dbrs.com for further information on the entities mentioned in this press release.

Notes:
All figures are in U.S. dollars unless otherwise noted.
The ratings of Noble Corporation and Noble Drilling Corporation are based on each entity guaranteeing the other’s debt.

Ratings

Noble Corporation
Noble Drilling Corporation
  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

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