Revisiting Noble Corporation Investment Thesis and Importance of Sell Discipline

Over the past eight months, a number of articles have appeared on The Rational Walk related to the Deepwater Horizon disaster and related investment opportunities. Value investors know that times of stress and uncertainty create opportunities in the financial markets whether the turmoil is due to natural disasters, political unrest, or the fallout from accidents such as the Deepwater Horizon incident. In this article we revisit our bullish investment thesis for Noble Corporation and explain our decision to sell shares at the current valuation.

Noble Corporation Q3 Results Impacted by Moratorium But Worst May Have Passed

Noble reported third quarter 2010 earnings of $86 million, or $0.34 per share, compared to $426 million, or $1.63 per share for the third quarter of 2009. Contract drilling revenues fell precipitously to $584.9 million for the third quarter of 2010, down from $875 million for the third quarter of 2009. Contract drilling revenues were $687.5 million for the second quarter of 2010. Read this article for more information and a forecast of likely Q4 revenues.

Noble CEO Forecasts Continued Gulf of Mexico Uncertainty Ahead

Noble Corporation Chairman and CEO David Williams believes that uncertainty in the Gulf of Mexico will continue to impact the offshore drilling industry for some time to come. Mr. Williams, speaking today at the Barclays Capital Energy and Power Conference in New York, updated investors regarding the company’s operations and future prospects in light of continued regulatory uncertainty in the Gulf of Mexico in the aftermath of the Deepwater Horizon disaster involving the blow out of the Macondo well. Read this article for a summary of the presentation.

Modern Drilling Rigs Have Advantage Under Proposed Regulations

New rules for offshore drilling under consideration in Congress could create major competitive advantages for offshore contract drillers that have heavily invested in modern drilling fleets in recent years. According to The Wall Street Journal, legislation designed to prevent future oil spills set minimum standards for blowout preventers (BOP) that could render older drilling rigs obsolete or, at a minimum, require expensive retrofitting. Read this article for more information.

Proposed Mediterranean Deepwater Moratorium Unlikely to Gain Traction

According to The Financial Times, pressure is growing in Europe to impose a moratorium on deepwater drilling in the Mediterranean Sea. BP is planning to begin deepwater operations off the coast of Libya within weeks and has a rig in place preparing to drill in the Gulf of Sirte, an area believed to hold large deposits of oil.

The planned exploration well is 200 meters deeper than the ill fated Macondo well which blew out in April and was only recently capped. BP’s exploration in Libya has attracted additional controversy because of allegations that the company may have lobbied the Scottish government to release Libyan national Abdel Baset al-Megrahi from prison, the only man ever convicted for a role in the 1988 bombing of Pan Am 103. Read this article for more details.

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