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EX-23.3 - EX-23.3 - Noble Finance Cod117872dex233.htm
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Table of Contents

As filed with the Securities and Exchange Commission on June 23, 2021

Registration No. 333-255069

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

AMENDMENT NO. 1

TO

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

NOBLE FINANCE COMPANY

(Exact name of registrant as specified in its charter)

SEE TABLE OF ADDITIONAL REGISTRANTS

 

 

 

Cayman Islands   1381   98-0366361

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

13135 Dairy Ashford, Suite 800

Sugar Land, Texas 77478

(281) 276-6100

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Richard B. Barker

Noble Finance Company

13135 Dairy Ashford, Suite 800

Sugar Land, Texas 77478

(281) 276-6100

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

With a copy to:

David L. Emmons

Clinton W. Rancher

Baker Botts L.L.P.

910 Louisiana Street

Houston, Texas 77002

(713) 229-1234

 

 

Approximate date of commencement of proposed sale to the public: From time to time after the effectiveness of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of

Securities to be Registered

 

Amount

to be

Registered

 

Proposed

Maximum

Offering Price

Per Security

 

Proposed

Maximum

Aggregate

Offering Price

 

Amount of

Registration Fee

11%/ 13%/ 15% Senior Secured PIK Toggle Notes due 2028

  $489,763,895 (1)   100%   $489,763,895   $53,433.24 (2)

Guarantees of 11%/ 13%/ 15% Senior Secured PIK Toggle Notes due 2028

  —     —     —     —  (3)

 

 

(1)

Represents the sum of (i) $108,931,608, the initial aggregate principal amount of the 11%/ 13%/ 15% Senior Secured PIK Toggle Notes due 2028 (the “Notes”) issued pursuant to the Plan (as defined herein) and registered for resale hereby, and (ii) an additional $380,832,287 aggregate principal amount of Notes that may be issued if interest on the Notes is paid-in-kind through maturity.

 

(2)

The registration fee has been calculated pursuant to Rule 457(o) under the Securities Act of 1933, as amended (the “Securities Act”). The registration fee has previously been paid in connection with the prior filing of this Registration Statement.

 

(3)

Pursuant to Rule 457(n) under the Securities Act, no separate fee is payable with respect to the guarantees of the Notes being registered.

 

 

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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TABLE OF ADDITIONAL REGISTRANTS

 

Exact Name of Additional Registrant as Specified in its Charter*

  State or Other Jurisdiction of
Incorporation or Organization
  I.R.S. Employer
Identification Number

Bully 1 (Switzerland) GmbH**

  Switzerland   98-0568935

Noble BD LLC

  Delaware   82-5210197

Noble Cayman SCS Holding Ltd

  Cayman Islands   98-1350467

Noble Contracting II GmbH**

  Switzerland  

Noble Drilling (Guyana) Inc.***

  Guyana   98-1405736

Noble Drilling (Norway) AS

  Norway   52-2239546

Noble Drilling (TVL) Ltd.

  Cayman Islands  

Noble Drilling (U.S.) LLC

  Delaware   76-0295031

Noble Drilling Doha LLC

  Doha, Qatar  

Noble Drilling International GmbH**

  Switzerland   98-0688632

Noble Drilling Services LLC (f/k/a Noble Drilling Services Inc.)

  Delaware   76-0295033

Noble DT LLC

  Delaware   84-3405555

Noble International Finance Company

  Cayman Islands   98-0655893

Noble Leasing (Switzerland) GmbH**

  Switzerland   98-0566694

Noble Leasing III (Switzerland) GmbH**

  Switzerland   98-0631434

Noble Resources Limited

  Cayman Islands   98-1096876

Noble Rig Holding 2 Limited

  Cayman Islands   98-1461033

Noble Rig Holding I Limited

  Cayman Islands   98-1443703

Noble SA Limited

  Cayman Islands   98-1343368

Noble Services Company LLC

  Delaware   85-3318770

Noble Services International Limited

  Cayman Islands   98-1096893

 

*

Each additional registrant is a wholly-owned direct or indirect subsidiary of Noble Finance Company. Unless otherwise indicated, the address, including zip code, and telephone number, including area code, of each additional registrant’s principal executive offices is 13135 Dairy Ashford, Suite 800, Sugar Land, Texas 77478, telephone (281) 276-6100. The primary standard industrial classification code number of each of the additional registrants is 1381. The name, address, including zip code, and telephone number, including area code, of the agent for service for each of the additional registrants is Richard B. Barker, 13135 Dairy Ashford, Suite 800, Sugar Land, Texas 77478, telephone (281) 276-6100.

 

**

The address, including zip code, of such registrant’s principal executive offices is Dorfstrasse 19a, Baar Switzerland 6340.

 

***

The address, including zip code, of such registrant’s principal executive offices is 63 Hadfield & Cross Streets, Werk-en Rust, Georgetown, Demerara, Guyana.

 

The address, including zip code, of such registrant’s principal executive offices is Hinna Park Jåttåvågveien 7, Bygg B, PO Box 370, Stavanger, Norway 4067.

 

The address, including zip code, of such registrant’s principal executive offices is Salam Globex Business Center, The Gate- Tower II, Office 807, 8th Level, PO Box 14023, West Bay, Doha, Qatar.


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The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED JUNE 23, 2021

PROSPECTUS

 

 

LOGO

NOBLE FINANCE COMPANY

11%/ 13%/ 15% Senior Secured PIK Toggle Notes due 2028

 

 

This prospectus relates to the resale, from time to time, by the selling securityholders identified in this prospectus of up to $489,763,895 aggregate principal amount (assuming interest is paid-in-kind through maturity) of 11%/ 13%/ 15% Senior Secured PIK Toggle Notes due 2028 (the “Notes”) previously issued or to be issued by us.

We are registering the offer and sale of the Notes pursuant to registration rights we have granted under a registration rights agreement dated as of February 5, 2021. We have agreed to bear all of the expenses incurred in connection with the registration of the Notes. The selling securityholders will pay or assume brokerage commissions and similar charges, if any, incurred in the sale of the Notes.

We are not selling any Notes under this prospectus, and we will not receive any proceeds from the sale of the Notes by the selling securityholders under this prospectus. Our registration of the Notes covered by this prospectus does not mean that the selling securityholders will offer or sell any of the Notes. The Notes to which this prospectus relates may be offered and sold from time to time directly by the selling securityholders or alternatively through underwriters, broker dealers, or agents. The selling securityholders will determine at what price they may sell the Notes offered by this prospectus, and such sales may be made at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale or at negotiated prices. See “Plan of Distribution” and “Selling Securityholders.”

We may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read this entire prospectus and any amendments or supplements carefully before you make your investment decision.

There is currently no established public trading market for the Notes, and there can be no assurance that a public trading market will develop.

 

 

Investing in the Notes involves risks. See “Risk Factors” beginning on page 9 of this prospectus for a discussion of the risks regarding an investment in the Notes.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

The date of this prospectus is                 , 2021.


Table of Contents

TABLE OF CONTENTS

 

     Page  

EXPLANATORY NOTE

     i  

ABOUT THIS PROSPECTUS

     iii  

PROSPECTUS SUMMARY

     1  

RISK FACTORS

     9  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     44  

USE OF PROCEEDS

     46  

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION—NOBLE FINANCE COMPANY AND SUBSIDIARIES—CHAPTER 11 EMERGENCE

     47  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION—NOBLE CORPORATION—MERGER

     54  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     72  

BUSINESS

     104  

MANAGEMENT

     116  

EXECUTIVE AND DIRECTOR COMPENSATION

     120  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     152  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     156  

DESCRIPTION OF THE NOTES

     159  

SELLING SECURITYHOLDERS

     249  

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

     254  

CAYMAN ISLANDS TAX CONSIDERATIONS

     259  

PLAN OF DISTRIBUTION

     260  

LEGAL MATTERS

     263  

EXPERTS

     263  

WHERE YOU CAN FIND MORE INFORMATION

     263  

INDEX TO FINANCIAL STATEMENTS

     F-1  


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EXPLANATORY NOTE

As previously reported, on July 31, 2020 (the “Petition Date”), Noble Holding Corporation plc (formerly known as Noble Corporation plc), a public limited company incorporated under the laws of England and Wales (“Legacy Noble”), and certain of its subsidiaries, including Noble Finance Company (formerly known as Noble Corporation), an exempted company incorporated in the Cayman Islands with limited liability (“Finco”), filed voluntary petitions in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) seeking relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”). On September 4, 2020, the Debtors (as defined herein) filed with the Bankruptcy Court the Joint Plan of Reorganization of Noble Corporation plc and its Debtor Affiliates, which was subsequently amended on October 8, 2020 and October 13, 2020 and modified on November 18, 2020 (as amended, modified or supplemented, the “Plan”), and the related disclosure statement (the “Disclosure Statement”). On September 24, 2020, six additional subsidiaries of Legacy Noble (together with Legacy Noble and its subsidiaries that filed on the Petition Date, as the context requires, the “Debtors”) filed voluntary petitions in the Bankruptcy Court. The chapter 11 proceedings were jointly administered under the caption Noble Corporation plc, et al. (Case No. 20-33826) (the “Chapter 11 Cases”). On November 20, 2020, the Bankruptcy Court entered an order confirming the Plan.

In connection with the Chapter 11 Cases and the Plan, on and prior to the Effective Date (as defined herein), Legacy Noble and certain of its subsidiaries effectuated certain restructuring transactions, pursuant to which Legacy Noble formed Noble Corporation, an exempted company incorporated in the Cayman Islands with limited liability (“Noble Parent”), as an indirect, wholly-owned subsidiary of Legacy Noble and transferred to Noble Parent substantially all of the subsidiaries and other assets of Legacy Noble. On February 5, 2021 (the “Effective Date”), the Plan became effective in accordance with its terms, the Debtors emerged from the Chapter 11 Cases and Noble Parent became the new parent company. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Chapter 11 Proceedings and Going Concern” for a description of the events that occurred on the Effective Date, including the issuance of ordinary shares of Noble Parent with a nominal value of $0.00001 per share (the “Ordinary Shares”). In accordance with the Plan, Legacy Noble and its remaining subsidiary will in due course be wound down and dissolved in accordance with applicable law. The Bankruptcy Court closed the Chapter 11 Cases with respect to all Debtors other than Legacy Noble, pending its wind down. Noble Parent’s principal asset is all of the shares of Finco. Finco has no public equity outstanding. The consolidated financial statements of Noble Parent have been included in this registration statement because they include the accounts of Finco and Noble Parent conducts substantially all of its business through Finco and its subsidiaries. Finco was an indirect, wholly-owned subsidiary of Legacy Noble prior to the Effective Date and has been a direct, wholly-owned subsidiary of Noble Parent since the Effective Date.

On October 12, 2020, the Debtors entered into a Backstop Commitment Agreement (as amended, supplemented or modified, together with all exhibits and schedules thereto, the “Backstop Commitment Agreement”) with the backstop parties thereto (collectively, the “Backstop Parties”). On the Effective Date, pursuant to the Backstop Commitment Agreement and in accordance with the Plan, Noble Parent and Finco consummated a rights offering (the “Rights Offering”) of the Notes and associated Ordinary Shares at an aggregate subscription price of $200 million. On the Effective Date, Finco issued an aggregate principal amount of $216 million of Notes.

On the Effective Date, Finco entered into a registration rights agreement (the “Registration Rights Agreement”) with certain parties who received Notes under the Plan (the “RRA Noteholders”). Under the Registration Rights Agreement, RRA Noteholders have certain demand and piggyback registration rights, subject to the limitations set forth in the Registration Rights Agreement. Pursuant to their underwritten offering registration rights, RRA Noteholders have the right to demand that Finco register underwritten offerings of any or all of their Registrable Securities (as defined in the Registration Rights Agreement) pursuant to an effective registration statement, subject to certain conditions, including that the aggregate proceeds expected to be received from such an offering is equal to or greater than $20 million, unless such demand is not pursuant to a shelf

 

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registration statement, in which case certain RRA Noteholders may require that Finco register an underwritten offering for an amount that would enable all remaining Registrable Securities to be included in such offering. In addition, the Registration Rights Agreement requires Finco to register for resale such Registrable Securities pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), including by filing a registration statement on Form S-1 or Form S-3 by the applicable deadline set forth in the Registration Rights Agreement.

Finco is filing the registration statement of which this prospectus forms a part pursuant to the foregoing registration obligation. The foregoing description of the Registration Rights Agreement is only a summary and does not purport to be complete, and such description is qualified in its entirety by reference to the full text of the Registration Rights Agreement, which is filed as an exhibit to the registration statement of which this prospectus forms a part.

Unless otherwise expressly set forth or as the context otherwise indicates, all financial information and data and accompanying financial statements and corresponding notes, as of and prior to the Effective Date, contained herein reflect the actual historical consolidated results of operations and financial condition of Legacy Noble or Finco, as applicable, for the periods presented and do not give effect to the Plan or any of the transactions contemplated thereby or the adoption of fresh start accounting, which Noble Parent and Finco adopted as of the Effective Date. Accordingly, such financial information may not be representative of Noble Parent’s or Finco’s, as applicable, performance or financial condition after the Effective Date. Except with respect to such historical financial information and data and accompanying financial statements and corresponding notes or as otherwise suggested by the context, all other information contained herein relates to Noble Parent or Finco, as applicable, following the Effective Date.

 

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ABOUT THIS PROSPECTUS

Unless we otherwise indicate, or unless the context requires otherwise, references in this prospectus to “Noble,” the “Company,” “we,” “us” and “our” refer collectively to Noble Parent and its consolidated subsidiaries, including Finco, when referring to periods following the Effective Date, and to Legacy Noble and its consolidated subsidiaries, including Finco, when referring to periods prior to the Effective Date.

This prospectus is part of a registration statement that we have filed with the Securities and Exchange Commission (the “SEC”). This prospectus provides you with a general description of us and the securities that may be offered by the selling securityholders. Because each of the selling securityholders may be deemed to be an “underwriter” within the meaning of the Securities Act, each time securities are offered by the selling securityholders pursuant to this prospectus, the selling securityholders may be required to provide you with this prospectus and, in certain cases, a prospectus supplement that will contain specific information about the selling securityholders and the terms of the securities being offered. The prospectus supplement may also add to, update or change the information contained in this prospectus. If there is any inconsistency between the information in this prospectus and any prospectus supplement, you should rely on the information in the prospectus supplement. Please carefully read this prospectus and any prospectus supplement, in addition to the information contained in the documents we refer to under the heading “Where You Can Find More Information.”

We have not, and the selling securityholders have not, authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We and the selling securityholders take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are not, and the selling securityholders are not, making any offer to sell the Notes in any jurisdiction where the offer is not permitted. The information contained in this prospectus is accurate only as of the date on the cover of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the Notes. Our business, financial condition, results of operations and prospects may have changed since such date.

We have not, and the selling securityholders have not, taken any action to permit this offering or the possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offer and sale of the Notes and the distribution of this prospectus outside the United States.

This prospectus contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. See “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.”

 

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PROSPECTUS SUMMARY

The following summary highlights information contained elsewhere in this prospectus, is not complete and does not contain all the information that may be important to you in making an investment decision. You should read this entire prospectus carefully, including the Explanatory Note and the information under “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” and the consolidated financial statements and the notes thereto appearing elsewhere in this prospectus before making an investment decision. Unless we otherwise indicate, or unless the context requires otherwise, references in this prospectus to “Noble,” the “Company,” “we,” “us” and “our” refer collectively to Noble Parent and its consolidated subsidiaries, including Finco, when referring to periods following the Effective Date, and to Legacy Noble and its consolidated subsidiaries, including Finco, when referring to periods prior to the Effective Date.

Our Company

Finco is a direct, wholly-owned and controlled subsidiary of Noble Parent. Noble is a leading offshore drilling contractor for the oil and gas industry. Noble provides contract drilling services to the international oil and gas industry with its global fleet of mobile offshore drilling units. Noble focuses on a balanced, high-specification fleet of floating and jackup rigs and the deployment of its drilling rigs in oil and gas basins around the world. The consolidated financial statements of Noble Parent have been included in this registration statement because they include the accounts of Finco and Noble Parent conducts substantially all its business through Finco and its subsidiaries. Noble and its predecessors have been engaged in the contract drilling of oil and gas wells since 1921.

Contract Drilling Services

We report our contract drilling operations as a single reportable segment, Contract Drilling Services, which reflects how we manage our business. The mobile offshore drilling units comprising our offshore rig fleet operate in a global market for contract drilling services and are often redeployed to different regions due to changing demands of our customers, which consist primarily of large, integrated, independent and government-owned or controlled oil and gas companies throughout the world.

We typically provide contract drilling services under an individual contract, on a dayrate basis. Although the final terms of the contracts result from negotiations with our customers, many contracts are awarded based upon a competitive bidding process.

Generally, our contracts allow us to recover our mobilization and demobilization costs associated with moving a drilling unit from one regional location to another. When market conditions require us to assume these costs, our operating margins are reduced accordingly. For shorter moves, such as “field moves,” our customers have generally agreed to assume the costs of moving the unit in the form of a reduced dayrate or “move rate” while the unit is being moved. Under current market conditions, we are much less likely to receive full reimbursement of our mobilization and demobilization costs.

Contracts often contain early termination provisions permitting the customer to terminate the contract if the unit is lost or destroyed or if operations are suspended for a specified period of time due to breakdown of equipment or breach of contract. In addition, the terms of our drilling contracts permit the customer to terminate the contract after specified notice periods by tendering contractually specified termination amounts and, in often cases, without any payment or a modest payment.

During periods of depressed market conditions, such as the one we experienced for a number of years, our customers may attempt to renegotiate or repudiate their contracts with us although we seek to enforce our rights under our contracts. The renegotiations may include changes to key contract terms, such as pricing, termination and risk allocation.



 

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Drilling Fleet

Noble is a leading offshore drilling contractor for the oil and gas sector. Noble owns and operates one of the most modern, versatile and technically advanced fleets of mobile offshore drilling units in the offshore drilling industry. Noble provides contract drilling services with a fleet of 24 offshore drilling units, consisting of 12 floaters and 12 jackups at the date of this prospectus, focused largely on ultra-deepwater and high-specification drilling opportunities in both established and emerging regions worldwide. Each type of drilling rig is described further under “Business—Drilling Fleet.” At June 1, 2021, our fleet was located in Africa, Far East Asia, the Middle East, the North Sea, Oceania, South America and the US Gulf of Mexico.

Emergence from Chapter 11

On the Petition Date, Legacy Noble and certain of its subsidiaries, including Finco, filed the Chapter 11 Cases in the Bankruptcy Court. On September 4, 2020, the Debtors filed with the Bankruptcy Court the Plan, which was subsequently amended on October 8, 2020 and October 13, 2020 and modified on November 18, 2020, and the Disclosure Statement. On September 24, 2020, six additional subsidiaries of Legacy Noble filed the Chapter 11 Cases in the Bankruptcy Court. On November 20, 2020, the Bankruptcy Court entered an order confirming the Plan. In connection with the Chapter 11 Cases and the Plan, on and prior to the Effective Date, Legacy Noble and certain of its subsidiaries effectuated certain restructuring transactions, pursuant to which Legacy Noble formed Noble Parent as an indirect, wholly-owned subsidiary of Legacy Noble and transferred to Noble Parent substantially all of the subsidiaries and other assets of Legacy Noble. On the Effective Date, the Plan became effective in accordance with its terms, the Debtors emerged from the Chapter 11 Cases and Noble Parent became the new parent company.

On the Effective Date, pursuant to the Backstop Commitment Agreement and in accordance with the Plan, Noble Parent and Finco consummated the Rights Offering of the Notes and associated Ordinary Shares at an aggregate subscription price of $200 million. On the Effective Date, Finco issued an aggregate principal amount of $216 million of Notes. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Chapter 11 Proceedings and Going Concern” for a description of the events that occurred on the Effective Date, including the issuance of the Ordinary Shares, the Tranche 1 Warrants, the Tranche 2 Warrants and the Tranche 3 Warrants (each as defined herein). In accordance with the Plan, Legacy Noble and its remaining subsidiary will in due course be wound down and dissolved in accordance with applicable law. The Bankruptcy Court closed the Chapter 11 Cases with respect to all Debtors other than Legacy Noble, pending its wind down.

Recent Events

Merger

On March 25, 2021, Noble Parent entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Duke Merger Sub, LLC, a wholly-owned subsidiary of Noble Parent (“Merger Sub”), and Pacific Drilling Company LLC (“Pacific Drilling”), providing for the merger of Merger Sub with and into Pacific Drilling (the “Merger”), with Pacific Drilling continuing as the surviving company and a wholly-owned subsidiary of Noble Parent. The board of directors of Noble Parent (the “Board”) and the board of directors of Pacific Drilling unanimously approved and adopted the Merger Agreement.

On April 15, 2021, Noble Parent completed the Merger with Pacific Drilling. In connection with the Merger, and pursuant to the terms and conditions set forth in the Merger Agreement, (a) each membership interest in Pacific Drilling (the “Membership Interests”) was converted into the right to receive 6.366 Ordinary Shares and (b) each of Pacific Drilling’s warrants outstanding immediately prior to the effective time of the Merger (the “Pacific Warrants”) was converted into the right to receive 1.553 Ordinary Shares.



 

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Upon completion of the Merger, Noble Parent contributed Pacific Drilling to Finco and designated Pacific Drilling and its subsidiaries as unrestricted subsidiaries pursuant to the Revolving Credit Facility (as defined herein) and the Notes. As a result, neither Pacific Drilling nor any of its subsidiaries is a subsidiary guarantor of the Revolving Credit Facility or the Notes, and none of their assets secure the Revolving Credit Facility or the Notes.

Merger Registration Rights Agreement

On April 15, 2021, in connection with the closing of the Merger, Noble Parent entered into a registration rights agreement (the “Merger RRA”) with each of the holders identified therein (the “Merger RRA Holders”), pursuant to which, among other things, Noble Parent is required to file with the SEC a registration statement registering for resale the Ordinary Shares issuable to the Merger RRA Holders upon consummation of the Merger, and subject to certain limitations set forth therein, certain Merger RRA Holders have customary shelf, demand and piggyback registration rights. In addition, pursuant to the Merger RRA, certain Merger RRA Holders have the right to require Noble Parent, subject to certain limitations set forth therein, to effect a distribution of any or all of their Ordinary Shares by means of an underwritten offering. Noble Parent is not obligated to effect any underwritten offering unless the dollar amount of the registrable securities of the Merger RRA Holder(s) demanding such underwritten offering to be included therein is reasonably likely to result in gross sale proceeds of at least $20 million.

Risk Factors

Investing in the Notes involves risks associated with our business, operating results and financial condition. You should carefully read “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” in this prospectus for an explanation of these risks before investing in the Notes. These risks include, among others, the following:

 

   

risks related to the Notes, including the following:

 

   

the indenture governing the Notes contains operating and financial restrictions;

 

   

the value of the Collateral (as defined herein) on the Notes may not be sufficient to ensure repayment of the Notes, and it may be difficult to realize the value of the Collateral securing the Notes and the guarantees;

 

   

the liens on the Collateral securing the Notes and the guarantees thereof are junior and subordinate to the liens on the Collateral securing priority lien debt;

 

   

interest on the Notes may be paid in PIK interest;

 

   

risks related to our emergence from bankruptcy, including the following:

 

   

the effect of our recent emergence from bankruptcy on our business and relationships;

 

   

our actual financial results after emergence from bankruptcy may not be comparable to filed projections;

 

   

our historical financial information will not be indicative of future financial performance;

 

   

the warrants Noble Parent issued pursuant to the Plan are exercisable for Ordinary Shares;

 

   

risks related to our business and operations, including the following:

 

   

the impact of the novel strain of coronavirus (“COVID-19”) pandemic;

 

   

our business depends on the level of activity in the oil and gas industry;

 

   

the offshore contract drilling industry is a highly competitive and cyclical business;



 

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the over-supply of offshore rigs;

 

   

our ability to renew or replace existing contracts;

 

   

our current backlog of contract drilling revenue may not be ultimately realized;

 

   

our substantial dependence on several of our customers;

 

   

risks relating to operations in international locations;

 

   

our and our service providers’ failure to adequately protect sensitive information technology systems and critical data;

 

   

our failure to attract and retain skilled personnel;

 

   

supplier capacity constraints or shortages in parts or equipment or price increases;

 

   

risks associated with future mergers, acquisitions or dispositions of businesses or assets;

 

   

future sales or the availability for sale of substantial amounts of the Ordinary Shares could adversely affect the trading price of the Ordinary Shares;

 

   

we are a holding company, and we are dependent upon cash flow from subsidiaries to meet our obligations;

 

   

risks related to the Merger, including the following:

 

   

the integration of Pacific Drilling into the combined company may not be as successful as anticipated, and the combined company may not achieve the intended benefits;

 

   

financial and tax risks, including the following:

 

   

we may record impairment charges on property and equipment;

 

   

the Revolving Credit Agreement (as defined herein) contains various restrictive covenants limiting the discretion of our management in operating our business;

 

   

the impact of a loss of a major tax dispute or a successful tax challenge to our operating structure, intercompany pricing policies or the taxable presence of our subsidiaries in certain countries on our tax rate on our worldwide earnings;

 

   

regulatory and legal risks, including the following:

 

   

the impact of governmental laws and regulations on our costs and drilling activity;

 

   

increasing attention to environmental, social and governance matters;

 

   

changes in, compliance with or our failure to comply with certain laws and regulations;

 

   

compliance with laws and regulations relating to the protection of the environment and of human health and safety; and

 

   

we are subject to litigation.

Our Offices

Finco’s principal executive offices are located at 13135 Dairy Ashford, Suite 800, Sugar Land, Texas 77478, and its telephone number at that address is (281) 276-6100. Our website address is http://www.noblecorp.com. The information contained on or linked to or from our website is not part of, and is not incorporated by reference into, this prospectus or the registration statement of which this prospectus forms a part, and you should not consider such information part of this prospectus or rely on any such information in making your decision whether to purchase the Notes.


 

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The Notes

The following summary contains basic information about the Notes and is not intended to be complete. It does not contain all information that may be important to you. For a more complete understanding of the Notes, see “Description of the Notes” in this prospectus. For purposes of the description of the Notes included in this prospectus under this section and the “Description of the Notes,” references to (i) the “notes” refer to the 11%/ 13%/ 15% Senior Secured PIK Toggle Notes due 2028, (ii) the “PIK notes” refer to additional notes that may be that may be issued if interest on the notes is paid-in-kind through maturity and (iii) “NFC,” the “Company,” “we,” “us” and “our” refer only to Noble Finance Company and do not include any of its subsidiaries. Capitalized terms used and not defined in this section have the meaning given them in the “Description of the Notes.”

 

Issuer

Noble Finance Company, an exempted company incorporated in the Cayman Islands with limited liability.

 

Notes to be Offered by the Selling Securityholders

$489,763,895 aggregate principal amount of 11%/ 13%/ 15% Senior Secured PIK Toggle Notes due 2028, including up to $380,832,287 aggregate principal amount of notes that may be issued if interest on the notes is paid-in-kind through maturity.

 

Maturity Date

The notes will mature on February 15, 2028.

 

Interest

The notes will bear interest, at our option for each interest payment date, at the per annum rates of (i) 11% payable in cash, (ii) 13%, with 6.5% per annum of such interest to be payable in cash and 6.5% per annum of such interest to be payable by issuing PIK notes, or (iii) 15%, with the entirety of such interest to be payable by issuing PIK notes. Interest on the notes will be paid semi-annually, in arrears, on February 15 and August 15, commencing August 15, 2021, to the holders of record at the close of business on the February 1 and August 1 immediately preceding the applicable interest payment date. Interest on the notes will be computed on the basis of a 360-day year of twelve 30-day months. See “Description of the Notes—General.”

 

Ranking

The notes:

 

   

rank equally in right of payment with all future senior indebtedness of the Company but, to the extent the value of the Collateral exceeds the aggregate amount of all Priority Lien Debt, are effectively senior to all of the Company’s unsecured senior indebtedness;

 

   

rank senior in right of payment to any existing and future subordinated obligations of the Company;

 

   

are effectively junior to any obligations of the Company that are either (i) secured by a Lien on the Collateral that is senior or prior to the Liens securing the notes, including the Permitted Liens securing Priority Lien Debt, and to other Permitted Liens, or (ii) secured with property or assets that do not constitute Collateral to the extent of the value of the assets securing such Indebtedness; and



 

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are structurally subordinated to all future Indebtedness, claims of holders of Preferred Stock and other liabilities of the Company’s Subsidiaries that do not guarantee the notes (but if a Pledgor that is not a guarantor has pledged the Capital Stock of a guarantor to secure the notes, then such pledge will be senior to the Preferred Stock and other liabilities of such Pledgor).

 

Optional Redemption

Within 120 days of any Change of Control, we (or the successor entity following such Change of Control) may redeem for cash all (but not less than all) of the outstanding notes, at a redemption price, if the redemption is (x) prior to (but not including) February 15, 2024, equal to the sum of (1) 106% of the principal amount of the notes to be redeemed plus (2) accrued and unpaid interest, if any, to, but excluding, the redemption date or (y) on or after February 15, 2024, equal to the redemption price applicable to the notes (expressed as a percentage of the principal amount of the notes to be redeemed) if redeemed during the 12-month period beginning on February 15, 2024 of the years indicated in the second immediately following paragraph.

 

  Prior to February 15, 2024, we will be entitled at our option to redeem the notes, in whole or in part, at a redemption price equal to 106% of the principal amount of the notes plus the Applicable Premium as of, and accrued and unpaid interest, if any, to, but excluding, the redemption date (subject to the right of holders on the relevant record date to receive interest due on the relevant interest payment date).

 

  The redemption price for the notes to be redeemed on any redemption date that is on or after February 15, 2024 will be equal to the applicable percentage set forth below of the principal amount of the notes, plus accrued and unpaid interest thereon, if any, to, but excluding, the date of redemption (subject to the right of holders on the relevant record date to receive interest due on the relevant interest payment date) if redeemed during the 12-month period beginning on February 15 of the years indicated below:

 

YEAR

  

PERCENTAGE

2024

   106.000%

2025

   104.000%

2026

   102.000%

2027 and thereafter

   100.000%

 

  See “Description of the Notes—Optional Redemption.”

 

Tax Redemption

The notes will be subject to redemption at any time, in whole but not in part, at a redemption price, if the redemption is (x) prior to (but not including) February 15, 2024, equal to 106% of the principal amount of the notes to be redeemed or (y) on or after February 15, 2024, equal to the redemption price applicable to the notes (expressed as a percentage of the principal amount of notes to be redeemed), in each



 

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case together with accrued and unpaid interest to, but not including, the Tax Redemption Date, plus all Additional Amounts then due or which will become due on the Tax Redemption Date as a result of the redemption or otherwise, if on the next date on which any amount would be payable in respect of the notes, we are or would be required to pay Additional Amounts, and we cannot avoid any such payment obligation by taking reasonable measures available (including, for the avoidance of doubt, appointment of a new paying agent but excluding the reincorporation or reorganization of the Company), and the requirement arises as a result of a Change in Tax Law.

 

  See “Description of the Notes—Tax Redemption.”

 

Guarantees

The notes are guaranteed on a senior secured basis by each subsidiary guarantor. The notes guarantees of the notes by each subsidiary guarantor:

 

   

are a senior obligation of such subsidiary guarantor;

 

   

are secured by a second-priority security interest in the Collateral (subject to Permitted Liens) owned by such subsidiary guarantor;

 

   

rank equally in right of payment with all future senior indebtedness of such subsidiary guarantor but, to the extent the value of the Collateral exceeds the aggregate amount of all Priority Lien Debt, are effectively senior to all of such subsidiary guarantor’s unsecured senior indebtedness;

 

   

rank senior in right of payment to any existing and future subordinated obligations of such subsidiary guarantor; and

 

   

are effectively junior to any obligations of such subsidiary guarantor that are either (i) secured by a Lien on the Collateral that is senior or prior to the Liens securing such subsidiary guarantor’s notes guarantee, including the Permitted Liens, or (ii) secured with property or assets that do not constitute Collateral to the extent of the value of the assets securing such Indebtedness.

 

  Neither Pacific Drilling nor any of its subsidiaries is a subsidiary guarantor of the Revolving Credit Facility or the notes, and none of their assets secure the Revolving Credit Facility or the notes.

 

  See “Description of the Notes—General” and “Description of the Notes—Notes Guarantee.”

 

Collateral

The notes and the notes guarantees are secured by second-priority security interests (subject to Permitted Liens) in the Collateral. Subject to the terms described under “Description of the Notes—Collateral—Release,” the Collateral consists of substantially all of the property and assets of the Company and the subsidiary guarantors, other than Excluded Property, and the pledge of the Capital Stock of the Company and some or all of the Capital Stock of certain subsidiary guarantors. See “Description of the Notes—Collateral.”


 

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  The Collateral does not include any assets of, or equity interests in, Pacific Drilling or any of its subsidiaries.

 

Certain Covenants

The indenture governing the notes restricts our ability and the ability of our restricted subsidiaries to, among other things:

 

   

incur or guarantee additional indebtedness or issue preferred stock;

 

   

pay dividends or make other distributions on account of capital stock;

 

   

purchase or redeem capital stock or subordinated indebtedness;

 

   

make investments;

 

   

create liens;

 

   

enter into agreements that restrict the ability of our restricted subsidiaries to pay dividends or make other payments to us;

 

   

sell assets;

 

   

consolidate or merge with or into other companies or transfer all or substantially all of our assets; and

 

   

engage in transactions with affiliates.

 

  These limitations will be subject to a number of important qualifications and exceptions. See “Description of the Notes—Certain Covenants.”

 

OID

Because the notes provide the issuer with the option to pay interest in the form of additional notes (the PIK notes) in lieu of paying cash interest, the notes will be treated as having been issued with original issue discount for U.S. federal income tax purposes. As a result, a holder of a note who is subject to U.S. federal income tax is generally required to pay U.S. federal income tax on accrual of original issue discount on the notes. See “Material U.S. Federal Income Tax Considerations” for more information.

 

Use of Proceeds

We will not receive any proceeds from the sale of the notes by the selling securityholders pursuant to this prospectus. See “Use of Proceeds.”

 

Absence of a Public Market

There is currently no established public trading market for the notes, and there can be no assurance that a public trading market will develop.

 

Risk Factors

Investing in the notes involves significant risks. You should carefully read and consider the information beginning on page 9 of this prospectus under “Risk Factors” and all other information in this prospectus before deciding to invest in the notes.


 

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RISK FACTORS

Investing in the Notes involves significant risks. Before making an investment decision, you should carefully consider the specific risk factors set forth below, together with the other information included elsewhere in this prospectus. If any of the risks discussed in this prospectus occur, our business, prospects, liquidity, financial condition and results of operations could be materially impaired, in which case the price of the Notes could decline significantly and you could lose all or part of your investment. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. See “Cautionary Statement Regarding Forward-Looking Statements.”

Risks Related to the Notes

The indenture governing the Notes contains operating and financial restrictions that may restrict Finco’s business and financing activities.

The primary restrictive covenants contained in the indenture under which the Notes were issued limit Finco’s ability and the ability of certain of its subsidiaries to pay dividends or make other distributions or repurchase or redeem its capital stock and certain indebtedness, create liens securing certain indebtedness, incur certain indebtedness, consolidate, merge or transfer all or substantially all of its properties and assets, enter into transactions with affiliates and dispose of assets and use proceeds from the dispositions of assets.

Finco’s ability to comply with the covenants and restrictions contained in the indenture governing the Notes may be affected by events beyond its control. If market or other economic conditions deteriorate, Finco’s ability to comply with these covenants and restrictions may be impaired. A failure to comply with the covenants, ratios or tests in the indenture governing the Notes, if not cured or waived, could have a material adverse effect on Finco’s business, financial condition and results of operations. Finco’s existing and future indebtedness may have cross-default and cross-acceleration provisions. Upon the triggering of any such provision, the relevant creditor may:

 

   

not be required to lend any additional amounts to Finco;

 

   

elect to declare all borrowings outstanding due to them, together with accrued and unpaid interest and fees, to be due and payable (and, with respect to Finco’s secured indebtedness, foreclose on the collateral securing such indebtedness);

 

   

elect to require that all obligations accrue interest at the default rate provided therein, if such rate has not already been imposed;

 

   

have the ability to require Finco to apply all of its available cash to repay such borrowings; and/or

 

   

prevent Finco from making debt service payments under its other agreements,

any of which could result in an event of default under the Notes.

If any of Finco’s existing indebtedness were to be accelerated, there can be no assurance that it would have, or be able to obtain, sufficient funds to repay such indebtedness in full. Even if new financing were available, it may be on terms that are less attractive to Finco than the Revolving Credit Facility or the Notes or it may not be on terms that are acceptable to Finco. For additional information, see “Description of the Notes.”

The value of the Collateral securing the Notes may not be sufficient to ensure repayment of the Notes because the holders of obligations under the Revolving Credit Facility and other first-priority lien obligations will be paid first from the proceeds of the Collateral. It may be difficult to realize the value of the Collateral securing the Notes and the guarantees.

Finco’s indebtedness and other obligations under the Revolving Credit Facility and other priority lien debt are secured by a first-priority lien on the Collateral securing the Notes and the guarantees thereof. The liens securing the Notes and the guarantees thereof are effectively junior to the liens securing obligations under the

 

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Revolving Credit Facility and other priority lien obligations, so that proceeds of the Collateral will be applied first to repay those first lien obligations before any such proceeds are applied to pay any amounts due on the Notes. Accordingly, if Finco defaults on the Notes, Finco cannot assure you that the collateral agent would receive enough money from the sale of the Collateral to repay you. In addition, Finco has specified rights to issue additional notes (including Notes used to pay PIK interest) and other parity lien obligations that would be secured by liens on the Collateral on an equal and ratable basis with the Notes. See “—The Collateral securing the Notes and related guarantees may be diluted under certain circumstances.” If the proceeds of any sale of the Collateral are not sufficient to repay all amounts due on the Notes and any other parity lien obligations, then your claims against Finco’s remaining assets to repay any amounts still outstanding under the Notes would be unsecured. The Revolving Credit Facility permits Finco to incur additional indebtedness thereunder, and the indenture governing the Notes permits Finco to incur additional obligations secured by liens that have priority over the Notes in certain circumstances, as well as incur additional obligations secured by liens with the same priority as the liens securing the Notes.

By their nature, some or all of the pledged assets may be illiquid and may have no readily ascertainable market value. Accordingly, the Collateral may not be sold in a short period of time, if at all. In addition, a portion of the Collateral includes assets that may only be usable, and thus retain value, as part of Finco’s existing operating businesses. Finco also cannot assure you that the fair market value of the Collateral will exceed the principal amount of the debt secured thereby. Additionally, the value of the assets to be pledged as Collateral for the Notes and the guarantees could be impaired in the future as a result of changing economic conditions, commodity prices, environmental concerns, Finco’s failure to implement its business strategy, competition and other future trends. Any claim for the difference between the amount, if any, realized by holders of the Notes from the sale of the Collateral securing the Notes and the guarantees thereof will rank equal in right of payment with all of Finco’s other unsecured unsubordinated indebtedness and other obligations, including accounts payable. Additionally, in the event that a bankruptcy case is commenced by or against Finco, if the value of the Collateral is less than the amount of principal and accrued and unpaid interest on the Notes and all other obligations secured thereby on a priority and pari passu basis, holders of Notes would not be entitled to receive, among other things, post-petition interest, fees or expenses or adequate protection on account of any “undersecured” portion of their claims. Likewise, Finco cannot assure you that the pledged assets will be saleable or, if saleable, that there will not be substantial delays in their liquidation.

In addition, the Collateral securing the Notes will be subject to other liens permitted under the terms of the Revolving Credit Facility, the indenture governing the Notes and the Senior Lien Intercreditor Agreement (as defined herein), whether existing now or arising on or after the date the Notes are issued. To the extent that third parties hold prior liens, such third parties may have rights and remedies with respect to the property subject to such liens that, if exercised, could adversely affect the value of the Collateral securing the Notes. The indenture governing the Notes does not require that Finco maintain any amount of Collateral or maintain a specific ratio of indebtedness to asset values.

With respect to some of the Collateral to be pledged, the collateral agent’s liens and ability to foreclose on the Collateral are also limited by the need to meet certain requirements, such as obtaining third-party consents, paying court fees that may be based on the principal amount of the parity lien obligations and making additional filings. If it is unable to obtain these consents, pay such fees or make these filings, the liens may be invalid and the applicable holders and lenders will not be entitled to the Collateral or any recovery with respect thereto. Finco cannot assure you that any such required consents, fee payments or filings can be obtained on a timely basis or at all. These requirements may limit the number of potential bidders for certain Collateral in any foreclosure and may delay any sale, either of which events may have an adverse effect on the sale price of the Collateral. Therefore, the practical value of realizing on the Collateral, without the appropriate consents, fees and filings, may be limited.

In the event of a foreclosure on the Collateral under the Revolving Credit Facility and other priority lien debt (or a distribution in respect thereof in a bankruptcy or insolvency proceeding), the proceeds from the

 

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Collateral may not be sufficient to satisfy the Notes and other parity lien obligations because such proceeds would, under the Senior Lien Intercreditor Agreement, first be applied to satisfy Finco’s obligations under the Revolving Credit Facility and other priority lien obligations. Only after all of Finco’s obligations under the Revolving Credit Facility and such other priority lien obligations have been satisfied will proceeds from the Collateral be applied to satisfy Finco’s obligations under the Notes and other parity lien obligations. In addition, in the event of a foreclosure on the Collateral, the proceeds from such foreclosure may not be sufficient to satisfy Finco’s obligations under the Notes and other parity lien obligations.

Pursuant to the terms contained in the Revolving Credit Facility and the indenture governing the Notes, Finco and its Restricted Subsidiaries (as defined herein) may sell Collateral and other assets. Upon any such sale, all or a portion of the interest in any asset sold may no longer constitute Collateral. The indenture governing the Notes contains a covenant concerning the use of the proceeds from any sale of assets, including the use of those proceeds to pay debt or reinvest in Finco’s business. Although Finco may seek to reinvest proceeds from any asset sales, any assets in which Finco reinvests may not constitute Collateral or be as profitable to Finco as the assets sold. Additionally, the indenture governing the Notes does not require that the Notes be secured by at least a specified amount of Collateral, whether expressed as a minimum ratio of the value of such Collateral to the amount of the Notes or otherwise.

The liens securing the Notes will be released automatically if the liens securing the Revolving Credit Facility are released.

An active trading market may not develop for the Notes.

There has been no trading market for the Notes, and Finco does not intend to apply to list the Notes on any securities exchange or to arrange for quotation on any automated dealer quotation system. In addition, the liquidity of the trading market in the Notes, and the market price quoted for the Notes, may be adversely affected by changes in the overall market for this type of security and by changes in Finco’s financial performance or prospects or in the prospects for companies in Finco’s industry generally. As a result, an active trading market may not develop for the Notes. If an active trading market does not develop or is not maintained, the market price and liquidity of the Notes may be adversely affected. In that case, you may not be able to sell your Notes at a particular time or you may not be able to sell your Notes at a favorable price. You should not purchase the Notes unless you understand, and know you can bear, all of the investment risks involving the Notes.

Finco’s subsidiaries that are not guarantors of the Notes, including Pacific Drilling, have no obligation, except in the circumstances described herein, to pay amounts due under the Notes.

The Notes are guaranteed by all of Finco’s subsidiaries that guarantee the Revolving Credit Facility. Except for such guarantors of the Notes and pledges of equity in certain guarantors directly owned by certain non-guarantors, Finco’s subsidiaries will have no obligation, contingent or otherwise (except in the circumstances described herein), to pay amounts due under the Notes or to make any funds available to pay those amounts, whether by dividend, distribution, loan or other payment. The Notes and guarantees will be structurally subordinated to all existing and future indebtedness and other obligations of any non-guarantor subsidiary, other than indebtedness and other liabilities owed to Finco by such non-guarantor subsidiaries and, in the case of certain non-guarantors, the pledge of equity in certain guarantors directly owned by such non-guarantors. Neither Pacific Drilling nor any of its subsidiaries is a subsidiary guarantor of the Revolving Credit Facility or the Notes, and none of their assets secure the Revolving Credit Facility or the Notes. In the event of insolvency, liquidation, reorganization, dissolution or other winding up of any non-guarantor subsidiary, all of that subsidiary’s creditors (including trade creditors) would be entitled to payment in full out of that subsidiary’s assets (other than, with respect to certain non-guarantors, the pledges of the equity in certain guarantors directly owned by them) before the holders of the Notes would be entitled to any payment. As a result, your ability to make a claim against Finco’s non-guarantor subsidiaries may be limited.

 

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Finco may in the future have additional non-guarantor subsidiaries and your ability to make a claim against such subsidiaries may also be limited. In addition, the indenture governing the Notes permits all of these non-guarantor subsidiaries to incur additional indebtedness and does not contain any limitation on the amount of other liabilities, such as trade payables, that may be incurred by these subsidiaries.

In addition, any of Finco’s subsidiaries that provide guarantees of the Notes will be automatically released from those guarantees upon the occurrence of certain events, including (i) a sale or other disposition of such guarantor that results in such guarantor no longer being a Restricted Subsidiary (as defined herein) or (ii) upon the dissolution or liquidation of such guarantor.

If any guarantee is released, no holder of the Notes will have a claim as a creditor against that subsidiary, and the indebtedness and other liabilities, including trade payables, if any, whether secured or unsecured, of that subsidiary will be effectively senior to the claim of any holders of the Notes. See “Description of the Notes—Notes Guarantee.”

A guarantee and any lien granted by a subsidiary could be voided if it constitutes a fraudulent transfer or fraudulent conveyance under federal bankruptcy law, similar state law or the insolvency laws of foreign jurisdictions, which would prevent the holders of the Notes from relying on that subsidiary to satisfy claims.

Under U.S. bankruptcy law and comparable provisions of state fraudulent transfer laws and the insolvency laws of foreign jurisdictions, Finco’s guarantees of (including for all purposes of the discussion under this caption, liens granted by Finco’s subsidiaries to secure) the Notes can be voided, or claims under the guarantees may be subordinated to all other debts of that subsidiary if, among other things, the subsidiary, at the time it incurred the indebtedness evidenced by its guarantee or, in some jurisdictions, when payments become due under the guarantee, received less than reasonably equivalent value or fair consideration for the incurrence of the guarantee and:

 

   

was insolvent or rendered insolvent by reason of such incurrence of the obligations under the guarantee;

 

   

was engaged in a business or transaction for which the subsidiary’s remaining assets constituted unreasonably small capital; or

 

   

intended to incur, or believed that it would incur, debts beyond its ability to pay those debts as they mature.

The guarantees of the Notes may also be voided, without regard to the above factors, if a court finds that the subsidiary entered into the guarantee with the actual intent to hinder, delay or defraud its other creditors.

A court would likely find that a subsidiary did not receive reasonably equivalent value or fair consideration for its guarantee if the guarantor did not substantially benefit directly or indirectly from the issuance of the guarantee. If a court were to void a guarantee, you would no longer have a claim against that subsidiary. Sufficient funds to repay the Notes may not be available from other sources, including the remaining subsidiaries providing guarantees, if any. In addition, the court might direct you to repay any amounts that you already received from the subsidiary.

The measures of insolvency for purposes of fraudulent transfer laws vary depending upon the governing law. Generally, a subsidiary would be considered insolvent if:

 

   

the sum of its debts, including contingent liabilities, were greater than the fair saleable value of all its assets;

 

   

the present fair saleable value of its assets is less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or

 

   

it could not pay its debts as they become due.

 

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The indenture governing the Notes contains a provision intended to limit the guarantors’ liability to the maximum amount that it could incur without causing the incurrence of obligations under its guarantee to be a fraudulent transfer. Finco cannot assure you that this provision will protect the guarantees from fraudulent transfer challenges or, if it does, that the remaining amount due and collectible under the guarantees would suffice, if necessary, to pay the Notes in full when due. Such provision may not be sufficient to protect the guarantees from being voided under fraudulent transfer laws.

A financial failure by Finco or its subsidiaries may result in the assets of any or all of those entities becoming subject to the claims of all creditors of those entities.

A financial failure by Finco or its subsidiaries could affect payment of the Notes if a bankruptcy court were to substantively consolidate Finco and its subsidiaries. If a bankruptcy court substantively consolidated Finco and its subsidiaries, the assets of each entity would become subject to the claims of creditors of all entities. This would expose holders of Notes not only to the usual impairments arising from bankruptcy, but also to potential dilution of the amount ultimately recoverable because of the larger creditor base. Furthermore, forced restructuring of the Notes could occur through the “cramdown” provisions of the Bankruptcy Code. Under these provisions, the Notes could be restructured over your objections as to their general terms, including principal amount, interest rate and maturity.

The liens on the Collateral securing the Notes and the guarantees thereof are junior and subordinate to the liens on the Collateral securing the obligations under the Revolving Credit Facility and other priority lien debt.

The Notes and the guarantees are secured by second-priority liens in the Collateral granted by Finco and certain of its subsidiaries and any existing or future subsidiary in the future in accordance with the provisions of the indenture governing the Notes, subject to certain permitted liens, exceptions and encumbrances described in the indenture governing the Notes and the security documents relating to the Notes. All obligations arising under the Revolving Credit Facility are secured by first-priority liens on the same Collateral that secure the Notes on a second-priority basis. The Senior Lien Intercreditor Agreement provides, among other things, that if the collateral agent or any Parity Lien Secured Party (as defined herein) obtains possession of any Collateral or realizes any proceeds or payment in respect of any Collateral, pursuant to the exercise of remedies under any second lien security document or by the exercise of any rights available to it under applicable law as a result of any distribution of or in respect of any Collateral or proceeds in any of Finco’s or its guarantors’ bankruptcy, insolvency, liquidation, dissolution, reorganization or similar proceeding or through any other exercise of remedies, at any time prior to the payment in full of the obligations under the Revolving Credit Facility and other priority lien debt, then it will hold such Collateral, proceeds or payment in trust for the lenders under the Revolving Credit Facility and the other holders of priority lien obligations and transfer such Collateral, proceeds or payment, as the case may be, to the priority lien collateral agent as promptly as practicable. See “—The value of the Collateral securing the Notes may not be sufficient to ensure repayment of the Notes because the holders of obligations under the Revolving Credit Facility and other first-priority lien obligations will be paid first from the proceeds of the Collateral. It may be difficult to realize the value of the Collateral securing the Notes and the guarantees.”

In addition, if Finco defaults under the Revolving Credit Facility or any other priority lien debt, the lenders under such priority lien debt could declare all of the funds borrowed thereunder, together with accrued interest, immediately due and payable and foreclose on the pledged assets.

The Collateral securing the Notes and related guarantees may be diluted under certain circumstances.

The indenture governing the Notes permits Finco to incur additional secured indebtedness, including additional notes (including Notes used to pay PIK interest), parity lien obligations and other priority lien obligations, including bank financing, subject to Finco’s compliance with the applicable restrictive covenants. See “Description of the Notes—Certain Covenants—Limitation on Indebtedness” and “Description of the Notes—Certain Covenants—Limitation on Liens.”

 

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Any additional notes issued under the indenture governing the Notes would be guaranteed by the same subsidiary guarantors and would have the same liens and security interests, with the same priority, as the Notes. As a result, the Collateral securing the Notes would be shared by any additional notes Finco may issue under the indenture governing the Notes, and an issuance of such additional notes would dilute the value of the Collateral compared to the aggregate principal amount of Notes outstanding. The issuance of any such notes would also dilute the value of the Collateral. In addition, the indenture governing the Notes and Finco’s other security documents permit it and certain of its subsidiaries to incur additional priority lien debt and parity lien obligations, in some (but not all) instances limited to a threshold amount, by issuing additional debt securities under one or more new indentures or by borrowing additional amounts under the Revolving Credit Facility or under different instruments. Any additional priority lien debt or parity lien obligations secured by the same Collateral would dilute the value of the noteholders’ rights to the Collateral.

The realizable value of the Collateral may not be sufficient to pay the Notes and other future parity obligations in full after repayment of all priority lien obligations.

Certain of Finco’s offshore rigs constitute a substantial portion of the value of the Collateral securing the Notes and priority lien obligations (including the Revolving Credit Facility). The offshore contract drilling industry is currently in a period characterized by low demand for drilling services and excess rig supply. Such over-supply of offshore rigs continues to contribute to depressed demand for Finco’s rigs. Further declines in demand for Finco’s rigs may cause the value of the Collateral to decline. See “—Risks Related to Our Business and Operations—The offshore contract drilling industry is a highly competitive and cyclical business with intense price competition. We have competitors who are larger and have more financial resources than us. If we are unable to compete successfully, our profitability may be materially reduced” and “—Risks Related to Our Business and Operations—The over-supply of offshore rigs continues to contribute to depressed dayrates and demand for our rigs, which may remain unchanged for some time and, therefore, is expected to further adversely impact our revenues and profitability.”

Under the Revolving Credit Facility and the indenture governing the Notes, Finco could incur a substantial amount of additional priority lien obligations and parity lien obligations, and debt secured by collateral not including the Collateral securing the Notes. In the event of a default or liquidation, there may not be sufficient realizable value of the Collateral to first repay all priority lien obligations outstanding at such time and then repay the Notes and any other outstanding parity lien obligations.

Holders of the Notes will not control decisions regarding the Collateral, even during an event of default.

Under the Senior Lien Intercreditor Agreement between the Senior Credit Facility Agent (as defined herein), the collateral agent and the Grantors (as defined herein) party thereto, the Senior Credit Facility Agent will generally be entitled to receive and apply all proceeds of any Collateral to the repayment in full of the obligations under the Revolving Credit Facility and under Finco’s other priority lien obligations before any such proceeds will be available to repay obligations under the Notes and other parity lien obligations. In addition, the Senior Credit Facility Agent will generally be entitled to sole control of all decisions and actions, including foreclosure, with respect to Collateral, even if an event of default under the Notes has occurred, and neither the holders of Notes nor the collateral agent will generally be entitled to independently exercise remedies with respect to the Collateral until the discharge of Finco’s obligations under the Revolving Credit Facility and under Finco’s other priority lien obligations, unless and until a “Standstill Period” has elapsed (see “Description of the Notes—Collateral—First Lien-Second Lien Intercreditor Arrangements—Standstill Period; Permitted Enforcement Action”). In addition, the Senior Credit Facility Agent will be entitled, without the consent of holders of Notes or the collateral agent, to amend the terms of the Revolving Credit Facility and the security documents securing Finco’s priority lien obligations and to release the priority lien on any Collateral in certain circumstances.

Furthermore, because the holders of priority lien obligations will control the disposition of the Collateral securing such priority lien obligations and the Notes, if there were an event of default under the Notes, the

 

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holders of the priority lien obligations could decide, for a specified time period, not to proceed against the Collateral, regardless of whether or not there is a default under such priority lien obligations. During such time period, unless and until discharge of the priority lien obligations, including the Revolving Credit Facility, has occurred, the sole right of the holders of the Notes will be to hold a lien on the Collateral.

At any time that obligations that have the benefit of priority liens on the Collateral are outstanding, if the holders of such indebtedness release the Collateral for any reason whatsoever, including, without limitation, in connection with any sale of assets, the parity lien on such Collateral securing the Notes will be automatically released without any action by the holders of the Notes. The Collateral so released will no longer secure Finco’s and the subsidiary guarantors’ obligations under the Notes. See “Description of the Notes—Collateral—First Lien-Second Lien Intercreditor Arrangements.”

Pursuant to the Senior Lien Intercreditor Agreement, in the event of certain insolvency or liquidation proceedings, the Parity Lien Secured Parties will not raise any objection, contest or oppose, and each Parity Lien Secured Party will waive any claim to any financing by such debtor(s)-in-possession or the liens on the Collateral securing such financing or to any use, sale or lease of cash Collateral, subject to certain exceptions.

Pursuant to the Senior Lien Intercreditor Agreement, in the event of certain insolvency or liquidation proceedings related to the Grantors or their subsidiaries, the Parity Lien Secured Parties (as defined herein) will not raise any objection, contest or oppose, and each Parity Lien Secured Party will waive any claim to any DIP Financing (as defined herein) or to any DIP Financing Liens (as defined herein), or to any use, sale or lease of Collateral or to any grant of administrative expense priority under Section 364 of the Bankruptcy Code, unless the Priority Lien Agent (as defined herein) opposes or objects to such DIP Financing, such DIP Financing Liens or such use of cash collateral or the DIP Cap (as defined herein) is exceeded, among other exceptions. Additionally, no Parity Lien Secured Party shall propose, support or enter into any DIP Financing prior to the discharge of the priority lien obligations without the consent of the Priority Lien Agent, in its sole discretion, unless liens securing such DIP Financing rank junior to the priority Liens and such DIP Financing does not refinance any parity lien obligations which are repaid in cash prior to the discharge of the priority lien obligations. See “Description of the Notes—Collateral—First Lien-Second Lien Intercreditor Arrangements—Certain Agreements With Respect to Insolvency or Liquidation Proceedings.”

Finco will in most cases have control over the Collateral, and the sale of particular assets by it could reduce the pool of assets securing the Notes.

The security documents relating to the Collateral allow Finco to remain in possession and retain exclusive control over the Collateral (other than as set forth in the Collateral Documents (as defined herein)), to operate the Collateral, to alter the Collateral and to collect, invest and dispose of any income thereon. To the extent Finco sells or takes actions that reduce the value of the Collateral, it will reduce the pool of assets securing the Notes and the related guarantees.

The rights of holders of Notes to the Collateral securing the Notes may be adversely affected by the failure to record or perfect liens on the Collateral and other issues generally associated with the realization of liens on the Collateral.

Applicable law requires that a lien on certain tangible and intangible assets can only be properly perfected and its priority retained through certain actions undertaken by the secured party. The liens on the Collateral securing the Notes may not be perfected with respect to the claims of the Notes if the collateral agent is not able to take the actions necessary to perfect any of these liens. Moreover, applicable law requires that certain property and rights acquired after the grant of a general security interest can only be perfected at the time such property and rights are acquired and identified and additional steps to perfect in such property and rights are taken. Furthermore, even though it may constitute an event of default under the indenture governing the Notes, a third-party creditor could gain priority over one or more liens on the Collateral securing the Notes by recording an

 

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intervening lien or liens. In addition, the lien of the collateral agent will be subject to practical challenges generally associated with the realization of liens on Collateral. For example, the collateral agent may need to obtain the consent of third parties and make additional filings. If the collateral agent is unable to obtain these consents or make these filings, the liens may be invalid and the holders of the Notes will not be entitled to the Collateral or any recovery with respect thereto. Finco cannot assure you that the collateral agent will be able to obtain any such consent or make any such filing. Finco also cannot assure you that the consents of any third parties will be given when required to facilitate a foreclosure on such assets. Accordingly, the collateral agent may not have the ability to foreclose upon those assets and the value of the Collateral may significantly decrease.

Rights of holders of Notes in the Collateral may be adversely affected by bankruptcy proceedings. In addition, the value of the Collateral securing the Notes may not be sufficient for a bankruptcy court to grant post-petition interest on the Notes in a bankruptcy case against Finco or any of the guarantors. Should the amount of Finco’s obligations under the Notes, together with the amount of its obligations under the Revolving Credit Facility, and any other priority lien obligations or parity lien obligations, equal or exceed the value at foreclosure of the Collateral securing such obligations, the holders of the Notes will be deemed to have an unsecured claim for the difference between the outstanding principal amount of Notes, on the one hand, and the proceeds from realization on the Collateral available to be applied to the outstanding principal amount of Notes, on the other hand.

The right of the collateral agent to repossess and dispose of the Collateral upon acceleration is likely to be significantly impaired by federal bankruptcy law (separate and apart from the limitations set forth in the Senior Lien Intercreditor Agreement) if bankruptcy proceedings are commenced in the United States (“US”) by or against Finco prior to or possibly even after the collateral agent has repossessed and disposed of the Collateral.

Under the Bankruptcy Code, a secured creditor, such as the collateral agent acting for the holders of the Notes, is prohibited from repossessing its security from a debtor, such as us, in a bankruptcy case, or from disposing of security repossessed from a debtor, without bankruptcy court approval. Moreover, bankruptcy law permits the debtor to continue to retain and to use collateral, and the proceeds, products, rents or profits of the collateral, even though the debtor is in default under the applicable debt instruments, provided that the secured creditor is given “adequate protection.” The meaning of the term “adequate protection” may vary according to circumstances, but it is intended in general to protect the value of the secured creditors’ interest in the collateral. Adequate protection may include cash payments or the granting of additional security such as replacement liens, if and at such time as the court in its discretion determines, for any diminution in the value of the collateral as a result of the stay of repossession or disposition or any use of the collateral by the debtor during the pendency of the bankruptcy case. Generally, adequate protection payments, in the form of interest or otherwise, are not required to be paid by a debtor to a secured creditor unless the bankruptcy court determines that the value of the secured creditor’s interest in the collateral is declining during the pendency of the bankruptcy case. However, pursuant to the terms of the Senior Lien Intercreditor Agreement, the holders of the Notes agreed not to file or prosecute any motion for “adequate protection” based on their interest in the Collateral and not to object to any request for “adequate protection” by the priority lien collateral agent or any holder of priority lien obligations or to the objection by the priority lien collateral agent or any holder of priority lien obligations claiming a lack of “adequate protection,” subject to certain exceptions. In view of the lack of a precise definition of the term “adequate protection” and the broad discretionary powers of a bankruptcy court, it is impossible to predict (1) how long payments under the Notes could be delayed following commencement of a bankruptcy case, (2) whether or when the collateral agent would repossess or dispose of the Collateral or (3) whether or to what extent holders of the Notes would be compensated for any delay in payment of loss of value of the Collateral through the requirements of “adequate protection.”

Furthermore, in the event the bankruptcy court determines that the value of the Collateral is not sufficient to repay all amounts due under the Revolving Credit Facility and other priority lien obligations and on the parity lien obligations, the holders of the Notes would have secured claims only to the extent of the value (if any) of the Collateral available to them in accordance with the Senior Lien Intercreditor Agreement, and unsecured claims

 

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equal to the amount that the obligations under the Notes exceed such value of the Collateral, rendering the claims of the holders of the Notes “undersecured.” Federal bankruptcy laws do not permit the payment or accrual of interest, costs and attorneys’ fees for “undersecured claims” during the debtor’s bankruptcy case. Upon a finding by a bankruptcy court that the Notes are undersecured, the claims in the bankruptcy proceeding with respect to the Notes would be bifurcated between a secured claim and an unsecured claim, and the unsecured claim would not be entitled to the benefits of security in the Collateral. In addition, based on such a finding of under-collateralization, the unsecured portion of the Notes would not be entitled to receive “adequate protection” under U.S. bankruptcy laws. Finally, if any payments of post-petition interest were made at the time of such a finding of under-collateralization, such payments could be re-characterized by the bankruptcy court as a reduction of the principal amount of the secured claim with respect to the Notes.

Additionally, the collateral agent’s ability to foreclose on the Collateral on the noteholders’ behalf may be subject to the consent of third parties, prior liens and practical problems associated with the realization of the collateral agent’s lien on the Collateral. The debtor or trustee in a bankruptcy case may seek to void an alleged lien on the Collateral for the benefit of the bankruptcy estate, and it may be able to successfully do so if the lien is not properly perfected or was perfected within a specified period of time (generally 90 days) prior to the initiation of such proceeding. If the lien is avoided, a creditor may hold no lien and be treated as holding a general unsecured claim in the bankruptcy case. It is impossible to predict what recovery (if any) would be available for such an unsecured claim if Finco became a debtor in a bankruptcy case.

In addition to the waiver with respect to adequate protection set forth above, under the terms of the Senior Lien Intercreditor Agreement, the holders of the Notes also waive certain other important rights to which secured creditors may be entitled in a bankruptcy proceeding, as described in “Description of the Notes—Collateral—First Lien-Second Lien Intercreditor Arrangements.” These waivers could adversely impact the ability of the holders of the Notes to recover amounts owed to them in a bankruptcy proceeding.

In addition, a bankruptcy court may decide to substantively consolidate Finco and some or all of its subsidiaries in the bankruptcy proceeding. If a bankruptcy court substantively consolidated Finco and some or all of its subsidiaries, the assets of each entity would become subject to the claims of creditors of all entities that are so consolidated. Such a ruling would expose holders of Notes not only to the usual impairments arising from bankruptcy, but also to potential dilution of the amount ultimately recoverable because of the larger creditor base. Furthermore, a forced restructuring of the Notes could occur through the “cramdown” provisions of the U.S. Bankruptcy Code. Under those provisions, the Notes could be restructured over holders’ objections as to their general terms, including with respect to interest rate and maturity.

Any future pledge of Collateral may be avoidable in bankruptcy.

Any future pledge of Collateral in favor of the collateral agent, including pursuant to security documents, may be avoidable by the pledgor (a debtor in possession) or by its trustee in bankruptcy as a preferential transfer under U.S. law if certain events or circumstances exist or occur, including, among others, if:

 

   

the pledgor is insolvent at the time of the pledge;

 

   

the pledge permits the holder of the Notes to receive a greater recovery than if the pledge had not been given; and

 

   

a bankruptcy proceeding in respect of the pledgor is commenced within 90 days following the pledge, or, in certain circumstances, a longer period.

 

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There are circumstances other than repayment or discharge of the Notes under which the guarantee of a subsidiary guarantor will be automatically released with respect to the Notes.

Under various circumstances, the guarantee of a subsidiary guarantor may be released without your consent, including:

 

   

if Finco exercises its legal defeasance option or its covenant defeasance option as described under “Description of the Notes—Discharge and Defeasance”;

 

   

upon the dissolution or liquidation of such subsidiary guarantor, if immediately after giving effect thereto, Finco will be in compliance with certain covenants under the indenture governing the Notes;

 

   

if such subsidiary guarantor is designated as an Unrestricted Subsidiary (as defined herein) as described in “Description of the Notes—Certain Covenants—Designation of Restricted and Unrestricted Subsidiaries”; and

 

   

in other circumstances specified in the Senior Lien Intercreditor Agreement, including in connection with the exercise of remedies by the priority lien collateral agent.

In addition, a guarantee will be automatically released in connection with a sale, transfer or disposition of the capital stock of a subsidiary guarantor, if as a result of such sale, transfer or disposition, such subsidiary guarantor is no longer a Restricted Subsidiary and, immediately after giving effect thereto, Finco will be in compliance with certain covenants under the indenture governing the Notes. See “Description of the Notes—Notes Guarantee.”

If a bankruptcy petition were filed by or against Finco or a subsidiary guarantor, holders of the Notes may receive a lesser amount for their claim than they would have been entitled to receive under the indenture governing the Notes.

If a bankruptcy petition were filed by or against Finco or a guarantor under the Bankruptcy Code, the claim by any holder of the Notes for the principal amount of the Notes may be limited to an amount equal to the sum of:

 

   

the original issue price for the Notes; and

 

   

that portion of the original issue discount that does not constitute “unmatured interest” for purposes of the Bankruptcy Code.

Any original issue discount that was not amortized as of the date of the bankruptcy filing would constitute unmatured interest. Accordingly, the holders of the Notes under these circumstances may receive a lesser amount than they would be entitled to receive under the terms of the indenture governing the Notes, even if sufficient funds are available.

Interest on the Notes may be paid in PIK interest rather than cash, which will increase the amount of Finco’s indebtedness.

Finco will be entitled to pay PIK interest on the Notes at its option. As a result, Finco cannot assure you that it will make cash interest payments on the Notes. The payment of interest through PIK interest will increase the amount of Finco’s indebtedness and increase the risks associated with its level of indebtedness.

Risks Related to Our Emergence from Bankruptcy

We recently emerged from bankruptcy, which may adversely affect our business and relationships.

It is possible that our having filed for bankruptcy and our recent emergence from the Chapter 11 Cases may adversely affect our business and relationships with our vendors, suppliers, service providers, customers,

 

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employees and other third parties. Many risks exist as a result of the Chapter 11 Cases and our emergence, including the following:

 

   

we may have difficulty obtaining acceptable and sufficient financing to execute our business plan;

 

   

key suppliers, vendors and customers, may among other things, renegotiate the terms of our agreements, attempt to terminate their relationship with us or require financial assurances from us;

 

   

our ability to renew existing contracts and obtain new contracts on reasonably acceptable terms and conditions may be adversely affected;

 

   

our ability to attract, motivate and retain key employees and executives may be adversely affected; and

 

   

competitors may take business away from us, and our ability to compete for new business and attract and retain customers may be negatively impacted.

The occurrence of one or more of these events could have a material and adverse effect on our operations, financial condition and reputation. We cannot assure you that having been subject to bankruptcy protection will not adversely affect our operations in the future.

Our actual financial results after emergence from bankruptcy may not be comparable to our projections filed with the Bankruptcy Court in the course of the Chapter 11 Cases.

In connection with the Disclosure Statement we filed with the Bankruptcy Court, and the hearing to consider confirmation of the Plan, we prepared projected financial information to demonstrate to the Bankruptcy Court the feasibility of the Plan and our ability to continue operations upon our emergence from the Chapter 11 Cases. Those projections were prepared solely for the purpose of the Chapter 11 Cases and have not been and will not be updated and should not be relied upon by investors. At the time they were prepared, the projections reflected numerous assumptions concerning our anticipated future performance with respect to then prevailing and anticipated market and economic conditions that were and remain beyond our control and that may not materialize. We have not reviewed the projections or the assumptions on which they were based after our emergence. Projections are inherently subject to substantial and numerous uncertainties and to a wide variety of significant business, economic and competitive risks, and the assumptions underlying the projections or valuation estimates may prove to be wrong in material respects. Actual results may vary significantly from those contemplated by the projections. As a result, investors should not rely on these projections.

Our historical financial information will not be indicative of future financial performance as a result of the implementation of the Plan and the transactions contemplated thereby, as well as our adoption of fresh start accounting following emergence.

Our capital structure was significantly impacted by the Plan. Under fresh start accounting rules that became applicable to us upon the Effective Date, assets and liabilities were adjusted to fair values and our accumulated deficit was reset to zero. Accordingly, because fresh start accounting rules apply, our financial condition and results of operations following emergence from the Chapter 11 Cases are not be comparable to the financial condition and results of operations reflected in our historical financial statements from before February 5, 2021.

The warrants Noble Parent issued pursuant to the Plan are exercisable for Ordinary Shares, and the exercise of such equity instruments would have a dilutive effect to shareholders of Noble Parent.

On the Effective Date and pursuant to the Plan, Noble Parent issued 8,333,081 Tranche 1 Warrants and 8,333,081 Tranche 2 Warrants to the holders of Legacy Notes (as defined herein) and 2,777,698 Tranche 3 Warrants to the holders of Legacy Noble’s ordinary shares outstanding prior to the Effective Date. The warrants are exercisable for one Ordinary Share per warrant at initial exercise price of $19.27 per Tranche 1 Warrant, $23.13 per Tranche 2 Warrant and $124.40 per Tranche 3 Warrant, in each case as may be adjusted from time to

 

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time pursuant to the applicable warrant agreements. The Tranche 1 Warrants and the Tranche 2 Warrants are exercisable until 5:00 p.m., Eastern time, on February 4, 2028 and the Tranche 3 Warrants are exercisable until 5:00 p.m., Eastern time, on February 4, 2026. The Tranche 1 and Tranche 2 Warrants have Black-Scholes protections. The exercise of these warrants into Ordinary Shares would have a dilutive effect to the holdings of Noble Parent’s existing shareholders.

Risks Related to Our Business and Operations

Public health issues, including epidemics or pandemics such as COVID-19 have resulted in, and may in the future cause, significant adverse consequences for our business and financial position.

Public health issues, such as the COVID-19 pandemic, our mitigation efforts necessitated by COVID-19, and the effect from the actual and potential disruption of operations of our business partners, suppliers and customers, have had, and may in the future have, a material negative impact on our business and results of operations. In addition, if new, more infectious strains of COVID-19 develop or sufficient amounts of approved vaccines or boosters thereto do not become available, are not widely administered for a significant period of time, are not accepted by a significant portion of the population or otherwise prove ineffective against new strains, the negative impact of COVID-19 on the global economy, and, in turn, on our business and results of operations, could be material.

In response to COVID-19, governmental authorities around the world took various actions over time to mitigate the spread of COVID-19, such as imposing mandatory closures of non-essential business facilities, seeking voluntary closures of certain businesses, and imposing restrictions on, or advisories with respect to, travel, business operations and public gatherings or interactions. In addition, individuals and entities implemented measures in response to the pandemic and the governmental actions, as well as made changes to personal behaviors, such as requiring employees to work remotely, suspending non-essential travel worldwide for employees, discouraging or canceling employee attendance at in-person work-related meetings, and social distancing and isolating from others.

We have taken and will continue to take precautionary measures intended to mitigate the risk to our business, employees, customers, suppliers and the communities in which we operate. Our operational employees have been, and currently are, able to work on site and on our rigs, due in part to various precautionary measures with little or no material negative impact on the business and results of operations, such as requiring individuals to verify they have not experienced any COVID-19 related symptoms, or been in close contact with someone showing such symptoms or having recently tested positive for COVID-19, before they are permitted to travel to the work site or rig; quarantining any operational employees on a rig who have shown signs of COVID-19 (regardless of whether such employee has been confirmed to be infected); and imposing social distancing requirements in various areas of the rig, such as in the dining hall, work and meeting spaces, and sleeping quarters. Other precautionary measures that have contributed to our ability to continue operations have nonetheless had a material negative impact on the business and results of operations, such as requiring individuals to isolate in a designated facility or repurposed hotel for up to 14 days and test negative for COVID-19 prior to being permitted to travel to our rigs, which has resulted in an increase in the cost of operations. We are also actively assessing and planning for various operational contingencies; however, we cannot guarantee that any actions taken by us, including the precautionary measures noted above, will be effective in preventing an interruption of operations from an outbreak of COVID-19 or absence due to COVID-19 infection resulting in the vacancy of essential positions on one or more of our rigs. To the extent there is an outbreak of COVID-19 or vacancy of essential positions on one or more of our rigs, we may have to temporarily shut down operations thereof, which could result in significant downtime and have significant adverse consequences for our business and results of operations. In addition, many of our non-operational employees are now working remotely, which increases various logistical challenges, inefficiencies and operational risks. For instance, working remotely may increase the risk of security breaches or other cyber-incidents or attacks, loss of data, fraud and other disruptions as a consequence of more employees accessing

 

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sensitive and critical information from remote locations via network infrastructure and internet services not arranged, established or secured by the Company.

Governmental authorities around the world have implemented and continue to develop policies with the goal of re-opening various sectors of the economy, and certain jurisdictions have completed or nearly completed the re-opening process. However, certain other jurisdictions have returned, or may in the future return, to restrictions based upon increases in COVID-19 cases. The COVID-19 pandemic may continue unabated or worsen during the upcoming months in such jurisdictions, which may cause governmental authorities to implement restrictions on businesses and society, resulting in the re-opening of the economy being further curtailed. In complying with travel restrictions and mandatory quarantine measures imposed by governmental authorities and navigating surges in COVID-19 cases in various jurisdictions, we have experienced, and may continue to experience, increased difficulties, delays and expenses in moving our personnel to and from our operating locations. We have been unable, and may in the future be unable, to pass along these increased expenses to our customers. Additionally, disruptions to the ability of our suppliers, manufacturers and service providers to supply labor, parts, equipment or services in the jurisdictions in which we operate, whether as a result of government actions, labor shortages, travel restrictions, or the inability to source labor, parts or equipment from affected locations or other effects related to COVID-19, have increased our operating costs, increased the risk of rig downtime and negatively impacted our ability to meet our commitments to customers and may continue to do so in the future.

These conditions have had significant adverse consequences for the financial condition of many of our customers and resulted in, and may in the future result in, reductions to their drilling and production expenditures and delays or cancellations of projects, thereby decreasing demand for our services. We have experienced customers seeking price reductions for our services, payment deferrals and termination of our contracts; customers seeking to not perform under our contracts based on a force majeure claim; and customers that are unable or unwilling to timely pay outstanding receivables owed to us, all of which present liquidity challenges for us. In addition, we have experienced, and may in the future experience, pressure to reduce dayrates on existing contracts and idle or suspend existing operations. Any early termination payment made in connection with an early contract termination may not fully compensate us for the loss of the contract or may result in a negative impact to our projected future earnings due to the accounting treatment of such a termination payment under applicable accounting requirements. Accordingly, the actual amount of revenues earned may be substantially lower than the backlog reported.

The factors described above, including the ultimate duration and scope of the COVID-19 pandemic (including any potential future outbreaks and the continued success of vaccination programs), the impact on customers, suppliers, manufacturers and service providers, the timing to return to normal economic conditions, the impact on our operations, the demand for our services, and any permanent behavioral changes that the pandemic may cause, have had, and may continue to have, a material negative impact on our business, results of operations and financial condition, have previously contributed to our ability to continue as a going concern, and could in the future raise substantial doubt about our ability to continue as a going concern. We cannot predict when this negative impact will end, or whether it may worsen.

Our business and results of operations have been materially and negatively impacted and our market value has substantially declined due to depressed market conditions which are the result of, in part, the dramatic drop in the oil price, the development of additional onshore oil and gas resources and the oversupply of offshore drilling rigs.

Crude oil prices have been in a steep decline since late 2014 and dropped to as low as approximately $30 per barrel in January 2016. Oil prices have partially recovered to a price of approximately $70 per barrel on May 28, 2021, but have been volatile and have not recovered to 2014 levels. As a result of the oil price environment prior to the significant drop in 2014, the offshore drilling business flourished with high utilization and high dayrates, and a large number of offshore drilling rigs were constructed to take advantage of the market.

 

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Also, many in our industry extended the lives of older rigs rather than retiring these rigs. These factors have led to a significant oversupply of drilling rigs while our customers have greatly reduced their planned offshore exploration and development spending in response to the depressed price of oil.

During the same period, onshore crude oil production in the US rose sharply. While the cost of production onshore varies, in some cases it may be less than the cost of production in offshore fields where our rigs are designed to operate, especially deepwater fields. Additionally, onshore production is perceived as yielding more consistent results and posing lower regulatory risk than offshore production. This increase in onshore US production has had a negative impact on the price of oil and the demand for our services. Further, given the reduced oil price and often the lower operating costs onshore, many of our customers have allocated more of their capital budgets to onshore exploration activities than offshore exploration activities, particularly deepwater exploration activities, which has also led to a decrease in the demand for offshore drilling services since 2014.

These factors have affected market conditions and led to a material decline in the demand for our services since 2014, the dayrates we are paid by our customers and the level of utilization of our drilling rigs. These poor market conditions, which may continue into the foreseeable future, in turn, have led to a material deterioration in our results of operations. There can be no assurance as to if, when or to what extent the current depressed market conditions, and our business, results of operations or enterprise value, will improve. Further, even if the price of oil and gas were to increase dramatically, we cannot assure you that there would be any increase in demand for our services.

Our business depends on the level of activity in the oil and gas industry. Adverse developments affecting the industry, including a decline in the price of oil or gas, reduced demand for oil and gas products and increased regulation of drilling and production, could have a material adverse effect on our business, financial condition and results of operations.

Demand for drilling services depends on a variety of economic and political factors and the level of activity in offshore oil and gas exploration and development and production markets worldwide. As noted above, the price of oil and gas, and market expectations of potential changes in the price, significantly affect this level of activity, as well as dayrates that we can charge customers for our services. However, higher prices do not necessarily translate into increased drilling activity because our clients take into account a number of considerations when they decide to invest in offshore oil and gas resources, including expectations regarding future commodity prices. The price of oil and gas and the level of activity in offshore oil and gas exploration and development are extremely volatile and are affected by numerous factors beyond our control, including:

 

   

the cost of exploring for, developing, producing and delivering oil and gas;

 

   

the ability of the Organization of Petroleum Exporting Countries (“OPEC”) to set and maintain production levels and pricing;

 

   

expectations regarding future energy prices;

 

   

increased supply of oil and gas resulting from onshore hydraulic fracturing activity and shale development;

 

   

the relative cost of offshore oil and gas exploration versus onshore oil and gas production;

 

   

worldwide production and demand for oil and gas (including the over-supply of oil and gas as a result of the COVID-19 pandemic and actions by OPEC and other oil and gas producing nations (together with OPEC, “OPEC+”)), which are impacted by changes in the rate of economic growth in the global economy;

 

   

potential acceleration in the development, and the price and availability, of alternative fuels or energy sources;

 

   

the level of production in non-OPEC countries;

 

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worldwide financial instability or recessions;

 

   

regulatory restrictions or any moratorium on offshore drilling;

 

   

the discovery rate of new oil and gas reserves either onshore or offshore;

 

   

the rate of decline of existing and new oil and gas reserves;

 

   

available pipeline and other oil and gas transportation capacity;

 

   

oil refining capacity;

 

   

the ability of oil and gas companies to raise capital;

 

   

limitations on liquidity and available credit;

 

   

advances in exploration, development and production technology either onshore or offshore;

 

   

technical advances affecting energy consumption, including the displacement of hydrocarbons through increasing transportation fuel efficiencies;

 

   

merger and divestiture activity among oil and gas producers;

 

   

the availability of, and access to, suitable locations from which our customers can produce hydrocarbons;

 

   

adverse weather conditions, including hurricanes, typhoons, cyclones, winter storms and rough seas, the frequency and severity of which may be increased due to climate change;

 

   

the occurrence or threat of epidemic or pandemic diseases or any governmental response to such occurrence or threat;

 

   

tax laws, regulations and policies;

 

   

laws and regulations related to environmental matters, including those addressing alternative energy sources, the phase-out of fossil fuel vehicles and the risks of global climate change;

 

   

the political environment of oil-producing regions, including uncertainty or instability resulting from civil disorder, an outbreak or escalation of armed hostilities or acts of war or terrorism; and

 

   

the laws and regulations of governments regarding exploration and development of their oil and gas reserves or speculation regarding future laws or regulations.

Adverse developments affecting the industry as a result of one or more of these factors, including any further decline in the price of oil and gas from their current levels or the failure of the price of oil and gas to recover to a level that encourages our clients to expand their capital spending, the inability of our customers to access capital on economically advantageous terms, including as a result of the increasing focus on climate change by investors, a global recession, reduced demand for oil and gas products, increased supply due to the development of new onshore drilling and production technologies, and increased regulation of drilling and production, particularly if several developments were to occur in a short period of time, would have a material adverse effect on our business, financial condition and results of operations. The current level of oil and gas prices has had a material adverse effect on demand for our services since 2014 and is expected to continue to have a material adverse effect on our business and results of operations.

The offshore contract drilling industry is a highly competitive and cyclical business with intense price competition. We have competitors who are larger and have more financial resources than us. If we are unable to compete successfully, our profitability may be materially reduced.

The offshore contract drilling industry is a highly competitive and cyclical business characterized by high capital and operating costs and evolving capability of newer rigs. Drilling contracts are traditionally awarded on

 

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a competitive bid basis. Price competition, rig availability, location and rig suitability and technical specifications are the primary factors in determining which rig is qualified for a job, and additional factors are considered when determining which contractor is awarded a job, including experience of the workforce, efficiency, safety performance record, condition of equipment, operating integrity, reputation, industry standing and client relations. Our future success and profitability will partly depend upon our ability to keep pace with our customers’ demands with respect to these factors. In the past several years, the pace of consolidation in our industry has increased, leading to the creation of a number of larger and financially stronger competitors. If we are unable, or our customers believe that we are unable, to compete with the scale and financial strength of these larger competitors, it could harm our competitiveness and our ability to secure new drilling contracts. Moreover, certain of our competitors have engaged, or may in the future engage, in bankruptcy proceedings, debt refinancing transactions, management changes or other strategic initiatives in an attempt to reduce operating costs to maintain a position in the market, which could result in such competitors emerging with stronger or healthier balance sheets and, in turn, an improved ability to compete with us in the future. Further, if current competitors, or new market entrants, implement new technical capabilities, services or standards that are more attractive to our customers or price their product offerings more competitively, it could have a material adverse effect on our business, financial condition and results of operations.

In addition to intense competition, our industry has historically been cyclical. The offshore contract drilling industry is currently in a period characterized by low demand for drilling services and excess rig supply. Periods of low demand or excess rig supply intensify the competition in the industry and have resulted in, and are expected to continue to result in, many of our rigs earning substantially lower dayrates or being idle for long periods of time. We cannot provide you with any assurances as to when such period will end, and when there will be higher demand for contract drilling services or a meaningful reduction in the number of drilling rigs.

The over-supply of offshore rigs continues to contribute to depressed dayrates and demand for our rigs, which may remain unchanged for some time and, therefore, is expected to further adversely impact our revenues and profitability.

Prior to the current downturn, we experienced an extended period of high utilization and high dayrates, and industry participants materially increased the supply of drilling rigs by building new drilling rigs, including some that have not yet entered service. This increase in supply, combined with the decrease in demand for drilling rigs resulting from the substantial decline in the price of oil that began in 2014, has resulted in an oversupply of drilling rigs, which has contributed to the decline in utilization and dayrates.

We are currently experiencing competition from newbuild rigs that have either already entered the market or are available to enter the market. The entry of these rigs into the market has resulted in lower dayrates for both newbuilds and existing rigs rolling off their current contracts. Lower utilization and dayrates have adversely affected our revenues and profitability and may continue to do so for some time in the future. In addition, our competitors may relocate rigs to geographic markets in which we operate, which could exacerbate excess rig supply and result in lower dayrates and utilization in those markets. To the extent that the drilling rigs currently under construction or on order do not have contracts upon their completion, there may be increased price competition as such vessels become operational, which could lead to a further reduction in dayrates and in utilization, and we may be required to idle additional drilling rigs. Rig operators may take lower dayrates and shorter contract durations on older rigs to keep their rigs operational and avoid scrapping or retiring them. As a result, our business, financial condition and results of operations would be materially adversely affected.

We may not be able to renew or replace expiring contracts, and our customers may terminate or seek to renegotiate or repudiate our drilling contracts or may have financial difficulties that prevent them from meeting their obligations under our drilling contracts.

Since the market downturn began at the end of 2014, the new customer contracts we have entered into have generally had less favorable terms, including dayrates, than contracts entered into prior to the downturn. In

 

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addition, for some of our older rigs we were unable to find any replacement contracts. Our ability to renew contracts that expire or obtain new contracts and the terms of any such contracts will depend on market conditions and our customers’ expectations and assumptions of future oil prices and other factors.

Our customers may generally terminate our drilling contracts if a drilling rig is destroyed or lost or if we have to suspend drilling operations for a specified period of time as a result of a breakdown of major equipment or, in some cases, due to other events beyond the control of either party. In the case of nonperformance and under certain other conditions, our drilling contracts generally allow our customers to terminate without any payment to us. The terms of some of our drilling contracts permit the customer to terminate the contract after a specified notice period by tendering contractually specified termination amounts and, in some cases, without any payment. These termination payments, if any, may not fully compensate us for the loss of a contract. The early termination of a contract may result in a rig being idle for an extended period of time and a reduction in our contract backlog and associated revenue, which could have a material adverse effect on our business, financial condition and results of operations. Moreover, if any of our long-term contracts were to be terminated early, such termination could affect our future earnings flow and could have material adverse effect on our future financial condition and results of operations, even if we were to receive the contractually specified termination amount.

In addition, during periods of depressed market conditions, such as the one we are currently experiencing, we are subject to an increased risk of our customers seeking to renegotiate or repudiate their contracts. The ability of our customers to perform their obligations under drilling contracts with us may also be adversely affected by the financial condition of the customer, restricted credit markets, economic downturns and industry downturns. We may elect to renegotiate the rates we receive under our drilling contracts downward if we determine that to be a reasonable business solution. If our customers cancel or are unable to perform their obligations under their drilling contracts, including their payment obligations, and we are unable to secure new contracts on a timely basis on substantially similar terms or if we elect to renegotiate our drilling contracts and accept terms that are less favorable to us, it could have a material adverse effect on our business, financial condition and results of operations.

Our current backlog of contract drilling revenue may not be ultimately realized.

Generally, contract backlog only includes future revenues under firm commitments; however, from time to time, we may report anticipated commitments under letters of intent or award for which definitive agreements have not yet been, but are expected to be, executed. We may not be able to perform under these contracts as a result of operational or other breaches or due to events beyond our control, and we may not be able to ultimately execute a definitive agreement in cases where one does not currently exist. Moreover, we can provide no assurance that our customers will be able to or willing to fulfill their contractual commitments to us or that they will not seek to renegotiate or repudiate their contracts, especially during the current industry downturn. The terms of some of our drilling contracts permit the customer to terminate the contract after specified notice periods by tendering contractually specified termination amounts and, in certain cases, without any payment. In estimating backlog, we make certain assumptions about applicable dayrates for our longer-term contracts with dayrate adjustment mechanisms (like certain of our contracts with Royal Dutch Shell plc (“Shell”)). We cannot assure you that actual results will mirror these assumptions. Our inability to perform under our contractual obligations or to execute definitive agreements, our customers’ inability or unwillingness to fulfill their contractual commitments to us, including as a result of contract repudiations or our decision to accept less favorable terms on our drilling contracts, or the failure of actual results to reflect the assumptions we use to estimate backlog for certain contracts, may have a material adverse effect on our business, financial condition and results of operations.

 

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We are substantially dependent on several of our customers, including Equinor ASA, Exxon Mobil Corporation, Saudi Arabian Oil Company and Shell, and the loss of any of these customers would have a material adverse effect on our financial condition and results of operations.

Any concentration of customers increases the risks associated with any possible termination or nonperformance of drilling contracts, failure to renew contracts or award new contracts or reduction of their drilling programs. Equinor ASA (“Equinor”), Exxon Mobil Corporation (“ExxonMobil”), Saudi Arabian Oil Company (“Saudi Aramco”) and Shell accounted for approximately 14.3 percent, 26.6 percent, 13.8 percent and 21.7 percent, respectively, of our consolidated operating revenues and approximately 3.6 percent, 44.2 percent, 17.0 percent and 26.3 percent, respectively, of our backlog for the year ended December 31, 2020. This concentration of customers increases the risks associated with any possible termination or nonperformance of contracts, in addition to our exposure to credit risk. If any of these customers were to terminate or fail to perform their obligations under their contracts and we were not able to find other customers for the affected drilling units promptly, our financial condition and results of operations could be materially adversely affected.

Our business involves numerous operating hazards.

Our operations are subject to many hazards inherent in the drilling business, including:

 

   

well blowouts;

 

   

fires;

 

   

collisions or groundings of offshore equipment and helicopter accidents;

 

   

punch-throughs;

 

   

mechanical or technological failures;

 

   

failure of our employees or third-party contractors to comply with our internal environmental, health and safety guidelines;

 

   

pipe or cement failures and casing collapses, which could release oil, gas or drilling fluids;

 

   

geological formations with abnormal pressures;

 

   

loop currents or eddies;

 

   

failure of critical equipment;

 

   

toxic gas emanating from the well;

 

   

spillage handling and disposing of materials; and

 

   

adverse weather conditions, including hurricanes, typhoons, tsunamis, cyclones, winter storms and rough seas, the frequency and severity of which may be increased due to climate change.

These hazards could cause personal injury or loss of life, suspend drilling operations, result in regulatory investigation or penalties, seriously damage or destroy property and equipment, result in claims by employees, customers or third parties, cause environmental damage and cause substantial damage to oil and gas producing formations or facilities. Operations also may be suspended because of machinery breakdowns, abnormal drilling conditions, and failure of subcontractors to perform or supply goods or services or personnel shortages. The occurrence of any of the hazards we face could have a material adverse effect on our business, financial condition and results of operations.

 

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We are exposed to risks relating to operations in international locations.

We operate in various regions throughout the world that may expose us to political and other uncertainties, including risks of:

 

   

seizure, nationalization or expropriation of property or equipment;

 

   

monetary policies, government credit rating downgrades and potential defaults, and foreign currency fluctuations and devaluations;

 

   

limitations on the ability to repatriate income or capital;

 

   

complications associated with repairing and replacing equipment in remote locations;

 

   

repudiation, nullification, modification or renegotiation of contracts;

 

   

limitations on insurance coverage, such as war risk coverage, in certain areas;

 

   

import-export quotas, wage and price controls and imposition of trade barriers;

 

   

delays in implementing private commercial arrangements as a result of government oversight;

 

   

compliance with and changes in taxation rules or policies;

 

   

compliance with and changes in various jurisdictional regulatory or financial requirements, including rig flagging and local ownership requirements;

 

   

other forms of government regulation and economic conditions that are beyond our control and that create operational uncertainty;

 

   

governmental corruption;

 

   

the occurrence or threat of epidemic or pandemic diseases or any government response to such occurrence or threat;

 

   

piracy; and

 

   

terrorist acts, war, revolution and civil disturbances.

Further, we operate or have operated in certain less-developed countries with legal systems that are not as mature or predictable as those in more developed countries, which can lead to greater uncertainty in legal matters and proceedings. Examples of challenges of operating in these countries include:

 

   

procedural requirements for temporary import permits, which may be difficult to obtain; and

 

   

the effect of certain temporary import permit regimes, where the duration of the permit does not coincide with the general term of the drilling contract.

Our ability to do business in a number of jurisdictions is subject to maintaining required licenses and permits and complying with applicable laws and regulations. For example, all of our drilling units are subject to regulatory requirements of the flag state where the drilling unit is registered. The flag state requirements are international maritime requirements and, in some cases, further interpolated by the flag state itself. In addition, each of our drilling units must be “classed” by a classification society, signifying that such drilling rig has been built and maintained in accordance with the rules of the classification society and complies with applicable rules and regulations of the flag state. If any drilling unit loses its flag, does not maintain its class or fails any periodical survey or special survey, the drilling unit will be unable to carry on operations and will be unemployable and uninsurable.

Jurisdictions where we operate may attempt to impose requirements that our drilling units operating in such a jurisdiction have some local ownership or be registered under the flag of that jurisdiction, or both. If our debt agreements do not permit us to change the flag of a rig to a certain jurisdiction or register a rig under the flag of that

 

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jurisdiction (and consequently comply with local ownership requirements), and if we are otherwise unable to successfully object to registration, we may no longer be able to operate in that country. Any such inability to carry on operations in jurisdictions where we operate or desire to operate, or our failure to comply with any other laws and regulations of the countries where we operate, could have a material adverse effect on our results of operations.

In addition, OPEC initiatives, as well as other governmental actions, may continue to cause oil price volatility. In some areas of the world, this governmental activity has adversely affected the amount of exploration and development work done by major oil companies, which may continue. In addition, some governments favor or effectively require the awarding of drilling contracts to local contractors, require use of a local agent, require partial local ownership or require foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. These practices may adversely affect our ability to compete and our results of operations.

In June 2016, the UK held a referendum in which voters approved an exit from the EU (“Brexit”). The UK exited the EU on January 31, 2020, consistent with the terms of the EU-UK Withdrawal Agreement, with a transition period that ended on December 31, 2020. On January 1, 2021, the UK left the EU Single Market and Customs Union as well as all EU policies and international agreements. As a result, the free movement of persons, goods, services and capital between the UK and the EU ended, and the EU and the UK formed two separate markets and two distinct regulatory and legal spaces. On December 24, 2020, the European Commission reached a trade agreement with the UK on the terms of its future cooperation with the EU. The trade agreement offers UK and EU companies preferential access to each other’s markets, ensuring imported goods will be free of tariffs and quotas (subject to rules of origin requirements). Uncertainty exists regarding the ultimate impact of this trade agreement, as well as the extent of possible financial, trade, regulatory and legal implications of Brexit. Brexit also contributes to global political and economic uncertainty, which may cause, among other consequences, volatility in exchange rates and interest rates, and changes in regulations. The Company provides contract drilling services to the international oil and gas industry and our fleet operates globally across multiple locations. Based on our global operating model and the versatility and marketability of our fleet, we do not expect the impact of Brexit to be significant to the Company.

Operating and maintenance costs of our rigs may be significant and may not correspond to revenue earned.

Our operating expenses and maintenance costs depend on a variety of factors including: crew costs, costs of provisions, equipment, insurance, maintenance and repairs, and shipyard costs, many of which are beyond our control. Our total operating costs are generally related to the number of drilling rigs in operation and the cost level in each country or region where such drilling rigs are located. Equipment maintenance costs fluctuate depending upon the type of activity that the drilling rig is performing and the age and condition of the equipment. Operating and maintenance costs will not necessarily fluctuate in proportion to changes in operating revenues. While operating revenues may fluctuate as a function of changes in dayrate, costs for operating a rig may not be proportional to the dayrate received and may vary based on a variety of factors, including the scope and length of required rig preparations and the duration of the contractual period over which such expenditures are amortized. Any investments in our rigs may not result in an increased dayrate for or income from such rigs. A disproportionate amount of operating and maintenance costs in comparison to dayrates could have a material adverse effect on our business, financial condition and results of operations.

Drilling contracts with national oil companies may expose us to greater risks than we normally assume in drilling contracts with non-governmental clients.

Contracts with national oil companies are often non-negotiable and may expose us to greater commercial, political and operational risks than we assume in other contracts, such as exposure to materially greater environmental liability and other claims for damages (including consequential damages) and personal injury related to our operations, or the risk that the contract may be terminated by our client without cause on short-term notice, contractually or by governmental action, under certain conditions that may not provide us an early termination payment, collection risks and political risks. In addition, our ability to resolve disputes or enforce

 

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contractual provisions may be negatively impacted with these contracts. We can provide no assurance that the increased risk exposure will not have an adverse impact on our future operations or that we will not increase the number of rigs contracted to national oil companies with commensurate additional contractual risks.

Operational interruptions or maintenance or repair work may cause our customers to suspend or reduce payment of dayrates until operation of the respective drilling rig is resumed, which may lead to loss of revenue or termination or renegotiation of the drilling contract.

If our drilling rigs are idle for reasons that are not related to the ability of the rig to operate, our customers are entitled to pay a waiting, or standby, rate that is lower than the full operational rate. In addition, if our drilling rigs are taken out of service for maintenance and repair for a period of time that exceeds the scheduled maintenance periods set forth in our drilling contracts, we will not be entitled to payment of dayrates until the rig is able to work. Several factors could cause operational interruptions, including:

 

   

breakdowns of equipment and other unforeseen engineering problems;

 

   

work stoppages, including labor strikes;

 

   

shortages of material and skilled labor;

 

   

delays in repairs by suppliers;

 

   

surveys by government and maritime authorities;

 

   

periodic classification surveys;

 

   

inability to obtain permits;

 

   

severe weather, strong ocean currents or harsh operating conditions;

 

   

force majeure events; and

 

   

the occurrence or threat of epidemic or pandemic diseases or any government response to such occurrence or threat.

If the interruption of operations exceeds a determined period due to an event of force majeure, our customers have the right to pay a rate that is significantly lower than the waiting rate for a period of time and, thereafter, may terminate the drilling contracts related to the subject rig. Suspension of drilling contract payments, prolonged payment of reduced rates or termination of any drilling contract as a result of an interruption of operations as described herein could materially adversely affect our business, financial condition and results of operations.

We may have difficulty obtaining or maintaining insurance in the future and our insurance coverage and contractual indemnity rights may not protect us against all the risks and hazards we face.

We do not procure insurance coverage for all of the potential risks and hazards we may face. Furthermore, no assurance can be given that we will be able to obtain insurance against all of the risks and hazards we face or that we will be able to obtain or maintain adequate insurance at rates and with deductibles or retention amounts that we consider commercially reasonable. In addition, our insurance carriers may interpret our insurance policies such that they do not cover losses for which we make claims.

Although we maintain insurance in the geographic areas in which we operate, pollution, reservoir damage and environmental risks generally are not fully insurable. Our insurance policies may not adequately cover our losses or may have exclusions of coverage for some losses. We do not have insurance coverage or for all risks, including loss of hire insurance on most of the rigs in our fleet. Uninsured exposures may include expatriate activities prohibited by US laws and regulations, radiation hazards, cyber risks, certain loss or damage to property onboard our rigs and losses relating to shore-based terrorist acts or strikes. In addition, our insurance

 

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may not cover losses associated with pandemics such as the COVID-19 pandemic. Furthermore, the damage sustained to offshore oil and gas assets in the United States as a result of hurricanes has negatively impacted certain aspects of the energy insurance market, resulting in more restrictive and expensive coverage for US named windstorm perils due to the price or lack of availability of coverage. Accordingly, we have in the past self-insured the rigs in the US Gulf of Mexico for named windstorm perils. We currently have US windstorm coverage for most of our US fleet subject to certain limits, but will continue to monitor the insurance market conditions in the future and may decide not to, or be unable to, purchase named windstorm coverage for some or all of the rigs operating in the US Gulf of Mexico.

Under our drilling contracts, liability with respect to personnel and property is customarily assigned on a “knock-for-knock” basis, which means that we and our customers assume liability for our respective personnel and property, irrespective of the fault or negligence of the party indemnified. Although our drilling contracts generally provide for indemnification from our customers for certain liabilities, including liabilities resulting from pollution or contamination originating below the surface of the water, enforcement of these contractual rights to indemnity may be limited by public policy and other considerations and, in any event, may not adequately cover our losses from such incidents. There can also be no assurance that those parties with contractual obligations to indemnify us will necessarily be in a financial position to do so. During depressed market periods such as the one in which we currently operate, the contractual indemnity provisions we are able to negotiate in our drilling contracts may require us to assume more risk than we would during normal market periods.

If a significant accident or other event occurs and is not fully covered by insurance or contractual indemnity, it could adversely affect our business, financial condition and results of operations.

Our failure to adequately protect our sensitive information technology systems and critical data and our service providers’ failure to protect their systems and data could have a material adverse effect on our business, results of operations and financial condition.

We increasingly depend on information technology systems that we manage, and others that are managed by our third-party service and equipment providers, to conduct our day-to-day operations, including critical systems on our drilling units, and these systems are subject to risks associated with cyber incidents or attacks. It has been reported that unknown entities or groups have mounted cyber-attacks on businesses and other organizations solely to disable or disrupt computer systems, disrupt operations and, in some cases, steal data. In addition, the US government has issued public warnings that indicate that energy assets might be specific targets of cybersecurity threats. Also, in response to the COVID-19 pandemic, many of our non-operational employees are working remotely, which increases logistical challenges, inefficiencies and operational risks. Working remotely has significantly increased the use of online conferencing services and remote networking, which enable employees to work outside of our corporate infrastructure and, in some cases, use their own personal devices. This remote work model has resulted in an increased demand for information technology resources and may expose us to additional risks of security breaches or other cyber-incidents or attacks, loss of data, fraud and other disruptions as a consequence of more employees accessing sensitive and critical information from remote locations. Due to the nature of cyber-attacks, breaches to our systems or our service or equipment providers’ systems could go undetected for a prolonged period of time. While the Company has a cybersecurity program, a significant cyber-attack could disrupt our operations and result in downtime, loss of revenue, harm to the Company’s reputation, or the loss, theft, corruption or unauthorized release of critical data of us or those with whom we do business as well as result in higher costs to correct and remedy the effects of such incidents. If our or our service or equipment providers’ systems for protecting against cyber incidents or attacks prove to be insufficient and an incident were to occur, it could have a material adverse effect on our business, financial condition and results of operations, along with our reputation. Even though we carry cyber insurance that may provide insurance coverage under certain circumstances, we might suffer losses as a result of a security breach that exceeds the coverage available under our policy or for which we do not have coverage.

 

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In addition, laws and regulations governing data privacy and the unauthorized disclosure of confidential or protected information, including the European Union General Data Protection Regulation and recent legislation in various US states, pose increasingly complex compliance challenges and potentially elevate costs, and any failure to comply with these laws and regulations could result in significant penalties and legal liability.

Upgrades, refurbishment and repair of rigs are subject to risks, including delays and cost overruns, that could have an adverse impact on our available cash resources and results of operations.

We will continue to make upgrades, refurbishment and repair expenditures to our fleet from time to time, some of which may be unplanned. In addition, we may reactivate rigs that have been cold or warm stacked and make selective acquisitions of rigs. Our customers may also require certain shipyard reliability upgrade projects for our rigs. These projects and other efforts of this type are subject to risks of cost overruns or delays inherent in any large construction project as a result of numerous factors, including the following:

 

   

shortages of equipment, materials or skilled labor;

 

   

work stoppages and labor disputes;

 

   

unscheduled delays in the delivery of ordered materials and equipment;

 

   

local customs strikes or related work slowdowns that could delay importation of equipment or materials;

 

   

weather interferences;

 

   

difficulties in obtaining necessary permits or approvals or in meeting permit or approval conditions;

 

   

design and engineering problems;

 

   

inadequate regulatory support infrastructure in the local jurisdiction;

 

   

latent damages or deterioration to hull, equipment and machinery in excess of engineering estimates and assumptions;

 

   

unforeseen increases in the cost of equipment, labor and raw materials, particularly steel;

 

   

unanticipated actual or purported change orders;

 

   

client acceptance delays;

 

   

disputes with shipyards and suppliers;

 

   

delays in, or inability to obtain, access to funding;

 

   

shipyard availability, failures and difficulties, including as a result of financial problems of shipyards or their subcontractors; and

 

   

failure or delay of third-party equipment vendors or service providers.

The failure to complete a rig upgrade, refurbishment or repair on time, or at all, may result in related loss of revenues, penalties, or delay, renegotiation or cancellation of a drilling contract or the recognition of an asset impairment. Additionally, capital expenditures could materially exceed our planned capital expenditures. Moreover, when our rigs are undergoing upgrade, refurbishment and repair, they may not earn a dayrate during the period they are out of service. If we experience substantial delays and cost overruns in our shipyard projects, it could have a material adverse effect on our business, financial condition and results of operations. We currently have no new rigs under construction.

 

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Failure to attract and retain skilled personnel or an increase in personnel costs could adversely affect our operations.

We require skilled personnel to operate and provide technical services and support for our drilling units. In the past, during periods of high demand for drilling services and increasing worldwide industry fleet size, shortages of qualified personnel have occurred. During the last few years of reduced demand, there were layoffs of qualified personnel, who often find work with competitors or leave the industry. As a result, if market conditions improve and we seek to reactivate warm or cold stacked rigs, upgrade our working rigs or purchase additional rigs, we may face shortages of qualified personnel, which would impair our ability to attract qualified personnel for our new or existing drilling units, impair the timeliness and quality of our work and create upward pressure on personnel costs, any of which could adversely affect our operations.

Supplier capacity constraints or shortages in parts or equipment, supplier production disruptions, supplier quality and sourcing issues or price increases could increase our operating costs, decrease our revenues and adversely impact our operations.

Our reliance on third-party suppliers, manufacturers and service providers to secure equipment used in our drilling operations exposes us to volatility in the quality, price and availability of such items. Certain specialized parts and equipment we use in our operations may be available only from a single or small number of suppliers. During the last few years of reduced demand, many of these third-party suppliers reduced their inventories of parts and equipment and, in some cases, reduced their production capacity. If the market for our services improves and we seek to reactivate warm or cold stacked rigs, upgrade our working rigs or purchase additional rigs, these reductions could make it more difficult for us to find equipment and parts for our rigs. A disruption or delay in the deliveries from such third-party suppliers, capacity constraints, production disruptions, price increases, defects or quality-control issues, recalls or other decreased availability or servicing of parts and equipment could adversely affect our ability to reactivate rigs, upgrade working rigs, purchase additional rigs or meet our commitments to customers on a timely basis, adversely impact our operations and revenues by resulting in uncompensated downtime, reduced dayrates, the incurrence of liquidated damages or other penalties or the cancellation or termination of contracts, or increase our operating costs.

We may experience risks associated with future mergers, acquisitions or dispositions of businesses or assets or other strategic transactions.

As part of our business strategy, we may pursue mergers, acquisitions or dispositions of businesses or assets or other strategic transactions that we believe will enable us to strengthen or broaden our business. We may be unable to implement this element of our strategy if we cannot identify suitable companies, businesses or assets, reach agreement on potential strategic transactions on acceptable terms, manage the impacts of such transactions on our business or for other reasons. Moreover, mergers, acquisitions, dispositions and other strategic transactions involve various risks, including, among other things, (i) difficulties relating to integrating or disposing of a business and unanticipated changes in customer and other third-party relationships subsequent thereto, (ii) diversion of management’s attention from day-to-day operations, (iii) failure to realize the anticipated benefits of such transactions, such as cost savings and revenue enhancements, (iv) potentially substantial transaction costs associated with such transactions and (v) potential impairment resulting from the overpayment for an acquisition.

Future mergers or acquisitions may require us to obtain additional equity or debt financing, which may not be available on attractive terms. Moreover, to the extent a transaction financed by non-equity consideration results in goodwill, it will reduce our tangible net worth, which might have an adverse effect on credit availability.

Acts of terrorism, piracy and political and social unrest could affect the markets for drilling services, which may have a material adverse effect on our results of operations.

Acts of terrorism and social unrest, brought about by world political events or otherwise, have caused instability in the world’s financial and insurance markets in the past and may occur in the future. Such acts could

 

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be directed against companies such as ours. In addition, acts of terrorism, piracy and social unrest could lead to increased volatility in prices for crude oil and natural gas and could affect the markets for drilling services. Insurance premiums could increase and coverage may be unavailable in the future. Government regulations may effectively preclude us from engaging in business activities in certain countries. These regulations could be amended to cover countries where we currently operate or where we may wish to operate in the future.

Our drilling contracts do not generally provide indemnification against loss of capital assets or loss of revenues resulting from acts of terrorism, piracy or political or social unrest. We have limited insurance for our assets providing coverage for physical damage losses resulting from risks, such as terrorist acts, piracy, vandalism, sabotage, civil unrest, expropriation and acts of war, and we do not carry insurance for loss of revenues resulting from such risks.

Fluctuations in exchange rates and nonconvertibility of currencies could result in losses to us.

We may experience currency exchange losses when revenues are received or expenses are paid in nonconvertible currencies, when we do not hedge an exposure to a foreign currency, when the result of a hedge is a loss or if any counterparty to our hedge were to experience financial difficulties. We may also incur losses as a result of an inability to collect revenues due to a shortage of convertible currency available to the country of operation, controls over currency exchange or controls over the repatriation of income or capital.

We are a holding company, and we are dependent upon cash flow from subsidiaries to meet our obligations.

We currently conduct our operations through our subsidiaries, and our operating income and cash flow are generated by our subsidiaries. As a result, cash we obtain from our subsidiaries is the principal source of funds necessary to meet our debt service obligations. Unless they are guarantors of our indebtedness, our subsidiaries do not have any obligation to pay amounts due on our indebtedness or to make funds available for that purpose. Contractual provisions or laws, as well as our subsidiaries’ financial condition and operating requirements, may also limit our ability to obtain the cash that we require from our subsidiaries to pay our debt service obligations. Applicable tax laws may also subject such payments to us by our subsidiaries to further taxation.

Future sales or the availability for sale of substantial amounts of the Ordinary Shares, or the perception that these sales may occur, could adversely affect the trading price of the Ordinary Shares and could impair the ability of Noble Parent to raise capital through future sales of equity securities.

Pursuant to the Memorandum of Association of Noble Parent, the share capital of Noble Parent is $6,000 divided into 500,000,000 ordinary shares of a par value of $0.00001 each and 100,000,000 shares of a par value of $0.00001, each of such class or classes having the rights as the Board may determine from time to time. On June 7, 2021, there were 60,137,878 Ordinary Shares outstanding and 6,463,182 Penny Warrants (as defined herein) issued and outstanding. In addition, as of June 7, 2021, 8,332,910 Tranche 1 Warrants, 8,332,602 Tranche 2 Warrants and 2,777,698 Tranche 3 Warrants were outstanding and exercisable. Noble Parent also has 7,716,049 Ordinary Shares authorized and initially reserved for issuance pursuant to equity awards under the Noble Corporation 2021 Long-Term Incentive Plan.

A large percentage of the Ordinary Shares are held by a relatively small number of investors. Noble Parent entered into (i) the Equity Registration Rights Agreement (as defined herein) with certain parties who received Ordinary Shares under the Plan and (ii) the Merger RRA with the Merger RRA Holders, in each case pursuant to which it has agreed to file a registration statement with the SEC to facilitate potential future sales of such Ordinary Shares by them. Sales of a substantial number of the Ordinary Shares in the public markets, or even the perception that these sales might occur (such as upon the filing of the aforementioned registration statements), could impair the ability of Noble Parent to raise capital for our operations through a future sale of, or pay for acquisitions using, equity securities.

 

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Noble Parent may issue Ordinary Shares or other securities from time to time as consideration for future acquisitions and investments. If any such acquisition or investment is significant, the number of Ordinary Shares, or the number or aggregate principal amount, as the case may be, of other securities that Noble Parent may issue may in turn be substantial. Noble Parent may also grant registration rights covering those Ordinary Shares or other securities in connection with any such acquisitions and investments.

Noble Parent cannot predict the effect that future sales of Ordinary Shares will have on the price at which the Ordinary Shares trades or the size of future issuances of Ordinary Shares or the effect, if any, that future issuances will have on the market price of the Ordinary Shares. Sales of substantial amounts of the Ordinary Shares, or the perception that such sales could occur, may adversely affect the trading price of the Ordinary Shares.

Certain shareholders own a significant portion of our outstanding equity securities, and their interests may not always coincide with the interests of other holders of the Ordinary Shares.

As noted above, a large percentage of the Ordinary Shares are held by a relatively small number of investors. As a result, these investors could have significant influence over all matters presented to Noble Parent’s shareholders for approval, including election and removal of directors, change in control transactions and the outcome of all actions requiring a majority shareholder approval. This influence would likely directly impact decisions made by Noble Parent as our sole shareholder.

The interests of these investors in Noble Parent may not always coincide with the interests of the other holders of the Ordinary Shares, and the concentration of control in these investors may limit other shareholders’ ability to influence corporate matters. The concentration of ownership and voting power of these investors may also delay, defer or even prevent an acquisition by a third party or other change of control of Noble Parent and may make some transactions more difficult or impossible without their support, even if such events are in the bests interests of other shareholders. In addition, the concentration of voting power may adversely affect the trading price of the Ordinary Shares, which could adversely affect the ability of Noble Parent to provide us with capital for our operations, if needed.

Risks Related to the Merger

The integration of Pacific Drilling into the combined company may not be as successful as anticipated, and the combined company may not achieve the intended benefits or do so within the intended timeframe.

The Merger involves numerous operational, strategic, financial, accounting, legal, tax and other risks, including potential liabilities associated with the acquired business. Difficulties in integrating Pacific Drilling into the combined company may result in the combined company performing differently than expected, in operational challenges or in the delay or failure to realize anticipated expense-related efficiencies, and could have an adverse effect on the financial condition, results of operations or cash flows of Noble. Potential difficulties that may be encountered in the integration process include, among other factors:

 

   

the inability to successfully integrate the businesses of Pacific Drilling into the combined company, operationally and culturally, in a manner that permits Noble to achieve the full revenue and cost savings anticipated from the Merger;

 

   

complexities associated with managing a larger, more complex, integrated business;

 

   

not realizing anticipated synergies;

 

   

the inability to retain key employees and otherwise integrate personnel from the two companies and the loss of key employees;

 

   

potential unknown liabilities and unforeseen expenses associated with the Merger;

 

   

difficulty or inability to comply with the covenants of the debt of the combined company;

 

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integrating relationships with customers, vendors and business partners;

 

   

performance shortfalls, including operating, safety, or environmental performance at one or both of the companies as a result of the diversion of management’s attention caused by completing the Merger and integrating Pacific Drilling’s operations into the combined company; and

 

   

the disruption of, or the loss of momentum in, each company’s ongoing business or inconsistencies in standards, controls, procedures and policies.

Additionally, the success of the Merger will depend, in part, on the combined company’s ability to realize the anticipated benefits and cost savings from combining Noble’s and Pacific Drilling’s businesses. The anticipated benefits and cost savings of the Merger may not be realized fully or at all, may take longer to realize than expected or could have other adverse effects that Noble does not currently foresee. Some of the assumptions that Noble has made, such as the achievement of certain synergies, may not be realized.

As noted above, certain shareholders own a substantial percentage of the Ordinary Shares of Noble Parent. Certain of such shareholders may also have received additional Ordinary Shares in the Merger. As a result, the risks relating to concentrated ownership of the Ordinary Shares, described above in “—Risks Related to Our Business and Operations—Future sales or the availability for sale of substantial amounts of the Ordinary Shares, or the perception that these sales may occur, could adversely affect the trading price of the Ordinary Shares and could impair the ability of Noble Parent to raise capital through future sales of equity securities,” would be increased.

Financial and Tax Risks

We may record impairment charges on property and equipment, including rigs and related capital spares.

We evaluate the impairment of property and equipment, which include rigs and related capital spares, whenever events or changes in circumstances (including a decision to cold stack, retire or sell rigs) indicate that the carrying amount of an asset may not be recoverable. An impairment loss on our property and equipment may exist when the estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Any impairment loss recognized represents the excess of the asset’s carrying value over the estimated fair value. As part of this analysis, we make assumptions and estimates regarding future market conditions. To the extent actual results do not meet our estimated assumptions, for a given rig or piece of equipment, we may take an impairment loss in the future. In addition, we may also take an impairment loss on capital spares and other capital equipment when we deem the value of those items has declined due to factors like obsolescence, deterioration or damage. Based upon our impairment analyses for the years ended December 31, 2020 and 2019, we recorded impairment charges of $3.9 billion and $615.3 million, respectively, on various rigs and certain capital spares during those periods. There can be no assurance that we will not have to take additional impairment charges in the future if current depressed market conditions persist, or that we will be able to return cold stacked rigs to service in the time frame and at the reactivation costs or at the dayrates that we projected. It is reasonably possible that the estimate of undiscounted cash flows may change in the near term, resulting in the need to write down the affected assets to their corresponding estimated fair values.

The Revolving Credit Agreement contains various restrictive covenants limiting the discretion of our management in operating our business.

The Revolving Credit Agreement contains various restrictive covenants that may limit our management’s discretion in certain respects. In particular, the Revolving Credit Agreement limits Finco’s ability and the ability of its restricted subsidiaries to, among other things and subject to certain limitations and exceptions, (i) incur, assume or guarantee additional indebtedness; (ii) pay dividends or distributions on capital stock or redeem or repurchase capital stock; (iii) make investments; (iv) repay, redeem or amend certain indebtedness; (v) sell stock of its subsidiaries; (vi) transfer or sell assets; (vii) create, incur or assume liens; (viii) enter into transactions with

 

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certain affiliates; (ix) merge or consolidate with or into any other person or undergo certain other fundamental changes; and (x) enter into certain burdensome agreements. In addition, the Revolving Credit Agreement obligates Finco and its restricted subsidiaries to comply with certain financial maintenance covenants and, under certain conditions, to make mandatory prepayments and reduce the amount of credit available under the Revolving Credit Facility, all as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Post-emergence Debt—Senior Secured Revolving Credit Facility.” Such mandatory prepayments and commitment reductions may affect cash available for use in the Company’s business. Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in all obligations under the Revolving Credit Facility to be declared due and payable immediately and all commitments thereunder to be terminated.

Changes in the method of determining the London Interbank Offered Rate, or the replacement of the London Interbank Offered Rate with an alternative reference rate, may adversely affect interest expense related to outstanding debt.

The loans outstanding under the Revolving Credit Facility bear interest at a rate per annum equal to the applicable margin plus, at Finco’s option, either: (i) the reserve-adjusted London Interbank Offered Rate (“LIBOR”) or (ii) a base rate. On July 27, 2017, the Financial Conduct Authority in the UK, which regulates LIBOR, announced that it intends to phase out LIBOR as a benchmark by the end of 2021. It is unclear if LIBOR will cease to exist at the end of 2021, when it is intended to be phased out or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. While the Revolving Credit Facility, which has a term that extends beyond 2021, contains “fallback” provisions providing for alternative rate calculations upon the occurrence of certain events related to the phase-out of LIBOR, these “fallback” provisions may not adequately address the actual changes to LIBOR or successor rates. Although the Secured Overnight Financing Rate is expected to be the alternative rate that replaces LIBOR, we cannot predict what margin adjustments and related terms would be negotiated in connection with the “fallback” provisions. As a result, our interest expense could increase. In addition, the overall financial markets may be disrupted as a result of the phase-out or replacement of LIBOR. Uncertainty as to the nature of such potential phase-out and alternative reference rates or disruption in the financial market could have a material adverse effect on our financial condition, results of operations and cash flows.

A loss of a major tax dispute or a successful tax challenge to our operating structure, intercompany pricing policies or the taxable presence of our subsidiaries in certain countries could result in a higher tax rate on our worldwide earnings, which could result in a material adverse effect on our financial condition and results of operations.

Income tax returns that we file will be subject to review and examination. We recognize the benefit of income tax positions we believe are more likely than not to be sustained upon challenge by a tax authority. If any tax authority successfully challenges our operational structure, intercompany pricing policies or the taxable presence of our subsidiaries in certain countries, if the terms of certain income tax treaties are interpreted in a manner that is adverse to our structure, or if we lose a material tax dispute in any country, our effective tax rate on our worldwide earnings could increase substantially and result in a material adverse effect on our financial condition.

Our consolidated effective income tax rate may vary substantially from one reporting period to another.

We cannot provide any assurances as to what our consolidated effective income tax rate will be because of, among other matters, uncertainty regarding the nature and extent of our business activities in any particular jurisdiction in the future and the tax laws of such jurisdictions, as well as potential changes in the UK, US, Switzerland and other tax laws, regulations or treaties or the interpretation or enforcement thereof, changes in the administrative practices and precedents of tax authorities or any reclassification or other matter (such as changes in applicable accounting rules) that increases the amounts we have provided for income taxes or deferred tax

 

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assets and liabilities in our consolidated financial statements. For example, the Organization for Economic Cooperation and Development (“OECD”) has issued its final reports on Base Erosion and Profit Shifting, which generally focus on situations where profits are earned in low-tax jurisdictions, or payments are made between affiliates from jurisdictions with high tax rates to jurisdictions with lower tax rates. Certain countries within which we operate have recently enacted changes to their tax laws in response to the OECD recommendations or otherwise and these and other countries may enact changes to their tax laws or practices in the future (prospectively or retroactively), which may have a material adverse effect on our financial position, operating results and/or cash flows.

In addition, as a result of frequent changes in the taxing jurisdictions in which our drilling rigs are operated and/or owned, changes in the overall level of our income and changes in tax laws, our consolidated effective income tax rate may vary substantially from one reporting period to another. Income tax rates imposed in the tax jurisdictions in which our subsidiaries conduct operations vary, as does the tax base to which the rates are applied. In some cases, tax rates may be applicable to gross revenues, statutory or negotiated deemed profits or other bases utilized under local tax laws, rather than to net income. Our drilling rigs frequently move from one taxing jurisdiction to another to perform contract drilling services. In some instances, the movement of drilling rigs among taxing jurisdictions will involve the transfer of ownership of the drilling rigs among our subsidiaries. If we are unable to mitigate the negative consequences of any change in law, audit, business activity or other matter, this could cause our consolidated effective income tax rate to increase and cause a material adverse effect on our financial position, operating results and/or cash flows.

Pension expenses associated with our retirement benefit plans may fluctuate significantly depending upon changes in actuarial assumptions, future investment performance of plan assets and legislative or other regulatory actions.

A portion of our current and retired employee population is covered by pension and other post-retirement benefit plans, the costs of which are dependent upon various assumptions, including estimates of rates of return on benefit plan assets, discount rates for future payment obligations, mortality assumptions, rates of future cost growth and trends for future costs. In addition, funding requirements for benefit obligations of our pension and other post-retirement benefit plans are subject to legislative and other government regulatory actions. Future changes in estimates and assumptions associated with our pension and other post-retirement benefit plans could have a material adverse effect on our financial condition, results of operations, cash flows and/or financial disclosures.

Regulatory and Legal Risks

Governmental laws and regulations may add to our costs, result in delays, or limit our drilling activity.

Our business is affected by public policy and laws and regulations relating to the energy industry in the geographic areas where we operate.

The drilling industry is dependent on demand for services from the oil and gas exploration and production industry, and accordingly, we are directly affected by the adoption of laws and regulations that for economic, environmental or other policy reasons curtail exploration and development drilling for oil and gas. We may be required to make significant capital expenditures to comply with governmental laws and regulations. Governments in some foreign countries are increasingly active in regulating and controlling the ownership of concessions, the exploration for oil and gas, and other aspects of the oil and gas industries. There is increasing attention in the United States and worldwide concerning the issue of climate change and the effect of greenhouse gases (“GHGs”) and other sustainability and energy transition matters. This increased attention may result in new environmental laws or regulations that may unfavorably impact us, our suppliers and our customers.

 

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The modification of existing laws or regulations or the adoption of new laws or regulations that result in the curtailment of exploratory or developmental drilling for oil and gas could materially and adversely affect our operations by limiting drilling opportunities increasing our cost of doing business, discouraging our customers from drilling for hydrocarbons, disrupting revenue through permitting or similar delays, or subjecting us to liability. For example, on January 20, 2021, the Acting Secretary for the Department of the Interior signed an order effectively suspending new fossil fuel leasing and permitting on federal lands, including in the US Gulf of Mexico, for 60 days. Then on January 27, 2021, President Biden issued an executive order indefinitely suspending new oil and natural gas leases on public lands or in offshore waters pending completion of a comprehensive review and reconsideration of federal oil and gas permitting and leasing practices. Demand for our services could be diminished during this review period. Further, to the extent that the review results in the development of additional restrictions on offshore drilling, limitations on the availability of offshore leases, or restrictions on the ability to obtain required permits, it could have a material adverse impact on our operations by reducing drilling opportunities and the demand for our services.

Increasing attention to environmental, social and governance matters may impact our business and financial results.

In recent years, increasing attention has been given to corporate activities related to environmental, social and governance (“ESG”) matters in public discourse and the investment community. A number of advocacy groups, both domestically and internationally, have campaigned for governmental and private action to promote change at public companies related to ESG matters, including through the investment and voting practices of investment advisers, public pension funds, universities and other members of the investing community. These activities include increasing attention and demands for action related to climate change and energy transition matters, such as promoting the use of substitutes to fossil fuel products and encouraging the divestment of fossil fuel equities, as well as pressuring lenders and other financial services companies to limit or curtail activities with fossil fuel companies. If this were to continue, it could have a material adverse effect on Noble Parent’s ability to access equity capital markets. Members of the investment community have begun to screen companies such as ours for sustainability performance, including practices related to GHGs and climate change. If we are unable to find economically viable, as well as publicly acceptable, solutions that reduce our GHG emissions and/or GHG intensity for new and existing projects, we could experience additional costs or financial penalties, delayed or cancelled projects, and/or reduced production and reduced demand for hydrocarbons, which could have a material adverse effect on our earnings, cash flows and financial condition.

Any violation of anti-bribery or anti-corruption laws, including the Foreign Corrupt Practices Act, the United Kingdom Bribery Act, or similar laws and regulations could result in significant expenses, divert management attention, and otherwise have a negative impact on us.

We operate in countries known to have a reputation for corruption. We are subject to the risk that we, our affiliated entities or their respective officers, directors, employees and agents may take action determined to be in violation of such anti-corruption laws, including the US Foreign Corrupt Practices Act of 1977 (the “FCPA”), the United Kingdom Bribery Act 2010 (the “UK Bribery Act”) and similar laws in other countries. Any violation of the FCPA, UK Bribery Act or other applicable anti-corruption laws could result in substantial fines, sanctions, civil and/or criminal penalties and curtailment of operations in certain jurisdictions and might adversely affect our business, financial condition and results of operations. In addition, actual or alleged violations could damage our reputation and ability to do business. Further, detecting, investigating and resolving actual or alleged violations is expensive and can consume significant time and attention of our senior management.

 

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Changes in, compliance with, or our failure to comply with the certain laws and regulations may negatively impact our operations and could have a material adverse effect on our results of operations.

Our operations are subject to various laws and regulations in countries in which we operate, including laws and regulations relating to:

 

   

the environment and the health and safety of personnel;

 

   

the importing, exporting, equipping and operation of drilling rigs;

 

   

currency exchange controls;

 

   

oil and gas exploration and development;

 

   

taxation of offshore earnings and earnings of expatriate personnel; and

 

   

use and compensation of local employees and suppliers by foreign contractors.

Public and governmental scrutiny of the energy industry has resulted in increased regulations being proposed and often implemented. In addition, existing regulations might be revised or reinterpreted, new laws, regulations and permitting requirements might be adopted or become applicable to us, our rigs, our customers, our vendors or our service providers, and future changes in laws and regulations could significantly increase our costs and could have a material adverse effect on our business, financial condition and results of operations. In addition, we may be required to post additional surety bonds to secure performance, tax, customs and other obligations relating to our rigs in jurisdictions where bonding requirements are already in effect and in other jurisdictions where we may operate in the future. These requirements would increase the cost of operating in these countries, which could materially adversely affect our business, financial condition and results of operations.

From time to time, new rules, regulations and requirements regarding oil and gas development have been proposed and implemented by the Bureau of Ocean Energy Management (“BOEM”), the Bureau of Safety and Environmental Enforcement (“BSEE”) or the United States Congress, as well as other jurisdictions outside the United States, that could materially limit or prohibit, and increase the cost of, offshore drilling. For example, in July 2016, BOEM and BSEE finalized a rule revising and adding requirements for drilling on the US Arctic Outer Continental Shelf. Similarly, in April 2016, BSEE announced a final blowout preventer systems and well control rule. BSEE also finalized a rule in September 2016 concerning production safety systems for oil and natural gas operations on the Outer Continental Shelf. BSEE issued final rules amending both the September 2016 production safety systems rule and the April 2016 blowout preventer systems and well control rule in September 2018 and May 2019, respectively. BSEE also published a proposed rule in December 2020 that would revise the 2016 rule concerning drilling on the US Arctic Outer Continental Shelf. In addition, BOEM released a Notice to Lessees and Operators in the Outer Continental Shelf (“NTL”) in September 2016 that updated offshore bonding requirements. The NTL was only partially implemented before being rescinded and replaced by a proposed rule addressing offshore bonding published in October 2020. However, on January 20, 2021, President Biden issued executive orders freezing the issuance of new rules pending further review and directing all executive departments and agencies to review and consider suspending, revising, or rescinding all regulations issued between January 20, 2017 and January 20, 2021 determined to be inconsistent with President Biden’s environmental and climate goals. To the extent these recent proposed and final rules are reviewed and determined to be inconsistent under the executive orders, BOEM and BSEE could issue new rules reinstating the requirements of the 2016 rules and/or reimplement the NTL.

We are also subject to increasing regulatory requirements and scrutiny in the North Sea jurisdictions and other countries. New rules, regulations and requirements, or a return to the requirements of the 2016 versions of the BSEE and BOEM regulations, including the adoption of new safety requirements and policies relating to the approval of drilling permits, restrictions on oil and gas development and production activities in the US Gulf of Mexico and elsewhere, implementation of safety and environmental management systems, mandatory third party

 

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compliance audits, and the promulgation of numerous Notices to Lessees or similar new regulatory requirements outside of the United States, may impact our operations by causing increased costs, delays and operational restrictions. If new regulations, policies, operating procedures and the possibility of increased legal liability resulting from the adoption or amendment of rules and regulations applicable to our operations in the United States or other jurisdictions are viewed by our current or future customers as a significant impairment to expected profitability on projects, then they could discontinue or curtail their offshore operations in the impacted region, thereby adversely affecting our operations by limiting drilling opportunities or imposing materially increased costs.

We could also be affected by challenges and restrictions to offshore operations by environmental groups, costal states and the federal government. For example, in December 2018, environmental groups challenged incidental harassment authorizations issued by the National Marine Fisheries Service that allow companies to conduct air gun seismic surveys for oil and gas exploration off the Atlantic coast. The attorney generals for ten US coastal states also intervened as plaintiffs. The litigation concluded in October 2020 and the authorizations expired in November 2020. Restrictions on authorizations needed to conduct seismic surveys could impact our customers’ ability to identify oil and gas reserves, thereby reducing demand for our services. Several coastal states have also taken steps to prohibit offshore drilling. For example, California passed laws in September 2018 barring the construction of new oil drilling-related infrastructure in state waters. Similarly, in November 2018, voters in Florida approved an amendment to the state constitution that would ban oil and gas drilling in offshore state waters. Such initiatives could reduce opportunities for our customers and thereby reduce demand for our services. In addition, the federal government has taken steps to restrict offshore drilling opportunities. For example, on January 20, 2021, the Acting Secretary for the Department of the Interior signed an order effectively suspending new fossil fuel leasing and permitting on federal lands, including in the US Gulf of Mexico, for 60 days. Then on January 27, 2021, President Biden issued an executive order indefinitely suspending new oil and natural gas leases on public lands or in offshore waters pending completion of a comprehensive review and reconsideration of federal oil and gas permitting and leasing practices. Demand for our services could be diminished during this review period. Further, to the extent that the review results in the development of additional restrictions on offshore drilling, limitations on the availability of offshore leases, or restrictions on the ability to obtain required permits, it could have a material adverse impact on our operations by reducing drilling opportunities and the demand for our services.

Adverse effects may continue as a result of the uncertainty of ongoing inquiries, investigations and court proceedings, or additional inquiries and proceedings by federal or state regulatory agencies or private plaintiffs. In addition, we cannot predict the outcome of any of these inquiries or whether these inquiries will lead to additional legal proceedings against us, civil or criminal fines or penalties, or other regulatory action, including legislation or increased permitting requirements. Legal proceedings or other matters against us, including environmental matters, suits, regulatory appeals, challenges to our permits by citizen groups and similar matters, might result in adverse decisions against us. The result of such adverse decisions, both individually or in the aggregate, could be material and may not be covered fully or at all by insurance.

Our operations are subject to numerous laws and regulations relating to the protection of the environment and of human health and safety, and compliance with these laws and regulations could impose significant costs and liabilities that exceed our current expectations.

Substantial costs, liabilities, delays and other significant issues could arise from environmental, health and safety laws and regulations covering our operations, and we may incur substantial costs and liabilities in maintaining compliance with such laws and regulations. Our operations are subject to extensive international conventions and treaties, and national or federal, state and local laws and regulations, governing environmental protection, including with respect to the discharge of materials into the environment and the security of chemical and industrial facilities. These laws govern a wide range of environmental issues, including:

 

   

the release of oil, drilling fluids, natural gas or other materials into the environment;

 

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air emissions from our drilling rigs or our facilities;

 

   

handling, cleanup and remediation of solid and hazardous wastes at our drilling rigs or our facilities or at locations to which we have sent wastes for disposal;

 

   

restrictions on chemicals and other hazardous substances; and

 

   

wildlife protection, including regulations that ensure our activities do not jeopardize endangered or threatened animals, fish and plant species, nor destroy or modify the critical habitat of such species.

Various governmental authorities have the power to enforce compliance with these laws and regulations and the permits issued under them, oftentimes requiring difficult and costly actions. Failure to comply with these laws, regulations and permits, or the release of oil or other materials into the environment, may result in the assessment of administrative, civil and criminal penalties, the imposition of remedial obligations, the imposition of stricter conditions on or revocation of permits, the issuance of moratoria or injunctions limiting or preventing some or all of our operations, delays in granting permits and cancellation of leases, or could affect our relationship with certain consumers.

There is an inherent risk of the incurrence of environmental costs and liabilities in our business, some of which may be material, due to the handling of our customers’ hydrocarbon products as they are gathered, transported, processed and stored, air emissions related to our operations, historical industry operations, and water and waste disposal practices. For example, we, as an operator of mobile offshore drilling units in navigable US waters and certain offshore areas, including the US Outer Continental Shelf, are liable for damages and for the cost of removing oil spills for which we may be held responsible, subject to certain limitations. Our operations may involve the use or handling of materials that are classified as environmentally hazardous. Environmental laws and regulations may expose us to liability for the conduct of or conditions caused by others or for acts that were in compliance with all applicable laws at the time they were performed. Joint, several or strict liability may be incurred without regard to fault under certain environmental laws and regulations for the remediation of contaminated areas and in connection with past, present or future spills or releases of natural gas, oil and wastes on, under, or from past, present or future facilities. Private parties may have the right to pursue legal actions to enforce compliance as well as to seek damages for non-compliance with environmental laws and regulations or for personal injury or property damage arising from our operations. In addition, increasingly strict laws, regulations and enforcement policies could materially increase our compliance costs and the cost of any remediation that may become necessary. Our insurance may not cover all environmental risks and costs or may not provide sufficient coverage if an environmental claim is made against us.

Our business may be adversely affected by increased costs due to stricter pollution control equipment requirements or liabilities resulting from non-compliance with required operating or other regulatory permits. Also, we might not be able to obtain or maintain from time to time all required environmental regulatory approvals for our operations. If there is a delay in obtaining any required environmental regulatory approvals, or if we fail to obtain and comply with them, the operation or construction of our facilities could be prevented or become subject to additional costs. In addition, the steps we could be required to take to bring certain facilities into regulatory compliance could be prohibitively expensive, and we might be required to shut down, divest or alter the operation of those facilities, which might cause us to incur losses.

We make assumptions and develop expectations about possible expenditures related to environmental conditions based on current laws and regulations and current interpretations of those laws and regulations. If the interpretation of laws or regulations, or the laws and regulations themselves, change, our assumptions may change, and new capital costs may be incurred to comply with such changes. In addition, new environmental laws and regulations might adversely affect our operations, as well as waste management and air emissions. For instance, governmental agencies could impose additional safety requirements, which could affect our profitability. Further, new environmental laws and regulations might adversely affect our customers, which in turn could affect our profitability.

 

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Finally, although some of our drilling rigs will be separately owned by our subsidiaries, under certain circumstances a parent company and all of the unit-owning affiliates in a group under common control engaged in a joint venture could be held liable for damages or debts owed by one of the affiliates, including liabilities for oil spills under environmental laws. Therefore, it is possible that we could be subject to liability upon a judgment against us or any one of our subsidiaries.

Unionization efforts and labor regulations in certain countries in which we operate could materially increase our costs or limit our flexibility.

Certain of our employees and contractors in international markets are represented by labor unions or work under collective bargaining or similar agreements, which are subject to periodic renegotiation. Efforts may be made from time to time to unionize portions of our workforce. In addition, we may be subject to strikes or work stoppages and other labor disruptions in the future. Additional unionization efforts, new collective bargaining agreements or work stoppages could materially increase our costs, reduce our revenues or limit our operational flexibility.

Any failure to comply with the complex laws and regulations governing international trade could adversely affect our operations.

The shipment of goods, services and technology across international borders subjects our business to extensive trade laws and regulations. Import activities are governed by unique customs laws and regulations in each of the countries of operation. Moreover, many countries, including the United States, control the export and re-export of certain goods, services and technology and impose related export recordkeeping and reporting obligations. Governments also may impose economic sanctions against certain countries, persons and other entities that may restrict or prohibit transactions involving such countries, persons and entities. US sanctions, in particular, are targeted against certain countries that are heavily involved in the petroleum and petrochemical industries, which includes drilling activities.

The laws and regulations concerning import activity, export recordkeeping and reporting, export control and economic sanctions are complex and constantly changing. These laws and regulations may be enacted, amended, enforced or interpreted in a manner materially impacting our operations. Shipments can be delayed and denied export or entry for a variety of reasons, some of which are outside our control and some of which may result from failure to comply with existing legal and regulatory regimes. Shipping delays or denials could cause unscheduled operational downtime. Any failure to comply with applicable legal and regulatory trading obligations could also result in criminal and civil penalties and sanctions, such as fines, imprisonment, debarment from government contracts, seizure of shipments and loss of import and export privileges.

Currently, we do not, nor do we intend to, operate in countries that are subject to significant sanctions and embargoes imposed by the US government or identified by the US government as state sponsors of terrorism, such as the Crimean region of the Ukraine, Cuba, Iran, North Korea, Sudan and Syria. The US sanctions and embargo laws and regulations vary in their application, as they do not all apply to the same covered persons or proscribe the same activities, and such sanctions and embargo laws and regulations may be amended or strengthened over time. There can be no assurance that we will be in compliance in the future, particularly as the scope of certain laws may be unclear and may be subject to changing interpretations. Any such violation could result in fines or other penalties and could result in some investors deciding, or being required, to divest their interest, or not to invest, in us. In addition, certain institutional investors may have investment policies or restrictions that prevent them from holding securities of companies that have contracts with countries identified by the US government as state sponsors of terrorism. In addition, our reputation and the market for our securities may be adversely affected if we engage in certain other activities, such as entering into drilling contracts with individuals or entities in countries subject to significant US sanctions and embargo laws that are not controlled by the governments of those countries, or engaging in operations associated with those countries pursuant to contracts with third parties that are unrelated to those countries or entities controlled by their governments.

 

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We are subject to litigation that could have an adverse effect on us.

We are, from time to time, involved in various litigation matters. These matters may include, among other things, contract disputes, personal injury claims, asbestos and other toxic tort claims, environmental claims or proceedings, employment matters, issues related to employee or representative conduct, governmental claims for taxes or duties, and other litigation that arises in the ordinary course of our business. Although we intend to defend or pursue such matters vigorously, we cannot predict with certainty the outcome or effect of any claim or other litigation matter, and there can be no assurance as to the ultimate outcome of any litigation. Litigation may have an adverse effect on us because of potential negative outcomes, legal fees, the allocation of management’s time and attention, and other factors.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts included in this prospectus, including those regarding the impact of our emergence from bankruptcy on our business and relationships, the global COVID-19 pandemic and agreements regarding production levels among members of OPEC+, and any expectations we may have with respect thereto, and those regarding rig demand, peak oil, the offshore drilling market, oil prices, contract backlog, fleet status, our future financial position, business strategy (including our business strategy post-emergence from bankruptcy), impairments, repayment of debt, credit ratings, liquidity, borrowings under any credit facilities or other instruments, sources of funds, future capital expenditures, contract commitments, dayrates, contract commencements, extension or renewals, contract tenders, the outcome of any dispute, litigation, audit or investigation, plans and objectives of management for future operations, foreign currency requirements, results of joint ventures, indemnity and other contract claims, reactivation, refurbishment, conversion and upgrade of rigs, industry conditions, access to financing, impact of competition, governmental regulations and permitting, availability of labor, worldwide economic conditions, taxes and tax rates, indebtedness covenant compliance, dividends and distributable reserves, timing, benefits or results of acquisitions or dispositions (including the benefits of the Merger and our plans, objectives, expectations and intentions related to the Merger), and timing for compliance with any new regulations, are forward-looking statements. When used in this prospectus, the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would,” “shall,” “will” and similar expressions are intended to be among the statements that identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot assure you that such expectations will prove to be correct. These forward-looking statements speak only as of the date of this prospectus and we undertake no obligation to revise or update any forward-looking statement for any reason, except as required by law. We have identified factors, including but not limited to risks and uncertainties relating to our emergence from bankruptcy (including but not limited to our ability to improve our operating structure, financial results and profitability and to maintain relationships with suppliers, customers, employees and other third parties following emergence from bankruptcy), the Merger (including the risk that the Merger disrupts the parties’ current plans and operations as a result of the consummation of the transactions contemplated by the Merger Agreement, the ability to recognize the anticipated benefits of the Merger, which may be affected by, among other things, competition, the ability of the combined company to grow and manage growth profitably, maintain relationships with customers and suppliers and retain its management and key employees, costs related to the Merger, changes in applicable laws or regulations, the possibility that the combined company may be adversely affected by other economic, business, and/or competitive factors and the ability of the combined company to improve its operating structure, financial results and profitability and to maintain relationships with suppliers, customers, employees and other third parties), the effects of public health threats, pandemics and epidemics, such as the ongoing outbreak of COVID-19, and the adverse impact thereof on our business, financial condition and results of operations (including but not limited to our growth, operating costs, supply chain, availability of labor, logistical capabilities, customer demand for our services and industry demand generally, our liquidity, the price of our securities and trading markets with respect thereto, our ability to access capital markets, and the global economy and financial markets generally), the effects of actions by or disputes among OPEC+ members with respect to production levels or other matters related to the price of oil, market conditions, factors affecting the level of activity in the oil and gas industry, supply and demand of drilling rigs, factors affecting the duration of contracts, the actual amount of downtime, factors that reduce applicable dayrates, operating hazards and delays, risks associated with operations outside the US, actions by regulatory authorities, credit rating agencies, customers, joint venture partners, contractors, lenders and other third parties, legislation and regulations affecting drilling operations (including as a result of the change in the US presidential administration), compliance with or changes in regulatory requirements, violations of anti-corruption laws, shipyard risk and timing, delays in mobilization of rigs, hurricanes and other weather conditions, and the future price of oil and gas, that could cause actual plans or results to differ materially from those included in any forward-looking statements. Actual results could differ materially from those expressed as a result of various factors. These

 

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factors include those described under “Risk Factors” in this prospectus. We cannot control such risk factors and other uncertainties, and in many cases, we cannot predict the risks and uncertainties that could cause our actual results to differ materially from those indicated by the forward-looking statements. You should consider these risks and uncertainties when you are evaluating an investment in the Notes.

 

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USE OF PROCEEDS

The Notes offered hereby are being registered for the account of the selling securityholders identified in this prospectus. See “Selling Securityholders.” All net proceeds from the sale of the Notes will go to the selling securityholders. We will not receive any proceeds from the sale of the Notes by the selling securityholders pursuant to this prospectus. The selling securityholders will pay any underwriting fees, discounts or commissions and transfer taxes relating to the sale of the Notes. We will pay all other costs, fees and expenses incurred in effecting the registration of the Notes covered by this prospectus, including, without limitation, the SEC registration fee with respect to the Notes covered by this prospectus, reasonable fees and expenses of our counsel, auditors and accountants and reasonable fees and expenses of underwriters to the extent customarily paid by issuers or sellers of securities.

 

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION—NOBLE FINANCE COMPANY AND SUBSIDIARIES—CHAPTER 11 EMERGENCE

The following unaudited pro forma condensed consolidated financial information (solely for purposes of this section, the “Pro Forma Financial Information”) of Finco gives effect to the Plan, including the financing transactions contemplated thereunder. The Pro Forma Financial Information presents the financial information of Finco assuming the Plan’s Effective Date had occurred on January 1, 2020 for the unaudited pro forma condensed consolidated statements of operations. The Pro Forma Financial Information included in this section does not contemplate the consummation of the Merger.

The Pro Forma Financial Information presented herein is provided for informational and illustrative purposes only and is not necessarily indicative of the financial results that would have been achieved had the events and transactions occurred on the dates assumed, nor is such financial data necessarily indicative of the results of operations in future periods. Adjustments are based on available information and certain assumptions that the Company believes are reasonable and supportable. The Pro Forma Financial Information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the consolidated financial statements and notes included elsewhere in this prospectus.

The Pro Forma Financial Information is not intended to represent Finco’s actual post-Effective Date results of operations, and any differences to actual results could be material.

Finco’s historical financial statements will not be comparable to Finco’s financial statements after emergence from Chapter 11 due to the effects of the Plan and the adoption and application of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 852, Reorganizations (“ASC Topic 852”) under accounting principles generally accepted in the United States of America (“GAAP”). The Pro Forma Financial Information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.”

Reorganization Adjustments

The Reorganization Adjustments column of the Pro Forma Financial Information gives effect to the consummation of the Plan, including the following transactions:

 

   

Legacy Noble’s previously outstanding ordinary shares and equity-based awards were cancelled, extinguished and discharged against the issue of Noble Parent’s Tranche 3 Warrants;

 

   

all amounts outstanding under the 2017 Credit Facility (as defined herein), including the interest, were paid in full;

 

   

all of our then outstanding senior notes were settled for Noble Parent’s Ordinary Shares, Tranche 1 Warrants and Tranche 2 Warrants;

 

   

the issuance of 50 million Ordinary Shares of Noble Parent;

 

   

professional services fees incurred after December 31, 2020 through the Effective Date; and

 

   

the issuance of Finco’s $216 million of Notes and our entry into the new $675.0 million senior secured revolving credit facility (with a $67.5 million sublimit for the issuance of letters of credit thereunder) (the “Revolving Credit Facility”) with initial borrowings of $177.5 million.

 

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Fresh Start Adjustments

We adopted fresh start accounting in accordance with ASC Topic 852 as of the Effective Date of our emergence from reorganization under Chapter 11, resulting in reorganized Finco becoming the successor (solely

for purposes of the Pro Forma Financial Information, the “Successor”) for financial reporting purposes. In accordance with ASC Topic 852, with the application of fresh start accounting, the Company allocated its reorganization value to its individual assets based on their estimated fair values in conformity with ASC Topic 805, “Business Combinations.” Liabilities subject to compromise of the predecessor entity (solely for purposes of the Pro Forma Financial Information, the “Predecessor”) were either reinstated or extinguished as part of the reorganization.

The Successor enterprise value of the reorganized Company, as approved by the Bankruptcy Court in support of the Plan, was estimated to be $1.3 billion, which represented the mid-point of a determined range. A pro forma reorganization value of approximately $1.8 billion was then determined by adding non-interest bearing liabilities and cash adjustments to the $1.3 billion enterprise value. The Company’s enterprise value was determined with the assistance of a third-party valuation expert who used available comparable market data and quotations, discounted cash flow analysis and other internal financial information and projections. Our estimates of fair value are inherently subject to significant uncertainties and contingencies beyond our control. Accordingly, there can be no assurance that the estimates, assumptions, valuations, appraisals and financial projections will be realized, and actual results could vary materially. Moreover, the value of Noble Parent’s and Finco’s shares subsequent to our emergence from bankruptcy may differ materially from the equity presented for accounting purposes under GAAP.

 

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NOBLE FINANCE COMPANY AND SUBSIDIARIES

Pro Forma Unaudited Condensed Consolidated Statement of Operations

(Unless otherwise indicated, dollar amounts are in thousands)

Year Ended December 31, 2020

(Unaudited)

 

           Transaction Accounting
Adjustments
          Transaction
Accounting
Adjustments
       
     Historical     Reorganization
Adjustments
    Fresh Start
Adjustments
    Pro Forma
(including
Reorganization
items, net)
    Removal of
Reorganization
Items, net
    Pro Forma  

Operating revenues

            

Contract drilling services

   $ 909,236     $ —       $ (58,373 ) (e)    $ 850,863     $ —     $ 850,863  

Reimbursables and other

     55,036       —         —         55,036       —         55,036  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     964,272       —         (58,373     905,899       —         905,899  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating costs and expense

            

Contract drilling services

     566,231       3,708  (a)(d)      —         569,939       —         569,939  

Reimbursables

     48,188       —         —         48,188       —         48,188  

Depreciation and amortization

     372,560       —         (277,592 ) (f)      94,968       —         94,968  

General and administrative

     37,798       4,520  (a)      —         42,318       —         42,318  

Loss on impairment

     3,915,408       —         —         3,915,408       —         3,915,408  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     4,940,185       8,228       (277,592     4,670,821       —         4,670,821  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (3,975,913     (8,228     219,219       (3,764,922     —         (3,764,922

Other income (expense)

            

Interest expense, net of amounts capitalized

     (164,653     113,981  (b)      —         (50,672     —         (50,672

Gain on extinguishment of debt, net

     17,254       —         —         17,254       —         17,254  

Interest income and other, net

     9,014       —         —         9,014       —         9,014  

Reorganization items, net

     (50,778     2,511,937  (c)      (2,333,510     127,649       (127,649     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before income taxes

     (4,165,076     2,617,690       (2,114,291     (3,661,677     (127,649     (3,789,326

Income tax benefit (provision)

     260,403       17,281  (g)      (17,376 ) (g)      260,308       —         260,308  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (3,904,673   $ 2,634,971     $ (2,131,667   $ (3,401,369   $ (127,649   $ (3,529,018
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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NOBLE FINANCE COMPANY AND SUBSIDIARIES

Pro Forma Unaudited Condensed Consolidated Statement of Operations

(Unless otherwise indicated, dollar amounts are in thousands)

Three Months Ended March 31, 2021

(Unaudited)

 

                      Transaction
Accounting Adjustments
          Transaction
Accounting
Adjustments
       
    Predecessor
Historical

Period
From
January 1,
2021
through
February 5,
2021
    Successor
Historical

Period
From
February 6,
2021
through
March 31,
2021
    Three
Months
Ended
March 31,
2021
    Reorganization
Adjustments
    Fresh Start
Adjustments
    Pro Forma
(including
reorganization
items, net)
    Removal of
Reorganization
items, net
    Pro Forma
Noble
 

Operating revenues

               

Contract drilling services

  $ 74,051     $ 84,629     $ 158,680     $ —       $ (5,210 ) (k)    $ 153,470     $ —       $ 153,470  

Reimbursables and other

    3,430       7,804       11,234       —         —         11,234       —         11,234  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    77,481       92,433       169,914       —         (5,210     164,704       —         164,704  

Operating costs and expense

               

Contract drilling services (expense)

    46,965       79,981       126,946       920  (i)      —         127,866       —         127,866  

Reimbursables

    2,737       7,044       9,781       —         —         9,781       —         9,781  

Depreciation and amortization

    20,622       14,244       34,866       —         (11,123 ) (l)      23,743       —         23,743  

General and administrative

    5,727       9,548       15,275       803  (i)      —         16,078       —         16,078  

Pre-petition charges

    —         —         —         —         —         —         —         —    

Loss on impairment

    —         —         —         —         —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    76,051       110,817       186,868       1,723       (11,123     177,468       —         177,468  

Operating loss

    1,430       (18,384     (16,954     (1,723     5,913       (12,764     —         (12,764

Other income (expense)

               

Interest expense, net of amounts capitalized

    (229     (6,895     (7,124     (4,404 ) (j)      —         (11,528     —         (11,528

Interest income and other, net

    399       8       407       —         —         407       —         407  

Reorganization items, net

    252,051       —         252,051       —         —         252,051       (252,051     —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations before income taxes

    253,651       (25,271     228,380       (6,127     5,913       228,166       (252,051     (23,885

Income tax benefit (provision)

    (3,423     7,047       3,624       353  (m)      1,094  (m)      5,071       —         5,071  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

  $ 250,228     $ (18,224   $ 232,004     $ (5,774   $ 7,007     $ 233,237     $ (252,051   $ (18,814
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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NOBLE FINANCE COMPANY AND SUBSIDIARIES

Notes to Pro Forma Unaudited Condensed Consolidated Financial Information

(Unless otherwise indicated, dollar amounts are in thousands)

Note 1. Basis of Presentation

The accompanying unaudited pro forma condensed consolidated statements of operations and explanatory notes present the Pro Forma Financial Information of Finco assuming the consummation of the Plan had occurred on January 1, 2020.

The following are descriptions of the columns included in the accompanying Pro Forma Financial Statements:

 

   

Historical—Represents the historical condensed consolidated statements of operations and historical condensed consolidated balance sheet of the predecessor entity Finco for the period ended December 31, 2020.

 

   

Predecessor Historical—Represents the historical condensed consolidated statement of operations for the predecessor entity of Finco for the period from January 1, 2021 through the Effective Date of the Plan of February 5, 2021.

 

   

Successor Historical—Represents the historical condensed consolidated statement of operations for the successor entity of Finco for the period of February 6, 2021 through March 31, 2021.

 

   

Reorganization and Fresh Start Adjustments—Represents reorganization adjustments as of and for the year ended December 31, 2020 and for the three months ended March 31, 2021, assuming the Effective Date of the Plan had occurred on January 1, 2020 for the unaudited condensed consolidated statement of operations, and for the adoption of fresh start accounting.

 

   

Removal of Reorganization Items, net—These are non-recurring expenses, gains and losses that are realized or incurred as a direct result of the Chapter 11 Cases recorded under “Reorganization items, net.” Such amounts relate to Finco’s Predecessor period and have been removed for a fair presentation of pro forma statement of operations.

Note 2. Pro Forma Adjustments

Pro Forma Adjustments to the Unaudited Pro Forma Condensed Consolidated Statement of Operations, Twelve Months Ended December 31, 2020

Reorganization Adjustments

 

(a)

Stock based compensation

Reflects an increase in stock-based compensation expense based on the new awards issued.

 

(b)

Interest Expense

The adjustment reflects change of interest expense as a result of the Plan. The Plan provides for the repayment and settlement of Predecessor company 2017 Credit Facility and senior notes, respectively. Upon emergence, Finco entered into the Revolving Credit Facility and issued Notes with interest rate of LIBOR+4.75% and 15% payable semi-annually by paid in kind notes, respectively. The pro forma adjustments to interest expense was calculated as follows:

 

Reversal of Predecessor interest expense including amortization of deferred financing costs

   $ (162,156

Pro forma interest on the Successor Revolving Credit Facility and Notes

     45,286  

Amortization of Successor deferred financing costs

     2,889  
  

 

 

 

Pro forma adjustment for interest expense

   $ (113,981
  

 

 

 

 

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Assuming an increase in interest rates on the Revolving Credit Facility and the Notes of 1/8%, pro forma interest would increase by $0.5 million.

 

(c)

Reorganization Items, net

The adjustment represents the estimated remaining costs that were directly attributable to the Chapter 11 reorganization including the following:

 

Professional fees

   $ (1,189

Acceleration of unrecognized Predecessor share-based compensation

     (18,546

Gain on settlement of liabilities subject to compromise

     2,531,672  
  

 

 

 

Pro forma adjustment to reorganization items, net

   $ 2,511,937  
  

 

 

 

 

(d)

Includes $600 thousand related to the rejection of an executory contract per the Plan.

Fresh Start Adjustments

 

(e)

Revenue

Adjustment reflects the amortization of favorable contracts with customers as a result of adopting fresh start accounting. The remaining useful life of the favorable contracts range between 1-3 years.

 

(f)

Depreciation and amortization

Reflects the pro forma decrease in depreciation expense based on new asset values as a result of adopting fresh start accounting. The pro forma adjustment to depreciation expense was calculated as follows:

 

Removal of Predecessor depreciation expense

   $ (372,560

Pro forma depreciation expense

     94,968  
  

 

 

 

Pro forma adjustment for depreciation and amortization

   $ (277,592
  

 

 

 

Drilling equipment and facilities are depreciated using the straight-line method over their estimated useful lives as of the date placed in service or date of major refurbishment. Estimated useful lives of our drilling equipment range from three to thirty years. Other property and equipment is depreciated using the straight-line method over useful lives ranging from two to forty years.

 

(g)

Income Tax

Reflects the pro forma adjustment to tax expense as a result of reorganization adjustments and adopting fresh start accounting. The income tax impact was calculated by applying the appropriate statutory tax rate of the respective tax jurisdictions to which the pro forma adjustments relate and which are reasonably expected to occur.

 

(h)

Impact of Fresh Start Accounting

Reflects the cumulative impact of fresh start accounting adjustments, excluding tax impacts.

Pro Forma Adjustments to the Unaudited Pro Forma Condensed Consolidated Statement of Operations, Three Months Ended March 31, 2021

Reorganization Adjustments

 

(i)

Stock based compensation

Reflects an increase in stock-based compensation expense based on the new awards issued.

 

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(j)

Interest Expense

The adjustment reflects change of interest expense as a result of the Plan. The Plan provides for the repayment and settlement of Predecessor’s 2017 Credit Facility and senior notes, respectively. Upon emergence, we entered into the Revolving Credit Facility and issued Notes with interest rate of LIBOR + 4.75% and 15% payable semi-annually by paid in kind notes, respectively. The pro forma adjustments to interest expense was calculated as follows:

 

Reversal of Predecessor interest expense

   $ (229

Pro forma interest on the Successor Revolving Credit Facility and Notes

     4,391  

Amortization of Successor deferred financing costs

     242  
  

 

 

 

Pro forma adjustment for interest expense

   $ 4,404  
  

 

 

 

Assuming an increase in interest rates on the Revolving Credit Facility and the Notes of 1/8%, pro forma interest would increase by $0.13 million.

Fresh Start Adjustments

 

(k)

Revenue

Adjustment reflects the amortization of favorable contracts with customers as a result of adopting fresh start accounting. The remaining useful life of the favorable contracts range between 1-3 years.

 

(l)

Depreciation and amortization

Reflects the pro forma decrease in depreciation expense based on new asset values as a result of adopting fresh start accounting. The pro forma adjustment to depreciation expense was calculated as follows:

 

Removal of Predecessor depreciation expense

   $ (20,631

Pro forma depreciation expense

     9,499  
  

 

 

 

Pro forma adjustment for depreciation and amortization

   $ (11,132
  

 

 

 

Drilling equipment and facilities are depreciated using the straight-line method over their estimated useful lives as of the date placed in service or date of major refurbishment. Estimated useful lives of our drilling equipment range from three to thirty years. Other property and equipment is depreciated using the straight-line method over useful lives ranging from two to forty years.

 

(m)

Income tax provision (benefit)

Reflects the pro forma adjustment to tax expense as a result of reorganization adjustments and adopting fresh start accounting. The income tax impact was calculated by applying the appropriate statutory tax rate of the respective tax jurisdictions to which the pro forma adjustments relate, and which are reasonably expected to occur.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION—NOBLE CORPORATION—MERGER

The following unaudited pro forma condensed combined financial information (solely for purposes of this section, the “Pro Forma Financial Information”) of Noble reflects the impact of the following completed transactions on the historical financial statements of Noble Corporation (solely for purposes of this section, “Noble”).

 

   

Business Combination: On March 25, 2021, Noble entered into the Merger Agreement with Merger Sub and Pacific Drilling Company LLC (solely for purposes of this section, “Pacific”), providing for the merger of Merger Sub with and into Pacific (solely for purposes of this section, the “Pacific Merger” or “Acquisition”). The business combination closed on April 15, 2021. Refer to Note 2 of the Pro Forma Financial Information for the terms of the agreement and purchase price consideration provided in connection with the business combination.

 

   

Noble Reorganization: On February 5, 2021, Noble successfully consummated its plan of reorganization (solely for purposes of this section, the “Noble Plan”) and emerged from bankruptcy reorganization under Chapter 11 of the United States Bankruptcy Code (“Chapter 11”). Refer to Note 4 for the pro forma adjustments for the twelve months ended December 31, 2020 and three months ended March 31, 2021 related to Noble’s reorganization.

 

   

Pacific Reorganization: On December 31, 2020, Pacific successfully consummated its plan of reorganization and emerged from bankruptcy reorganization under Chapter 11.

The Pro Forma Financial Information of Noble is presented assuming the business combination had occurred on March 31, 2021 for the unaudited pro forma condensed combined balance sheet and on January 1, 2020 for the unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2021 and for the twelve months ended December 31, 2020. The unaudited pro forma condensed combined statement of operations of Noble for the twelve-month period ended December 31, 2020 and for the three-month period ended March 31, 2021 also reflects the Noble Reorganization and Pacific Reorganization as if these transactions occurred on January 1, 2020.

The Pro Forma Financial Information does not represent what the actual consolidated results of operations or the consolidated financial position of Noble would have been had Noble and Pacific emerged from bankruptcy and the Pacific Merger occurred on the dates assumed, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position. The assumptions underlying the pro forma adjustments are described in the accompanying notes to these unaudited pro forma condensed combined financial statements. Adjustments are based on available information and certain assumptions that Noble believes are reasonable and supportable.

Noble has developed a plan to integrate the operations of Pacific. In connection with the plan, management anticipates that certain non-recurring charges, such as operational relocation expenses, employee severance costs, field equipment upgrading and standardization, product rebranding and consulting expenses, will be incurred in connection with this integration. Management cannot identify the timing, nature and amount of such charges as of the date of this filing. However, any such charge could affect the future results of the post-acquisition company in the period in which such charges are incurred. The Pro Forma Financial Information does not include the effects of the costs associated with any restructuring or other integration activities resulting from the Pacific Merger, however, management’s estimates of certain costs savings to be realized following closing of the Acquisition are presented in Note 6 of the Pro Forma Financial Information.

The Pro Forma Financial Information should be read in conjunction with the following:

 

   

The consolidated financial statements and notes included in the Noble 2020 Form 10-K.

 

   

The condensed consolidated financial statements and notes included in the Noble March 31, 2021 Form 10-Q.

None of Pacific or its subsidiaries are guarantors and none of their assets secure the Revolving Credit Facility or the Notes.

 

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NOBLE CORPORATION

Unaudited Pro Forma Condensed Combined Statement of Operations

Three Months Ended March 31, 2021

(Unless otherwise indicated, dollar and share amounts are in thousands)

 

                   Pro Forma        
     Pro Forma
Noble (Note 4)
     Pacific
Successor
Historical
     Transaction
Accounting
Adjustments
    Pro Forma
Noble
Combined
 

Operating revenues

          

Contract drilling services

   $ 153,470      $ 24,777      $ —       $ 178,247  

Reimbursables and other

     11,234        1,334        —         12,568  
  

 

 

    

 

 

    

 

 

   

 

 

 
     164,704        26,111        —         190,815  
  

 

 

    

 

 

    

 

 

   

 

 

 

Operating costs and expense

          

Contract drilling services (expense)

     127,866        35,375        1,754  (a)      164,995  

Reimbursables

     9,781        511        —         10,292  

Depreciation and amortization

     23,743        10,090        (6,801 )(c)      27,032  

General and administrative

     16,078        13,694        —         29,772  
  

 

 

    

 

 

    

 

 

   

 

 

 
     177,468        59,670        (5,047     232,091  
  

 

 

    

 

 

    

 

 

   

 

 

 

Operating income (loss)

     (12,764)        (33,559)        5,047       (41,276)  

Other income (expense)

          

Interest expense, net of amounts capitalized

     (11,528)        (338)        338  (d)      (11,528)  

Interest income and other, net

     407        (354)        —         53  
  

 

 

    

 

 

    

 

 

   

 

 

 

Income (loss) from continuing operations before income taxes

     (23,885)        (34,251)        5,385       (52,751)  

Income tax benefit (provision)

     5,071        (296)        (5 )(f)      4,770  
  

 

 

    

 

 

    

 

 

   

 

 

 

Net income (loss)

   $ (18,814)      $ (34,547)      $ 5,380     $ (47,981)  
  

 

 

    

 

 

    

 

 

   

 

 

 

Basic net income (loss) per share

   $ (0.38)           $ (0.72)  

Diluted net income (loss) per share

   $ (0.38)           $ (0.72)  

Weighted average shares outstanding

          

Basic

     50,000           16,600  (e)      66,600  

Diluted

     50,000           16,600  (e)      66,600  

 

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NOBLE CORPORATION

Unaudited Pro Forma Condensed Combined Statement of Operations

Year Ended December 31, 2020

(Unless otherwise indicated, dollar and share amounts are in thousands)

 

                Pro Forma        
    Pro Forma
Noble (Note 5)
    Pacific
Predecessor
Historical
    Transaction
Accounting
Adjustments
    Pacific
Reorganization
Adjustments
    Pro Forma
Noble
Combined
 

Operating revenues

           

Contract drilling services

  $ 850,863     $ 181,368     $ —       $ —         $ 1,032,231  

Reimbursables and other

    55,036       16,569       —         —           71,605  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 
    905,899       197,937       —         —           1,103,836  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Operating costs and expense

           

Contract drilling services (expense)

    571,195       226,611       (636 )(a) (g) (h)      —           797,170  

Reimbursables

    48,188       12,529       —         —           60,717  

Depreciation and amortization

    94,968       110,567       (97,410 )(c)      —           108,125  

General and administrative

    125,716       46,161       11,027  (b) (g) (h)      —           182,904  

Pre-petition charges

    14,409       21,219       —         —           35,628  

Loss on impairment

    3,915,408       —         —         —           3,915,408  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 
    4,769,884       417,087       (87,019     —           5,099,952  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Operating income (loss)

    (3,863,985)       (219,150)       87,019       —           (3,996,116)  

Other income (expense)

           

Interest expense, net of amounts capitalized

    (50,672)       (87,642)       87,642  (d)      —           (50,672)  

Gain (loss) on extinguishment of debt, net

    17,254       (1,000)       (2,619 )(j)      —           13,635  

Interest income and other, net

    9,012       5,592       —         —           14,604  

Reorganization items, net

    —         (767,049)       —         767,049       (i)       —    

Bargain purchase gain

    —         —         54,376  (k)      —           54,376  

Income (loss) from continuing operations before income taxes

    (3,888,391)       (1,069,249)       226,418       767,049         (3,964,173)  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Income tax benefit (provision)

    260,308       (8,367)       (2,574 )(f)      —           249,367  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Net income (loss)

  $ (3,628,083)     $ (1,077,616)     $ 223,844     $ 767,049       $ (3,714,806)  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Basic net income (loss) per share

  $ (72.56)             $ (55.78)  

Diluted net income (loss) per share

  $ (72.56)             $ (55.78)  

Weighted average shares outstanding

           

Basic

    50,000         16,600  (e)          66,600  

Diluted

    50,000         16,600  (e)          66,600  

 

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NOBLE CORPORATION

Unaudited Pro Forma Condensed Combined Balance Sheet

As of March 31, 2021

(Unless otherwise indicated, dollar and share amounts are in thousands)

 

                      Pro Forma        
       Noble
Successor
Historical
       Pacific
Successor
Historical
    Transaction Accounting
Adjustments
    Pro Forma
Noble
Combined
 

Assets

             

Current assets:

             

Cash and cash equivalents

     $ 116,326        $ 64,648     $ (9,639 )(l)    $ 171,335  

Accounts receivable, net

       178,942          21,798       —         200,740  

Taxes receivable

       31,487          1,584       —         33,071  

Materials and supplies

       —            14,716       (14,716 )(o)      —    

Deferred costs, current

       —            7,180       (7,180 )(p)      —    

Prepaid expenses and other current assets

       27,840          21,376       (2,120 )(q)      47,096  
    

 

 

      

 

 

   

 

 

   

 

 

 

Total current assets

       354,595          131,302       (33,655     452,242  
    

 

 

      

 

 

   

 

 

   

 

 

 

Intangible assets

       104,930          —         —         104,930  

Assets held for sale

       —            —         28,000  (n)      28,000  

Property and equipment, at cost

       1,178,688          657,164       (321,783 )(m)      1,514,069  

Accumulated depreciation

       (13,873)          (10,066)       10,066  (m)      (13,873)  
    

 

 

      

 

 

   

 

 

   

 

 

 

Property and equipment, net

       1,164,815          647,098       (311,717 )(m)      1,500,196  
    

 

 

      

 

 

   

 

 

   

 

 

 

Other assets

       70,528          11,246       (3,950) (f)(j)(p)      77,824  
    

 

 

      

 

 

   

 

 

   

 

 

 

Total assets

     $ 1,694,868        $ 789,646     $ (321,322)     $ 2,163,192  
    

 

 

      

 

 

   

 

 

   

 

 

 

Current liabilities

             

Accounts payable

     $ 96,223        $ 32,383     $ —       $ 128,606  

Accrued payroll and related costs

       36,615          4,235       11,022  (g)      51,872  

Taxes payable

       32,901          3,349       5  (f)      36,255  

Interest payable

       6,587          —         —         6,587  

Other current liabilities

       30,689          636       (636 )(p)      30,689  
    

 

 

      

 

 

   

 

 

   

 

 

 

Total current liabilities

       203,015          40,603       10,391       254,009  
    

 

 

      

 

 

   

 

 

   

 

 

 

Long-term debt

       393,500          —         —         393,500  

Deferred income taxes

       17,929          820       (500 )(f)      18,249  

Other liabilities

       77,862          28,627       (15,956 )(f)(p)      90,533  
    

 

 

      

 

 

   

 

 

   

 

 

 

Total liabilities

       692,306          70,050       (6,065     756,291  
    

 

 

      

 

 

   

 

 

   

 

 

 

Shareholders’ equity

             

Common stock (Successor)

       1          —         —         1  

Additional paid-in-capital

       1,020,785          —         353,768  (r)      1,374,553  

Membership capital

       —            754,143       (754,143 )(r)      —    

Retained earnings (accumulated deficit)

       (18,224)          (34,547)       85,118  (r)      32,347  
    

 

 

      

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

       1,002,562          719,596       (315,257)       1,406,901  
    

 

 

      

 

 

   

 

 

   

 

 

 

Total liabilities and equity

     $ 1,694,868        $ 789,646     $ (321,322)     $ 2,163,192  
    

 

 

      

 

 

   

 

 

   

 

 

 

 

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NOBLE CORPORATION

Notes to Pro Forma Unaudited Condensed Combined Financial Information

(Unless otherwise indicated, dollar and share amounts are in thousands)

Note 1. Basis of Presentation

The Pro Forma Financial Information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses,” which was adopted in May 2020 and became effective on January 1, 2021. The pro forma adjustments include (i) transaction accounting adjustments, which reflect the application of required accounting for the business combination, Noble Reorganization, and Pacific Reorganization; and (ii) management adjustments, which depict synergies and dis-synergies of the acquisition.

The accompanying unaudited pro forma condensed combined statement of operations, unaudited pro forma condensed combined balance sheet and explanatory notes reflect the business combination, Noble Reorganization, and Pacific Reorganization transaction as follows:

 

   

The unaudited pro forma condensed combined balance sheet of Noble as of March 31, 2021 includes the effects of the business combination as if it had occurred on March 31, 2021. No pro forma adjustments were made for the Noble Reorganization or the Pacific Reorganization because both transactions were fully reflected in the historical balance sheets of Noble and Pacific, respectively, as of March 31, 2021.

 

   

The unaudited pro forma condensed combined statement of operations of Noble for the three months ended March 31, 2021 includes the effects of the business combination and Noble Reorganization as if they had occurred on January 1, 2020.

 

   

Refer to Note 4 that presents the standalone pro forma effects of Noble as if the Noble Reorganization occurred on January 1, 2020. The results of which are included on an as-adjusted basis in the unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2021.

 

   

No pro forma adjustments were made for the Pacific Reorganization because the transaction was fully reflected in the historical statements of operations of Pacific for the three months ended March 31, 2021.

 

   

The unaudited pro forma condensed combined statement of operations of Noble for the twelve months ended December 31, 2020 includes the effects of the business combination, Noble Reorganization, and Pacific Reorganization as if they had occurred on January 1, 2020.

 

   

Refer to Noble’s S-1 filed on April 21, 2021 for the pro forma adjustments for the twelve months ended December 31, 2020 related to the Noble Reorganization. The results of which are included on an as-adjusted basis in the unaudited pro forma condensed combined statement of operations for the twelve months ended December 31, 2020.

 

   

The pro forma adjustments for the twelve months ended December 31, 2020 related to the business combination and the Pacific Reorganization are included within Transaction Accounting Adjustments in the unaudited pro forma condensed combined statement of operations for the twelve months ended December 31, 2020.

 

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Note 2. Consideration and Purchase Price Allocation

Purchase Price Consideration

The Merger Agreement provides that Merger Sub will merge with and into Pacific, with Pacific continuing as the surviving company and a wholly owned subsidiary of Noble. Under the terms of the Merger Agreement, each membership interest in Pacific was converted into the right to receive 6.366 Ordinary Shares of Noble and each of Pacific’s warrants outstanding immediately prior to the effective time of the Merger was converted into the right to receive 1.553 Ordinary Shares. In total, 16.6 million Ordinary Shares were exchanged in connection with the Merger at an estimated value of $21.31 per share, resulting in an aggregate consideration paid by Noble to Pacific of $353.8 million. The following table presents the calculation of preliminary purchase price consideration (in thousands, except ratios and per unit prices):

 

     Pacific Units
Outstanding
           Exchange
Ratio
     Noble
Converted
Shares
     Per Share
Price
     Purchase Price
Consideration
 

Pacific membership interest outstanding

     2,500       X        6.366        15,915        21.31        339,167  

Pacific warrants outstanding

     441       X        1.553        685        21.31        14,601  
  

 

 

         

 

 

       

 

 

 

Total

     2,941             16,600           353,768  
  

 

 

         

 

 

       

 

 

 

Allocation of Purchase Price Consideration to Asset Acquired and Liabilities Assumed

The purchase price consideration applied in the Pro Forma Financial Information is preliminary and subject to certain post-closing purchase price adjustments as provided in the Merger Agreement (estimates of which are included in the table above). Furthermore, the allocation of the consideration is preliminary and pending finalization of various estimates, inputs and analyses used in the valuation assessment of the specifically identifiable tangible and intangible assets acquired. Since the Pro Forma Financial Information has been prepared based on preliminary estimates of consideration and fair values attributable to the Acquisition, the actual amounts eventually recorded in accordance with the acquisition method of accounting may differ materially from the information presented.

The acquisition method of accounting for business combinations was used in accordance with ASC 805, Business Combinations, with Noble treated as the accounting acquirer of Pacific. ASC 805 requires, among other things, that the assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. Any excess fair value of the assets acquired and liabilities assumed beyond the consideration transferred or paid in a business combination should be identified as a bargain purchase gain. Management’s estimate as of the date of this Form 8-K/A is that the fair value of the net assets and liabilities acquired is greater than the purchase price. The fair value allocated to the acquired assets and assumed liabilities in excess of the purchase price was recognized a bargain purchase gain on the pro forma condensed combined statement of operations for the year ended December 31, 2020. This preliminary determination is subject to further assessment and adjustments pending additional information sharing between the parties, more detailed third-party appraisals, and other potential adjustments.

 

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The preliminary allocation of the purchase price consideration is as follows:

 

     Estimated fair value  

Total current assets

   $ 107,286  

Property and equipment, net

     335,381  

Assets held for sale

     28,000  

Other noncurrent assets

     7,296  
  

 

 

 

Total assets acquired

     477,963  
  

 

 

 

Total current liabilities

     40,773  

Deferred income taxes

     16,375  

Other liabilities

     12,671  
  

 

 

 

Total liabilities assumed

     69,819  
  

 

 

 

Net Assets acquired

   $ 408,144  
  

 

 

 

Gain on bargain purchase

     54,376  
  

 

 

 

Purchase price consideration

   $ 353,768  
  

 

 

 

Note 3. Business Combination Transaction Accounting Adjustments

Condensed Combined Statements of Operations

 

(a)

Contract drilling services

Noble has an accounting policy to expense costs for materials and supplies as received or deployed to the drilling units, while Pacific’s historical policy was to carry inventory at average cost and recognize them in earnings upon consumption. Adjustment reflects the change in contract drilling services expense related to Pacific’s materials and supplies inventory during the three months ended March 31, 2021 and twelve months ended December 31, 2020 to align with Noble’s treatment of such costs.

 

(b)

Transaction Costs

Reflects the accrual of $7.0 million and $2.6 million of transaction costs consisting primarily of legal and professional fees incurred subsequent to March 31, 2021 by Pacific and Noble, respectively, in connection with the Pacific Merger, which were not reflected in the historical statements of operations or balance sheets. This adjustment excludes less than $0.1 million and $1.6 million of transaction costs incurred in the three months ended March 31, 2021 by Pacific and Noble, respectively. The above costs are not expected to recur in any period beyond twelve months from the close of the Pacific Merger.

 

(c)

Depreciation and amortization

For the three months ended March 31, 2021, reflects the replacement of historical depreciation expense by the pro forma depreciation expense based on the estimated fair value of Pacific’s property and equipment upon the Acquisition. For pro forma purposes it is assumed that the Acquisition occurred on January 1, 2020. The pro forma adjustment to depreciation expense for the three months ended March 31, 2021 was calculated as follows:

 

Removal of historical depreciation expense

   $ (10,090

Pro forma depreciation expense

     3,289  
  

 

 

 

Pro forma adjustment for depreciation and amortization

   $ (6,801
  

 

 

 

For the twelve months ended December 31, 2020, reflects the pro forma decrease in depreciation expense recorded at the predecessor entity of Pacific based on new preliminary asset values as a result of adopting fresh

 

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start accounting. This adjustment also reflects the decrease in depreciation expense based on the estimated fair value of Pacific’s property and equipment upon the Acquisition. For pro forma purposes it is assumed that Pacific’s emergence from bankruptcy and the Acquisition both occurred on January 1, 2020. The pro forma adjustment to depreciation expense for the twelve months ended December 31, 2020 was calculated as follows:

 

Removal of historical depreciation expense

   $ (110,567

Pro forma depreciation expense

     13,157  
  

 

 

 

Pro forma adjustment for depreciation and amortization

   $ (97,410
  

 

 

 

 

(d)

Interest expense

For the three months ended March 31, 2021, reflects the elimination of interest expense recorded at the successor entity of Pacific which was associated with the new senior secured delayed draw term loan facility entered into on December 31, 2020. In connection with the Merger Agreement, the facility was terminated, and the related interest expense removed from the unaudited pro forma condensed combined statements of operations. For the twelve months ended December 31, 2020, adjustment reflects the elimination of interest expense recorded at the predecessor entity of Pacific, as the underlying debt was terminated upon Pacific’s emergence from bankruptcy.

 

(e)

Weighted average shares outstanding

The Pro forma weighted average shares are calculated as follows:

 

     Three months
Ended
March 31,
2021
     Twelve Months
Ended
December 31,
2020
 

Basic:

     

Noble historical weighted average shares

     50,000        50,000  

Noble incremental shares issued for business combination

     16,600        16,600  
  

 

 

    

 

 

 

Pro forma weighted average shares

     66,600        66,600  
  

 

 

    

 

 

 

Diluted:

     

Noble historical weighted average shares

     50,000        50,000  

Noble incremental shares issued for business combination

     16,600        16,600  
  

 

 

    

 

 

 

Pro forma weighted average shares

     66,600        66,600  
  

 

 

    

 

 

 

 

(f)

Income Tax

Reflects the pro forma adjustment to tax expense. The income tax impact was calculated by applying the appropriate statutory tax rates of the respective tax jurisdictions to which the pro forma adjustments relate.

 

(g)

Severance and Retention

Includes the pro forma adjustments to record a one-time payroll cost of $10.2 million consisting of: (1) $8.7 million of severance expense primarily for certain executive officers of Pacific in accordance with their employment agreements which included double-trigger provisions for these benefits upon a change in control and termination; and (2) $1.5 million related to accelerated vesting of prepaid retention awards for certain

 

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executive officers of Pacific upon consummation of the Acquisition in accordance with the Key Employee Retention Plan (“KERP”). The $8.7 million of severance expense and the $1.5 million related to retention are recognized as General and administrative expense and Contract drilling services expense in the pro forma condensed combined statement of operations for the year ended December 31, 2020, respectively. Both the severance and retention were not reflected in the historical statements of operations or balance sheets and are accrued in the pro forma condensed combined balance sheet as of March 31, 2021.

 

(h)

Stock based compensation

Reflects the elimination of stock based compensation expense recorded in the predecessor entity of Pacific, as the underlying awards previously issued were cancelled prior to Pacific’s emergence from bankruptcy on December 31, 2020 and replacement equity awards were not issued. For pro forma purposes it is assumed that the Acquisition occurred on January 1, 2020. Stock based compensation expense of $7.3 million and $2.0 million are recognized as General and administrative expense and Contract drilling services expense in the pro forma condensed combined statement of operations for the year ended December 31, 2020, respectively, for a total of $9.3 million.

 

(i)

Reorganization items

Reflects the removal of Reorganization items within the predecessor period of Pacific. All expenses are directly related to the Pacific Reorganization and are non-recurring.

 

(j)

Deferred financing costs

Reflects the elimination of deferred financing costs included in historical Pacific, which were associated with the new senior secured delayed draw term loan facility entered into on December 31, 2020. In connection with the Merger Agreement, the facility was terminated, and the related deferred financing costs were removed from the unaudited pro forma condensed combined balance sheet and recorded as gain (loss) on extinguishment of debt, net in the unaudited pro forma condensed combined statements of operations for the twelve months ended December 31, 2020.

 

(k)

Bargain purchase gain

Reflects the bargain purchase gain due to the fair value of the net assets and liabilities acquired being greater than the purchase price. The purchase price has been allocated to the purchased assets and assumed liabilities at fair values as determined by management. The remaining $54.4 million of allocated fair value in excess of the purchase price was recognized a bargain purchase gain on the pro forma condensed combined statement of operations for the year ended December 31, 2020.

Condensed Combined Balance Sheet

 

(l)

Cash and cash equivalents

Reflects the estimated transaction costs for legal, professional and success fees to be paid in connection with the Pacific Merger.

 

(m)

Property and equipment, net

Represents the preliminary fair value adjustment to Property and equipment to reduce the historical net book value of Pacific’s drillships and related equipment to fair value.

 

(n)

Assets held for sale

 

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Reflects the classification of the Pacific Bora and the Pacific Mistral, two Pacific drillships acquired as part of the Pacific Merger, as held for sale.

 

(o)

Materials and supplies

Noble has an accounting policy to expense costs for materials and supplies as incurred, while Pacific’s historical policy was to carry inventory at average cost and recognize them in earnings upon consumption. This adjustment reflects the write-off of Pacific’s materials and supplies inventory balance to align with Noble’s accounting policy.

 

(p)

Deferred costs and deferred revenue

Represents the elimination of Pacific balances related to deferred costs and deferred revenue as a result of applying purchase accounting on a pro forma basis.

 

(q)

Prepaid insurance

Reflects the removal of director and officer liability (“D&O”) insurance for Pacific’s directors and officers of $2.1 million recorded to Prepaid expenses and other current assets in Pacific’s 3/31/21 historical balance sheet.

 

(r)

Equity

The following adjustments were made to Noble’s equity accounts based on the Pacific Merger transaction:

 

Membership Capital:

  

Remove Pacific balance

   $ (754,143
  

 

 

 

Pro forma adjustment

   $ (754,143
  

 

 

 

Common stock:

  

Add: Noble converted shares (at par of $0.00001)

   $ —    
  

 

 

 

Pro forma adjustment

   $ —    
  

 

 

 

Additional paid-in capital:

  

Add: Noble shares issued (less par value) to acquire Pacific

   $ 353,768  
  

 

 

 

Pro forma adjustment

   $ 353,768  
  

 

 

 

Retained (deficit) earnings:

  

Remove Pacific balance

   $ 34,547  

Subtract: Estimated transaction costs for Pacific Merger. See adj (b)

     (9,639

Subtract: Severance and separation costs for terminated Pacific executives. See adj (g)

     (10,221

Tax effects of transaction adjustments. See note (f)

     16,055  

Subtract: Gain from bargain purchase. See adj (k)

     54,376  
  

 

 

 

Pro forma adjustment

   $ 85,118  
  

 

 

 

 

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Note 4. Noble Reorganization Pro Forma Statement of Operations for the Three Months Ended March 31, 2021

NOBLE CORPORATION AND SUBSIDIARIES

Pro Forma Unaudited Condensed Consolidated Statement of Operations

(Unless otherwise indicated, dollar and outstanding share amounts are in thousands)

Three Months Ended March 31, 2021

(Unaudited)

 

                      Transaction Accounting
Adjustments
          Transaction
Accounting
Adjustments
       
    Predecessor Historical
Period From January 1,
2021 through
February 5, 2021
    Successor Historical
Period From February 6,
2021 through
March 31, 2021
    Three Months Ended
March 31, 2021
    Reorganization
Adjustments
    Fresh Start
Adjustments
    Pro Forma
(including
Reorganization
items, net)
    Removal of
Reorganization
items, net
    Pro Forma Noble  

Operating revenues

               

Contract drilling services

  $ 74,051     $ 84,629     $ 158,680     $ —       $ (5,210 ) (u)    $ 153,470     $ —       $ 153,470  

Reimbursables and other

    3,430       7,804       11,234       —         —         11,234         11,234  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    77,481       92,433       169,914             (5,210     164,704       —         164,704  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating costs and expense

               

Contract drilling services (expense)

    46,965       79,981       126,946       920  (s)      —         127,866       —         127,866  

Reimbursables

    2,737       7,044       9,781       —         —         9,781       —         9,781  

Depreciation and amortization

    20,622       14,244       34,866       —         (11,123 ) (v)      23,743       —         23,743  

General and administrative

    5,727       9,548       15,275       803  (s)            16,078       —         16,078  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    76,051       110,817       186,868       1,723       (11,123     177,468       —         177,468  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

    1,430       (18,384     (16,954     (1,723     5,913       (12,764     —         (12,764

Other income (expense)

               

Interest expense, net of amounts capitalized

    (229     (6,895     (7,124     (4,404 ) (t)      —         (11,528     —         (11,528

Interest income and other, net

    399       8       407       —         —         407       —         407  

Reorganization items, net

    252,051       —         252,051       —         —         252,051       (252,051     —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before income taxes

    253,651       (25,271     228,380       (6,127     5,913       228,166       (252,051     (23,885

Income tax benefit (provision)

    (3,423     7,047       3,624       353       1,094  (w)      5,071         5,071  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

  $ 250,228     $ (18,224   $ 232,004     $ (5,774   $ 7,007     $ 233,237     $ (252,051   $ (18,814
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic net income (loss) per share

  $ 1.00     $ (0.36             $ (0.38

Diluted net income (loss) per share

  $ 0.98     $ (0.36             $ (0.38

Weighted average shares outstanding

               

Basic

    251,115       50,000                 50,000  

Diluted

    256,571       50,000                 50,000  

 

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Pro Forma Adjustments to the Unaudited Pro Forma Condensed Consolidated Statement of Operations

Reorganization Adjustments

 

(s)

Stock based compensation

Reflects an increase in stock-based compensation expense based on the new awards issued.

 

(t)

Interest Expense

The adjustment reflects change of interest expense as a result of the Noble Plan. The Noble Plan provides for the repayment and settlement of Predecessor’s 2017 Credit Facility and senior notes, respectively. Upon emergence, we entered into the Revolving Credit Agreement that provides for a $675.0 million senior secured revolving credit facility (with a $67.5 million sublimit for the issuance of letters of credit thereunder) and issued the Notes with an interest rate of LIBOR + 4.75% and 15% payable semi-annually by paid in kind notes, respectively. The pro forma adjustments to interest expense was calculated as follows:

 

     Three Months Ended
March, 31, 2021
 

Reversal of Predecessor interest expense

   $ (229

Pro forma interest on the Successor Revolving Credit Facility and Notes

     4,391  

Amortization of Successor deferred financing costs

     244  
  

 

 

 

Pro forma adjustment for interest expense

   $ 4,406  
  

 

 

 

Assuming an increase in interest rates on the Revolving Credit Agreement and Notes of 1/8%, pro forma interest would increase by $0.1 million.

Fresh Start Adjustments

 

(u)

Amortization of favorable contract

Adjustment reflects the amortization of favorable contracts with customers as a result of adopting fresh start accounting. The remaining useful life of the favorable contracts range between 1-3 years.

 

(v)

Depreciation and amortization

Reflects the pro forma decrease in depreciation expense based on new preliminary asset values as a result of adopting fresh start accounting. The pro forma adjustment to depreciation expense was calculated as follows:

 

     Three Months Ended
March, 31, 2021
 

Removal of Predecessor depreciation expense

   $ (20,622

Pro forma depreciation expense

     9,499  
  

 

 

 

Pro forma adjustment for depreciation and amortization

   $ (11,123
  

 

 

 

Drilling equipment and facilities are depreciated using the straight-line method over their estimated useful lives as of the date placed in service or date of major refurbishment. Estimated useful lives of our drilling equipment range from three to thirty years. Other property and equipment is depreciated using the straight-line method over useful lives ranging from two to forty years.

 

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(w)

Income Tax

Reflects the pro forma adjustment to tax expense as a result of reorganization adjustments and adopting fresh start accounting. The income tax impact was calculated by applying the appropriate statutory tax rate of the respective tax jurisdictions to which the pro forma adjustments relate, and which are reasonably expected to occur.

 

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Note 5. Noble Reorganization Pro Forma Statement of Operations for the Twelve Months Ended December 31, 2020

NOBLE CORPORATION AND SUBSIDIARIES

Pro Forma Unaudited Condensed Consolidated Statement of Operations

(Unless otherwise indicated, dollar and outstanding share amounts are in thousands)

Year Ended December 31, 2020

(Unaudited)

 

          Transaction Accounting
Adjustments
          Transaction
Accounting
Adjustments
       
    Historical     Reorganization
Adjustments
    Fresh Start
Adjustments
    Pro Forma
(including
reorganization
items, net)
    Removal of
Reorganization
items, net
    Pro Forma  

Operating revenues

           

Contract drilling services

  $ 909,236     $ —       $ (58,373 ) (ab)    $ 850,863     $ —       $ 850,863  

Reimbursables and other

    55,036       —         —         55,036       —         55,036  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    964,272       —         (58,373     905,899       —         905,899  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating costs and expense

           

Contract drilling services

    567,487       3,708  (x)(aa)      —         571,195       —         571,195  

Reimbursables

    48,188       —         —         48,188       —         48,188  

Depreciation and amortization

    374,129       —         (279,161 ) (ac)      94,968       —         94,968  

General and administrative

    121,196       4,520  (x)      —         125,716       —         125,716  

Pre-petition charges

    14,409       —         —         14,409       —         14,409  

Loss on impairment

    3,915,408       —         —         3,915,408       —         3,915,408  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    5,040,817       8,228       (279,161     4,769,884       —         4,769,884  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

    (4,076,545     (8,228     220,788       (3,863,985     —         (3,863,985

Other income (expense)

           

Interest expense, net of amounts capitalized

    (164,653     113,981  (y)      —         (50,672     —         (50,672

Gain on extinguishment of debt, net

    17,254       —         —         17,254       —         17,254  

Interest income and other, net

    9,012       —         —         9,012       —         9,012  

Reorganization items, net

    (23,930     2,575,497  (z)      (2,312,902 ) (ae)      238,665       (238,665     —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before income taxes

    (4,238,862     2,681,250       (2,092,114     (3,649,726     (238,665     (3,888,391

Income tax benefit (provision)

    260,403       17,281  (ad)      (17,376 ) (ad)      260,308       —         260,308  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

  $ (3,978,459   $ 2,698,531     $ (2,109,490   $ (3,389,418   $ (238,665   $ (3,628,083
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic net loss per share

  $ (15.86       $ (67.79     $ (72.56

Diluted net loss per share

  $ (15.86       $ (67.79     $ (72.56

Weighted average shares outstanding

           

Basic

    250,792           50,000         50,000  

Diluted

    250,792           50,000         50,000  

 

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Pro Forma Adjustments to the Unaudited Pro Forma Condensed Consolidated Statement of Operations, Twelve Months Ended December 31, 2020

Reorganization Adjustments

 

(x)

Stock based compensation

Reflects an increase in stock-based compensation expense based on the new awards issued.

 

(y)

Interest Expense

The adjustment reflects change of interest expense as a result of the Plan. The Plan provides for the repayment and settlement of Predecessor’s 2017 Credit Facility and senior notes, respectively. Upon emergence, we entered into the Revolving Credit Facility and issued Notes with interest rate of LIBOR + 4.75% and 15% payable semi-annually by paid in kind notes, respectively. The pro forma adjustments to interest expense was calculated as follows:

 

Interest Expense

  

Reversal of Predecessor interest expense including amortization of deferred financing costs

   $ (162,156

Pro forma interest on the Successor Revolving Credit Facility and Notes

     45,286  

Amortization of Successor deferred financing costs

     2,889  
  

 

 

 

Pro forma adjustment for interest expense

   $   (113,981
  

 

 

 

Assuming an increase in interest rates on the Revolving Credit Facility and the Notes of 1/8%, pro forma interest would increase by $0.5 million.

 

(z)

Reorganization Items, net

The adjustment represents the estimated remaining costs that were directly attributable to the Chapter 11 reorganization including the following:

 

Reorganization Items, net

  

Professional fees

   $ (15,017

Acceleration of unrecognized Predecessor share-based compensation

     (18,546

Gain on settlement of liabilities subject to compromise

     2,609,060  
  

 

 

 

Pro forma adjustment to reorganization items, net

   $ 2,575,497  
  

 

 

 

 

(aa)

Includes $600 thousand related to the rejection of an executory contract per the Plan.

Fresh Start Adjustments

 

(ab)

Revenue

Adjustment reflects the amortization of favorable contracts with customers as a result of adopting fresh start accounting. The remaining useful life of the favorable contracts range between 1-3 years.

 

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(ac)

Depreciation and amortization

Reflects the pro forma decrease in depreciation expense based on new asset values as a result of adopting fresh start accounting. The pro forma adjustment to depreciation expense was calculated as follows:

 

Depreciation and amortization

  

Removal of Predecessor depreciation expense

   $ (374,129

Pro forma depreciation expense

     94,968  
  

 

 

 

Pro forma adjustment for depreciation and amortization

   $ (279,161
  

 

 

 

Drilling equipment and facilities are depreciated using the straight-line method over their estimated useful lives as of the date placed in service or date of major refurbishment. Estimated useful lives of our drilling equipment range from three to thirty years. Other property and equipment is depreciated using the straight-line method over useful lives ranging from two to forty years.

 

(ad)

Income Tax

Reflects the pro forma adjustment to tax expense as a result of reorganization adjustments and adopting fresh start accounting. The income tax impact was calculated by applying the appropriate statutory tax rate of the respective tax jurisdictions to which the pro forma adjustments relate, and which are reasonably expected to occur.

 

(ae)

Impact of Fresh Start Accounting

Reflects the cumulative impact of fresh start accounting adjustments, excluding tax impacts.

Note 6. Reclassification of Pacific’s Historical Financial Statements

The following reclassifications were made as a result of the Acquisition to conform Pacific’s historical financial information to Noble’s presentation:

Statement of Operations for the Three Months Ended March 31, 2021

(in thousands)

 

Financial Statement Line Item

   Pacific Historical
Presentation
     Pacific Historical
as Presented
 

Contract drilling services

   $ 1,334      $ —    

Reimbursables and other

     —          1,334  

Operating expense

     35,911        —    

Contract drilling services (expense)

     —          35,375  

Reimbursables

     —          511  

Depreciation and amortization

     —          25  

Other expense

     (366      —    

Interest income and other, net

     —          (366

 

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Statement of Operations for the Twelve Months Ended December 31, 2020

(in thousands)

 

Financial Statement Line Item

   Pacific Historical
Presentation
     Pacific Historical
as Presented
 

Contract drilling services

   $ 16,569      $ —    

Reimbursables and other

     —          16,569  

Operating expense

     242,214        —    

Contract drilling services (expense)

     —          226,611  

Reimbursables

     —          12,529  

Depreciation and amortization

     —          3,074  

Other expense

     (423      —    

Interest income and other, net

     —          (423

Write-off of deferred financing costs

     4,448        —    

Interest income and other, net

     —          4,448  

Balance Sheet as of March 31, 2021

(in thousands)

 

Financial Statement Line Item

   Pacific Historical
Presentation
     Pacific Historical
as Presented
 

Restricted cash

   $ 6,659      $ —    

Prepaid expenses and other current assets

        6,659  

Accounts receivable, net

     245        —    

Prepaid expenses and other current assets

     1,339        —    

Taxes receivable

     —          1,584  

Property and equipment, net

     647,098     

Property and equipment, at cost

     —          657,164  

Accumulated depreciation

     —          (10,066

Accrued expenses

     27,494        —    

Accounts payable

     —          23,259  

Accrued payroll and related costs

     —          4,235  

Accounts payable

     3,349        —    

Taxes payable

     —          3,349  

Other liabilities

     820        —    

Deferred income taxes

     —          820  

Deferred revenue

     65        —    

Other liabilities

     —          65  

 

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Note 7. Management Adjustments

Management expects the post-acquisition company will realize certain cost savings as compared to the historical combined costs of Noble and Pacific operating independently. Such cost savings result from the elimination of duplicate costs and are not reflected in the unaudited pro forma condensed combined statements of operations. The unaudited pro forma condensed combined statements of operations also do not reflect the way the post-acquisition company will be integrated and managed prospectively.

Management estimates that, had the Pacific Merger been completed as of January 1, 2020, expenses of approximately $30 million as reflected in the historical results of operations for Pacific for the twelve months ended December 31, 2020 would not have been incurred. These expenses relate primarily to IT, finance, management and other services. The following tables present the estimated effects on the pro forma condensed combined statements of operations from elimination of the identified corporate level expenses. In order to achieve these expected savings, management expects to incur certain costs to achieve, including but not limited to severance expenses and other integration costs. Such costs to achieve are not expected to recur in any period beyond twelve months from the close of the Pacific Merger.

The adjustments shown below include those that management deemed necessary for a fair statement of the Pro Forma Information presented. The adjustments include forward-looking information that is subject to the safe harbor protections of the Exchange Act, and actual results could differ materially from what is presented below as efforts to integrate Pacific’s operations into Noble progress.

 

Three Months Ended March 31, 2021

 
     Net loss      Basic and diluted
earnings per share
     Weighted average
shares
 

Pro Forma Combined

   $ (47,981    $ (0.72      66,600  

Management Adj

        

Cost savings

     7,500        

Tax effect

     47        
  

 

 

    

 

 

    

 

 

 

Pro Foma Combined after management adj

   $ (40,434    $ (0.61      66,600  
  

 

 

    

 

 

    

 

 

 

 

Year Ended December 31, 2020

 
     Net loss      Basic and diluted
earnings per share
     Weighted average
shares
 

Pro Forma Combined

   $ (3,714,806    $ (55.78      66,600  

Management Adj

        

Cost savings

     30,000        

Costs to achieve

     (12,483      

Tax effect

     189        
  

 

 

    

 

 

    

 

 

 

Pro Foma Combined after management adj

   $ (3,697,100    $ (55.51      66,600  
  

 

 

    

 

 

    

 

 

 

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is intended to assist you in understanding our financial position at March 31, 2021 and December 31, 2020, our results of operations for the period from February 6 through March 31, 2021, the period from January 1 through February 5, 2021, the three months ended March 31, 2020 and each of the years in the three-year period ended December 31, 2020. The following discussion should be read in conjunction with the audited consolidated financial statements of Noble Parent and Finco and related notes included elsewhere in this prospectus (the “Audited Financial Statements”) and the unaudited condensed consolidated financial statements of Noble Parent and Finco and related notes included elsewhere in this prospectus (the “Interim Financial Statements”).

As used in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section, the term (i) “Predecessor” refers to Legacy Noble and, as appropriate, its subsidiaries prior to and including the Effective Date, and (ii) “Successor” refers to Noble Parent and, as appropriate, its subsidiaries subsequent to the Effective Date. Finco was an indirect, wholly-owned subsidiary of Legacy Noble prior to the Effective Date and has been a direct, wholly-owned subsidiary of Noble Parent since the Effective Date. Noble Parent’s principal asset is all of the shares of Finco. Finco has no public equity outstanding. The consolidated financial statements of Noble Parent include the accounts of Finco and Noble Parent conducts substantially all of its business through Finco and its subsidiaries. As such, the terms “Predecessor” and “Successor” also refer to Finco, as the context requires.

Executive Overview

We provide contract drilling services to the international oil and gas industry with our global fleet of mobile offshore drilling units. Our business strategy focuses on a balanced, high-specification fleet of both floating and jackup rigs, and the deployment of our drilling rigs in established and emerging offshore oil and gas basins around the world.

We emphasize safe operations, environmental stewardship, social responsibility, and robust governance to sustain the superior performance and maximize stakeholder value achieved through our qualified and well-trained crews, the care of our surroundings and local communities, an effective management system, and a superior fleet. We also carefully manage rig operating costs through innovative systems and processes, including the use of data analytics and predictive maintenance technology.

As of the date of this prospectus, with the addition of five floaters from our acquisition of Pacific Drilling, our fleet of 24 drilling rigs consisted of 12 floaters and 12 jackups strategically deployed worldwide in both ultra-deepwater and shallow water locations. We typically employ each drilling unit under an individual contract, and many contracts are awarded based upon a competitive bidding process.

Demand for our services is highly competitive and, in significant part, a function of the worldwide demand for oil and gas and the global supply of mobile offshore drilling units. Since late 2014, the offshore drilling industry has experienced a severe and prolonged downturn stemming from the combination of an oversupply of competing drilling rigs that resulted from the new build rig influx of the 2010s, weak and volatile crude oil prices, and the advancement of onshore opportunities and technology. The Company entered 2020 cautiously optimistic with the prospects for the offshore drilling market continuing to improve; however, the combined effects of the pandemic and the steep decline in the demand for oil have resulted in significantly reduced global economic activity. These factors in concert led to heightened competition for opportunities to re-contract our rigs upon the expiration of existing contracts.

 

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Recent Events

Emergence from Chapter 11. In connection with the Chapter 11 Cases and the Plan, on and prior to the Effective Date, Legacy Noble and certain of its subsidiaries effectuated certain restructuring transactions, pursuant to which Legacy Noble transferred to Noble Parent substantially all of the subsidiaries and other assets of Legacy Noble. On the Effective Date, Legacy Noble successfully completed its financial restructuring and Legacy Noble and its debtor affiliates emerged from the Chapter 11 Cases.

As a result of the financial restructuring, Noble emerged from bankruptcy on the Effective Date with a substantially de-levered balance sheet and less than $400.0 million of debt. Noble’s capital structure as of the Effective Date includes a $675.0 million revolving credit facility, of which $150.0 million is drawn as of May 5, 2021, and $216.0 million of Notes. On the Effective Date, Legacy Noble’s ordinary shares were cancelled and Ordinary Shares were issued to Legacy Noble’s former bondholders. Certain former bondholders and former equity holders of Legacy Noble were also issued warrants to purchase shares of Noble Parent. All cash payments made by Noble under the Plan on the Effective Date were funded from cash on hand, proceeds of the Rights Offering, and proceeds from the new revolving credit facility. For additional information regarding the Chapter 11 Cases and our emergence, see “—Chapter 11 Proceedings and Going Concern” below.

Fresh Start Accounting. In connection with our emergence from bankruptcy, Noble Parent and Finco qualified for and applied fresh start accounting on the Effective Date. With the application of fresh start accounting, we allocated the reorganization value to our individual assets and liabilities based on their estimated fair values. The Effective Date fair values of our assets and liabilities differed materially from their recorded values as reflected on the historical balance sheets. The application of fresh start accounting resulted in new reporting entities with no beginning retained earnings or accumulated deficit. Accordingly, our financial statements and notes thereto after the Effective Date are not comparable to our financial statements and notes to prior to that date. To facilitate our discussion and analysis of our financial condition and results of operations herein, we refer to the reorganized company as the “Successor” for periods subsequent to the Effective Date, and “Predecessor” for periods prior to the Effective Date. Furthermore, our presentations herein include a “black line” division to delineate the lack of comparability between the Predecessor and Successor. To facilitate our discussion herein, we have addressed the Successor and Predecessor periods discretely and have provided comparative analysis, to the extent that it is practical, where appropriate.

Merger with Pacific Drilling. On March 25, 2021, Noble Parent entered into the Merger Agreement with Merger Sub and Pacific Drilling, providing for the Merger of Merger Sub with and into Pacific Drilling, with Pacific Drilling continuing as the surviving company and a wholly-owned subsidiary of Noble Parent. The Board of Noble Parent and the board of directors of Pacific Drilling unanimously approved and adopted the Merger Agreement.

On April 15, 2021, Noble Parent completed the Merger with Pacific Drilling. In connection with the Merger, and pursuant to the terms and conditions set forth in the Merger Agreement, (a) each Membership Interest in Pacific Drilling was converted into the right to receive 6.366 Ordinary Shares and (b) each Pacific Warrant was converted into the right to receive 1.553 Ordinary Shares. As part of the transaction, Pacific Drilling’s equity holders received 16.6 million Ordinary Shares, or approximately 24.9% of the outstanding Ordinary Shares and Penny Warrants at closing.

The Merger facilitates Noble’s reentry into the growing West Africa and Mexico regions, and broadens our customer relationships. Noble expects to dispose of the Pacific Bora and Pacific Mistral rigs expeditiously. Subsequent to those dispositions, Noble will own and operate a high specification fleet of 24 rigs, with 12 floaters and 12 jackups.

Upon completion of the Merger, Noble Parent contributed Pacific Drilling to Finco and designated Pacific Drilling and its subsidiaries as unrestricted subsidiaries pursuant to the Revolving Credit Facility and the Notes.

 

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As a result, neither Pacific Drilling nor any of its subsidiaries is a subsidiary guarantor of the Revolving Credit Facility or the Notes, and none of their assets secure the Revolving Credit Facility or the Notes.

Voting and Support Agreement. Concurrently with the entry into the Merger Agreement, Noble Parent and the Members of Pacific Drilling, which collectively represented approximately 66% of the issued and outstanding Membership Interests and 64% of the Pacific Warrants, entered into the Voting Agreements in connection with the Merger Agreement. Among other things, each Voting Agreement required that each Member that was party to such Voting Agreement (a) vote (or cause to be voted) its Membership Interests (i) in favor of the approval and adoption of the Merger, the Merger Agreement and all other transactions contemplated by the Merger Agreement, (ii) among other things, against any merger agreement or merger (other than the Merger Agreement, the Merger and the transactions contemplated thereby), any action or any other takeover proposal relating to Pacific Drilling, (b) be bound by certain other covenants and agreements relating to the Merger, including the delivery of any notices and documentation required to effect a “Drag-Along Sale” as defined in the Pacific Drilling limited liability company agreement, and (c) be bound by certain transfer restrictions with respect to such securities subject to certain exceptions. The Voting Agreements terminated at the effective time of the Merger.

Merger Registration Rights Agreement. On April 15, 2021, in connection with the closing of the Merger, Noble Parent entered into the Merger RRA with the Merger RRA Holders, pursuant to which, among other things, Noble Parent is required to file with the SEC a registration statement registering for resale the Ordinary Shares issuable to the Merger RRA Holders upon consummation of the Merger, and subject to certain limitations set forth therein, certain Merger RRA Holders have customary shelf, demand and piggyback registration rights. In addition, pursuant to the Merger RRA, certain Merger RRA Holders have the right to require Noble Parent, subject to certain limitations set forth therein, to effect a distribution of any or all of their Ordinary Shares by means of an underwritten offering. Noble Parent is not obligated to effect any underwritten offering unless the dollar amount of the registrable securities of the Merger RRA Holder(s) demanding such underwritten offering to be included therein is reasonably likely to result in gross sale proceeds of at least $20 million.

Appointment of New Director. On April 19, 2021, the Board of Noble Parent appointed Paul Aronzon to serve as a director. Mr. Aronzon will serve as a director until the next shareholder vote at the annual general meeting of shareholders of Noble Parent in 2022. At the time of his appointment, Mr. Aronzon was named to serve on the Audit and Finance Committees of the Board of Noble Parent.

Paragon Matter. In August 2014, Legacy Noble completed the Spin-off through a pro rata distribution of all of the ordinary shares of its wholly-owned subsidiary, Paragon Offshore plc (“Paragon Offshore”), to the holders of Legacy Noble’s ordinary shares. Paragon Offshore filed for protection under chapter 11 of the Bankruptcy Code in February 2016, and in connection with Paragon Offshore’s emergence from bankruptcy in July 2017, all claims it may have had against Legacy Noble were transferred to a litigation trust. In December 2017, a litigation trust filed fraudulent conveyance and related claims relating to the Spin-off in an action against Legacy Noble and certain of its subsidiaries (the “Noble Defendants”), as well as certain of Legacy Noble’s and then current and former officers and directors (the “Individual Defendants”).

On February 3, 2021, the Noble Defendants, the Individual Defendants and the litigation trust entered into a global settlement. Pursuant to the global settlement, among other things, the Debtors made a $7.7 million payment to the litigation trust, and all claims brought against all defendants, including the Noble Defendants and Individual Defendants were settled and released. The global settlement was subject to approval by the Delaware Court, which approval was granted on February 24, 2021. See “Note 16—Commitments and Contingencies” to the Audited Financial Statements included elsewhere in this prospectus for more information.

 

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Outlook

The offshore drilling industry remains highly competitive. We believe the convergence of events in 2020 and 2021, including the ongoing impacts from the COVID-19 pandemic, have lengthened an already challenging and slow recovery in our industry. Despite these challenges and demand projections, we believe that oil and gas demand will rebalance and oil and gas will remain a significant portion of the world’s energy mix. We expect that the return to stable oil demand and prices coupled with the continued attrition of rigs in the global offshore fleet will bring improved market conditions for our services.

After completing the Merger with Pacific Drilling, Noble has a fleet of 24 rigs, consisting of 12 jackups and 12 floaters. Our fleet is among the youngest, most technically advanced, and versatile fleets in the industry and is well positioned to compete as market dynamics improve. Our fleet consists predominantly of technologically advanced units, equipped with sophisticated systems and components prepared to execute our customers’ increasingly complicated offshore drilling programs safely and with greater efficiency, contributing to an overall reduction of our carbon footprint. We remain committed to safely and efficiently serving the needs of our customers globally and we set several company safety records during 2020.

Chapter 11 Proceedings and Going Concern

On the Petition Date, Legacy Noble and certain of its subsidiaries, including Finco, filed the Chapter 11 Cases in the Bankruptcy Court. On September 4, 2020, the Debtors filed with the Bankruptcy Court the Plan, which was subsequently amended on October 8, 2020 and October 13, 2020 and modified on November 18, 2020, and the Disclosure Statement. On September 24, 2020, six additional subsidiaries of Legacy Noble filed the Chapter 11 Cases in the Bankruptcy Court. As a result of the filing of the Chapter 11 Cases, Legacy Noble’s board of directors determined to cancel Legacy Noble’s share ownership policy applicable to the officers and directors. Noble is currently considering an appropriate policy subsequent to its emergence from bankruptcy.

The filing of the Chapter 11 Cases constituted events of default that accelerated the Company’s obligations under the indentures governing our then outstanding senior notes and under our 2017 Credit Facility. In addition, the unpaid principal and interest due under our then outstanding senior notes and 2017 Credit Facility became immediately due and payable. However, any efforts to enforce such payment obligations with respect to such senior notes and 2017 Credit Facility were automatically stayed as a result of the filing of the Chapter 11 Cases, and the creditors’ rights of enforcement were subject to the applicable provisions of the Bankruptcy Code. We elected not to make the semiannual interest payment due in respect of the Senior Notes due 2024 (the “2024 Notes”), which was due on July 15, 2020, and did not made any additional interest payments due on any senior notes through the Effective Date.

On the Petition Date, the Debtors entered into a Restructuring Support Agreement (together with all exhibits and schedules thereto, and as amended by the First Amendment thereto dated as of August 20, 2020, the “Restructuring Support Agreement”) with an ad hoc group of certain holders of approximately 70% of the aggregate outstanding principal amount of the Senior Notes due 2026 (the “Guaranteed Notes”) and an ad hoc group of certain holders of approximately 45% of the aggregate outstanding principal amount of our other then outstanding senior notes, taken as a whole (the “Legacy Notes”). Legacy Noble entered into the Backstop Commitment Agreement with the Backstop Parties on October 12, 2020, pursuant to which the issuance of the Notes were fully backstopped by the Ad Hoc Guaranteed Group and the Ad Hoc Legacy Group (each as defined in the Restructuring Support Agreement). Participation in the Rights Offering was offered to the holders of the Guaranteed Notes and the Legacy Notes. On November 20, 2020, the Bankruptcy Court entered an order confirming the Plan. On the Effective Date, the Plan became effective in accordance with its terms, the Debtors emerged from the Chapter 11 Cases and Noble Parent became the new parent company.

 

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On the Effective Date, and pursuant to the terms of the Plan:

 

   

Noble Parent appointed five new members to the Board to replace all of the directors who had served on the board of directors of Legacy Noble, other than the director also serving as President and Chief Executive Officer, who was appointed to the Board pursuant to the Plan;

 

   

Noble Parent terminated and cancelled all common stock and equity-based awards of Legacy Noble that were outstanding immediately prior to the Effective Date;

 

   

Noble Parent transferred 31.7 million Ordinary Shares with a nominal value of $0.00001 per share to holders of the Guaranteed Notes in cancellation of the Guaranteed Notes;

 

   

Noble Parent transferred 2.1 million Ordinary Shares, approximately 8.3 million seven-year warrants with Black-Scholes protection (the “Tranche 1 Warrants”) with an exercise price of $19.27 and approximately 8.3 million seven-year warrants with Black-Scholes protection (the “Tranche 2 Warrants”) with an exercise price of $23.13 to holders of the Legacy Notes in cancellation of the Legacy Notes;

 

   

Noble Parent issued approximately 7.7 million Ordinary Shares and Notes to participants in the Rights Offering at an aggregate subscription price of $200 million;

 

   

Noble Parent issued approximately 5.6 million Ordinary Shares to the Backstop Parties as Holdback Securities (as defined in the Backstop Commitment Agreement);

 

   

Noble Parent issued approximately 1.7 million Ordinary Shares to the Backstop Parties in respect of their backstop commitment to subscribe for Unsubscribed Securities (as defined in the Backstop Commitment Agreement);

 

   

Noble Parent issued approximately 1.2 million Ordinary Shares to the Backstop Parties in connection with the payment of the Backstop Premiums (as defined in the Backstop Commitment Agreement);

 

   

Noble Parent issued 2.8 million five-year warrants with no Black-Sholes protection (the “Tranche 3 Warrants” and, together with the Tranche 1 Warrants and the Tranche 2 Warrants, the “Emergence Warrants”) with an exercise price of $124.40 to the holders of Legacy Noble’s ordinary shares outstanding prior to the Effective Date;

 

   

Finco entered into a senior secured revolving credit agreement (the “Revolving Credit Agreement”) providing for a $675.0 million senior secured revolving credit facility (with a $67.5 million sublimit for the issuance of letters of credit thereunder) (the “Revolving Credit Facility”);

 

   

Noble Parent entered into an exchange agreement (the “Exchange Agreement”) with certain Backstop Parties which provided that, as soon as reasonably practicable after the Effective Date, the other parties to such agreement would deliver to Noble Parent an aggregate of approximately 6.5 million Ordinary Shares issued pursuant to the Plan in exchange for the issuance of penny warrants to purchase up to approximately 6.5 million Ordinary Shares, with an exercise price of $0.01 per share (the “Penny Warrants”), which were exchanged on a one-for-one basis for Ordinary Shares issued to certain initial holders of Ordinary Shares;

 

   

Finco entered into the indenture governing the Notes;

 

   

Noble Parent entered into a registration rights agreement with certain parties who received Ordinary Shares under the Plan; and

 

   

Finco entered into the Registration Rights Agreement with certain parties who received Notes under the Plan.

Management Incentive Plan. The Plan contemplated that on or after the Effective Date, (i) Noble Parent would adopt a long-term incentive plan and authorize and reserve 7.7 million Ordinary Shares for issuance pursuant to equity incentive awards to be granted under such plan, and (ii) the initial awards under such plan

 

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would consist of at least 40% of such shares and be made as soon as practicable after the Effective Date on the terms and conditions as determined by the Board; provided that at least 40% of such initial awards would be in the form of time-based vesting awards vesting over a period of no shorter than three years and no longer than four years. As contemplated by the Plan, on February 18, 2021, Noble Parent adopted a long-term incentive plan and authorized and reserved 7.7 million Ordinary Shares for issuance pursuant to equity incentive awards to be granted under such plan.

Sources of Cash for Plan Distribution. All cash required for payments made by Noble Parent under the Plan on the Effective Date was obtained from cash on hand, proceeds of the Rights Offering and proceeds of the Revolving Credit Facility.

Going Concern. Legacy Noble performed the required assessments in conjunction with the filing of its Form 10-Q for the three months ended March 31, 2020 and determined, at that time, that substantial doubt about its ability to continue as a going concern existed. Subsequent to emergence from the Chapter 11 Cases, Noble performed a reassessment and concluded there was no longer substantial doubt regarding its ability to continue as a going concern one year from the date of filing its Form 10-K for the year ended December 31, 2020. This was primarily due to the cancellation of Legacy Noble’s outstanding debt obligations and increased liquidity with the Revolving Credit Agreement. Management’s assessment was based on the relevant conditions that were known and reasonably knowable at the issuance date and included Noble’s post-emergence financial condition and liquidity sources, forecasted future cash flows, contractual obligations and commitments and other conditions that could adversely affect its ability to meet its obligations through one year from the issuance date of such Form 10-K.

Impairment

As more thoroughly described in “Note 10—Loss on Impairment” to the Interim Financial Statements included elsewhere in this prospectus and “Note 6—Loss on Impairment” to the Audited Financial Statements included elsewhere in this prospectus, we evaluate our property and equipment for impairment whenever there are changes in facts that suggest that the value of the asset is not recoverable. An impairment loss is recognized when and to the extent that an asset’s carrying value exceeds its estimated fair value. As part of this analysis, we make assumptions and estimates regarding future market conditions. To the extent actual results do not meet our estimated assumptions for a given rig or piece of equipment, we may take an impairment loss in the future.

During the period from February 6 through March 31, 2021 and the period from January 1 through February 5, 2021, we recognized no impairment charges to our long-lived assets. During the three months ended March 31, 2020, we recognized a non-cash loss on impairment of $1.1 billion, related to our long-lived assets.

During the years ended December 31, 2020, 2019 and 2018, we recognized non-cash, before-tax impairment charges of $3.9 billion, $615.3 million and $802.1 million, respectively, related to certain rigs and related capital spares. These impairments were driven by factors such as customer suspensions of drilling programs, contract cancellations, a further reduction in the number of new contract opportunities, capital spare equipment obsolescence, and our belief that a drilling unit is no longer marketable and is unlikely to return to service.

The impact of the current global economic turmoil continues to evolve and its duration and ultimate disruption to our customers’ and our business cannot be estimated at this time. There can be no assurance that we will not have to take additional impairment charges in the future should such disruption continue, or that we will be able to return cold stacked rigs to service in the time frame and at the reactivation costs or at the dayrates that we projected. If we experience prolonged unfavorable changes to current market conditions, reactivation costs or dayrates or if we are unable to secure new or extended contracts for our active rigs at favorable rates, it is reasonably possible that the estimate of undiscounted cash flows may change in the near term, resulting in the need to write down the affected assets to their corresponding estimated fair values.

 

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Contract Drilling Services Backlog

We maintain a backlog of commitments for contract drilling services. Our contract drilling services backlog reflects estimated future revenues attributable to signed drilling contracts. While backlog did not include any letters of intent as of March 31, 2021, in the past we have included in backlog certain letters of intent that we expect to result in binding drilling contracts.

We calculate backlog for any given unit and period by multiplying the full contractual operating dayrate for such unit by the number of days remaining in the period, and include certain assumptions based on the terms of certain contractual arrangements, discussed in the notes to the table below. For the four rigs contracted with ExxonMobil mentioned below, we utilize the current market rate, adjusted for a moderate discount rate, as described in footnote (3) to the backlog table below. The reported contract drilling services backlog does not include amounts representing revenues for mobilization, demobilization and contract preparation, which are not expected to be significant to our contract drilling services revenues, amounts constituting reimbursables from customers or amounts attributable to uncommitted option periods under drilling contracts or letters of intent. Backlog herein also has not been adjusted for the non-cash amortization related to favorable customer contract intangibles which were recognized on the Effective Date.

The table below presents the amount of our contract drilling services backlog as of March 31, 2021, and the percent of available operating days committed for the periods indicated:

 

          Year Ending December 31, (6)  
    Total              2021 (1)                   2022                       2023                      2024                2025 - 2027     
    (In thousands)  

Contract Drilling Services Backlog

           

Floaters (2)(3)

  $ 1,150,452     $ 360,074     $ 367,526     $ 140,659     $ 71,279     $ 210,914  

Jackups (4)

    392,278       208,125       148,414       35,739       —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 1,542,730     $ 568,199     $ 515,940     $ 176,398     $ 71,279     $ 210,914  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Percent of Available Days Committed (5)

           

Floaters

      91%       65%       24%       14%       14%  

Jackups

      68%       32%       6%       —%       —%  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

      77%       44%       13%       5%       5%  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Represents a nine-month period beginning April 1, 2021. Some of our drilling contracts provide customers with certain early termination rights and, in limited cases, those termination rights require minimal or no notice and minimal financial penalties.

 

(2)

Two of our long-term drilling contracts with Shell, the Noble Globetrotter I and Noble Globetrotter II, contain a dayrate adjustment mechanism that utilizes an average of market rates that match a set of distinct technical attributes and is subject to a modest discount, beginning on the fifth-year anniversary of the contract and continuing every six months thereafter. On December 12, 2016, we amended those drilling contracts with Shell. As a result of the amendments, each of the contracts now has a contractual dayrate floor of $275,000 per day. Once the dayrate adjustment mechanism becomes effective and following any idle periods, the dayrate for these rigs will not be lower than the higher of (i) the contractual dayrate floor or (ii) the market rate as calculated under the adjustment mechanism. The impact to contract backlog from these amendments has been reflected in the table above and the backlog calculation assumes that, after any idle period at the contractual stacking rate, each rig will work at its respective dayrate floor for the remaining contract term.

 

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(3)

Noble entered into a multi-year Commercial Enabling Agreement (the “CEA”) with ExxonMobil in February 2020. Under the CEA, dayrates earned by each rig will be updated at least twice per year to the prevailing market rate, subject to a scale-based discount and a performance bonus that appropriately aligns the interests of Noble and ExxonMobil. Under the CEA, the table above includes awarded and remaining term of seven years related to the Noble Tom Madden, two years to each of the Noble Bob Douglas and Noble Don Taylor and eight months to the Noble Sam Croft. Under the CEA, ExxonMobil may reassign terms among rigs. The aforementioned additional backlog included in the table above was estimated using the current market rate, adjusted for a moderate discount rate.

 

(4)

In April 2020, we received notice from Saudi Aramco to suspend operations on the Noble Scott Marks for a period of up to 12 months. Beginning in early May 2020, we idled the Noble Scott Marks at a rate of $0 per day. The impact to contract backlog has been reflected in the table above and the backlog calculation assumes that, upon completion of the suspension period, the rig will resume operations at the contracted dayrate for the remaining contract term.

 

(5)

Percent of available days committed is calculated by dividing the total number of days our rigs are operating under contract for such period by the product of the number of our rigs and the number of calendar days in such period.

 

(6)

This table does not include $125.4 million of backlog associated with assets acquired in the Merger.

The amount of actual revenues earned and the actual periods during which revenues are earned may be materially different than the backlog amounts and backlog periods presented in the table above due to various factors, including, but not limited to, the impact of the COVID-19 pandemic and related mitigation efforts on the demand for oil, current oversupply of oil, shipyard and maintenance projects, unplanned downtime, the operation of market benchmarks for dayrate resets, achievement of bonuses, weather conditions, reduced standby or mobilization rates and other factors that result in applicable dayrates lower than the full contractual operating dayrate. In addition, amounts included in the backlog may change because drilling contracts may be varied or modified by mutual consent or customers may exercise early termination rights contained in some of our drilling contracts or decline to enter into a drilling contract after executing a letter of intent. As a result, our backlog as of any particular date may not be indicative of our actual operating results for the periods for which the backlog is calculated. See “Risk Factors—Risks Related to Our Business and Operations—Our current backlog of contract drilling revenue may not be ultimately realized.”

As of March 31, 2021, ExxonMobil, Shell and Saudi Aramco represented approximately 49.4 percent, 24.3 percent and 13.8 percent of our backlog, respectively. For the year ended December 31, 2020, ExxonMobil, Shell, Saudi Aramco and Equinor represented approximately 44.2 percent, 26.3 percent, 17.0 percent and 3.6 percent of our backlog, respectively.

Strategy and Results of Operations

Our business strategy focuses on a high-specification fleet of both floating and jackup rigs and the deployment of our drilling rigs in established and emerging offshore oil and gas basins around the world. We emphasize safe operations, environmental stewardship, and superior performance through a structured management system, the employment of qualified and well-trained crews, the care of our surroundings and the neighboring communities where we operate, and other activities advancing our environmental sustainability, social responsibility, and good governance. We also manage rig operating costs through the implementation and continuous improvement of innovative systems and processes, which includes the use of data analytics and predictive maintenance technology.

Our floating and jackup drilling fleet is among the youngest, most modern and versatile in the industry, with the majority of our rigs having been delivered since 2011. Our fleet consists predominately of technologically advanced units, equipped with sophisticated systems and components prepared to execute our customers