Contents
Introduction .................................................................................................................................................. 3
Strengths and Weaknesses of Noble Corporation .................................................................................... 3
Valuation ....................................................................................................................................................... 5
Dividend Discount Model.......................................................................................................................... 5
Long-term Growth Rate ............................................................................................................................ 6
Value Estimate .......................................................................................................................................... 7
Residual Income Model ............................................................................................................................ 7
Price to Earnings ....................................................................................................................................... 7
Price to Cash Flow ..................................................................................................................................... 7
Price to Sales ............................................................................................................................................. 8
Comparison ............................................................................................................................................... 8
Conclusion ..................................................................................................................................................... 9
References .................................................................................................................................................. 10
Introduction
The US oil and gas industry appears to be in an interesting phase currently. Oil & gas Production seems to be on the rise due to technological advancements in drilling. According to the US
Energy Information Administration (EIA), US will be the largest producer of oil and gas in the world by 2030. Furthermore, drilling activity in the Gulf of Mexico is on the rise after the moratorium was lifted more than a year after the Deepwater Horizon incident. The production in the Gulf of Mexico is likely to peak in 2019. Needless to say, the oil and gas industry in the US is positioned for a bright future in the years to come.
Noble Corporation PLC (NYSE:NE) is an offshore drilling contractor for the oil and gas industry and has one of the largest drilling fleets, second only to Transocean. Even with a large fleet, the company’s growth has not stagnated. The company’s strategy to spin-off the old rigs and add new sophisticated rigs with higher day-rates seems like a good strategy in the wake of the increased drilling activity requiring more state-of-the-art rigs, and should be interesting to analyze. Noble Corp is in the early stages of its proposed spin-off, which is forecasted to happen in late 2014. This spin-off may cut its taxed by up to 50%.
Strengths and Weaknesses of Noble Corporation
Strengths
Strong offshore contract drilling operations: The Company performs drilling services with a fleet of 79 offshore drilling units located worldwide. As of 3Q’13, the fleet consisted of 14 semisubmersibles, 14 drill ships, 49 jackups, and two submersibles. The offshore contract drilling operations accounted for approximately 97.6% of operating revenues for FY2012. Strong offshore contract drilling operations gives the company a
competitive advantage and enables the company to improve its overall revenue position
and
