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A contract drilling service provider, Noble Corporation (NE - Analyst Report) has signed a drilling accord with Anadarko Petroleum Corporation (APC - Analyst Report) for Noble's new ultra-deepwater drillship –– Noble Bob Douglas.

The drillship –– currently under construction at Hyundai Heavy Industries Co. Ltd.’s ("HHI") shipyard in Ulsan, South Korea on a fixed price basis –– is scheduled to come online by year-end 2013. It is expected to be utilized primarily for operations in the U.S. Gulf of Mexico (GoM).

Geneva-based Noble said that the Hyundai Gusto P10000 hull designed unit will operate in up to 12,000 feet under water, but will be delivered fully equipped to operate in up to 10,000 feet of water. It will also be well prepared to handle two complete blowout preventer systems with a 165 ton heave-compensated construction crane and accommodation for 210 people.

This latest contract will come online after the rig is moved to an initial operating location, pending customer approval. The three-year deal is likely to generate $677 million of revenues in total and includes the provision of higher operating costs.

Leasing the Noble Bob Douglas to Anadarko leaves Noble with two of its four ultra-deepwater drillships, under construction at HHI, under contract. The remaining two drillships that remain uncontracted are scheduled to be delivered in 2014.

Last quarter, Noble’s performance was fueled by solid demand for its wide range of rigs and vessels. The highlights of the quarter include improvement in business fundamentals (as utilization and tendering activity improved for both jackups and deepwater units) and the return of several rigs to active status.

With continued increases in tender activity, as well as the influx of positive contracts globally, management remains optimistic about the broader recovery in jackup and floating rig demand led by the North Sea, Mexico and the Middle East. Noble is favorably positioned to gain from increasing dayrates with about 77% of floating rig days and 75% of jackup rig days committed in 2012.

However, considering the risks associated with offshore drillers, including the lack of pricing power, and geopolitical risks associated with international operations and operational challenges, we prefer to remain on the sidelines.

We maintain our Neutral recommendation for the long term. Noble holds a Zacks #3 Rank that is equivalent to a short-term Hold rating.

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