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Noble on a Winning Streak

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Noble Corporation (NE - Free Report) has secured a three-year letter of intent for its Noble Duchess drillship to work for Oil and Natural Gas Corp., (“ONGC”) India. The deal was revealed at Noble’s recent fleet status update.

Per the contract, Noble Duchess, which was previously set aside to work in Nigeria, will earn $180,000 per day for the ONGC-operated project to waters offshore India. The rig is expected to reach India by March next year.

The company has also secured a three-month contract from Occidental Petroleum Corporation (OXY - Free Report) for its shallow-water Noble Dick Favor jackup rig. The previously stacked rig will be operational by November this year offshore Bahrain, with a day rate of $95,000.

Additionally, in the North Sea, Noble inked a six-month contract with Korea National Oil Company, through Dana Petroleum for Noble Lynda Bossler jackup at an increased dayrate of $125,000 (versus $88,000). In the Middle East, Noble’s three jackup rigs also received contract extensions to work offshore Qatar. It also comprises a two-year extension for the Noble Jimmy Puckett with RasGas.

The company has also received a letter of commitment for its jackup rig Tommy Craighead from Eni-Agip for a period of six months and more at a dayrate of $100,000 starting December in offshore West Africa. In Mexico, Noble secured a commitment from the country’s state oil monopoly -- Pemex -- to earn $68,000 per day (versus previous dayrate of $58,000) for a period starting this year end until August 2014 for the Carl Norberg jackup.

With continued increases in tender activity, as well as the influx of positive contracts globally, we see broader recovery in jackup demand led by the North Sea, Mexico, Southeast Asia and the Middle East. We also see long-term earnings and cash flow visibility with Noble’s solid backlog position, which was further enhanced by recent agreements for newbuilds.

However, considering the threats that offshore drillers face, including the lack of pricing power and geopolitical risks associated with international operations and execution challenges, we expect the stock to perform in line with the broader market and maintain our Neutral recommendation.

Noble currently holds a Zacks #3 Rank, which translates to a short-term Hold rating.

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