Leading contract drilling company, Noble Corporation’s (NE) board of directors have approved the spin-off of Paragon Offshore plc, a wholly-owned subsidiary of Noble Corporation.
The holders of Noble Corporation’s ordinary shares will receive an aggregate of 84,753,393 Paragon Offshore ordinary shares on a pro-rata distribution basis resulting from the spin-off. This equates to one ordinary share of Paragon Offshore for every three ordinary shares of Noble Corporation held by the latter’s shareholders on the record date of distribution – Jul 23, 2014.
The shareholders are not entitled to any fractional Paragon Offshore shares. However, they will get the cash value of the fractional share they possess in the distribution. The distribution is expected to take place on Aug 1, 2014, subject to satisfaction of the conditions of the spin-off.
On completion of the distribution of Paragon Offshore ordinary shares, it will be a separate, publicly traded company. Noble Corporation will not have any ownership interest in Paragon Offshore. An application has been made by Paragon Offshore to list its ordinary shares on the New York Stock Exchange (:NYSE) under the symbol “PGN”.
Post spin-off, Paragon Offshore will own and operate most of Noble Corporation's current standard specification drilling business, including five drillships, three semisubmersibles and 34 jackups. The new company will also be responsible for the Hibernia platform operations. Noble Corporation will continue to own and operate its high-specification assets with operating focus in deepwater and ultra-deepwater market segments for drillships and semisubmersibles, along with high-specification segments for jackups.
Noble Corporation is focused on returning cash to shareholders, even during the transition, which involves significant capital expenditures. We expect the deepwater market segment to witness strong growth in the foreseeable future. With the company’s strong backlog position, Noble Corporation’s earnings and cash flow visibility are likely to increase in the near to medium term.
Currently, Noble Corporation carries a Zacks Rank #3 (Hold). Meanwhile, one could consider better-ranked players in the same sector like EXCO Resources, Inc. (XCO), BPZ Resources, Inc. (BPZ) and Statoil ASA (STO). All these stocks sport a Zacks Rank #1 (Strong Buy).