All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a Q&A session. If you would like to ask a question, during this time, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question at any time, again, press star and then the number one on your telephone keypad. Ian Macpherson, Vice President of Investor Relations, you may now take over your call.
Thank you, Devin, and welcome everyone to Noble Corporation's third quarter 2022 earnings conference call. We appreciate your continued interest in the company. You can find a copy of our earnings report issued yesterday evening, along with the supporting statements and schedules on our website at noblecorp.com. Joining me today are Robert Eifler, President and Chief Executive Officer, and Richard Barker, Senior Vice President and Chief Financial Officer. Also joining are Blake Denton, Senior Vice President, Marketing and Contracts, and Joey Kawaja, Senior Vice President of Operations. For today's call, we will begin with prepared remarks, followed by Q&A. During the course of this call, we may make certain forward-looking statements regarding various matters related to our business and companies that are not historical facts. Such statements are based upon current expectations and assumptions of management and are therefore subject to certain risks and uncertainties.
Many factors could still cause actual results to differ materially from those forward-looking statements, and Noble does not assume any obligation to update these statements. Please refer to our SEC filings for more information regarding our forward-looking statements. Also note that we are referencing non-GAAP financial measures in the call today. You can find the required supplemental disclosure for these measures, including the most directly comparable GAAP measure and associated reconciliation in our earnings report and filed with the SEC. With that, I'll now turn the call over to Robert Eifler, President and CEO of Noble.
Thank you, Ian. Good morning. Welcome, everyone, and thank you for joining us on the call today. I'd like to begin with some opening remarks about our recent milestones and objectives related to our business combination with Maersk Drilling, and then provide some views on the market outlook and our global operations before turning the call over to Richard to review the financial results and outlook. First of all, let me say how excited I am to finally be speaking today on behalf of our newly combined company, and also remind the audience that next quarter's Q4 results will be our first quarter as a combined reporting entity. Like many of our senior leadership team, I've spent much of the past month since we closed the merger, visiting with our teams and crews across the globe.
I have been incredibly galvanized by these interactions and by having an opportunity to observe firsthand the value and the power of our complementary cultures and capabilities. When we defined the strategic rationale for this combination, among the critical components was the importance of creating the necessary scale with which to forge deep customer relationships and a platform for leadership in innovation and sustainability. We view these factors as essential to maintaining first-choice status among our blue-chip customer base. These collaborative long-term commitments with some of the largest and most influential operators in our relevant markets are foundational to our business, both in terms of the high-quality revenue backlog that they provide, as well as the opportunity to drive efficiency and improvement through the drilling and completions lifecycle with our customers. Integrating a combination of this size and complexity is a monumental undertaking, and we are well underway.
As a reminder, we are targeting at least $125 million of annual cost synergies to be realized within two years. Meanwhile, the internal team at our newly formed Offshore Impact Center is monitoring our integration efforts and filtering actions for our rig crews so that they can stay focused on our operations and safely removed from the noise of integration. Our entire company is laser-focused on business continuity and ensuring seamless service delivery for our customers. Next, we're very excited to announce today the authorization of a $400 million share repurchase program, which is a key first step of a capital allocation framework which establishes our priorities for use of cash. Richard will give more detail on that in a moment.
Providing a significant and sustainable capital return program has been a key rationale for the merger, and our financial profile is highly complementary with this rationale. We believe that our equity represents an excellent investment opportunity, and therefore, buying back shares represents an attractive return for our shareholders. As we assess the forward outlook for our business, of course, extraordinary uncertainty and risks abound with respect to inflation, recession, interest rates, and geopolitical unrest. However, the macro backdrop for oil and gas remains comparatively more straightforward. Arresting runaway global inflation will be difficult, if not impossible, to achieve without significantly higher investment in upstream oil and gas, period.
Even as our biggest IOC customers continue to solve for the right balance between their long-term energy transition objectives and responding to the current supply crunch, we remain confident that oil barrels with the lowest lifting cost and lowest carbon profile will be structurally advantaged over the long run. The strategic positioning of our new fleet toward the deep water and harsh environment shallow water markets is, in fact, a very purposeful reflection of that view, particularly with the Golden Triangle and Norway ranking very favorably in the global supply stack on both economic and CO2 metrics.
Our customers' 2023 spending budgets are currently under development against the backdrop of a healthy, albeit still significantly backwardated crude price strip. With Brent futures prices tapering from the mid-90s per barrel current spot price down to the mid-70s per barrel through 2024-2025 time frame, which is relevant to the planning cycle for offshore rig demand. Meanwhile, Brent prices have averaged close to $100 per barrel year to date. Even though the shape of the strip will likely serve to temper the rate of spending growth over the near term, it's also very important to keep in perspective that 80% of the offshore projects in the FID queue have estimated breakeven thresholds at or below $40 per barrel.
Additionally, all of our internal and external commercial intelligence clearly indicates a higher level of deepwater rig demand next year relative to current levels, which are still recovering from a multi-year stretch of underinvestment. We remain confident that we are in the early stages of a multi-year upturn in offshore drilling. With deepwater day rates already well into low to mid-$400,000-$450,000 per day, and with limited inventory of stacked rigs that can come back into the market, we believe the underlying fundamentals for our business are extremely promising. The supply-demand fundamentals for deepwater rigs are pretty straightforward. The current utilization rate on 100 or so marketed UDW rigs remains around 85%, where it has been for the past six-eight months.
The fulcrum of pricing power, however, has been at the high end of the market, where mid-90s% utilization of the 46 dual BOP drillships has driven day rates into the low to mid-$400,000 per day range. Our marketing intelligence indicates a likely demand increase for deepwater next year, which should exert further upward pressure on an already tight market. We had several new contract fixtures in the third quarter on the legacy Maersk Drilling side of the fleet that I'd like to highlight. First, the drillship Noble Viking received a contract extension from Shell in Malaysia for an additional eight wells at a day rate of $408,000 per day, including MPD services. That contract extension is expected to run from November 2023 to August 2024.
As a reminder, this rig does have about five months of downtime scheduled ahead of this new program, which includes a special periodic survey. Next, the drillship Noble Voyager had a six month option taken up by Shell with the base operating day rate increasing from $295,000 on the current contract up to $422,000 starting in April 2023 with a drilling program in Mexico. Among our deepwater semis, the Noble Developer was awarded a one well contract with Shell in Brazil at $411,000 per day, including mobilization, which commits that rig into the middle of next year.
The drillship Noble Gerry de Souza has the next contract rollover in our deepwater fleet later this quarter, and we hope to communicate with you again soon with positive news regarding that rig's next engagement, which could commence in the first quarter of next year. Given the timing of contract roll-off for a couple of our deepwater semis, the Noble Discoverer and Noble Developer, we do expect gaps in between contracts for one or both of those rigs in 2023. Now on to the jack-up side of the business. The harsh and ultra-harsh environment markets where Noble's jack-up presence is now heavily focused are witnessing steady demand and utilization above 90%, with day rate traction remaining comparatively more moderate thus far.
With European markets responding to rising energy supply challenges, license and permitting indicators for jack-up activity in the region are constructive, but we nonetheless continue to see the upturn for our jack-up business developing on a lag compared to the dynamics in the deepwater segment. With the combination of Noble and Maersk Drilling, we are now the market leader in the CJ70 class of jack-ups, which are the top-spec jack-ups in the world and the workhorse of the Norwegian Continental Shelf. As a reminder, two of our five CJ70s, the Noble Invincible and the Noble Integrator, will soon commence under a renewed five-year frame agreement with Aker BP that extends through 2027. This framework encompasses up to $1 billion of total potential work scope over the five-year period.
There is some variability around the scheduling of this activity, and we have highlighted on our fleet status report the near-term windows in which the work scopes are not yet defined. We have shown these as option periods for Aker BP. Our current expectation is that we will partially but not entirely fill these windows in 2023. While the activity schedule for these rigs beyond 2023 remains extensive and should keep both of these rigs very well-utilized over the next five years. Across our entire CJ70 fleet, we continue to expect a firmer NCS market to materialize by mid-2024. Outside of Norway, we are increasingly encouraged by strong activity levels in an improving pricing environment that's evident across the U.K. and other areas of the North Sea.
Although several of the most recent contract fixtures and exercise options across our harsh environment jack-up fleet have reflected legacy pricing with day rates below $100,000, we do have visibility into leading-edge fixtures improving to the $120,000-$130,000 per day range for programs commencing in 2023. This improvement in the harsh environment segment is consistent with the direction of the broader offshore drilling market cycle, and we view this as a leading indicator of the later recovery that we see developing in the ultra-harsh segment as well. The takeaway here is that we would earmark the mid-cycle earnings potential of our jack-up fleet as optional upside to what we expect to realize in 2023. That concludes my opening remarks, and now I'll pass it on to Richard to provide his commentary on the financials.
Thank you, Robert, and good morning or good afternoon, everyone. In my remarks today, I will provide some brief highlights of our third quarter results, discuss our capital structure, as well as our outlook for the remainder of the year. However, I'd like to start by discussing our share repurchase program, which is a key component of our broader capital allocation priorities. Today, Noble has a scaled platform and a conservative balance sheet that is well-positioned to generate cash through each cycle. Our ordered priorities as it relates to the use of cash are as follows. Firstly, to maintain a conservative through-cycle balance sheet coupled with significant liquidity. Secondly, to invest in the maintenance and maximum potential of our existing working fleet. Thirdly, to return at least 50% of our free cash flow to shareholders through share repurchases and/or dividends. Lastly, to target disciplined and accretive investment opportunities.
Returning capital to shareholders is a key rationale for the merger, and we are pleased to be able to announce this $400 million buyback program. Turning now to our quarterly results. Given the merger closed on October 3, after the end of the quarter, Noble's third quarter results reflect legacy Noble Corporation prior to the business combination. Contract drilling services revenue for the third quarter totaled $289 million, versus $262 million for the second quarter of 2022. This quarter's revenue was positively impacted by a full quarter of operating days for the Noble Regina Allen, the commencement of operations for the Noble Houston Colbert and the Noble Sam Hartley, and a day rate increase on September 1 for the four rigs operating in Guyana under the CEA.
Adjusted EBITDA for the third quarter was $97 million, compared to $84 million in the previous quarter. This translates to an adjusted EBITDA margin of approximately 32% for the quarter. Capital expenditures totaled $41 million in the quarter. Free cash flow in the third quarter was $44 million. As disclosed in our press release, revenue and adjusted EBITDA for legacy Maersk Drilling in the third quarter were $283 million and $63 million respectively. Capital expenditures were $35 million. Noble's revenue backlog stood at $3.9 billion as of November 2. This revenue backlog does not include additional non-drilling services that we expect to provide as part of existing contracts.
Our balance sheet remains extremely robust, with net debt as of September 30 adjusted for the closing of the business combination and the sale of the remedy rigs of approximately $190 million. We will have a cash need in the fourth quarter of up to $185 million for the compulsory purchase, which is essentially the squeeze-out of the remaining Maersk Drilling shares. This maximum cash amount assumes that all the Maersk Drilling shares that are subject to the squeeze-out, approximately 10% of legacy Maersk shares, are settled for cash as opposed to settled for Noble shares. Any shares settled for cash is a share buyback at a previously set price of approximately $29 per Noble share. As a reminder, whether to settle for cash or shares is the decision of each individual shareholder.
As disclosed at closing, we have received preliminary commitments from a group of banks to refinance the existing Maersk Drilling credit group debt with a new three-year $350 million bank term loan and a three-year $150 million facility with a sole lender. The current Maersk Drilling revolving credit facility will be terminated, and we will use balance sheet cash to pay off a portion of the existing debt of the Maersk Drilling credit group in order to achieve this proposed capital structure. We are targeting to complete the refinancing after closing of the squeeze-out in mid-November. As of September 30, we had $220 million borrowed under the Noble credit facility.
Driving this is a provision in Noble's credit facility that if we sell a collateral rig, we must either reduce commitments in the amount of the net cash proceeds or, within a certain period of time, reinvest those proceeds in new collateral. In September, in order to satisfy this provision relating to the sale of our Saudi fleet in 2021, the Noble Group acquired the Noble Gerry de Souza from the unrestricted Pacific Drilling subsidiary. This $220 million drawn amount was paid down on October 6 with cash proceeds received from the sale of the remedy rigs, and as of today, there are no borrowings under our $670 million facility. In the near term, we will manage the business with two separate credit groups, the legacy Noble Group and the legacy Maersk Drilling Group.
Both groups will be extremely well collateralized and have significant available liquidity. Ultimately, we will look to collapse them into one credit group. The currently contemplated refinancing of the Maersk Drilling Group, which has a three-year term, affords us significant flexibility to pick the optimal time to get the right and appropriate financing for Noble. I'd now like to discuss our guidance for the fourth quarter. We project adjusted EBITDA between $155 million and $175 million, and capital expenditures of between $65 million and $85 million. As we look towards 2023, we remain encouraged by the outlook for our business. On the floater side, excluding the two cold stacked rigs, we currently have over 60% of our available days contracted for 2023. Ongoing customer conversations give us confidence into further awards before the end of the year.
On the jack-up side, we currently have over 50% of our available days contracted for 2023, and we are also encouraged by the current level of customer dialogue. With the delayed recovery in day rates for jack-ups versus what we have experienced for floaters, as well as the expected softness in the Norwegian jack-up market for 2023, we do not expect to realize the true earnings power of our jack-up fleet until beyond 2023. We are managing the inflationary pressures that are prevalent across all industries. We continue to expect our total rig-level expenses to increase in the high single-digit range in the second half of this year as compared to the second half of 2021. While it is clearly a dynamic macro market, we currently expect to come under similar inflationary type pressures in 2023.
Our integration activities are well underway as we work towards realizing $125 million in cost synergies. We expect to have realized over 70% of these savings on a run rate basis during the fourth quarter of next year. As previously disclosed, we expect the full synergy total to be realized within two years. We expect the cost to achieve these synergies to be consistent with precedent transactions of this nature, which is expected to be within a range of a one-time cost of $1-$1.25 for every $1 of annual synergies realized. This excludes typical deal advisor fees. I'm candidly excited about our financial position, which has been transformed over the last couple of years, and I look forward to discussing the results of the consolidated company on the next earnings call.
That concludes my prepared remarks, and I'll now hand the call back to Robert.
Thank you, Richard. It has been a long journey since November 2021 when we announced our business combination with Maersk Drilling, but it has been more than worth the wait. I'd like to extend a huge thank you to all of our employees worldwide who have worked so tirelessly to get us to this exciting launch point in Noble's next chapter, including our offshore crews who have stayed focused on safety and operational efficiency throughout. As I said earlier, we are vigilant about the risks in the global economy, as well as the varying slopes of improvement across the different parts of our fleet here at Noble. We do not take lightly the burden of execution that we need to achieve throughout this crucially important business integration.
Getting this integration right is absolutely prerequisite to everything we want to achieve, and our organization is laser-focused on the job at hand. Ultimately, though, the outlook for our industry, and especially the outlook for Noble as both a drilling contractor of choice and as an investment proposition is extremely promising from our perspective. With that, we're excited to be leading our offshore drilling peer group in the generation of free cash flow and returning significant capital to shareholders. Operator, we're ready now to move on to Q&A.
At this time, I would like to remind everyone in order to ask a question, press star and then the number one on your telephone keypad. Our first question comes from Fredrik Stene. I am sorry, Mr. Stene has retracted his question. I am sorry, he has retracted it again. Mr. Stene, your line is open.
Hey, guys. I think I was a bit aggressive on the star one button there. Congratulations. Good to see that the merger is progressing.
Hey, Fredrik. I'm sorry to interrupt you. We've got a bad connection here and we can't really hear you.
Okay. Can you hear me now?
Yeah, that's much better. Good afternoon.
Okay. Cool. Yeah, good afternoon. My question, I mean, what I said, congratulations on a nice quarter here. I think the headline news for me was the share buybacks. I guess the merger has kind of allowed you to move forward on something on the shareholder return side. I wanted to kind of frame a question around that. Two things. You talked briefly about it, but, you know, drawn $220 million on your credit facilities. Is that targeted towards any debt buyback? Because I want you to just kind of refresh us on the dividend and share repurchase restrictions on your current debt.
You know, one thing is having the program in place, but are you know, can you go out today and buy back shares or what's kinda left to see that happen?
Yeah. It's a good question. You know, we have significant flexibility within our credit agreements today to be able to go buy back shares. So that's not a concern for us. You know, the reason we had $220 million drawn on the facility is a provision in the facility as it relates to reinvestment of proceeds from asset sales. So when we sold the Saudi fleet last year, we had a period of time to reinvest that capital, and so essentially we did that during the third quarter. That's why we had $220 million drawn. Now that we've received the cash proceeds from the Remedy rig sale, that's now being paid back down again.
As we sit here today, we don't have anything outstanding under our RCF.
Okay. No, that's good to know and good to get clarification on your ability to actually repurchase those shares. I have one rig-specific question as well before I retire from the queue. You have the Noble Gerry de Souza rig that's rolling off now according to the fleet status towards the year end. I think, or at least, you know, on our newsfeed, I think that rig has been mentioned as a potential front runner for a contract with TotalEnergies in Nigeria, which makes sense since it's the current operator as well.
You know, without going into kind of specific opportunities, and things that you find kind of sensitive in nature, but what are the chances do you think of follow-up for that rig, and what would be a fair assumption on downtime before it commences any new work?
It's a little bit too early for us to talk conclusively about follow-on work for that. We are. I'm not losing sleep. We're confident that that rig gets a follow-on contract.
You know, we think it's first quarter of next year.
Thank you very much. I think I had a part of that for next year as well. All right, that's all from me, guys. Again, nice to see progress here and looking forward to. Sorry, actually one thing. Dividends, is that something you're considering as well, or only share buybacks for now?
This authorization's for share buybacks. That's all for now. You know, anything related to dividends would be at some point in the future. We're really pleased with what we've announced here yesterday.
Super. Thank you so much, guys. Have a good one.
Our next question comes from Samantha Ho with Evercore ISI.
Hey, guys. Congrats on closing the deal and on the nice quarter and the share purchase program.
Thanks.
I was kinda curious in terms of just how your customer conversations are going. You know, it was interesting to see that you guys didn't really participate in the Noble tender. Or not Noble, the Petrobras tender. I just wonder if you're really, you know, spending more time in terms of having more private conversations these days or anything you can share in terms of, you know, the tone of conversations with customers and how they are viewing the Maersk's fleet now that you have that in your hands.
Yeah. Thanks for the question, Samantha. This is Blake. Happy to answer that one and pleased to be on the back of three weeks of steady customer visits between Joey and myself. So it's an appropriately timed question. Yeah. I think the response or the feedback we would say from those conversations is incredibly encouraging. I think we've seen customers recognize the benefits strategically that these two organizations represent on a combined basis. With respect to ongoing, the demand picture looks good and we're well suited with a high-spec young fleet to continue to do well in the market.
Okay, great. Then just maybe a question on the CapEx, the $65 million-$75 million guidance for Q4. Is that a pretty good run rate going forward, or should we think about more variability?
Yeah. It's the range of 65-85 for Q4, you know, I think as you when we announced the deal back in November of last year, we talked about a $250 million kind of average over a five-year period. Obviously, inflation since then has impacted everything. I think it's fair to assume that that number is probably higher over a five-year average period. You know, I think we do expect, you know, just given the age of some of the rigs, you know, higher capital in 2023 and 2024. Obviously, that's part of that five-year average. You know, something obviously we'll provide more guidance around here at some point, either later this year or early next year.
Okay, great. That does it for me. Thank you, and congrats again on the quarter.
Thank you.
There are no further questions at this time. Mr. Macpherson, I turn the call back over to you.
Thank you everyone for joining us today. We appreciate your interest, and we'll look forward to speaking with you again next quarter.
This concludes the Noble Corporation third quarter 2022 financial results. Thank you for attending today's presentation. You may now disconnect.