Shares of Noble Corporation (NYSE: NE) spiked 24% by 10:45 a.m. EST on Wednesday. Fueling the surge in the offshore drilling stock was the signing of a new drilling services agreement with ExxonMobil (NYSE: XOM) in the Guyana-Suriname Basin.
As part of the deal, Exxon will add three and a half years to the current contract terms of the three rigs Noble leases to the oil giant. Furthermore, instead of locking in a firm dayrate for the contract extensions, the companies will update the rates at least twice each year to the prevailing market rate, which they'll subject to a scale-based discount and performance bonus.
This agreement will align the interests of both companies. It also provides for the potential of adding six years to the term and bringing other rigs into the framework agreement, depending on development decisions and government approvals.