What happened

Shares of Noble (OTC:NEBLQ) took off in July, rallying 20.5% according to data provided by S&P Global Market Intelligence. Driving up shares of the offshore driller was optimism following industry leader Transocean's (NYSE:RIG) better-than-expected second-quarter results.

So what

Offshore drilling stocks bounced around with oil prices for most of July. However, the entire sector soared at the end of the month after Transocean posted its second-quarter results. While net loss met expectations, revenue came in a bit ahead of the consensus estimate. Meanwhile, the company said that despite the continued uncertainty surrounding oil prices, the offshore drilling market was getting better.

Silhouette of an offshore oil drilling rig.

Image source: Getty Images.

Transocean's report fueled the belief that other offshore drillers would post better-than-expected second-quarter results. That's exactly what happened with Noble. In early August, its numbers showed that revenue beat the consensus estimate while net loss wasn't as bad as analysts feared.

The company also said that it won several new contracts and extensions during the quarter. Overall, it added $303 million in future revenue to its backlog in the first half of the year. That's more than double the $133 million of contracts it won during the year-ago period.

Noble anticipates that trend will continue. CEO Julie Robertson stated that the "steady recovery remains apparent" as utilization rates across the industry improve. Oil companies are stepping up their exploration efforts due to an overall stabilization in the oil market and the fact that the industry is having a banner year for discoveries. Oil companies already made 10 deepwater finds this year, which has them on pace with 2016's record year when they made 22 discoveries.

Now what

After several challenging years, the offshore drilling industry is finally starting to show some signs of life. Oil companies are spending more money on offshore exploration and development programs, which is driving up demand for drilling rigs. That trend should continue as long as they keep finding oil and crude prices cooperate.

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