Earnings season has begun for offshore drilling rig owners and what Noble (NEBLQ) reported is something of a mixed bag for the rest of the industry. Revenue was up 20.8% to $1.17 billion and net income rose 36% to $174.1 million, or $0.68 per share, on the back of new ultra-deepwater rig deliveries but management didn't have great things to say about demand in 2014.

After an explosion in demand in the last two years, particularly for ultra-deepwater rigs, CEO David Williams said, "Our industry may be entering a short and arguably useful pause in the cycle." The comments have pushed Noble's shares 8% lower today and competitors Ensco (VAL), Transocean  (RIG -0.69%), and Seadrill  (SDRL) are down for the day as well. But before you go selling all drilling related stocks, let's examine what we're really seeing.  

Falling demand for drilling rigs
While demand might not be robust overall, it's also important to consider what markets Williams thinks are going to be weak. He said, "The lower utilization is likely to be more pronounced for the floating rigs with limited technical features."

These limited rigs are generally older rigs so we need to keep fleet age in mind. Of the  four companies mentioned above, Noble and Transocean will be most affected by these trends because their rigs average 8.2 years and 9.5 years, respectively. Seadrill and Ensco have younger fleets averaging 3.1 years and 3.7 years.

The other thing to consider is what's already under contract. Noble pointed out that 78% of 2014 operating days are already contracted, Transocean has 72% of high specification floaters under contract, and 94% of Seadrill's foaters are under contract. Earnings shouldn't be all that bad short term even if new contracts aren't in high demand. 

Foolish bottom line
As always in offshore drilling, it's worth keeping an eye on how dayrate and utilization trends move as earnings season continues. If the weakness Noble is seeing is short term, as it says, I wouldn't be panic selling right now, especially for companies owning new ultra-deepwater fleets. Companies with exposure to new ultra-deepwater rigs are still seeing high dayrates and long contracts and, with more than half of the new oil found globally last year coming from this segment of the market, I think the long-term trend will continue.